Friday, October 31, 2008
Next week will be an important one in deciding our collective future. The impact of our choices next week on businesses will be fundamental. The Economist described that "the current economic malaise will increase the pressure on companies to become more efficient. More has to be done with less...it will also profoundly change the way people work".
The election? No-- Dreamforce, of course! The run up of announcements from Amazon, Rackspace, and now Microsoft; as well as the recent explosion of press and analyst coverage (including a 14 page article in the print version of the Economist ) have more than whet the appetite for the main event. Dreamforce, a celebration of success of the on-demand model and a foreshadowing of the future of SaaS, PaaS, Cloud Computing, is arguably the premier industry event (and the Foo Fighters are playing).
They say that the necessity is the mother of invention. So with an economy in turmoil and technology more important to businesses than ever, the prerequisites have been met. There is growing sense across leaders in the industry that traditional enterprise software is the new mainframe - a legacy that must be overcome or minimally partitioned off. In Microsoft's own announcements, Ray Ozzie passionately described, "Its (cloud computing) a transformation of our strategy." He then went on to acknowledge that the fire of innovation was driven by others: "I'd like to tip my hat to Jeff Bezos and Amazon. Across the industry, all of us will stand on their shoulders."
Whether they can become true agents of change, or if Microsoft Azure will suffer the same fate as SAP and Oracle's lackluster cloud computing strategies remains to be seen. Regardless of which outcome you predict (we think Chevron or BP just as likely to lead the green revolution) the fact is that even Microsoft is admitting the game has completely changed.
So now we come to Dreamforce - it's like the season premier for a new age in the industry (think Lost meets 24 plus American Idol) . Salesforce.com has been the pioneer in this space for the last nine years. What will they do next? We'll just say that it will be a combination of high impact innovations - the importance of which will be most appreciated by those already on the journey to the cloud. We also expect a few ripples in time to provide a glimpse of the future. Its fitting that Malcom Gladwell, the author of "Tipping Point" is one of the keynote speakers. Because we are experiencing one right now.
For those who will be there, and those that can't, we have the guide to helping you get the most out of these important moments in the history of enterprise computing - Appirio's own Dreamforce Central. Get the insiders view of whats happening on the ground at the conference - live blogs and insider commentary, twitters , instant pictures from the floor , a crazy server art exhibit , the private event for industry luminaries and much more. Whether you are in San Francisco and want the "backstage pass" or you're remote and looking to get more than just the announcements, this will be your Hitchhikers Guide to Dreamforce .
If you are coming, come see us in one of 20+ sessions Appirio and our customers are presenting in and come by our booth (#487). Mention that the blog brought you there and get ready for your own special gift....
---What's the image above all about? Find out now!---
Wednesday, October 22, 2008
Tuesday, October 14, 2008
We’ve always been a big fan of Nicholas Carr’s presentation on the Big Switch … he's delivered it at several Salesforce "Tour De Force" events earlier this year, and gave it tonight before a panel in Palo Alto on whether Cloud Computing is “Ready for the Enterprise.”
There’s a lot that we love in Carr’s pitch:
- We love the stats: In the average IT organization, 80% of server capacity is wasted, 65% of storage capacity is wasted, and 70% of IT labor cost is spent on upkeep of legacy applications. Clearly a ripe opportunity to capture the benefits of centralized cloud computing.
- We love the imagery: the image of a huge water wheel, created as a source of major competitive advantage for a steel company, abandoned to rot in the woods just 2 decades later. His message that on-premise servers are on that same path is right-on.
- We love the scope of his talk, with the emphasis on the broader economic implications of cloud computing. Carr points out that what’s most interesting is not the new infrastructure itself, but what gets built on top. The electricity industry itself quickly became a utility… but the market for electric-powered appliances became highly innovative for decades. As a company that builds on the cloud, we love that message.
We were expecting some fireworks in last night's talk: It was sponsored by the German American Business Association, and was hosted by SAP… not exactly the epicenter of cloud computing. And one of the panelists was Steve Lucas, the former head of On-Demand BI at SAP, who recently left to lead the Force.com business at Salesforce.com. Carr himself is a controversial figure, having gone from the IT industry’s biggest foe for suggesting that “IT Doesn’t Matter” to IT’s biggest friend by backing “The Big Switch” to cloud computing.
But there was remarkably little disagreement among the panel, composed of speakers
from SAP, Salesforce, VMWare, and T-Systems: Salesforce, of course, has built its business around the trends that Carr is talking about. VMWare loves the role that virtualization plays in enabling cloud computing providers. T-Systems positioned itself as an enabler of cloud-based applications. Even SAP acknowledged that “we believe that there will be certain edge processes that will be enabled by the cloud,” which is a bold step forward coming from SAP.
My realization? "Boring" is probably a great phase for cloud computing in today's environment. The elephant in the room was this month’s financial crisis, finally raised by the audience in Q&A. “Boring” technologies do well in the enterprise during tough economic times.
Lucas emphasized that Salesforce has a simple subscription model that is going to get more appealing to companies in a recession. When the economy is bad, the last thing a company wants to do is write a big, difficult-to-justify license check. He quoted the CIO of a financial services firm he met with in New York in the midst of last week's financial crisis-- “We’re looking at Salesforce because we need to better leverage our IT investment. We have 88,000 servers in our organization, and want to reduce that number.”Is cutting servers boring? Maybe. But good for customers and, ultimately, the cloud computing ecosystem.
Thursday, October 9, 2008
- SAP customers faced difficulty financing upfront license fees. On-demand customers, on the other hand, pay for their solution as they use it. They don’t need to finance a big up-front investment in a monolithic solution with an uncertain business benefit.
