An Introduction to Cloud Computing and Business Model Disruption

In his introductory post, Steve mentioned that when we were at VeriCenter we became aware of a new sort of challenge facing our industry - from outside entrants like Amazon.com who were beginning to grow their cloud storage and cloud computing businesses, leveraging internal web-based infrastructure. We knew then that cloud storage, as a significant part of an overall cloud computing strategy, was going to change our business and yes, our entire industry. Now we see new entrants like Google and Microsoft, as well as veterans like IBM and Sun, EMC, and Cisco are all delivering cloud-based offerings that are redefining the hosting and SaaS markets.

So here’s the question we’re asking: how will cloud computing disrupt your business model?

To answer this question, we start by defining a basic yet useful framework for understanding business models; this framework applies to businesses of all types and is adapted from Wikipedia:

Let’s look at the nine components of the business model framework, and describe each one briefly.

Infrastructure

• Core Capabilities: The capabilities and competencies necessary to execute a company’s business model. These include your key people, processes and technologies.
  
• Partner Ecosystem: The business alliances which complement your capabilities.
  
• Key Processes: The key activities (sometimes proprietary) which create the product or service you offer.
  

Offering

• Value Proposition: The compelling benefits your customers receive from buying your products and services.
  

Customers

• Customer Segments: The target audience for your products and services.
• Distribution Channel: The means by which a company delivers products and services to customers. This includes the company’s marketing and distribution strategy, and may involve a chain of intermediaries, each passing the product down the chain to the next organization, before it finally reaches the consumer or end-user.
• Customer Relationship: The links a company establishes between itself and its different customer segments.
  

Finances

• Cost Structure: The nature of the expenditures required to run your business, particularly considering whether costs are fixed or variable in nature, and whether they are capital of operating expenses.
  
• Revenue: The way a company receives payment from customers.
  
• Profit: The degree to which your revenue exceeds your costs, of course!