A bit of passion spilled over into a rather bland conversation (this is a true story) among a group of IT procurement people and their technical consultant recently.  Imagine the scene: the consultant was on a teleconference line while the client team gathered around a speaker phone.  The not-so-exciting topic was about a benchmarking firm’s recently published market prices for a common infrastructure component – SAN storage.  The consultant, who could not contain himself, declared that the benchmark was in gross error – as his experience indicated that market prices were exponentially less than those published.    The IT procurement team – probably among the most logical and pragmatic people in business – felt comfortable with the benchmarking results.  Their comfort was achieved due to the extensive documentation of parameters – about 40 in total – that clarified what was included in the price benchmark.  These parameters included: disaster recovery capability, service level agreements, additional auxiliary services and others.  The client team asked that the consultant compare his parameters – that is, working assumptions on quality and scope - with the benchmark to help validate the prices.  That comparison was not happening.  The increasingly belligerent consultant touted example after example reflecting a lower unit cost.  Finally, the client manager abruptly hung up the phone in frustration, much to the consultant’s chagrin.

I don’t think the consultant was making up his facts.  And belligerence aside, he was making a critical point regarding the low prices available in the market.  But what did those prices offer in terms of service scope and quality?  I would like to suggest that a simple comparison of the facts and assumptions between competing offerings are needed to validate services offered against client requirements – and then look at price.  That said, what are others (like you) seeing in the market place today?  Do ‘exponentially lower’ unit prices for infrastructure components exist on a pay-as-you-go basis?  What does the client sacrifice, if anything, of for the lower price?  

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A great CEO client shared this story with me. His grandfather came to the United States and started a very successful retail and distribution business from a small fruit and vegetable store. The grandfather kept two cigar boxes at the checkout stand. One was for his bills and the other was for the cash receipts. Each Saturday he would reconcile the receipts with the bills, and if there was money left over it was a good week. The business measure was simple, fifty two good weeks in a row, satisfied customers, and the ability to build his business.

Today the cigar box has been replaced by Managed Service providers with integrated business processes, mission-critical infrastructures and end-user technology to support essentially the same result. Just not as romantic and a lot more complex.

Every so often one or more of these providers’ steps forward with "The Solution" to get us back to simpler cigar box times. Some solutions are as solid as concrete and others as fluffy as clouds. Cloud Computing is building expectations in the market; to provide the same simplicity as the cigar box. But what I miss in the dialogue is the Old Fashion Value Proposition. In short what does it do (assuming it works) besides reduce costs? Do not get me wrong reducing costs is a good thing but where is the enablement, the integration and the management with the simpler value propositions of a lost time:

• Will the cloudy cigar box of managed services enable an enterprise to lower the cost of healthcare for the consumer and improve their loyalty to the HMO?
• Can it enable the reduction of credit card fraud within the retail industry so as to lower interest rates and increase available credit to customers?
• Can it shine the sun to enable NASA to send a manned mission to MARS at a more cost efficient ratio?
• Can it assist in enabling an energy company to be greener?

 

Value propositions such as these need the common sense of discipline and rigor not just a quick solution. The discipline centered on a vision, a hypothesis and the rigor of a strong methodology to bring the clouds to earth for the enterprise. An Alsbridge Phase One can make sure the promise of better cigar boxes and simpler times is possible. Check it out www.alsbridge.com. It is worth the time.

　

　

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Over the last year or so, major IT service providers have progressed in their efforts to position themselves in the Cloud Computing market-space as well as building out what is still a limited number of product offerings that can be delivered to the marketplace.

Industry analysts suggest that enterprise demand for Cloud Services may be hampered, or slowed down, until more progress is made on critical technical and business issues around cloud computing.

Come on now, how hard can cloud computing really be?

Well…upon investigation it turns out that clouds are not always the transparent, fluffy cotton balls that come and go with ease… as it relates to highly flexible, demand oriented pay-as-you-go services, clouds can in fact be fairly hard!

Despite their progress, IT service providers have a number of thorny issues to deal with before prospective clients feel comfortable enough to do more than plan around the eventual need to consider Cloud Services.  Likewise, provider management is not yet convinced there is a sustainable market for what is being built or that given the business, technical and economic models in place today that providers can confidently price and deliver Cloud Services at a reasonable profit.  Finally and perhaps most importantly, assuming the issues are successfully dealt with by providers and client organizations…how do you contract for these services and govern the relationship successfully over time from an IT outsourcing point of view?
The purpose of this blog is to initiate a discussion around these (and other) thorny issues and to explore the nature of them from a number of perspectives.

First, from a client’s point of view:

• What are the things that have to change for you to feel comfortable that Cloud Services are real and that there is substantial value in them for the enterprise?
• Why are the majority of enterprises (a recent market assessment indicates from 65- 85%) are not aware of, not interested in, or not budgeting for Cloud Services today? 

 

Second, from a provider’s point of view:

• How do the Business, Technical and Economic models in your business need to change to successfully deliver Cloud Services to your clients?
• What has to change for you to be assured of a favorable Return on Investment from the delivery of Cloud Services?

 

Finally, from an IT Outsourcing point of view:

• How do the parties contract for these evolving services to ensure that value is delivered over time?
• How do ITO relationships and their underlying agreements need to be governed differently, through Service Level Metrics, Measures and Agreements for example?
  

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