Industry Insights: 5 Types of Buyers in Cloud Selling

The earliest known use of the term ‘Cloud’ to refer to off-premise computing and storage took place in a 1996 Compaq business plan. The document pretty much foresaw many of the things that would eventually make up early iterations of the Cloud.

It accurately predicted how enterprise software would be replaced by web-based services and that users would access applications through the Internet, not on local machines—exactly a full decade before the official launch of AWS.

Cloud Buyer 2.0

Now, over 20 years on, as the Cloud transitions into what many folks in the industry consider as ‘Cloud 2.0’, it resembles very little of what it looked like even just a few short years ago.

The Cloud used to be all about agility, scalability, efficiency, and cost savings. Originally implemented in stand-alone, low-risk business areas (such as web hosting, development testing, CRM, etc.), the Cloud has now become a key component in almost every business IT portfolio. Today’s cloud architectures are smarter, dynamic, and (more importantly) business-critical.

Alongside these sweeping changes, cloud customers have evolved, too. As I-CIO observes, modern cloud buyers look at cloud technologies not only as cost-saving measures but as part of their core business and overall strategy.

This refocus has created a more diverse ecosystem of cloud buyers, with different customers having their own expectations and requirements. Businesses’ IT buying needs are maturing, and this change is reflected in the things buyers take into account when evaluating cloud providers and services:

Does the application help the buyer become a leading supplier and serve their customers better?
Does the time it take to modify an existing application remain within business timelines?
What are the costs of switching into and out of a cloud service?
How does the vendor guarantee security and compliance?
What is the level of interoperability and compatibility with other cloud services?

The Different Cloud Buyer Types You Need to Know

To be more effective at reaching their target audience, marketers clearly need to become firmly acquainted with the different buyer groups that make up today’s B2B cloud market. Let’s dig into the findings of two recently published studies on cloud buyer types to help us get to know potential cloud customers better.

Last year, Bane & Co. released a research brief ‘The Changing Faces of the Cloud’ which tracked the evolution of enterprise cloud buyers since the late aughts up to the onset of Cloud 2.0. The study identifies several distinct types of buyers and explains many of their defining characteristics.

In a similar line of inquiry, ISG’s ‘Provider Lens Archetype Report 2017’ drills down on the different buyer “archetypes” that influence public cloud purchase decisions. The report draws a lot of interesting insight on each group and outlines what customers expect and demand from vendors.

While the two studies group B2B cloud customers a bit differently, the underlying qualities neatly align into five key buyer profiles:

1. Transformational

Transformational buyers consist of early adopters already heavily dependent on the Cloud. Performance and scalability top their list of factors for buying cloud services, and they tend to deemphasize cost savings as a purchase driver. Most transformational buyers look for innovative cloud services and work with vendors that offer best-in-class support.

According to the Bane & Co. brief, transformational buyers already had around 40% of their IT environments running on at least one cloud service in 2011. By 2015, this number was close to 70%.

But as a source of current cloud demand, transformational buyers no longer lead the market. In 2017, they account for 26% of the demand for cloud services, versus 47% in 2011.

Actionable Tip: Transformational buyers resemble ISG’s “next-gen buyers”. To tailor your marketing messages according to what next-gen buyers require, keep in mind that these buyers:

Follow a “cloud-first” approach (meaning they’re not weighed down by legacy system requirements)
Focus on “born-in-the-cloud” applications
Consider IT as a “change agent” (IT is a revenue and growth driver)

2. Heterogeneous

These buyers are also starting to move some of their workloads to the Cloud, but are keeping their migration at a slower pace because of the complexity of their current IT systems and their future IT needs.

As a result, heterogeneous cloud buyers maintain an entire mix of public and private cloud components in their IT portfolio. It’s typical for heterogeneous buyers to distribute their workloads across various SaaS, IaaS, and PaaS providers while keeping some of it on-premise.

