Pricing the Cloud
There are plenty of newer options out there for cloud services, be it provider or even the ‘type’ of cloud, including cloud-based file sharing. In addition, there are always new cloud-based solutions and delivery methods. What many cloud vendors and managed service providers (MSPs) might be overlooking is that there are also evolving methods of pricing.
Westcon Group NZ, historically a logistics-based company, spent a few years making inroads into the software business and now, as of this summer, entered the cloud business. At least, that’s what they’re calling it. According to Sean Mitchell at Techday, this isn’t necessarily the case.
“Cloud is really the wrong word for it. It’s a move into the business of charging IT by subscription. Some of these subscriptions will replace hardware and software that would have been sold to organizations, while some will be software that may continue to operate on the organization’s premises.”
The idea that Westcon is going half-in on cloud offerings here isn’t necessarily the news of the day. Rather than purely analyzing their delivery method, the important thing to decipher is how they’ve chosen to go about billing.
Westcon will be taking a very different approach to pricing their solutions. The New Zealand-based company has chosen to package multiple services and software solutions into product codes, which can be sold by channel partners in the IT industry.
Adhering to this pricing method would represent a bit of a departure for many MSPs. Most MSPs are used to selling products in the more traditional, transactional sense. Westcon’s approach asks channel partners to sell their clients on a user subscription service in order to bring about more recurring revenue.
Meanwhile, many of these recurring revenue items are sold for such a minute amount of money per user, per month, that the approach has created a system wherein vendors may only be pocketing a few extra dollars each cycle.
If MSPs are really trying hard to onboard new organizations, this approach should benefit some of the organizations greatly. Organizations can easily adjust the number of users that require access each month to ensure they’re only being billed for what they needed to use. However, it’s hard to see any more benefits of this method in how it relates to providers. Even arguing that a few more dollars every month will add up over time, the complex billing structure will likely require enough attention from your accounts/receivable department to make any profit a net wash.
Regardless, the potential for this billing approach to become a trend is something to pay attention to. As end users become aware of this option, they may have a harder time continuing to pay for services they don’t plan to use or aren’t using each month. With 60% of Westcon’s cloud channel partners under two-years-old, we could be looking at an evolution of the reseller. While even Westcon admits that only a small number of their channel partners have been taking this new cloud approach thus far, MSPs still need to be wary that a potential shift in business models could be underway.