6 cloud sourcing archetypes

From traditional cloud RFPs to API-enabled cloud brokerage, buyers are dramatically changing the way they engage the market. Here are six of the most common archetypes.

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What does a typical enterprise cloud services buyer look like?

It’s a tricky question to answer. Cloud services are everywhere: in the data center, in development teams, in shared services organizations on manufacturing floors. It’s also delivered in many different ways: as software, as infrastructure that behaves like software and as business processes supported by cloud software. Complicating matters further, what one buyer may call cloud another may call a rack of dedicated, virtualized servers, making the line of demarcation between “cloud” and “traditional” very blurry.

Regardless how one chooses to define this boundary, cloud is permeating just about every corner of the enterprise, and the buyers that are driving this transformation are as varied as the functions they represent. However, buying “archetypes” are starting to emerge. Here are six of the most common:

  1.  “Burst to avoid capex”: This buyer has decided to retain a large portion of its organization’s data center services in-house and often has a substantial investment in an on-premises, high-performance grid or a private cloud. However, this buyer is increasingly interested in the idea of using the public cloud — usually Amazon Web Services — as a place to burst into when it needs excess capacity, often only for a few days a month. Financial services companies are increasingly attracted to this model. The primary challenges this buyer faces are around data segregation and security, building a utilization-based business case and the technology complexity inherent in spreading a workload across two disparate technology environments.
  1. “Create cloud RFX”: Procurement organizations are increasingly trying to approach cloud the same way they do a tower-based ITO deal: a deep and broad RFP that covers the entire delivery model stack from software to platform to infrastructure as a service. This buyer is looking for help defining the market and creating an RFP with cloud-like requirements. However, no service provider can provide the entire stack without significant levels of partnering; additionally a large, prescriptive RFP generally won’t yield the results buyers are looking for. Note that this archetype is clearly different from the others in that procurement is not necessarily the buyer but instead is the agent of the buyer; that said, there is significant demand for insights from procurement and legal on how to adapt to this new world, so it’s in here as a buyer.
  1. “Disrupt ITO”: An increasing number of ITO clients are looking to break out of the traditional tower-based ITO model. This buyer is looking to take back significant levels of control from the outsourcer, and is most often pursuing a strategy of reducing its footprint with the ITO provider by moving net-new applications to a co-location facility and using a public cloud provider such as AWS or Microsoft to burst to when excess capacity is needed or when development environments need to be spun up or down. Some shrewd ITO buyers are using mechanisms in their contracts to slowly pull away legacy workloads from outsourcing partners and shifting those to the co-location model as well. These buyers have become quite savvy and are not necessarily looking for help with a technology strategy; rather, they are seeking a contracting and business case strategy to help them move their disruption strategy forward.
  1. “Transform to ITaaS”: This is the newest archetype and typically is an initiative led by the organization’s IT strategy function. The focus here is on an internal transformation to run IT “as a service” by creating a service-oriented approach, while at the same time exposing a “store” on the front end and automating as much of the fulfillment and billing on the back end as possible. Buyers are focused on process redesign as well as procurement of platforms such as ServiceNow for service management, RightScale for cloud management and Gravitant for cloud brokerage and storefront. The primary challenge for these buyers is defining what they actually want — this is an emerging space and is not yet well-defined within the industry.
  1. “Renew ITO”: This buyer is looking to renew its ITO agreement but wants to include cloud in the mix. Often “cloud” means an evolution from its existing agreement that could involve remaining on dedicated servers or possibly moving to a country club cloud, with the primary goals of reducing capital expense, moving to utilization-based pricing model and reducing provisioning times. While this buyer archetype sometimes wants to disrupt the ITO delivery model by moving to the “Disrupt ITO” model, they’re finding this difficult to do if the majority of technical talent resides within the outsourcer. Buyers are finding that significant levels of insourcing may be required to move from “Renew” to “Disrupt”.
  1. “Transform Applications”:  The explosion of SaaS as a delivery model is well documented. Although adoption initially occurred primarily outside IT in sales and HR functions, it now has found its way into the IT organization — in a big way. Cloud-based IT service management and collaboration are the two biggest areas of demand, specifically for ServiceNow and Microsoft 365, respectively. That said, buying outside of IT for platforms such as Workday and Salesforce continues at a torrid pace. While this adoption shows no sign of abating anytime soon, the primary challenges these buyers face are increasingly around the commercial aspects of the SaaS delivery model: Committed baselines, significant liability limits and innovation premiums are but a few of the commercial challenges these buyers face.

Given the pace of change and innovation inherent in the cloud delivery model, these archetypes are likely change considerably over the next 18 to 24 months. What is not likely to change, however, is the continued disruption of the ITO market due to cloud. Hungry buyers will continue to identify and source services that help them stay competitive and reduce costs — services that will increasingly be delivered from a cloud-scale data center.

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