CCSS Offers Flexible Pricing for Service Providers
January 4, 2010 Timothy Prickett Morgan
In tough economic times, like those we have lived through for nearly two years now, companies look to outsourcing and other managed services as a way of maintaining and improving their IT operations while cutting costs at the same time. While this is great for IT shops and their companies’ chief financial officer, monitoring and managing complex i setups takes the right tools, and it can be expensive to acquire them under perpetual licenses. Not any longer, at least for the service providers who choose Power Systems i monitoring tools from CCSS.
After The Four Hundred went on holiday in late December, CCSS announced that it was offering an adaptable pricing model for managed service providers to encourage them to use the company’s QSystem Monitor, QMessage Monitor, and QRemote Control tools. Rather than ask service providers to shell out cash for perpetual licenses to these tools as they add i shops to their services customer bases, CCSS has come up with a monthly rental pricing scheme that allows service providers to only be charged for the modules and features they use as they deploy the CCSS tools to manage boxes on behalf of customers.
“The advantage of CCSS’s rental option versus purchase option is that it adapts to a particular managed services business model,” explains Ray Wright, chief executive officer at the company. “Outsourcing clients typically pay over a 36- to 72-month period, so a large upfront purchase is not a viable option for the outsourcing company as cash inflow is spread over the contract period. CCSS’s rental solution, which includes maintenance, offers a low monthly rental payment of approximately 2 to 3 percent of the traditional full purchase and maintenance payment over a three-year period. Rentals start as low as $100 per month for QSystem Monitor and $130 per month for QMessage Monitor.”
The monthly rental pricing for the CCSS monitoring tools can be used by outsourcing companies that actually host many different i shops and their applications, such as Connectria, a St Louis hosting and outsourcing company announced it was doing in early December. (See System i Hosting Firm Taps CCSS for Systems Management.) Services companies engaged in pure outsourcing (where they own the iron) and co-location (where the customer owns the iron) can get the special monthly pricing, and QSystem Monitor in particular can be used to figure out how much computing resources each outsourcing customer has used so the outsourcer can calculate the customer’s bill each month.
Alternatively, if a service provider wants to go into the business of selling a service to monitor and remotely manage customer i boxes as they continue to run inside that customer’s data centers, they can get the monthly pricing, too.
“One of the great benefits of this solution is flexibility,” says Wright. “As clients systems or partitions are added or removed, the monthly rental amounts are adjusted accordingly. This means no capital outlay is ever lost, and in this competitive marketplace reduces any risk factor and protects the bottom line.”
CCSS usually has tiered pricing per system for its various tools, but in the managed services pricing model, the company is offering pricing per month per logical partition or per system, depending on how the managed services company is providing its service.
While monthly rental pricing is not the norm in the IBM midrange, such a move could be a boon for software makers who adopt it. For one thing, you can argue–and many accountants certainly will–that by shifting from a perpetual license to a monthly rental fee, you shift an IT expenditure from the capital equipment budget where you have to do depreciation to the operational budget, where you don’t have to cope with depreciation. And pay-per-use makes it easier to sell a product and to pay for it, since the numbers are relatively small even if it does add up over time. The way people feel about paying for a service is usually different than how they feel about shelling out money for a an expensive product they buy all at once, even if the numbers work out the same in the end.
The wonder, of course, is why more software companies are not offering monthly pricing to all of their customers, not just to managed services companies that use or resell their wares. IBM figured out a long time ago that having an ongoing and predictable monthly revenue stream from mainframe software was the best way to go. Before IBM wiggled out of the 1956 Consent Decree and no longer had to provide list pricing for its mainframe software, the monthly rental fee for any given bit of IBM mainframe operating system or systems tools could be calculated by taking the acquisition price for the software and dividing by 36. This is essentially what CCSS is charging, with wiggle for the size of the system (as IBM used to do) and logical partitions (IBM did this, too).
I expect to see more of this kind of pricing in the midrange as 2010 gets moving, particularly if the economy doesn’t pick up rapidly and companies look at ways to expand their customer base. Such a shift will, of course, require some sort of conversion from a perpetual to a monthly license fee for an existing customer base, and it might make revenues initially a little choppy. But in the long run, pay per use is the wave of the future for all but the most inexpensive tools–or free ones, of course.