Tag: cloud computing

  • It’s hard to make a buck on the cloud

    It’s hard to make a buck on the cloud

    Microsoft released its quarterly financial results to general acclaim from the stock market which drove the shares seven percent higher after reporting slightly better than expected returns.

    The market was applauding the continued shift to cloud services with income rising five percent in the company’s Intelligent Cloud division, however the decline in the company’s more traditional strengths of software licenses and devices saw earnings fall by eleven percent over the corresponding period last year.

    More concerning for the company’s shareholders would be the profits that have fallen 23% which once again proves that cloud services are much less profitable than Microsoft’s traditional software business.

    To make matters worse margins on cloud services are falling with returns from the division declining despite sales being up five percent. It’s not hard to see the effects of Amazon Web Services’ ruthless driving down of cloud service prices.

    While Microsoft’s results are encouraging in that they show the company is continuing its evolution to a cloud services business, it’s clear the legacy products are still the key cash generators.

    As of December 31, Microsoft has a 102 billion dollars in the bank so there’s little risk the company will be going broke soon however the company has to find a way to make better profits from its new business models.

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  • Creating a digital spaghetti divide

    Creating a digital spaghetti divide

    Are we seeing a new digital divide develop between big and small businesses, particularly in areas like retail and hospitality?

    This thought occurred to me during a radio spot earlier today where we were talking about Apple Pay’s Australian launch. Many small businesses don’t have the capital or expertise to implement many of these new technologies.

    A number of factors contribute to this including the legacy systems installed in small businesses, the proprietors having a poor understanding of technology and, most importantly, the lack of either capital for reinvestment or cashflow to fund the monthly charges that are standard for cloud computing services.

    The expensive cloud

    One unstated factor with cloud computing services is how the cost of services add up. For example a Premium 10 Xero customer with Receiptbank attached is looking at a $100 a month in charges. It’s not hard to see how adding cloud based Point of Sale, rostering and customer service software could see a small business incurring $400 a month in fees, throw in Salesforce and you could be looking at a very expensive exercise.

    No doubt for those companies that can afford these services this is money well spent but for many margin or low turnover businesses, the charges could be a deal breaker.

    Spaghetti Junction

    Another aspect to the cloud services is the myriad of different platforms that need to be stitched together in most businesses, one cloud service founder calls it “digital spaghetti.”

    Managing this bowl of complexity isn’t easy and raises a number of business risks as different services apply varying policies and practices to the data they collect and store. A breach or service failure at one could cause a ripple effect through all business operations.

    For many small business owners, particularly older proprietors, managing this complexity is intimidating if not downright scary.

    It may well be there’s a number of opportunities for a canny service provider to offer an out of the box small business solution, but for many older small operators with limited capital and restricted cashflow affording such a product might also be difficult.

    The risk though for those businesses is they will find themselves falling further behind as markets, consumer demands and the workforce’s expectations evolve. A business digital divide could be fatal for those caught on the wrong side of it.

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  • Killing the business of complexity

    Killing the business of complexity

    “The cardinal sin of the computing industry is the creation of complexity,” is quote attributed to Oracle founder Larry Ellison and often repeated at the company’s Open World forum which I’m attending at the moment in San Francisco.

    For the computer industry that complexity has been a very profitable profitable business with everything from the local computer shop through to the big technology vendors and integrators.

    One of the biggest beneficiaries of that complexity were the salespeople, big complex enterprise deals meant big commissions.

    With the shift to cloud services and apps, those fat margins and commissions have evaporated, leaving the lucrative old models of business stranded. IBM are probably the greatest victim of this while Microsoft are, once again, showing the company’s ability to evolve in the face of a fundamental market change.

    For the salespeople the days of fat commissions are over, with thinner margins it’s not possible to pay big lump sums for winning contracts.

    The simplification of the computer industry is changing the fortunes of many IT businesses, but that change isn’t limited to the tech sector or their salespeople as those fundamental changes are rippling into other sectors.

    A constant claim by Internet of Things evangelists is that the IoT will squeeze inefficiencies out of businesses and this is exactly what we’re seeing with cloud and mobile based services like Uber and AirBnB.

    If you’re in a business that profits from market inefficiencies then it might be time to figure out how to survive in a low margin environment. The challenge facing companies like Oracle is one whole industries are now having to face.

