When start-up Salesforce.com went public ten years ago, with the idea that businesses should buy their CRM software by monthly subscriptions instead of store-bought packages or licenses, they went from young bucks to big bucks-and jolted the software industry awake to software as a service (SaaS).
Today all the big guys — IBM, Microsoft, Oracle and SAP — have SaaS offerings, allowing customers to access their software housed in the cloud, on servers somewhere other than on enterprise infrastructures, or desktop hard drives. Soon you won’t be able to buy Microsoft Office on a disc, you’ll subscribe to Office 365. Adobe did this a year ago by changing Creative Suite to Creative Cloud.
For businesses, paying for software over time rather than in a big upfront spend is easier on the budget, which means it’s easier on the board approval process (and easier on the go-to-market/ RFP process, unless I’m being too hopeful).
Since there is no deployment needed by the IT team, the application can be rolled out without disrupting day-to-day business by bringing down the network for maintenance. A small team or the whole company gets the software on their desktops and mobile devices, and it’s always up-to-date.
A business can try out an application for a month to see how it meets their needs and quickly get to work on its core business, without the hassle of IT resource planning or hiring consultants who promise “go live” dates and deliver scope creep.
Not all IT departments are over the moon, if I may understate. They don’t like to be considered an administrative hurdle to getting down to the real business. They get miffed at the marketing team that bypasses governance rules to use a new app that sends competitive data flying off in all directions-and they do so with great self-congratulatory relish.
With IT practitioners out of the loop in some decision making, they may not even know which programs are being used. Security’s an issue. Sensitive customer or company data is more likely to be haplessly misused by employees than hacked by cybercriminals.
So, that’s the new challenge for IT departments. Governance and security in a lawless, Wild West frontier of cloud-based software. Successful IT managers will have to proactively collaborate with business partners and front-line staff to bring the right applications into the fold. By helping to navigate the waters, they can catch the wave and become IT-as-a-service.
This should begin tomorrow. In the next year, most business applications will be in the cloud. The global SaaS market, which reached $39 billion in revenue last year, is predicted to surpass $100 billion by 2018.
Which tech companies will see these billions? SaaS champions like Adobe, Salesforce and NetSuite will continue to do well with their programs. Cloud infrastructure giants Google and Amazon will do just fine, thanks very much. But it’s IBM, Microsoft, Oracle, and SAP who will rake it in big-time with their converged solutions. And they’ll do it the way they do it: with prescient acquisitions and smart strategic alliances.
Let’s see: Microsoft struck a deal with Salesforce to integrate Office 365 and Windows with Salesforce’s CRM customer base, even though Salesforce.com and Microsoft’s Dynamics CRM compete. Microsoft has also allied with Dropbox to allow all 300 million Dropbox users to use Office 365 in new ways from their desktops and mobile devices.
IBM and SAP have partnered to deploy SAP’s applications on IBM’s enterprise cloud platform, tripling SAP’s cloud capacity and offering IBM’s customers better access to SAP’s SaaS offerings. SAP and Oracle both have agreements with Microsoft to run their solutions on the MS cloud-computing platform, and IBM has recently jumped on the Azure bandwagon.
With every partnership, everyone wins. None more than Microsoft, it seems. No surprise. Question is, who’s going to surprise us. Cisco? Or some not-yet-acquired start-up?