Apple data center investments have got my chattering classmates excited. And so it should. Larry Dignan's speculation about what really lies beneath is an opening gambit to what could be a much bigger play in the enterprise. But who, if anyone, will jump first and why?
Let's set the scene. The Apple AppStore model has proven incredibly popular. Half a million apps and 10 billion downloads represent eye popping numbers. Despite the fact many of the apps you find are...err...useless, Apple managed to earn $743 million in the last quarter from this source. Pundits reckon that will rise 30% in the coming year. But that only scratches the surface. If you take the six month numbers, double up and add for growth then an annual figure of $3.5 billion could be in the ballpark. What is not clear to me however is whether those numbers represent the gross revenue that AppStore generates or net sales for which Apple can take credit as its 30% commission. Let's stick with the smaller numbers and turn to the possible runners and riders.
IBM - Sure, IBM runs mega data centers - for premium paying customers. IBM's stated course is to continue down the services path. But if you take the Apple AppStore model and apply it to the enterprise then where to for all those consultants busy customizing everything to within an inch of existence? Many will remain busy for years to come but I can imagine a day when many will not.
Accenture - Again, they run data centers and again, if you've got the money they'll manage the whole kit and kaboodle for you. They also build apps. But can they figure out a way of not just flogging endless consulting for yet more customizations but productizing functionality and throw it over the appstore wall? That would require a wholesale change in business model but the potential rewards must look attractive to a company that already counts Salesforce.com as a strategic partner.
Microsoft - Investing in data center technology like crazy, mentioning Azure at every opportunity but seemingly unable to fully comprehend what it means to deliver applications as service. On the other hand it has a vast army of third party developers who I'm sure would love the opportunity to reach a global audience. Microsoft is building the skeleton, it has the foot soldiers but does it see the opportunity beyond Office 365?
Oracle - Who can possibly fathom what goes on in Oracle's mind? We know it's into private clouds but that only scratches the surface. Fusion must represent the longest pregnancy in applications history yet still the company wont put it out on general release. My spies tell me the company is secretly afraid that Fusion will only be desirable as a SaaS offering with all the risks of cannibalization that implies and difficulties in finding an appealing price point. But - Oracle has a secret weapon that could make Fusion a runaway success. It now has the ability to template and replicate instances of functionality. That means faster time to value, endless configurations and goodbye to consultants spending years on implementation. Does Oracle realise the potential that brings to beleaguered customers and fresh prospects? More to the point, will Oracle open the kimono enough to provide developers with the incentive to develop their own solutions for sale in an AppStore kind of way? Again, they have an army of developers who would benefit. It has data center experience but most of that seems to relate to government bunkers.
SAP - Who can forget SAP in this discussion? Now rueing the day it sold its data center facilities, the company is kicking its heels as it waits for contract restrictions to time out. It has some of the applications in beta already. 40 are in active development, I've seen about 100 of one kind or another. Consultants are banging on the door to work with the Sybase Unwired Platform but so far no publicly stated commitment to building out super efficient, massively scalable data centers. Instead, the company seems content to wring millions out of initial customers rather than throw resources at building a truly scalable platform with the prize that could represent.
Salesforce.com - It's already there with some 200,000 apps and developers increasingly using the Force.com platform. But it is slow going and the company cannot set the trend by itself. Even so, it is showing the rest of us that building apps in an AppStore kind of way is possible.
What's stopping them?
This is the kind of thing that even my skeptical old chum Vinnie Mirchandani might welcome as something worthy of the label 'innovation.' In this fantasy play, everyone's a winner and especially customers. But only if it is done right combined with new thinking.
Many of the pieces of this puzzle are not in place with each vendor facing its own challenges. How for example can a vendor make it as easy as possible for developers to build apps for a particular platform? I know of moves afoot in the iOS world to make that happen but nothing has yet been said publicly. (Watch this space.) What APIs will vendors provide? Even Salesforce.com doesn't have this whole nut cracked.
We're not even close to seeing a model solution but the potential prize must be tempting some. Who would not give their right arm for a slice of the Apple pie as applied to the enterprise space? How big could those numbers get? I've done some back of fag packet calculations and reckon there is every possibility that in the SAP space alone, we could be looking at numbers in the $24-60 billion range. Even reckoning on a 90% BS factor leaves numbers any CEO would love to share in. But who really 'gets it?'
The oft touted notion that SaaS/cloud cannibalizes the enterprise vendors is less true today. Sure, there are risks but the prospect of selling small pieces of functionality must surely be tempting. I can't count the number of developers would would like nothing more than to appear on an Oracle or SAP price list at few bucks a pop. It's do-able but the will to make it happen rests with the vendors who have yet to come to terms with low cost high volume sales and complex product management.
Amazon is emerging as the de facto 'test and build' low cost arms dealer. Its problems with Oracle will be ironed out. As it gains experience you can expect it will attempt to bring apps from other vendors to a wider audience. Right now it is very much baby steps with many questions up in the air.
Apple doesn't really like enterprise - or so many commentators would have you believe. And of course they have that all powerful final decision making capability that means you're either in or out. But if Apple could figure out how to properly support the enterprise then there are some very rich pickings to be had.
HP should not be forgotten. If Larry Dignan's speculation is half right, they could turn out to be a powerful force as either hardware arms dealer or operational player. If they so choose and have the vision to turn that success into a repeatable winner and of course assuming they don't get distracted by webOS and their own tablet ambitions. Dell has its own play but is it willing to move into this business in a big way? Oracle only really fits if you believe the world centers around...Oracle. But they have their own opportunities as mentioned above. And then there are the new generation of super efficient server builders that no-one's really heard about. SeaMicro springs to mind.
In all of this we should not forget that openness can act as a powerful gravitational pull. That's proved in Google's recent rise in the appstore world. As one developer told me, being able to see inside the OS is a real help, even if changes across releases is proving a pain in the butt. But then does Google's apparent mis-step in allegedly violating Oracle's IP means we all end up paying an Oracle tax? How many would be willing to do so?
But what do you think? Does the prospect of having hundreds or thousands of enterprise apps you can tap for any platform and at low cost sound appealing? What big pieces of the puzzle have yet to be solved? Does Apple hold too may of the winning cards for this to make sense or will enterprise pressure prevail? Or do none of the technical and legal problems matter? Has Apple simply shown us the way towards easily consumable apps and now the enterprise vendors have little choice but to follow?
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