Real-World Cloud Computing
Marinate SaaS Pricing with Function Points
Complementary way to measure the cloud services offered
By: Srini Sundar Jr
Oct. 26, 2010 04:30 PM
We all know that the SaaS model of Cloud Computing delivers software as a service over the Internet, eliminating the need to install and run the application on the customer's own computer and simplifying maintenance and support.
As SaaS providers grow, especially the providers for the same kind of service grow, this will result in a healthy price war much to the benefit of the cloud consumer, which is the whole goal of industry's research in this area.
So how a Cloud provider prices its consumer as a Cloud & SaaS provider makes all the difference to the bottom line to a cloud service provider in winning.
Common Models Of SaaS Pricing :
Like most IT principles, "There is no One Size Fits All" and hence each of these models have their own pros and cons.
Again the a Cloud Consumers as of today are mostly direct individual consumers and hence these simple models like subscription based accounting works well for them. It is like a phone company charging their consumers based on one or combination of above models.
However as the large organizations started to adopt SaaS model, especially when they out source their activities like Supply Chain or Manufacturing processes on a pay as you go model, these large enterprises require better accounting for the service costs they have been charged by the cloud providers.
These stem from the two aspects.
Function Points :
How the Function Point Compliments the existing SaaS Pricing Models ?
Also the function point is technology independent so is Cloud from a Cloud Consumer point of view, adopting function points to SaaS makes it even more relevant.
How the function point is counted for typical ‘Software Service' ?
EI (External Input): A Service measurement philosophy when a user (Cloud consumer) sends the data to a Application System (SaaS enabled Application). For example a user creates a materials requisition by entering details of the parts needed.
EQ ( External Query), EO ( External Output): A Service measurement philosophy when a user (Cloud consumer) retrieves data from a Application System (SaaS enabled application). For example a user a prints a purchase order.
Take a case of a large enterprise uses a ERP software based on SaaS Model. And organization would like to create and send purchase orders to vendors through the ERP software.
As per true pay as you go model, the SaaS consuming organization would like the billing to be based on the size of the functions served by the SaaS provider. Each time a Purhcase Order is printed an External Query would be added to the consumer's billing based on the complexity of the purchase order printed. For examples some domestic purchase order may have less data to be queried versus a foreign purchase order and hence the size of the functions will vary accordingly.
Function point methodology has well defined means to size the functions based on the complexity of the service that is served, as indicated by the following table.
At the end of the month, If the Cloud provider charges the large enterprise consumer based on the amount of Function Points Served rather than stating that 75% of the Virtual Server X has been utilized by the actions of the large enterprise, would have been a better way of convincing the larger enterprise about the cost of the SaaS.
This article is not a guide for counting function points , please refer to the international function point user group site www.ifpug.org for knowing more about function points. Also the ability of the Cloud Managing platform in linking the service requests to the function points in an automated way is key to this model of SaaS billing.
Latest Cloud Developer Stories
Subscribe to the World's Most Powerful Newsletters
Subscribe to Our Rss Feeds & Get Your SYS-CON News Live!
SYS-CON Featured Whitepapers
Most Read This Week