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On Disrupting Pricing Models

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Today Nodejitsu is happy to announce our Public Cloud Pricing, which will become widely available in the next few weeks.

It has been a long time coming. We have been working on making Nodejitsu the best-of-breed Node.js platform with outstanding cloud orchestration and infrastructure tools to back it up for over two years. In that time, the Node.js community has grown organically into a vibrant group of dedicated professionals from all over the world. They are focusing on the right problems: creating and improving software and tools that set the standard for innovation.

Our commitment to the community remains steadfast and the pricing for Nodejitsu is designed to only further the goals of the community and our customers.

Our plans are designed to service both Individuals building non-critical applications or experiments and Businesses who need dedicated resources for hosting mission critical applications.


Individuals


Businesses

It may be surprising to you that Nodejitsu is not offering an unlimited free tier. This is intentional. The choice represents our deeply held belief that competing Platform-as-a-Service pricing models are doing damage to developer communities everywhere. We do not want to be part of the same problem.

And what is the problem at hand? Let me preface this by saying I am an technologist. I have been building things with technology as long as I can remember. So believe me that I say this with all the love in my heart: developers feel too entitled. Far too frequently in the Open Source community, I see the wasted potential of those focused on making demands instead of spending their energy on creating value. Don't forget, there are no refunds on Open Source projects.

It is, however, not completely their fault. Developers have been subject to pervasive incentives for years. In our Information economy those who understand and actively shape the flow of information (i.e. developers) hold a heavy sway over public opinion:

  • Our families and friends value our opinions of what technology to buy.
  • Our labors contribute to the consumer products reaching millions of people.
  • The opinions of our communities -- both in the mainstream and the dissents -- shape the futures of multi-billion dollar corporations, whose executives pay close attention to what developers have to say.

Thus to leading tech companies, in both the consumer and enterprise markets (read: Google, Microsoft, Apple, etc) the mantra has become "make developers happy and ye shall succeed."

Impact on Cloud Computing

Now consider cloud computing. In their drive to make developers happy early Platform-as-a-Service companies introduce an unlimited "free tier" usually comprised of one or two compute units of varying size. This may be an energetic effort to increase product distribution, but it is the fundamental problem with Platform-as-a-Service pricing.

You may be asking yourself: "Huh? Isn't an unlimited free tier a good thing?" In reality, this pricing system distorts developers’ incentives, to the detriment of their customers and themselves. Investors with whom I’ve spoken who have placed bets with some of Nodejitsu’s competitors have told me that if they were to "do it over again, they would never have created a free tier."


1. It ignores the varying needs of customer segments

Very early in the life of Nodejitsu, based on feedback and user data from our private beta, two distinct customer segments became obvious to us:

Individuals: Developers or independent freelancers who wish to host personal applications which they expect small to moderate amounts of traffic. If these apps experience higher than average latency or less than a 24x7 SLA the disruption has a minimal effect on the customer.

Businesses: Small to medium sized businesses that want to host one or more applications in a real production environment. These applications need minimal latency and maximum uptime; disruptions could mean a real impact on their revenue or their reputation with their customers.

What both segments have in common is their wish to offload completely their developer operations to Nodejitsu (That said, if you already have a devops team why don't you checkout some of our Enterprise solutions?).

By creating two different pricing plans for both Individuals and Businesses we at Nodejitsu seek to find a middle ground for everyone.


2. It discourages giving back

Economists like to evaluate incentives by considering rational behavior and utility theory. To sum it up:

Rational behavior is a decision-making process that is based on making choices that result in the most optimal level of benefit or utility for the individual.

How might an unlimited free tier influence the rational behavior of developers? If the desired utility can be obtained for free, then there is no incentive for developers to contribute beyond improving a product and workflow they use regularly. Although this secondary incentive will elicit contributions from some developers there is a huge set of developers for whom this is not enough.

We are working on new and innovative ways to motivate developers to contribute to the Open Source community through the Nodejitsu platform.


3. It encourages "beating the system"

To save money on the free tier many Platform-as-a-Service companies will turn off applications while they are not in use. In theory, this may create economy for the platform companies, but by offering an unlimited free tier these companies have told developers "if you keep this application active it will stay up." I can't tell you how many times I've heard a ludicrously simple way of getting around these idle shutdown systems. This is why many of our competitors do not support long-held connections or WebSockets.

Nodejitsu was the first platform to support WebSockets and we remain committed to providing the best WebSocket and soft real-time experience on the web.


4. It causes price inflation for average users

So if an unlimited free tier encourages abuse of resources, who pays the price for the waste? Platform-as-a-Service companies really have two choices. The first is to operate at a loss. This has been the model for large technology companies with existing revenue models that are attempting to break into the market space. Operating at a loss is, obviously, not sustainable. As more platform companies announce pricing plans over the coming months, we expect many of them to transition to the second choice for dealing with this cost inefficiency: passing this cost on to the paying user. This is already a widespread practice in the platform startup space, and somehow it seems to be tolerated. For what should be an affordable resource, the markup on 300MB of RAM has really gotten out of control.

I’ll say it again: paying customers (many of them individual developers and freelancers) are subsidizing the warped incentive for developers to work around platform companies’ payment plan restrictions.


Our Commitment to You

These ideas all underpin our decision at Nodejitsu to limit the free tier in our Development Sandbox. We want you to try Nodejitsu today for free. We will do our best to ensure that your trial period lasts as long as possible. When that trial period is over we have paid plans starting at just $4 per month. We will also be offering many of our Enterprise Products as a service in addition to our existing Enterprise software model.

It may be difficult to accept, but it is our belief that a limited free tier will encourage developers to look beyond the free services of the platform and to consider how they can best use Nodejitsu's tools to continue to build a better community. We developers need to realize that we have the power to actively shape our surroundings through self-motivated creation instead of waiting for the next version of your favorite library. Fix a bug, fork a project, add a feature, you're going to make someone else's day. Stay tuned and keep creating!