Cloud Consolidation: Good for Business but Bad for Customers

I’ve been closely following the industry chatter in the wake of the recent spate of cloud-related acquisitions by Oracle and SAP. I’ve been interested for a couple of reasons. The first is that I was with Oracle when it tried to shift to a software-as-a-services model, so I’m always interested in following its strategy. The second, more important reason is that the moves validate the approach my team is taking in evolving our cloud services business at JDA.

In particular, two articles grabbed my attention – guest posts by Tien Tzuo (CEO of Zuora) and Flip Filipowski (CEO of SilkRoad Technology) in TechCrunch and Forbes, respectively.  They agree that the acquisitions will fail because they are knee-jerk reactions to the fact that the companies failed to innovate themselves, so instead are buying innovation without a clear strategy or vision to get their customers migrated to cloud.

According to Tzuo, “SAP and Oracle should be pushing innovative cloud solutions that cannibalize their bases. Instead, they’re attempting to acquire themselves into innovation. That’s not a strategy. That’s a shift into survival mode.” They’ve attempted this before and, as in previous years; the result will most likely be the same. The acquired companies won’t be recognizable.

Don’t Forget Current Customers

The other interesting question raised is why the focus on cloud-based solutions? The answer is the customer!

Customers today — both large and small — are looking to cloud solutions rather than traditional software implementations to address real issues they face in these dynamic economic times.  What seems to have been forgotten in this recent frenzy of acquisitions is a bulid versus buy strategy that will take into account cloud migration solutions for the thousands of loyal installed base customers.

As traditional software companies race to provide cloud offerings in the form of new solutions, they’ve forgotten that existing customers are still grappling with the challenges of maintaining them behind their own firewall. Buying cloud-based companies does not address current customers and in some cases will deflect from the opportunity to provide cloud solutions to installed customers.

In short, software companies have an obligation to take the cloud and offer it to its loyal installed bases as well as new customers. The software companies who have developed a cloud or managed service offering always are quoted “who better to manage xxx software than the company who develops that software”.

That value proposition holds true for delivering cloud services as well as who should lead the development of cloud solutions for the existing installed base. If you believe that statement, and I do, the product development teams for software companies along with the services teams have the most in depth knowledge of their own software and the challenges that customers face when running and maintaining that software. This partnership between the services team and the product development team here at JDA provides the foundation in which our cloud solutions are continuing to evolve for both new and existing customers.

JDA has been leading this movement and we continue to deliver new cloud-based solutions while providing our customer base with a compelling alternative to sticking with the status quo – innovative solutions to enhance productivity, refresh business processes and improve business performance. We offer an alternative to expecting our customers to optimize and continue to self manage, self update and self upgrade all at an enormous cost of money, time and talent while trying to navigate their business though challenging economic times.

One of the key benefits cloud can bring to an existing customer is to address the reason why many companies remain on older software – the fact that solution and technology lifecycle upgrades are often costly and difficult to manage, providing limited perceived value to the business.

Acquisition of cloud technology solutions and existing solutions providers is not necessarily an ill-advised strategy. Leveraged properly with organic growth, internal development, and most importantly, external customer input can create powerful, innovative, problem-solving solutions for new and existing customers alike.

Where do you fall on the build vs. buy spectrum when it comes to moving to the cloud? As an existing customer, do you expect your vendor to take the responsibility to help you along?

No Comments

Be the first to start a conversation

Leave a Comment