Monthly Pay Pricing Model for SME Enterprise Applications using Cloud Computing

Monthly-Pay Pricing model for SME and Enterprise Applications using VVC Cloud Computing
approach
Vivek Muralidharan,vivek.murali88@gmail.com, Dated: 2013
Abstract— the main purpose of this paper is to showcase
the greater chances of IT affordability by the Small and
Medium enterprises by the wake of cloud. This paper
exhaustively illustrates the effects of the Monthly pay pricing
model in leveraging the capability of the SME in their
respective fields and also the leveraging of the middle level
entrepreneurship with the V1-V2-C implementation model.
I. INTRODUCTION
Technological growth has made our lives easier and also did
allow us to access various resources easily. The wake of cloud in
the recent times has kindled the interests of technocrats and
businessmen on ways to effectively use this technological
advancement for operational efficiencies and cost cutting. In the
same path, we have tried to propose a pricing and operational
model to take this technological beauty to the Small and
Medium Enterprises in manufacturing for their operational
efficiencies and leveraging of their standards.
The pricing approach we are proposing is ‘Monthly-Pay’
approach with the operational model being ‘Vendor-Vendor-
Customer’ (V1-V2-C). We would like to present this paper as a
business solution to the Small and Medium enterprise market,
for which IT has always been a far dream. We would also stress
the effects of our implementation model and extend our support
to our solution to be a game changer for Indian economical
growth through leveraged production efficiencies.
I. CLOUD’S ADVANTAGES
As enough discussions on the computing have been already
made, we would like to touch upon only the implementation
part. Cloud has enabled the outsourcing of the application
hosting, server management and even SDK tools online
resulting in easier deployability such that a complete advantage
over the infrastructure costs is met. Even though the scenario
mentioned above is already present with Microsoft and other
vendors, the utilization of this technology for unique business
requirements is being scarce and in research.
Targeting manufacturing sector has some reasons behind it. As
mentioned twice above, the operational efficiencies are
leveraged which could result in the GDP share of the
manufacturing sector increasing up to 20, 25 percent, nearing
China. This increase can only be possible with the efficient
management and cost effectiveness being maintained strictly,
and the utilization of resources in a better and efficient way.
Now, coming to the core part, how cloud will be used and who
uses it and who gives solutions?
II. V1-V2-C
As gave the abbreviation of this model before itself, it is a
Vendor1 - Vendor2 – Customer model, where Vendor 1 will
be the cloud technology provider; Vendor 2 will be the business
solution provider and Customer being the manufacturing
company.
Fig 1 . VVC
What is this model and why this model has to be successful?
Relationship between V1- V2 –C:
• For Vendor2 to create an environment for solution,
they are going to incur infrastructure costs, resource
costs and the implementation costs with high
uncertainty over the product being successful or not.
By this model, an advantage over the infrastructure cost
becomes possible for Vendor2. This could make them
to concentrate only on the business solutions with
minimal resources.
• For Vendor1, it is the business opportunity that would
stop with only the infrastructure support and
maintenance of servers. In this case, it is the
responsibility of this vendor in maintaining the user
accounts for the Vendor 2 and the customers too. Also,
these people need to ensure the up time of the server of
100%.

