Part 4 - Born/Not Born in the Cloud - TheCloudGuy Series on Transforming your Company into Cloud and SaaS

In Part 3 I focused on what happens to my packets on the way to and from the cloud. In the next sections, I move from the more technical background sections to the business and organizational aspects of cloud transformation.

?4) “Born in the Cloud” vs. “Not born in the Cloud” Products: Vendor Side, Customer Side

• ????????Many cloud products?from?companies(vendors) founded in the last 20 years were designed in environments organized uniquely for cloud development and support. I won’t focus on those in this series. Rather I’ll focus on companies which started as non-cloud companies and would like to transform to cloud. The change required goes well beyond the technical aspects.?

Vendor (Company) Side:

• A Vendor setup to provide “shrink-wrapped” products will typically have engineering organizations with processes for such products. Methods may be Waterfall or Waterfall like – involving long planning sessions followed by a development cycle and subsequent releases.?
• Releases can be months, quarters or even years apart vs. agile development methods common In SaaS development environments where releases happen up to multiple times a day
• Operations, installation, customer support organizations will all be catered around supporting some on-prem version, usually many versions at customer’s sites
• Sales will generally not be recurring revenue, other than maintenance/support contracts which will be the main/sole source of MRR (monthly recurring Revenue) or ARR (Annual Recurring Revenue)
• Many times, there will be a slew of legacy products and a catalogue of hundreds or even thousands of sub-versions based on customizations provided to customers to win business, one customization at a time
• Security will many times be something that happens at the end of development cycle vs. ongoing or “secure by design” methodologies
• Public companies may have a particularly hard time - where they will need to balance short term meeting of guidance with sometime large cloud investments needed. In some cases, products will need to exist in both Cloud and Legacy form for years before the legacy can be dropped creating a significant financial burden
• Cloud nomenclature will need to be adapted across all organizations

Customer (Buyer) Side:

·??????While many customers will openly express a desire to move to SaaS/Cloud based consumption they sometimes underestimate the challenges

·??????Multi-year spend planning may be Capex Centric vs. Opex and will need to change to accommodate MRR spend vs. bulk spending on perpetual license products

·??????IT managers that are accustomed to “huggable boxes” they control may have a hard time putting faith in a vendor whom much control has been relinquished to, as they now manage the customers data, upgrades, security and more

·??????Organizational structures will need to change. As mentioned, budgets will change. Some people will no longer have a role and will need to look for new roles in the organization or on the outside

·??????New roles may need to be created – e.g., CSO (Chief Security Officer)

·??????Trust in cloud security can be a big challenge as trust needs to be put in a new vendor

·??????There may not be a desire to commit to a specific cloud vendor(s) due to the high future switching cost

·??????Customer will need to educate board/investors on changes in its spending parameters

·??????During the transition there will typically be an investment period lowering profitability

·??????There will be a learning curve that could be difficult for parts of the organization

·??????There may be some hiccups, or even failures during the change, and tenacity will be needed to fulfill the transition

This is only a partial list of challenges - so how does one start? From the top down and the bottom-up simultaneously:

Top-down means from shareholders to the CEO and senior managements and down the organization.

Bottom-up by bringing in younger DNA who are “Cloud Born” in their thinking and have no issues letting go of the customer’s past.

?I am not proposing this is the only way to go forward, I am saying I have seen this work. It is the middle layers of an organization which sometimes have the hardest times changing. These are veterans, sometimes founders or early employees, who have succeeded with the company and know how things work and don’t like running towards the risk of change. Some of course will have no issue and drive. Some will follow. Some will resist. The top-level management must all align and within a short time frame. Nothing will be instant and that’s normal. Each function will need to balance meeting its short term’s goal, with the transition. This mind set must be achieved internally by changing of hearts, augmenting with top level talent, and if there is no choice eliminating resistors.

In the next few sections, I’ll elaborate in more detail about how to drive these changes internally

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*** As usual, feel free to contact me at [email protected]?if you’re looking to engage with me on a consulting/advisory basis as an operating partner, fractional CXO and work on cloudification, transformation, turnaround, growth, product strategy, VC & PE advisory, or start-up mentoring. More here ***