This is why many software vendors struggle in the cloud

Transforming your business from on-premise to cloud requires a different mindset

In my day to day business, I speak to many business software CEOs about what it takes to have an edge in today’s fast pace technology market. One aspect that often comes to the table is how to stay relevant in transforming your software business from on-premise to cloud.

What strikes me is the apparent belief that this transition is merely a re-deployment challenge – making the same software available in the cloud. At a 30000 ft level it might appear correct, but in reality, there’s much more at stake to drive success.

Shifts

Changes in platforms create new opportunities to shift markets and shuffle the established players. That was true with the shift to Dos and Windows back in the 90s, it is true for the change to the cloud, and it will be true for any platform change we’ll see in the future.

So, if your company was the go-to-brand yesterday, it doesn’t mean it will be tomorrow, simply because the norms change with every significant platform change.

What this means is that with the transformation from on-premise to cloud you have to critically challenge your products and business model and validate if your ability to differentiate continues to sustain. Let’s look at the word ‘differentiation’ for a moment: “It’s the result of efforts to make a product or brand stand out as a provider of unique value to customers in comparison with its competitors.”  So, the answer is not entirely up to you – it is driven by the level of entrepreneurship around you in your category. That’s what it will require from you as well: entrepreneurial thinking.

It’s about creating a leap in value

When cloud computing became popular early 2000, it shifted the industry. However, as with all new things, not overnight. It always starts with the ones that jump first – the innovators and early adopters. So, to understand what’s going on is to make an effort to look at the shift from the customer’s perspective. Why do innovators jump and take that risk of being first? The answer is pretty much always ‘a leap in value.’

Innovators and early adopters go first because they see significant value. This value can be monetary such as the opportunity to create substantial cost savings. It can be growth related, such as an opportunity to embrace new market segments or opportunities. It can be brand related, such as the possibility to be perceived as ‘excellent’ in their category.

Whatever the label, there’s a significant leap in value created between ‘what was,’ and ‘what will be.’

Think about how you invest. As they say: If it ain’t broken, don’t fix it. It’s a mantra many businesses have. However, if it’s evident that the gain is significant, i.e., it will double the performance, half the cost, create the ability the break with the linear growth of your business, etcetera, then you’d consider shifting – even when everything is working fine for you today. That’s how your customers and prospects think as well.

So, what does that mean if my business wasn’t ‘born in the cloud’?

A big mistake is to think that merely porting your solutions to be delivered in the cloud will cut it. As with all technology shifts you have to look beyond the deployment concept. To state it differently: Offering your on-premises HR solution as a cloud-deployed solution is not what will drive that leap in value for your customers. Not for existing customers to encourage them to migrate; not to attract potential new customers. Also, be honest, the significant investment you have made in Multi-Tenancy, rapid provisioning, and enhanced security is not exactly value for your customer, it’s a benefit to the scalability and profitability of your own business.

The cloud has paved the foundation for lots of underlying shifts that enable us to rethink how we can perform work and create value. So, here’s where the secret lies to successful transformations. The vendor that embraces this most creatively will lead. It’s as simple as that.

What’s changed?

To make a successful transition to any new platform, you have to combine the opportunities it gives you. For the transformation to the cloud this means you have to go beyond ‘just the deployment’ concept – otherwise your customers would happily stay where they are.

Here are some examples of what has changed beyond the ‘deployment aspect:

1. Infrastructure has matured extremely rapidly which offers extreme scaling benefits
2. Data is available in abundance due to the fact all customer data is available in one single infrastructure, and of course due to the explosion of connected devices and sensors (IoT)
3. Due to the two factors above technology such as artificial intelligence, machine learning, deep learning and for example pattern recognition have a) rapidly matured, and b) have become available to the masses
4. Last but not least compute power has leaped a) through cheaply available infrastructure, but more critical due to technology evolution around in-memory computing.

Leveraging these capabilities together enables opportunity. It allows creating entirely new categories of business software — categories that are not just about the deployment benefit, but on transformational business impact. Just check out the titles of the podcast interviews I had with almost 50 business software pioneers to understand the art of ‘what’s possible.’

Four different mindsets to change the status quo:

The meta-changes mentioned above enable any vendor to rethink their approach across four different axes.

1. Optimize vs. Challenge: 
2. In the on-premise world, and even with the 1st generation Cloud solutions the aim was to optimize conventional doing (single digit % improvements were considered excellent). The new breed of business software is about challenging the status quo by asking ‘why perform this function it in the first place’ (+10x impacts is the objective)
3. User- vs. System-driven: 
4. With on-premise systems and 1st generation Cloud solutions the user drove the action, hence the UI was important. A different approach is where the system drives action (autonomous or by augmenting the user) where the best UI is No UI.
5. Process- vs. Data-centric: 
6. With on-premise solutions and traditional cloud solutions the process is at the core – so guiding the user through each step is key. In the new approach, data is at the core, taking every opportunity to allow intelligence to drive the process from A to B in the shortest amount of time
7. Inward vs Outward focus: 
8. Last but not least, with on-premise systems and 1st generation cloud solutions the focus in ‘inwards’ i.e. the solution approach embraces the company and its outputs, where with the new generation the focus that is outwards, embracing the ecosystem where possible (tapping into infinite resources, incorporating IoT inputs, utilizing the blockchain, etc..) and to deliver upon outcomes.

Need some inspiration to get started?

1. Set aside an afternoon in the coming weeks to challenge your approach to transformation. It’s refreshing to take some steps back and look at the big picture.
2. Get some fresh ideas on how to differentiate yourself in a commodity market
3. Join the Be Remarkable tribe for business software professionals and get inspiration from industry peers.

Keep reading

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• Is your software business suffering from complacency?
• What business are you in? No, what business are you really in?