Utility-Based Pricing Troubles Me
Utility, or Consumption-Based pricing models offer an interesting way of matching costs to revenues. But if they’re not managed well, customer costs could blow out just trying to keep the lights on. We’ve come to expect rapidly declining hardware prices. Have vendors realised their utility prices need to decline at a similar rate?
I’ve been doing more architecture work over the last twelve months, and this has changed some of my thinking about technology. Previously I was only really interested in speeds & feeds, and technical capabilities. Scaling was only about how to add capacity – not what it would cost. When I looked at costs, it was just to shake my head at the ridiculous prices charged for things like a second power supply.
But now I find myself interested in things like cost curves, and trying to figure out how my costs will change as demand changes. The ideal is for their to be a clear relationship between costs & revenue, hopefully with costs growing at a slower rate than demand (and revenue).
Previously we had high upfront costs to buy hardware and software, and we aimed to amortise it over the life of the service. Our costs Continue reading
