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By | Alan Pelz-Sharpe 12th July 2013 13:03

Swollen cloud could burst at any time, splatter us with FAIL – anxious tech biz

You know what else was really popular? Dotcom firms

As a technology consultant, I regularly speak - both formally and informally - with sellers and buyers of cloud services, and I don't know if I can ever remember a time when the conversations have been further apart.

While may be a temporary disconnect, it may point to something long term and more fundamental. Everyone is using the same words, but each seems to have different understandings of what those words mean.

There are two key elements of these conversations that have a direct impact on a vendors' ability to sell cloud services and similarly a prospect's willingness to buy those services.

We are in the early stages of a mini cloud boom, along the lines of the dot.com boom of the late '90s, with a lot of investment going into vendors who claim to be able to "leverage", as they say, big data and the cloud. Like most things in the world of IT, cloud may be a bit hyped, but it is real and here to stay.

Show me the money

It is a given that most enterprise budget or strategic discussions touch on cloud in some way. No wonder investors want to get in there and throw a bit of money around.

But many of these newly minted vendors are encountering a very different looking landscape from the one seen by those who lived through the dot.com boom. This time round they are facing an increasingly fragmented and hard-to-piece-together marketplace, one that is only set to fragment yet further.

Our world is changing fast, and the business of technology is changing fast, and those stuck in the past are going to get hurt. It doesn't matter whether you are an industry Goliath like Oracle or an upstart like Box: the traditional buyer is on the way out.

Every vendor I speak to wants to sell to the "Enterprise", every seller wants to get beyond the "Department" level sale. Of course they do, who wouldn't prefer a high six- or even seven-figure deal to a bundle of four- or five-figure deals?

Trouble is, though, that the CIO whom they are targeting often doesn't really exist. New sales are mostly at the departmental level, and will remain that way in the foreseeable future.

How to land that big buyer

Selling to an enterprise today means selling to a multiplicity of buying points within that organisation. The bulk of central IT budget in an enterprise today is not going toward new services of any description, it is spent on keeping the lights on.

New spend and initiatives come from "business users" - which covers teams, individuals, projects or departments. The department-level sale is the norm today and will remain so.

While large enterprise-wide deals still occur, it is at an ever-decreasing frequency. Departmental buyers often have unrealistic expectations about the true cost of technology services, but they are aided and abetted by a continuous stream of free and freemium services, which vendors are finding increasingly difficult to flip into premium services.

Freemium models are kicking our ass

For cloud service providers which have hundreds of thousands of non-paying customers, the future may be bleak. Both the sellers and buyers need to find a happy medium here; not every startup can IPO in the billions, and buyers can't keep expecting enterprise grade services for little or no money.

Furthermore, nobody can expect enterprise-wide deals to be as plentiful or lucrative than they once were.

Another area of disconnect, one that has been with us a long time, is that of trust in the cloud and trust in those who run cloud services. This has always been a contentious issue for enterprises.

PRISM break

In fairness it's not an issue for everyone, but for many buyers it's critical. I purposefully use the word "trust" here rather than security. For vendors love to talk about how secure their cloud services are (and they must). In fact few buyers, even the most skeptical on the cloud really question cloud vendors security credentials.

But buyers actually use the word "trust" more often than "security". They tell me: "I don't trust the cloud" and "They tell me everything is encrypted, but I don't believe them".

The recent PRISM scandal has only further confirmed their trust issues. It is clear for example that email and the content on social media platforms is typically unencrypted as it runs its path through the internet.

It's also clear that governments are able to tap fairly freely into content and data and have been doing so on a regular basis. Adding to that, enterprises are well-aware that low-cost cloud services often base their business models around mining customer data.

So it's not the technology itself they have trust issues with, the issues are with those who run the cloud services. That is a tough problem to resolve. Just look at the damage control being done by and Google and Microsoft as they try to persuade the US's Foreign Intelligence Surveillance court to make public their submissions about gov requests for their customers' data.

Two different issues maybe, but easily the two that come up the most in advisory calls and general discussions I have with folk. To put it another way, from a buyer's perspective, cloud services are popular because they are cheap and, self-provisioned and you can even spin up a business initiative really fast.

The flip side to this is that the use of such services can be near impossible to govern, and buyers question who else has access to their data.

It has engendered the development culture of “agile failure” - products are available long before they are really enterprise-ready, or even barely capable. The "move fast and break things" way of thinking has merit, but not for mission- or business-critical applications.

From a seller's perspective, cloud offers on-tap high-quality easily scalable services with a very low-cost low-hassle entry point. The tension here is that at some point the seller may want to aggregate all those low entry point subscriptions in a single enterprise agreement, but that was probably never realistic in the first place.

From a buyer's perspective, a fundamental lack of trust means that many buyers will continue to slow the move to the cloud, and will continue to look for hybrid trustworthy alternatives where they can hold all the keys.

As with open source, there are fundamentalists on either side of the cloud equation: those who believe that cloud is the "only" way and that anything other is heresy, and those who believe the cloud to be only of value for consumers and amateurs. But even if one takes the zealots out of the equation, the fact remains that there is disconnect right now in mainstream IT that needs to be addressed. ®

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