Consumption-Based Pricing Is Here to Stay
Pay-per-use computing stretches back to the dawn of the mainframe era, when users were charged for each second of CPU time consumed. In the intervening decades, with the advent of personal computers, the model shifted to purchasing discrete hardware and software. Client/server models then arrived with seat license deals, which fit neatly into the traditional government acquisition model.
Now, cloud computing, with its numerous advantages, is quickly revolutionizing the provision of services.
“With cloud computing, government agencies can acquire technology services on an as-needed basis,” says an Amazon Web Services spokesperson. “Our customers pay only for what they use, and we offer management tools that help them optimize their costs.”
Cloud-based services also eliminate the need for customers to keep or update their own hardware or software.
“When we look at total cost of ownership and how cloud evolves, with cloud solutions, you have more innovation injected into services,” says Keith Nakasone, federal strategist at VMware. “Customers don’t have to maintain legacy environments.”
After decades of building, staffing and paying for in-house data centers and software, federal agencies can start shifting away from hands-on IT infrastructure.
For example, government data centers don’t have to sit on standby for a hurricane anymore, Beutel says. Agencies can just spin up more virtual machines to handle any crisis through their cloud providers, and — just as important — those extra resources can be scaled back when they’re no longer needed.
“This is why cloud strategy is moving forward,” Nakasone says. “Consumption-based pricing is competitive, and the total cost of ownership should be lower if it’s managed well.”
Risks of the Pricing Model
Some cloud service customers have a rude awakening when they find they’re being charged for idle resources, such as Remote Desktop Services databases and elastic load balancers. These charges can quietly accumulate over time and create significant bills.
Certain providers also charge for data transfers within the platform, as well as to and from the internet. Effective management of cloud services takes know-how and vigilance, experts say.
Using consumption pricing also requires smart forecasting. If an agency can predict and plan the volumes it expects, it can better control costs, but there’s risk if it lacks the talent to do so.