1. Cisco Capital Open Pay Consumption Model

2. What is Open Pay?
Shared risk model featuring a “fixed-plus-variable” payment structure based on the metered usage of your data center assets
Fixed portion of the model is sized to meet your ongoing business needs. Fixed payment obligation is determined up front and payable regardless of asset usage.
Variable “buffer” assets are installed in your data center and available for use throughout the term of the agreement. Incremental variable payment becomes due only for the days the buffer assets are used.
I like to call Open Pay a quasi consumption model
It allows customer to get more equipment today than they might initially need. It is not intended for back up capacity that may never be used.
There is a minimum FIXED payment component.
There is also variable payment, which based on buffer capacity installed on-site and ready to use for the full term
Customers only pays for this variable capacity when it is used (and that is a true utility)
Open Pay measures both compute and storage, which is among the first models to do this in the market
It’s intended for Vblock, FlexPodD and stand alone UCS
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3. Open Pay Utility Consumption Model
Term -12 quarters
Variable Usage
Consumption Curve
Open Pay is a fixed/variable utility model that allows companies to pay for compute and/or storage capacity as needed.
Billed quarterly as used
Base Capacity
Fixed quarterly payment $
Lease Revenue
(regardless of consumption) 1 2
Fixed Payment Obligation
70%
30%
Uncommitted Capacity
The “base” compute and storage components require a minimum payment.
The “variable” capacity is installed and ready for use, but customers pay for variable capacity only when utilized.
This slide is a graphical representation of Open Pay that shows the fixed as the minimum committed portion at 70% , and that the variable portion as a true utility at 30%.
While the customer pays for the fixed portion no matter what usage they have, they only pay for what they use on the variable portion.

4. Who would use Open Pay and Why?
Growth companies who need extra capacity during the term
Customers with seasonal fluctuations in demand
Companies seeking to overcome the common challenge of meeting uncertain demands quickly and efficiently with extra buffer capacity
Companies concerned with security, privacy, compliance, and control that the public cloud models do not address (off premise/shared resources)
There are a number of use cases that customers have discussed with us but if we categorize them there are really two dominant use cases.
Companies with growth in their compute environment or growth in applications
And companies with peak usage in a given month or quarter, or those with seasonality to their business.
It also benefits organizations that require agility because their procurement and installation processes are too slow
Some customers have said this helps provide an alternative for unplanned or unanticipated needs from their user community. It provides them with a way to chargeback these users based on the variable capacity.
Open Pay is really a private cloud that addresses security concerns that companies have with public clouds
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5. Overview Structure Default term is 3 years
Variable usage is measured on a daily basis and billed quarterly in arrears
Mix is 70% fixed and 30% variable
Monthly reports will be provided to customers to verify utilization
Fixed portion is billed on a quarterly basis in arrears to be in sync with variable usage billing
Available for UCS B-series servers and UCS as part of select Vblock/FlexPod solutions
If usage exceeds fixed percentage on a daily basis, blade and/or storage charges are incurred
The standard Open Pay deal is based on a 3 year term..
The default construct is 70% fixed and 30% variable capacity
We can consider other constructs with greater variability but that has some challenges
Please realiize that greater variability for UCS will require working closely with our Cisco counterparts since greater variability represents greater risk to Cisco and Cisco Capital
Similar challenges exist for the storage components and greater variability may be more challenging since we will need to engage EMC and NetApp.
The fixed portion is billed quarterly in arrears and this syncs up with the variable usage which needs to be measured in arrears.
If there is usage on a given day beyond the fixed percentage customers are charged only for that day, for the resources used.
I think it’s important to point out that this approach is an advantage over assigning specific assets as fixed or variable assets allowing customers to move workloads as needed.
Varible usage is measured hourly, charged daily, and reported monthly, and is ultimately invoiced quarterly in arrears.
It will require installation of our metering SW
Open Pay is available for stand alone UCS, Vblocks and FlexPods in both virtualized and bare metal environments. Open Pay will be expanded in the future to other products but the approach is to gain an understanding from our current customers of other products where this model could be leveraged.
EMC: VMAX storage; NetApp 3040 disk based series storage. Flash style storage (EMC XtremI/O) currently under development and expected to be available Q4 FY16.

6. Customer Candidate Considerations
Subject to credit approval
UCS required
Minimum deal size:
$500K* for UCS only
$1 million for converged infrastructure (compute plus storage)
Willing to allow metering of compute and storage usage
Business use case expecting significant growth with seasonal periods of peak usage, known spikes in usage over time, or need for short term rapid deployment.
All customers are subject to credit approval, that is a standard business practice at Capital
UCS is required as part of the BoM
Deal size guidelines:
Are $500K minimum for UCS only
And $1 million minimum for converged infrastructure (compute plus storage)
We are seeking customers that are growing their environment, or have seasonal or periods of peak usage and there are some qualifying questions we have to help us better understand your environment and the intended use of the Open Pay structure.
Customers must be willing to allow installation of the metering SW for compute and storage monitoring. This SW only captures usage data and not proprietary information.
* (all local currencies equivalent)
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7. Customer Benefits Flexibility/Agility Privacy Minimizes upfront cost
Quarterly base cost lower than a full lease on all of the equipment
Pay for buffer usage only when needed
Match solution to operational and financial objectives
Available for select UCS, Vblock and FlexPod
Measures compute and/or storage
It’s flexible and provides agility in terms of having what you need on site “ready to use”. Customers have said this is a key benefit of Open Pay that provides an option as to how to handle unplanned or unanticipated demand in their environment and avoids the delays associated with procurement, installation and provisioning.
Open Pay addresses some of privacy concerns with public clouds and yet has some of the attributes associated with public cloud in terms of flexibility.
It minimizes upfront costs and it may be less expensive than a traditional Fair Market Value lease depending on usage.
Again you pay for what you use.
Open Pay is a great match of both operational and financial objectives.
When there is known demand but the ramp up time and full capacity needs are not known, this solution can scale with revenue.
And it works for both compute and storage
for UCS, Vblock and FlexPods.
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8. Impact of Open Pay UCS
Open Pay is intentionally priced to compete reasonably with a normal FMV lease. In this example the PV of a FMV lease is about equal to an Open Pay deal where 50% of the variable assets are used.
Even with very high usage (say 75% - 100%), the PV is lower than that of a cash purchase. Of course, with very low levels of usage (less than 50%), the customer pays less than he would with a FMV lease.

10. Impact of Open Pay UCS