Ethernet services

C&W Mulls Apps-Based Pricing

Application-based pricing for enterprise Ethernet services is an aspiration for Cable and Wireless plc (NYSE: CWP), but a long way from reality, according to the carrier's head of hosting, security, and application products, Tom Stockwell.

Talking to Light Reading at Ethernet Expo: Europe 2009 in London last week, Stockwell explained that customers are starting to ask for service-level agreeements (SLAs) based on the guaranteed delivery of specific applications and related criteria, such as the time it takes to process a particular order, rather than the traditional bandwidth, packet loss, jitter, and delay parameters. (See Photos: Ethernet Expo Europe Part I.)

However, there are significant practical and commercial barriers to the implementation of such models, noted the C&W man: "As you can imagine, we kick the subject around internally a lot. It works as a concept, but, practically, I struggle to see how to deliver it."

Essentially, introducing apps-based pricing means changing the basic service provider business model. That requires: understanding what the changed model would look like; establishing the commercial risk associated with changing it; and retraining sales teams to sell more, and more complex, products.

"With so many things involved, it starts to get very tricky," Stockwell noted.

And that business model shift couldn't be bigger, as it involves breaking the sacred link between the cost of delivering bandwidth to the carrier and the price of that bandwidth to the customer.

The reason carriers are even considering such a radical change is that cracks are appearing in the dominant bandwidth-based model, as various factors, such as intense competition and customer expectations, erode the profit margins on bandwidth-based tariffs.

Enterprise customers are also becoming increasingly aware that many of their mission-critical applications, such as ERP (enterprise resource planning), for which they are prepared to pay SLA fees, are far less bandwidth-hungry than other applications, such as public Internet access (especially as the use of online video services like YouTube increases in the workplace).

Yet, even if a new commercial model could be established, Stockwell said, it's still very difficult to separate the responsibilities of the carrier and the enterprise, and that's something that would be essential to making an apps-based SLA work.

For example, a service delay could just as easily be caused by a problem in the enterprise's IT systems (in the database or LAN) as in the carrier network. Only services that involve end-to-end managed service responsibility will be able to overcome such issues.

— Catherine Haslam, Asia Editor, Light Reading

astir554 12/5/2012 | 4:04:33 PM
re: C&W Mulls Apps-Based Pricing

While it may still be very difficult for a service provider to offer apps-based pricing at the granularity of an individual application transaction such as a sales order it is possible to do so at a level which allows sensible application service levels agreements to be defined and delivered against.

Taking the ERP vs YouTube example, by using the right technology it is possible to protect business critical applications such as ERP from the flood of low priority TCP traffic and ensure that the resources required by the ERP (and other business critical) flows are always available no matter what other traffic is present on the WAN.

It is also possible to instrument circuits in such a way to be able to deliver proof positive that any performance issues suffered by applications protected in this way are not attributable to the WAN circuit.

While not offering the nirvana of application transaction level pricing this type of service can offer application session level pricing against a measurable SLA and if combined with service delivery management enables service providers to offer high value, high margin services without needing to extend into the LAN space.

For further details go to www.telindus.co.uk/downloadcentre/whitepapers  and download our Application Performance Management whitepapers

Ian Shepherd, Telindus

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