• Having given more emphasis on Vendor 1 in the
previous point, nevertheless it is Vendor 2 who wants
to incur the costs of the server maintenance, up time,
user accounts in a monthly basis.
• Having given the type of relationship with Vendor1 and
Vendor 2, the customer gets access to the application in
the web with a separate domain name unique for the
customer. The cost bourn by the customer includes the
data usage, scale outs and the extra customizing
development costs.
Advantages of the model:
• As Vendor 1 is possibly a big vendor, SLA will be very
much strict with respect to the up times to 100%. This
will ease the risk of the business being hampered,
which could greatly affect Vendor2.
• Vendor 2 is at great advantage of readymade
deployment after a proper design and architecture with
effective brainstorming.
• Vendor2 can concentrate on effective implementation
techniques and deploying resources for development
alone.
• The advantage of the customer is to be seen in the
pricing model, which will follow.
III. TYPES OF SOLUTIONS
As the emphasis is towards the manufacturing and production
industry, the types of solutions to be given are very much crucial
aspect to think of. The types of solutions we propose are,
• Simplified ERP Product
• Online business intelligence tools
• Online MIS tools
• Online CRM tools
All these types of solutions are affordable except the ERP,
which poses as a challenge. As it is widely known that ERP
needs not only a thorough understanding on the processes and
flows but also on the technical implementations of the processes,
which normally demand a huge investment. But simplifying
ERP in a significant, user friendly manner will be an asset to the
manufacturing industry as most of the manufacturers are now
unable to handle the whooping cost of ERP implementation.
Vendor 2 has to do this.
But, as a solution to address the complexity problem of ERP
implementation, the emphasis may be put on the essentialities
with adequate dose of business intelligence leaving over the
head business intelligence tools, as the target audience is the
small and medium level industries. How this implementation
can be done is well out of scope in this context but more
research has to be done.
V.IMPLEMENTATION OF V2
Before getting into the pricing model, we would like to propose
how the solution can be implemented in a SaaS type with multi-
tenancy to the customers. As the product may involve
customized solutions, it is very much vital to maintain a
sustainable, profitable and quotable multi-tenancy set up. There
are many methods proposed for this purposes by experts widely.
To repeat or stress the expert’s opinion, the following diagram
on multi-tenancy architecture is proposed.
Fig2. Efficient Multi-tenant Architecture
This type of implementation will ease the maintenance effort of
the Vendor2 as the customized solution for a particular customer
can be maintained in separate servers with database maintained
in one server with partitioning with customer id or so. The
minute details of this particular implementation are out of scope
of this paper. Nevertheless it can be said that, an effective
approach for the cases of customized solutions getting
maintained in the cloud are to be devised. The implementation
type must employ an effective architecture to share the product
as much as possible, so that the efforts get minimized for a
particular customer alone. This above diagram is just an
illustration.
With a very small suggest on the architecture, the flow goes on
to the pricing model.
VI.MONTHLY PAY PRICING MODEL

The pricing model is nothing new but the cost to customer is a
monthly payment from them, which will be along with other
expenditures posing as an ordinary liability rather as an
investment. And also, on the run the customer also leverages
himself in IT capabilities. How?
• Customer initially doesn’t care on the IT capabilities as
the utility alone will be of expectation and of stress
from Vendor 2.
• But on the run, after the effects of the implementation
in Business, Customer could think more on leveraging
the IT capability by wanting more IT implementations
for better consolidation and operational efficiency. This
would give Vendor 2 more space to innovate and serve.
Like Management Information Systems, payroll
processing, Sales forecasting in addition to basic ERP
modules. The types of solutions are to be discussed
later.
• The automation of the processes is supposed to
leverage the operational efficiency of the manufacturer,
resulting in more revenue and standardization of the
processes. This would automatically lead to further
strengthening the system.
All the above said points may insinuate many ifs and buts but it
is the optimistic approach that we propose.
Costs and Quotes:
In M-PM, we solely concentrate on the costs of Vendor 2 as
Vendor 1 deals with the infrastructure and the quote is widely
available in the market. And customer‘s cost will be covered in
the quote. Let us see what are the costs involved with Vendor2
in the making of a solution and the quote they can propose to the
customer.
• Costs of Development: This cost straight-forwardly
refers to the human resource involved in the solution
making process with proper planning.
• Cost of utilizing the Cloud: In the market, there are
many schemes to utilize for a cloud solution. According
to the vendors, the price of the usages varies. With the
best user friendly and technology friendly vendor,
agreement can be signed. For example, a vendor who
supports .NET, Java, PHP etc. Again this needs a
prudent analysis on the time taken to deploy the
solution as a whole in the cloud.
• Cost of Marketing
• Cost of maintenance: There are two types of
maintenance cost.
o One that involves the addition of infrastructure
for better performance and customer needs.
Here, the customer will not be worried on the
addition. Thus optimizing the cost is very
much vital. This cost is major as this involves
the addition of servers for better performance.
This involves scalability, managing
enhancements in the case of customized
solutions.
o Secondly, the maintenance of all servers, their
uptime and most importantly, data. This needs
additional efforts to ensure the smooth running
of the application.
The maintenance cost needs to be articulated in an effective way
as it involves human resources and the utilization of the cloud
that will also involve cost, which will be consistent.
These are the technical costs that are involved in the
implementation with other miscellaneous costs. Now with these
costs in the packet, how to present it on the platter to the
customer?
Quote:
Quote forms a critical part of V1-V2-C, as the purpose itself is
the ease of payment for the manufacturer as a monthly payment
to the vendor without too much costs to bear. Coming to the
core, Vendor2, as mentioned before, must employ an effective
architecture to share the product as much as possible, so that the
efforts get minimized for a particular customer alone. With all
these in mind, the quote can constitute,
• Rent for the product – this cost has to be a shared one
that is derived from the development cost and hosting
cost
• Data Usage cost- Use of Database by the customer by
uploading and downloading data
• Bandwidth cost – Usage of the site for one month.
• Data maintenance Effort cost
• Miscellaneous cost
To get to the origin of these costs,
• Rent for the product – To have a shared rent for the
product between the customers, the product needs to
almost work as a single product with multi users. But as
customization and uniqueness essential for every
customer, most of the code and modules need to be
designed in such a way that efforts are minimized from
Vendor2 end. For example, having all the modules on
the platter and effective tweaking of the modules with

