Google App Engine is going to offer Adwords-style pricing -
my first question was: if an additional 1000 people want to visit your website and as a result you go over the limit, what happens?
I found Google’s answer in one of the preview screenshots:
“As this budget represents the maximum you will be charged in one day, we recommend setting it higher than expected to buffer against sudden traffic surges.”
Translation: we turn those overflow visitors away.
Google may be thinking it can make more money with the Adwords model. SEO marketers know this very well.
As in the Adwords model where you don’t pay until impressions convert into clicks, I understand that you don’t pay until the storage/bandwidth/compute is consumed.
I also understand once you use up your budget limit in Adwords, your ads won’t compete in the auction for the rest of the day, resulting in a lost opportunity to advertise. That seems fair enough.
But what I don’t understand is how Google will tell users to willingly deny visitors each time they’re over-the-limit in App Engine. That goes against one of the key tenets of cloud computing: consumption-based pricing model.
One of the main reasons cloud computing ala Amazon AWS or Microsoft Azure is so attractive is because customers only pay for what they consume, eliminating the need to plan and purchase for peak usage.
It would be interesting to see how this plays out. What’s next, an Adwords minimum bid-like requirement?
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Recently co-CEO of SAP Leo Apotheker talked about the company’s decision to slow the rollout of BusinessByDesign (BBD), their ERP as-a-service product.
He gave valid reasons:
- Changing the business model from traditional license sale to subscription sale will result in revenue drop in the short-term.
- Running a SaaS business requires capex investment upfront, increasing costs and supressing margins, again in the short-term.
He is essentially saying - I paraphrase - “The revenue and margin we get from selling traditional license plus professional services is better, so we’d rather not sell BBD to customers unless we really, really have to (such as when we would otherwise lose an important enough prospect).”
Now let’s keep things in perspective: NetSuite’s comparable product costs 50% off what customers would pay just for SAP maintenance. SaaS is just cheaper and faster to deploy - and in this economic climate, that means a lot.
It is tough for SAP as a public company to focus on the long-term, but as a consequence it may find itself losing ground that’s difficult to reclaim. I mean, how often do customers replace their ERP systems? Especially knowing how challenging it can be to deploy the on-premise product - remember all those ERP project horror stories?
Time will tell if this was a good decision.
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I think what gets in the way, Sarah, is business school professors.
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