More consumption based pricing

I saw VMware’s announcements about it’s new pricing model based on consumption of pooled vRAM.

This is a great step forward and exactly the way things will go. VMware continues to show itself as an innovation leader both in technology and business/pricing models.

Customers should expect their other software vendors to follow a similar model, in fact they should demand it.

But, most vendors will hate this model. Why? Because there is no revenue to book or bill until it is utilized.

Vendors must run lengthy sales cycles to “win” the customer’s business, utilizing sales and technical resource. But, once they’ve won the business…how does the vendor pay commission and bonuses?

It needs vendors to think about their business completely differently. It is possible to solve these problems (I have personal experience of doing so) but there has to be a willingness and a desire to do so. This is one of those areas that startups should be able to adapt much faster.

Actually, in my experience, the hardest part of this type of model is actually measuring and agreeing what the consumption actually is.

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