Cloud computing has done one very significant thing with the relationship between the provider and its customers. Their goals have become aligned. Cloud providers do not have any meaningful revenue unless their relationship with their customer is successful and long term. If you sign on for short period of time and then leave, there is no benefit to the provider. In fact, it may be a loss for them because of the overhead related to provisioning and de-provisioning services. So what this means is that the provider now has skin in your game to be successful. The more successful you are, the more revenue for the provider through continued and expanded subscription services.
In the sea of cloud computing providers, I don’t think this new reality of unified success is well understood. As a result, those that don’t get it, over time will go away. In fact, I think by the end of 2012, we will see a huge drop off of those trying to find footing in this market space. Running a true services model is not simple and will put a tremendous burden on those providers who don’t understand how to run a comprehensive service. What we will see is a rise of a few providers of cloud solutions who understand the meaning of building a proper cloud ecosystem, where solutions are agile and can provide the best practices to propel a company’s growth.
For years software vendors have been selling software solutions where a small subset of the capabilities is leveraged. So if a company only uses 40% of a software solution’s capabilities, this means that the provider has spent a lot of development dollars on functionality that goes widely unused. Conversely, if software is sold to a customer and they only use a portion of the solution, they in essence have overpaid and have done this all upfront.
Cloud providers must be focused to ensure that the investments they make will deliver high value and ease of use. The goal is to have functionality that almost all users within an organization will need, in order to maximize profitability with a single customer. The business suite is presenting itself as the best opportunity for a cloud provider to build a solid revenue base per customer. For a company, the business suite has always represented the best approach for controlled, structured and scalable process execution. You can tout all the features that you want, but unless there is a foundation in process delivery and assurance, the value to the business will be mitigated.
For the last three years, I have built business operations using SAP’s cloud platforms and continue to watch their strategies. In my view they understand this new relationship of provider and customer. For a company that quite literally stands for “systems, applications and products”, I am seeing a new vision emerge from their cloud computing business as they further engage this consumption driven IT model. They are evolving into an organization that’s about “services and people”. It’s an imperative.
The end goal is to deliver world-class business execution services and enable success for the people who use them. Agility of execution and real-time information is at the center of this. This is the real cloud. There is still a road ahead for the best providers to emerge with comprehensive offerings for the many verticals. But for those providers who are genuinely invested in the customer’s need for successful growth, they will be the powerhouses of the cloud.