As cloud computing rapidly disrupts nearly every segment of the technology industry, many enterprises are signing up with cloud vendors in order to move their workloads off bulky, costlier on premise data centers to be managed by third party hosts. In response, many software vendors are migrating to an all-cloud approach so to leverage economics of scale while offering customers a cheaper product with enhanced capabilities.
While on premise software is installed locally on a company’s own computer and servers, cloud based software is hosted on a cloud vendor’s servers and accessed through a web browser. Before taking the leap to an all-cloud offering, many software vendors choose to take a hybrid approach, wherein cloud software is hosted on an organization’s private servers. Taking this route, businesses can try out their product as a hybrid software-as-a-service (SaaS) model before gradually evolving them to become true SaaS modules. In this way, software vendors can benefit from cloud-based software’s low entry cost. While SaaS pricing is set under a monthly or annual subscription basis, with additional recurring fees for support, training and updates, on premise software requires a large, one-time perpetual license fee.
Vendors should also investigate the option of creating a new product as opposed to changing an existing product. Companies should analyze their product architecture and check whether it can support multi-tenant hosting. If not, vendors may have to create a separate instance of their product framework for each tenant, increasing costs such as hardware and software support. The architecture should offer quality performance to customers that is not adversely effected by other tenants’ use.
Much of the resistance enterprises have towards the cloud comes from concerns that it is relatively less customizable and secure, and that they will lose control of their data. As these issues rest in the hands of the vendor, companies must manage customers’ perceived risk. Vendors can ease their clients’ worries by ensuring strict standards to keep their data safe and offering the ability for customers to customize software to their specific needs and requirements. As always, excellent day-to-day service should come first in order to build long-term partnerships and secure recurring revenue streams through subscription renewals.