Will Cloud Computing Result In Uniform Pricing?Featured, Opinions Sunday, May 6th, 2012
I know many people in Europe who are absolutely pissed off that CAD vendors make them pay more for the same software that people in the rest of the world use. The reason given by CAD vendors is that everything is expensive in Europe. They put the blame on their resellers who allegedly need more money to run a profitable business or something to that effect. To enforce their country/region specific pricing structure, their license agreements prohibit users from using the software in a country other than the one it was licensed.
There is a view that cloud computing may solve this problem for users. The logic is that since the software is served from the cloud to everyone in the world, the middle men (resellers) will be sidelined and customers will deal with the CAD vendors directly. I don’t subscribe to this view. In fact I think whatever is going on now will continue. And things might get a little more sticky for customers.
Let me explain the sticky part first. Today if I install a piece of software on my laptop and activate it in India I can take my laptop outside the country and use the software on it. If the software tries to phone home while I am outside India to alert the vendor, I could block it from accessing the internet or work completely unplugged. But if I run the software off the cloud I have no option than to let my computer connect to the internet. In which case the vendor could block my access to the software based on my IP address.
As to why I think people in Europe will continue to pay high prices, well, it is because cloud computing is actually more expensive in Europe. Take Amazon AWS for example. An extra large instance in Amazon’s server farms in Oregon (US west coast) and Virginia (US east coast) costs 42 cents an hour. Whereas the same instance in Ireland (their only server farm in the EU) costs 52 cents an hour. That’s 21% more expensive.
So even if resellers and their costs to do business were taken out of the picture completely, the vendors will actually be spending more to serve their cloud based software to Europeans than to Americans. Of course, one could argue that the vendors could average things out and charge customers uniformly throughout the world. To that I’ll ask what exactly is stopping them from doing that right now with desktop software.
BTW, I found something else morbidly amusing. The cost of an extra large instance in Amazon’s Tokyo server farm is 56 cents per hour which is actually more than that in Ireland. So this means that if CAD vendors end up charging customers based on how much they are spending on providing the service then Asians will end up actually paying more than Europeans and Americans. ;-)