In Lady Windermere’s Fan, Oscar Wilde had Lord Darlington quip that a cynic was ‘a man who knows the price of everything and the value of nothing’. In cloud computing we might all be judged as cynics, as pricing is often presented to us by cloud providers, in a way that almost obscures any understanding of the underlying value.
Let me help here by explaining the two main approaches to cloud pricing:
Honey-pot pricing model – careful you don’t get stuck!
Some pricing strategies rely on having the lowest prices, or perceived lowest prices, for a given product or service to provide encouragement for customers to come through your door. Profits are then made by enticing consumers to make further purchases of more profitable goods and services. Tactic are also often employed to lock you into these more profitable goods and services in order to offset the cost of the initial inducement.
Things to look out for:
- Contractual lock-in: some global IaaS providers will hold your data hostage until you have paid all ‘post termination costs’, and any other amounts due. They may also set a minimum cool-off term of 1 year, with early termination making you liable for a full year’s charge. In addition, they may explicitly state that termination charges will apply, but are often not particularly transparent about what those charges might be.
- Technological lock-in: Some global IaaS providers attract you with low entry costs for compute and storage, but as soon as you start to integrate to their APIs or develop to their proprietary feature sets then you will find that you are becoming locked-in, and that applications cannot be migrated to other providers without considerable application re-writes.
- Add-on pricing: Entry level pricing on basic services may be attractive, but you are often stung by unanticipated extras, or the need to upgrade to more expensive options to get what you really need. Such ‘hidden’ costs can include charges for bandwidth, IO requests, VPC/VPN gateways, production-grade support, currency hedging, etc. Then there are the indirect costs of support (where you are left to navigate complex integrations and options) and accreditation (where it can take far longer to achieve assurance for sensitive workloads).
- Client value based pricing model – satisfaction is the only lock-in: This strategy is focused on giving the client exact wants, and indeed needs, to ensure that it is always satisfied and would therefore not wish to go elsewhere. Typically, pricing is not distorted by the need to offer initial inducements, nor is there need to lock the client in. Indeed, open contractual and technological platforms are valued by clients as they provide an assurance that migration would be simple and easy if service levels ever fell. At the same time the client typically experiences higher levels of service on a sustained basis as the provider knows that the client can always walk away if unsatisfied. Profits are made by offering higher value or more specialist services that the clients value and are willing to pay a premium for (such as enhanced security).
What this looks like:
- There is no lock-in as clients don’t value this: typically, this means that you can terminate at will without any form of penalty (in fact, at UKCloud a client can simply stop consuming the services and export their data – the bills will simply stop).
- There is a bias towards open technologies: the flexibility provided by open source and open standards is valued equally by both the provider and the client.
- Pricing is transparent and extra service is often included: the provider has a vested interest in ensuring that the client is helped and supported every step of the way and often provides this at no extra charge – at UKCloud a Technical Account Manager is provided for FREE to help every client. At the same time pricing is transparent, as this is what clients want, and competitive because clients don’t want to pay over the odds.
In the real world, what does this mean?
Here at UKCloud we very much adopt the second pricing model. Our commitments to open standards and to client satisfaction are legend. We truly believe that we ‘compete on price, win on value’. Click here to take a look at our price savings.
Once you focus on real world requirements and include the ‘add-ons’ that aren’t always made obvious by others, a competitive pricing analysis shows that we are clearly competitive with the likes of AWS and Azure and in many cases, we are clearly considerably cheaper than the global generalists.
As a specialist that only focuses on the UK Public Sector we are also able to beat our global rivals on value:
- Specialisation: specialists that understand the way that their clients operate by focussing on what they need, and can deliver truly excellent service are always going to win against global generalists – as we have been able to do in cloud services for the UK Public Sector.
- Value Networks: not only are we specialists in our market, but we also work with an ecosystem of 250 partners that are also specialists in the markets we serve. Together we are able to come together on any client engagement to form a dream team of best of breed specialists that directly meets the client’s needs.
- Client value: while we provide a set of truly excellent technologies and an award-winning platform, it is always important to focus on customer needs over technology. In addition to being maniacal about customer service, we are continually refining our platform in response to client needs, and then there is the extra innovation on our platform which comes directly from our ecosystem of partners and the applications and services that we host.
With the G-Cloud framework the government has provided the pitch ‘the level playing field on which was can all play’ and we provide the dream team ‘the best of breed specialists – each at the top of their game – that come together and work as a team to deliver the result that our clients need’.