Your new cloud boss? Your old software boss

Summary:Traditional enterprise software vendors are bundling---and in some cases mandating---that licenses are attached to their cloud offerings. Welcome to the new software and services model with the same old lock-in.

Cloud computing may become a case of having a new boss that's the same as the old one. And that reality is starting to become increasingly clear as technology buyers and CXOs start negotiating software and cloud deals.

Here's a tale from one CIO's dealings with Oracle, cloud providers and how lock-in and licensing fit into the equation. The key moving parts go like this:

  • The company was looking for new HCM system. 
  • The company is primarily an Oracle shop for ERP and financials. 
  • However, the aim was to use more cloud resources and be more nimble. 
  • Workday and Oracle Fusion HCM were evaluated as the company eyed a move off of PeopleSoft. 
  • In this CIO's view, Oracle HCM has come a long way and closed key gaps. 
  • Workday was lacking two must have processes for the company. 
  • Oracle had those processes and integrated tightly with Oracle Financials. 
  • A cloud deployment was preferred.
  • The path of least resistance was to use Oracle's cloud. 

This CIO noted a few key wrinkles as she shopped around with legacy providers and their cloud services. For instance, Oracle mandated that its cloud be used if the company were to keep her HCM license.

The company decided to remain on the Oracle stack---including the cloud---because it had already invested tens of millions of dollars in Oracle's software. Integration ease was a bonus, but ultimately the company was a bit stuck. "What were we going to do rip out our Oracle infrastructure?" she said.

In addition, she also looked at using IBM's cloud for ERP. There was a catch there too. IBM required that the company move from Linux to AIX to use its cloud. The CIO shot that down largely because just a few years ago her company moved from AIX to Linux.

These buying cycle moves are clearly driven from the vendor point of view. The big question going forward is whether customers will fight back against the new model (cloud) with the same lock-in.

Add it up and the reality is that the cloud isn't exactly screaming freedom. Lock-in works in the cloud just as well as it does with enterprise software. For good measure, smaller specialty vendors she's dealing with have similar arrangements with cloud lock-in. Sure, this CIO will get significant discounts, but she also realizes her buying choices are limited due to previous tech purchases.

Now the CIO isn't sure that these cloud dealings will continue, but she noted that licenses will ultimately turn into services and established vendors will continue to do well. In five years, it's quite possible that we'll find this so-called cloud revolution was basically more of the same for large enterprises.

Her strategy is to architect the company's IT infrastructure so proprietary applications can hop clouds, say Oracle to Rackspace to Amazon Web Services, but she's limited given her previous technology buying choices.

orclcloudlogo

The aforementioned CIO tale puts some color around Oracle's cloud strategy and the partnerships that have been announced. For Oracle, the strategy is relatively simple. First, Oracle wants to keep its existing customers on its cloud. Tethering licensing and cloud computing is a blunt instrument to make that plan a reality.

Oracle's other move is to partner to make sure it is able to acquire new customers on multiple platforms. Partnerships with Salesforce and Microsoft in addition to an existing deal with Amazon Web Services illustrate how Oracle can sell licenses. After all, you need to tote your licenses along to use cloud services. If Oracle can keep its base as license and cloud customers and acquire a few new ones it's set.

Microsoft is in a similar boat. Any cloud where you use Microsoft software requires a license. Microsoft doesn't care where you go---although I'm sure Azure is preferred by the software giant---the company will garner license revenue. If you're a Microsoft shop there will be plenty of breaks to go with Azure.

Oracle and Microsoft look like they have models that can transition to the cloud, but what will a company like HP do? What is the lock-in mechanism for HP's cloud without applications? Perhaps HP Cloud becomes a preferred venue for SAP. The problem: SAP has been a really strong Amazon Web Services partner.

Existing enterprise software vendors such as Adobe have already made the license to cloud turn, but you'll also see a bevy of cloud partnerships modeled after Oracle's moves. Add it up and it's highly likely that your new cloud boss will be the same as your old software license and maintenance one. The cloud may not be the lock-in cure originally foreseen.

Related:

Topics: Enterprise Software, Cloud, Microsoft, Oracle

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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