Every client has cloud (and the related topic, Software as a Service) top of mind these days. And not as a buzzword (as it's been for five years now), but as a tangible business strategy that they are either actively pursuing or planning to pursue in the next 12 to 18 months. 

If you’ve been in any way involved in the tech space over the last five years, you’ve been so inundated with “the sky is falling” prognostications of doom around cloud risks that I’m surprised you’re even reading this post. But since you are, let me share my thoughts on what the real risk of the cloud is today, since so many of the typical risks (security, privacy, availability, etc.) not only are no longer risks, but are now core strengths of the cloud versus on premises deployments.

No Exit

For my money, exit risk should be the biggest concern for organizations considering the cloud. That is, if I need to move my application (and its data) or content off of my provider’s servers, how can I do that, what will it cost, are there any constraints, etc.?

The reason why it should be a concern is because — to date — there is shockingly little clarity among most cloud providers about how exactly a customer might switch from its service to another service (or bring everything back on premises). And when your provider is unclear about something, you can bet that the details, once they come to light, will be favorable to them and unfavorable to you. If they were favorable to you, it would be used as a sales tool, right?

So if you go to the cloud now, just be aware that if you need to get out it will likely be difficult, expensive, risky and less than ideal. Or at least it will be for the next five years. After that, I believe that the high switching costs of the cloud will be lowered in the same way that they have for the Telco industry.

It Only Takes One

Once upon a time, it was easier and cheaper to get a divorce than switch cell phone providers. Long-term contracts with terms highly unfavorable to consumers, high up front costs, the inability to port contacts, message history, phone numbers and email addresses — pretty much everything about buying cell phone service was engineered to make it so painful to switch providers that you would put up with almost anything not to go through with it.

And then in less than a year, that all changed. Sprint decided that the competitive advantage to be gained from removing the switching costs was greater than the money they made by keeping their customers from switching. They offered to pay all the costs associated with terminating your current plan and moving to Sprint — and they offered a lower bill and a newer phone as a bonus. 

Whether or not you think Sprint can turn this into a profitable, sustainable model is a conversation for a different post. But what you can’t argue with is that in short order all the other major Telcos followed suit in one way or another to lower switching costs … and then went even further and added services to keep customers, such as phone leasing (e.g., Verizon Edge), where you can pay a low monthly fee for your phone instead of a few hundred bucks up front and can also trade your phone in more frequently.

The relevance for the cloud is that it’s only a matter of time before a smart cloud provider does what Sprint did — remove the switching costs. Two things will be accomplished with this: 1. it will give it a huge competitive advantage in the short term as other providers scramble to figure out how to keep their customers and 2. it will drive other providers to also lower switching costs, effectively removing exit risk from the cloud equation.

So much for my prognostication about the exit risks of the cloud. What about you all out there? Is your organization worried about exit risk? Do you know of any cloud providers that are actively addressing exit risk or lowering switching costs? Do you agree that cloud will go the way of Telcos or do you think the switching costs will remain high indefinitely? Jump in, and let's get the conversation started!

Creative Commons Creative Commons Attribution 2.0 Generic License Title image by  Vincepal