Capitalizing on the Cloud

This is likely the most succinct analysis of the challenges that cloud computing faces in becoming a viable paradigm in delivering technology services that we’ve found anywhere on the Interweb.  M.R. Rangaswami ties together some high-level research from Merrill Lynch on the value of the cloud computing market with adoption challenges and Gartner’s prescriptive view of considerations that we face as companies trying to monetize services in the cloud.

Key takeaways:

1. Cloud computing needs to be defined.  Is this critical on a micro level for providers that leverage the cloud for service delivery in order to drive customer adoption?  Probably not so much – most people buy Salesforce because it’s a great CRM product, not necessarily because it’s “in the cloud.”  Is it critical on a macro level to define cloud computing in a comprehensive yet accessible manner?  Absolutely.  Confusion in the cloud computing message only underscores the immaturity of the space and can impact mainstream adoption.
2. Focus on value.  Explaining the value proposition to those of us that are able to run our entire businesses on SaaS applications that automate the end-to-end “virtual value chain” as opposed to having to hire half a dozen people with comparable functional expertise is preaching to the choir…the value is self-evident to early adopters.  The key challenge is to find the right value proposition for the various tiers of the market; the SMB market that can leverage SaaS to gain access to applications that just 5 years ago had too many zeroes in the price tag see the value immediately (or with minimal nudging), but the enterprise end of the spectrum still bristles at the thought of giving up control of IT resources to providers outside of the walls of the corporation…the thought of not being able to walk into a server room and know that all is right in the world because you can see thousands of blinking green lights is just science fiction in the majority of enterprise CIO’s minds at this point.
3. Figure out how to sell this stuff.  Marketing and selling services in the cloud requires a radically different approach than selling software out of a box.  We know this, but that doesn’t make the prospect any easier.  How do we price it?  How do we position it?  Are competitors really competitors, or are we all complementary and connected in this new world of cloud computing?  What business models will hold up as the everything-as-a-service, pay-as-you-go model gains real traction in the market?  Nobody has the answers.  Yet.