Host Pricing: What In The End Am I Actually Paying For?

Cloud Pricing

I’ve been blogging about this concept now for a while. What is the cost of a cloud solution and what in the end am I actually paying for? I know I am not the only person considering this as I’ve seen any number of articles and blogs posted on this topic. In reviewing those posts, I’ve realized that in the end, there are a number of overall pricing models that most people consider being valid.

Personally I like the following:

Utility: sometimes called pay by the drink or pay as you use. There are two models of this payment style the first being cash (which is paid after X time period of use) and credit (which is billed up front).

Subscription: Sometimes also called committed or managed VM’s this model supports you have machines that in the end are dedicated for you. You can use more, but you pay for the minimum every month.

Managed: Beyond subscription, you also pay the provider for IT services, operations and you don’t in the end have an onsite IT staff.

Within each of these pricing models, you can go even further into the various details such as buying by the CPU or buying storage over time. Storage is normally sold on a utility for 30 days, but then after that there is a move towards subscription pricing.

All these models are intriguing in the end. Utility can sometimes add a component called Spot Market where pricing is normally lower than list due to the fact that CPU’s available on the spot market tend towards not being used or leveraged therefore the provider is willing to rent them at a reduced rate until a higher paying customer needs them again.

So does it interest me? For years, I have talked to customer’s about moving from where they are to somewhere new. In every case as I have talked to my customer I have asked them three questions.

1. What applications are critical for your business?

2. What is your mix of COTS (commercial) vs. FOSS (Free and open source)?

3. Do you have a mandate for this migration?

Now back in the day I first started asking these questions it was more focused on cross-platform moves, but the questions still apply. I find that asking number 3 first is the most effective because from there, you can determine what the ultimate goal of this project will be. Cost reduction as a mandate produces a different migration than upgrading the overall organization does.

This is why I think about pricing all the time. I suspect I should start building a calculator that would help my customers as they embark on this journey. Balance security of the solution against the overall need to reduce cost. Throw in a little cloud and in the end sprinkle some magic migration dust and hopefully it will all end up in the cloud. Then we can spend some serious time figuring out the various pricing models. Or maybe in the end my calculator already did that.

By Scott Andersen

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