Cloud Cost Models Made Simple

Cloud Cost Models can be termed as a method which is used by firms like Microsoft Azure or Amazon web services to charge you for all the cloud services offered by them in the process. While we understand that most of the big companies in the world have now moved to cloud for data storing purpose, it’s more often been used for tying workspaces and creating an efficient network of computers. Despite all its benefits, cloud computing is very expensive and if you want to run a viable business, you need to figure out how you are paying for the service. To help you out, this blog will look at the various models in the same regards. 

Factors influencing Cloud Cost Models

Cloud providers are undoubtedly trying to maximize their profit, whereas the customers of such services are trying to get the best service at the lowest costs. A company can take steps to reconcile these interests by understanding what impacts costs. Among other things, the length of the contract between the provider and the consumer, lease period, the up-front cost of the resource, the quality of the service, the duration of the service and the cost of maintenance will impact the price you will be paying for the same. These determine the quantum, let us look at pricing models.

The Various Models: an Overview

There are various schemes you can opt into when subscribing to cloud computing services. These schemes can largely be divided into two main heads. They are fixed pricing models and dynamic pricing models. Under these wide heads, there are other schemes. In the fixed pricing model, there is pay-per-use scheme, a subscription scheme, a hybrid scheme and a resource based scheme. Similarly in Dynamic pricing, there is a cost based model, a value based model, a competition based model, a customer based model and a location based model. Now let us look at each of these models in more depth.

1.      Fixed pricing models

Also known as static pricing, this method is used by the giants’ o the industry such as Microsoft Azure and Amazon Web Services. The characteristic feature is stable prices over sustained periods of time and consistent pricing for all customers. The pros of this model is that you know what you will be incurring and you can plan accordingly. The cons is that you have no bargaining power and demand has no effect on this pricing. As a result, you might end up over paying for the services you are availing. There are various types under this model. They are:

1.1.Pay-per-use

This is a model in which users pay for what they use. Its cost based. Costs are computed at regular intervals and consumers pay for what they have used in that period. There are essentially costs under two heads. Firstly the data consumed and secondly the service provided. The data used is charged in hoe many TB was used every month or year as agreed upon in the contract and the service cost is charged based on type of consumer. Smaller enterprises generally pay less but avail less support. In any case, the prices are predetermined and do not change.

1.2.Subscription Model

In this model the payment is based on predetermined usage. Service providers such as drop box use this pricing model. Here, you pay for a specific amount of data and a specific set of capabilities and features. Based on this, you choose a package which has a fixed price. You can use only what you have paid for and it does not allow you to use beyond this. Generally one pays based on the amount of Data required. The higher the package, the more the features that are available. This gives you control over your costs and helps avoid overspending.

1.3.Hybrid Model

As name suggests, this is a mix between both the aforementioned models. Usually, the first scheme used here is a subscription scheme. You choose how much data you want to use and what features you want. As long as you use just this much data, you will not incur and extra costs. Use beyond this and you will be charged as per your usage. The distinction here is that you may use beyond subscription limit in this model, whereas in a subscription model, you cannot do so, In Hybrid model, you may, but will be charged additionally for data used.

1.4.Resource Based Model

In a resource based payment model, users pay for the resources they have used only. Microsoft Azure used this scheme of pricing. Here, the service provider accounts for the number of cores used etc. to determine the cost of the service. All in all, there might be some small variations within these models based on the company who is providing the service. But they more or less all fall within these models of usage itself. You must look at how a company prices its service before determining which provider to go with. This can significantly affect your cost of operation.

2.      Dynamic Pricing

A dynamic model charges different customers in different ways. The pricing is negotiated before the commencement of service and carried out accordingly. Consumers have bargaining chips here and they can drive down the price. In determining the price, service providers look at the cost they are incurring, the value that they are providing, the price of competitors, the willingness of the consumer and maybe even the location of the consumer. These pricing models are often provided by smaller companies with whom you can have personal contact and is suitable for similarly small companies, whose requirements might not be very tasking.

Conclusion

Most of the companies in United States and the world around have understood the value that is provided by cloud based computing. Having decided to move further worth it, it is important to know the various options they have in terms of pricing. This is a consideration that helps decide which provider to select initially and also a choice that determines the financial viability of the venture. Hence, one must tread carefully and consider all aspects of the service before selecting a service and a plan within the service as well. This may be a make or break for your company’s viability.