Cloud optimize

A true cloud model vs. 'cloudwashing' by vendors

Thoran Rodrigues says that while true cloud software is necessarily SaaS, not all software sold as a service really fits into the true cloud model. What are the distinguishing characteristics?

The definition of software-as-a-service (SaaS) predates the rise of cloud computing, and it relates to the delivery of software from a centralized data center and its access by end-users, through some sort of "thin" client. It's easy to see how, in a cloud world, the thin client is the web browser, and since software is web-based, it is necessarily distributed from a server to somewhere else. I believe, however, that the similarities between the cloud-based software model and this basic definition of software-as-a-service have led to a generalized misconception that every piece of web-based software is a service, and that has allowed vendors everywhere to "cloudwash" their offerings.

Mixing terminology

Cloud computing is composed, in a very broad sense, of three service layers that can be exploited by end users to achieve their computing needs. The first layer is infrastructure-as-a-service, or IaaS. From the standpoint of the user, this is the level with the least amount of abstraction. IaaS vendors offer servers and other equipment in a managed, pay-as-you-go fashion, and while assurances about hardware uptime are made, the end-user is ultimately responsible for any software-related downtime. Examples of companies that are positioned on this layer are Rackspace and Amazon.

On the second level we have platform-as-a-service, or PaaS, vendors. These companies offer an abstraction layer on top of the basic computing infrastructure for tasks such as storage or messaging, so that the end-user can accomplish certain computing-related tasks more easily. Examples of offerings on this layer are Microsoft's Windows Azure, or Google's App Engine.

Finally, on the uppermost layer of the cloud, we have software-as-a-service, or SaaS, companies. These are fully featured, web-based software offerings that are sold to end users as a closed package. There are literally thousands of different companies in this space, offering everything from web-based e-mail and calendar to ERP solutions. Even though all cloud-based software is necessarily software-as-a-service, the opposite may not always be true.

What's in a name

The basic definition of software-as-a-service is concerned mainly with how software is distributed, making no distinction as to how the software is priced and sold. This means that a vendor could charge annual licensing fees from customers, just as what happens with traditional software, and still get labeled as "software-as-a-service" as long as the software followed a web-based model. In fact, there are several "cloud" software solutions that are sold this way: the annual fee is disguised as a monthly payment with the possibility to opt-out along the way, and customers are happy.

On the IaaS and PaaS layers, services are charged on the basis of usage metrics that make sense for the end user. Servers are bought based on how many CPUs and memory you'll use, and for how long that server will be active. For computing platforms, you pay for the different tasks executed, such as storage transactions and space, messages sent and received, computations performed, and so-on. This establishes some basic premises for the cloud: that systems can be scalable and that control over expenses can be fine-grained. These premises don't hold true for software offerings, however. There are still several vendors that insist in charging monthly or per-user (or both) fees. This is just the replication of the traditional software model using the web as a new distribution channel.

To truly follow the cloud model, software should be sold based on usage metrics that make sense to the end user. If I'm using e-mail, charge me for the volume of messages that are sent, received and stored. If I'm using an office suite, charge me for documents (or spreadsheets, or anything else) created and shared. By moving away from the traditional pricing model, companies can build a stronger value chain, where products can be created using others as a foundation and everyone can earn money.

While the service model is related mainly to the distribution channel, the cloud is an economic model. It encompasses not only the ideas behind the service model, but also other ideas, such as transparent scalability and always available resources. We can see that, while all true cloud software is software-as-a-service, not all software sold as a service fits into the cloud model. By understanding these differences, customers can better choose their cloud providers.

About

After working for a database company for 8 years, Thoran Rodrigues took the opportunity to open a cloud services company. For two years his company has been providing services for several of the largest e-commerce companies in Brazil, and over this t...

4 comments
OlaSun
OlaSun

...I do believe that comparing pricing-per-minute with pricing-per-usage is somewhat unfair, since the princing-per-minute model is about as blunt as a fixed price model, though even more obsolete. I think that a pay-per-use model [i]could[/i] be really attractive since it, just as Thoran Rodrigues says, lacks barriers [i]and can be really transparent[/i]. The advantage comparing to pay-per-minute is that it is very easy to achieve a close relation between costs and efforts made, or even better costs-to-(expected )performance. This could make work made with support from the cloud services more focused and carefully prepared (just think about how much unnecessary (not business-driven) document production that is performed in this very minute... ;-) ). BUT - there are [i]strong requirements[/i] on the development of the pricing models though, since they must be mirroring the performance and result that the customer (and its customer) expects - and this demands numerous monitoring and interviewing of the customers, with ideation and iteration as vital disciplines in order to get high quality pricing models in place. Thorough analysis of this [i]could[/i] result in hybrid pricing models for messaging functions for instance, while production of advanced spreadsheets with higher value to the customer's customer is priced in another way. It's quite interesting to make a parallel to other branches - where all sorts of tool investments always should be compared to short term rentals or leasing contracts, instead of making heavy investments in poorly used equipment, which most often results in increased overhead and thus increased cost for the end customer.

mwalters1984
mwalters1984

I'm not sure if I'm buying into your idea of abandoning the "unlimited" based pricings. Charging per eMail, per N of used storage, per document... that all just sounds like going back to the AOL/Compuserv models of charging per minute. I think organizations really need a (relatively) fixed pricing model, so they can budget accordingly. I couldn't imagine getting call from AP because so and so created 300 documents this month, and the bill went up by a ridiculous amount.

thoran.rodrigues
thoran.rodrigues

I agree with you that a fixed pricing model allows for easier budgeting. At the same time, it can act as a barrier for smaller companies. A company may be unwilling to sign up for a service that it will only use eventually due to perceiving the monthly cost to be unfair. I believe that the pay-per-usage model works as long as the price is fair and it also allows users to better figure out what is the best deal for them, since it invites comparison. It creates a base unit for the price that makes sure everyone is on the same page. Maybe the solution lies somewhere in between: a hybrid model, where there is a fixed price that covers some usage, and an extra when that usage is exceeded.

kraabeasa
kraabeasa

I completely agree mwalters1984, it just sounds to me like a way to nickel & dime consumers into paying more for for services they already get with a one time fee.