Disruptive cloud pricing?

Remember a few weeks ago when I published on the blog a long article about pricing from The451 group?

This is a topic that I’ve been looking at for some time and holds a ton of interest for me. Many, many times, when I speak to executives of other IT vendors, they are trying to understand the impact of cloud pricing models on their business.

Think of it like this…..

I am vendor, I am accustomed to large up-front perpetual license fees and cash payments. My customers are implementing private clouds or using public clouds for an increasing part of their business. My customers wants pricing that “flexes” according to usage…. but that’s not my business model.

How do I report financials against “flexible” pricing mechanisms, how do I pay my sales reps, how can I put in place a prudent business plan when I’m not sure what revenue I’m going to make next month/quarter, how do I rebuild my business processes to be able to charge customers “as they use”?

It’s a challenge and not an easy one.

But then think about the customer. They wish to use some management software to manage “a project” which involves them firing up/down up to 1,000 cloud instances for 2 weeks. They go to their regular vendor and ask about this….the vendor tries to sell them 1,000 perpetual licenses….no thanks.

But then a new, innovative vendor comes along and offers their product on a “pay as you use” basis. Yes….you are paying $1 per hour for that cloud instance…..well you are going to pay us an additional 10 cents per hour for the use of our management tools. Makes the choice very easy right?

I have a personal belief for the world of software which is shared by many. Pricing models/licensing capabilities and the ability to “switch on/switch off” at a moment’s notice may well become the killer features of tomorrow. Less about all the thousands of features of the product. If I cannot buy it correctly and switch it on easily….it’s not even worth a look.

Comments are closed.