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Saturday, November 14, 2009

The Cloud Monetization Paradigm.

Too often when large enterprises begin to look at number justification to move onto the cloud, many seasoned executives are struck by the limited enterprise class billing choices that the model is able to provide – Granted this is an evolving space, the urgency in getting this done can’t be understated.

Let’s look at the basics :

The Advantages of cloud are far too well known :

-Pay subscription on usage
-Enables usage of the current version and focus is on continuous service
-Economies of scale and anytime, anywhere, ubiquitous use

There are clear upside to the whole cloud horizon when we are able to make determinations on issues around providing options to customer /providers in terms of

-Flexible pricing – spectrum from subscriptions to pay-per-use
-High Volume – Low touch sales model
-Elastic scaling – ability to scale up and down

When existing business computing models gets disrupted and order of magnitude business performance improvements are looked at, paradoxically the cloud paradigm offers both unmatched opportunity and competitive challenges for software and services providers. But seen from a customer perspective, too often the thought chain gets dimmed when the actual issue of metering and billing gets reviewed by customers. It transpires that as the mindshare of cloud picks up among the IT buyers and the various players begin to align we see that too often the locus of value creation is shifting within the Cloud ecosystem and with it the balance of power between service providers and channel partners. This is huge change in the ecosystem. The reality is that successfully transition to SaaS will affect every aspect of the company, including key operational systems such as billing and payments. 

The complexity in providing multiple levels of flexibility to customers in metering and billing are far too complex in real life and warrants careful determination of choices. Billing, administration and related marketing capabilities are essential in meeting the new operational challenges of a Software-as-a-Service business. More often than not the new models inject potential conflicts/role clarity amongst service providers, channel partners and in the process as Saugatuck brings out raises very fundamental questions like :

-Who owns the customer?
- What is the best way to compensate channel partners?
- Is the partner paid a commission for managing a customer that the vendor owns?
- Or does the partner own the customer and pay a revenue share?
- Can the partner up sell its own offerings and keep it all?

Obviously there are many possible answers to these questions and some answers are beginning to appear and in this direction the landmark study helps finds answers by taking a detail oriented view to evaluation options. Emergence of cloud based billing solutions reflects the fast pace at which things are evolving and the report notes that Cloud billing solutions have targeted Web providers of content, online gaming, virtual worlds, media and entertainment – primarily consumer offerings – as well as SaaS, SaaS enablement, PaaS, business media, business content and other online business solutions. On-premise solutions have moved into a variety of other verticals and segments, such as media and entertainment, financial services, transportation, SaaS, SaaS enablement and Cloud Infrastructure.

I think we will get an ideal monetization view across the cloud ecosystem in a few years from now but for early adopters we need more choices and more analyses and here’s one helping the progress.

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