Cloud Conundrum: Private Cloud Computing With A Pay-for-Use Model

By | September 20, 2011

One of the touted benefits of cloud computing is supposed to be that it is a metered service. Much like your water and electric, the cloud is supposed to allow users to access compute resources as needed and be charged only for what is used. This is a great model for users of cloud computing since the risk is nominal. However, it’s a very costly investment on the part of cloud service providers since they need to create, market, manage and support the service without any guarantees that the service will be used. Moreover, pricing this usage so as to be profitable can be a complex initiative since users expect to pay less than it would cost for them to acquire and manage the resources themselves.

Now, some pundits and vendors can talk all they want about what they believe cloud is and isn’t, but the truth of the matter is that customers are speaking up, especially in the federal government, and they want usage-based charge models. Here’s the rub; many of these users also only want to be the only tenant. Hence, we have customers that want a low-risk, private cloud solutions on one hand and cloud service providers that offer either public usage-based charge models or private temporal-based charge models on the other hand.

The answer to this problem is not a simple one. The reason why these two options exist is to balance the risk. If you want to be the only tenant, then many cloud service providers are willing to share the risk, but want commitments for usage based on time. These contracts are analogous to your mobile phone contracts, where there are fees for early termination. Meanwhile, the cloud service provider can significantly reduce the costs and offer a usage-based charge model if they can share the resources among a wide enough audience such that they are likely to have a very high utilization rate.

However, recently I have learned that there are some companies, such as ESCgov, that are offering up alternative means of acquiring private cloud computing services based on usage. Due to the complexity these alternatives are not one-size-fits-all, but instead, are highly-dependent upon the individual business opportunity. Each opportunity needs to undergo an underwriting process that examines multiple variables, such as expected usage, other existing options for acquisition, and the private cloud architecture. Given that these businesses can qualify that the consumption patterns exist, they will develop custom private cloud services for customers that charge based on usage-based models.

I recently watched a video from Stanford University’s Entrepreneurship program in which the speaker made a very interesting statement, “big problems = big opportunities.” While challenging, answering the call from customers for private cloud pay-for-usage models could lead to the creation of the next Amazon Web Services.

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