Brian Sommer’s review and analysis of cloud app audits gave me pause for thought. While I applaud his efforts at outlining preventative measures I believe we are missing some important basics on this topic.
As Sommer said:
The software audit should become less commonplace as more of the market moves to the cloud. Practitioners of cloud solutions and services know exactly how much disk consumption your firm is using. They know not only which applications you utilize, but even which pieces of code within them are being used. The ability to meter usage of cloud applications exists and will be an integral part of the pricing. That said, the amount of information that cloud providers have has shifted the power balance to them and away from customers.
Despite these knowns, the contracts I most frequently see are written as if the customer is operating in the on-premises world. In that context and with the notable exception of Amazon, I almost never see pricing innovation in the cloud app world in the sense of real metering.
I get for example the need to guesstimate in advance for numbers of user in the on-premise world but I cannot see why that should be necessary beyond preliminary pricing in the cloud app world. Why?
The vendor knows what you’re using anyway. Add users? They see it. Add modules? They buy them. Vendors have the log files to tell them all of these dimensions.
It doesn’t take a rocket scientist to understand the better way of pricing is based on metered resource usage and not the blunt instrument of user counts plus flat module access costs. That reflects what the vendor is standing up for the customer instance.
Although he doesn’t say so outright, Sommer alludes to the storage cost issue. Here I have seen numerous complaints from customers who have been hit with year end charges they had not anticipated. While it may be fair to charge for storage, again, the vendor knows what they’re provisioning on an ongoing basis. Why leave it until year end to hit up a customer? My guess is that it is more to do with hitting vendor revenue targets than it is about customer convenience.
In his SaaS Bill of Rights (PDF), first discussed as long ago as 2009, Ray Wang of Constellation Research argued, among other things that:
Cloud clients often find out after the fact that “upsell” items such as storage allocations do not satisfy actual usage requirements. Once hooked onto the product, ongoing storage costs could prove to be the largest expense item. Vendors should disclose all potential upsell items to clients. Customers should negotiate upsell terms in advance and seek pricing plans from vendors.
Cloud apps provide everyone with a fantastic opportunity to understand usage across different user types but with the exception of a few broad bands such as power user, occasional user or viewer, there is little attempt by the vendors to provide helpful information that would allow for optimized cost based upon real world usage.
I could go on but you get the picture. In short, the claimed benefits of web scale vendor operation do not always trickle down to the buyer and, with the risk of vendor lockin, the deck is most definitely stacked in favor of the vendor.
I believe the real problem stems from a lack of skills among buyers to truly understand what they’re buying into. Part of that comes from the fact that it has proven very difficult to get real world, fully loaded costings for applications usage in the on premises world and especially where extensive customizations are involved. It therefore makes meaningful comparisons difficult to assess over the long haul.
That’s one good reason why Wang’s Bill of Rights should be a ‘must buy ‘ in advance of any contract negotiation. More to the point, I’d prefer to see vendors go back to the drawing board on price configuration for cloud apps. If Amazon can make money in a world of declining cost, then surely the app vendors could follow suit.
Sadly, I suspect I may be whistling in the wind. Until buyers are educated on these critical topics it will remain an uphill hand to hand battle with dissatisfied buyers as the inevitable outcome.
Image credit @fotolia cash Robert Hoetnnik