The UK Cloud Computing and MSP market today reminds me of Florence and Rome during the Renaissance, full of Machiavellian whispering and Borgia scheming, although I would say that the politics was less in yesteryear.
[easy-tweet tweet=”Commoditisation coupled with tired business models is driving #Cloud politics” user=”comparethecloud”]
What is driving this? Simple answer, commoditisation coupled with tired business models with external forces driving down costs. Lets analyse each of the above in turn:
Commoditisation: Traditionally IT companies made large margins from customer sales. A large majority of this margin was made from physical hardware such as servers and storage, and with anything that has movable parts support contracts on this IT hardware made considerable margins. Now along comes Cloud Computing and Software as a Service that does not require large Capital Expenditure in physical goods and the emergence of mega-scale cloud providers with a nod towards Amazon AWS driving this model. And what does this bring us, shrinking margins and the ‘Borgia-esque’ venture capitalists riding their spreadsheets demanding more revenue to satisfy investments or looking for exits.
sell/merge or acquire to grow to a scale whereas providing IT and cloud services becomes profitable
The answer; sell/merge or acquire to grow to a scale whereas providing IT and cloud services becomes profitable. And this is what is driving todays UK marketplace a fear of commoditisation and the need to scale to reach profitability. When you are an IT organisation that has taken investment either from the stock exchange or venture capital community, there is always a Faustian bargain struck, one of future growth and profitability.
In the commoditisation of IT era we are now seeing a bloodbath play out in front of us. Akin to the mobile telephone dealers and photocopier era before us revenue streams EBDITA and other metrics of profitability and growth need to be adorned before the paymasters.
[easy-tweet tweet=”In the commoditisation of #IT era we are now seeing a bloodbath play out in front of us” user=”comparethecloud”]
Tired business models: a model based on capital expenditure based hardware investments without innovation and R&D investment is dead. Any business that is not looking at API based interconnections through to Big Data and analytics is crying out for modern leadership. Look at any successful organisation today and you will see a number of shared factors namely;
- Investment in areas such as Big Data and Analytics
- Embracing of social tools and methodologies
- Customer centric not revenues at all costs
- Innovation born from diligence and customer needs
- Leveraging metrics such as CLV / LTV to measure growth over time
- Investment plans based on medium to long term initiatives
- Focus on sectors rather than broad categories and develop a true understanding of what drives those customers
- Building of innovative marketing functions such as buyer personas
- Allowing for thought leadership and content to be consumed over multiple touch points
- Developing products and services based on tomorrow not today and consultatively working with customers
[easy-tweet tweet=”Any business not looking at #API #BigData and #analytics is crying out for modern leadership” user=”comparethecloud”]
External influences; when Marc Benioff of Salesforce fame declared ‘Software is dead’ many years ago SaaS, Cloud Computing and other forces have eroded traditional IT Margins. The full force of what I call the on-demand consumption model is only just started to cause to pain to traditional partners. What Salesforce has done in a short while to established players within the CRM sphere is now being played out across the infrastructure sector. The only area where cloud is in my view going to drive higher consumptions is that often forget cloud staple ‘connectivity’ higher demands for direct connectivity and data centre bandwidth will really drive the growth in this sector. As for the rest, commodity requires differentiation to stand out from the crowd. With regards to business models we are in one of the greatest times of technical and business change therefore agile business strategy (not the devops one) combined with an open mind and propensity to innovate will be key.
commodity requires differentiation to stand out from the crowd
And if in doubt consult the original stories of the Borgia and Medici perhaps in these books you may find todays answers.