This article first appeared in the Spring 2017 issue of The Record.
There are always different perspectives on the benefits and challenges of any new technology. I spent half of my career in corporate IT, but having now spent the last 15 years in sales, I try and figure out how to make life better for my former self and address the things that are going to appeal to your average IT or business leader.
At Profisee, we recently had a customer in our corporate offices evaluate our solution. While discussing deployment, the customer happily chimed in and said: “We are cloud first!” Imagine my delight as the freshly installed leader of this new line of business! Can you see the dollar signs in the bubble above my head? There is definitely a lot of buzz around cloud deployment and the benefits of cloud deployment.
Over the past year, the topic of ‘cloud first’ has been bandied about, but each time I ask somebody “What is your goal with a cloud strategy?” I get a different answer. I decided I better dig just a little deeper before I cash the cheque.
To better frame this question, let’s review what we mean by the cloud. There are four generally accepted descriptions on how you deploy applications – skipping for the moment one of the most talked about – hybrid.
The first is the on-premise solution, which has been adopted by organisations for many years. We still run into this most of the time and a general characteristic of organisations who still prefer this is a desire for data to remain inside the organisation’s four walls due to security and privacy concerns. These customers are also often late adopters and haven’t found a compelling application in the cloud. Also, the larger the scale an application needs, the perception is that it is cheaper to deploy on premise. These companies often have a standard capital budget spending mentality.
Infrastructure as a service (IaaS) may be the most adopted cloud model to date. We run into this one when we see an IT organisation that is slow to acquire and provision hardware and doesn’t have the manpower to expand to new applications quickly. These are seen when every change to an environment is an IT help desk ticket and the response time is one hour to one week, regardless of the time or importance of the request. We also see this when there are looser controls on how money is spent and departments have a lot of freedom to try new things. Expense money is sometimes easier to acquire than capital budget.
Platform as a service (PaaS) is our new line of business and tries to address a lot of customer and partner needs, but more about those later. PaaS generally looks like a specific application and provides the business functionality that is needed. The quickest way to stand it up and manage it is to have someone else do the heavy lifting. Also, the specific performance requirements of the application may change over time and we are unsure of, or not confident in, our estimates. The elasticity of the cloud, where users can get more central processing units, more memory, or more storage at their fingertips, is attractive to many.
The fourth description is software as a service (SaaS). This is the holy grail of asks and often you hear “We have a small application and can’t justify the cost on our own so we are happy to share,” or “We don’t want to hire new staff to manage this application”. We also hear “We just finished a major upgrade to – name your painful upgrade application – and it cost us US$750K and took three months and was the only thing we did last quarter; we don’t want to deal with upgrades anymore,” and “We want a customised application that requires no customisation.”
The opportunities for customers
Now that we have an idea, or at least a framework, through which to look at the cloud, let’s look at how I see a lot of choices made. It often reminds me of that old commercial jingle ‘have it your way’, and the cloud is no different. Some customers and partners want things ‘their way’ and these are often outside of the core reasons listed previously. Essentially, it all boils down to choice.
I recently did a proof of concept with a large financial services customer and it took three months from the time we agreed upon success criteria to the day the hardware was available. Once the hardware was ready, we started the installation and along the way found many of the documented prerequisites were not installed. We had to submit a ticket and wait, and wait, and wait, and – well, you get the picture.
Having been around IT for many years, I guess you learn to have patience, but some younger IT professionals don’t always have the patience to let things take their natural course. In the cloud, the vendor sets up the image and tests it and, like magic, (if we have done our job right) you push a button, and alacazam! It just works.
While software vendors like to tout, these customers tend to focus on this only when it means it saves them money. So while tenancy may be a good thing, it is not without its shortcomings. Many popular cloud services won’t say “We really like you but if you want to do a million-record update, that’s not going to happen in real time as we don’t want you to slow down the environment you are sharing with one, two, ten, a hundred or thousands of our other valued customers.”
