Redefining the Enterprise Service Delivery with Legacy Modernization

Srini Sundar Jr

Subscribe to Srini Sundar Jr: eMailAlertsEmail Alerts
Get Srini Sundar Jr: homepageHomepage mobileMobile rssRSS facebookFacebook twitterTwitter linkedinLinkedIn


Article

Marinate SaaS Pricing with Function Points

Complementary way to measure the cloud services offered

We all know that the SaaS  model of Cloud Computing delivers software as a service over the Internet, eliminating the need to install and run the application on the customer's own computer and simplifying maintenance and support.

As SaaS providers grow, especially  the providers for the same kind of service grow, this will result in a healthy price war much to the benefit of the cloud consumer, which is the whole goal  of industry's research in this area.

So how a Cloud provider prices its  consumer as a Cloud & SaaS provider makes all the difference to the bottom line to a cloud service provider in winning.

Common Models Of SaaS Pricing :

  • Per User: As the name indicates based on the number of users
  • Subscription Based: Typically Monthly subscription payments
  • Resource Based: Computing resources like CPU/Hour

Like most IT principles, "There is no One Size Fits All" and hence  each of these models have their own  pros and cons.

Again the a Cloud Consumers as of today are mostly  direct individual consumers and hence these simple models like subscription based accounting works well for them. It is like a phone company charging their consumers based on  one or combination of above models.

However as the large organizations started to adopt SaaS model, especially when they out source their activities like Supply Chain or Manufacturing processes on a pay as you go model, these large enterprises require better accounting for the service costs they have been charged by the cloud providers.

These stem from the two aspects.

  • Most large enterprises tend to have stricter auditing requirements to clearly explain the costs involved with software as a service model
  • If the large enterprises out source their key business activities, it also hinder their ability to drive metrics out of those business activities that they out source and hence Cloud Providers will be forced to give more details of the services utilized

Function Points :

  • Function point analysis measures software by quantifying the functionality the software provides to the user based primarily on logical design. With this in mind, the objectives of function point analysis are to:
    • Measure functionality that the user requests and receives
    • Measure software development and maintenance independently of technology used for implementation

How the Function Point Compliments the existing SaaS Pricing Models ?
As evident from the theory, Function point measures the  functionality  that ‘User Requests and Receives' which is the underlying intent of a SaaS usage by a cloud consumer.

Also the function point is technology independent so is Cloud from a Cloud  Consumer point of view, adopting function points to SaaS makes it even more relevant.

How the function point is counted for typical  ‘Software Service' ?
There are several underlying concepts  in function point counting, which basically measures the complexity of a user requested service in terms of amount of data it retrieves and sends back to the user. Basically the services are measured from  two way interaction between the user and application system.

EI (External Input): A Service measurement philosophy when a user (Cloud consumer) sends the data to a  Application System (SaaS enabled Application). For example a user creates a materials requisition  by entering details of the parts needed.

EQ ( External Query), EO ( External Output): A Service measurement philosophy when a user (Cloud consumer) retrieves data from a  Application System (SaaS enabled application). For example  a user a prints a purchase order.

Take a case of a large enterprise uses a ERP software based on  SaaS Model. And organization would like to create and send purchase orders to vendors through  the ERP software.

As per true pay as you go model, the SaaS consuming organization would like the billing to be based on the size of the functions served by the SaaS provider. Each time a Purhcase Order is printed  an External Query would be added to the consumer's billing based on the complexity of the purchase order printed. For examples some domestic purchase order may have less data to be queried versus a foreign purchase order and hence the  size of the functions will vary accordingly.

Function point methodology has well defined means to size the functions based on the complexity of the service that is served, as indicated by the following table.

Files Type Referenced (FTR)

Data Elements

 

1-4

5-15

Greater than 15

Less than 2

Low (3)

Low (3)

Average (4)

2

Low (3)

Average (4)

High (6)

Greater than 2

Average (4)

High (6)

High (6)

 

File Types Referenced (FTR)

Data Elements

 

1-5

6-19

Greater than 19

less than 2

Low (4)

Low (4)

Average (5)

2 or 3

Low (4)

Average (5)

High (7)

Greater than 3

Average (5)

High (7)

High (7)

At the end of the month, If the Cloud provider charges the large enterprise consumer based on the amount of Function Points Served  rather than stating that 75% of the Virtual Server X has been utilized by the actions of the large enterprise, would have been a better way of convincing the larger enterprise about the cost of the SaaS.

This article is not a guide for counting function points , please refer to the international function point user group site www.ifpug.org for knowing more about function points. Also the ability of the Cloud Managing platform in linking the service requests to the function points in  an automated way is key to this model of SaaS billing.

More Stories By Srini Sundar Jr

Srini has over 18 years of experience on transforming Information Technology systems to a service oriented platforms by best utilizing the investments on the existing Legacy Assets. He is currently working as a Senior Solution Architect for Hewlett Packard serving large enterprise customers. Srinivasan's concentration is Legacy modernization and data integration across enterprise and fitment to a service delivery model. His current concentration is on cloud computing towards service improvement and optimizing organization costs.

Srini is a cerified SOA Solution Designer, certified in Function Point from IFPUG and is also certified in most of the major enterprise platforms from IBM, Oracle, Sun and Microsoft.