Pricing and Revenue Projection in a Cloud-Centric World


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By leveraging services in the cloud, businesses can host new applications and services in a cost effective manner. Existing systems can also leverage the cloud in its entirety or for specific aspects of the system to reduce infrastructure management costs and to support potential scale-out requirements as usage increases. Windows Azure offers many services from application hosting, storage, content delivery, messaging, caching and security. Pricing each of these services to estimate your costs requires some thoughtfulness around how you will use each service within your architecture, and some predictions about the number of users, payload traffic and number of transactions. How then can you estimate your costs, or price your own offering to customers when there are so many variables? Pricing is not a perfect science and each business will have its own level of tolerance for cost absorption vs. costs to be deferred to customers. In this session we will break down the pricing model of the cloud, look at ways to quantify your service using various architectural examples, and look at ways you can track usage, validate costs and ultimately collect your costs across the core Windows Azure features to gain perspective on what you need to charge your customers for those services, along with some ideas on how to project revenue.

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  • IF(X<1, X*$, IF(X<50, 1*$ + (50-X)*$, IF(X<500, 1*$ + 49*$ + (500-X)*$, IF(X<1000, 1*$ + 49*$ + 450*$ + (1000-X)*$, IF(X<5000, 1*$ + 49*$ + 450*$ + 500*$ + (5000-X)*$, IF(X<9000, 1*$ + 49*$ + 450*$ + 4000*$ + (9000-X)*$, NA))))))
  • How many records per user in the system?Other records unrelated to users?Footprint per record per table? Average size of record?
  • Pricing and Revenue Projection in a Cloud-Centric World

