Contributed by Tim Bowman and Nick Buckley
In 2016, enterprise infrastructure spending actually declined 1 percent overall, led by a huge decline (5 percent) in the $31B market in data centers and servers.
Meanwhile, the revenues of major cloud vendors (Amazon, Microsoft, IBM…) grew by 25 percent to $148B in 2016.
The cloud is no longer coming … it’s here.
Hardware and software products that were once distinctly branded and sold through carefully cultivated relationships with IT departments are now lined up on the major cloud providers’ web pages alongside a half dozen competitors, not to mention the storefront’s (e.g., Amazon’s) own native offering.
In addition, new startups are jumping the queue with lean business models specifically crafted to serve the SaaS space (and without the legacy overhead and infrastructure of traditional B2B hardware and software firms).
Competing successfully in the cloud today means a sea-change for traditional hardware and software B2B companies. The list of pivots required is immense: revamping go to market strategies, managing the P&L in transition, shifting distribution and sales strategies, identifying new customers and how to motivate them – all while revamping the core product line and company culture / structure to succeed in this brave new world.
It isn’t easy. And what does success get you? A position in the lineup on a mega-competitor’s webpage, one step closer to ultimate commoditization.
Or does it? AWS (or Google, or Azure) gives you a distribution channel to millions of new SMBs that your traditional sales team would have never reached. And even if your technical specs align with your competitor’s, customers are still willing to splurge for brands that go beyond meeting their technical requirements and show they can advance their business strategy while empathizing with their struggles to transition to the cloud (–something new “born in the cloud” startups can’t relate to). Differentiation and growth can still happen, they just happen differently–identifying where your company stands in this sandstorm is the first step in ultimately crafting a successful strategy for tomorrow. Here are some questions we’d ask to get started:
- How well do you know your customers of tomorrow – the many SMBs and smaller companies that you aren’t reaching now?
- Do you know what motivates your present and future customers beyond the technical requirements of your product – what is the business strategy/need you are helping them meet? How does that impact your product design and marketing?
- Do you have an inside sales and marketing team that is aligned to these new distribution channels and customer profiles?
- How are you balancing your company structure and culture as you transition to the cloud?
Stay tuned for our next post on the concept of companies following their customers, to dive into this topic further.