Trepidation in Moving to the Cloud

I’m thinking a lot about something I don’t have good answers to yet. I like to sit down and write something insightful, some meaningful thought that you can take forth. Today, I’m pondering questions that don’t have simple answers.

As 2010 has gotten underway, the question of building business in a cloud world has taken my attention. A customer approached me recently and asked “How can we move our business away from physical servers to just services?” It’s a great question. Email is business critical for them, and they are well-connected to the Internet. As I began to have the discussion with them, while I was focused initially on the “how”, they quickly focused me on the “why”.

“Dave, we’ve seen organizations drop their IT spend for similar size to a third of our current spend.  We want to do that.”

This presents both a wonderful opportunity and a difficult challenge. Anytime a customer asks us to work with them in this manner, it’s an opportunity to strengthen the relationship and deliver a new solution. A new project, a new set of services, and ideally, a new “managed service.” Recurring revenue is the holy grail of our customer relationships, and something we value.

The challenge is that we’re displacing ourselves. This longtime customer has had us maintain their existing environment. We’ve been their IT department and delivered solutions on top of their existing infrastructure. By changing this environment, we displace our existing managed service with another one.

And most challenging, the new work is of both lower revenue and lower margin.  

The specifics of the actual implementation are to be ironed out. There are system concerns that lead me to believe that the customer will be best served by a combination of on premise and cloud systems, and not a complete abandonment of the entire onsite environment.

This is the piece that leaves me with the most difficult questions. It’s best for our customer. It’s something we can deliver and something that we believe is the future. Yet we apply additional pressure to our own organization in the form of reduced revenue. My own modeling on this tells me that I need to acquire net new customers in addition to serving the now changing needs of our customers. And the same models tell me that to achieve stability we’ll need to serve twice as many customers as we serve now.

Our customers, on the flip side, need us to remain stable and correctly staffed to ensure their organizations success. By aligning themselves with us, we’ve achieved the trusted advisor role. And in that role, our advice and relationship is valuable to our customer.  Our success lies together.

And thus, the question. How to best take your organization forward? I don’t believe there is a simple answer here.  I believe that this transformation may be as difficult or more difficult than the transition from a “break-fix” provider to a managed services provider.

I’m going to be thinking about this some more, and coming back with more thoughts.  I would love to hear your thoughts.

Dave Sobel is CEO of Evolve Technologies, a Washington, D.C.-based solution provider, and regular contributing columnist to Channel Insider.

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