How Does the Cloud Computing Trend Impact Enterprise Software Vendors?

There is much hype about the cloud computing model, particularly in the consumer and small business space. Small companies are using cloud services to save money, while larger companies are drawn to the promise of flexibility of scalable services at lower cost. But many enterprises are still cautious, even as they are starting to utilize cloud services in certain non-critical areas. The main challenges for enterprises considering the adoption of cloud services are:

  • Concern about outages,
  • Data security,
  • Vendor viability

However, interest is increasing, and venture capitalists are investing heavily in cloud software startups. Big vendors like Google, Amazon, IBM and Dell are offering enterprise cloud services or repositioning existing products or services as cloud services.

How is cloud computing defined, and how is it different from Software-as-a-Service (SaaS)? Cloud computing is computing done via the Web in a mostly self-service way, in real-time, and scalable to an enterprise's needs. Costs for cloud software are typically on a per-usage or per-user basis. So Software-as-a-Service is a necessary ingredient of software in the cloud, but full cloud services also require IT business processes, development, and financial systems operate in a services model. This is often the more challenging part for large enterprises with their heterogeneous mixture of legacy systems.

Forester defines five segments in the cloud market:

  • Software-as-a-Service,
  • Developer application services,
  • Service middleware infrastructure,
  • Virtual IT infrastructure as a service,
  • Physical infrastructure as a service.

An enterprise can adopt one or more of these, but they will only realize the full benefit of cloud services once they implement all five.

IT are also investing in internal cloud software development, creating private clouds for their own employees.

What does the IT move toward the enterprise cloud mean for enterprise software vendors? Opportunities exist not only for vendors to offer their existing software as cloud services, but also for vendors to provide tools for IT to monitor cloud performance, and aggregation services combining packages of different cloud services.

Finally, the trend toward cloud computing provides opportunity for vendors to offer various types of "data services" (see this classic SOAWorld Magazine article on the topic). Data services that integrate disparate data from different cloud services to provide new customer value are especially interesting, and an area where vendors should be able to provide additional benefit (and new revenue) to their customers.

So what does the cloud trend mean for your software solution or service? The answer will be different for each vendor. The trick is to factor this trend into your strategic planning, and think out-of-the box about cloud services, cloud tools, or data services that you could offer as unique value to your customer base.

Software Marketing Advisor can help. We offer custom consulting services to assist vendors in optimizing their software service strategy, business plan, and marketing strategy.

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