Two recent stories at InfoWorld got me thinking about how much enterprise pricing approaches are being infused into the cloud -- approaches that are much like the familiar enterprise software pricing of the 1990s.
These pricing models are clearly aimed at the enterprise, not at the small-business market that made cloud what it is today. And they bring the same pros and cons of those traditional software licences.
I’m referring to the following stories:
- Microsoft's new cloud price cuts benefit top-tier customers most
- AWS offers part-time computing at a discount
IT has long used a form of licensing called an enterprise license agreement (ELA), which basically lets you consume as much of a vendor's software as you like for a lump sum of money. Many enterprises view ELAs as a good deal, and they favored ELAs when they could.
The ELA model is available in the cloud in a few guises, despite the pay-for-what-you-use model from the cloud's early days. For example, Amazon Web Services' reserved instances are really virtual servers in the cloud that you own, there for your use anytime you need at a single price.
Amazon's scheduled reserve instances let users request capacity on a recurring basis with discounts of as much as 10 percent. It's a fusion of the pay-as-you-go and all-you-can eat models, in which Amazon gives you a discount for the increased predictability, as it gets maximum efficiency of its resources by knowing when they will be used.
Microsoft, not to be outdone, slices costs for a popular instance type on Azure. The steepest discounts go to those who purchase an enterprise agreement.
But these enterprise-style licenses are complicating the use of the cloud. As someone who does enterprise TCO models for a living, I can assure you that the complexity of these pricing models means that enterprises may have trouble understanding them. That in turn makes it hard to say which is the best deal, and how the enterprises should best consume the cloud services. Even if you understand the implications of the license, what could be a good deal today may not be tomorrow.
That, of course, is also a familiar state in enterprise IT: overwrought vendor contracts whose complexity seems mostly aimed at giving the vendor an advantage through confusion and obfuscation, even if wrapped in the label of customer choice and fit to purpose.
My advice: When you select a cloud agreement, bring in the folks who have proven effective in understanding and negotiating contracts with the Oracles, SAPs, Microsofts, IBMs, and Adobes -- that's where cloud licenses are heading for enterprises.