How do you put a price tag on the cloud?

Paula Reinman specialises in creating new markets. She is currently SVP of Marketing at ServiceSource and works at the intersection of marketing, analytics and technology. She has held various leadership roles in the marketing departments of Bersin & Associates, Microsoft, Juniper Networks, and Telechoice. Paula has an MBA from the University of Michigan and a bachelor's degree from the University of California at Berkeley.

By Richard Campione,  President, Cloud & Data at Services Business at ServiceSource

A recent CIO Zone article stated “cloud computing is increasingly becoming the rule and not the exception.”  With cloud computing becoming so pervasive and commonplace in our day-to-day lives and businesses, everyone has differing opinions on how to quantify the true value of the cloud.

So, how exactly do you put a value on and quantify the business benefits of the cloud?

On its surface, the cloud brings economies of scale that can be quantified through traditional metrics such as cost savings and performance improvements.  For ServiceSource, a company focused on harnessing the power of big data to increase recurring revenue and customer retention for our clients, the real benefit of the cloud is the ability to do things that you couldn’t otherwise do, and the unprecedented agility it affords.

Let’s start with agility

I frame this in the context of speed and elasticity.  In the cloud, via PaaS, one can deploy an application and increase capacity much easier and more quickly than one could if one had to manage the hardware directly.

For example, if you’re a seasonal Christmas retailer that requires excess computing capacity during the month of December, it’s much faster to scale-up your shopping application in the cloud than to procure new servers and install new systems at a co-location facility.  In this case, an application that would previously have taken days to weeks to increase computing capacity, now takes a matter of minutes or hours.  This power is priceless in terms of new sales opportunities, increased customer goodwill and a sustained online reputation.

ServiceSource benefits in the same fashion.  We process massive amounts of customer data to manage recurring revenue for some of the largest B2B brands in the world.  By its nature, data supporting recurring revenue activities is expansive – often 10x more data than required to make an initial sale, all coming from a wide variety of sources.  We need the ability to rapidly scale-up our application and processing capabilities at a moment’s notice because of unpredictable data loads, and the cloud lets us do this. We simply couldn’t offer the same level of service if we weren’t in the cloud.

Things you couldn’t do otherwise

The cloud allows for unprecedented aggregation of data across an industry, which can serve as the basis for “machine learning” and “prescriptive analytics.”  SaaS providers offer customers something that they simply can’t do themselves. Even if they had access to the data and computer scientists, they don’t have access to this breadth of data.  This is only possible due to the cloud.

In short, because of the cloud, we are in an early phase of the next generation of enterprise applications, where machine learning across large data sets enables better business decisions for the enterprise SaaS users. We at ServiceSource use extensive customer data from a wide variety of sources to drive superior renewal rates and customer retention rates, which increases high margin revenue.

Another example in the consumer space is Amazon’s recommendation engine which customises the browsing experience for returning customers based upon their previous purchases, items in a virtual shopping cart, or items that have been rated and liked.  Amazon uses prescriptive analytics to tailor the experience for one individual based on analysing the patterns present in the enormous amount of data they gather across their entire user base.

So in conclusion, how does one measure the value of the cloud?  Clearly it can be measured in traditional terms of cost reduction, increased revenue, and customer loyalty due to improved service levels.  But personally, what I find the most exciting is exploring the new ways Big Data and prescriptive analytics enables us to better serve our customers that simply weren’t available to us before the cloud.

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