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Scalable Pricing in a Scalable World

Nati Shalom: Need scalability in the new dynamically-scalable world? Don’t forget pricing

Nati Shalom's GigaSpaces Blog

In most discussions about scalability, we often approach the topic as a pure technical/architecture challenge, and ignore cost issues. The problem is that when we truly scale our application, and want to benefit from economies of scale, we're going to end up with scale limitations, not because of technical issues, but because of the pricing and licensing models.

In most discussions about scalability, we often approach the topic as a pure technical/architecture challenge, and ignore cost issues. The problem is that when we truly scale our application, and want to benefit from economies of scale, we're going to end up with scale limitations, not because of technical issues, but because of the pricing and licensing models.

Scalable pricing

Scalable pricing means a pricing scheme that provides the benefits of economies of scale. Below are pricing models commonly used for software products and how they fit in the new dynamically-scalable world.

  • Free - while this certainly sounds like the best option (and may very well be) the customer needs to be aware of the following:
- The free license of a software product typically does not include support: not an option for most mission critical applications.
- When you do pay extra for support, you will typically be charged just like any other run-time license on a per CPU basis.
- Make sure that the company behind the product has a sustainable business model, otherwise there is a good chance that it will either die when its funding dries up or change its license model to monetize its user base. That's fine, but all it means is that it's not really a free offering in the long run, and you don't know what the pricing model will be exactly.
- In terms of total cost of ownership (TCO), free products are not necessarily the cheapest option. TCO is dependent on many factors, for example, dependency on other products (and their license costs), the need for integration and maintenance, etc. See my post, Economies of non scale, for more on the topic.
  • Subscription model - With a subscription model you pay a fixed periodical fee, typically on an annual basis for infrastructure software, and on a monthly basis for SaaS. Subscription pricing is suitable for on-demand scalability as it provides the flexibility to grow or reduce cost based on the annual use of the product.
  • Pay per use - this model is even more flexible then subscription model as it gives you higher granularity. Pay per use is provides in various forms where the usage can be a measure of CPU utilization or bandwidth utilization. Amazon for example charge per machine utilization for its EC2 services and data-utilization for its data services.
  • Perpetual license - This model is used to buy licenses in advance and pay for support separately (normally 15-20% on top of the per CPU license). This is the most commonly used model with commercial software products, however, due to the large initial investment required by this model, it doesn't fit well with on-demand environment.
  • Enterprise unlimited license - This model enables you to pay premium price in advance (based on potential future usage) and gives you the freedom to use the software without any limit. This model fits to environment where you anticipate that over a fairly short period of time the usage of the product will become wide and therefore the pay-per use or any of the other models mentioned above will become more expensive.

Which model to choose?

Each of the models has pros and cons and therefore the answer depends on your situation. Also, over time, as the situation changes, you will probably realize you need a different license model, and so it becomes equally important that the product you choose will give you the freedom to move from one model to another in the future.

GigaSpaces scalable pricing

With GigaSpaces we continuously look into ways to make our software license cost fit the on-demand world. For example, we launched a free Start-Up program that provides a totally FREE version of GigaSpaces for startups (hundreds of start-ups have already signed up for this program since we launched it last year). We also provide a Pay-Per-Use model for those running on Amazon EC2.

We felt that even though this is a fairly flexible pricing, we could do better. As of our 6.6 release, we added the option to buy our software at a yearly subscription price, and we also launched a new package called XAP Standard Edition, which is sold at a very low price of $9,500k per package (not CPU) where the package includes two servers, 4 GigaSpaces nodes and up to 50 clients or remote servers.

These changes were designed to address the needs of developers looking to start running their applications at a relatively low scale, who need the full functionality of the product, but cannot afford the full XAP price. Another principle that we kept when we designed this package is that moving from Standard to Premium edition wouldn't require any change in your architecture or code - which means that you could always scale to the premium edition just by changing the license key.
More details about the new pricing model is available here.

 


Nati Shalom was part of the star-studded lineup of speakers that spoke at SYS-CON's Cloud Computing Expo. Between them, they covered every aspect of the hottest IT topic for years, with not just Amazon but also IBM, Microsoft, Google, Yahoo, Intel, HP and a host of others all offering, using or developing high-end computing services typically described as “cloud computing” - through which massively scalable IT-related capabilities are provided as a service using Internet technologies.

Forrester Research analyst James Staten calls cloud computing "classic disruptive innovation - where the mainstream dismisses the product and small companies have time to create a real differentiated value." But there are so many offerings just now that what infrastructure architects are looking for above all is a set of organizing principles they can use to guide them in choosing between them all.

Such principles. and a host of associated topics, were addressed in San Jose by a Top Speaker Faculty that included:

  • Dr Werner Vogels - VP & CTO, Amazon.com (Keynote)
  • Mike Feinberg - Senior Vice President, Cloud Infrastructure Group, EMC
  • Steve Herrod - CTO, VMware
  • David Bernstein - VP & GM of Network Applications Infrastructure, Cisco
  • Rob Weltman - Director of Grid Services, Yahoo!
  • Peter Nickolov - President CTO, 3tera
  • Kevin Haar - President & CEO, Appistry
  • Songnian Zhou - Co-Founder & CEO, Platform Computing
  • Patrick Harr - CEO, Nirvanix
  • Gerrit Huizenga - Cloud Solutions Architect, IBM
  • John Keagy - CEO & Co-Founder, GoGrid/ServePath
  • Sajai Krishnan - CEO, ParaScale
  • Reuven Cohen - Founder & Chief Technologist, Enomaly
  • Mike Eaton - CEO, Cloudworks
  • Jonathan Bryce - Founder at Mosso (Rackspace)
  • Nati Shalom - CTO, GigaSpaces
  • Don MacAskill - CEO & Chief Geek, SmugMug
  • Billy Marshall - Founder & CEO, rPath
  • Dr Thorsten von Eicken - CTO & Founder, RightScale
  • Jonathan Pyke - Chief Strategy Office, Cordys
  • Jason Stowe - Founder & CEO, Cycle Computing
  • David Young - Co-Founder & CEO, Joyent
  • Dave Durkee - Founder, CEO & Technical Director, ENKI
  • John Janakiraman - CTO, Skytap
  • Stuart Charlton - Chief Software Architect, Elastra
  • Lars Leckie, Principal, Hummer Winblad Venture Partners
  • Dr Rich Wolski - Professor, U.C. Santa Barbara
  • Javier Soltero - Co-Founder & CEO of Hyperic
  • Omer Trajman - Director of Field Engineering, Vertica Systems
  • Rachel Chalmers - Senior Analyst, Enterprise Software, The 451 Group
  • Alan Williamson, Founder at Blog-City.com, Creator of BlueDragon

More Stories By Nati Shalom

Nati Shalom, Founder and CTO at GigaSpaces, is a thought leader in Cloud-Computing and Big-Data Technologies. Shalom was recently recognized as a Top Cloud Computing Blogger for CIO’s by The CIO Magazine and his blog listed as an excellent blog by *technical founders* by YCombinator. Shalom is also the founder of the IGTCloud, and is a frequent presenter at industry conferences.

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