June 22nd, 2009
Vendors being pushed into cloud, kicking and screaming?
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.
Joe McKendrick is an author and consultant with deep knowledge and insights regarding trends and developments in the technology industry. See his full profile and disclosure of his industry affiliations.
Subscribe to Service Oriented via Email alerts or RSS.
