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Backup Vendors Tweak License Model

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Heads up: The days of backup software pricing based on CPUs, hosts, clients, tape slots or application support may be numbered. According to Chris Van Wagoner, vice president of marketing at CommVault, a backup software provider, new pricing models such as monthly subscriptions or pricing based on capacity are being considered.

The way backup software is priced today, "is a legacy of the evolution of client/server computing," Van Wagoner says. The problem is, "the old client/server architecture is evolving into a networked storage architecture, and the old pricing model doesn't map in a straightforward fashion."

Take backup software that charges per supported tape drive. A tape library that hung off a single server before may now be shared among five servers. Assuming a host-based model, "How do you charge for that?" Van Wagoner asks. "Once or five times?"

One alternative may be capacity-based pricing. Toronto-based Asigra Inc. recently announced an enterprise version of its Televaulting software, which was originally designed for service providers offering backup as a monthly service. Televaulting for the Enterprise offers a one-time "utility" license based on compressed capacity, where you pay $56,000 for the first terabyte, and $7,000 for every terabyte thereafter.

Besides being simple to understand, capacity-based pricing removes an obstacle to backing up client desktops, says Eran Farajun, Asigra's executive vice president. With backup software that charges

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for agents, customers "either overbuy because they don't really know how many targets they have, or they don't buy agents for the desktops and laptops at all." Instead, administrators instruct end users to save their data to a file server, which gets backed up. But Farjun says, "in practice, that rarely happens."

The upside of capacity-based pricing is that there's "no need to factor in agents or servers ... it's definitely simpler," says Mike Fisch, director of storage and networking at The Clipper Group, Wellesley, MA. Is it less costly? "It can be, though it depends on the particular configuration, and how competitors would price it out."

The downside of capacity-based backup models is that "it doesn't necessarily reward efficiency," says CommVault's Van Wagoner. In other words, backup vendors have no incentive to be careful about how much data they store. His firm has developed a subscription pricing model that's based on a customer's configuration where they pay for only the amount of software being used and the length of time they use it. That model changes the way backup software is paid for by users--from being a capital expenditure to a regular operating expense, which may appeal to the accountants at some companies. A subscription model also frees companies from the headache of administrating backup software licenses.

Subscription-based pricing has worked well with other kinds of software, for example, antivirus. "End users like it because they have very predictable costs; we like it because our revenue is so predictable," says Steve Fairbanks, Symantec director of product management for enterprise administration and backup. Certainly, backup costs should be predictable, but whether companies see an advantage to paying for it on a monthly basis remains to be seen. To date, Symantec has charged users of its V2i Protector backup application on a per server/per seat basis.

However you price it, what users want is to be able to reliably budget for backup, says Kami Snyder, market manager, IBM TotalStorage Open Software. In the past, IBM experimented with capacity-based pricing, she says, but users complained that they were having a hard time predicting their future capacity, and therefore, their backup budget.

Since then, IBM has settled on a CPU-based pricing model, plus additional charges for tape drives and slots. "Customers tell us that this pricing model is consistent with what they need and that we don't surprise them with additional charges," Snyder says, "and that they appreciate that."

This was first published in September 2004

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