    1. 1. DEVintersection Session AZ05Pricing and Revenue Projection in a Cloud-Centric World Michele Leroux Bustamante
    2. 2. Michele Leroux Bustamante Managing Partner Solliance ( CEO and Cofounder Snapboard ( Microsoft Regional Director Microsoft MVP Author, Speaker Pluralsight courses on the way! Blog: @michelebusta © DEVintersection. All rights reserved. 2
    3. 3. Agenda The impact of pricing Azure pricing tools Estimating costs across features Mapping costs to customers Pricing strategy © DEVintersection. All rights reserved. 3
    4. 4. The Impact of Pricing Cloud pricing has impact on your business Cloud architecture and feature selection Estimation of immediate costs Estimation of costs as the business grows Cost to the business per user Revenue required to offset costs (and yield a profit) © DEVintersection. All rights reserved. 4
    5. 5. Sign Up Options Free Trial, 90 days Pay-as-you-go model Monthly subscriptions (discounts pay-as-you-go) Other Member Savings  MSDN Subscription  BizSpark (Regular, Plus, One)  Microsoft Partner Network (MPN) © DEVintersection. All rights reserved. 5
    6. 6. Azure Pricing Tools Tools are useful for rough estimates only•  Pricing Calculator  TCO Calculator Every business must review how they use features, and estimate the numbers based on expected usage patterns © DEVintersection. All rights reserved. 6
    7. 7. Core Features / Costs VM size and compute Azure Storage and SQL Azure CDN Service Bus Caching size requirements Identity and Access Control (FREE) Bandwidth usage across all features © DEVintersection. All rights reserved. 7
    8. 8. Compute Instance Web Sites or Cloud Services? What size VM and how many? Factors:  CPU  Memory  Disk space Measured in clock hours © DEVintersection. All rights reserved. 8
    9. 9. Web Site ASSUMPTION:  Using reserved instances for production Calculations are based on clock hours CPU cores and memory drive instance size required © DEVintersection. All rights reserved. 9
    10. 10. Cloud Services ASSUMPTION:  Using at least a Small instance for production © DEVintersection. All rights reserved. 11
    11. 11. Cloud Services Disk space increases since June 2012 No price changes © DEVintersection. All rights reserved. 12
    12. 12. Compute Costs
    13. 13. Storage How much storage is used across tables, blobs, queues?  How many rows per user by table grouping?  How much media?  What generates queue messages? © DEVintersection. All rights reserved. 15
    14. 14. Storage How many transactions?  Differs by table, blob, queue  All CRUD operations  Queue reads even if they don’t return an item  Use back off polling to reduce costs © DEVintersection. All rights reserved. 16
    15. 15. Storage Storage transactions price reduced since June 2012, now per 100K tx Storage prices reduced twice since June 2012, plus benefits for increased capacity © DEVintersection. All rights reserved. 17
    16. 16. CDN Transactions same as blob storage costs Data transfers included in blob reads Future changes between CDN and storage charges could warrant separation for estimates © DEVintersection. All rights reserved. 18
    17. 17. Storage Costs
    18. 18. SQL Azure Relational data requirements  10GB storage is plenty for many small businesses  Big data options available Evaluate your storage records  How big are record footprints?  How many records per account, per user  How do records grow? Based on average usage of the system? How are records accessed?  Web pages  API © DEVintersection. All rights reserved. 20
    19. 19. SQL Azure Rate reductions since June 2012 © DEVintersection. All rights reserved. 21
    20. 20. SQL Azure Costs
    21. 21. Caching Monthly fee by size Typical Web caching  Browser sessions, shopping carts Application data  Varies with application requirements © DEVintersection. All rights reserved. 23
    22. 22. Caching No rate changes since June 2013 © DEVintersection. All rights reserved. 24
    23. 23. Caching Costs
    24. 24. Service Bus Service connections  At service host startup  Receive message buffer Client connections  Each “proxy” to call endpoints  Send message to buffer Concurrent connections, not in total!!!!  Averaged each 5 min period © DEVintersection. All rights reserved. 26
    25. 25. Service Bus
    26. 26. Identity Access Control is FREE Directory features are in preview  Basic features will be FREE  Some advanced features may have a charge upon release © DEVintersection. All rights reserved. 28
    27. 27. Bandwidth Many aspects of the system  Blob downloads, web page data, reports, each with different usage patterns  Blob reads may be CDN  Cache traffic with on-premise servers  Service bus traffic  Identity traffic Estimate by user region Same region transfers are no charge © DEVintersection. All rights reserved. 30
    28. 28. Bandwidth Reduced costs since June 2012 New benefits for increased usage © DEVintersection. All rights reserved. 31
    29. 29. Bandwidth Costs
    30. 30. Costs / User Allocating costs per user can vary Biggest costs are bandwidth and storage for large media Users pay for media  Look at storage as fixed cost per media  Downloads and transfers are unpredictable  How often does producer access media?  How often does consumer download purchases? © DEVintersection. All rights reserved. 33
    31. 31. Cost Totals Provide estimates by quarter Estimate growth trends and compare to actual values Quantify growth factors  What is per customer cost, do they pay more?  What is cost of doing business?  Can margins cover the latter? © DEVintersection. All rights reserved. 34
    32. 32. Projecting Revenue
    33. 33. Pricing Spreadsheet Up to date for March 2013 pricing Based on the following assumptions:  Cloud Services (same price as Web Sites) Does not include free or preview items:  Virtual Network  Connect and Traffic Manager  Active Directory  Mobile Services Does not include these features:  SQL Reporting  HDInsight  Media Services © DEVintersection. All rights reserved. 36
    34. 34. Monitoring CostsCost factor What to monitorCompute VM size CPU usage, memory, disk space, bandwidthStorage Average storage per user, other multipliersStorage transactions Average CRUD per user records, blobs; queue messages generated per user (or ?)Cache Average size cache per user session, average concurrent usersService Bus Average service restarts, average connections made per user, average concurrent usersBandwidth Average users per region, page/service requests and data, media requests, caching requests; averages per user per day/month © DEVintersection. All rights reserved. 37
    35. 35. References Conference resources:  See my snapboards:  Currently at the alpha site:  Will move these to when we go live on the main site (SOON watch my blog for announcement) Contact me:   @michelebusta © DEVintersection. All rights reserved. 39
    36. 36. Summary Estimating pricing requires a hands-on approach  Every app is different  Usage patterns will vary Bandwidth is by far the big cost driver  Estimate that, and you have a good idea of your margins Pricing is difficult at first  You want to make sure you cover your costs  Easier to drop prices than to increase them, beware! © DEVintersection. All rights reserved. 40
    37. 37. Questions? Don’t forget to enter your evaluation of this session using EventBoard! Thank you!