Cloud Computing Blogosphere Takes Enterprise Software out of Context

Dennis Byron

I recently finished up some research on "Business Process Management (BPM) in the Cloud," a synopsis of which appears on ebizQ at the adjacent link. As a result, my little Google alert keeps raining cloud-computing-related articles on me. The confusion between technology, business model and implementation choices when it comes to cloud computing must be causing IT staffs and managers fits because I have yet to find anyone on the net that clearly points out the differences. Everyone has an agenda. Not surprisingly then, there is an agenda-driven investment-community-led movement to try to make a distinction between cloud vendors and enterprise software vendors (there is none - see more detail below). It's important to get a handle on the differences and similarities with your current business practices as you prepare your 2010 budgets.


This June 29 blog post, titled "Evolve or Perish: Cloud Computing and Enterprise Software," is just one example of the loose mixing of definitions and vendor types that contributes to the confusion. It asks what you will do


"if at some not-to-distant point in the future-perhaps 5, 10 or 15 years-most systems in large enterprises are delivered from the cloud?"


(From the context of the blog post, "systems" means "enterprise software.")


The question is asked of enterprise software suppliers rather than IT folks. But let's turn it around and give you a chance to answer it.


If you are a small or midsized enterprise in a services industry such as banking or health care delivery, your answer will be that you will do nothing. You already receive your key applications via the cloud, although you think of it as a service bureau or application service provider or as software as a service (SaaS), depending on what generation you come from. In this case, the cloud is a business model.


If you participate primarily in the product supply chain as a manufacturer, distributor or retailer - no matter what your company's size - you are more likely to use on-premise software. But that trend is changing at about the same rate as the trend to outsource the manufacturing and/or warehousing of the goods in your chain. In other words, your position on enterprise software in the cloud is a cultural/implementation thing driven by industry. Already, you are most likely doing all your purchasing in the cloud.


If you are a larger enterprise, on premise is more prevalent because of historic economies of scale that relate to telecommunications infrastructure issues. You have nothing fundamentally philosophical against the cloud. Your move to cloud computing will be driven by the technology of cloud computing, including advances in virtualization. Most likely you have already moved your payroll to the cloud.


As an example of how many blogs with an agenda play loose with data, the author of this blog post offers long-time on-premise and SaaS ERP providers Compiere and NetSuite suppliers as examples of the new "cloud" paradigm, even though they have been around for more than a decade and have or still do offer software for on-premise installation. They are in no way dramatically different from SAP and Oracle. The blogger's analysis avoids the sticky fact that Oracle is already delivering more CRM, ERP and other applications "OnDemand" (its term for all these business model buzzwords) than any so-called cloud supplier mentioned in the blog except Salesforce.


In fact, as measured by revenue, Oracle may already be delivering more applications via SaaS than all the other suppliers listed under Cloud in the Evolve or Perish blog post combined, except Salesforce. Similarly, Microsoft is surely already delivering more Office/collaboration software via the cloud than the two companies listed in this blog post, and probably more than all other software suppliers of any type combined. Despite what the cloud computing folks with an agenda tell you, when you are ready for the cloud, your enterprise software supplier will be there. It is most likely there already.

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Jul 8, 2009 11:25 AM Peter Wall Peter Wall  says:

Isn't the term "Cloud Computing" just an euphimism for that other term that we used to hear so often in the past but now seems to have disappeared from the ever-evolving lexicon of IT: "Utility Computing!"

When the hardware/Software/Firmware/Middleware/Anyware companies provide the cloud, they have effectively improved their own revenue streams at the expense of "service only" organizations. First it will be small businesses that use "service bureau" -like facilties, but then it will progress to ever larger firms with their own in-house systems and applications. Once the market is "captive", where do you think price for service will be headed?

Jul 10, 2009 7:45 AM Antoine Rizk Antoine Rizk  says:

The size of the enterprise matters when choosing cloud computing, but I do not think this corresponds to the pattern described in the article.

In fact, outsourcing IT seems to have long been exclusive to large enterprises. In the coming years, I wouldn't be surprised to see the market for SaaS/cloud to be driven mainly by large and very large enterprises, as the transition from IT outsourcing to cloud computing is quite easy. And the current economic crisis will accelerate this process, as cloud-based applications require less initial investment.

As for judging the cloud readiness of an enterprise, I believe a judgment can only be made relative to the nature of the enterprise's application. The more the application forms a strategic part of the core business of the enterprise, the less likely it is a candidate for the cloud, no matter how large the enterprise is.

Antoine Rizk

VP, B2B Program, Product and Solutions Marketing



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