Right Business Strategies for the Cloud Era

By Neil Smith

Cloud computing is one of the major forces of change impacting business in the next decade. It’s already changing the manner in which IT services are delivered and managed. Gartner predicts that the public cloud services market will grow 18.5 percent in 2013 to a total of $131 billion worldwide. Infrastructure-as-a-Service (IaaS) is the fastest growing market segment and will achieve a compounded annual growth rate (CAGR) of 41.3% through 2016.Platform-as-a-Service (PaaS) will achieve a 27.7% CAGR; Software-as-a-Service (SaaS) market will grow at a steady CAGR of 19.5% through 2016.

As expected then, the cloud services market is growing rapidly in terms of number of service/ solution providers, all of which are looking for a pie of the action. Since cloud computing is a hypercompetitive market it’s difficult to figure who’ll be the market leader. The primary drivers behind the winner could be cost structures, performance and or security and assurance. Well organized companies will have more initiatives, best practices and may deliver high performance cloud applications, not so well managed companies will be laggards and would borrow these practices and adapt them.

The buyer side is one of opportunity with peril as they are having difficulty segregating and evaluating these cloud offerings in the plethora of marketing jazz. Often organizations overestimate the short-term effects while simultaneously underestimating the long-term benefits. Without fully understanding the wave of developments of which cloud is just a part, companies may invest in capabilities that will not pay off sufficiently.

With IT buyers changing the way they buy and consume technology, we believe there would be more than one winning business model. As an example, some players could succeed by enabling the change to cloud and others by managing the cloud itself. Every IT firm thus has a choice to make. Some firms will consider this conundrum as an opportunity to evaluate possibilities and focus on the right business strategy for the future, given their current capabilities. A few tips to navigate through this maze could be:

  • Know your customer – reassess how your customers prefer to learn about, shop for, purchase and ultimately consume technology
  • Redraw you value chain – go back to you suppliers and channel partners
  • Choose right partners – your partners should ideally help enable your customer’s migration to the cloud. Needless to say they need to be viable and reliable
  • Know your competition – identify what your traditional/ primary competitors are doing. Still the levels of competition may differ. You may end up succumbing to secondary competitors, who would have not distinguished themselves yet
  • Turn your value proposition into sales – a value proposition is the key reason that your customers buy from you rather than from others. Make your “unique value proposition” as the selling point so that customers buy from you and your offering remains unique.

There is a clear trend towards increased consumption and offering of cloud based services and products. There would be winners and losers in this paradigm shift. Winners will assess the market, business models and offer unique value proposition to deliver high performance, high value offerings to their customers.

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