June 12, 2013 | Written by: Ethann Castell
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Some people are not aware that there are a number of different pricing models for cloud computing. In this post I’m going to explain the four most common cloud computing pricing models. Understanding these models is important so that you can make informed decisions about which model to choose and also understand how you will be billed under each model. I’m going to finish by looking into my crystal ball to see what the future of cloud computing pricing might hold.
Consumption-based pricing model
With consumption-based pricing you simply pay for what you use. This is most common for infrastructure as a service (IaaS) offerings such as IBM SmartCloud Enterprise. Under these models you only pay for the amount of resources you actually use such as disk space, CPU time and network traffic.
In this model you pay to use the service for a period of time – typically on a monthly basis. Your subscription cost typically allows for unlimited usage during the subscription period. So you pay the same amount regardless of the amount or resources you use. This is most common model for software as a service (SaaS) offering such as IBM SmartCloud for Social Business.
In this model the service is no or low-cost, but features advertising. So the user gets a no charge or heavily-discounted service and the provider receives most or all of their revenue from advertisers. This model is quite common in cloud media services such as free TV provider net2TV.
With market-based pricing there is a market price for a service, like per hour of CPU time. The market price varies over time based on supply and demand. As a customer you can buy the service at the current price and use it straight away. Or you can make a bid to use the service at a lower price and if the market price reaches your price then your workload will be activated and you will be charged at your bid price. Amazon EC2 Spot Instances are an example of market based pricing.
The future of cloud pricing models
As cloud computing evolves, so will the pricing models used. The challenge for the industry will be to make these more complicated models easily assessable and understood.
Over time we may see more market-based systems and even pure auction systems. Other possibilities that could eventuate include price comparison sites, aggregation services, group buying, and a futures market for cloud computing services.
As standards such as OpenStack make it easier to move workloads between suppliers, it’s possible that we’ll also see sophisticated deployment engines which query the market, acquire a service at the lowest price, and then deploy workloads to the lowest-price provider.
Always check the fine print
These are only my ideas and speculations about the future but I think it’s safe to say that the future of cloud computing pricing has yet to be written. Keep in mind that this is an evolving space and changes will continue to happen and often very quickly. And always make sure understand whatever pricing model you are signing up for and that you know exactly what you are going to be billed for.