Wednesday, October 15, 2008

Cloud Summit Executive: Making "Pay-As-You-Go" Customers Happy

I got to spend a few hours yesterday at the Cloud Summit Executive conference at the Computer History Museum in Mountain View, California, today. The Summit was unique, at least in the Bay Area, for its focus on the business side of cloud computing. The networking was quite good, with a variety of CxOs digging into what the opportunities and challenges are for both customers and providers. The feedback that I got from those that attended the entire day was that the summit opened eyes and expanded minds.

Ken Oestreich has great coverage of the full summit.

I attended the afternoon keynotes, which started with a presentation from SAP CTO Vishal Sikka which seemed at first like the usual fluff about how global enterprise markets will be addressed by SaaS (read "SAP is the answer"). However, Vishal managed to weave in an important message about how the cloud will initially make some things worse, namely integration and data integrity. Elasticity, he noted, is the key selling point of the cloud right now, and it will be required to meet the needs of a heterogeneous world. Software vendors, pay attention to that.

For me, the highlight of the conference was a panel led by David Berlind at TechWeb, consisting of Art Wittmann of Information Week, Carolyn Lawson, CIO of the California Public Utilities Commission, and Anthony Hill, CIO of Golden Gate University. Ken covers the basic discussion quite well, but I took something away from the comments that he missed: both CIOs seemed to be in agreement that the contractual agreement between cloud customer and cloud provider should be different than those normally seen in the managed hosting world. Instead of being service level agreement (SLA) driven, cloud agreements should base termination rights strictly on customer satisfaction.

This was eye opening for me, as I had always focused on service level automation as the way to manage up time and performance in the cloud. I just assumed that the business relationship between customer and provider would include distinct service level agreements. However, Hill was adamant that his best SaaS relationships were those that gave him both subscription (or pay-as-you-use) pricing and the right to terminate the agreement for any reason with 30 days notice.

Why would any vendor agree to this? As Hill points out, it's because it gives the feeling of control to the customer, without giving up any of the real barriers to termination that the customer has today; the most important of which is the cost of migrating off of the provider's service. Carolyn generalized the benefits of concepts like this beautifully when she said something to the effect of
"The cloud vendor community has to understand what [using an off premises cloud service] looks like to me -- it feels like a free fall. I can't touch things like I can in my own data center (e.g. AC, racks, power monitors, etc.), I can't yell at people who report to me. Give me a sense of control; give me options if something goes wrong."
In other words, base service success on customer satisfaction, and provide options if something goes wrong.

What a beautifully concise way to put a very heart felt need of most cloud consumers--control over their company's IT destiny. By providing different ways that a customer can handle unexpected situations, a cloud provider is signaling that they honor who the ultimate boss is in a cloud computing transaction--the customer.

Hill loved his 30 day notice for termination clause with one of his vendors, and I can see why. Not because he expects to use it, but because it let's him and the vendor know that Golden Gate University has decision making power, and the cloud vendor serves at the pleasure of Golden Gate University, not the other way around.