How the cloud has transformed vendor business models

A great example is if you subscribe to a particular magazine or a daily paper. The transition is the way the subscription business models are now becoming pervasive across the world of technology and it has been largely driven by the advent of cloud computing.

There is another dynamic that is important to understand. Today we are seeing technology acquisition and usage being fundamentally influenced by what is happening in the consumer world. If you think of this in terms of how in our own personal lives we use and apply technology in totally different ways than we did in the past, the same goes for businesses.

Our expectations now are that consumer and business should be closer connected. In the context of business, buyers and acquirers of technology have seen that they can now acquire the technology in a different way on a subscription basis. It is analogous in many ways to what is going on with cloud computing.

Cloud computing is fundamentally a utility and the usage is dependent upon the profile and value that is perceived by the end user. Therefore the acquisition of that service or that technology is much more aligned to a subscription base.

When we think about the benefits it brings to businesses, it gives them a significantly greater freedom in terms of technology choice, acquisition and indeed technology usage. What a subscription model gives for the end user or the end user business is the freedom to switch more frequently.

The fact that they are less locked in to a particular vendor or to a particular technology means that the end user or business can now actually think about technology, about how it continually offers benefit to their business.

Rather than a lock-in technology stack that may over time diminish in terms of value that it brings to the business.

TRP: How does a business navigate the cultural shift to selling in the cloud?

MM: It has been a huge cultural shift but it is important to recognise that it is not just a cultural shift in terms of the acquisition and deployment of technology. It is actually a fundamental cultural shift in the business model.

The new generation of cloud computing companies' business models are predicated largely on a subscription service. This means they think about customer acquisition and the lifetime value of a customer much differently than they would have done in a traditional technology model.

There is a cultural shift, not only in the way you sell cloud, but in the way you think about your customer in that context.

Selling motions have dramatically reduced, for example, in the past, when I was buying a CRM product, I would be looking at evaluating that CRM product not only from the point of view of functionality but also in terms of the whole entire technology stack from the database through application servers, web servers, user interface, all the elements of that stack.

Today I don't need to focus on the infrastructure. I simply need to be assured by the cloud vendor that it is secure, that it is reliable and that it is available. In today's world, most of those questions are being fundamentally answered.

So where I can focus on now, is how well that cloud service drives business benefit to me as a business. Thus procurement becomes less a technology platform-driven decision and much more about the perceived and real benefits to the business user.

That shifts the selling motion for companies selling cloud based services but there is also another really important aspect to this – how you think about the lifecycle value of your customer.

Desire Athow
Managing Editor, TechRadar Pro

Désiré has been musing and writing about technology during a career spanning four decades. He dabbled in website builders and web hosting when DHTML and frames were in vogue and started narrating about the impact of technology on society just before the start of the Y2K hysteria at the turn of the last millennium.