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  • Rethinking business IT

    Rethinking business IT

    Last week at the AWS:Reinvent conference in Las Vegas, I had the opportunity to interview the company’s Global Head of Enterprise Strategy, Stephen Orban about where he and Amazon see the direction of the cloud computing market and how business practices are being reinvented.

    Among the things we discussed was Orban’s seven best practices for a company’s journey to the cloud, gleaned from his own experiences in his AWS role of advising clients on adopting and his previous experiences as a technology officer at Dow Jones and Bloomberg.

    Orban laid out what he thinks are the keys to success in a company heading to the cloud in his own blog post and during our conversation he expanded on his ideas which also very much reflect the changing role of the CIO or IT manager.

    Supporting the C-suite

    The first point is the IT department has to understand the business and align technology with the organisation’s objectives.

    “Somebody who understands technology who can merge technology with the business needs” will be better able to win the confidence of management says Orban.

    Doing that is the key to winning support from the executive suite Orban believes. Once CIOs have that trust from senior management it gives their teams the space to experiment with new ways of delivering value to their companies.

    Education 

    “The second thing is to provide training and education,” Orban says. “People tend to get a bit anxious of what they don’t know, particularly when it affects their jobs.”

    In Orban’s experience, having informed staff makes them more open to change within the business, “with the transformation I went through at Dow Jones, most of what we accomplished was because of the people who’d been there a long term. They had the institutional memory but they were very open minded.”

    Foster a Culture of Experimentation

    One of the great benefits of cloud computing is how it lowers the costs of experimentation and development, “gone are the days when it cost hundreds of thousands of dollars, even millions, to try something.” Orban says.

    Learning what works and fails is essential, he believes. But as long as there is executive support then a tolerance towards unsuccessful experiments will develop in the organisation.

    Working with partners

    Outside parties are essential to most organisation’s IT systems and Orban believes partner ecosystems have changed with the advent of cloud computing. “There’s a whole new breed of partners that have been going through this,” he says in citing ‘born in the cloud’ software developers and systems integrators who are changing how projects are being delivered.

    Build a Center of Excellence

    “Creating a center of excellence is, I think, one of the key practices any organisation should invest in. You want a body of people who can institutionalise best practice within an organisation,” observes Orban.

    As cloud services take away the complexity of computer systems it becomes an opportunity for organizations to rethink boundaries between the IT department and business operations.

    Move to the cloud

    Given Orban’s employer it’s not surprising he sees cloud computing as key to a company’s transformation however he admits that few organisations will make the jump straight into cloud services.

    “Hybrid will be a part of every enterprise’s journey. Any company who’s been doing IT for any period of time will have existing investments,” he says. “Our view is that we will make it as easy as possible to create that bridge.”

    “We do believe in the long run that enterprises will find they become so much more effective over here (in the cloud) they will move in that direction.

    A Cloud-First Policy

    Once an organisation has its cloud strategy and experimentation culture in place then having a ‘cloud first’ policy, “it reverses the burden of proof away from ‘why would you use the cloud?’ to ‘why wouldn’t you?’”

    While Orban is emphasising the Amazon Web Services view of the world where ultimately all business computing will be done on the cloud – preferably their cloud – his views illustrates the change facing businesses as they implement online technologies.

    For most, the availability of easily accessible cloud computing services is an opportunity to rethink their business processes and how organisations can deliver the best products quickly to their customers.

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  • Amazon takes on the world

    Amazon takes on the world

    Yesterday I had my first piece in Diginomica about the threat Amazon Web Service’s new business analytics service creates for ‘old school’ companies such as Oracle and IBM as well as the up and coming firms such as Qlik and Tableau.

    Diginomica’s Dennis Howlett followed that piece with one of his own flagging consulting services and systems integrators are under threat from AWS’s new partnership with consulting firm Accenture which also further puts the screws on IBM.

    Today, AWS’s announcements of new Internet of Things services threatens a range of businesses creating data connectors and management software for connected devices.

    Historically Amazon has been a fierce and brutal competitor and there’s little indication things will be different with the new web services.

    Things could be about to get tough for a lot of sectors in the computer industry as Amazon expands its services and territory.

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