It will stay cloudy forever
Use of the cloud is now well established. So much so that, according to the latest research by the Cloud Industry Forum (1), the overall cloud adoption rate in the UK stands at 84 percent. That’s an impressive figure.
What is even more impressive is that normally stingy financial controllers have been persuaded that ‘pay as you go’ is more attractive than ‘buy once, use often’.
One of the primary reasons for ignoring a seemingly obvious financial reality is that, especially for small businesses, the lack of capital, or the will to borrow, is a real difficulty. If you won’t fork out £000s for a shiny new system, you are nevertheless likely to pay £0s on a recurring monthly basis. The op-ex option is simple, controllable, and budget-able and ends up being a ‘no brainer’ for many businesses – 84 percent of them it would appear.
So why should it be otherwise for developers and solutions providers?
For developers and solutions providers, the traditional model is to gather software and components in a server, and to ship that platform to a customer who buys once and uses often. Vendors benefit greatly from that, because the ratio of value vs. cost is heavily in their favour and accordingly, they are able to gain substantial, per sale revenues. However, other than an eventual technology refresh (if you’re blessed), it’s a case of sell once and move on.
Two factors mean that paradigm cannot be sustained.
For one, the marketplace is far more competitive and the buying community is tuned in to a keener awareness of value for money. As a result, competitive pressure is forcing vendors to reduce their margins, which has a knock-on effect across the board.
Secondly, shrinking hardware lifecycles of servers and components, means developers are forced to incur the cost of re-qualifying major elements of their platform more frequently than ever before. At their level, buying once isn’t an option, because what they once bought is no longer available – it’s been replaced by a new model.
The end is nigh
Both factors mean developers are seeking concessionary prices from suppliers for regular, cap-ex platform purchases. It also means they should be looking for economies in all aspects of what they do.
The costs involved in continuing to ship ‘boxes’ are many and varied. The costs involved in being able to ship the same product in a ‘similar box’ are revealing. The costs of procuring once and shipping often, during the 5-7 years lifecycle expectancy of a typical communications platform, have been superseded by those involved in procuring often (to enable continued shipping).
When seeking economies, developers must surely prefer to avoid recurring costs associated with these activities:
- Sourcing replacement servers and compatible components
- Performing platform (re-)qualification &/or productisation
- Producing software and documentation updates
- Ensuring ongoing support and deployment familiarisation
- Marketing new variant introductions and end-of-life programmes
- Dealing with warranty issues on obsolete platforms
- Accommodating vendor enforced hardware and software changes
Follow the leader
The alternative is to adopt a cloud model and offer the benefits of their platform as a service i.e., stop shipping boxes and start selling services. If the market has shifted substantially to favour cloud-based solutions – 84 percent is a compelling statistic – perhaps it’s time for developers to follow suit.
All of the functionality inherent in the servers, components, and 3rd party hardware and software that developers buy, in persisting with the traditional model, are available as cloud-based alternatives. So instead of offering a ‘buy once, use often’ solution, give ’em what they prefer – ‘pay as you go’.
There are several models for ongoing, monthly charges. There will be more than one that suits the business philosophy of a given developer organisation. As a service provider, developers need to strike a balance between commitment and risk in determining their charging model. The number of alternatives suggests the market is willing, and the risk, where it exists, can be mitigated readily by fair usage policies.