Cloud Computing – 3 key things customers and suppliers need to understand

A recent masterclass by industry guru Guus Krabbenborg issued a "wake-up call" to Microsoft ERP resellers identifying 3 issues that they must get their heads round now, or risk extinction in the long run. Whether or not we agree that ERP solutions are heading to the cloud just as quickly as Microsoft would like us to think, the issues are worth considering by us all, INCLUDING customers:-

1/ The big upfront licence fee will disappear and be replaced by a monthly subscription thereby causing an dip in reseller revenues (and, by default, easing the cashflow of the customer).

Is that really a huge disaster for the reseller and great news for the customer? The revenue from licences, over the typical 5 – 7 year life of an ERP system, represents quite a small percentage of the total cost of ownership. Savvy customers measure TCO not initial cost. However, Krabbenborg argues that the nature of the system delivered might affect this. So, read on..

2/ Mainstream customers will expect a generic system that does most of what they expect from an accounting solution and crucially, where it doesn’t, they will expect to just work around these deficiencies. Thus revenues a reseller expects from the associated services necessary to deliver a fully-fitting solution will also dip (and customers will pay less for their system, again).

The counter is that actually maybe they won’t! Customers are a lot more demanding of their computer systems than they once were. They know that changes can be made; they’ve been getting it done for quite a few years now. We installed our first NAV site in 1996 and EVERY site since has had changes to suit the customer’s own business model. Why would they accept compromise now? But Guus has some thoughts on this as well, so read on again…

3/ Non-mainstream customers, i.e. those is specialist areas, will demand industry-specific solutions that suit their business and won’t require change. An off-the-shelf solution for EVERY conceivable industry. So, even in such vertical markets, revenue streams will dry up as the customer logs in to his fully-functional industry-specific solution (and, once more, pays a lot less for the privilege).

Hmm – we do a number of vertical solutions such as hire, professional services, log management and builders’ merchants and while we would love to think we’ve covered all the bases, that’s just not realistic. EVERY customer, in each industry vertical, has their own ideas on how their business works. Now you can either say “No, this is what it does, live with it” or provide chargeable services to deliver exactly what the customer wants. Customers will make up their minds.

Lots to think about.