Why Companies are Really Buying Applications in the Cloud
By Ginger Conroy-Oracle on Apr 14, 2014
Everyone is talking about cloud applications. There are different definitions of cloud, but the simplest is that an application in the cloud
- Is managed by someone outside your organization
- Allows users to login from their devices and use the application
It seems like a subtle difference to users. Why does it matter if their application is in their company’s data center in a faraway location or someone else’s? But in reality it can be greatly beneficial. This article explains why companies are really buying applications in the cloud and what that means to application software vendors from a product development and sales perspective.
The IT Bottleneck
The capabilities of technology are exploding. Applications are available that can do everything from counting your pennies to controlling complex automated manufacturing processes to driving the process of developing new products. Every person in an organization can do their job more effectively if they can leverage new technology.
Implementing applications is increasingly complex. There are more regulations, more security threats, more integration, more devices… you get the point. IT organizations can’t possibly keep pace. They spend over 80% of their resources maintaining what they have. So they cannot possibly support transformative technology initiatives throughout the organization.
Which projects get the scarce IT resources?
With only 20% of the precious IT budget for innovation, which projects will be selected? They will be the projects with the highest impact on the company bottom line. These will usually be related to the core business of the company…a trading application for a financial company, a merchandising system for a retailer, etc. Projects that are critical to a department, such as a human resources application, are deferred year after year.
Strong leaders find a way to bypass the IT bottleneck
If a VP of a department has objectives that require technology, and IT can’t help them get it, they will go somewhere else. Cloud applications are a great new option for them. In order to buy a cloud application, everything about the offering must be within the budget, capabilities and scope of control of the decision maker. All facets of the software implementation must be achievable without the help of IT. These include:
- Project Management
- User Training
- Capital/Expense Budget
This Fundamentally Changes the Characteristics of the Software
Every facet of cloud software has to be within the scope of control of the decision maker. While IT organizations have capabilities across all facets, other departments might have zero capabilities for one or more of the facets. For example, an HR department might not have any project management experts on their staff. The project management aspect of the implementation must be simple enough for someone on the HR staff to successfully manage the project.
The best cloud software will minimize all facets of the implementation. It must be extremely simple to evaluate, install, configure and learn.
This Fundamentally Changes the Sales Process
Most application purchases in the past have been managed by IT. If the primary reason that customers are buying cloud applications is to bypass the IT Bottleneck, then cloud application purchases will be different. IT involvement in the decision process will be minimal. C-level executives are unlikely to be involved. Look for a departmental decision maker in most cloud application sales.
Cloud applications are here to stay. The technology genie is out of the bottle, and departments and users are demanding capabilities that IT departments can’t deliver.
On-premise applications are not going away. Mission critical applications that differentiate an organization will continue to receive the attention of all resources including IT. The move to cloud of the other applications will reduce the pressure on IT.
All applications will become simpler. Using consumer applications and now cloud business applications has changed expectations about how applications should work. Users will not select any applications with high levels of complexity or steep learning curves.
Sound Off – Let Me Know What You Think
Do you agree that the IT Bottleneck is the primary reason that cloud applications are emerging? Do you think the majority of applications will be in the cloud in the future? Agree? Disagree? Either way, I'd love to hear your thoughts.