Cloud providers’ love/hate relationship with pay-as-you-go pricing
January 15, 2014
Grazed from TechRadar. Author: Owen Rogers.
IT vendors had a golden age before the invention of the cloud. It was essentially a risk-free delivery. Customers required a product, sales would propose a solution to which the customer would sign and commit, the customer would pay upfront, the vendor would start manufacturing (if required), and eventually the solution would be delivered to the customer.
At every step of this journey the vendor took steps to prevent its risk. The contract was negotiated per customer, thereby ensuring the deal was profitable. The customer paid upfront so the vendor didn’t need to borrow money or risk the customer defaulting on a debt.
The contract commitment was made beforehand, so the customer took the risk that the solution might not be used. And finally, the customer was told when delivery would be made, so the vendor could optimize its stock levels…
On demand
Cloud computing changed this. Being able to buy computing resources on-demand, with no advanced notice, no commitment, no upfront payment, public pricing and immediate delivery, means the financial risk on the customers part is negligible. If you don’t consume a resource, you don’t pay for it; if you do, pay only for what you used at the end of the month. This is an attractive selling point for providers…
Read more from the source @ http://www.techradar.com/news/internet/cloud-services/cloud-providers-love-hate-relationship-with-pay-as-you-go-pricing-1207617