Cloud Services: What you need to know about finding the value proposition
You will be assimilated, resistance is futile.
– The Borg – Star Trek, The Next Generation
As cloud services and technologies rapidly improve and the provision of valuable IT services evolves into an a la carte, “everything as a service” model, one thing is for certain: we are on the threshold of a massive transformation. And it promises (if you believe ALL the hype) to make business computing bigger, better, and faster not to mention cheaper, more scalable, easier, less hassle and may even cure baldness (ok, I made that last one up). Well of course it does! What else would you expect in an over-hyped world, right? But getting ROI can be elusive and is really an exercise in value judgment that will depend largely on your perspective.
First my standard disclaimer: I am neither anti nor pro “cloud”. I am also neither anti nor pro “on-premise”. I am however, pro “whatever moves the business forward in the most efficient and least costly way possible that delivers simultaneous value to the customers and the company”. And that rarely means 100% cloud or 100% on-premise but is almost always a hybrid of cloud services that sees a business leveraging both models to their fullest potential. Oh – and make sure you read to the end to see where I believe the biggest “cloud services plays” exist.
With that in mind, there are only a handful of drivers that make up any value proposition when considering technology moves, adds or changes. All the drivers affect both sides of the equation – yours and the customer’s – and they all have an effect on each other. The drivers we’ll focus on here are Cost, Performance (and/or Usability) and Risk. Yes, there are plenty more drivers surrounding cloud services but I only have so much of your attention.
Most folks would be surprised to learn that the bulk of the available cloud services today do not represent much of a savings in cost. In fact, many are more expensive and in some cases much more expensive. Especially after you start to add up intangibles such as greater need for internet bandwidth and additional overhead required to manage diverse systems. You need to do your homework and amortize your expenses over the long term to find the real cost. After all, you do intend to be in business long term, right? Sometimes it’s less expensive but sometimes it’s not. Usually the “savings” is in upfront costs but that only represents an advantage if you are looking to move expenses from Cap-Ex to Op-Ex. Some like to spend cash when they have it, some don’t. That’s a judgment call only you can make and it is solely dependent upon your own unique situation, no one else’s. One size does NOT fit all and you need to follow the money to decide for yourself if this truly represents a value proposition to you.
No one likes to put in a solution that affects production performance or is harder to use – for you OR the customers. Bad for production, bad for costs, bad for risk tolerance, and bad for morale. If you are moving an existing service to the cloud, you’d better be very clear about why you are doing it because if it is slower or harder to use for you and/or your customers, you will have a revolt on your hands. Often times, cloud services offerings are scaled back in their customizability and that could hurt if you weren’t expecting it. So the lesson here is if it doesn’t provide a better experience for the customer or it doesn’t make your company leaner and meaner (thereby providing a better customer experience), there had better be a HUGE value proposition elsewhere.
This is a big one. If your company is bound by privacy laws that prevent sensitive data from leaving our soil, internationally hosted cloud services are a non-starter, the end. Also at risk: your data. Is the cloud services provider going to be around tomorrow? What if they actually start to suck or they go belly up – how easy is it to migrate your data to a new provider or back in-house? And is it being backed up or replicated regularly and if so, how often – enough to satisfy your needs? What if you need to restore something from a couple of hours/days/weeks/months ago? What’s that look like? Or what if your internet pipe is slow or unreliable? If it isn’t easy or cost effective to upgrade AND to install a second internet line as failover, you could be placing your ability to service your customers’ needs in serious jeopardy. And how often does the cloud services provider upgrade their hardware and software? If your company creates processes around a specific feature set that becomes unavailable in the next iteration of the provider’s software, you could be in trouble and yes, I have seen this one play out and it’s not pretty. They upgrade when they want to – your needs be damned. Or if they are somewhat lax in their hardware upgrades or they over-subscribe their services, things may slow down and you will have zero ability to affect that. There are plenty of risks in ANY move. Again, do your homework to determine your own risks and then apply your tolerance to those risks prior to any decisions around cloud services.
So – good plays and bad plays… Good cloud play: Does it improve your profitability without sacrificing your performance, usability or the customer experience or does it represent a step in any of those directions? Good play. Examples of good cloud plays today are hosted email, hosted backup, disaster recovery and business continuity, and hosted CRM (think Dynamics or Salesforce). All are very scalable and reliable and represent a positive move. Bad cloud play: Any move to the cloud that does not have a crystal clear value proposition and a definable-on-your-own-terms ROI. And a lateral move that brings no value anywhere is just downright silly. Remember, do your homework.
Oh, and if you have trouble completing said homework, let us know – we’re experts in quantifying all the moving parts of any cloud services solution – 100% cloud-based, on-premise or hybrid!