Launching into the Cloud – A Vendor’s Perspective

Looking at the resignation letter on my desk, I don’t understand how we got it so wrong. He was our top salesman and was the most vocal about offering a cloud solution alongside our existing product. And now he’s joining our biggest competitor, who haven’t even considered the cloud. Why?

Execution was clearly the issue. The strategy was correct but our implementation was a disaster as new issues kept surprising us. We underestimated how this new offering would confuse customers. We thought they understood cloud computing. But it simply stalled sales. They assumed they needed less consulting support and projects started to fail. The help desk was swamped and customer satisfaction scores went through the floor.

But the worst was the sales cannibalization and changing salesmen’s compensation to be tied into our annuity model. This seemed to be the last straw for our salesmen. If they can’t make money, they will go somewhere where they can.

12 months ago, before we launched our cloud computing strategy we were on the top of our game. Now we are fighting for survival.

There are so many questions, with hindsight, we wish we’d asked.

Could this be you? As a successful software vendor, are you on the brink of making the same fateful mistakes? Or are you a start up with a great idea? Building on a cloud platform may be a no-brainer but what else do you need to consider to be successful?

Much has been written about cloud computing from a customer’s or technology, and mostly from a security, perspective but little has covered what it is like from the independent software vendors (ISV) viewpoint, particularly those migrating from an on-premise model.

Cloud is here to stay

Cloud computing seems to have struck a chord in a way that ASP, On Demand, SaaS and all the previous incarnations never have. Every analyst is blogging and tweeting about it, there are a slew of conferences and a surprising number of books have already been published. That means it is more than just the technology folks who have heard about it and the benefits. Now that business and consumer worlds are familiar with the concepts and that is driving demand for ISVs with cloud offerings.

The cloud computing evangelists would have us all believe that this is the only future and someday soon all software will be delivered as a service. And looking at the huge investments that some of the largest gorillas in the IT industry are making, maybe they’re right. A 100% cloud world may be true for SMBs but for large enterprises, they will continue to run their core applications such as SAP and Oracle in-house for years to come.

Independent software vendors (ISV) require a hybrid model with some clients 100% cloud, others using it as a platform for pilots/early stage projects and then a migration in-house, and finally straight on-premise purchases.

Life for the ISV has just got more complicated not less.

Benefits and risk – two sides of the same coin

Putting aside the hyperbole that always goes hand-in-hand with new ideas in IT, there are many sound reasons to consider the cloud. Here are a few:

Enterprise capability at commodity costs – By providing the service to multiple customers, utilizing a common centralized infrastructure and a multi-tenant approach, you can achieve economies of scale and therefore provide the service at a reduced cost compared to an on-premise solution. This means that you can then scale down to reach the long-tail. Also, by outsourcing the infrastructure there will be the potential for internal cost savings.

Before, you needed to knock out a software release every six months or so. Now you are responsible for a service that needs to be available 24/7/365. Are you adequately funded, resourced and prepared to do that? Do you have the management and technical skills to handle it?

Speed of availability vs. implementation – With the service already installed and waiting for use, much of the traditional time taken for customers to plan, install, configure and deploy is removed. But don’t confuse availability with their ability to use the service. Simply making the service available, unless it is very simple and of a very narrow scope, will result in chaos. Implementation from a process perspective will be critical for successful projects, which will in turn reduce churn and increase your annuity revenue. Ignore this at your peril.

Anywhere access – Clients can access the service using any device: PC, tablet or smartphone. A hybrid model may answer the question, “What happens when not connected to the internet?” By providing synchronized copies of data. But this has implications on the architectural complexity of the solutions you need to develop.

Always up to date – The centralized management of the services makes it easier for you to deploy updates and once deployed all users will have access to the new capabilities. This also provides the opportunity to have more frequent release cycles, which leads to a more rapid introduction of improvements, bug fixes and enhancement requests. This means that you can move to truly agile development but this may be a very different way of working.