The Paradigm Shift: Software Execs Move to the Cloud
Kamesh Pemmaraju heads cloud computing research for Sand Hill Group. He writes a weekly blog, Leaders in the Cloud for weekly updates on developments in the cloud market. In an opinion piece for Sand Hill entitled Cloud Leaders Face a Changing Tide he reports to us on the latest Sand Hill survey of 100 software CEOs and senior executives and their responses regarding their firms expected revenues from Cloud Computing for the next few years, their customer’s attitudes and readiness to adopt Cloud Computing, and which products and services seem to be catching hold. What appears to be obvious to Pemmaraju from the results of the survey is that these vendor’s customers want to be in the Cloud and the execs recognize this demand and no longer expect their customers to accept the existing products for sale. The survey respondents seem to feel that the global recession is ending and they expect considerable growth in the Cloud Computing market space.
85% of the respondents already had cloud products and service offerings ready for sale to their customers and 43% expect that Cloud Computing sales will make up the majority of their sales in the next 5 years:
The survey showed an interesting dichotomy between small firms (i.e. revenues of $250M or less) and large firms. The larger firms will grow their revenue from Cloud Computing but at a much slower pace in the next 5 years:
Pemmaraju identifies the key to success for these software vendors are to recognize the value their customers see in the applications and the platforms on which these applications are developed. Hence these software vendors “also need to create platforms to attract developers to extend and build new applications.” The concerns from all parties are very real and consist of:
· PaaS (Platform as a Service) is still relatively new and unproven
· Enterprise customers are stocked with on-premises development tools
· Customers want to avoid being locked into one vendor
Although SaaS is the primary model today, Pemmaraju reports that the surveys show that PaaS is the choice for most respondents in the next 3 years:
The paradigm is shifting once again and as the software vendors learn and adapt there will be many missteps along the way. Pemmaraju sums it up nicely in his opinion piece:
“But as customers move away from traditional licensing models, software vendors—particularly the incumbents—face challenges in adjusting their products, go-to-market strategies and pricing models. How can they move towards cloud computing without cannibalizing their existing product revenues? Even the metrics or methods that software firms use to track their business are evolving rapidly. Moreover, nearly 50 percent of the executives surveyed said the cloud offerings today are not yet ready for enterprise use, and the current lack of standards is a growth inhibitor.”
