Traditional software publishers have not yet moved into the cloud, especially on their pricing model, which is not suited to the principles of capacity on demand and elasticity.
The Cloud has revolutionized IT for several years now with recognized and pure player publishers (Saleforce.com, Amazon Web Services, Google …) or historical players who have decided to switch to the Cloud to enrich their service offerings and especially not not risk ending up on the downside of this revolution in their sector. But a problem remains as soon as the proposed solution enters a hybrid logic, application On Premise installed on a Cloud environment.
Today, the fact is that most of the historical players have not yet adapted their business model and therefore their pricing to the expectations of their customers. Indeed, more and more companies have IaaS type facilities and therefore wish to equip themselves with solutions from the traditionally On Premise market to install them on these infrastructures. Of course, publishers are always quick to answer that they have the ability to provide different levels of supply to meet such needs. Whether it is to provide the software setup or a virtual appliance both to be installed by the client on its IaaS environments, the publisher thinks to have solved the problem of the client, let’s say that on the form it seems to answer, but on the bottom there is still some way to go.
What are the benefits of IaaS solutions?
Let’s go back on the basis of what an “Infrastructure as a Service” or IaaS. These infrastructures bring a level of flexibility and quality of service that is almost impossible to achieve without oversized means, which can be done by major players by pooling the costs of all their customers and by creating new innovative infrastructures. By doing this, the pure players are able to price their services with high value added to the fair and offer real models of pricing on demand. Thus you will only have to pay the exact time of use of the service you consume (server, RAM, processor, bandwidth, disk space …).
Take a concrete example, your business needs to run an annual treatment that requires a lot of computing power, if you have an infrastructure of its own, you will need this power at the time of execution of this treatment. The fact is that you will have invested in this power and it will therefore be available at all times even if the rest of the year, every day you only need a small percentage of this power. You will therefore have to cover the costs associated with this occasional need throughout the year, whether for hardware, especially servers, RAM and processors, or for software related to execution. of these treatments which are invoiced according to the power of the machines on which they are installed (number of processors,
Now take the same case on IaaS, at the time of the execution of your treatment, you will have temporarily provisioned, and with a few clicks on the interface web of your supplier, the power necessary to the execution of this one. You benefit from what is called the elasticity of your infrastructure, its ability to adapt quickly, even dynamically, to your needs with a cost accordingly. In this case, the cost of your punctual charge will be calculated according to the use you make of the infrastructure at this very precise moment, but the rest of the year you return to a pricing adapted to your use real. In fact when we talk about IaaS, it is only the infrastructure that you will pay on demand not the software that will have been used to perform this treatment,
As you will have understood, when you choose IaaS you decide when you want it, or you have programmed this decision making, that your infrastructure adapts to your needs and especially you only pay according to the actual use you have of this infrastructure. As a bonus, you no longer need to worry about the obsolescence of your equipment or its maintenance in operational condition, and all this in highly secure environments.
Now let’s talk about software vendorsRemains these historical editors of On Premise solutions, able according to them to turn on cloud mode, allowing you to benefit from the power of capacity on demand … but unfortunately not the pricing that goes with it. Take the example of the treatment that runs once a year and for which you use the power and elasticity of your IaaS to handle this difficult passage, your favorite editor will not be able to adapt its pricing to the maximum power of which you have need a few hours in the year.
At the end of the day, whatever you’ve earned with your infrastructure, most publishers do not know how to earn it on licensing costs. So of course, some of them will propose after long hours of negotiation to make sure to help you pass this complicated course when it is an isolated treatment for a peak once in the year. But if you have, like many companies, several treatments of this type, see monthly and not only annual, the negotiation becomes at once much more difficult.
Let’s take a moment from the previous example, which may seem anecdotal, and take the case of an intermediation platform (ESB, API Gateway …) that will meet the same types of issues with peaks of activity related to a certain seasonality or to marketing campaigns inducing a large and punctual solicitation of your infrastructure, you will encounter the same problem with your publishers. Today, there is virtually no option to adapt the pricing of your software to your actual need for use.
Threats underway for these publishers
The challenge for all these publishers and to take into account a real threat, that of new entrants on the market of the software or pure player whose service offer will be natively compatible with the elasticity and the use on demand IaaS platforms. Just look at what’s happening in Amazon’s marketplace, for example, to find publishers who offer software solutions that are priced with the level of service provided by AWS. Worse still, AWS services are growing at a tremendous rate, every month new services are created, existing services evolve strongly and refer to the place of well-established actors. Competition becomes tough.
Take the API Gateway-type solutions whose leaders are today historical players in the software market and who do not offer any pricing offer adapted to an IaaS environment. In this niche Amazon has released a new API Gateway service whose pricing model is based on your call volume web service. It should be noted that this new service still young in the AWS environment does not currently meet the same functionalities as those of the leaders, but at the speed Amazon is advancing, it’s a safe bet that in a few months this option will become more than relevant, and above all much more economical than a choice of a traditional publisher.
Finally this subject will become more and more essential for software publishers who still play on their name and on their loyal customers to not move too fast. However, even companies as famous as Kodak who did not believe in a major evolution of their sector ended up being left behind. The difficulty lies in the ability of major players to reform to come up with a service offer that meets the expectations of demanding customers who do not want to spend locked-down contracts over years at prohibitive prices.
These same customers are now looking for purchasing models that allow software load variability rather than fixed-cost models that also lock firms into long-term commitments. In a world in the midst of a digital transformation in which no one knows what tomorrow will be, let alone what solution will best meet tomorrow’s new business goals, it becomes necessary for large software publishers to envision a profound paradigm shift. It is at this price that they will survive and allow their customers to continue to innovate and transform themselves to remain competitive.