Tuesday, August 2, 2011

From Capex to Opex: Clouding the Issue of Location Intelligence

Joe Francica of Directions Magazine recently published an article discussing Cloud-based GIS deployments. In the article, Joe was critical of TCO justifications for deploying geospatial solutions in the Cloud. I have to say that I am completely in agreement: cost savings are the last thing to consider in planning enterprise location intelligence solutions, but not necessarily (or primarily) for the same reasons that Joe indicates.

I agree that the focus on cost-savings is counter-productive. In general, cost-savings become a factor in any market where the item for sale has become a commodity. This is simply not the case in the location intelligence market.

There's an old saying in IT: No one was ever fired for buying a Cisco router. What this means, in less cryptic terms, is that you focus on cost savings at your peril. For what does it profit a company to achieve low total cost of ownership (TCO) if it doesn't realize the full return on investment (ROI) for the solution?

I think Joe is right in saying that the majority of GIS vendors are less ready to adopt the Cloud paradigm than are their potential customers. Moving location intelligence from the capital expenditures budget (capex) to the operational expenses budget (opex) is attractive to organizations adopting solutions for a number of reasons:

  1. Because a Cloud-based solution qualifies as an operational expense, and because the annual costs of licensing a Cloud-based solution are generally low enough to reduce the number and range of people involved in decision making, it is easier to make the decision, close the deal, and deploy location intelligence on a compact timeline.
  2. A Cloud-based solution lessens or eliminates the role of IT in choosing and implementing solutions, again making it easier to adopt a solution and start realizing its value quickly.
  3. As location intelligence moves to the mainstream of enterprise solutions, the need for GIS expertise grows accordingly. Finding the human resources to meet enterprise-level needs becomes a major challenge. The Cloud limits exposure to this challenge during the early days of deployment.
  4. Cloud-based deployments make sense for companies that need to perform proof of concept, which is most companies, because the technology appears disruptive and revolutionary to them.

At APOS, we have come to recognize the necessity of this transitional, proof-of-concept approach to location intelligence.

Deployment strategies for location intelligence cannot be binary: it's not a question of all or nothing. Companies won't understand the need for, and power of, geospatially-enabled workflows until they see them for themselves. Thus, an iterative approach is frequently required. There are many hybrid stops along the way from fully Cloud- to fully network-based models.

The challenge for vendors is to provide a clear migration path from Cloud-based, silo-oriented deployments of location intelligence to network-based, enterprise-wide deployments. The two approaches are not mutually exclusive. It helps to think of solution deployment not as an event, but as a path that takes into account the company's need to scale and extend the solution over time.

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