Are Cloud Options Lengthening Enterprise Sales Cycles?
With a public cloud provider popping up in many technology sales, enterprises are faced with an even more complex variety of acquisition options regarding how to license, support, host and pay for the solution. How these options line up can have a significant impact on budget, short- and long-term cost, and receipt of business value. And getting your prospect to choose can have a huge impact on the sales cycle!
For the enterprise account manager, communicating the business value nuances of selling with and against the public cloud can be a key to streamlining the buyer decision making process.
Value Selling the Public Cloud
Speed! Agility! Core competency! Usage-based expenses! Kittens and puppies for everyone!
Of course there’s value in the public cloud, but it requires the same rigor as does any technology investment. When TFP creates a business value assessment, we do deep discovery to quantify how deploying the technology will:
- Grow revenue
- Reduce cost
- Increase employee productivity
- Reduce risk
Let’s apply this rubric to value selling for or against the public cloud to help you position your solution more effectively.
Impact on Revenue
Does the public cloud drive revenue directly?
Probably not, but if your customer’s applications enable or drive revenue, and they have DevOps challenges regarding procuring, configuring and deploying environments, then the public cloud could be a part of the solution.
To calculate this value, you will need to understand the periodic (e.g., monthly) value the applications deliver and factor that by the estimated days, weeks or months of acceleration in application deployment (a.k.a. faster time to market).
This quantification of value can simply be applied to new applications or can be extended to the incremental revenue gains for upgraded applications.
If you are selling with or alongside the public cloud, the above approach can be strong, especially if IT and/or a given LOB is cloud-ready. Selling against the public cloud may require inclusion of value through technologies like kubernetes or automation and standardization tools that enable IaaS or PaaS capabilities on premises.
Impact on Cost
For on premises, your customer needs to buy for peak utilization. This includes compute, storage, and network hardware & software, plus floor space, power and cooling.
The public cloud can be especially compelling for smaller and mid-size companies or for enterprises that don’t consider IT a core competency. In most cases, the shorter-term numbers point to the public cloud, but we recommend that you take at least a five-year view. For mature (read: highly capable) IT organizations, long-term TCO advantage can be realized on premises.
Impact on Productivity
Labor is also a cost that we tend to quantify separately and discretely. Some companies will consider headcount reduction (or repurposing), but others will only factor hiring avoidance for attrition and growth. For this calculation we consider all of the IT functions (DevOps, SysAdmin, storage, network, etc.) but also how leveraging the public cloud might improve LOB productivity.
We’ve seen a substantive “cloud economics” labor impact with SaaS solutions (self-service data inquiry and reporting, elimination of IT request work flow, etc.) and can correlate these types of impacts to the public cloud. Some of it may be related to shadow IT (not how you want to sell to a CIO), but much of it is the business owner/analyst side of DevOps or production challenges.
The public cloud often wins here, though there will be an uptick in cloud service provider management.
Impact on Risk
With the numerous reported breaches, risk is often synonymous with security, but there can be a number of areas to consider and quantify, including: compliance, outages, and cost overruns. It’s not all doom and gloom, but one key takeaway is that outsourcing some or all a data center to the public cloud doesn’t eliminate the need for sensibility. It remains the company’s responsibility to avoid breaches, comply with regulations, architect to avoid outages and manage costs.
Assuming the customer shares in the responsibility of risk, the risk component of the business case could be neutral. The public cloud providers can likely speak to security, compliance, and uptime, but cost overruns should be on the finance team’s radar as the enterprise has essentially yielded their data center to a utility-like entity.
Will prices rise? How hard is it to switch or move back to on premises?
Spoiler Alert: It’s the Hybrid Cloud
The truth lies somewhere on the spectrum of private to public cloud—the hybrid cloud. One size does not fit all regarding time to market, cost savings, productivity and/or risk.
A subset of your customers’ apps and infrastructure are ideal for the public cloud. The rest should probably stay on premises. With newer technologies, plus monitoring and management tools, your customers can readily move workloads between private and public clouds (a.k.a. cloud fluidity). This supports cost optimization and reduces long-term risk.
Too many options can make sales cycles longer. So, while you are nailing down architecture and technical fit, make sure you or your financial sales engineer is developing the hybrid business case in parallel and is ready to chart the multi-year impact of the acquisition options.
Interested in more?
My colleagues and I have written about a number of related cloud topics that can help navigate some of the challenges. For example, ”How to Effectively Offer Technology Acquisitions” discusses the importance of showing prospects the multi-year cost impact of your proposed options. And “TCO vs ROI: Which Metric is Best for Making Investment Decisions” explains the role of important metrics by applying them to a cloud vs on-premises decision.