New Commercial models emerging from the Cloud

Arcus Global

Arcus Global
November 25, 2010

As many people are no doubt aware, Cloud Computing is presenting a growing number of innovative commercial models.

The next 2 posts will explore some of the ones that we have deployed with out clients. (Stafford Beer’s VSM diagram, representing a human control model is for illustration purposes only…)

We can ensure that the maximum commercial benefits are achieved from a Cloud focused programme by implementing a number of measures designed to take advantage of the new type of delivery. For example:

Pay for what you consume. There are several key aspects of this model that must be in place in order to ensure continued cost reduction and efficiency from a cloud strategy. Firstly, business demand management has to be effectively implemented. If it is not, commodity procurement may effectively increase costs if business users do not realise that their actions increase costs immediately. Indeed, the old days of “poor” licence management are over – as majority of SaaS applications do not offer an enterprise licensing model. Thus an effective cost / demand control model as well as easy to use toolsets must be deployed in parallel.

Secondly, on demand pricing allows to significantly reduce business planning burden, thus a simple re-charge model  must be in place to allow business users to effectively estimate their ICT costs in an increasing maturing and on-demand commercial environment. This will become increasingly important as more products become available from the Cloud. As the council moves into becoming a service provider (if that is the goal) for other authorities (by leveraging the scalability and effectiveness of its Cloud based ICT), a recharge model will need to be deployed for passing costs onto its users. Arcus and our partner, Methods are currently working with a unitary authority on developing one such mechanism, which is unique in the market place

Benchmarking and Value Assurance. Similarly to the existing, non-Cloud applications, there is increasing competition in the rapidly maturing Cloud market place. Thus we offer a benchmarking and value assurance model, that monitors deployed solutions and examines credible alternatives. Whilst commercial discounts and negotiations are ineffective in the Cloud environment. Short commitments required by Cloud vendors (typically 1 – 12 months) allow for a potentially rapid migration if a cheaper solution becomes available. This is enabled by a robust Architecture model covered in the paragraph below.

Architecture designed to  avoid technology lock-in. In order to be able to maximise the long term value of Cloud computing (this is true all types of As a Service providers) and credible and effective architecture has to allow for easy migration between vendors and solution. This is also required to reduce the risk of immature vendors and a market consolidation that will no doubt take place over the coming years.

A solid methodology for application deployment and configuration that includes such technical configurations from the beginning is essential. In fact, we utilise this same model to significantly reduce the costs during pilot stages. This methodology is effective for shared business applications, as well as larger, more complex ERP packages. We have worked with an organisation that has migrated their entire CRM system 3 times in 4 weeks between 2 competing vendors to achieve the most effective price point. In each case, the cost was minimal, as an automated process was “designed in” for migrating data, accounts customisations and integrations between the packages.

I will cover off some more models in the next post. If you would like to hear more details on the above, please get in touch via our website or e-mail me.