We talk a lot about opening new revenue streams so service providers can make more money. One area I’ve come across recently as a missed opportunity is pay-as-you-go (PAYG) cloud computing.
Long-term renting is always more expensive than full ownership, but for sporadic short sharp bursts renting provides a more economical approach. You wouldn’t rent a car every day of the year vs. full car ownership, but if you need one for just a week or a few days, or even a few hours then renting wins the cost benefit argument.
The same concept is applicable to our industry and it is a win-win for both the customer and the service providers. For the service provider, they have the opportunity to make additional pay-as-you-go revenues out of their existing IT costs. For the customer, this allows them to optimize budgets with flexibility and also reliability.
Mobile phone providers are a great example of this. In many cases, customers are already retained on a monthly package. Should that customer need more data or minutes, the mobile phone provider scales to allow that user the services they require. Better yet, the mobile phone provider makes more revenue off the service they are already providing to that person.
Service providers are increasingly adopting a similar approach, offering customers more infrastructure when they have bursts of activity. As a result, service providers need a comprehensive approach to metering and billing that can support a sensible mix of fixed, retained services and PAYG billing to accommodate agile scale-up and scale-down computing. For information on various types of billing models, read a previous blog from Tony Lucas “Cloud Service Provider Billing Models Explained.”
Service providers that have the ability to offer fixed and PAYG cloud services and meter and bill accurately for these may find they are in demand. We believe more and more service providers will then use metering capabilities to measure against CPU, RAM, bandwidth or IO, for example, and then bill accordingly. This effectively increases service providers revenues against existing costs.
Forbes wrote an article on Four Ways Vendors Make Money From Cloud Computing and one of those is PAYG:
The approach is “valuable for companies that are at the early stage of ramping up their need for a particular product and anticipate greater future usage,” according to the report.
Service providers need a way to bill according to their business and that includes having the capability to offer PAYG cloud. The thing is that many service providers are not necessarily offering this as a PAYG cloud. Why not? Often it is because the layer of metering and billing on top of the infrastructure is limited. These metering and billing capabilities have not been built into the cloud offer from the start and the integration with existing billing systems is limited.
Our latest version of Flexiant Cloud Orchestrator extends the existing powerful native billing system to now include full subscription billing capabilities. Flexiant Cloud Orchestrator is the only cloud management platform that offers a complete PAYG/metered and monthly subscription-based billing system built directly into the platform.
Read our white paper Cloud Billing Pitfalls and The Nitty Gritty of Overcoming These to learn more about some issues service providers face as they try to bill for the cloud.