Sunday, 21 November 2010

Making money as a Cloud Provider

The percentage of IT budgets allocated to Cloud services continues to increase as the use of as a Service" becomes a mainstream strategy for enabling the full spectrum of business activities.
The now famous "Capacity-utilization" cloud business model adopted by Amazon ( ) highlights the revenue potential of moving consumers from a fixed to variable usage-based cost model. However, though Cloud revenues are increasing, the profit margins for lower value-add services such as commodity cloud storage are shrinking. Fortunately for new market entrants selling commodity capacity is just one way to make money as a provider of Cloud services or as a supplier to those providers.
Providers who consciously and deliberately identify which combination of business model elements to adopt in support of their Cloud service offerings, and who have a clear strategy for making the necessary business model transformations, have a much higher probability of successfully exploiting the potential of cloud. {"reaping the benefits" is an option; you had "exploiting the benefits"} However, this transition to cloud, an on-demand business model, can be very rough for a provider used to selling custom, high-end services to established large enterprises, or for a hardware or software vendor used to getting paid up front (one-time charges). Taking on cloud characteristics means learning to support a one-to-many paradigm; changing cost allocations from an engagement to a service offering (product) basis; and getting used to an annuity revenue stream.
In this session we will present the following cloud business model elements that cloud computing and service providers can adopt to build greater ROI.
* Seek buyers with complementary consumption profiles to drive higher asset utilization (yield curves)
* Over-provision and commoditize resources to drive higher returns
* Develop operational efficiencies to improve price and/or service level objectives
* Enable better access to market choices to optimize license costs
* Offer aggregation and integration solutions (which help customers build customer market share and maintain coherent IT architectures) to expand the revenue opportunities
* Shift to "Appstores" and self-service (sales) channels to reduce sales costs and to expand the addressable market
* Build services for adjacent markets and/or build service options and add-ons (service variations) to expand the market opportunity horizontally and/or vertically
* Manage risk to increase outcome revenue and margin
* Use creative pricing and charging mechanisms to increase outcome return

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