I was once on a driving holiday in southern Ireland. As anybody who has been to that beautiful part of the world will know, the scenery is magnificent, but the road signs can be very confusing. Totally lost I pulled over to ask directions to Ballylickey and a local farmer uttered the immortal phrase: “Well, if I was going there the first thing I would do is not start from here!” Amused by the response and the clarity of his logic, I drove off and tried again at the local pub. But when I think about it that guy was right – starting off from the right place is hugely important. And when we apply that homespun logic to IT most CIOs are not starting in the right place when it comes to their cloud strategy.
In my last blog, we talked about the current age of digital disruption and how unicorns are changing the tech landscape.
What Does This Mean For You Though?
As a result, IT and LoBs are under more competitive pressure than ever before. A new wave of disruption faces them – hence, businesses need to react fast, innovate and release. This is where Shadow or Rogue IT comes into place – LoBs want to fail fast, and fail often. You can’t do that if it takes 2-4 weeks for a VM, never mind with access control restraints. At Cisco, our Cloud Consumption Service helps find on average 5-10 times more cloud services than the CIO was aware of. Shadow IT or Rogue IT is just the business trying to react to the market: the path of least resistance wins.
If you’re a traditional on-premises software company, you’re in the right place. Today, I will talk about how cloud computing can transform your business. In a subsequent Cisco Blog, I’ll discuss the implication this move will have on your sales and distribution strategy.
Model One Business Model
Traditional software companies have operated in a Model One Business Model. In this on-premises model, the customer buys a perpetual license for software and then pays annual support and maintenance fees, which turn out to be another kind of subscription revenue stream. While that might seem to be the end of the cost to the customer, it’s not. The customer is going to have to spend money managing the software – and it’s not cheap.
Many years ago I found myself talking to venture capitalists about the differences between SaaS, outsourcing, ASPs, MSPs, online applications; etc. Also I noticed that my Stanford students had little understanding of the economics of software, so I developed the idea of seven business models to cover everything in the software business, and remove the buzzwords and replace them with economic models.
In my previous blog post we discussed the first four models, this post will cover Models Five through Seven.
We ended the last blog talking about Model Four being able to provide management of the security, availability, performance and change of the software at nearly 10x less cost.
The question we left with was “how”?
How is it possible to decrease the cost of management without just paying people a fraction of what they made previously?
Many years ago I found myself talking to a venture capitalist about the differences between SaaS, outsourcing, ASPs, MSPs, online applications; etc. Also I noticed that my Stanford students had little understanding of the economics of software, so I developed the idea of seven business models to cover everything in the software business, remove the buzzwords and replace them with economic models.
In my previous post, I talked about the Seven Ways to Move to the Cloud. In the second issue (there’s a lot here), I’ll break this into two separate posts, discussing models one through four here, and models five through seven in the next issue publishing on Monday, March 2.
Note the dollar numbers used throughout are intended to be relatively representative.