Go-To-Market Challenges to Consider before Unveiling Cloud Services
POSTED : May 15, 2013
BY : PK

Cloud computing is one of those paradigm shifts that has long been accompanied by great expectations.  At this point, the debate is over—the cloud has proven it can deliver.  With each new wave of releases, we continue to see exciting, purposeful innovation that has real and measurable ramifications for the way we live, work, and play—not to mention the bottom line.

But while we were busy reveling in the promise of the cloud come true, it’s likely that our attention was diverted from the many costly spurts, fits, and flare-outs of some prominent cloud players.

  • EMC shut down its Atmos Online cloud storage service in 2010 amid rumored conflict with its reseller partners (it has since returned).
  • Following a May 2012 launch, GoDaddy covertly laid to rest its Cloud Server product after only five months, saying the product did not resonate with SMB customers.
  • Earlier this year, Brightcove shuttered Appcloud, a promising cloud-based HTML5 app development environment, citing a desire to return its focus to native video player SDKs instead.

Companies that are not cloud “natives”, who are instead introducing cloud-based alternatives to their conventional hardware and software products, have often endured painful unveilings marked by slow customer adoption, ineffective sales organizations, and outright revolt from distribution channel partners.  Why is the promise of the cloud so often fraught with go-to-market challenges for the software companies that invest to develop there?

The answer, somewhat surprisingly, may have less to do with the features and capabilities of the software and much more to do with the rest of the value equation.  Software solutions are so much more than just a software product—a reality that is easy to overlook when we become enamored with the embedded technology.  The value of a true software solution comes not only from users interacting with a product, but also from how that product is marketed, priced, licensed, sold, integrated, deployed, managed, and supported.  It takes a delicate and complex ecosystem of processes, partners, and programs to consistently deliver against the more holistic value proposition of a full software solution, and sophisticated software buyers are not easily seduced by a product’s technical feature set.

Think, for a moment, about the biggest advantages of cloud computing—are they primarily related to unique software capabilities?  Do cloud-hosted applications have better user features than on-premise software?  Not necessarily.  Most of the time, we are thrilled when we can do exactly what we’ve always done with our conventional software products minus the challenges and expenses of software ownership (e.g. Microsoft Office 365, Adobe Creative Cloud, and Quickbooks Online).

The fact that most of the value of the cloud is derived from benefits other than new software features is a big clue as to why cloud-based alternatives often encounter significant go-to-market challenges:  software companies tend to introduce cloud services as new products, without adapting the rest of their solution ecosystems.  Force-fitting cloud services into the center of a solution ecosystem built to deliver on-premise software products rarely works out well (just ask Iron Mountain).  The processes, partners, and programs that evolved to deliver conventional software solutions are often completely unprepared (and entirely ill-suited) to deliver a solution anchored in the cloud.  Remember, the value of the cloud is in the delivery, and when the delivery ecosystem doesn’t adapt, the implicit promises and unique go-to-market value proposition of the cloud falls apart.

Not convinced?  Consider the following 5 go-to-market challenges frequently encountered when unveiling a cloud solution in place of conventional software:

Customers can’t justify giving up their “owned” software for a cloud service.

Perhaps you’ve had (or heard) these concerns about moving software to the cloud.  Things like, “I think I’d prefer to have our team manage the application,” or, “I don’t want to rely on someone else’s infrastructure when it comes to our critical LOB applications.”  These reflect uncertainty around software maintenance and ensuring availability (not the product itself).

Partners are disinterested in selling cloud services instead of conventional products. ​

It could be that the incentives for selling conventional software licenses are more lucrative, or that the incentives offered for selling cloud services are not well understood.  Also, partners may perceive real or imagined impacts to other areas of their business due to changes in the need for implementation services like data conversion, infrastructure provisioning, and middleware development.  If seen as requiring a significant shift in competency, the default response is often for the channel to reject or ignore cloud alternatives.  Some partners may not be a fit for the new solution, and those that are need well-designed programs and robust guidance.

Cloud-native competitors are routinely winning competitive sales opportunities.

Competitors that never had conventional software solution ecosystems to begin with are much more likely to have developed value-added delivery functions that are a fit for cloud-based solutions.  Their story is crisp and clear on holistic benefits and ROI, their partners are aligned to annuitized business rhythms and payment cycles, and the migration process is well-conceived and delivered.  The time-tested example is Salesforce.com, which continues to enjoy the benefits of its cloud-native “challenger” positioning almost a decade after going public (check out their take on what a successful SaaS ecosystem looks like).  Conversely, non-native vendors need to overcome entrenched programs, partners, and processes to be considered a viable alternative—and many never do.

Customers who do switch quickly become frustrated and seek competitive alternatives. 

Despite not always having all the kinks worked out, the most loyal customers sometimes do choose incumbents over cloud-native entrants to the market.  When they do, they often become casualties of vestigial solution ecosystems.  Like with channel partners, migrating customers to the cloud also requires well-designed programs and robust guidance for smooth transitions.  Inaccessible support, unexpected downtime, creeping implementation timelines, and misaligned expectations all have the potential to negatively impact business, and to turn the most loyal customers and evangelists into negative reviews and vocal opponents.

Each win for the cloud service is viewed as cannibalization of conventional alternatives.

The beginning of the end of a new cloud service happens as soon as it starts being resented internally for detracting from the sales of the conventional software solution it was meant to replace.  This is a surefire sign that the organization responsible for cultivating and stewarding the ecosystem to support the cloud alternative has turned on its own product and begun the return to a cloud-free existence.

When these challenges ultimately spell the demise of a promising new cloud service, it’s often rationalized by declaring that the cloud-based version was a bad idea from the start, and the original product was just too well-loved for it to ever be supplanted.  But really, how many of these challenges can be traced back to root issues with the technology?

More often than not, when traced back diligently, the root cause of cloud failure lies not in the product, but in the ecosystem that delivers it.

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