You will often hear an IT company saying, ‘buyers don’t understand the cloud’, and using that as a justification for either (a) not saying anything about it, or (b) launching into a grand programme to define the cloud for CIOs.

But in the background, buyers are creating specific plans for the elements of the cloud they want to use now. What vendors really need are some focused examples of problems their solutions can solve, not high level positioning of where they fit amongst SaaS, IaaS, PaaS…

Perhaps more significantly, all this talk of ‘as a service’ is starting to extend to non-cloud conversations and contracts. The FT’s recent article, Outsourcing begins to blur into services, shares a range of views on providing more flexible pricing and resourcing models on wider IT Services contracts. In an interesting section 3/4 of the way through the article, there are some good CIO viewpoints:

Simon Post, CTO at Carphone Warehouse: “Flexibility is vital to us, not just in the infrastructure space, with IBM, but also for applications. Retailers have shorter buying cycles than other businesses, so we do need to gear up and gear down quickly.” According to the article, “Buying IT services on a pay-per-use basis is certainly on the agenda at Carphone Warehouse”.

Richard Boynet, CIO at Electrocomponents: “when our current data centre contract runs out, we are looking at multiple options from virtualisation, to taking some of that [capacity] as a service. We might, for example, use a vendor such as Amazon to stress-test the next release of our main IT systems.”

So to summarise, by the start of 2010, if you have a cloud offering you will need the specific examples of where people can use it (which may sound obvious, but is currently surprisingly thin on the ground). And even if you are keeping your head above the cloud (sorry), you will still be coming up against competitors for traditional services who have developed some model for ‘pay as you go’ pricing that could be opening doors for them in your client base.

Until now, there has tended to be agreement that pricing is more of a hygiene factor than a compelling component of a proposition (with clients more interested in any existing relationship, proof of past delivery, or promises of helping them to achieve large savings). But is the rise of cloud propositions making the pricing strategy of traditional services a more decisive issue? How can suppliers build more flexibility (not just performance-related elements) into their offerings?

IDC said this week that its research shows cloud providers can utilise the telecommunications world’s proven approach for charging to help “monetise” the service. The research firm also claims that certain billings software vendors are already well placed to support cloud providers through their telco billings offerings.

“Leveraging a system to put a value on the transaction – “rate” in telecom language – will be a critical first step for cloud computing infrastructure projects.” says IDC. It argues that telecom billing vendors like Amdocs, Comverse, Convergys, CSG, Intec, LHS and Oracle include rating as a core component of a holistic billing system, which also includes capabilities such as customer care, partner billing, promotions, and payments and collections. 

“The business and consumer experiences of complex bills for technology services is often tightly associated with voice and, increasingly, data services, thereby making the telecommunications example instructive. A new generation of business and consumer customers mean that cloud providers need to take a critical look at the options.”