Performance models are benchmark-based models that rely on key metrics, or benchmarks, to decide the price paid. Most performance models originate from employee remuneration or outsourcing related price strategies but can be applied to cloud computing, especially to a private or hybrid cloud service. Sometimes these models are used to align your business goals to those of your service pro-vider’s goals in order to create a true partnership.Performance price models exhibit some common traits:
- They require a clearly defined output or metric that can be measured easily.
- The metric is often aligned to a business process or outcome with a demonstrable correlation to its impact.
- We consider here the outcome, business-linked and gain-share price models as being within the category of performance models.
Outcome-Based Price Model If your department wants to use cloud computing because it wants to reduce time to market (this being one of the seven value models), then you may want to negotiate a “bonus” payment to the cloud service provider that is linked to that outcome. Most outcomes use metrics that relate to cloud computing’s value proposition, as expressed by the value models that we consider in the next section. There is a difference in psychology between the outcome-based model and some performance-related price models. With the former, you provide a bonus if an outcome is achieved, and with the latter, you penalize the provider if an SLA or benefit is not realized. Outcome-based models are often used with other models, usually fixed price models, in order to create a value culture based on rewards.