Actionable Tip: ISG points out that this type of cloud buyer generally takes a long-term strategic view about their IT capabilities and requirements. Heterogeneous buyers tend to:

Already have plans and timelines to migrate a bigger portion of their IT workloads to the Cloud
Use the strategic value of cloud investment to justify their decisions
Choose a given cloud solution based on its workload-specific advantage

3. Security-Conscious

These buyers look to become public cloud users but are holding back due to a whole host of factors, mainly industry regulations, privacy laws, and security requirements.

As a result, security-conscious cloud buyers tend to have the bulk of their cloud applications running on private cloud environments. They prefer to work with vendors that offer secure, dedicated cloud platforms.

Bane & Co. estimates that security-conscious cloud customers make up around 20% of the market, while cloud spending represents 26% of their IT budget.

Actionable Tip: While security-conscious buyers naturally gravitate toward private cloud providers, recent trends indicate they’re also increasingly becoming avid users of public cloud services, especially as public cloud vendors are now better able to comply with security standards. Reaching out to security-conscious cloud buyers means you need to:

Help them carry out due diligence (which is mandatory in some industries)
Be transparent about technical security measures (network, servers, platform, databases, etc.)
Demonstrate compliance with industry-specific requirements (HIPAA, PCI-DS, GDPR, etc.)

4. Price-Conscious

Price-conscious buyers base their cloud investment choices chiefly on cost-savings. ISG describes this customer group as “pragmatic” cloud buyers whose number-one goal typically revolves around the practical use of cloud resources to make their workloads more agile, flexible, and cost-efficient.

In their research brief, Bane & Co. argues that a price war in the cloud market has little impact on changing the attitudes of most customers toward the Cloud since price-sensitive buyers make up a relatively small percentage of the market. The price-conscious segment represents only 14% of cloud spending and around 13% of the customer base.

Actionable Tip: One reason why most cloud customers aren’t purely price-conscious is that the majority of buyers want cost-neutral solutions that offer business flexibility and responsiveness. Still, price and costs do factor in any customer’s purchase decision, so it pays to focus on ways to:

Understand both short-term (pricing) and long-term (total cost of ownership, TCO) considerations
Ensure apples-to-apples comparison of alternatives via standard benchmarks (e.g., labor and utilization efficiency for public vs. private cloud options)
Offer different service bundles at multiple price points (e.g., providing limited trial versions to attract entry-level customers and then advance through a multi-tier delivery model)

5. Slow-and-Steady

Slow-and-steady (also known as traditional) customers have yet to migrate the bulk of their IT environments to the Cloud. This hesitation stems from a number of reasons including regulation, compliance, security issues, or organizational inertia. As such, this buyer’s IT portfolio consists primarily of mainframe and legacy systems.

Bane & Co. believes that slow-and-steady buyers have the potential to become the largest customer segment in the cloud market. In 2011, they only had 1% of their workloads running on the Cloud. In 2016, it grew to 16% and, by 2018, it’s projected to reach 30%.

Actionable Tip: While slow-and-steady customers have yet to accept the Cloud as something that’s critical to its current needs, this buyer group remains open to learning and exploring how the Cloud concretely benefits their IT and business processes. Slow-and-steady buyers tend to:

Be risk-averse and carry out cloud migration in a piecemeal fashion

Remain with an existing provider but can switch to new vendors if there’s a business case for doing so
Choose mostly private cloud architectures, but are also adopting public cloud services

Related: Analysis: The Information Gathering Process of B2B Buyers

Data Summary: 5 Types of Cloud Customers

	% of companies	% of IT in the cloud	Cloud spending
Transformational	11%	69%	$24B
Heterogeneous	12%	36%	$13B
Security-Conscious	21%	37%	$24B
Price-Conscious	13%	31%	$12B
Slow-and-Steady	43%	16%	$18B

The Takeaway: As both cloud services and customers continue evolving, vendors need to focus on a number of key marketing capabilities to ensure they remain relevant among their target buyers. It’s important that providers clearly identify the right customer segments for their services. As we’ve seen, different buyer types have vastly different expectations and requirements. So, it’s crucial to develop value propositions that speak to each unique group.