by Stephen White | February 20, 2017 | Comments Off on Paying for what you use – too much to expect from SaaS?
By definition cloud computing should deliver an elastic solution which is metered by usage, thus as the organization needs to increase or decrease consumption, that is measured and costs adjust accordingly.
Whilst these attributes are considered synonymous with cloud computing, in practice they are largely absent from SaaS offerings which being core within the majority of PaaS and IaaS.
In an era where more organizations have SaaS enterprise contracts due for renewal, a degree of disillusion and dissatisfaction with SaaS commercials is surfacing. Such a view, or emotion, is an outcome of a sequence of actions, whereby initial commitments to SaaS are made and incentivised by initial contract discounting, however on renewal prices escalate.
In cases price protection will be integral within the initial contract for multiple terms, however that protection in turn will regularly be conditional upon maintaining up-front quantities. Accordingly clients trade price risk for any scope to scale down commitments, thus losing elasticity benefits.
As the SaaS market matures will this sequence continue? Or will an alternative equation prevail? Perhaps. An alternative is emerging however. Whereby consumption billing based on active usage enables a stronger match with the notion that cloud computing will enable matching of costs with value.
There may be a series of influences behind SaaS active usage billing emergence.
- Firstly, client demand for a better deal, arguably driven by large enterprises.
- Second, greater use of capable SAM tools and growing SAM maturity provides awareness of wastage and shelfware, whilst enabling predictability of future consumption based costs.
- Third, competition, new market entrants or disruptive providers choosing to use active usage to differentiate and dislodge incumbent providers.
- Fourth, SaaS available through marketplaces extends the consumption based model of the platform which it resides.
Gartner clients wishing to investigate the potential of SaaS consumption and active usage billing for the enterprise should see Consumption-Based Pricing Is Emerging From Leading SaaS Providers, but Beware! For service provider clients, see our research published this month addressing the same subject SaaS Active-Usage Billing Provides Opportunity to Disrupt Software Application Markets
Read Complimentary Relevant Research
Cloud Computing Primer for 2018
Cloud is evolving from a market disruptor to an expected approach for traditional and next-generation IT. Our research offers actionable...
View Relevant Webinars
Calculating Cost of Ownership for Cloud and On-Premises Data Management Platforms
Cloud and dbPaaS represent a different financial model for procuring and consuming services. This presentation explores the key differences...
Comments or opinions expressed on this blog are those of the individual contributors only, and do not necessarily represent the views of Gartner, Inc. or its management. Readers may copy and redistribute blog postings on other blogs, or otherwise for private, non-commercial or journalistic purposes, with attribution to Gartner. This content may not be used for any other purposes in any other formats or media. The content on this blog is provided on an "as-is" basis. Gartner shall not be liable for any damages whatsoever arising out of the content or use of this blog.