Paying for It: Cloud Costs and Billing Models

Next up at ECS was a panel session led by Allan Leinwand, Venture Partner at Panorama Capital

The speakers were:

Allan opened with the example of MCI, who owed a lot of its success to the introduction of a “Friends & Family” scheme. No new technology, nothing new, just a new billing model. This is why clouds are exciting, they offer an opportunity to revolutionise the domain with new pricing models.

How do cloud computing models affect budgeting?

Richard: We’re going to give departments the ability to manage their usage, but they are in more direct control of it.

Thorsten: It’s all about visibility and control. Provided you have both, you can make the decisions and budget more or less as normal. You actually have more control with cloud computing. For example Skytap can alert you when your usage goes over a threshold.

Grace: It’s important to think about who your audience is. They don’t worry about the pricing model. They’re thinking about the task. So it’s important that the pricing model works for the end user as well as IT. Lack of understanding about a pricing model may deter users from using the application completely.

Jesse: The kinds of metrics that exist in the cloud are ones that should already exist at the CIO level in a large enterprise.

Allan: CPU hours are a different kind of unit which are not well understood by decision makers.

Jesse: The educated finance organisations understand waste. One of the key driver for cloud service adoption is virtualisation. Ask your IT department what percentage of our aggregate utilization are we actually using. 2%? Cloud spurs us to look at our usage more intelligently.

Richard: It’s easy to spin up, but people forget about spinning down.

Grace: Flexibility is the key thing. You may not be sure, but that’s ok when flexibility is built in and you can adjust. It’s very important too to choose a model where you’re not penalizing end users doing their jobs.

What sort of bill, what sort of contract should we expect?

Grace: We give our customers options – the shorter the contract the more you pay. We also have add on bundles and services.

Thorsten: We found it important to align the contract duration to the payment. If you don’t you’re creating a problem for your organisation. We do metering ourselves but we outsource the billing itself.

Jesse: One of the most important parts of this transition is that sysadmins want to try stuff prior to having to sign contracts and make heavy commitments. Easy free onboarding is key. As you grow, you then look at those more formal aspects. A transition from free to pay is how the early adoption is going to come.

Richard: We believe you have to have a compliant cloud (PCI etc). We are doing hourly billing with no commitment.

Jesse: … which is almost the same as free.

Grace: It’s easy to offer free trials. We find that pay per use rarely grows as new people come in and old ones sign up for contracts etc.

Would you ever offer flat pricing, like cellphones or internet DSL? Should it evolve to that?

Richard: We played with that. It may be possible down the road but it’s not right now.

Jesse: SMS is my favourite example. You’re paying for a free to provide uplift. Everyone would want to charge like that.

Grace: We found end users like the unlimited usage best, they don’t have to think.

Are there any products or tools for billing?

Thorsten: We use Aria which is a SaaS billing service, which keeps things simple.

Jesse: There is also Zoura and Evapt. Google and Amazon and Paypal are in the field too.

Richard: We used to use Aria. Licayla (sp?) too. But you can use us (OpSource)