Buy, Build or Lease?

Buy, build or lease? Whenever a company needs real estate, assets or people, it must answer that or a similar question. The company’s answer depends on many factors and even a slight change in the company’s goals can swing a “buy” answer to a “build” or “lease” answer. Until relatively recently, it was somewhat easy for the software application customer to answer the “buy, build or lease” question. It was almost a foregone conclusion that the customer would need to invest in infrastructure, hardware, personnel and real estate, as a pre-condition to hosting the desired application. And, when it came to the application itself, the customer could “buy” (acquisition or perpetual license), build (self-development) or, in a minority of occasions, lease (term limited subscription licenses).  

Thanks to the rapidly expanding number of cloud computing options, including Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS), combined with traditional software access models, a software application customer now has a wide breadth of options to select from. However, with this wide breadth of options, customers are finding it harder than ever to answer the “buy, build or lease” question.  

Factors in “Getting to the Lease” Answer

In order to answer the “buy, build or lease” question with both traditional software access models and cloud computing access models in mind, the cloud solution provider must be ready to provide cloud-favorable answers to many questions, including:  

  • Bankruptcy. One of the main “what if” questions a customer will ask before moving to the cloud, is “what if my cloud solution provider goes bankrupt and/ or ceases operating?” Recognizing that it may be practically impossible for a customer to rapidly acquire hardware, software, real estate and employees to replicate or replace the cloud solution, cloud solution providers should be able to provide comfort to its customers in the unlikely event the cloud solution provider goes bankrupt and/or ceases operating. In our experience, creativity leveraging the cloud solution’s relationship with its own disaster recovery partner may provide the customer with a means to mitigate its perceived bankruptcy and business failure risks.
  • Security. Security is one of the biggest concerns, real and perceived, that customers face when looking to the cloud for applications. Cloud solution providers can help customers identify the security sensitivity of their various applications and focus on those applications with a low security sensitivity. Once the security sensitivity is identified, the cloud solution provider provides meaningful information regarding its security procedures and precautions, and the customer provides meaningful information regarding its present security procedures and precautions, customers will often find that the cloud solution provides more rigorous security than is required for the specific application and more rigorous security than the customer currently has in place.  
  • Legal Requirements. Do not overlook legal requirements that apply to customer data and applications. Cloud solution providers should be up-front about whether they have a solution that meets a customer’s unique legal issues. For example, if a customer will use a cloud solution to process personally identifiable protected health information, and the cloud solution provider is unable to sign an appropriate business associate agreement, that fact should be identified early in the engagement.
  • Data Access. With an in-house solution, customers often take the ability to access its data any time of day or night for granted. Cloud solution providers should clearly identify their service levels to allow the customer to match their needs with your solution.
  • Reliability. Many customers find comfort, and the perception of reliability, from a dedicated group of employees and in-house hardware to operate their software applications. However, cloud application providers often have the ability to spread the cost of redundant systems, multiple warm failover locations, and high availability servers over its entire user base. With a clearly articulated response to the “reliability” question, many customers will find that the cloud solution provides greater reliability than they currently enjoy.  

Cloud solution providers that are able to provide cloud-favorable answers to these questions will have a greater likelihood of acquiring new customers. And, forthright cloud-unfavorable answers may avoid the cost, expense and potential litigation that could result from having a customer that is not a good fit for the cloud application.