For CIOs, clouds are the fourth column

Photo by pasotraspaso
Photo by pasotraspaso

Clouds are transforming IT; that’s not news. But regardless of your cloud computing agenda, clouds are already affecting your IT plans, because they give you a cudgel with which to bludgeon traditional software and infrastructure providers.

Every IT decision of any real consequence starts with a shortlist of three competing offerings. One of the three is usually the incumbent provider—Cisco Systems, IBM, EMC, Microsoft, and so on. Along with this incumbent are a couple of alternate providers. As a buyer, you line the features and prices of each contender up in nice, clean columns where you can compare them. Sometimes these providers are simply “column fodder” designed to rein in the incumbent; but many IT companies have built healthy businesses by being the alternate.

It’s time to add a fourth column: a cloud-based offering. That means every Request for Proposals (RFP) that a company issues must have a cloud-based option, regardless of whether the company actually plans to adopt clouds.

Here’s why.

Clouds set the upper bar

A cloud-based solution is often cheaper than hosted software. That’s because it’s not as customized, and can amortize costs across many buyers. As such, it’s a good “high watermark” for any IT project. Clouds act as a sanity check on pricing.

Clouds make the “basic feature” set apparent

Cloud-based offerings, particularly SaaS applications, are based on mass production. They offer 80 percent of the features one might want, for 20 percent of the cost. This is how cloud vendors achieve economies of scale—they don’t do a lot of customization, and where they do, it’s usually a set of tools and scripting that let you tailor it yourself.

This means the cloud offering shows you what the core features are. They make it clear what’s an extra, and what’s “table stakes.” Then it’s up to the vendors in the first three columns to prove that they’re worth the premium pricing because of their special features.

Clouds force true cost accounting

Enterprise software pricing is confusing—sometimes intentionally so. It’s often tacked on to the price of a CPU, or a computer. There are add-ons, installation fees, per-seat licenses, and more. It can be hard to compare offerings cleanly. Then there’s the storage, networking, security, and processor power needed to run those offerings.

A cloud, on the other hand, has a relatively simple pricing model. There aren’t hidden costs. Despite Salesforce.com’s famous “no software” logo, they’re really all about no hardware. Because clouds are specific to users or usage, it’s easier to charge costs back to individuals or departments.

By including a cloud vendor in a competitive comparison, you force a true assessment of costs across all participants, and surface the hidden costs of software you run on your own.

Cloud pricing is easy to get

Cloud providers have a very different sales strategy from enterprise software. They seldom have direct sales teams; instead, they rely on word of mouth and easy trials to get adopted. That means they don’t guard their pricing jealously, since they have a one-size-fits-all mentality.

Clouds are all about self-service IT access, and their sales and marketing processes are also more self-service. As a result, it’s easier to get numbers and details for the fourth column: just visit their website.

Make clouds the fourth column

Even if you believe you’ll never use a cloud computing platform (you Luddite, you!) you need to treat a cloud offering as a fourth column when evaluating any IT solution. You’ll be better armed, and more likely to discover hidden costs.

Sidenote: If you’re into cloud computing and the enterprise, stay tuned for details on the Cloud Connect vent next March. We’ve assembled a top-tier advisory board, and we’re currently accepting submissions for presentations.