The promise of the cloud can be very seductive and the adoption in every industry of cloud-based solutions provided - by and large - by new, young companies offering all manner of software as a service (SaaS) solutions continues to accelerate. The prospects of reduced capital expenditures and smaller IT staffs as well as ubiquitous access and perpetual uptime are very compelling for any business.
And while I realize that there are a few big, long-established players (like Salesforce.com) in the SaaS space; if you look carefully, most of the major and more substantial players have concentrated on infrastructure plays while most of the new, interesting, and potentially highly disruptive software solutions are being offered by young players who have elected to ride on that newly available infrastructure which is inexpensive to access (though not to build) and to assemble their products and service offerings on top of these industrial-strength platforms which are being provided by Amazon, Microsoft and others.
But those new young entrants present three serious and essentially structural risks to businesses looking to move to the cloud which every CEO needs to appreciate and evaluate before making such a move. The truth is that not every “cloud” has a silver lining and – as the head of a growing company – before you bet your entire business and begin to migrate mission-critical services and offerings to the cloud - you need to be sure (a) that you really understand who you’re signing up with; (b) that you appreciate what you’re signing up for and what you’re not getting; and (c) that you have an accurate picture of the risks that you are taking and how they compare to the potential benefits of a move. The devil is always in the details and, in many cases, the devil you know and have worked with for years (with all the warts and all the complaints) may still be a better bet for your business than a crapshoot on a company that’s still getting its shit together.
Only after you get solid and complete answers to a few, very critical and important questions should you think about moving forward. These aren’t easy things to determine or simple inquiries to make, but you won’t get a second chance if you move prematurely or if you pick the wrong vendor/partner. You could end up entirely out of business. So take the time and commit the resources to do the necessary due diligence and to look hard before you leap. They’re called “clouds” for a reason – they’re not remotely transparent – they’re totally opaque.
Here are some brief thoughts on the three most critical concerns and one final suggestion:
Who Are These Guys and Are Their Interests Aligned with Mine?
When you’re first starting out and trying to build a new business, there’s a tremendous emphasis and tons of pressure on management to keep increasing revenues. Make the sale and move on to the next. But, for the customers, the rubber really meets the road when it’s implementation time and that’s when the SaaS sales guys tend to be long gone. And, because installations, training, configurations and the entire process of customization for individual users don’t drive “new” revenues, the senior management and top sales guys at too many of these SaaS start-ups have little or no interest in these “down and dirty”, but crucial parts of the migration process. I think that this is totally because they are focused solely on the top line and compensated accordingly.
But, even if you want to give them the benefit of the doubt, and you say that – because they’ve never done it before – they don’t understand that software development is basically a business of brief moments of creation embedded in a lifetime of maintenance; it still doesn’t make life any better or smoother for their customers. Essentially the basic SaaS modus operandi is to sell the stuff in and then leave the rest of the work to third party consultants and integrators or to the customer. Bottom line – they’re into sales, not service or support, and you can easily end up – under the best of circumstances - with a partial solution and a load of headaches.
What Am I Getting and What Do I Only “Think” I’m Getting?
Not only is the SaaS solution sometimes half-delivered; it’s also often half a loaf when you look under the hood. In some ways, it’s a competitive advantage to be young enough not to know any better and not to know what you can’t do. Entrepreneurs regularly bite off too much and promise far more than they can deliver. Business as usual – buyer beware – no harm, no foul. But other times, especially with first-generation software programs, the initial set of buyers are involuntarily turned into the last beta testers and – believe me – that doesn’t make for happy campers. In this context, I like to say that SaaS software changes and upgrades aren’t released; they escape from the engineers. Newbies seize on the “lean” methodology jargon as an excuse to launch all kinds of under-cooked and half-assed products, but we’re all pretty tired of hearing that flaws are actually features, and not bugs. And, in addition, it turns out that, by “lean”, they don’t even mean simply-designed initial MVPs; they mean that they plan to learn what works and what doesn’t by leaning on the users and letting them live through all the hiccups and mistakes.
Young entrepreneurs rarely understand the difference between a software program and a software product. Developing a robust and stable software product (with programs incorporated into it) which will hopefully be used by hundreds or thousands of customers in a wide variety of ways and contexts takes at least TEN times longer and far more effort than developing a basic software program or solution for a private user. This where all that nasty, time-consuming, and highly-detailed work called implementation, configuration and customization comes in which – by the way – rarely scales.
Are the Savings, Flexibility and New Functionality Worth the Risks to My Business?
Drivers of electric cars suffer from “range” anxiety. They worry about whether their current charge will last long enough to get home or to the next charging station. Thoughtful and attentive SaaS users should suffer constantly from “change” anxiety for two reasons. First, another portion of the half-a-loaf problem is that, as a SaaS customer (whether you realize it or not), you only get effective control over your part of the total package. This makes for the serious likelihood of some very nasty surprises whenever the main operating system in the cloud is changed, updated or otherwise revised – with or without ample notice to you and rarely with testing sufficient to confirm that the new versions will work with your install. Think of the overall installation as having two parts (theirs and yours) and ANY time that the two parts get out of sync, you’re basically screwed.
Ultimately, I feel that the real problem is a structural one – the vendors are worried about enhancing and improving their main set of offerings and solutions and you’re praying (because you’ve spent a small fortune configuring and customizing your end of their system so that it works with and for your business) that whatever changes they make won’t damage or disrupt your operations. I hope that you don’t think for a minute that there are ANY SaaS vendors out there who test their new updates and revisions against every customer’s installation and usage BEFORE they release the new versions. That would be far too difficult and time-consuming as well as impossibly costly to staff and support.
And it gets worse. No small start-up can realistically afford (whether they admit it to you or not) to build and be running a completely separate development environment alongside their production systems. That’s just not the way the world or the money works in the start-up universe. And, as a result, they release their changes into the production environment and – as noted above – they do their testing on you and your business in real time. This is the fundamental risk of a cloud-based solution. One size and one version or system will never work for any serious number of customers and frankly the attitude in the SaaS world isn’t to make the system work for the customers. Once these businesses have any real traction and installed bases, their attitude is that you need to decide whether their system will work for you and – if it doesn’t – they respectfully suggest that you change your business processes until it does.
One Last Thing to Think About
And remember one final thing – in addition to determining whether the vendor’s sales people are telling you the truth and whether the references they provide are legitimate and satisfied users (or just fellow victims looking for company) - you have to weigh and consider the agendas and the motivations of the people inside your company as well. In every case I have seen (or suffered through myself), there are well-intentioned and sincere people on both sides of the decision with decent reasons to support their arguments and then there is usually another collection of people who are scared to make any decision that they might be blamed for; afraid to rock the boat or change things; committed to prior solutions that they endorsed or recommended; protecting their own job, people, turf or fiefdoms; and/or just too lazy to want to do the work that it takes to do one of these migrations well. They are rarely incented to give you the straight scoop.
Information (along with hard questions and sharp edges) has a way of getting smoothed out and softened as it wends its way upward in your organization on its way to your desk. That’s just another fact of life – regardless of how big or little your headcount is. Just be sure you have all the facts before you make your move.
PP: “You Get What You Work for, Not What You Wish for”
