The Complex Web of Cloud Pricing

Printer-friendly version

One of the most popular advantages of using cloud services is a shift to an OpEx payment model that allows organizations to purchase the right amount of services to best fit their fluctuating needs over time. On the surface the pricing model seem flexible, simple, and appealing, but digging deeper reveals a complex web of pricing and feature sets that makes it almost impossible to reasonably compare vendor offerings. 

To gain an understanding of how to address the problem, it helps to learn a bit of the history of cloud services. Cloud services in general are a new type of product with little precedence for pricing models, so attempting to map them to customary service models is extremely difficult.

The cloud market has the classic long tail business model profile. A few major providers such as Rackspace and Amazon own 80 percent of the market and offer general-purpose services that appeal to a mass market. The remaining 20 percent is fragmented into a myriad of niche vendors, each of which appeals to tiny market slivers. 

Unlike traditional IT services, the cloud market grew out of a consumer- and small-business-oriented services focus. These customers are traditionally highly fragmented and often willing to sacrifice features in exchange for a lower price.   

SaaS Pricing Models
SaaS services in one form or another have been around for more than ten years and had a chance to mature. While there is a myriad of confusing SaaS services available for every possible need, the pricing model for most SaaS products essentially boils down to a price per seat for a given set of features. 

This model is appealing to smaller companies that want to purchase feature-rich enterprise services but want to limit their investment in capital equipment and systems. However, because of the linear pricing structure, large enterprises cannot take advantage of the economies of scale.

IaaS Pricing Models
Unlike SaaS products, IaaS services in their current form have only become widely available in the past five years or so. The cloud computing industry is changing constantly, and as IaaS providers listen to their customers and understand the market, many readjust their prices. Rapid fluctuation in pricing is common throughout the industry. For example, Amazon EC2 alone has changed its price twenty times in the past six years.

To make matters worse, the IaaS market is emerging out of a well-established model of hosted, managed, and data center co-location services. Some of the vendors still price their IaaS services using the older model. Customizable services from whole servers to bits and pieces of storage, CPU, or memory can be purchased by the minute, the hour, the month, or the year depending on the vendor.

In addition, there are a myriad of vendor differences in up-time SLAs, firewalls, load balancers, network connectivity options, the capacity for bursting, or high availability features such as the ability to scale across data centers and multiple regions. Attempting to compare vendor offerings with that number of variables is an exercise in frustration. 

PaaS Pricing Models
Sadly, PaaS pricing models are even less developed than IaaS models, which were at least based on similar but older data center services models, since the industry can’t even agree what PaaS is yet. Pricing models vary wildly from a per developer seat license, to a per VM instance, and all the way up to a traditional corporate license.

Printer-friendly version

Something to say? Leave a Comment

Beth Cohen

Beth Cohen is a cloud strategist for Verizon, helping to develop cutting-edge products for the next generation. Previously, Beth was president of Luth Computer Specialists, an independent consultancy specializing in cloud-focused solutions to help enterprises leverage the efficiencies of cloud architectures and technologies, a senior cloud architect with Cloud Technology Partners, and the director of engineering IT for BBN Corporation, where she was involved with the initial development of the Internet and worked on some of the hottest networking and web technology protocols in their infancy.