Inertia is a great thing. It’s what makes me watch 30 minutes of a TV show I don’t really like (but don’t hate enough to change the channel). And it’s been a big reason why IT customers, particularly service providers’ customers, don’t move. Too much pain for the gain. But as cloud technologies evolve and make it easier for customer a customer to “pick up his ball and go home”, how do you make sure you’re still in business a few years from now?
For IT customers, one of the great promises of Cloud is that provisioning components necessary to meet their IT needs will be seamless, transparent and make it irrelevant where those components live and who’s managing them. One of the results of this commoditization is that this gives IT customers greater freedom to choose a service provider. We’ve certainly already seen a lot of examples of enterprise IT customers taking advantage of Amazon cloud services rather than leveraging corporate IT services because the customer can virtually (pun intended) snap their fingers and get servers provisioned in a fraction of the time that corporate IT takes.
And as IT customers start flexing this cloud benefit, the nature of “competition” for IT customers will change pretty fundamentally. In fact, it really already has. And this is true for both enterprise IT as well as for service providers. Where enterprise IT once had a monopoly, it now finds itself competing with service providers in a way that it hadn’t been before. Cloud makes it easy for IT customers to bypass enterprise IT and even eliminate IT’s role as the middle man in technology decisions. For public cloud service providers, Cloud is enabling them to reach a broader audience of potential customers. That’s great that their sphere of potential customers is broader, but that also means that there’s more competition. And, interestingly, just as enterprise IT will need to do a better job of competing against public cloud providers, service providers will need to think about how private clouds change the needs of the traditional customer base.
From an Economics point of view, it’s the kind of free market environment that makes my wife (an economist by training) drool because it enables customers to vote with their dollars, driving price competition and rewarding those sellers that provide the best overall bang for the buck.
So the challenge becomes, for both private cloud and public cloud providers: “How do I distinguish myself from my competitors?” given that potential customers will inevitably do Internet comparison shopping?
There are several ways to do this, and they fundamentally roll up into two dimensions: dollars and service.
Dollars.
When I say dollars, I’m not just talking about price, though that’s a key thing. Obviously, if you offer your services at a really good price compared to your competitors, that’s a great thing – assuming that you’ve priced your services in a way that you’re actually bringing in more dollars than are going out the door! But what if you can’t compete with an Amazon on price, then what?
Don’t underestimate HOW you talk about dollars. Cost transparency is really important. Make it easy for your customers to understand what the likely costs will be, what the implications are of choosing different options, and what the costs were based on their consumption.
Think about how you help customers make the most cost effective decisions. Sure, you can make more money if customers are over-provisioning, but coming across as an involved consultant, helping them make efficient buying decisions will increase your credibility and reputation as a place to go.
Service.
Differentiate your service by the kinds of services you offer and the quality of the services you offer. If you’re an enterprise, what do you bring to the table in terms of culture and expertise that’s unique to you? How do you “celebrate” that differentiation? Customers are willing to pay more if they see the value in the price difference.
If you’re a service provider, what domain expertise or capacity do you bring that sets you apart from the rest?
Define and communicate your offerings in ways that are comprehensible to your customers. Make the bundles logical and reasonable. While it’s tempting to provider totally ala cart offerings, customers are looking for you to have done some of the hard work of bundling things for them. Dell Computers is a great example of this. The main way most customers buy Dell computers is by choosing from pre-defined models that are pretty much ready to go. You can always tweak it, but you’re not starting off at the most basic level of choosing a mother board, then RAM and DRAM and hoping that you didn’t somehow forget to order the appropriate power supply.
Ultimately, this all comes down to realizing that there is going to be competition for your customers and you need to be sure that you’re not lost in the cloud hoopla. If you don’t find ways to make yourself compelling, your may find out the hard way that customer loyalty ain’t what it used to be.
Posted by Tony Navarrete
BMC