Cloud washing
Cloud washing is a term used to refer to the often deceptive attempt to rebrand an existing product or service by associating the buzzword cloud with it. Within a financial construct, there is a parallel that describes the practice of inflating financial results for a company's cloud business by redefining existing services and products as cloud services. A typical example of this is referring to access to any application or service over the internet through a browser as cloud computing, just because you are receiving the service over the internet.
Another example is the traditional application service provider (ASP) model where a third party offers individuals, and companies access over the internet to applications and services that would normally have been located in their own personal or enterprise computers. This is often marketed as a SaaS, but there are many significant differences between the two models. ASP is a software delivery method with a revenue model that is disconnected from the software itself. At its core, these are single-instance, single-tenant legacy software deployments. The revenue model is like renting a server with an application installed on it. This approach failed in the marketplace because it lacks scalability for the vendor, too much customization is required, and there is a single customer for the instantiation. There is also no organic aggregation of data, and no network effect data available for collection and aggregation.
SaaS, on the other hand, is an all-inclusive business architecture that is a value delivery method. Its built-in multi-tenancy design allows for shared resources and shared infrastructure. SaaS is scalable and offers true economies of scale to the service provider. This approach reduces overall costs, operational complexities, and customization. Multi-tenancy can also be leveraged to improve customer service and retention, reduce sales cycles, accelerate revenue, gain competitive advantage, and even directly monetize additional services.
Managed service arrangements are also sometimes referred to as cloud hosting. The difference here is that the day-to-day functions are outsourced to a particular vendor to realize an increase in efficiency around processes associated with data center operations. When doing this, the client also pays for all the capital investment (either up front or embedded in the recurring fee) and commits to regular payments over a minimum term. These payments are not driven by use but are a calculation related to total operational and customization costs over the minimum term, financial interest rates and a minimum profit for the service provider. In all cloud service models, the cloud service provider bears all capital cost and offers the same standard service to all marketplace customer. Payment is related directly to actual customer use, and there is no minimum term commitment.
