Is the price right?

Is the price right?

Summary: As demands for a higher quality of service (QoS) perpetually rise, service providers -- the organizations "exposing" Web services for active use -- will need to determine how to price for their offerings. While there are some companies now (like Amazon) that make Web services available at no charge, it's simply not sensible to think this industry is going to come anywhere near its potential without a revenue model.

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TOPICS: Cloud
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As demands for a higher quality of service (QoS) perpetually rise, service providers -- the organizations "exposing" Web services for active use -- will need to determine how to price for their offerings. While there are some companies now (like Amazon) that make Web services available at no charge, it's simply not sensible to think this industry is going to come anywhere near its potential without a revenue model. Amazon, for instance, currently is relying on an honor system to ensure that developers don't crash its servers.

That can't last forever, as even Amazon now realizes. Which is exactly what George Elby Mathew, Joseph Shields and Vikas Verma from Infosys have concluded. In a recent white paper ("QoS based Pricing for Web Services"), they contend that higher quality demands will require service providers to come up with new pricing strategies. Web services customers, they contend, will want to define service levels along several parameters:

  • availability,
  • accessibility,
  • integrity,
  • performance,
  • reliability,
  • interoperability; and
  • security.

The folks from Infosys have put together a framework that sees Web services of three varieties: Commoditized (high volume, standardized functionality); Channelized (selectively offered on an on-demand basis); and Customized (serving a specific end user with specific requirements).

Their framework also recognizes three different pricing models: Subscription-based (time-bound fee, no limits on transactions); Transaction-based (a value-based approach pegged to transactional instances); and Risk-based (which essentially require the service provider and end-user to share risks and costs associated with building "relationship-specific assets" that meet a buyer-defined QoS).

It's a simple and elegant model -- one that points us in the right direction. Because nothing will really happen in the Web services world over time if there's no money to ensure quality improvements. Just make sure the price is right.

Topic: Cloud

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