Is there profit in the Cloud?

(Stephen Parker, Head of Cloud Strategy, NewLease.)

Oscar Trimboli at Microsoft posed this question in a recent blog post(http://oscartr.wordpress.com/2012/01/17/profitability/).  I started to craft a short response which ended up a little larger (!!), so I decided to post it here.

———————

Oscar,

Like you I have worked with and talked to lots (hundreds) of partners across APAC over the past few years in relation to business transformation and the Cloud (whatever that means!!). My experience is:

  • There is an increasing awareness that the Cloud is something that cannot be ignored.
  • However change is difficult and understandably they are looking for some comfort and assurance that they will still be in business.

On the one hand this is still an immature market and there are not 20 years of successful cloud businesses to model yourself upon. On the other, many of the skills required will already be in place (especially technically) and if we look at the world outside IT there is all the evidence we could need to provide examples of annuity revenue, managed service provision etc.

To the direct question “Is there profit in the Cloud?” I would answer most definitely YES.

The more interesting question is “Where will this profit come from?”. Will it be from the same things you do today? “Yes but different” is probably the shortest answer.

  • Will you still sell hardware? YES. Will you sell as many servers? NO. The Cloud will offer the opportunity for many different device types (laptops, tablets, smartphones etc), provisioned to a wider group of users, with connections and usage occurring almost anywhere.
  • Will you still do installation and configuration services? YES. Will it be based around traditional server setup? NO. The wider device usage will require remote management and setup, integration to services potentially in multiple locations and more complex identity management. Network services are likely to increase with improved routers and broadband connectivity in offices, setup of home offices or access to remote sites and provisioning of mobile networking.
  • Will you still do consulting? YES. Will it be around traditional infrastructure? NO. Business owners are tired of paying money every 3+ years to refresh physical hardware and software and still be left with the promise rather than the realisation of the business benefits. The reduction in CAPEX spend will free up funds to deliver training, to implement business process improvement and in general deliver the promise of the IT capability.
  • Will revenue increasingly come from annuity based fees and managed service offerings? YES. Will this mean no more project work? NO. Although a move to managed services and standardised periodic fees is the trend, it is highly likely that you will still deliver specific projects. In fact evidence from a number of early adopting partners is that they have more predictable project revenue from customers they have managed service agreements with.
  • Will you have more dealings with the line of business management? YES. Will this mean bypassing the IT staff? NO. Although more time will be spent with the business lines delivering the promised benefits, it will be important to work with IT to ensure their support and engagement.

There are many more examples, but in summary:

  • “Is there profit in the Cloud?” YES.
  • Will you be to able to build on existing skills? YES
  • However where this profit comes from will be different and it will require commitment and creativity to overcome the challenges of change.
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About SJKParker

Discovering exceptional stakeholder value through innovative technology investments. 25+ years’ experience as a business and technology hybrid. Providing creative and challenging thinking that delivers alignment of essential business needs with innovative technology. Passionate leadership and business model transformation across large enterprises, start-ups, SMBs, and business turnarounds. Experience gained from working closely with leading software vendors on their global cloud strategy, provided associate services to industry analysts, sharing knowledge as a keynote speaker and writing a variety of books covering the Cloud space. Painting business pictures with an IT brush, providing Experience, Passion & Impact Specialties: Business model transformation, Evangelist and presenter, Cloud Computing, Software as a Service, SaaS, Office 365, Azure, Solution Architect, eProcurement, SPLA, Subscription licensing
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