1. www.wipro.com
Robert Bates
SMAC Architecture Group Head,AdvancedTechnologies & Solutions
Addressing Need-Based Consumerism for
Cloud Services

2. Table of contents
03 ������������������������������������������������������������������������������������ Abstract
03 ������������������������������������������������������������������������������������ Introduction
04 ������������������������������������������������������������������������������������ Disappearing Upfront Fees
04 ������������������������������������������������������������������������������������ ShrinkingTop Line and Purchase Cycles
04 ������������������������������������������������������������������������������������ Stay the Course
05 ������������������������������������������������������������������������������������ Changing Landscape
06 ������������������������������������������������������������������������������������ About the Author
07 ������������������������������������������������������������������������������������ About Wipro Ltd.

3. 3
Abstract
Cloud service vendors are facing new
challenges in today’s IT landscape. As the
global economy struggles to emerge from
the financial crisis,customers are demanding
“need-based” solutions that shift operating
risks almost entirely to the service provider.
Vendors who can address such demands
without hampering their ROI are the ones
that will emerge ahead of competition.
Introduction
Cloud computing first emerged as time-sharing of large mainframe
computers in academia or businesses. Sharing of physical access and
CPU time gave a greater return on investment by reducing idle time.
Today, cloud can mean any of several different things -- ranging from
storage space, processing power, CRM systems to email managers.
A cloud service provider can be anyone who provides a service to
enterprise or individual clients.
As the global economy tries to wriggle out of the financial crisis, cloud
computing assumes a greater significance. Businesses are increasingly
opting for a need-based purchase model for their IT requirements.This
means that they no longer want to spend in advance for their future
technology needs.The implication of this for the service providers is that
they can no longer depend on large upfront fees for revenues. In fact, as
customer preferences change, they might opt out of the service before
the provider is able to realize adequate returns on the initial investment.

4. 4
ShrinkingTop Line and
Purchase Cycles
Businesses are facing risks to their revenue streams due to changes in
customer tastes, number of users, etc.These risks are further aggravated by the
fact that purchase cycles are getting shorter by the day. Three year sub-
scription periods are being replaced by annual or even monthly cycles,forcing
CSVs to bear nearly all capital (CAPEX) as well as operating expenses (OPEX).
Stay the Course
To alleviate challenges associated with today’s need-based consuming
patterns, cloud service providers can work on ways to mitigate risks.
Managing geo-distribution is another way to control risk.
Cloud vendors typically provide technology stacks in partnership with
other firms.They might have sub-contracts or rental agreements with
such partners. By making sure that they have access to resources
local to their clients, they can better manage the geo-distribution
of the overall infrastructure.This can make it easier to scale-up and
scale-down their business at each location.
For starters, they can diversify their business. Service
providers should try to reach out to as many customers as
possible and in as diverse markets as possible. Diversification can
be achieved by altering the product (or service) portfolio and also
by marketing existing products to new customers. Even the most
popular social networking app runs the risk of become obsolete
if it satisfies a very specific need. A better replacement can easily
encroach upon its user base.
Disappearing Upfront Fees
Traditionally, service contracts involved an upfront commitment from
the client and continued service delivery from the cloud provider.
However, as services become increasingly more commoditized and
the market more competitive, a subtle change has come about. Clients
are becoming averse to paying large upfront fees for service contracts,
instead, opting for fee structures directly based on consumption or
usage. The spot pricing model recently introduced for Amazon Web
Services (AWS) is a typical example. Users only need to provide a
credit card number to start using the cloud computing platform that
includes exchange hubs and industry supply-chain services.
The problem gets compounded if companies want to court the individual
consumer with their service offering.This is because the consumer space
is typically characterised by demand seasonality or phases of peaks and
troughs. For instance, mobile phone carriers typically see a surge in app
downloads around the December holiday season, but demand drops
in the work months of January and February. Video game companies
generally see a jump in sales around sports events, creating a significant
degree of unpredictability in revenues through the year.
Similarly, as blockbuster style items hit the markets, infrastructure may
become overwhelmed momentarily. The last few iPhones were so
popular that Apple Store servers came crashing down at the time of
their release. Service providers must ensure that they have the capacity
to deal with such surges, but their infrastructure spending should not be
so high as to make a dent in return-on investment.
All this means that cloud service providers have to bear a greater risk
related to talent acquisition, capital expenditure, equipment purchases,
etc.They have to ensure that they can match the client demand pattern
as closely as possible. If they ramp-up their infrastructure too fast then
their profitability will be hampered. If they are too slow, they could
invite penalties for not meeting the requirements.
It is here that service partners can help offload some of the business
risks.In fact,if organizations are alert to the changing scenario,challenges
stemming from need-based consumerism can be transformed into
revenue generation opportunities. Indeed, there is a huge, yet largely
untapped, market for services that allow clients to “buy what is needed,
only when needed.”

5. 5
CSPs can avoid long-term support commitments to
keep risks at bay.In an environment where customers can come
and go as they please, vendors have little to gain from offering long-
term support commitments. Support, even if it is paid, generally
slows down innovation.To avoid this, most CSVs only maintain“one
version ahead” and “one version behind” its current production
platform, decommissioning any older software. Customers must
upgrade in order to continue using the platform.This is particularly
relevant to the high-tech computing space for which continuous
innovation is important.
Firms must strive to create longevity of revenue. As cost
of compute continues to reduce every year, vendors can enhance
profitability by making it attractive for customers to commit to
longer-term contracts. Margins might be low in the initial stages
because of incentives added to make the customer commit for a
longer period. However, as the vendor’s costs reduce over time,
profitability will rise. AWS is again a good example of this practice.
Start-ups will be attracted by the little upfront fees and sign up for,
say, a one-year contract.This would allow Amazon to net a healthy
profit over the course of the contract.
Changing Landscape
Today’s brand landscape is very different from the one 10 years ago.
Consumerization of IT means votes are cast with dollars spent. Properly
setting the course to deliver a value-platform can catapult a new brand
to the top of the pecking order.While a poorly thought out plan can push
them out of the market.The CSVs should adopt one or more strategies
to maintain a healthy level of profitability and risk even while keeping-up
with increasing customer demands.To shift the balance of investment and
returns, the opportunity realized in both revenue and risk avoidance will
need to be translated into hard balance sheet numbers for CSVs.

6. 6
About the Author
Robert Bates
SMAC Architecture Group Head,AdvancedTechnologies & Solutions
Robert Bates is the head of Wipro Technologies Global SMAC Architecture Team. As the principal technical advisor and lead to the Wipro Advanced
Technologies & Solutions organization, Robert is responsible for advising on all service design, delivery and technology programs. He and his team evaluate
and recommend co-investment customer research programs. Robert is a veteran technology leader, performance advisor and a business architect with a
deep background in process and technology stacks. His technical experience includes technology strategy, enterprise architecture, operations, information
management, solution/product development and process/technology selection.

7. 7
About Wipro Ltd.
Wipro Ltd. (NYSE:WIT) is a leading Information Technology, Consulting and Business Process Services company that delivers solutions to enable its
clients do business better.Wipro delivers winning business outcomes through its deep industry experience and a 360 degree view of “Business through
Technology” - helping clients create successful and adaptive businesses. A company recognized globally for its comprehensive portfolio of services, a
practitioner’s approach to delivering innovation, and an organization wide commitment to sustainability,Wipro has a workforce of over 140,000, serving
clients in 175+ cities across 6 continents.
For more information, please visit www.wipro.com

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