The Dark Side of the Cloud Force
Author: Steven Zolman
The proliferation of Cloud Computing and SaaS (Software-as-a-Service) providers, and the promise these technologies offer: (i) low-cost solutions, (ii) quick and easy deployments, (iii) high levels of user adoption, (iv) device and access and platform homogeneity, (v) elastic scalable capacity, (vi) subscription based pricing, and (vii) plug-and-play interoperability, has certainly led clients to unprecedented levels of adoption of these technologies. And while the “Promise of Cloud Largely Remains Unfulfilled,” this hasn’t seemed to materially slow this pace of adoption.
As a result, we think it’s important that our clients get this right. In a previous blog post entitled, “The XaaS’s Have IT!”, we published what we thought was a pretty good definition of how our clients look at the various stages of “as-a-Service” offerings. We highlighted the differences of packaged software from cloud based technologies ranging from IaaS (Infrastructure-as a-Service), to PaaS (Platform-as-a-Service), to SaaS. It’s easy to see how suppliers are interested in moving up the value chain to claim more market and wallet share. However, every step further into these darker clouds is potentially a step further towards the dark side of these cloud forces.
One of the key considerations of moving to any cloud based solution is the increasing level of accountability and control you are driving deeper from your technology supply chain and effectively outsourcing as you move up the value chain. In our blog post, “The Shifting Line of Accountability”, we diagnosed the two main reasons for failure of these types of outsourcing agreements and chronicled the four broken business processes that lead to ineffective supplier management. Without world-class strategic supplier management capabilities, these relationships often fail to achieve their promise and remain sub-optimized both economically and strategically. Strategic Supplier Management is the key to unlocking the maximum economic and strategic value from the agreement, the investment and the relationship. Fortunately, NET(net) provides this capability on a monthly subscription fee basis as well as full technology enablement through its WIN(win) platform (currently accepting beta testers at firstname.lastname@example.org).
Absent the professional assistance from NET(net) and technology enablement of the WIN(win) platform, it’s exceedingly difficult for clients to know who the best SaaS providers are in the first place, let alone optimizing the commercial arrangements and the contractual agreements. This makes the evaluation, selection, and contracting process just as difficult to get right on your own as the strategic supplier management process is. These market conditions put clients at the mercy of suppliers that have significantly more experience structuring commercial arrangements and contractual agreements for their wares. The unfortunate consequences of supplier led activities are agreements that are all too often restrictive and punitive, investments that (at scale) are far beyond legacy and/or alternative costs, and relationships that turn out to be opportunistic, predatory, and focused on supplier lock-in and monopolistic pricing control. To add to these concerns, the decisions for SaaS based solutions are increasingly being made by business units, and are therefore not a part of the centralized organizational discipline that is designed to underpin the organization’s capabilities with solid business process for evaluation, selection and contracting.
One way to avoid this problem is to work with (what we call) disruptive suppliers; those suppliers who offer high value and low cost solutions, have an excellent reputation in the industry, and offer flexible and customer centric contractual terms and conditions. Finding these suppliers is a significant challenge, especially as Cloud and SaaS based technologies have led to an explosion of technology suppliers. The evaluation process has transformed from one of looking at a few key legacy suppliers, to now considering a supplier pool of thousands of cloud and SaaS providers. NET(net) can help in this effort by providing access to its WIN(win) platform, where you can find detailed information on thousands of pre-screened suppliers and tens of thousands of offerings. From there, WIN(win) allows you to vet these supplier solutions with a trusted peer network, including the thousands of client peers that subscribe to the platform, and engage (anonymously) with suppliers as they respond to your requests for information, proposals and price quotes.
In an effort to prevent the landslide of wealth from shifting to the cloud and SaaS providers, a plethora of cloud acquisitions have been made by legacy technology suppliers such as SAP, Oracle, and IBM among others. Another trend that is cause for concern – formerly disruptive suppliers like Salesforce.com and others have gone legacy. Instead of being flexible, nimble and customer centric, they have become some of the biggest perpetrators of all that’s wrong in the industry, with even higher stakes. Clients now routinely consider Salesforce.com to be “as bad as” Oracle because their commercial arrangements and contractual terms and conditions are becoming increasingly costly, rigid and inflexible. What’s worse, clients often learn about these problems when it’s too late. Once these problems manifest themselves, it’s very difficult to take action. With Oracle, in many cases you have perpetual use rights, and can continue to use the software even if you don’t pay for maintenance and support services. Not so with SaaS. Once you stop paying, you lose your access to the application and to your data.
Certainly, there has been no love lost between Oracle and Salesforce.com. As their enigmatic leaders often publicly suggest, they’re not too fond of one another. However it appears that Salesforce.com does admire many of the Oracle policies that have led to record level disenfranchisement with is customer base, as they seemingly have been adopting them as quickly as they can. One client was shocked to learn that his so-called subscription with Salesforce.com wasn’t really a subscription at all, rather a financial commitment to a low-water mark on user levels that could not be reduced. Another client was alarmed when they tried to scale down a certain demographic of user, and was told that it was impossible to move the users (with their data) to a different subscription level and would therefore have to remain at the higher level (at the higher price). Another client complained about the seemingly endless add-on costs and the surprise bills. Still other clients never expected the level of ‘implementation’ and/or customer support services required for a SaaS solution, wondering how they missed the fact that these supposed multi-tenant environments can take so long to set-up, configure and integrate.
One of the strongest indications that Salesforce.com admires Oracle policies can be seen in how many Oracle executives Salesforce.com hires. This may be most notably embodied in the hiring of former Oracle executive Keith Block, who now serves as Salesforce.com’s President and Vice Chairman. As you probably remember, Block was ousted after his instant messages criticizing Oracle’s acquisition of Sun Microsystems emerged during the discovery phase of a lawsuit with bitter rival HP.
All of this leads to a genuine concern from most of our clients that there is a dark side of the cloud force which is designed to look easy, fast, fun and inexpensive, when in reality that’s just the siren’s song to lure you in. Once you’re there, you find out you’re dealing with a succubus. And when it’s time to face up to the mistake, you find it exceedingly difficult, if not impossible, to disentangle. The good news is that with some added discipline in the strategic sourcing and the strategic supplier management functions, capabilities that can be secured through your relationship with NET(net) and your access to the WIN(win) platform, a full 94% of the problems that emerge from cloud based agreements can be avoided and/or mitigated to an acceptable risk. Absent these protections, many clients unfortunately fall victim to the dark side of the cloud force.
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Celebrating more than 10 years, NET(net) is the world’s leading IT Investment Optimization firm, helping clients Find, Get and Keep more economic and strategic value. With over 1,500 clients around the world in nearly all industries and geographies, and with the experience of over 15,000 field engagements with over 250 technology suppliers in XaaS, Cloud, Hardware, Software, Services, Healthcare, Outsourcing, Infrastructure, Telecommunications, and other areas of IT spend, resulting in incremental client value captured well in excess of $100 billion since 2002, NET(net) has the expertise you need, the experience you want, and the performance you demand. Contact your NET(net) representative, email us today at email@example.com, visit us online at www.netnetweb.com, or call us at +1-866-2-NET-net to see if we can help you capture more value in your IT investments, agreements, and supplier relationships.