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Does Cloud Consumption Scare You?

Scott Frew
Scott Frew

Let’s face it – unless you were born in the cloud – of course it does!

If I were a large multinational vendor with a significant installed base of customers earning stable and substantial revenue from perpetual or annual licenses, then transitioning to a cloud subscription or consumption usage model would scare me.

In fact at the recent TSIA Technology Services World Best Practice conference, I heard from one vendor that said “if we do nothing different and transform to a 100% SaaS company, then we’re looking at a immediate 30% decrease in revenue”.

This begs the question, so why bother?

Simple, your customers are demanding it and if you don’t at least plan to do it – your customers will move to competitors that do offer it.

As an example of how some are not reacting quickly enough, at the same TSW conference I actually heard a representative from a vendor say that customers were already asking them for it, but that simply do not provide this option and with no plan to. Another large vendor detailed their plans to offer their products “as a Service” but in fact was not consumption based (ie you could not reduce the cost if not using the products) it was just a fixed cost fixed term payment (this is nothing more than a lease or rental contract!)

So, my suggestion is – get on board NOW! – I know it’s not easy but you are already behind the curve.

There’s a multitude of questions companies need to digest and strategize, not least the one being how to close the large revenue gap that you will face as well as various marketing and product development questions. But beyond that, there’s one area I want to focus on in this Blog that involves the operational mechanics of adopting these models.

I know it’s boring - but the process issue is usually one of the biggest challenges companies face. Typically companies have a team of people managing the renewal process, which can either include license upgrades or refreshes as well as ongoing maintenance.

Taking an example, if you have 5,000 customer transactions on your books with annual or perpetual licenses with maintenance, as a conservative estimate you’re probably processing around 400-500 renewals a month. Let’s assume that around 3-5 renewals can be processed by one person per day, your current team of specialists is probably around 5 people.

Now, imagine you move every customer to a cloud subscription or consumption usage model that is billed monthly. The previously manageable 400-500 renewals a month suddenly becomes around 10,000 per month. To “renew” every month based on the current processes would take at least 12x the resources. Since you’re just shaved 30% off your revenues, this blow out just doubled.

So the process needs to be highly automated just for business survival.

If I have managed to get you to read this far, I have just quantified your challenge and because I am a salesman, I knew the answer before I asked the question!

iasset.com is the only answer to this conundrum.

Transitioning to Cloud Consumption? Download this guide for key issues you should address now.

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