October 22, 2011

Weathering the Cloud: Moving your service company ahead in the age of SaaS

With phrases like "cloud computing" making their way deeper in to the everyday dialect of non-technical business managers, it no longer comes as a surprise when decision makers approach me about cutting costs by using "the cloud". They may not know exactly (or even vaguely) what that means, but they know it might save them money, so the door is wide open for a discussion about _aaS ("Something" as a Service - Software, Infrastructure, Security, and so on).

This would appear to be a huge sales opportunity for I.T. service companies, but my observations of several have shown that adoption can be slow for a number of reasons:


  1. Lower Perceived Profits - With clients spreading the TCO of software/hardware over the course of their commitment, as opposed to making large upfront purchases, the profit from a single sale takes a long time to realize for a service company - not always an acceptable situation for a business just getting in to reselling the _aaS space. Selling a client a $10,000 Exchange 2010 server plus labor vs a measly $200 a month for an easy-to-deploy hosted solution seems counter-intuitive at first glance.
  2. Resistance to Change - Change is not always welcomed, even by the I.T. veterans who typically operate small service companies. Old-school suspicions about the security, reliability, and longevity of hosted services are deeply ingrained in many people. Others feel threatened by the technical and financial aspects of operating a cloud-focused business, which are a drastic departure from the comfortable install-break-fix model many companies have been built on, and which also require a very different skill set to maintain.
  3. Analysis Paralysis - A rapid explosion of cloud systems, vendors, and services have resulted in a huge selection of products to sift through. Researching, finding, and implementing the services that will be most profitable is a daunting task that can leave your decision making skills comatose.
  4. Limited Investment Funds - The cloud is all about moving CAPEX to OPEX for the end-user, but someone has to make the initial investment to build it. For custom IaaS solutions, this expenditure could fall on the service provider. After all, the cloud has to physically exist somewhere, and someone will have to pay for the physical hardware that powers the virtual.
With these challenges, how does an I.T. company that thrives on the instant capital of hardware, software, and labor sales become a lean, agile provider of pay-as-you-go (and pay-as-you-grow) cloud services? Here's my two cents on the subject:

  1. Take stock of your employees - The entire company has to embrace the cloud and be excited about its potential at every level, from sales to operations to management. Bring in fresh faces who are passionate and eager to work with cutting edge virtualization solutions. Make sure your financial officers understand the model and are on board with changing your income generators from large one-time projects to recurring monthly revenues. 
  2. Start with reseller opportunities - Jumping head first in to building your own private cloud could spell disaster. Work with existing providers who have strong channel partner programs and can provide the infrastructure (and the some of the liability) for your product.
  3. Use what you sell - The world of cloud computing touches on so many aspects of technology, it can be daunting to understand. The best way to learn is to use the service you plan on selling within your own firm first. Not only is it good for your staff to become familiar with it, but it is a great way to reassure clients that your cloud product is mature and reliable.
  4. Streamline Operations - Providing product as a service and at a distributed monthly rate means your company must be laser-focused on efficiency. When your clients were simply billed directly for time and material, you were passing the cost of inefficiency along to them. Now that they pay you a flat-rate each month for a particular service, every dollar you spend maintaining that SLA comes straight out of the bottom line. The more servers you can maintain or accounts you can manage without adding staff will keep you in the green and allow you to stay competitively priced.
  5. Understand your clients - Not everyone is a good fit for the cloud computing model, but many are and just don't realize it yet. Learn to recognize the pain points in your customers that can be relieved with a move to cloud services. Then when you here someone say "Our e-mail just isn't reliable enough" or "We are spending too much on server maintenance", your inner sales person will scream out to sell a cloud product.
But most importantly be excited. This should be easy: There is so much potential and rapid growth in this area, it's hard not to indulge your inner geek in the possibilities this model offers.

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