Why Is It Still Cloudy?
How the cloud services market needs to mature to become less muddled.
Never before has a buzzword constituted such a market reality like "cloud services." Years after this concept was introduced, I find myself wondering, why is it still cloudy? Or, in other words, in what ways does the cloud services market still need to develop and hence become less cloudy?
To start with, let us agree that recent developments in mobility and the success experienced with cloud-based consumer app stores have been behind the re-launch of cloud services. This is not the first time that we have a product designed for the consumer market now addressing the corporate one (remember that PC stands for "Personal Computer").
Are we going to see the same tsunami we saw in the hardware business in the software or service markets? Unlike with hardware gears that have a definite life timestamp, the cloud business is all about service. What about its adoption by corporate users?
Confidence and Flexibility are the two major concerns mentioned by corporate users when asked about their level of cloud services adoption
At a first glance, one may say that such a response from users might be expected. But a closer look indicates that when migrating to a cloud-based service, a corporation ends up partnering with its vendor, and the cloud-based business, by nature, tends to introduce flexibility into the commercial relationship. Therefore, in order to retain customers, vendors should be able to anticipate their business customer challenges.
Gaining customer confidence and delivering the expected system flexibility is key for cloud service providers. Vendors will only reap great benefits by building long-term relationships with their clients.
In order for this area of business to develop and become less cloudy, vendors must focus on building confidence with their clients. One way to do that is through being focused and dedicated to a specific industry or market segment.
Needless to say that building such a long-term relationship by being focused takes time. Will the cloud business provider find the VC willing to sustain such a long-term niche strategy?
As things stand today, we are witnessing more businesses transform legacy systems to cloud services offerings, but are cloud-based service offerings the way to go for IT service delivery?
Corporate customers will be looking for a flexible and reliable IT service delivery mechanism in tune with the challenges that their businesses are facing today. On the other side of things, investors should be attracted by the stable and recurring revenue stream that cloud business is able to provide. There is one major snag today: While B-to-C cloud-based service providers (Telcos, WhatsApp, Facebook, etc...) have always been valued on an ARPU (average revenue per user) basis, a new method should be considered for valuing B-to-B businesses. Such new valuation methodology will be advised to measure customer loyalty such as "an annual revenue growth rate per customer." Purely from an investment angle, B-to-C and B-to-B need to be viewed differently.
Cloud-based IT service offering is not another marketing buzzword. In order for it to succeed, it will have to be considered in the industry at large, both vendors, customers and investors, as a real game changer: Vendors will have to structure their businesses per specialty or service, investors will have to review their valuation mechanisms, and customers must develop a clear cloud strategy to drive all this movement instead of waiting for it to happen.
"SCTC Perspectives" is written by members of the Society of Communications Technology Consultants, an international organization of independent information and communications technology professionals serving clients in all business sectors and government worldwide.