Software as a Service

Amazon EC2, cloud computing and the enterprise

Amazon’s Elastic Cloud Computing (EC2) is gaining some traction as the framework for software vendors to offer software-as-a-service (SaaS). This is no surprise given that the value of cloud computing is most easily demonstrated for large-scale applications that could be highly variable in their requirements.

Amazon is also more of a “true cloud,” in that it offers greater flexibility and elasticity and imposes no major restrictions on applications (an x86 image is required). SaaS is also likely an early market for cloud computing because by nature it is incremental to current IT plans.

For cloud computing to be successful, though, it will have to move outside of these simple sideline and overflow missions and take on more mainstream applications. We believe that this can happen only by having enterprises adopt private cloud architectures for their own data centers, which would facilitate integration of public cloud resources.

SaaS could be 2009 capex avoidance plan

Many are expecting that companies will turn to cloud computing to avoid capex in 2009, and there are certainly indicators that would suggest that at least some are doing just that. Past history and buyer research. however, shows that companies often stand pat on older strategies during a downturn and change only when things get a bit better again.

In past declines, companies have not switched technologies as fast as in good times, even to apply cost savings. The reason is that they’re afraid of disrupting operations when they need all the sales and profit they can get. We expect that cloud computing might do extremely well in 2009 relative to current levels, but not explode as some expect.

In 2010, we could see a considerable ramp in cloud computing use. Software as a service (SaaS), on the other hand, appears likely to have a noticeable surge in sales in 2009 as companies turn to the model to avoid short-term application investments and expansions in IT due to new software needs.

IBM expands cloud computing offerings

IBM is expanding its cloud computing offerings, responding in part to the realization that during tough economic times, many companies will trade service expense for capital expense, particularly when credit is difficult.

We believe that SaaS and cloud computing could be a big winner in the IT shift that is likely to occur in 2009, and IBM and others will surely be positioning to take advantage of the shift. For IBM, cloud computing is a critical hedge since it would likely suffer if buyers were to slow capital programs.

Google Chrome: Sign of browsers to come?

Google’s Chrome browser may be a harbinger of changes to browsers brought about by SaaS applications and online services. As script-based tools and plugins become more important, browsers are beginning to address the performance of applications run within them as differentiators. This reflects a general trend toward integration of IT and networking, and a specific goal of both portal and software players to offer applications all or partly based on online software loaded into a browser. There will be major upgrades to other browsers this fall to improve application performance, so it is not clear that Google’s trend-setting will benefit it for long.

Microsoft to launch collaboration software partner plan

Microsoft is launching its new online flagship service concept in what it calls the “Deskless Worker.” The new suite is designed for the entry-level Exchange and Sharepoint candidates who often don’t use Microsoft at all because of the cost and complexity of running their own versions of the server software.

Microsoft is working to promote a revenue-sharing scheme with partners that will then benefit from the revenue stream in the same way they’d have profited from selling the server software. This latter piece is a critical component of the idea, since it rectifies one of the challenges Microsoft has faced in promoting SaaS versions of traditional server applications.

This launch jumps the gun on Cisco and other rumored entrants into the online collaborative service space, and it likely indicates a competitive collision in this area at the end of this year and ranging through 2009.

Software-driven network services — lots of talk

Network operators at a UK software event talked about more aggressive plans to focus on software-driven network services and features, and included goals of delivering software modules as elements or units of basic service functionality. This vision mirrors what we have heard in private dialogs and public presentations alike, beginning almost 18 months ago, but there are more public articulations of the view today than there have been in the past. Some operators are reportedly avid supporters of Web 2.0 (BT included) and others (like Telstra) are more skeptical. We believe that despite all of the talk here, there is actually relatively little real progress in transforming operator business models to a more software-driven, partner-developer-focused, form.