Cloudian Introduces New Pay-As-You-Go Storage Consumption Model

Cloudian, a provider of infrastructure for Exabyte-scale object storage, has introduced a new consumption model that it said lets customers build on-premises storage infrastructures while paying for capacity only as needed.

The new public cloud-like consumption model means that customers can move away from the need for a large up-front capital investment in object storage while avoiding leasing options that, because of new accounting rules, are also now treated as Capex, said Jon Toor, chief marketing officer for the San Mateo, Calif.-based vendor.

"This really frees up one of the roadblocks in any purchase decision: How to purchase it," Toor told CRN. "It frees up capital with pay-as-you-go financing. Customers are getting accustomed to pay-as-you-go with the cloud. This new program applies to on-prem infrastructures."

[Related: Big Win For Object Storage: Cloudian Unveils $94M Funding Round]

Toor said the new consumption model is not a lease as defined under new accounting rules, ASC 842, which went into effect Jan. 1.

According to accounting firm Deloitte, the new Accounting Standards Codification (ASC) 842 from the Financial Accounting Standards Board (FASB) brings most leases onto the balance sheet in a major change to the previous guidance that has been used for the past 40 years.

"The Cloudian program was engineered so that, under the new leasing rules that went into play this month, this is structured as Opex," he said. "Under the new rules, existing pay-as-you-go leases are viewed as Capex. Our program was specifically configured to be viewed as an Opex."

To ensure the program would be considered an Opex, not a Capex, under ASC 842, Cloudian is working with a large financing company with a lot of insight into the rules, Toor said. He declined to name the financing firm.

The new program is different from standard leases in a number of ways, including the fact that there is no minimum payment and it is an open-ended program, he said.

Under the program, channel partners sell the hardware and software to the customer, and get paid up front on the sale as if it were a conventional sale, Toor said. However, the partner then sells the gear to the financing company, which then takes title to it and arranges to provide service to the customer on a pay-as-you-go basis. The customer then pays the financing company based on monthly service, while the partners continue to offer customers other services.

As customers meet the expected 80 percent usage ceilings that would trigger a call to increase total capacity of the infrastructure, the follow-on sales would work the same way, he said.

Like any financing program, the cost to the customer will be higher than an outright purchase, Toor said.

"Adopting a consumption model is something you do for financial accounting," he said. "We're not presenting this as a cheaper way to do storage. … This is a way to keep expensive assets off the balance sheet and treat them like any other operating expense. Leasing was an option to keep infrastructure off the balance sheet. But as of this year, that's not true anymore."

The program was designed with one of the top-four largest accounting firms, Toor said. He declined to say which one.

Use cases for Cloudian have been expanding over the past couple years from offering a simple Amazon Web Services S3-like experience to becoming an on-premises landing space for object storage and backups, said Jeanne Blachowicz, director of sales and marketing at AE Business Solutions, a Madison, Wis.-based solution provider and Cloudian channel partner.

Cloudian has also become a convenient on-ramp to hybrid clouds, Blachowicz told CRN.

Cloudian's new consumption program will likely initially appeal to large public sector clients with internal master leases, Blachowicz said, and eventually spread to customers looking to reduce spikes in storage spending.

"It's hard to come up with the capital to change the infrastructure every three to five years," she said.

The new program comes as more and more IT vendors are moving to subscription models, especially on the software side, Blachowicz said. On the hardware side, vendors are also trying to find ways to mimic the cloud.

"This new program provides a predictable flat growth line," she said. "Cloudian is able to provide a cloud-like experience both in terms of technology with its S3 compatibility, and financial with the new consumption model. This completes the equation."

Cloudian's new consumption model is available now.