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Capacity On Demand (COD)

Definition - What does Capacity On Demand (COD) mean?

Capacity on demand (COD) is a concept in modern IT vendor services provisions that allows buyers to purchase only part of a delivered capacity, depending on what they use. This structure is fast becoming one of the most popular delivery models for many kinds of enterprise IT services.

Techopedia explains Capacity On Demand (COD)

The idea with COD is that companies have the option to buy part of a service upfront, and buy the rest later if they need.

These kinds of purchasing agreements can be provided with hardware or network architecture, or digital services. For example, if a company only needs, say, half the bandwidth of a provided offer, it would pay for half, with a clause in the contract that would set a price for the remaining half as needed.

Experts point out that many of the attractive cloud computing bending options have capacity on demand relatively built in. Multitenant cloud systems often include a lot of capacity that clients share.

When a company needs to drop a volume of services, it does it without a lot of lengthy back and forth or logistics. While capacity on demand has become a popular model, some critics contend that depending on the contract, this can cause companies to pay more for services if they don't plan well.

If the company gets a good rate on the amount of services they use, that can be an efficient model, but if it starts taking advantage of instant upgrades at higher prices, the result may not be economical in the long run.

Much of the practicality of capacity on demand depends on a careful reading of the service-level agreement or contract between the seller and the buyer.

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