Pay-As-You-Go Web Services - Next Phase of Web Services (
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The next
phase in the Web services evolution, though, is migrating from the heavy
subscription-based services to the pay-as-you-go model. As Dancizger says,
there is a growing demand for accountability within the enterprise, and that
often means justifying how much is being spent where. Switching to on-demand
pricing, he says, will give enterprises a better sense of what they’re true
application and infrastructure utilization rates are, where they need more and
less resources, and more accurate budgeting. “This trend is forcing the service departments within the organization
and service providers to put the processes in place to align services with the
business,” he says.
It’s a wonderful vision that could save
enterprises millions of dollars potentially, but not one that anyone is racing
to implement. Digital Fuel, like similar applications, are more reporting tools
that provide deeper and broader utilization intelligence under a single pane of
glass. While it’s possible to use Digital Fuel to measure customer utilization
and charge by the sip rather than drinking from a firehouse, James Jimenez says
the market just isn’t there yet.
“It depends
a lot on the maturity of the customer. The customer may have a built in
mechanism to allocate IT cost and may not be mature and doesn’t integrate with
anything external,” says Jimenez, director of business intelligence at Siemens
IT Solutions and Services.
Siemens uses
Digital Fuel internally and externally for service-level agreement compliance
reporting. Jimenez says the tool works very well for measuring multiple,
complex metrics that provide the service provider and its customers with the
intelligence they need to make strategic IT decisions. Transitioning to a pay-as-you-go
model, he says, is the next step.
“We haven’t
deployed it in that matter, but it’s certainly been discussed,” he says.
Micropayments
and pay-as-you-go service pricing has the potential to save enterprises money,
but they too could be opponents to changing the pricing structure. The current
subscription-based, tiered pricing gives enterprises consistent pricing by
which to budget and allocate funding, says Burton Group analyst Craig Roth.
“Every
company has a budget planning season, and you go through and budget what you
expect is a fix service cost,” he says. “It helps them by knowing they have an
exact figure to work with.”
And don’t
expect the Web services companies to willingly start offering variable pricing.
The value of offering Web-based services is the sale of regular, fixed
subscriptions that create a recurring and predictable revenue stream. Roth said
Wall Street will hammer any public company that can’t accurately forecast its
revenues, as happened with Google last week when its quarterly performance fell
below expectations.
Numerous
technology, business thinking and market obstacles stand in the way of a
broad-based pay-as-you-go service models taking hold, but Dancziger believes
the day will come when businesses will force IT and service providers to adopt
a more flexible approach to pricing services based purely on real-time
utilization.
“The businesses units are already coming to IT
and saying that if they don’t put in place processes and products that are aligned
to the business, they’ll go to someone more willing to align to the business
and they’ll win the business,” says Dancziger.