Cloud Computing model cannibalizes traditional vendor revenue streams
The marketplace has witnessed a burgeoning demand for cloud computing as companies seek out computer infrastructure, software and storage to be provided as a utility service. With the market for cloud computing services growing rapidly, vendors face the challenge of reworking their revenue models so as not to lose profits to the new paradigm.
However this change is coming too fast for most vendors, as they face the challenges of the transition to new model. The existing business model involves selling enterprise licenses or services to end users through commissioned salespeople. The new model challenges the hitherto linear association between the number of customers and revenues generated.
Traditional IT vendors and service providers face a challenging transition period from the old models to new cloud-based models as they must keep their existing business going while simultaneously beginning to offer cloud services knowing that cloud sales will likely cannibalize current revenue streams.
In addition, cloud computing often requires vendors to make substantial investments in infrastructure so as to be able to offer remote Platform, Infrastructure, and Storage as a Service. The model often requires that they do this without first having a critical mass of paying customers as a guarantee of success for the business. This strategy is made all the more risky by the knowledge that a slow economy will lead to reduced demand for their services.
Even companies established purely with a cloud focus still have to finance the creation of a cloud with the hope that customers will come.
IBM has been one of the early movers in the industry, according to researchers Longhaus, the leading supplier of enterprise-grade clouds in Australia. But even the giant of the cloud market has found that the transition demanded that it make significant changes to its business model.
Last week IBM announced a new approach to providing services, using pre-configured computing units that can be rapidly assembled to meet customers’ needs.
Source: http://www.itwire.com/storage/46139-cloud-cannibalises-vendor-revenue-models
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