How is the cloud changing how technology is bought and sold?
9 March 2012
How is cloud computing changing the way that technology is being sold?
The most significant change is that the customer can now purchase IT services and infrastructure without many of the traditional costs associated with many IT projects. For example, before, customers would have needed to purchase hardware and software licenses, would have had to pay the integration and migration costs, trained internal IT staff on new technologies and platforms, retained those staff, and so on.
With cloud, however, vendors are able to offer significant reductions in CapEx and OpEx expenditure, along with a ‘freedom from technology’ promise that makes it possible to combine many different types of software and hardware. This approach can be seen everywhere at the moment.
Most software vendors are now moving their products into the cloud as well. This brings with it some pluses (such as CapEx reduction/removal), but it also raises some potential concerns. For example, many software vendors are simply throwing their services into the cloud, even though they may have limited experience on the infrastructure side of things. As a result, problems may arise with performance, security, support, integration, and so on.
The arrival of cloud computing also means that companies that offer relatively high-value services are now marketing those services in the same way that low-value services used to be sold, such as with email marketing campaigns, cold-calling, and so on. With this approach, vendors are hoping to remove the fear (and hide the perceived complexity) from the customer.
Many companies are also marketing and selling different messages to the senior decision-makers by more or less suggesting that ‘IT doesn’t need to be involved’. As a result, many people now are buying relatively high-value services over the phone and online without ever meeting a salesperson. This is obviously allowing the vendors to operate on a global stage.
How is the cloud changing and shaping provider offerings?
In recent years, there has certainly been a shift to a monthly, or ‘per resource, per hour’ pricing structure across the industry. This is partly due to the rise of cloud, but has also been fuelled by the current downturn, since the coffers are empty in many businesses and they can only afford to refresh/build with finance agreements in place, or with monthly recurring pricing models.
There have also been some significant pricing wars going on across the industry. By its very nature, ‘the cloud’ allows suppliers to operate on a worldwide basis, and customers are now more willing to engage with overseas providers than they were in the past, largely due to the rise of the internet, globalisation, online commerce and other factors.
Is the arrival of cloud computing influencing the way in which suppliers are packaging, marketing, selling, and supporting their offerings?
You would not believe the amount of emails that I get every day with the word ‘cloud’ in the subject title; everyone and his dog are now packaging their product as a ‘cloud solution’.
Most marketing/sales messages are about how simple the cloud is, and basically make the claim that you just pay your money and you never worry about your IT application/service ever again. They also regularly use the ‘risk-free’ message by promoting an outsourced risk theme. However, regardless of how attractive these offers may sound, businesses should never outsource the accountability of their business risks to a third party.
Is cloud influencing user procurement processes?
Again, the vast amount of cloud marketing on every website, magazine and email puts the buyer into a state of false security. In fact, you’ll often see a senior decision-maker purchase a service from a cloud supplier on the word of a salesperson alone, with no real understanding of any risks or negative impacts.
On the other hand, the cloud is certainly making business leaders think about IT in a positive light again, albeit nervously. In the past, they may have been burnt through failed ICT projects, such as CRM, VOIP, and so on. They may have also found IT in general quite daunting, as it tends to be completely outside of their knowledge sphere. The rise of the cloud, however, is helping to bring IT back to the masses again, but without the huge CapEx and financial risks.
Are there any hidden dangers of these changes for end-user businesses?
It is not uncommon for companies to misjudge the complexity and/or time involved in migrating any system or service to the cloud, and mistakes in this area tend to be the most costly.
The correct levels of security and resilience are also sometimes overlooked when choosing a vendor or solution. It’s very important to keep these areas in clear focus, however, as it’s simpler and usually cheaper to address these issues at the beginning, rather than having to re-engineer them at a later date. A business should never think that it will be able to outsource its risk (and risk management) simply because it has chosen to use a cloud service.
Also, it’s worth noting that a service or relationship sometimes doesn’t work out. A business should always understand what its exit costs are going to be, not just contractually, but also in terms of pulling off data and systems and migrating them to another vendor or back in house.
It’s also common to see organisations massively over-specify cloud solutions, as if they were buying a server that will need to last for the next three years. People often forget that the beauty of cloud is that it allows you to flex your operations and only to pay for what you are using.
Vendor selection is critical in this regard, as there are many providers flooding into the market and simply chasing the cash. Customer should always undertake a rigorous selection process, and should also be sure that a move to the cloud is the right solution for their business. After all, the cloud isn’t the only option out there: traditional in-house server options can be just as suitable in many cases, and if it’s a ‘price per month’ you’re looking for, then there are always finance options available.
How can businesses protect themselves and minimize their risk/exposure when it comes to cloud computing?
For a start, if the cloud solution doesn’t interface with other vendors and solutions then businesses should definitely think twice before going ahead. Likewise, you should always know your exit strategy from your cloud service provider before you go in.
Cloud services are still a whole new entity for many service providers, so make sure that your provider is proven and that its infrastructure and security is solid. Also, if buying from an international provider, you should check whether its support function is available (and adequate) during UK business hours.
You should also look for a solution that can be tailored to meet your exact needs: don’t change your operations without good reason. Also, just because cloud computing is an online service, don’t feel like you need to purchase it online. If you want to see someone, then make sure you do.
You should always check what the service provider’s business continuity plans are, as well. What happens if its data centre suffers an extreme disaster? What will the impact be on your company, systems and data? On the other hand, don’t expect your internet connection to work 100 per cent of the time; it’s not unheard of to lose connectivity for a day or two, so it is important to have contingency plans in place.
Last but not least, it’s important to realise that cloud isn’t always the right solution for every business. Make sure that you are clear on all of the options, and consider in-house and your own private cloud, as well.