As more enterprises gain comfort with private clouds, a logical next step is to consider monetizing these assets.
The situation most often comes up when an enterprise has a well developed application and a portal to it; there is excess capacity; and there are other organizations that need the app and are willing to pay for it. The provider then can extend a private cloud as a software-as-a-service (SaaS) offering to other companies for a fee.
On the surface, this seems as if it would be an easy transition for an enterprise IT department — but it isn’t. There can be non-cloud features (such as network connectivity or technical failover/ISP redundancy) that have to be plugged in for outside customers, which are non-issues for internal users. Liability issues can also come into play, and can even prompt the enterprise to consider whether a “charged for” service should be separated into a corporate spinoff, a move that affects the overall IT organization.
Before any of these decisions are made, business management and the CIO need to answer each of the following questions with a resounding “yes”:
Can you provide the service levels that outside customers are going to expect?
IT experiences occasional difficulties with internal users; but the truth is, it can be easy to take one’s internal users for granted! This isn’t the case with external paying customers, who expect continuously great service. Since IT will have to provide commercial-level service, it needs to evaluate whether it has the internal service talent needed for the job.
Can you meet customer security and regulatory requirements?
If you are in the same industry as your customers, you have a better chance to meet customer security/regulatory requirements because you are probably already meeting these requirements for your own business. But you also need to be prepared for outside customer requests for copies of your own IT audits that these customers’ auditors will surely demand. Customers might even demand SAS70 audits for their files. Providing copies of these audits is expensive — and if some of your customers are potential competitors, you might not want to do it.
Do you have the right leader for your SaaS business unit?
The leader of this business unit will interact regularly with outside customers. He or she must possess a combination of business savvy and IT expertise. This person must also have excellent interpersonal skills and be able to inspire confidence.
Do you have the right pricing model?
For enterprises whose core businesses are not cloud or SaaS, it is easy to err on pricing. Base costs must account for everything: facility costs, licensing costs, staff costs, administrative costs, audit costs, and so on — and you have to be able to markup above that. The enterprise must be able to see itself in the cloud/SaaS business for the foreseeable future, and the offering must be convincing when “penciled out” for clients.
At first glance, this checklist on offering a cloud or SaaS service for profit seems daunting — but the fact is, there are organizations that are doing it successfully. They have covered all of the “vetting” questions and have converted IT into a profit- as well as a cost-center. In the process, they have developed business acumen and service levels that excite the internal users and stakeholders as well as the customers they serve.
Written by Mary E. Shacklett