Enterprise cloud apps uptake is overstated: Software AG

Will the majority of enterprise apps reside in the cloud in the next few years? It's unlikely, according to the enterprise management software company's senior vice president of market strategy, Matt Durham.
Written by Spandas Lui, Contributor

The idea that the majority of enterprise apps will be sourced from the cloud in the near future is unrealistic because of the importance of maintaining legacy apps, according to Software AG senior vice president of market strategy, Matt Durham.

Speaking at the Gartner Application Architecture, Development, and Integration Summit 2013 panel discussion in Sydney, he acknowledged that cloud services are becoming extremely popular as companies look for ways to reduce operational expenditure. However, there are a lot of legacy issues that businesses have to consider.

"Cloud is compelling, but the reality is something like 70 percent of typical organisations' IT spend is focused on existing operations," Durham said. "Software AG started as a mainframe database vendor, and we still have a very healthy business there — lots of big banks' trading platforms run on mainframe systems, and that's not going anywhere anytime soon, or at least much of it isn't.

"While I absolutely believe cloud is a highly disruptive force and there's a huge amount opportunity, I think this [cloud trend] is overstated."

Companies may be dealing with a huge amount of legacy, but it's not necessarily a bad thing, he said.

"It's stuff that works, and, frankly, if it doesn't need to be leveraged differently, then why change them?" Durham said. "If you have a big honking client server app that's does what it's supposed to do, I don't think it's required to move that to a cloud architecture to leverage services there."

HP enterprise services architect, Vijay Seetharaman, who was also on the panel, has more faith in seeing enterprise apps go into the cloud. Seetharaman believes the hybrid cloud model will become increasingly prevalent to accommodate for legacy applications.

"While it's going to be difficult to transform existing applications into the cloud, I do believe by 2016, the state of IT will be in a converged or hybrid model, and legacy apps will remain as they are," he said. "Most of the applications that don't fit in that legacy category is probably going to be some sort of cloud model."

Future top enterprise apps: Vendor lineup

Currently, IBM, Microsoft, and Oracle are the top players in the enterprise apps space, but Seetharaman sees this changing in the future.

"I think Google will be up there," he said.

Durham disagreed with this view, as the scale of incumbent top vendors is hard to compete with.

"Let's do a reality check: HP is a US$120 billion company the last time I checked, and its enterprise software business is around US$20 billion — that's a lot of money, and it's not even on the list," he said.

IBM, Microsoft, and Oracle, collectively, have made hundreds of billions of dollars in the enterprise apps space.

"That's a gigantic amount of revenue," Durham said. "Now, Google is a huge and exciting company with a lot of revenue, but not a lot of revenue in the enterprise space."

It will take a lot of time and effort for the likes of Google and Salesforce.com to match the revenue of the big guys, he said.

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