Cloud washing gives way to cloud laundering

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12 February 2016 | 0

Paul HearnsA term emerged a few years ago that described the practice of vendors describing existing products and services as cloud offerings, as they scrambled to take advantage of cloud computing fever.

WhatIs.com provides a handy definition: “Cloud washing (also spelled cloudwashing) is the purposeful, and sometimes deceptive attempt, by a vendor to rebrand an old product or service by associating the buzzword ‘cloud’ with it.”

“A vendor may include cloud-enabling technologies in their cloud revenue, such as servers, virtualisation software or management tool sales, which are all components of a cloud, but are not an actual cloud service”

Well now it seems that we can expand the idea, and perhaps coin a new term, as Gartner has reported that many vendors are now lumping together all sorts of fiscal results under the heading ‘cloud’ to fool markets into thinking they are making more from ‘cloud’ than they actually are.

I’d suggest ‘cloud laundering’.

Writing in Network World, senior editor Brandon Butler reports that one of the most common tricks used by vendors is to include non-cloud technology in their cloud earnings. A vendor may, he says, include cloud-enabling technologies in their cloud revenue, such as servers, virtualisation software or management tool sales, which are all components of a cloud, but are not an actual cloud service.

Butler quotes a cloud watcher, Jeff Kaplan of THINKStrategies, who says this is an ag-old issue and that “it’s always been difficult to discern what money a vendor is generating from a specific product line”.

This is quite a serious issue as certain vendors are actively transitioning away from being product sellers to being service providers and technology partners based on cloud technologies and their fiscal results are evidence of their success in doing so.

IBM, for example, has had a poor run of quarters recently, but cites the performance of its cloud businesses as evidence of its transformation to the new style of business.

Butler is not so sure.

Butler reports that Big Blue has “some of the most confusing ‘cloud’ reporting”, making any real assessment of its progress difficult to discern.

“Despite boisterous claims that it earned $9.4 billion (€8.3 billion) in cloud revenue last year,” Butler writes, “a closer look at the figures raises questions showing that $4.5 billion (€4 billion) of that revenue is related to “as a service” offerings. Butler’s ruminations are shared by Gartner, who Butler says wonders, “What cloud revenue is not ‘as a service?’” leading the analyst to believe IBM is lumping non-cloud revenue, such as consulting and professional services in with cloud line items.

Amazon and its AWS is not quite as bad as others, says Butler, but Microsoft and Google are also singled out for their less than stellar cloud reporting.

But most surprising in all of this is the attitude of the Gartner report authors David Mitchell Smith and Ed Anderson.

Butler summarises the succinctly: the authors say opaque reporting by vendors means customers should evaluate providers not based on earnings, but on which offering best matches their use case.

Now this is where it got truly vapid.

“Assessing vendor cloud revenue claims has become more challenging, with many vendors’ IT-related businesses being complicated and nuanced,” the Gartner pair write in the December report. “We recommend CIOs direct their organisations to never take vendor cloud revenue at face value, and evaluate vendors on their strategy and service mix.”

Who, in their right mind, would evaluate a technology product, service or platform based on the financial results of the vendor?

What CIO, having actually earned their place, would do such a thing?

I certainly don’t know, but it seems to be central to the analysts’ thinking or they would not have stated it so specifically.

Due diligence in selecting any technology, not least a service that could be at the heart of an entire enterprise strategy, demands that an exhaustive technological evaluation be carried out to ensure that not only can a potential offering meet the criteria, but also that it complies with regulatory needs, legal obligations and many other considerations. If there are multiple offerings that come up to the standard, then the financial standing or market valuation of the company in question may figure, if only to ensure that it will be around for the duration of the contract, or would have sufficient resources to meet the SLA. But, I cannot imagine a conversation whereby a CIO would say, ‘no we won’t take that service because the company dropped 4% in earnings from that segment in the last two quarters and is therefore too volatile to consider’.

I find it somewhat hard to swallow, especially when it comes to established players in the market, that the procurement rules of any company would be so strong and specific as to preclude a choice that fulfilled all technical criteria, but would be ruled on financial grounds due to the, albeit undesirable but understandable, opaque reporting of revenues for that line of business.

The report’s authors should perhaps have added a helpful contextual note to that statement quoted above along the lines of “Well, duh!”

 

 

 

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