Cloud-based solutions for all aspects of business are here to stay, and these days they influence how end users are evaluating, choosing and implementing their corporate IT strategy. Solution providers, ISVs, and VARs are as important as ever and must stay current, adopt new technology early and be fully supported to retain their reputation as trusted advisors.
The shift to the cloud has created new opportunities for solution providers and is enticing many to invest in cloud platforms and data centers in order to support their customers' cloud vision. But what must change to keep up with the pace?
"From a delivery perspective, the move to a cloud model changes the business requirements," said Greg Pierce, Vice President, Concerto Cloud Services. "The good news is – not every solution provider will have to go through a massive business model transformation, but to what extent will depend on the type of cloud solution being adopted and whether the cloud-based system introduces a new capability or replaces an existing one in the customer's organization."
Build versus buy? Either path requires a shift in business models to a “cloud-first” focus. This article series will guide solution providers through the five main principles necessary to develop a practical, customized cloud transformation strategy designed to support a cloud-first customer offering.
These principles include:
- Financial Considerations to Building a Cloud Model
- Marketing Approach
- How To "Sell" the Cloud
- Technical Strategy
- Operational Readiness
Financial Considerations – Funding a cloud transition and shift in business model
If you’ve looked into offering more cloud solutions to your customers, you’ve likely discovered that the working capital required for a cloud business model is much higher up-front. The traditional on premise model, selling software licenses for example, helps pay for the day-to-day business operations at the beginning of a new project. But in a cloud model, selling subscriptions, creates a longer ramp up time for working capital. During this shift, it is critical to establish short and medium term cash flow requirements and understand the business' key performance indicators.
To appreciate total costs and benefits, solution providers must look at the bigger picture and the benefits to their customers. End customers will continue to gravitate toward cloud. The long-term cost savings related to an on-demand, pay-as-you-go service model is often one of the primary drivers for customers to first consider a cloud model.
"Providing customers what they need when they need it allows costs to remain directly proportional to that customer's specific requirements," said Pierce. "Subscription licensing enables companies to shift from paying a large up front capital expenditure for IT to less costly operational expenditures – allowing customers to budget more strategically."
With on premise solutions, software, maintenance, hardware and the people and processes that are in place to manage IT operations can be costly. The platform must be designed to handle a maximum number of users and provide remote access to data 24/7, and that can drain internal resources and be difficult for a customer to manage effectively.
Businesses are realizing huge gains with choosing a cloud deployment over an on premise deployment. Given the additional benefits of regular and tested back-ups, redundancy for disaster recovery, and the time savings of a more strategically aligned IT team, cloud deployments can net to be a lower total cost. Other factors driving the move to a cloud model:
- Solutions deployed in days instead of the typical weeks or months
- Shorter provisioning timeframe enables companies to launch new divisions, new product lines, and scale for peak seasons quickly and easily
- Internal IT resources can focus on strategic initiatives that often take a back seat to daily maintenance and platform risk mitigation
It is important to start now to analyze the financial implications on the business of moving to a recurring revenue model, and with proper deployment, which will be addressed throughout the series, a solution provider can offer its customers significant savings, better IT services and a higher level of reliability all the while adapting its business model to capitalize on new offerings.
Read the rest of the posts in this series: