Cloud market penetration - is Cloud successful?

We are now a few years into to Cloud evolution, meaning that there are not only ten-folds of Cloud providers, but hundreds that are offering their IaaS, PaaS and SaaS! Thus one should expect to find a mature Cloud market out there that is being utilized by most buyers, but is this the reality?

Cloud penetration pyramid              

I dont think so? Why is that? How come we have hundreds of providers and so few enterprises that are taking advantage of the Cloud?
Well, as for private Cloud offerings, many, maybe even most of the large enterprises are on a transformation journey into a private Cloud (however this is also being disputed by some sources), but is this really the ultimate target of their strategy?
I hope not, because it is much more to the Cloud value proposition than automation of internal IT, like no CAPEX and significant cost reduction through paying only for the resources consumed! On top of this the buyer gets the flexibility of multi-sourcing and ability to "shop-around" where the services are to the best for the business. So what is wrong, why are not the large enterprises transforming into the public Cloud? One obvious reason is of course regulatory reasons, ie security and trust. But is it not the providers responsibility to ensure that their services are according to the regulatory requirements? Thus significant lobbying is needed to convince the regulators, but of course not without the solutions that actually can solve the issues that makes the regulators restrict so many large enterprises being engaged in a transition into the public Cloud.

At the same time there are multiple large Public Cloud providers claiming they can meet any security requirements set up by the enterprises or regulators, but the problem is lack of transparency! Most of the secure enterprise public Cloud offerings are too complicated and the providers fails entirely in providing the transparency that the buyer and regulators requires - so dont blame the large enterprises or the regulators!

Simplicity is key, that includes the required transition and transformation process, the delivery model and the payment model - the core of the Cloud value proposition is simplicity, automation and cost efficiency, but the providers fails miserably on the first instance; simplicity by proposing complex T&T processes and payment models that requires a mathematical genius with considerable IT delivery experience to fully understand.

Why are Amazon (AWS) so successful, maybe it is beacuse they have successfully implemented a very simple value proposition that communicates a simple transition- and delivery process with an understandable payment model? However, I am not sure that the AWS covers all large enterprises need of availability, scalable and secure cloud solution, but one should not let possible lack of functionality get in the way of the real issue of simplicity and transparency!

References/sources:
Cloud Computing Today
Don’t believe any claim about private cloud market share

IT Outsourcing on the brink of being disrupted

The traditional IT outsourcing business is being challenged through its own "medicine" like Cloud and the buyers strategies of multi-sourcing and cost reductions. Even the IT technology itself is challenging the IT outsourcing business through cost effective technology convergence that simplifies the delivery and reduces the resource requirements. 

Both the outsourcing provider and the buyers alike wants to build relationships based on [long term] strategic advantages that provides revenue growth for the provider and cost reduction for the buyer - apparently contradicting interests - at least within the current metrics based SLA and FTE based model, thus this model is being disrupted by innovative value-based pricing models like the outcome based pricing model. Even the traditional consultancy business is being disrupted by value based pricing models (ref HBR October 2013), the clients are simply expecting the providers to put real value behind the value proposition they used when they sold their services to the buyer, thus if the consultants claim they can improve the efficiency of a specific process etc by applying their services, they should then quantify the improvement and price their services according to the achievement of a realistic target and possibly exceeding this target (a generous bonus for exceeding the target is very effective) - that would really be something the buyer would appreciate.

There cannot be any doubt that such a model will be beneficial to the buyer as the buyer hardly pays for the service if the agreed target is not achieved and the provider will be able to improve its revenue significantly if the they are able to exceed the benefits of their services - a real win-win scenario.

Similarly an outcome based pricing model could be applied to the IT outsourcing business, however such a model is complex and difficult to manage compared to a metrics based SLA-model. Also, the provider would need to have significant experience from the IT outsourcing business in order to be able to apply an outcome based model as it will be critical to the provider to have an experienced delivery organization to find the best outcome based model that realizes the benefits for both parties. A hybrid model would possibly be the best first step as the buyer can select specific strategic business areas like Help desks, Mobility, Big Data & Analytics etc as in such business areas its easier to quantify incentives in terms of expected business value to the buyer and more revenue to the provider.

As the traditional IT outsourcing model is being disrupted, providers need to take the first step and offer an outcome based price model, many large Indian companies are already doing so, waiting for the buyer to request a new business model is probably too late ....



Outcome-based Pricing is a Natural Progression of a Maturing Industry
10 Tips For Making Outcome-based Outsourcing Work
A Simple Econometric Approach for Utility-Based Asset Pricing Models