If you have not heard enough of the cloud and its importance, you have probably been sleeping or being ignorant of what is happing in the IT industry. I have to say that I am unbelievably excited of having the opportunity to be part of this change and there are many reasons for this. The first and foremost is that the cloud has brought the software industry something new and exciting and a reason to re-learn a few things that keeps the innovation happening in our industry. I have lived three different IT industry eras: the minicomputer, client/server and dot.com era. The latest and very much transformational will create a new generation of solutions/applications that we all will somehow benefit from.
I still hear from many ISVs that “this is nothing new as we have had managed services for years” demonstrates that these naysayers do not really have the understanding what the cloud will bring to the table such as “pay as you use”, scalability etc. The cloud platform will give new opportunities for innovation, opportunities that traditional hosting can’t provide. If you are one of the naysayers, you can keep doing that but I will remind you in a year or two about this and let’s see where we are at that point in time.
If you are an ISV and have not looked at the cloud possibilities, you could be soon overtaken by a competitor that you would never have expected. There are hungry entrepreneurs that want to take over established vendors that might not be any longer as agile as a small startup can be. To become agile again, we have to think outside the box and forget about our old routines and thinking and accept that the change is here and that people will be consuming software in a different way that we are used to. I still think it will be a hybrid model where some of the apps will have to live on the device due to usability factors, but most of the data and logic will stay in the cloud. The cloud era has been here for a while and the early adoptors have accumulated experiences that the rest of the IT industry can benefit from. Some best practices can be found from CIO.com and an example of this is an article “Which Apps Should You Move to the Cloud? 5 Guidelines”. My recommendation is to do your homework (=planning) before you go to the execution phase. The cloud is different and requires different skillsets from people involved with it.
What if you are a traditional software vendor with a legacy application that relies heavily on a traditional business model? What are the actions that you need to take when taking the steps forward? I like the advice from Ben Kepes blog where he lists six different things that he feels that are important to understand. He also emphasizes that it is not that much of a technological change, but more of a cultural change that has to happen for Independent Software Vendors (ISVs). I fully agree what Ben is saying. My typical comment to ISVs is that it is a change in the DNA when an ISV moves to cloud architectures and some people will never get it and I expect there will be some turnover within the ISV community. A good example is the change in sales model where the commission structure has to change for the sales rep whereby the traditional commission plan with one-time deals is gone that made some successful sales reps to really make big money in short-term if successful in closing large deals during a financial year. Let’s view on what Ben Kepes views as the six culture changes are:
1) Accept that disruption is going to occur and identify that it’s better to disrupt from within than without
2) Accept that for disruption to occur, control needs to be given up.
3) Dedicate resource – people, money and time – to building a development team charged solely with finding the “golden disrupter”
4) Accept that disruption will hurt short and medium term revenues, but will ensure long term survival
5) Once the product is there, don’t try and subvert it to suit the current status quo
6) Don’t even think about having the same sales personnel or strategies selling the traditional and the disrupting offering – it won’t work
The first statement is what I always try to bring up in my workshops. You have to face the reality now and not delay the decision to innovate using the cloud. If you do not, you might have the same fate what Nokia had with Symbian platform.
The second statement is also important to understand. You cannot control the change, but you have to try to live with it and make the best out of it.
The third one is what ISVs usually fail with. If you try to push the “cloud transformation” to the same team that is taking care of your traditional software application/solution, you will not only burn these people; you will also fail in your cloud attempt. Software development using cloud architectures is not the same as developing for the traditional software architectures due to many reasons such as multi-tenancy, latency and also how the application is consumed using different mobile devices. Ensure that the people that are assigned to work on the cloud solution will have the means to do it including sufficient investment and realistic expectations.
The forth statement is in line what I have been blogging about for months, where the ISV has to plan how to manage the financial impact on the ISV business with a strong transitioning plan that takes into account the change from perpetual licensing model to subscription-based model where the payments are divided into the contract period. Based on our research and discussions with lots of different ISVs, three years or 36 months seems to be the magic number where the organization should start to see the real benefits of an ongoing subscription-based revenue model.
Statement five and six has to do with the change of ISV DNA that I explained earlier in this blog.
Remember also that traditional geographical boundaries that you thought kept you secure are also gone with the cloud. End users will test-and-try solutions regardless of location and there is nothing that the IT department can do about it. We have seen it so many times that it is not even funny anymore.