The Changing Value Proposition of the Modern Cloud

The following is a summary of a contributed article, which originally appeared on VentureBeat. Read the full article here.

The cloud offers many benefits, but since 2000 there have been three predominant value propositions.
In the early to mid 2000s, companies moved to the cloud for cost savings. Cloud software was cheaper to implement, upkeep and upgrade. But, as the cloud grew more sophisticated and commonplace, software became commoditized and competing on cost alone was impossible. By the mid 2000s to 2010, allowing users to work from anywhere was the cloud’s most appealing benefit. The rise of smartphones and the prevalence of high speed wireless internet encouraged this trend.

Today, working from anywhere is a given in most companies. The cloud’s value proposition today comes from the ability to integrate multiple disparate SaaS applications either through out of the box connections, custom integrations or with the help of a third-party tool.

For more on the cloud’s changing value proposition, read the full article below.

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I’ve promoted cloud computing since the very early days of my career — nearly ten years. While I still have a passion for the cloud, the technology’s value proposition has changed drastically over time.

In the early 21st century, many viewed the cloud’s ability to save organizations hundreds of thousands of dollars as the technology’s primary benefit.

By the mid 2000s, several technological advancements like ubiquitous Internet access and handheld devices altered the cloud’s value proposition. Organizations were transfixed by the cloud’s ability to allow their users to work from anywhere.

Today, the proposition has changed yet again. The cloud now offers an open and integrated experience for both end users and the IT department.

Evolving Value Propositions of the Cloud

Early – Mid 2000s

Key Themes:

• Cost savings
• Removing on-premise hardware
• Automatic upgrades

During the early to mid 2000s, the cloud was praised for its ability to reduce capital expenditure. Software-as-a-service applications were cheaper to implement, upkeep, and upgrade. Since these applications weren’t tied into expensive hardware and were updated regularly, they freed the IT team from spending hundreds of thousands of dollars a year on maintenance and upgrade fees. So, for the cloud’s earliest adopters, price was a core component of the value proposition.

While the cloud offered much more even back then, buyers often viewed cost savings as the predominant benefit due to shortcomings in other areas. Like any new technology, a lack of general knowledge created misconceptions, and in some cases, people just weren’t amenable to change. But, technological roadblocks like downtime, inability to customize products, lack of feature parity with on-premise software, and slow load times all detracted from the cloud experience.

Mid 2000s – 2010

Key Themes:

• Ubiquitous internet
• Rise of mobile devices
• Ability to work from anywhere

By the mid 2000s, the conversation around the cloud had changed drastically. The value proposition had evolved from purely cost savings — although those were still largely in play — to giving users the ability to access their data from anywhere. At this point, the cloud was not only saving significant capital, it was actually capable of changing the way people worked.

A few significant advances during this time period helped to change the value proposition drastically. Availability and ubiquity of high-speed internet — including on airplanes by 2008 — free public wifi, and the evolution of mobile devices made working from anywhere a possibility while the cloud made it a reality. In the cloud, users could easily gain access to the same data from their laptop, smartphone, tablet or desktop. Hardware took a backseat to software.

By the end of the 2000s, the conversation around the cloud had changed from tactical to strategic.

2010 – Today

Key Themes:

• Prevalence of SaaS applications led to disparate systems
• APIs enable systems to communicate
• Integrations create efficiency

Since 2010 a new value proposition has taken shape — one that I feel truly realizes the full power and original intent of the modern cloud.

Today, the value proposition of the cloud comes from the ability to connect disparate applications to form one seamless web of IT. In a 100 percent web environment, APIs from dozens of applications can be integrated to allow data to flow across systems.

The rise of handheld devices and the Internet’s ubiquity in the mid to late 2000s led to the proliferation of SaaS applications built to meet very specific needs — marketplaces like Salesforce.com’s App Exchange and the Google Apps Marketplace even emerged to support these growing ecosystem. While these applications fulfilled their original purposes and brought about efficiency for their end users, the number of individual applications installed and used across different departments and devices in one organization became unmanageable and risky for IT.

Using APIs from different applications, a company’s internal IT department or an outside cloud services brokerage can now easily integrate these applications and let data flow between them. Whether the connections are included out of the box (Zendesk and Salesforce.com), you use a Chrome extension to pull data from one application into another (Cirrus Insight), or you actually use a third-party product to integrate different applications (Kevy), the cloud’s value proposition for this era is clear: it creates efficiency across organizational departments by permitting disparate applications to communicate and share data with one another. In essence, the newest SaaS providers act as glue holding together larger, more established platforms.

The Glue

This concept of “glue” as it relates to IT companies isn’t new. In 2008, Brad Feld, managing director at the Foundry Group, introduced a new investment theme: Glue. While Feld was referring to content dispersal on the web, he likens the Foundry Group’s theme of glue to enterprise application integration, which took place in the 1990s.

In many ways, the web is paralleling changes that took place in the enterprise environment during the 90s when once disparate systems were stitched together through what was termed enterprise application integration (“EAI” for those old school software folks in the audience). The result of these efforts was the freeing of data from traditional corporate IT silos for use in a variety of enterprise applications. This enabled an explosion of applications that could now more easily access corporate information and share that information with other services. The programming required to create these overlay applications became much simpler and the result was that application development could be accomplished much more easily and with less specialized resources. – Feld, 2008

The EAIs that Feld refers to are the predecessors of today’s Web APIs (application programming interfaces), first introduced in 2000 by none other than Salesforce.com. As Feld notes, integrating disparate systems frees data from IT silos. This concept applies to legacy systems as well as modern cloud IT.

While APIs have been in use since 2000, the concept has truly flourished in recent years with both large and small providers opening up APIs for their products. And the next generation of IT providers is taking this concept one step further by actually building full-fledged front-end products on top of multiple APIs from multiple providers.

Lone developers and larger companies have the unique opportunity to build off of the available APIs to either connect disparate systems or create complementary applications all in the hopes of automating and streamlining tasks and surfacing hidden data.

Final Thoughts

I believe organizations are only now able to realize the true value of a cloud-based IT infrastructure. Operating in the cloud is no longer less expensive than an on-premise environment (tally up the SaaS applications your organization uses over the course of one year) — at best, cost savings are negligible. Similarly, working in the cloud isn’t only about having the ability to work from anywhere — this is merely expected.

The cloud today is about changing the way organizations, employees, and partners interact and work together. Using cloud technology, we not only become more efficient and more effective, but the technology truly becomes an enabler for collaboration.

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David Politis is the founder and CEO of BetterCloud, the maker of FlashPanel, a management and security tool for cloud-enabled organizations, and the Google Apps resource site GoogleGooru.com. Follow BetterCloud on Google+.