Cloud computing presents challenges (new architectures and business models) and opportunities (efficient deployment, elastic scalability, faster ongoing innovation) for established software companies. Customers are still buying more on-premise than cloud solutions, but the best position is to give customers a choice, allowing them to opt-in to cloud offerings when they are ready and not get positioned as out of date by new cloud-centric competitors.
While the cloud enables the potential to apply your core IP to new markets, the product strategy team should carefully weigh the range of business, product, and channel implications. Following are key topics to consider in formulating your cloud app strategy.
What are the revenue incentives to move to the cloud?
What is the future addressable market for the target segment considering how big that segment is today, the expected growth of that segment, and the resulting market size?
Are cloud competitors affecting current revenues in a way that is forcing you to respond?
To what degree will your new cloud offering cannibalize existing product and services revenue?
Do you understand the revenue implications of pricing, cost, sales and channel compensation under a cloud business model?
What strategic drivers affect cloud consideration?
Does a cloud offering open up new markets (e.g., mid-market or new geographies)?
What strategic objectives will be enabled by a cloud offering (e.g., value-add data services around your existing products)?
Does a cloud offering enable adjacent markets that you don’t currently serve?
What competitors will likely compete for the cloud segment in the future?
What showstoppers would keep you from moving to the cloud?
Are there data sovereignty concerns for your target industries (healthcare, government, financial services) or geographies (e.g., Germany)
Will target customers be accepting of subscription pricing and iterative product updates?
Is your solution a usage fit for cloud (e.g., significant variations in demand)?
Is current product IP fully available (staff turnover and acquisitions can limit access)?
Are there technical requirements (data volume, network latency, market sensitivities, stringent SLAs) that would preclude cloud consideration?
What will it cost to move to the cloud?
Have you considered the IaaS vs. PaaS cost basis for your cloud offering?
Have you estimated both the cost of development and ongoing operations?
What hiring and training will you need, to appropriately staff for cloud development and operation?
What dependencies exist between your products (or technology partners)?
Is the technology/architecture you need available in cloud platform offerings (e.g., scale up vs. out database capacity)?
What are the partner/channel implications of delivering cloud solutions?
How will the existing channel react/transition to cloud pricing models?
What current business will be disrupted due to the channel transition?
How will partner programs enable you to communicate expectations and scale partner readiness?
What education and certification is required of customization/consulting partners?
What is your strategy to onboard new cloud-specific channel partners?
What new technology or service partners will be required for cloud solutions?
This provides a starting point for defining your cloud app strategy. Include sales, marketing, product management, and corporate strategy in the process. The end result should yield a road map that encompasses revenue potential, cost and timing, as well as strategic implications for your cloud offerings.
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