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An Introduction to Cloud Computing and Business Model Disruption

How will cloud computing disrupt your business model?

Gray Hall offers his insights about the critically important question we’re asking: how will cloud computing disrupt your business model? We start by defining a basic yet useful framework for understanding business models; this framework applies to businesses of all types and is adapted from Wikipedia

. We’ll look at causes and types of disruption, keeping in mind that disruption can produce both positive and negative change. We’ll also tell you where the money is - i.e., the areas which offer the most promise in terms of business opportunity and profit.

In his introductory post, Steve mentioned that when we were at VeriCenter we became aware of a new sort of challenge facing our industry - from outside entrants like Amazon.com who were beginning to grow their cloud storage and cloud computing businesses, leveraging internal web-based infrastructure. We knew then that cloud storage, as a significant part of an overall cloud computing strategy, was going to change our business and yes, our entire industry. Now we see new entrants like Google and Microsoft, as well as veterans like IBM and Sun, EMC, and Cisco are all delivering cloud-based offerings that are redefining the hosting and SaaS markets.

So here's the question we're asking: how will cloud computing disrupt your business model?

To answer this question, we start by defining a basic yet useful framework for understanding business models; this framework applies to businesses of all types and is adapted from Wikipedia:

Let's look at the nine components of the business model framework, and describe each one briefly.


  • Core Capabilities: The capabilities and competencies necessary to execute a company's business model. These include your key people, processes and technologies.
  • Partner Ecosystem: The business alliances which complement your capabilities.
  • Key Processes: The key activities (sometimes proprietary) which create the product or service you offer.


  • Value Proposition: The compelling benefits your customers receive from buying your products and services.


  • Customer Segments: The target audience for your products and services.
  • Distribution Channel: The means by which a company delivers products and services to customers. This includes the company's marketing and distribution strategy, and may involve a chain of intermediaries, each passing the product down the chain to the next organization, before it finally reaches the consumer or end-user.
  • Customer Relationship: The links a company establishes between itself and its different customer segments.


  • Cost Structure: The nature of the expenditures required to run your business, particularly considering whether costs are fixed or variable in nature, and whether they are capital of operating expenses.
  • Revenue: The way a company receives payment from customers.
  • Profit: The degree to which your revenue exceeds your costs, of course!

Going forward, we'll apply this generic business model framework to four specific industries we expect to experience business-model disruption from Cloud Computing:

  • IT hosting and disaster recovery companies
  • SaaS and Application Providers
  • Telecoms, and
  • Managed Service Providers.and VARS

We'll look at causes and types of disruption, keeping in mind that disruption can produce both positive and negative change. We'll also tell you where the money is - i.e., the areas which offer the most promise in terms of business opportunity and profit.

Your feedback and comments are welcome as always. More on this topic at: www.cloudstoragestrategy.com

More Stories By Steve Lesem

Steve Lesem is President/CEO of Mezeo Software. Previously, He was Senior Vice President and Chief Marketing Officer of the managed hosting provider VeriCenter. He has also served in leadership positions at SafeNet, BMC Software and IBM. Steve holds a Bachelor of Science from the University of Texas at Austin. He is the primary author of the Cloud Storage Strategy Blog (www.cloudstoragestrategy.com), which frequently sees posts picked up by publications in the IT services and Web hosting spaces.

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