Wednesday, 8 February 2012

The Service Dominant Logic and The Cloud, or why you should learn to love the Cloud and sympathise with Microsoft

I like to go back a little. So let me take you to back to 1934 and a chap called John Commons. John wondered how you might isolate each and every aspect of a firm such that you could identify which activites and attributes created competitive advantage and which detracted from it. Every transaction should be analysed - from procurement, through contract terms, delivery, premises and discounts, etc etc. Commons was way ahead of his time, and it took another 35 years before this found common (pun unintended) acceptance in Michael Porter's now famous five forces.  

So what has all this to do with the cloud? Bear with me...

The reason I bring up Commons is that it takes us back to the bean-counting side of realising competive advantage and value. Once we got all of Porter's fancy diagrams, some of the meaning got lost - it was just something you had to put in the marketing plan.

Now fast forward to Vargo and Lusch - a couple of guys that decided to give the startegy hegemony a good shake. They argue that the concentration of marketing on "goods" and transactional exchanges of tangible items was based on a now out-dated economic model dating back to colonial times. This paradigm needs to be updated to reflect a more service-oriented economy where value is derived not chiefly from the producers of goods, but from the owners of knowledge, expertise and skills. VAR's - that's you.

Sorry, I'll say that again - VAR's that's you, you, you, you YOUUUUUUUUUU!!!!!!!!! Its the very V and the very A of VAR.

So why do you now learn to love the Cloud?

Because the Cloud takes away a lot of the confusion caused by ISV's, hardware companies, hosters etc. claiming that they provide the value. They don't - they ship lumps of tin and bits and bytes. They may be very clever bits and bytes and the tin may have an inordinate number of slots in the back and flashing lights on the front - but in the hands of a customer they are about as useful as the proverbial bicycle to a fish.

Until you come in. You make it work. You make it real. You may even claim to make it dance and sing - you certainly should make sure it 'performs' (punny again!). You know how it should work for the industry of your customer, and what value it will afford them in saved man-hours, improved efficiency and savings from bottom, top and all lines in between.

And you do all of this becuase you provide the Service, and Mr Vargo and Mr Lusch say that service is dominant. Ipso facto you are dominant - and the dominant player gets to monetise the most. Unless, of course you are hung up on those ever-decreasing margins given out by the ISV's.

So, next time you are told by an ISV such as Microsoft or SAP that you have to love the Cloud, tell them that you do - and then tell them that you sympathise with the terrible position they will find themselves in.  For there's only one thing worse than not being dominant, and that's having once been dominant.