Cloud Procurement Challenges

Businesses saw a 45% reduction in IT infrastructure costs when implementing a Cloud solution.

Businesses of all sizes and industries are using cloud computing to save time and money by replacing up-front capital infrastructure and software expenses with low variable costs. Cloud computing is becoming an essential instrument for the future of business productivity.

It is critical to have a thorough understanding of the impact cloud computing has on your organization. Not only do operating managers have to better understand the effect the cloud has on their operations, procurement personnel must also develop new tools and procedures in order to overcome any challenges faced by the transition to the cloud.

Princeton Information can help you navigate through these waters by designing sound governance models, contract management processes and managed services best-practices.

  • Challenge 1: Variable Service Levels – Demands can change from month to month, or even more frequently, making the contract process/negotiation more complex.
  • Challenge 2: Nonstandard Terms of Service – Since the cloud helps to leverage economies of scale, whereby costs decline because multiple customers share common resources; however, providers try to negotiate cloud contracts that have custom services, which can slow down the procurement process.
  • Challenge 3: Shifting Landscape – Cloud providers bring additional uncertainties to service terms. Cloud providers regularly revise their service offerings, and the changes automatically flow to all customers, whether they ask for them or not. The pace of change is more rapid than with OOTB.
  • Challenge 4: Pricing Uncertainties – Need to determine whether a firm fixed-price or cost-plus approach delivers the most benefits in a cloud-computing contract with a pay-by-the-drink approach.
  • New Procurement Methods – are required to address contracts oriented to service and performance.