Comment: Customers want subscription not capital investment. This requires a shift in focus for many in the channel.
This statement in my opinion is quite powerful. People these days don’t want to be tied up with capital investment. This is a trend that expands well beyond IT. Take a look at this CNN article from 2010 “Rise or the Rental Class“.
Some notable quotes from the article:
“With homeowner markets stressed, it appears renting has become more appealing than owning. Between 2004 and 2009, the number of renter households rose nearly 10% or by 3.4 million, according to a 2010 studyof the Joint Center for Housing Studies of Harvard University. ”
“Owners don’t pay the landlord, but they pay taxes and maintenance costs on their house, and Gyourko says those costs can end up being roughly the same.
As far as buying a house as a smart long-term investment, Gyourko says that’s not always true. He says between 1975 and 2008, the price for houses of similar quality and size appreciated an average of about 1% per year after inflation. Investors could have earned more by buying Treasury bills.”
I rent, here is why:
- I don’t have to spend one minute a month maintaining my home. This gives me more free time to work on revenue generating activities.
- If something breaks, I am not on the hook for it. If my dishwasher breaks, I get a new one. Simple as that.
- I have a fixed monthly cost. This is what first appealed to me when I was researching managed services so many years ago. A fixed monthly cost is a huge benefit to a person as it is to a business. Unexpected costs can cause cash flow crunches, and I am sure you all know how much stress and additional cost a lack of cash-flow can cause.
It doesn’t necessarily make sense to outlay a lot of capital expense into something like a home, when the cost of renting is usually less. I know the age old argument of “If you rent, you are throwing your money away” but when you take a look at the breakdown of a homes monthly expenses, a large amount is money that will never produce a return. Insurance, property tax (less tax savings), and maintenance.
Of course this is argument is for an asset that is supposed to appreciate.
Now if you compare this trend to investing in underutilized server, desktop or software infrastructure, who’s value is notorious for depreciating very quickly, you can see why the cloud is being talked about so much.
We are living in an era of bootstrapped businesses. Most companies new or old do not want to lay out thousands or hundreds of thousands of dollars for infrastructure that will be out of date well before it has been paid off.
I know I would much rather pay a small monthly fee to a service provider than invest many months of income upfront. This makes my business that much more flexible. If my business changes, I can change my service provider to fit my needs a lot easier than buying, configuring and managing new software.
The cloud allows the small business to compete with very large corporations around the world, while retaining that oh so precious capital, agility and the high performance needed.
You can see the trend happening in other markets as well. Netflix is on its way to destroying the DVD – Blue-Ray market and Apple is rumored to release a cloud based music subscription service.
When you add in the costs of managing and maintaining on-premis systems, ask yourself – do things really add up?