Cloud computing and boring innovation
Last Friday, Ben Kepes at CloudAve got a something of a kicking from Dave Turner of CODA [Disclosure: CODA is a current client and is building financial apps on the Force.com platform] and Microsoft's Gary Turner. [I've known Gary more years than both of us would likely admit but Microsoft is not a current client.] Ben takes the religious high road for cloud computing, having a general swipe at the (un-named) incumbent vendors. Dave storms back with:
Come on guys. Do you really think that the big software companies of today have not had to cope with radical technology changes before...
...We aren’t alone. SAP, Microsoft, Oracle have all been around for many years and have survived and thrived as technology and business paradigms (aargh… that overused word!) have changed...
...I’m not saying that adopting SaaS doesn’t represent a challenge and a change of mindset - it certainly does. But just because a couple of ISVs have had hiccups in entering the SaaS world, don’t write off the whole established software industry.
Gary is a little more philosophical:
There's an innate characteristic of the technology industry upon which it has propellled itself down the years; improvement.
This quest for improvement exists, primarily, to serve the needs of the intended user of the tool or product who, presumably, has a business, process or need for improvment in some way.
However, a natural consequence of this endeavour to bring improvement is that some of it gets reflected back into the industry, most commonly witnessed when a once new and groundbreaking product is rendered redundant by its successor.
This in turn provides vendors with great scope for competition and differentiation; these being the key principles of selling. And it's easy to get excited by differentiation in a world which has become, frankly, quite vanilla in the last ten years.
But as David says, this isn't some new dynamic that will render every technology business that's been trading for more than five years obsolete. It IS the software business...
...Passion and enthusiasm for our products/service/companies is great. And some arrogance, ambition and determination are mandatory for success.
But sometimes I sense an unhealthy dogma when I read and hear about some of the coverage and opinions in support of SaaS.
Fighting talk from two different angles but then I read Andy Mulholland's interpretation of how much Amazon's market cap can be attributed to the Kindle and its use of cloud style services:
The stock market apparently understands the ‘iPod’ effect in creating an entire new market funded by device sales for huge amounts of reoccurring high margin service revenue. As a regular book reader and Kindle user I can only agree with the assessment! But it’s not just the device, it’s the always in place link and relationship with Amazon too, they use it to constantly update with text based matters that their great CRM systems says I will like, and they are right.
Spinning back, Ben might have fared better if he'd concentrated on the business model aspect because that's the part that hurts software license based vendors much more than the technology shift. We all know technology is an issue in on-demand computing but if the model is right - as Amazon's market makers think - then things start to look very different. Which brings me to the boring bit.
In the same article, Mulholland also talks about GE's telemetrics business:
The launch was fairly low key, but from this has grown a vast services business based on GE Veriwise division acquiring all the monitoring information from an ever growing fleet of truck/trailer units travelling across North America, and then cutting and dicing the information to be able to reuse it, or resell it to a wide range of transport operators. Once again the key is that the customers pay for the equipping of their trucks with Veriwise so market entry and creation is directly funded by customers...
...Once again this is an always connected system, this time by satellite as far as the sensors are concerned, though the other way round information can be passed back to the driver by wireless.
It's a bit of a stretch to argue the second example as one that fully embraces cloud computing (and please let's not go down that rat hole) but the principle of owning data that can be used in multiple ways holds just as good for this seemingly boring technology (it's used in transportation and logistics) as it does for the much more sexy 'cloud.' Let's put it this way, it's not too boring for the ever cost conscious Wal-Mart.
As I've argued in the past, on-demand, cloud enabled software could - and I say could - go down to ZERO in direct use cost to the end user. The data that's harvested, especially by the multi-tenant purists, is way more valuable. So why is that we don't see the enterprise players in the on-demand space diving in with both feet? I hear the reasons given but they ring hollow in the face of the mounting evidence.