5 Faces of Cloud Applications
Posted By: Ronald Segerstrom
New customers and their new demands are fueling the growth of cloud computing, forcing the providers to stop and listen. Cloud computing has evolved to the point of being furnished just like our natural gas or electricity. Applications that are delivered to companies which desire to outsource a wider range of their capabilities and capture the economic benefits. The 'savvy providers' will be the real winners as covered in the Bain Company Five Faces of the Cloud.
What makes the economics of the Cloud so attractive?
1. Cloud delivers real value (See figure 1):
a. Total IT spent as a % of Revenues earned has fallen from 6 – 4% (a 33% cost reduction).
b. Time to develop, test and deploy has dramatically fallen, improving time to market.
c. IT investment focus has moved to ROI versus the systems sunk cost approach.
2. Over the next 3 years there is a 30 – 40% cost advantage of opening up a public-cloud versus an in-house application. (See figure 2 )
Bain predicts growth of business spending 5 times by 2020, growing from $30B to $150B; representing 1/5th of the profits in the Technology Sector. Yet there are still major challenges for this market:
1. Security concerns and high-profile outages are at the top.
2. Data-intensive workloads, custom legacy applications or private clouds for small business are still obstacles.
Over the next 3 years, nearly all growth in cloud spending will come from 65% of the companies that currently make little or no use of the cloud today. (See figure 3) Major industries of Retail, Transportation, Industrials and Financial Services will demand more private and hybrid cloud offerings.
Figure 3: Early Cloud adapters
5 Clusters of Cloud Customers (Figure 4)
1. Transformational: early adapters, current IT environment is already more than 40% Cloud.
2. Heterogeneous: these have an exceptionally diverse package of legacy systems and cloud computing.
3. Safety-Conscious: security and reliability of their IT environments are primary.
4. Price Conscious: bottom-line focused companies whose only concern is the cost.
5. Slow and Steady: the largest segment is firms that are not yet ready to change.
These 5 customers segments will all move to the Cloud in different ways:
1. Transformational: will increase their Cloud market penetration by 11%
2. Heterogeneous: will equal Transformational with an increase in market penetration of 223%
3. Safety-Conscious: will represent real opportunities for private cloud providers with an increase of 86% penetration
4. Price-Conscious: will represent the lion share as competition drives down prices and they represent a market penetration of 280%
5. Slow and Steady: will start to realize the value of adaption and increase their market penetration by 90%
Success Formula for Providers
Understand how your offerings appeal to different segments; what is your added value? First and foremost, it must be practical and easy to use. In addition your sales force need to access four factors that determine to what degree a potential client is ready for your Cloud solution.
1. What is the business context, the company’s growth rate, speed to market and regulatory constraints?
2. What is the CIO’s philosophy, includes the IT’s leaders perspective on technology investments and past experiences with outsourcing?
3. What are the workload characteristics; this includes the moving of workloads to the clouds and the level of customization of existing platforms?
4. What are the economics involved, to what degree are cost savings a priority?
Cloud solutions need not be ignored and their added value will start to outweigh the security and legacy issues. One-size-fits-all solutions of the past that have brought providers this far will prove unsustainable.The next generation of winners will focus their product development pipelines, marketing strategies and sales approaches for customers that they are best equipped to address. And the best part, through the inbound marketing avenues clients will start to search and compare the potential applications through social and business media channels. The 'savvy providers' who are the first to take advantage of these venues will have their lead over their competitors.
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