Andres Aguiar's Weblog

Just My Code

Amazon EC2 and 'Pay As You Go Applications'

Just in case you never heard of Amazon EC2, go here first.

Right now, they charge you for the time the server is up and the consumed bandwidth. They provide 'Pay As You Go Hosting'.

I think Amazon is quite close to enable 'Pay As You Go Applications' if they support some kind of revenue-sharing model.

For example, suppose I built a web-based CRM application, and I'm selling it through my website. My customer pays me $5.000, he downloads the application, install it in his server and run it.

What if my customer can host it in Amazon EC2 and instead of charging him 0.10 per hour / 0.20 per GB they charge him 0.15/hour 0.25/GB and pay me 0.05/hour and 0.05/GB? The customer, instead of paying me $5.000 for my CRM, he'll pay depending on how much he uses it.

Now we have 'Pay As You Go Applications'. I think it opens a new world of interesting business models.

   

Posted: Nov 02 2006, 05:00 PM by aaguiar | with 3 comment(s)
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Comments

Fred Parnon said:

Interesting suggestion.  One potential problem is that Amazon might not want to be seen as "sponsoring" third-party applications, much less "selling" third-party applications, since Amazon might thereby attract liabilities if the third-party applications underperformed or failed in any significant way.  But there is a way around this.  Amazon EC2 and S3 provide detailed billing records and accounts.  Those records and accounts could be used by the third-party to bill its customers on a pay-as-you-go basis for use of applications on EC2 and S3.  Sure, the third-party would have to arrange and handle the billing and collection.  But that's not super-hard.  And there are other third-party services that could help in that area, too.  With this approach, Amazon can keep focusing on providing EC2 and S3 in a cost-effective and efficient way, while all other risks (and rewards) accrue to the third-party app provider, which seems to be a better long-term division of the work and responsibilities.

# November 3, 2006 2:40 PM

aaguiar said:

Hi Fred,

Actually, I think it will be much better if they do the billing.

They have something similar with the zShops/Marketplace, and they make very clear that they are not buying from amazon.com if you buy from the zShops.

# November 6, 2006 12:20 PM

Brian said:

Pay as you go is just dumb. Lots of software that gets sold (or books or videos, or widgets) don't get used (sometimes never or sometimes years or months). They sit on the shelf. The idea is to sell a product through marketing and make a good buck. Hopefully, the software is top notch, so the user got what he/she paid for. But, pay as you go is just ridiculous.

# December 15, 2006 7:55 PM