The cloud needs to become more transparent especially since the industry is scaling to dominate enterprise technology.
In a recent research note, Gartner argued that the revenue claims of cloud vendors are increasingly hard to digest. Gartner said enterprises shouldn't take vendor cloud revenue claims at face value and evaluate them based on strategy and services (naturally using tools from the research firm).
A week ago, I argued that Google should provide some kind of cloud run rate just so customers can get a feel for scale and how it compares to Amazon Web Services, Microsoft's Azure and IBM. Oh well. Unlike Gartner, I think the revenue figures matter somewhat, but are far from the deciding factor.
But debating revenue run rates and nuances between the private and public cloud variations misses the point. What's missing from the cloud equation today is better transparency.
With that issue in mind, here's where I think we need to go in terms of cloud transparency:
Revenue reporting from cloud vendors. Amazon Web Services breaks out its results and they're straightforward earnings and revenue. IBM has an "as-a-service" run rate. Microsoft has a commercial cloud run rate. And Oracle to its credit has line-by-line breakdowns of the various flavors--infrastructure-, platform- and software---of as-a-service sales.
Although Gartner calls some cloud revenue reporting nuanced, I'd call it hiding the hardware. Companies that have a mix of cloud flavors and traditional infrastructure should break them out. There's no crime in hosting data centers, managed services and converged private cloud building blocks. Cloud revenue should be broken out by product groups and various flavors. Not all cloud revenue is created equal.
Does this type of transparency matter? Gartner argues that revenue claims shouldn't matter more than strategic fit. However, revenue does indicate scale. Scale indicates the ability to lower infrastructure costs over time. My take: Revenue claims matter and the debate revolves around degree. Cloud revenue is material information to know whether a large enterprise vendor gets more revenue from platform- than infrastructure-as-a-service.
Software-as-a-service providers should break out infrastructure costs. Your software as a service vendor should have a breakout of what they charge for infrastructure on the backend and how it compares to leaders in the cloud. In other words, I want to know the benchmarks for infrastructure efficiency from Salesforce, Workday and the rest of the gang. Now we all know the cloud's promise is that an enterprise saves on people and management headaches, but I seriously doubt that a software as a service provider can cut infrastructure costs like AWS or Google could.
This idea comes from SugarCRM CEO Larry Augustin, who argues that infrastructure as a service and software as a service will become decoupled. Today, those two are part of what you buy from a software-as-a-service vendor. "It's such as competitive space that prices are just going to fall," said Augustin. If SugarCRM is running a big instance, there shouldn't have to be a middleman where Augustin's company procures AWS in the background and then sells its software as a service. "I'd have to mark up the infrastructure. I'd rather have the customer pay AWS directly and we can manage it," said Augustin.
Augustin's bet is that more enterprise customers are going to ask for the infrastructure costs of the software vendor to be broken out. Software-as-a-service vendors should be able to tell you what part of your bill is really infrastructure so you can compare your options. In some respects, this is similar to decoupling transmission fees from your traditional utility. What's the markup?
Cost and optimization disclosure and tools. The vendor who offers the most information and tools to help customers optimize their spending will garner the most loyalty. The more enterprises adopt the cloud the more optimization issues will arise. Ideally, cloud vendors would monitor utilization and right size instances, shut down temporary workloads and move regions around based on costs for the customer. Realize there's a big disincentive to not optimize costs for customers (less revenue), but the customer goodwill would be huge.
ZDNet's Monday Morning Opener is our opening salvo for the week in tech. As a global site, this editorial publishes on Monday at 8am AEST in Sydney, Australia, which is 6pm Eastern Time on Sunday in the US. It is written by a member of ZDNet's global editorial board, which is comprised of our lead editors across Asia, Australia, Europe, and the US.
Previously on the Monday Morning Opener:
- Microsoft and mobile: The headache that won't go away
- If a smartphone vendor acquiesces to anti-encryption laws, don't use them
- Why it's time to give Twitter back to the community
- Business, tech leaders' challenge : Finding innovation that matters
- Amazon's 2016: Five key cloud, e-commerce questions
- Tech predictions 2016: 4 business trends to watch
- The 5 trends that rocked business tech in 2015
- The state of enterprise software: 5 lessons
- How TV apps are about to remake the small screen and unleash a new land grab