The Price Is (Not Always) Right

Published on in Uncategorized by Nick Davies

As cloud computing becomes ever-more pervasive, costs are falling at an increasing frequency. The cost of hardware is coming down, the choice of open source software is growing, commercial SaaS applications come with ever-more flexible pricing models and tools that automate most cloud admin functions are now commonplace. So, as cloud platform costs fall in this increasingly competitive market, should cost be the principle deciding factor when choosing a cloud provider?

Cost vs minimum contract terms

For the most-part, it is for organisations that are transitioning their business to public/hybrid cloud services models, but when choosing a Cloud Service Provider, short-term cost savings should not be the only deciding factor for IT buyers.

  • SLA (Service Level Agreement): Customers should look closely at what they’re getting when buying cloud services; what guarantees there are for performance and uptime, and what punitive clauses exist.
  • Contract Terms: Check whether the minimum commitments and renewal terms are acceptable, and what happens if the service is cancelled early.
  • Payment Terms: Check how and when payments should be made.

You should examine the SLAs and contract terms that your CSP provides you with, to ensure they are fit for purpose and not watered down, (for example, to a freemium level), to match an introductory service offer or rate. You should also check the service availability and performance criteria, with support call priority, call to fix resolution-times and financially guaranteed uptime, following a full escalation process for exception management.

Contract terms are typically structured as a fixed-term, with no cancellations or early termination fees, or as a rolling month that can be cancelled at any time. Fixed-term contracts are often evergreen, whereby you auto-renew unless cancelled with an appropriate notice period, or shift to a rolling month.

Customers should be looking for a long-term relationship with their CSP, who in turn will need to realise a return on the capital investment they’ve made in cloud infrastructure so that they can continue to deliver a quality service. Fixed term contracts provide reassurance for both parties, but however attractive the security of fixed-term contract may be, they’re not always sensitive to market competition and CSPs must offer competitive contract terms and a quality service. Increasingly, CSPs are offering fixed term contracts that incorporate mechanisms to manage market pricing movements – but remember: prices can go UP as well as DOWN!

What is most commonly disruptive to the market place, and that offers real value to the customers is the Utilizations or Usage billing model.  Usage-based billing models (much like those employed by energy suppliers), charge customers only for the services they consume, and can include variable rates (by time, feature and even functionality) similar to off peak usage).

One size doesn’t fit all

Many traditional IT resellers that want to offer cloud services to meet customer demand, don’t have the economies of scale to invest in the necessary hardware or tools to compete with established cloud service providers. Some can only really be competitive through cutting corners, like not building in essential service features, such as high-availability (fail-over redundancy), a managed approach to migration, the right management facilities or even helpdesk support.

Other, more forward thinking IT resellers form strategic partnerships with an established CSP to offer a wide range of “white-label” cloud services that are fully designed to meet business objectives. These white label services will also offer competitive, (and most importantly), flexible pricing agreements alongside an eco-system that provides organisations with access to the latest cloud applications and bundles by helping them find other channel partners with suitable experience, knowledge bases and other complementary products or services that may be needed.

Traditional IT resellers that are looking to incorporate a cloud offering to their customers, should look for a CSP that provides them with full sales and marketing support at no cost, alongside technical training on how to plan, implement and support cloud and hybrid solutions that bolt onto their existing offerings. These complimentary services create real value to both the IT buyer and the reseller, both in the short-term and as cloud technologies develop.

Developing value at the right price

ISVs that want to take advantage of the changing IT landscape by gaining instant access to cloud application lifecycle management & enablement should look for a CSP that offers a partner program just for them. One that offers ways of monetising their products to maximise utilisation billing opportunities and that aligns their products, solutions and services with the core offerings of a thriving reseller community. Helping ISVs to gain access to resellers with customers that require cloud-based SaaS solutions hosted in a multitenant or public cloud in this way helps to maintain a stable and profitable channel and makes great commercial sense to IT buyers.

Are you an IT buyer that wants to get the very best value from the cloud but are worried about long-term contracts?

Does your business need a cloud service provider that can offer more than just hosted desktop solutions?

Do you want to find out more about cloud ecosystems and how they bring even greater value from the cloud?

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