Head in the Clouds: SaaS, PaaS, and Cloud Strategy

Jun 12 2015   1:43PM GMT

Monetization: It may be the real reason we built the cloud

Joel Shore Joel Shore Profile: Joel Shore

Tags:
Business strategy
recurring revenue

At the Cloud Computing Expo in New York (June 9-11), there was plenty of talk about Docker, APIs, everything-as-a-service, and all manner of things technical. Yet, there was an interesting simultaneous shift in some of the conversation toward leveraging the cloud to conduct business. And that’s a good thing.

After all, you’re not in business to sell shoes, you’re in business to make money. Everyone from the CEO down to the kid in the corner cranking out lines of Python code had better understand that. If there’s one word that dominated these discussions, it’s “monetization.” And montenization is about services, not devices. Your mobile phone company really has only three things it can ever sell you: voice, text, and data. The specific devices are irrelevant. Monetization is about services.

Brendan O’Brien, chief evangelist and co-founder of San Francisco-based Aria Systems, is all about monetization, which he describes as recurring, pay-per-use revenue streams, more so than one-time transactions. Here’s the perfect example: Medical MRI machines cost millions of dollars to buy. That means only large hospitals located in major metropolitan areas can afford them. The problem, of course, is that there is a finite number of these large hospitals. And they’ve already bought their machines. The market is saturated, right? Or is it?

Drill down to the next tier and you’ll find thousands of regional hospitals, 10 for each major city hospital, according to O’Brien. They need that MRI machine, but can’t afford the enormous up-front purchase price. What they can afford is a pay-per-use scheme. And that’s exactly what this major equipment maker is doing. It’s installing machines around the world in these second-tier hospitals with Aria Systems handling the monetization aspect (which includes billing and remittance, but is so much more than that). The hospitals get their gear, the equipment maker has increased its market tenfold, and Aria handles the monetary flow, essentially an annuity. It’s a recurring revenue model.

Other examples of monetization were noted at the conference. On your car’s next set of tires, you may pay per use based on mileage instead of shelling out nearly a thousand dollars as the up-front purchase price. It’s coming. And then there’s that shoe company. What if you could get yourself the best (and likely outrageously expensive) running shoes available if you could pay for them based on a usage model that’s tied to the number of steps you take or miles you run. Don’t ponder the question too long. It’s coming, too.

Note that we’re not talking pretty cloud apps that run on a smartphone or tablet. These are the industrial cloud applications that you can’t see, the ones that run inside an MRI machine or deep within your car. These are the cloud apps of business.

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