Help clients by cutting through the cloud hype

We’ve been reading about the threats and opportunities of the cloud for some time. This transition is not about faster, cheaper or better; it is not the kind of product evolution we’re all used to. It is a disruptive change.

It is not easy to assess the scope of the threat or opportunity, especially for a small business owner. We hear that the global cloud players are not making money yet. So how do I compete with a similar offering when I have to pay the staff, the bank, suppliers and shareholders, without recourse to the stockmarket or equity partners with deep pockets?

Answer: by testing the global hype against what is happening in our own backyard with our own clients.

Drilling down into reports from the global consultants, it appears that the workloads being migrated to global, x86-based, infrastructure-as-a-service public clouds relate primarily to test and development (so far).

Test and dev are big in the enterprise, but they’re not huge workloads in midmarket or SME. So if you service smaller clients, then perhaps the threat isn’t major.

Other workloads are becoming more readily deployed to the cloud – Office 365 is a great example. Office 365 is being adopted by all sizes of business, but it has to integrate with on-premise systems. This is an opportunity, because it’s not just a plug-and-play deployment.

It’s certainly a great opportunity. Where there is mystery, there is margin. Another cloud question is ‘Where is it located?’ Cloud purists say this doesn’t matter, but tell that to someone dealing with a contract dispute, excessive latency or change control mechanisms that are out of their hands.

Foregone conclusion

Clients often talk to us about the ‘move to the cloud’ like it’s a fait accompli. We ask them why, and sometimes we have to ask several times to cut through the recycled, sometimes mangled hype.

Maybe they don’t actually want infrastructure-as-a-service; maybe they just need help managing their current environment. Maybe the issue is their IT resources are stretched and they think migrating to the cloud will help. Maybe the client doesn’t know why they want to go to the cloud.

We ask them to slow down and think it through. Whatever the reason, getting to the heart of the matter will help to cast us in the role of the trusted adviser.

As an example, one clients – a medium-sized consulting firm – was talking about moving to Office 365 when in fact what was wanted was to move all on-premise systems to a robust data centre – in their mind, the Office 365 move covered it all.

Another client, a family-owned food distributor was very keen on ‘cloud’, but the discussion drilled down to their server room, which was very insecurely located. What they really wanted was to avoid moving the server room and rebuilding it. Again, their solution actually revolved around location, rather than ownership or management.

In fact, most of our clients are bundling those three elements – physical location, ownership and management – into one amorphous thing they refer to as ‘the cloud’.  That creates up lots of potential confusion.

There is a business challenge awaiting all of us who move significant revenue from selling product to selling subscriptions. Cash flow will be impacted, as will current year revenue and possibly profit. This change will also flow through to salespeople and how they are incented and paid. They will feel the pain of this transition, too.

Paradoxically, we feel the change will help the value of our business – on paper at least. Compared with one-off revenue from product sales or project services, recurring contracted revenue will gain a higher multiplier when valuing a business. A long-term contracted offering with bundled services means that the business is worth more long term. There are a million messages about this oppor­tunity. Sitting and waiting is a valid strategy, but it comes with some risk.

The bottom line? Understand what the reality is with your clients. Help them properly understand the pros and cons of their options and then build plans with them. Also, understand the impact that changes in cash flow patterns will have on your business and on your sales team.

Some would also say the private and hybrid cloud markets are just fancy names for what we have been doing for 20 years, albeit with self-service portals and billing thrown in. But this is an evolving landscape, changing faster than we might be used to.

Kon Kakanis is managing director of Sundata in Brisbane