As enterprises spend more on cloud options, a new market opportunity is forming: Cloud value management. Surprising, with all the fervor around cloud, that I got exactly ONE hit on Google for that exact term just now. Custon, a Dutch company, gets the credit. (Why am I not surprised this is a Dutch firm? Seems they are always first in ITSM related things.)
In coining this term I also considered “Cloud expense management,” but that is already taken for general purpose expense management solutions that happen to be hosted in the cloud. I am talking about the converse: how do we maximize the value of our cloud commitments?
The clearest precedent for this is the well established market for telecom expense management (TEM) solutions. These are a bit specialized, but highly relevant. TEM solutions such as Tangoe find their market space in the fact that it’s not in the interest of telco service providers to assist their customers in optimizing their spend patterns. A TEM solution has two major components: 1) up to date “market data” on the current offerings and pricing structures of telecommunications providers and 2) specialized analytics that can be applied to customer billing to recommend optimal service consumption. For example, does your company have too many people going over their cell phone minutes? Do the usage patterns match up better to a lower cost provider in your same region? Are you getting full credit for disputed charges?
And with cloud, this market is about to get a whole lot more interesting. I believe there is going to be a convergence — or collision — between the traditional TEM providers, software asset management providers, pureplay cloud vendors, and ITSM suite providers. Enterprises are spending more and more on cloud, often in uncoordinated ways, and (just like telcos) it’s not in the interest of cloud providers to be too aggressive in helping their customers optimize this spend. This kind of procurement optimization is an old enterprise problem, but solving it across the cloud spend will require new tools.
For a SAM example, I had a nice chat with the folks at OpenPlain, who have a product called LicenseMetrics, to identify underutilized software on user PCs. This is not new, and many products do it. But what I found very interesting was their twist on Salesforce.com. They’ve reverse engineered enough of the Salesforce interface to understand what features a subscriber is actually using (this is done through tight integration with the client browser).
Their value proposition is then to say, “You have X Salesforce licenses at the highest level of functionality, but half of them could be substituted at a lower level of functionality because those folks aren’t using the higher end features.” That’s overspend, just the same as underutilized MS Access and Project licenses installed locally.
I also believe that the traditional ITSM vendors will notice the opportunity. Some of course have software asset management modules, but others — especially the more mature firms, playing for full Service Lifecycle Management — may approach this more from a business service management perspective. How to specify and compare Cloud services? How to identify when a more competitive alternative is available?
All of this requires ongoing investment in what I call IT market data. Forms-based workflow, discovery tools, dependency modeling, and dashboards are no longer enough to manage enterprise IT value. New emphasis is emerging on knowing what is available in the marketplace. Who is selling what software? When does it become obsolete? (BDNA focuses on these sorts of questions.) Who is offering what cloud services? With what SLAs? What if the offerings are not directly comparable? Can I find some market data provider who will do the hard work of normalizing them, so I can see at a glance whether Google Apps or Office 365 is more suitable for me?
This is not a new idea. Go back to the early days of Service Oriented Architecture, and the UDDI spec (Universal Description Discovery and Integration). This spec is generally viewed as dead, and would be too narrow for the needs I’m seeing here — but it shared the same motivation. A whole market for such forms of brokering will likely emerge as cloud becomes more mature; I’d predict however that rather than being centered around a standards effort, it will be more of a competitive arena driven by parties who can profit by providing this kind of a service. It’s expensive and difficult to provide this kind of data to a market, and keep it up to date and accurate. Just ask Bloomberg or Dun & Bradstreet.
So, today’s prognostication: a gold rush by the TEM companies, Cloud niche players, SAM specialists, and broader ITSM providers to get a piece of cloud value management. Remember you read it here first.