As the campaign for American independence emerged from the triumph at Trenton and entered into the new year of 1777, King George III expressed his dismay over the recent events in America and said to parliament,
“If this treason be suffered to take root, much mischief must grow from it.”
Regarding the impact of the Battle of Trenton, Sir George Otto Trevelyan noted:
“It may be doubted whether so small a number of men ever employed so short a space of time with greater or more lasting results upon the history of the world.”
Cloud computing - treasonous to some, liberating to others
Indeed, much mischief has been the result of the American Revolution and the events of December 24th, 1776. But, I am not writing here to give you a lesson in American history, but to explore corollaries in history that cavort technological nuances in the software industry.
To some in the software industry, they see a new mischief afoot, treasonous in nature, it’s known as cloud computing. And in so short a span of time, cloud computing’s technological tsunami that we have witnessed through 2010, may have the greatest impact of all the business changes the Internet has thrust upon us thus far.
Most software executives recoil in terror or admit with shame service operations within their companies. I refer you to one of my recommended readings, The Business of Software, by Michael Cusumano. Published in 2004, The Business of Software may seem a little dated for the age of cloud computing, but the message Professor Cusumano strives to convey has an even greater importance because of the Software-as-a-Service (SaaS) model enacted by cloud computing services.
This blog entry follows up on a previous blog entry regarding how ISVs view cloud computing, so it may seem that this blog entry is essentially the same information. What I hope to convey in this blog is why the cloud computing services model can be embraced by software companies. This blog entry is more philosophical in nature than quantitative, more introspective than overt.
Why is it important for software companies to embrace the service aspects of their businesses? Pithily speaking, if they don’t, they will suffer to the benefit of those that do.
In a previous blog (from constraints to opportunity), I discussed the transformational effects, both economic and operational, that come from demand-based computing service models, particularly when applied to software-driven workflows. It is this psychology that changes the software use model in cloud computing from disconnected, task-oriented applications, to a productivity enhancing WorkFlow-as-a-Service (WFaaS) behaviorism.
During a conversation about cloud services at a conference this week, a director for a large defense contractor responded that when he thought of services, he thinks of how many headcount and the correspondingly low consulting margins that accompany services. It was hard for him as an engineering manager to grasp that cloud computing could be considered a service model. Which begs the question, what is the definition of service?
I content, perhaps controversially, that all software should be considered a service delivered in the form of an automaton. After all, aren’t software applications written to provide a user experience that offloads labor, whether that labor is expended in the form of entertainment or a business process? Isn’t a traditional consulting service actually labor applied to software applications that haven’t yet been assembled or automated into a workflow? In this context, I postulate that software can be considered a form of service with higher gross margins and that software development is about solving a service problem.
People and software - both perform a service
If you are of the mindset to accept cloud computing as a service offering, then you have to accept at least in theory the that the underlying software that delivers the cloud workflow constitutes a service as well.
Cloud Computing’s Subtle Infectiousness
The internal corporate battles that raged at Microsoft over both the importance of an Internet strategy and the threat of open source software have been expounded upon in various business strategy books. What we learn from both of those threats to Microsoft’s competitiveness is that given enough cash on the balance sheet, any company can overcome even the largest strategic blunders. Unfortunately (or fortunately, depending on your point of view), there is only one Microsoft and then, as the late Paul Harvey always said, “…the rest of the story.” But Microsoft has learned from it’s past mistakes and has made a home for itself in cloud computing.
I agree with Dennis Byron’s assessment regarding the indistinguishable markets of enterprise software, cloud computing, SaaS, and open source. However, Byron didn’t go far enough to characterize how the business models of each of those sectors affect their interrelated and respective markets. In this sense, I also think that force.com has got it right in building software frameworks that enable software applications to be deployed into cloud-based workflows.
(http://byrondennis.typepad.com/it_investment_research/2010/09/enterprise-software-cloud-saas-and-open-source-not-separate-markets.html).
Notes:
According to Gartner, the 2010 enterprise software market was $232B (http://www.gartner.com/it/page.jsp?id=1437613), with a projected market of $247B for 2011.
Mash-ups as an example of a workflow.
Microsoft Office as a workflow example!
More to come…
J. Marc Edwards' techno-blog 