Monetization In The Cloud

Are You Thinking Outside The Box For Your Next Cloud Solution?

Many companies are preparing to bring great new solutions to the market, often leveraging the technology advantages that Cloud based development and deployment platforms offer.  However, as business owners and product managers prepare for the launch of their new solutions, inevitably the question of how much can or should we charge comes up.

No business wants lose money, just as no business want to leave money on the table, so understanding the ramifications of how you choose to price your solution is critical. A lower price may mean more rapid adoption and increased demand.  A higher price may allow you to focus on delivering a premium user experience while making a handsome profit.  But lets take a step back and release some of the old preconceptions many of us have about how to monetize an IT solution.

The new Cloud paradigm allows solution providers to become very creative about how they make money with their solution offerings.  It’s no longer just about licensing your solution and charging for maintenance, implementation and integration services.  There are a lot of different ways to earn revenue on-line and in the Cloud, and many have the added advantage of making the cost of your solution look very attractive to your future customers.

So before you package up and price your new Cloud solution the way you traditionally have, think about some of these alternative methods of charging for your solution and remember they are not necessarily mutually exclusive. Many cloud providers successfully combine several methods to arrive at a successful hybrid pricing models.

Freemium

Providing a basic level of service for free and then offering premium upgrades. This encourages customers to try out your solution and once they have started to derive business value from it, they will quickly outgrow the limited number of free features and want to upgrade.

Ad Based Revenue

Is a valid pricing method, though a tough one to successfully implement. Having said this, Google and Facebook have both generated significant revenues from advertising while providing their services free of charge for users.

Per Meter Pricing

This has applicability only in certain situations. It is good, for example for file sharing or backup applications and is often used in combination with other methods such as per user pricing.

Per Transaction Pricing

Is now a common pricing method, but only applicable where it easy to carve out discrete transaction units. The growth goal here, of course, is to increase the number of transactions per customer.

Monthly Subscription

Now one of the most common payment mechanisms, though be careful not to limit the commitment period just because the payment frequency is monthly. A good service level agreement allows customer to make 2 to 3 year commitments when subscribing.

Revenue Share

This method provides you with greater market coverage but requires the ISV to take only a cut of the total revenues and share the rest with it selling partners. The share is most often higher for whoever owns the brand and customer relationship.

Per User

One of the most common pricing mechanisms, this may include number of seats or named users. Once again packaging your offering in such a way as to make premium upgrades available will help to ensure that you are providing a low end, easy point of entry for your customers and then quickly encouraging them to upgrade in order to have access to an expanded set of functions and features or to add more users.

Leveraging one or more of these monetization methodologies or creating a new one of your own just may be the key to explosive, profitable growth for your new Cloud solution.  So remember to think outside the box when you are envisioning how you will bring your next solution to market.

Good luck, and good selling.