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Cloud Platform Economics: Driving a Competitive Edge
In the era of digital transformation, organizations must prioritize a raft of strategies to harness the full potential of cloud technology.
Hiral Chandrana, Mastek Group
February 27, 2024
5 Min Read
Alamy
The modern business landscape requires efficiency, adaptability, and customer-centricity. Organizations today strive to streamline IT operations, drive sustainable growth, and foster innovation, all while navigating a fast-changing technological landscape. In this context, cloud platform monetization and economics take center stage.
A recent survey revealed that cloud computing can enhance business agility by as much as 30%, underlining its pivotal role in reshaping modern business practices. There has been a 22.5% increase in shared cloud infrastructure spending, which reached $15.7 billion in 2023.
Investing in cloud infrastructure, platforms, and Software-as-a-Service (SaaS) solutions offers significant benefits, yet organizations must also optimize consumption, deal with increasing costs, and strategically leverage technology for business agility.
Let’s discuss further what organizations must prioritize to harness the full potential of cloud technology and derive a competitive edge.
Moving From Cost Optimization to Business Value Generation
Given the increasing costs, organizations are focusing on optimizing and monetizing the investments made in cloud platforms. On the other hand, platform providers including hyperscalers, data platforms, or other SaaS products are interested in driving increased consumption leading to better ROI. It’s about time for the conversation to shift from cost to driving new revenue streams and business value from the investments.
Platform monetization in cloud economics must be about a strategic approach in turning the digital potential into tangible revenue streams. Across industries, cloud platforms are being used to drive business transformation and that can be further accelerated with new solutions and models.
Investments in cloud platforms across industries can help businesses in multiple ways. In the healthcare sector, for example, platforms often generate revenue through telehealth services, charging for virtual consultations or providing intelligent solutions for workforce scheduling, such as nurse visits to senior living or home care facilities.
In manufacturing, particularly those offering Industrial Internet of Things (IIoT) services, data from connected devices or at the edge can prevent or predict failures. In retail, e-commerce platforms can drive customer loyalty, while financial services platforms drive revenue streams with subscription-based premium services. Within the public sector, platforms can focus on actionable insights from biometrics data to stop cyber terrorism.
Developing Innovative Pricing Models
The future of business lies in embracing a pervasive "as-a-service" model that transcends technology, where every facet of business operations, from software and IT infrastructure to core processes and resources, are delivered and consumed as services on a cloud-based platform.
To gain a competitive edge, innovative pricing models are key. For example, AI-driven chatbots can transition from conventional, costly licensing to attractive transaction-based or outcome-driven pricing. The pricing model is flexible.
The balance between what customers and consumers expect and how well a company's operations can meet those expectations is crucial for a cloud-based "as-a-service" solution to stay competitive. Further, the value-based pricing will drive convergence between cloud platform providers and organizations leveraging the platforms. For example, Snowflake’s pricing model is consumption-based, which means that customers only pay for what they use. The pricing is based on the amount of data stored and the amount of compute resources used.
Businesses must go beyond mere data collection to unlock the true potential of the "as-a-service" model. Organizations must walk that extra mile to explain to their customers how it solves their specific problems, showcasing tangible improvements in their daily routines and productivity.
The public cloud market is exploding, with spending anticipated to jump 20.7% in 2023 to reach $591.8 billion. It surpasses the previous year's forecast of 18.8% growth, signifying a stronger-than-expected adoption rate.
Accelerating Actionable Insights and the Competitive Edge
The cloud's influence extends beyond agility; it equips businesses with a critical asset - advanced data analytics. It empowers companies to foresee market shifts and consumer behavior, adjusting strategies proactively. A report suggests that 74% of companies make better decisions when transitioning to the cloud. Cloud services empower businesses with the flexibility to swiftly adjust their resources based on demand. For instance, Netflix, which leverages Amazon Web Services (AWS) to seamlessly accommodate surges in streaming requests, scaling up its infrastructure as required.
As per MIT Technology Review, 30% of the world's stored data originates from healthcare and life sciences. In the United States, each hospital bed is linked to 10-15 edge devices, which constantly monitor the real-time status of patients. Projections indicate that 75% of medical data will originate at the edge. Now, with increasing amounts of data moving to the cloud, a unified data platform can accelerate the tuning of large language models which in turn can drive more value from AI/GenAI use cases to solve business problems such as safety or detecting patient falls in hospitals.
A financial services firm grappling with a slow pace of queries, high maintenance costs, and a siloed architecture needed a cloud-based refresh. They lacked the in-house expertise to migrate their data lake from existing on-premises solutions to Snowflake, and their current setup wasn't aligned with their broader cloud strategy.
With the help of a tech partner with proven migration chops and pre-built frameworks, they jumped to 10x boost in query speed, and a 19% reduction in IT spend.
Seizing the Competitive Edge
Successful cloud platform monetization necessitates a mindset of business solutions and value, innovative pricing, and a nuanced understanding of market dynamics. In some, it’s not always about incremental gains, but about seizing a competitive edge. It's about turning your data into dollars, your technology into a powerhouse, and your customers into loyal advocates. As we delve deeper into these elements, a roadmap emerges for enterprises seeking not only to navigate but to also drive a competitive edge.
Hiral Chandrana is CEO of Mastek, an enterprise-level digital engineering and cloud transformation company.
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