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[qi:051] The transition to delivering software, services and compute infrastructure via the web will change the dynamics of the IT industry, shifting power away from the services players such as IBM (s ibm) and HP (s hpq) and toward companies running monolithic data center operations such as Salesforce.com (s crm), Amazon (s amzn) or Microsoft, according to three Forrester analysts I spoke with last week. James Staten, John Rymer and Ted Schadler, who all cover what Forrester calls cloud computing and I would call delivering a variety of technology via the web, talked about how learning how to scale and deliver a single type of application or service is the best way to eke out margins in the cloud.
Staten uses the consistently growing and relatively stable revenue growth provided by software as a service as compared to the cyclical sales cycles for old-school enterprise software as an example of how delivering technology products such as infrastructure as a service will play out. Plus, if different types of clouds are delivered as a service, it becomes a fundamental disadvantage to vendors such as HP or IBM, which have built up an expertise around managing heterogeneous data centers, says Staten.
“For the server manufacturers, if the cloud becomes pervasive, then the people who are worried about taking your business away are also your biggest customers — and that’s a massive change,” Staten says.
Other vendors see things differently. Microsoft (s msft), for example, which has moved aggressively into the cloud by building its Azure platform as a service, sees a chance to build out a better way to deliver its software, and a way to garner more money by allowing customers to customize Microsoft products on the Azure platform rather than give that money up to a reseller or a consulting firm trying to customize Microsoft’s products. “Microsoft can make more money as a cloud provider than as a licensed server provider,” Schadler said.
The key for success as a platform vendor is to bring down costs by automating as much of the IT work as possible. That can be achieved by optimizing the platform or cloud to a particular type of software or specific function, then selling customers on higher-margin customization. Essentially all industry participants will have to provide higher-level services in order to make more money.