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What makes a successful cloud business?

A couple of weeks ago, my boss drew my attention to this ComputerWeekly article reporting on the European Cloud Expo Conference recently held in London. The article claimed that IT departments were failing to implement cloud solutions in the way that businesses want and that cloud providers are selling cloud solutions in the wrong way.

ComputerWeekly suggested that the main disconnect between cloud providers and their customers is due to the fact that cloud vendors are IT hardware vendors at heart, used to selling their products to IT departments. This means that they lack the ability to sell business solutions.

As well as this, IT departments feel threatened by cloud vendors and so put obstacles to cloud adoption in place. These may be based on security concerns or overly-complex procurement rules, but basically they make it hard for the business to procure third-party services. Often they create their own virtualisation platform internally and tout this as “private cloud”, but this is rarely as flexible as the business requires. George Reese of Dell is quoted as saying, “What the business wants is something with the speed and agility of AWS.”

In my opinion, successful cloud businesses fall into one of two categories:

Category 1 - SaaS

Businesses such as SalesForce.com, LinkedIn.com, ServiceNow.com or Medidata where the cloud allows them to deliver a consistent, reliable service to a large number of customers with little or no initial set-up fee. There are few barriers to adoption which increases the uptake of the product.

In these cases the service offered by the cloud platform is the product. (SaaS) The cloud platform itself is just a collection of tin and software sitting in a data centre somewhere and is largely irrelevant. If you want to buy a house, you don’t haggle about which hammer the joiner uses, or where the cement is coming from. You simply buy a product and the most successful cloud businesses (to date) seem to understand this.

Category 2 - PaaS

Companies such as Amazon or eBay, where the large scalability requirements mandate the use of a cloud platform and the customer is sufficiently technical to understand the pros and cons of this solution. In these cases the service offered by the cloud platform is the product. (PaaS)

Cloud vendors (and internal IT departments touting virtualisation as “private cloud”) often fall into the trap of selling and pricing solutions based on MIPS, RAM, CPU and so on to the IT department (like they used to). Successful cloud sales businesses need to decide whether their customer is category 1 or 2 and sell their services accordingly.

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