Cloud repatriation follow-up: Do you really know the value proposition of cloud?
A few weeks ago, I blogged my thoughts about cloud repatriation and how it feels like an over-emphasized trend. In my professional analysis amid researching various reports and interacting with data center vendors, one of the key pieces of the cloud repatriation narrative is that customers will move to cloud without a full picture of the costs and ultimately retreat to a more predictable environment. Seems like a reasonable hypothesis, but has this been tested? Also, is cost really the core decision driver?
A recent call with an enterprise IT buyer shone light on this topic, as much of their story about consuming IT didn’t align to the market generalizations. For starters:
- The buyer is in the healthcare industry but is using cloud services, even migrating some critical applications like ERP to a SaaS-based solution. Generally, it’s thought that the industries with sensitive data will stay away from cloud solutions.
- The company typically keep $500 million in the bank at any given time, meaning the perceived challenge of capex outlay associated with on-premises solutions isn’t much of an issue to drive it to adopt off-premises cloud solutions.
- But the real kicker? The customer indicated its cloud-based solutions are at best cost-neutral and sometimes even more expensive than their on-premises counterparts.
This came as a bit of a surprise to me, as these elements are counter to the typical IT industry narrative. If an enterprise is investing in an off-premises solution already knowing they will pay the same or more than an on-premises solution, what’s the point?
Let’s look at this particular customer’s cloud journey. Their first foray into enterprise cloud was, like for many businesses, using Office 365 and products such as Exchange for email. Based on the value seen from this implementation, including reduced management overhead and end-user benefits, they started adopting cloud-based offerings in other areas of the IT stack.
When describing the organization’s process for making decisions around acquiring IT solutions, the buyer described a fairly complex, quantitative strategy for assessing the ROI of any given solution over a three-year period. The assessment includes four facets:
- Will it save time? This can include making IT employees more efficient or enabling business unit employees to improve their workflows.
- Will it save money? A detailed calculation considers elements like license costs, management overhead and how these will change over the three-year period.
- Will it make money? This particular buyer works for an organization that acquires other companies often. The buyer described a scenario where using cloud solutions helped integrate an acquisition target’s data within two weeks and enabled a new product to be launched within a month of the acquisition.
- Will it reduce risk? Risk can take many forms, from risk of an IT outage to risk of interrupted operations or compromised IT security.
This is one example from one enterprise, but it illustrates the point that cost is far from the only factor being weighed when making choices about how IT is going to be delivered. Or at the very least, cost is not simply what you pay for a solution; decision makers must consider the many risks and benefits that spider across an organization. A higher fee for an IT solution might be a small price to pay if it increases your time to market by three times or more. Moral of the story: Know what the actual criteria are for your customers’ decision making. You may be failing to sell to their most important buying points. Or, you may be sending the wrong message!
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