Every area of enterprise software, from CRM to ERP, is ripe for increased competition from the big players in cloud infrastructure services.
Regardless of the issues, discussions, and controversies surrounding it, no one can deny the fact that cloud computing has significantly changed the IT landscape. If we look back to a few years ago, purchasing a server was a commonplace activity of any IT department or technology-related company. While in many companies it still is, today many startups own absolutely no servers, and even mid-size and large companies are rethinking their processes and, in many cases, opting to rely on cloud-based infrastructure instead of purchasing their own.
Having transformed the computing infrastructure market, major cloud computing providers are setting their sights higher and moving into the enterprise software space. There are several companies which have been offering cloud-based enterprise software for years (Salesforce.com and other cloud-bases software-as-a-service companies), but this new push, by traditional cloud infrastructure providers, such as Amazon and Rackspace, has several unique and important qualities to it.
Having a company like Amazon bring to market a service like Redshift, which is focused on data warehousing and competes directly with companies like Oracle and Teradata, shows us how far cloud computing has come over the past few years. Even a couple of years ago, the sheer number of questions and concerns related to the security and reliability of cloud computing and cloud-based services would have made it nearly impossible for such a service to be launched.
Two things have made these products possible, however. On one side, we have the push of traditional enterprise software companies into the cloud. Microsoft, IBM, Oracle — everyone has a cloud strategy or cloud-focused products. This push into the cloud space by the traditional companies has, above all else, helped validate the cloud in the minds of potential customers.
At the same time, there has been a major push by cloud providers to convince people of the cloud's reliability and security. Aggressive service level agreements try to overcome the fearfulness with elements that large companies understand well: fines in case of breaches of contract. Even the overall availability of the services has improved significantly, and there are today several tools that can help a cloud user keep a close watch on his provider.
Given these two factors, major cloud players seem poised to make headways into the enterprise software market in much the same way as they did in the infrastructure one. They are, in fact, already starting the push. The huge proliferation of cloud-based database services, with almost every single cloud provider bringing their own products to the market, is a clear example of this. All relational databases, from Oracle to MySQL are getting a cloud-based version these days.
The benefits of cloud-based database, like with any cloud-based software, is much the same as the benefits of cloud infrastructure. Cloud based software usually runs on a pay-per-use model, allowing companies to optimize their costs. It also takes away the responsibility for managing the software, removing the need for DBAs and a large IT support team. Cloud-based software can also offer increased scalability and reliability features both of which are very interesting on the enterprise market.
Cloud-based databases are only the start. Every area of enterprise software, from CRM to ERP, is ripe for increased competition from these players. While it is true that there are already many cloud software companies offering this kind of software, the large cloud providers have the brand recognition and the credibility attached to their name that these smaller players many times do not have. In this sense, they can offer much stronger competition for the entrenched companies.
The app route
Another trend in the push cloud providers are making is what Amazon is doing with its Marketplace. Instead of simply offering services to compete with traditional enterprise software, Amazon also allows the traditional companies to offer their own software or services, in a simplified manner and hosted on Amazon's cloud.
It is a very interesting strategy for everyone involved. Traditional enterprise software companies get to give a "cloud dressing" to their software, even if the only cloud part of it are the servers, that don't actually belong to them; and Amazon gets to earn money together with potential competitors, with companies that can be more resistant to adopting entirely cloud-based software.
We're reaching a point where the different cloud levels - infrastructure, platform and software - are coming together, with the large players creating offerings that span multiple aspects of the cloud. As these new services come to market and the competition for the enterprise heats up, the cloud computing space will only get more interesting to watch.