Executive Summary

Despite an increase in cloud adoption, the process for evaluation of alternative cloud solutions remains largely in line with the traditional IT services contracting mechanism.

As buyer organizations have grown accustomed to managed services models, they tend to use similar criteria to evaluate cloud solutions. For instance, the importance of resource-based pricing in applications and infrastructure services leads to a focus on similar commercial constructs for cloud solutions as well. While this may provide better unit pricing, such a contract structure may not always result in lower total cost of ownership.

Similarly, given the different cloud delivery models, buyers tend to focus on the physical location of assets used to deliver services. However, cloud solution evaluators are better served by taking a customized approach to the scope under consideration and mapping out desired end-states of security and reliability, rather than taking a decision on the model of choice based on asset location.

We believe there is a fundamental need for cloud adopters to consider an alternative evaluation process. This includes:

• Cloud principles based on multi-tenancy, by definition, lead to a certain “boxed” set of alternatives. These are, typically, driven by the scale of infrastructure requirement, the service components, and the security and privacy considerations. Taking a traditional RFP approach may not work well in such a market. What is more important is for enterprises to evaluate the “best fit” solution for the specific workload under consideration.
• The drivers of cloud adoption tend to be very different from the drivers of traditional outsourcing. Pure labor arbitrage or “your mess for less” thinking is being replaced by the business drivers of being quicker to market and a flexible infrastructure. As such, traditional constructs of negotiating for the lowest unit price are likely to be ineffective, as the focus shifts to return on investments and total cost of ownership.
• Such a change in mindset is already becoming evident where business users are driving adoption, as opposed to traditional procurement and corporate IT offices. Business users tend to adopt cloud solutions to sustain or improve competitive advantage, and not for primary cost reduction. As such they tend to evaluate cloud solutions based on end objectives rather than pre-decided and piecemeal technical criteria.

• Growing cloud adoption
• Cloud evaluation driven from traditional perspective
• Need for a newer approach to evaluate cloud models