Vendors being pushed into cloud, kicking and screaming?

Vendors being pushed into cloud, kicking and screaming?

Summary: Lately, if you have listened to the pronouncements of vendors large and small, they all are enthusiastically embracing cloud computing as the next wave of software and service delivery.However, the Wall Street Journal's Ben Worthen and Justin Scheck have a different take on all this happy cloud talk.

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Lately, if you have listened to the pronouncements of vendors large and small, they all are enthusiastically embracing cloud computing as the next wave of software and service delivery.

However, the Wall Street Journal's Ben Worthen and Justin Scheck have a different take on all this happy cloud talk. The way they see it, the recent economic slump and tighter IT budgets have pushed many vendors into the cloud world, kicking and screaming.  Oracle, HP, IBM, Microsoft, and SAP all run the risk of seeing business move into a lower-margin space, with a longer timeframe to see revenues, they write.

HP Software Chief Tom Hogan even offers an eye-opening comment, admitting to WSJ that the move from traditional to cloud software is "highly disruptive," and that "shareholders don't like it, and it's a real conflict between business strategy and fiduciary duty."

WSJ says vendors are reluctantly being forced into the cloud world, and offers this more sobering assessment for vendors looking at the cloud space:

"Fully embracing online software is risky for big technology vendors. 'My bet is that these large incumbents are going to be unable to cross this bridge,' says Bruce Cleveland, a venture capitalist at InterWest Partners who previously ran the online software business for Siebel Systems. 'They will not be able to transform their business models.' ... The big software makers are just getting their feet wet in online software, analysts say. But the more online software these large companies sell the more likely they are to hurt their profit margins."

Noteworthy: Worthen and Scheck don't use the word 'cloud' anywhere in the article, prefering 'online software.' Also, they put things in perspective: IDC says online software will account for just $9.5 billion of the $284 billion software businesses this year, but is growing more than 40% a year compared with 3.4% for software overall.

There have been similar worries about the open-source model in recent years. And the same fears gripped the industry 20-odd years ago as enterprises moved to cheaper PC-based software for many things. Some companies survived and thrived through the disruption, others fell by the wayside, new ones sprung up.

Topics: Software, CXO, IT Employment

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  • The problem is...

    Being dragged and forced into a new technology will ultimately lead to massive reforms later.
    You will see a few Fortune 500 companies lose control of their data and sue the stuffing out of the cloud vendor. All of a sudden client data ownership and security will get fixed but to late for some of the smaller companies that didn't have the legal edge as the Fortune 500 companies. There won't be any standards set until the market place has shaken all of the little players out. This means consumer choice will be extremely narrow.

    Few industry leaders fully understand the cost/benefit analysis with cloud computing. The legal, economic, and social aspects of the technology have not been confronted by large numbers of consumers yet and this means the consumers will have to bear the full brunt of the market adjustments.

    Few people understand where computing in the cloud makes sense and were it doesn't. Which means a lot of mistakes will occur that don't need to occur and cloud computing in general runs the risk of being branded as the next biggest flop.

    For example:
    A small company might save a little bit of money by only hiring 1-5 people to do IT. These people would manage the Cloud Vendors and support a small data storage and back up strategy. E-mail, office software, and communications could be handled by the Cloud and the companies private information could be served and stored on a local system that has a good back up strategy. You would see some savings but you can't just get rid of your entire IT infrastructure with out some real bullet proof contracts, and technology.

    Many small businesses will try to follow the giants on to the Cloud and ultimately realize to late they needed to keep some of their proprietary data off the Cloud.

    Again Cloud technology can be used to improve business but a real understanding of what it can do and what it can not do is important for decision makers to understand.

    So far I don't see any real understanding. I haven't seen any real change in the Cloud Vendors product offerings either. They still have horrible TOS and EULAs. They provide limited support and liability. Basically they are just sitting back, offering the least amount of service for the maximum price and waiting for the suckers to come on in and buy.

    P.T. Barnum claimed there was a sucker born every minute. He was right and cloud computing is in danger of looking like a sucker bet.
    mr1972
  • RE: Vendors being pushed into cloud, kicking and screaming?

    The Journal article hits the nail on the head but misses a key differentiator for vendors: how to avoid the Google Docs issue of privacy / security.

    The big security show this year (RSA) talked a LOT about this issue and everyone I talked to hit security as the big show stopper here. Web application security was a high point - vendors from all over the world where hitting on this - from Art of Defence to F5 to Avira to .... you name it.
    WAF Enthusiast