The Dark Side Of Cloud Computing

CIOs need to understand that cloud computing is changing
CIOs need to understand that cloud computing is changing
Image Credit: Cory M. Grenier

I suspect that by now just like most CIOs you have heard a great deal about the promises offered by cloud computing and if you have not already taken the plunge and dived into cloud computing, then at least you have a plan to do so in the near future because you understand the importance of information technology.. However, the folks who have gone before you have a message for you: cloud computing is undergoing some changes and you need to be aware of them before you commit too fully to this new computing paradigm.

The Way That Software Used To Be Sold

If we are going to want to have any hope of understanding the new models that are being presented to us in the world of cloud computing, then we will first have to make sure that we have a good understanding of how things used to be done. Back in the old days, software vendors would show up on our doorstep with a suitcase full of CDs and attempt to sell us software licenses. These licenses determined how many people could use the software and how long we were signing up to keep using the software.

What this meant for CIOs is that they had to spend a lot of time trying to determine how many staff were going to have to use each piece of software so that they could properly budget for that software. This was always an annual battle as we were trying to draw up lists of users and then the IT department engaged in negotiations with the other departments trying to convince them that they really didn’t need to have the IT department purchase so many licenses for people who really didn’t need to access a given piece of software.

Another common practice of software vendors was bundling. What they would do would be to take a piece of software that they knew a customer was interested in and then tell them that it was only available as a part of a bundle that included other less desirable, but still pricy, software. In doing this the software vendor was able to squeeze as much as possible out of each IT department that elected to purchase their software.

The New Cloud Model For Selling Software And Services

The arrival of cloud computing was supposed to change the way that the person with the CIO job purchased software. The phrase “pay-as-you-go” was created to try to describe how CIOs could simply increase the number of licenses that they needed when they needed them. What CIOs are starting to discover is that when they purchase cloud-based software, there is a very good chance that they are going to be stuck with this software for quite some time.

What has happened is that the old ways of pricing and selling software are now starting to creep into the world of cloud computing. Software service providers have started to bundle together applications. In addition to this, software vendors are also starting to require that firms agree to sign a multiyear commitment in order to use the application and other services provided by the firm.

When a firm discovers that this is what a software provider wants them to agree to, they should be on guard. The problem is that depending on how the deal is structured, signing a cloud agreement like this could end up costing you more than it would to just flat out buy the software. An additional issue that the person in the CIO position has to be aware of is that there is the possibility that they may decide to switch cloud providers. The more data and systems that a firm maintains in “the cloud”, the more challenging the job of changing cloud providers may turn out to be.

What All Of This Means For You

When cloud computing first showed up, we were all enamored of the promise of “on-demand-computing”. We were told that we only had to lease as much hardware and software as we needed right now and that we could always get more later on as our needs changed. It turns out that things are starting to change and this may no longer be the case.

Software vendors are starting to get squeezed by the low revenues that they are earning from their cloud customers and so they are starting to make some changes. They have started to bundle software applications together and are requiring customers to make multiyear commitments to use the software. All of a sudden it is starting to look like buying the software may be a better idea than leasing it in the cloud.

Things change and how software is being sold in the cloud is just one of these things. CIOs need to make sure to keep their eyes open and evaluate the deals that cloud software vendors are offering to them. Cloud computing does offer a lot of possibilities; however, you need to be careful to not select the first deal that comes your way.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World IT Department Leadership Skills™

Question For You: If a cloud software vendor tries to lock you into a long-term contract, what is your best response?

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What We’ll Be Talking About Next Time

I’m pretty sure that I’m not only speaking for myself when I say that I really, really don’t like failing at something. Yeah, yeah – I’ve heard all of the sayings like “fail often, fail fast”, “embrace failure”, “learn from your mistakes”, etc. That does not make failing any easier. I’d much rather forget my failures and move on quickly and deal with the importance of information technology. However, it turns out that would be a mistake. When we fail, what we really need to learn how to do is to put it to work. We need to find a way to make failure a resource that will allow us to become more successful in the future.