The Cloud Effect: A Dent In Traditional Software Pricing

The Cloud Effect: A Dent In Traditional Software Pricing

Cloud computing is altogether a different realm of end-user software delivery architecture. Cloud computing is centred around the remote availability of required software applications, ensured via a streamlined, subscription-based, over-the-Web service mechanism. This particular approach enables users to acquire very specifically what is needed, and only for as long as the requirement prevails. The scheme is utterly powerful and is being endorsed by plenty of customers. Estimates by Forrester Research indicate that more than 33% of ventures rely on the Software-as-a-Service model to get some of their applications delivered. The cloud-based services market is blooming, with an expansion rate as high as 20% per annum.

In addition to the way software is made available to end users, the dawn of the cloud computing era is foreseen as an unequivocal threat to the infamous conventional software pricing model. The move to the cloud is bound to disrupt traditional software pricing, giving rise to significantly altered consumer behaviour and inherently modified operational dynamics. Making the most out of cloud computing is not all about sheer technical expertise; a significant proportion of the package deal involves getting the pricing right.

A distinguished professor from the Wharton School of Business, Saikat Chaudhuri, is of the view that “The [pricing] disruption comes when bundles such as Microsoft Office don’t make sense anymore. Instead of big suites, lightweight applications will become the norm.”

Present-day customers are utterly vigilant with regards to over-priced software package upgrades that intrinsically bear costly hardware updates and escalated functional charges. Furthermore, ventures are naturally driven towards software applications that could effortlessly (and cost-effectively) be ported to novel environments.

Conventional software companies are naturally putting in a great deal of effort to somehow retain their market standing and, most importantly, safeguard their monetary returns. This is being achieved by introducing novel subscription-based pricing packages for their existing line-up of software products, and by procuring budding cloud-based solution providers in their entirety.

A cloud-centric model presents numerous ways to tailor the associated pricing as per scenario. The greatest advantage is the flexibility offered by adaptive pricing depending upon the client’s exact requirement. Availing a particular service from a cloud provider during an escalated demand period, for instance, would logically be charged higher as compared to the lower price associated with a similar volume during lower-demand spans.

It’s about time that ventures took note of the elastic pricing schemes associated with the cloud computing architecture to fully capitalize on their investment and anticipated returns.

By Humayun Shahid

Humayun

With degrees in Communication Systems Engineering and Signal Processing, Humayun currently works as a lecturer at Pakistan's leading engineering university. The author has an inclination towards incorporating quality user experience design in smartphone and web applications.

4 Responses to The Cloud Effect: A Dent In Traditional Software Pricing

  1. The shift to give customers a usage software-pricing model for software consumed in the cloud can eliminate over-priced software package. Rationally, a company starts paying for consulting before even buying the software and also pay throughout the life cycle of the product. Once software is deployed, vendor again charges for support, upgrades and maintenance for years to come. According to a study, the total cost of services for selection, implementation, maintenance and support ranges from 40% to 100% of the cost of software. Implementation costs for cloud products can reduce the cost to 20 percent less for on-premises software. Cloud apps are multi-tenant, so same software and costs are
    shared by customers. Cloud providers don’t also charge for maintenance and support.

    •  @sarojkar This is the real beauty of cloud as it really has eliminated the hefty software+implementation-+maintenance costs associated with the traditional model. However, once figuring out the economy of cloud one shouldn’t just see the reduced flat monthly rental inclusive of support. A cloud solution might cost more than the traditional software if we calculate the rentals over couple of years of time and the business loss due to vendor down-time. 

  2. The shift to give customers a usage software-pricing model for software consumed in the cloud can eliminate over-priced software package. Rationally, a company starts paying for consulting before even buying the software and also pay throughout the life cycle of the product. Once software is deployed, vendor again charges for support, upgrades and maintenance for years to come. According to a study, the total cost of services for selection, implementation, maintenance and support ranges from 40% to 100% of the cost of software. Implementation costs for cloud products can reduce the cost to 20 percent less for on-premises software. Cloud apps are multi-tenant, so same software and costs are
    shared by customers. Cloud providers don’t also charge for maintenance and support.

  3.  @sarojkar This is the real beauty of cloud as it really has eliminated the hefty software+implementation-+maintenance costs associated with the traditional model. However, once figuring out the economy of cloud one shouldn’t just see the reduced flat monthly rental inclusive of support. A cloud solution might cost more than the traditional software if we calculate the rentals over couple of years of time and the business loss due to vendor down-time. 

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