When you have an in-house solution, like Lotus or Sharepoint, it doesn’t just stop working. You will spend millions of dollars on upgrades, licenses, and support, but to be fair, it won’t just stop working.

Even before your cloud-based tools stop working, though, they might stop meeting your needs without app purchases that balloon way above your initial budget. This, simply, is the unintended consequence of the world of apps in the cloud. And when you hit the wall, you start doing some serious soul searching. Thinking back to the more than 20,000 people “attending” CloudForce NYC yesterday (in person or online), this is more relevant than ever.

A story

About five years ago there was this thing called Google Page Creator. It was a ridiculously rudimentary form of Google Sites (which itself is pretty basic). The catch, though, was that because Google Apps was one of the first web-based collaboration tools, Pages was a big deal – it let you create and store content in a way that basically no other service offered, and it was free. Combined, it meant a lot of people with small budgets started creating and sharing content. The public school in the south Bronx that I was working at in 2005 decided it would be a great idea to start sharing our assessments and lesson plans on Pages. You know it was easy to use if more folks knew how to access Pages than they did their DOE email.

Then, about three years later, Google decided to shut down Pages because Sites was much better. In the ecosystem of a beefed up Docs, Wave (oops), Buzz, and Sites, Pages was old school. This was fine, because Google made it relatively easy for everyone who had a Page to move it over to Sites. Yet, the decision is indicative of a larger trend – when you’re not in control of the ‘what’ in the updates (think of the online ranting every time there’s a new update on Facebook), something you thought was a ‘must have’ can just vanish and it’s not just your tools that take the hit – but your strategy too.

From basic to premium

If your strategy is to use simple cloud-based applications to meet basic collaboration needs, then you can fall prey to an unsuspecting twist of fate. Soon enough, you face the inevitability that your own success in garnering high adoption and user satisfaction will lead you to tap out the value from your free tools. Your clients will start asking for more once their basic needs are met.

Many SAAS (cloud) providers offer some form of their product for free or almost no cost per user at the outset. Plus, adding in an extension or two won’t dramatically increase most organization’s line item for technology. The “app marketplace” is basically a quid pro quo now. This is why they make the big bucks. The freemium model is perfect for small organizations that don’t need a lot of horsepower from their tools, but it stops right at the point when your now huge base of users start getting more sophisticated with their use cases and needs.

Furthermore, cost comparisons almost always land in favor of the Cloud. In fact, a study of app-based costs vs traditional IT showed that the App model was in almost every circumstance less expensive than the equivalent traditional IT one. Even with app extensions, it makes it that much easier to convince your leadership team to take the cloud approach right? Wrong.

The double edge sword of low-cost tools

First, your IT team likely has projects on the books for 2-3 years out that impact lots of teams and users. Making the case that “apps are less expensive than traditional IT” assumes that “traditional IT” just goes away. It won’t and all of a sudden your proposition begins to sound really expensive compared to “in house” because it is in addition to what was/is already planned.

Second, despite the fact that you’ve gotten people incredibly excited about something that delivers a lot of value, at some point they’ll start asking for more, and you’re caught between a rock and a hard place (they do exist, even in the Cloud). Do you say “sorry, our apps don’t do that” or do you try to spend more time and energy creating a less-than ideal workaround? Probably the latter because you want to deliver results and continue to make people happy. In the end, though, you’ll need to ask a few really tough questions:

• are the outstanding needs vital to business improvement? Can I say no and not alienate clients?
• if the needs are vital, what are the costs (both literal and human) of having to switch everyone over to something else, even if it’s “in their best interest”?
• is there a third, mash-up, option that leaves everyone happy?

A question of leadership

For each of the questions above, the answer has more to do with leadership than it does with funds available. While not-trivial, the cost of a subscription license to even one of the bigger KM systems will hover around $30/person per year. That’s less than a fraction your company spends on your blackberry that you don’t use. If it’s not cost, then the issue really comes to who is making the KM decisions at your organization, and what are its goals and vision.

We’re working to answer this very question ourselves right now. Here is how we’re thinking about it:

• How do we collect and use data across the organization, and what are the overlapping needs? What systems do we have in place to collect and analyze that data? These data-heavy questions help drive the questions because we accept that our knowledge is only as good as our data structure and quality. You can’t make informed decisions based on bad data.
• What are the related information needs to make the most of the data and data systems that we have? What are the needs to share the knowledge that surrounds the data? While we try to think tool agnostic at this stage, we have to be asking ourselves what tools offer compatibility across our data systems and our people systems. To give you an example here, take something like Box that connects across CRMs, social networking, and content management systems. While we haven’t made any decisions, something like that is increasingly necessary.
• What are people already using, and what is the cost – literally and operationally – of switching? Nearly the whole organization is using Google Apps in some way, but the question is are they doing so in the absence of something better, or because it is actually meeting their needs. And if it is meeting their needs, to what extent is it doing so and can it continue to do so as our data becomes even more integrated and nuanced?