Coupa's CEO on the staying power of the Cloud.

Over the past 18 months, CTOs and IT professionals have been swarmed with marketing materials and analyst predictions about Cloud Computing and the impact it will have on enterprise software purchasing. Numerous studies cite that moving more applications to the cloud and away from on-premise or one-off hosted deployments is on the agenda of the CTO. Nonetheless, when pitching why moving to the cloud is worth considering most vendors have been unable to succinctly deliver a value proposition that calls for immediate action. Sure, they will talk about lower upfront costs, easier to use functionality, alignment of incentives and so on. But, the reality is that many CTOs have invested millions and millions of dollars in on-premise software that they bought at the height of the 90s software buying frenzy, much of it in an effort to standardize on their ERP platform. They also spent years getting people trained on using much of this software and have no real easy path to decommission it. The last thing they want to see is another shiny salesperson pitching them on even more software, cloud or not. Even if they know that the latest cloud based technology offerings are more cost effective, their challenge is managing the switch and finding the impetus to do so.

The current economic situation presents an unprecedented opportunity to re-examine the value proposition Cloud Computing really offers. Most CTOs and CFOs are incented on cost savings and the reality is that traditional on-premise vendors currently charge an exorbitant amount of money for maintenance. It is not uncommon for the maintenance on an application such as eProcurement to be hundreds of thousands of dollars a year. What if a Cloud vendor could offer that company the opportunity to save ½ on that maintenance fee immediately by switching to the Cloud. With this approach the Cloud vendor is not selling more software but is actually selling the opportunity to cut maintenance cost for the company instantly. Not only that, but they are offering a way for the company to move off their on-premise deployment at their pace, which has option value of its own. Sure, the cloud software may not be as feature-rich, but chances are it is far more usable and feels more like a Tivo than a VCR.

With this shift in value proposition, and with Gartner predicting that a fifth of enterprises will have migrated all their IT to the cloud by 2012, why wouldn’t any CTO worth their paycheck consider saving money for the company by moving off existing outdated software and leveraging the best the cloud has to offer?