- SAP customers balked at difficult-to-justify maintenance fees. On-demand customers, on the other hand, know what they are paying for — they see continual enhancements to their solutions without expensive upgrades or patches.
- SAP only learned of this in the final days of the quarter. On-demand customers, on the other hand, don’t need to engage in the edge-of-the-cliff negotiations with their technology vendors at the end of the quarter. These vendors know that they will only keep their customers for as long as they are able to create value, and need to be working every day to keep their customers happy.
The average company spends 4-6% of revenue on IT-- for a customer at $1B in revenue, that is $40M - 60M in annual IT expense. Organizations that 'cloud-source' their IT infrastructure to on-demand providers can reduce this to 2-3%... a 50% reduction. This model provides cash critical in a down economy, and also provides executives flexibility and innovation that on-premise vendors cannot.
Wednesday, October 1, 2008
Recently, a plethora of attempted clarifications (such as those seen in the Wall Street Journal and Information Week), confusion, and even an angry Larry Ellison rant in CNET News have weighted in on the latest hot topic, "what, exactly, is 'cloud computing?'" But the increasing volume level says more about the medium of the argument and the participants, than the it does about the topic's essence. Really, it's just insider talk among "thought leaders" and tech companies, which likely leaves Main St. CIOs scratching their heads.
Let's not focus on the semantic question of "what is cloud computing?" Instead, let's shift to "what your company should do." The wit and wisdom of Yogi Berra seems appropriate as a guide to help explain the causes of the perfect storm around cloud computing.
"The future ain't what it used to be"
Just a few years ago, many predicted the tech industry, and particularly business software, would go the way of the auto industry. A few gigantic players would survive, around which supplier ecosystems would develop. However, innovative providers discovered that if they ran all their customers' systems on a single multi-tenant instance, they could achieve huge advantages - hence the advent of on-demand, Software-as-a-Service (SaaS), and Platform-as-a-Service (PaaS). These providers were able to rapidly develop and innovate for their entire customer bases.
As this market matured, customers discovered that SaaS provided a better functional fit, it was faster to rollout, and it was generally more accepted by end users. Inevitably, if you spend more time on strategy, requirements, business process and adoption, while spending less time on hardware, operating system configuration, software installation and configuration, you end up with projects that better meet business needs.
The future of how businesses used technology was changed forever. Although this is now widely understood, we are still very early in terms of impact on IT and business. This set the stage for the current attention and debate surrounding "cloud computing."
"If you can’t imitate him, don’t copy him"
Cloud computing confusion is sometimes sown intentionally - because of vendor envy for missing the buzz. Large on-premise companies know they have missed the "news cycle" for something that has the powerful combination of hype and reality on its side. So they try to re-spin existing terms in order to re-assert their leadership, leading to interesting tricks like Larry Ellison, Oracle's CEO, cleverly deriding the term "cloud computing" as overused, while simultaneously wrapping the Oracle seal around it.
So in a classic judo turn, they also promote "cloud computing." But they turn it into a powerful weapon by using it as the theme that connects business software with mainstream consumer Internet disruptions like Google, Yahoo, Amazon and Facebook. Suddenly, they have a way to further differentiate themselves from their laggard on-premise competitors, with a future tied to the Internet.
"Our similarities are different"
While on-premise laggards attempts at catch up fuel their interest in the cloud, successful SaaS companies have an equally compelling, but very different rationale for promoting "cloud computing." They know they have a winning value proposition, but, relatively speaking, a small part of the market dialogue. They fear a repeat of the past - where SAP, Oracle, IBM and Microsoft hijack leadership around an important market trend (see the browser, java, B2B/SOA, open source) that they've been living and breathing for years.
Happily, this spin has the added benefit of being true (which is always a plus!). The consumer Internet has conclusively shown the power of collaboration. Now businesses want to be unshackled from the constraints of legacy software that was designed to be physically and emotionally closed.
"You can observe a lot by watching"
With both the laggards and innovators supporting buzz creation around "cloud computing" the race is on. Will clarity or confusion rule the day? Businesses are looking at cloud computing (which for today we'll assume to be a superset of all SaaS, PaaS, and on-demand solutions) as a way of doing things that had never been done beyond their four (virtual) walls. Unfortunately, too many vendors are simply trying to tie the movement back to their past strengths so that any change is incremental.
1. Use the cloud computing hype to discuss broader related changes in your organization. The business press is saying that "business must think differently about IT." This is a real chance to focus broader discussions around cloud computing into the very real, concrete benefits of SaaS/PaaS/etc.. Appirio launched Business Model Prototyping to jump on this opportunity. We think companies can use SaaS/PaaS and other learning from the consumer Internet to dramatically reshape their businesses.
2. Start with the concrete. The "cloud computing" discussion makes for good blogging, but it's not directly helping your business or feeding your kids. Real impact comes from translating the trend into action. Do this with projects that prove quick value or clear measurable milestones in a slightly longer journey, and highlight a sharp contrast with the old way of doing things.
3. Force vendors to be specific and timely. We'll be seeing lots of vendors starting to parade their products and services under the banner of cloud computing. We'll see more arguments over what cloud computing is, and how to understand it. Customers cut through the hype by forcing vendors to be specific in how they will help, where they will help, and on what timeline. Force discussions around initiatives that have a quick time to benefit and very clear milestones. Protect your company from being a victim of hype with low hopes for success. As Yogi Berra supposedly once said, "If you don’t know where you’re going, chances are you will end up somewhere else."