Elastic cloud fantastic!

Elastic cloud fantastic! Dominic Smith looks at how usage-based pricing is the key to a truly elastic cloud, and introduces our new guest white paper - SaaS-Based Billing Accelerates the X-as-a-Service Future for Enterprise - by renowned industry analyst, Karl Whitelock of Stratecast / Frost & Sullivan.

Elasticity is often trumpeted as one of the key selling points of ‘The Cloud’, meaning that computing power and applications are available and scalable on-demand, each with an apparent magic dial that allows you to turn up the capacity as and when it is required. For example, with Infrastructure-as-a-Service (IaaS), you can typically ‘spin-up’ a new VM (virtual machine) or increase memory / storage settings within a matter of a few minutes; using Platform-as-a-Service (PaaS) this can be extended to requesting extra operating system features or database applications and these being provisioned immediately; and with Software-as-a-Service (SaaS) this can mean going to the checkout to buy extra ‘seats’ as new users require access.
 
Cloud technology provides this instant gratification of being able to order and consume almost immediately. But the problem faced by many businesses using cloud services today is that they normally end up having to pay for reserved capacity, not for what they’ve actually used. In a truly elastic model, the provisioning of resources, whether VMs, apps or seats, should happen automatically and scale both up and down, with the cost adjusting accordingly. 

So the big question is why is this not happening? 

Other sectors seem to be capable of charging based on usage, so why not cloud services? For example, digital advertising has enabled businesses to target their adverts and pay for the actual number of eyeballs (impressions) or clicks, rather than the cost being based on a historical record of a magazine circulation or how many people are estimated to watch a particular TV programme. You can also look at utilities and telecoms, where customers typically pay for what they actually use, whether that is priced per kWh, per minute or variable by different peak / off-peak periods, for example.

Cloud technology is by its very nature ‘digital’. Usage can be measured accurately. However, somewhere along the line the opportunity to use this information as a basis for charging is being lost or discarded. 

In some cases, this could be down to the business model – if you can convince customers to pay a fixed subscription for something that they gain a variable value from, then great. But just think of all those gym memberships that get started every January but are cancelled in March when members realise they are paying for something that they rarely use. However, more often than not, it comes down to the service provider’s billing and charging technology not being flexible or scalable enough to support usage-based pricing models.

As competition in the XaaS (anything-as-a-service) market increases, being able to introduce usage-based charging models will be crucial in delivering that elastic cloud experience, and SaaS billing solutions such as Cerillion Skyline make this capability accessible to more businesses than ever before. 

Find out more about the business value of moving to a usage-based billing strategy in our guest white paper - SaaS-Based Billing Accelerates the X-as-a-Service Future for Enterprise - by Karl Whitelock from Stratecast, a division of Frost & Sullivan.