Upgrades are almost always at the heart of what customers want in a cloud service. This is a characteristic of SaaS. While there are certain things that may get upgraded in IaaS and PaaS, the application, not the underlying operating system or platform software, is rarely the pain point that is top of mind.
Licensing – or in simple terms, cost – is also at the heart of a lot of customer discussions. One of the key reasons we have been successful is our partnership with Microsoft, and having followed the model that doesn’t charge users for domains, subjects, or record counts. These are functions of the hardware that you put the solution on. In the cloud, a customer can start out small and grow to very large – each growth is just an increase in hardware expense. This is an easily acceptable premise for customers, while the alternative of every time I add records, subjects, or domains the solution will cost me more is a lot more difficult.
The challenge to vendors
While these topics are foundational, they don’t address the challenges that many independent software vendors (ISVs) like Profisee face when moving to the cloud. We began our cloud journey several years ago and went ‘all in’ back in autumn 2016.
I think it is important to differentiate between the types of solutions provided when moving to the cloud. Solutions that are traditional box products that a customer buys, installs and are quickly up and running have a much easier transition to the cloud than more complex solutions like master data management.
Here are some of the things to consider as an ISV:
Deployment: the amount of automation required to deploy your solution is significantly higher than you might think. The questions that must be asked and the provisioning process require a high degree of thought and testing. It can take days, weeks or even months to publish your solution as images to the cloud. There are rigorous publishing standards that must be met and one small change to your image could mean you have to start the process over.
Pricing: How do you balance the cost of a cloud solution and on-premise solution? You must walk a fine line between eroding your traditional perpetual license business and capturing new opportunity and new markets in the cloud. A key here is any change in pricing means a whole new set of images that must be deployed.
Billing: if you can suddenly sell globally, how will you manage legal agreements, currencies, taxes, billing and collections? This is one reason that a marketplace like Azure can be so attractive to ISVs, as they can take care of this for many countries (but not all).
Support: this is an area where you need to plan carefully and invest appropriately. You must provide the same level of support to the cloud customers who might have a small spend as you do for existing on-premise customers who have a large spend. You must deal with 24-hour support across the globe, language and skill level barriers. It probably isn’t prudent to double your support staff at the beginning. You need to be creative about scaling up as the business grows.
Upgrades: probably the single hardest part of the cloud. As you release patches and new versions, how do you manage this with customers? If you release a new version and change pricing, this necessitates a new image and would require customers to migrate from the old image to the new one. Many vendors have challenges doing an upgrade, but if that upgrade requires movement from one environment to another, this increases the challenge exponentially. The level of automation and impact to support can be substantial.
License management: this can be a challenge in the cloud. Most vendors know their customer and issue keys, which may have product features turned on or off and dates tied to those keys. Understanding the impact of your existing licensing process is an area that is often overlooked.
Code base: Profisee is in an enviable position in that the code base for our products are the same on-premise and in the cloud. Many vendors have solutions that only run in one environment or the other. For us, this means that when a customer wants to start on premise and move to the cloud – or the other way around – it is straightforward.
Training and services: probably the second hardest part of the cloud. Self-service becomes critical to customer success. Knowledge transfer has traditionally been by on-premise services, and while this will probably continue to be the path for on-premise customers, it doesn’t work very well for cloud customers in terms of scale. Customers who are likely to spend a few thousand dollars a month won’t have an appetite for tens of thousands of dollars in services and are quite happy to educate themselves at a slower pace. We have heavily invested in our Profisee Academy to allow self-service for customers and partners, helping them gain knowledge quickly, simply and at a low price point. When we look back at this business in a few years, I wouldn’t be surprised to see the success of our growth tied to our success in self-service.
The journey to the cloud is often viewed from the consumer side of the equation and not the delivery organisation. I advocate a pragmatic approach, which means admitting you don’t know what you don’t know and will know a lot more in a year or two.
Gene Webb is vice president of Global Cloud Sales at Profisee