maximum code re-usage and minimum modifications
need to be strictly followed. Then the average of all the
customizations, infrastructure, and development efforts
can be shared among the customers and the same can
be quoted. The minimizing of efforts and cost both with
Vendor2 and the customer is the idea here.
• Data Usage cost- The solution , as runs in cloud , the
data usage by the customer on a daily basis or weekly
basis , whatever results in the data cost and hosting cost
for the Vendor2. Therefore this cost is to be added to
the quote, deriving from the cost that vendor1 quotes
vendor2 on usage basis. For example , if Microsoft
charges a 0.95$/ MB, then Vendor can use the same
cost to mostly break even , hoping for a low overall
monthly quote.
• Bandwidth cost – Bandwidth cost mostly involves the
usage of the pages in the internet. This utilization
should also be included as the utilization of the cloud
server is also vital.
• Data maintenance effort cost- This cost is purely a
manual cost that involves the utilization of human
resources for maintaining the data in the database and
to keep check of the servers, working closely with
Vendor 1 in the maintenance activities. This is very
much vital as a downtime for 1 hour may cost too much
for both Vendor2 and the customer.
• Miscellaneous costs – This cost is customer centric or
management centric where other additional efforts to be
accounted, if any case.
•
The Quote can be as simple as this. But the quote also should be
derived with following effective processes to maximize the
shared solution model between the customers. With this kind of
quote, the rate is sure to get affordable for the manufacturers and
producers. For an imaginary, yet feasible small sample,
Fig 3 . Sample Pricing grid
This diagram depicts the initial investment to be 77k and
monthly quote being 6k. This diagram doesn’t depict the real
time costs, only a sample. As a constraint, this M-PM quote for
a customer practically should not go past the range 10- 13% of
their actual monthly revenue or estimated revenue. If it is more
than the range, customer may see it as a huge liability. Having
put forth the model and its pricing, it is vital for any
implementation to have flip sides or glitches to fix. Now the
focus moves on to the advantages and the challenges.
VII.ADVANTAGES
Advantages are so straight forward and generic that
• Technology is taken to the Small and Medium
manufacturers easily.
• To have the cost to technology as a monthly liability
unlike an investment for the customer.
• Ease of spotting cloud providers such as Microsoft,
Amazon.
• Absolute transparency with Business intelligence and
management for the manufacturers. Metrics are
available readymade cheaply.
• No separate costs of infrastructure for the customers.
• A solid business opportunity to the aspirers (Vendor2)
to give out solutions without the need of infrastructure
investment that much.
• With effective marketing strategy and implementation
technique, break even can be reached soon and only

maintenance efforts to be incurred by Vendor 2 in the
long term.
• As per the cloud’s mantra, releasing the resources is
simpler.
• A long term commitment between Vendor2 and the
customer is sure. No easy customer attrition is possible.
VIII. CHALLENGES
Not to address as disadvantages, more as challenges,
• Implementation of the cloud architecture may pose as a
great challenge for Vendor2 that involves sharing of the
product.
• Devising the shared pricing can be a challenge.
• Skilled personnel in cloud implementation are a
challenge for Vendor 2. Development effort needs to be
kept under heavy check as the cloud utilization and its
resources involve charges.
• If complexity is the problem, then monthly costs may
shoot up to more than 13% of the turn over that may
lead to strong mistrust initially. Handling this situation
is very much vital.
IX.CONCLUSION
With seeing the challenges that are definitely critical, there is no
reason to sideline the approach that ensures cheap technology. A
proper, invested, prudent approach to use this model would lead
in taking technology to the huge SME segment of India, raising
the efficiency of the processes and profitability. As the growth
of manufacturing sector is very much a necessity for India, this
initiative will benefit it much.
X. REFERENCES
[1] Cloud Computing: A practical approach by Robert
Elsenpeter, Toby J.Velte, Anthony J. Velte.
[2] Rackspace.com, CloudU certificate
[3] Websites: Windows Azure, Amazon and Google Apps
[4] Experience in manufacturing domain in IT.

Monthly Pay Pricing Model for SME Enterprise Applications using Cloud Computing

More Related Content

What's hot (20)

Similar to Monthly Pay Pricing Model for SME Enterprise Applications using Cloud Computing (20)

Monthly Pay Pricing Model for SME Enterprise Applications using Cloud Computing