The Cloud for Value and Not Price


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It was reported today by the BBC, that Google has signed up Spanish Bank BBVA to a corporate-wide deal whereby the bank will transfer to Google all of its software use for internal communication, collaboration, and various organizational applications.

The move to the cloud by a commercial bank is a watershed moment in cloud adoption in terms of security. But the motivation underlying BBVA’s move is equally important – the move to cloud is a migration to value.

The Cloud is Secure

BBVA made it abundantly clear that they are not moving any client data to the cloud, but limiting the use of the cloud to purely internal purposes. Across their 110,000 staff in 26 countries, they will be using GMail, Google Docs, Google Calendar, Chat, Video Conferencing, etc. If we think about this for a second, and consider the approach BBVA would have taken to moving their internal processes to the cloud, there would have been two fundamental conclusions BBVA’s IT team and executive management came to:

  1. Security is not an issue. The Cloud is secure. We know it, we’ve tested it, and it’s secure. We should move forward.
  2. Our customers don’t understand the cloud and don’t 100% know if it’s secure or not. We have to draw a line with our client data until that public perception issue is solved….because we’re not going to resolve it.
In the disjointed continuum that is the Technology Adoption Curve, this is an important milestone to reach. It is a “pin in the alley” that will help the other pins to fall.

Cloud for Cultural Change and Value – Not Price

From the beginning, most vendors in the Infrastructure as a Service (IaaS) segment of the cloud stack have been promoting the idea that a move to the cloud is essentially about price – lower IT costs, scale compute on demand, migrate capital expenditure to operational expense, etc. This has always been a risky strategy in my mind as you play the cloud industry out over the long term. It’s essentially commoditization from birth. Companies like IBM and HP coming into the space will hopefully begin to create a value-based tier in the market, but I don’t think we started in the right place.

This is why ABVV’s motivation is so important. According to Carmen Herranz (Director of Innovation….great title to have within a bank!), the reason they’re making this move is to initiate “a cultural change within the company” to get “the whole company working together”. Specifically, the goal is to “promote innovation” and “increase productivity” across the entire organization.

The bottom line is not the “bottom line” – it’s the top line.

Class Structure with the Cloud Stack?

Another way to look at this proclamation by a serious enterprise user is to consider that a “class structure” is developing within the cloud stack. It shouldn’t be a surprise really. The model is not a new one. Consider the market capitalization of ARM, developer of the processor IP (essentially software used by chip manufacturers) that goes into all (pretty much) of our smartphones, at $12.11B; Intel, manufacturer of processors that go into the servers that power the cloud, at $135B; Rackspace (although not the #1 player in IaaS, Amazon does not break out AWS numbers from their annual report, and so the market cannot decide the value of that business in isolation) at $5.53B; Apple (we all know who they are), at $390.10B; and Google (ditto) at $201.88B.

It’s a simplistic analysis, but essentially the higher up the stack you go the greater the perception by the market of the delivery of value.

The reason so many of us have been working diligently to bring the cloud to reality is because we have always seen the value of the cloud. Unfortunately, too many have been selling on price. Hopefully this equation will start to become more nuanced as we move forward in this exciting space.

Republished with author's permission from original post.

James Colgan
James Colgan is Founder and CEO of Xuropa Inc. Xuropa is a unique cloud-based Sales & Marketing Platform for packaged software vendors for the demo and retail of their products via the cloud. Built upon a unique lead nurturing and analytics engine, Xuropa enables software vendors to conveniently deliver their products in the cloud and drive the resultant sales pipeline to increase revenues and profits. James is a frequent speaker and contributor on the subject of cloud technology, social media marketing, and sales optimization.


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