THINK IT Services

A year ago, I published a series of 10 predictions regarding how the Cloud Computing marketplace would evolve in 2011 in E-Commerce Times. Here’s a recap and assessment of my predictions:

1. The Cloud Computing market will grow more rapidly than analyst firms forecast as organizations move from asking “what is Cloud and why is it important” to “where and how can I capitalize on the Cloud today.”
   • I think I did ok on this one, although there remain plenty of organizations who are still trying to define the Cloud and determine why they should seriously consider employing it.
2. This accelerated growth will occur despite a major cloud computing service disruptions and/or significant security infractions, which will heighten customer concerns but won’t discourage wider adoption.
   • This certainly was the case as we watched Amazon’s Web Services (AWS) crash, jeopardizing numerous start-ups and other companies dependent on its Cloud capabilities, yet failing to dissuade more businesses of all sizes to adopt AWS and other Cloud services.
3. A wider array of appliances and applets will be offered by a growing number of Cloud vendors, which will permit users to “download” the functionality they need so they can work offline or deploy cloud-based solutions behind the firewall to satisfy their reliability and security concerns.
   • This wasn’t as prominent a trend as I expected. However, salesforce.com did acquire Navajo Systems, an Israeli-based startup with unique encryption capabilities that are the basis of salesforce.com’s new Data Residency Option (DRO) that permits users to retain control of their data behind their firewall, which could exponentially expand the addressable market for Cloud vendors.
4. Community clouds aimed at specific vertical markets and supply chain relationships will become more prevalent, as various organizations recognize the value of sharing cloud resources and services with their peers.
   • Although the number of community clouds grew in 2011, they didn’t proliferate as much as I expected as most organizations focused their attention on more binary public vs. private cloud alternatives. 
5. Corporate decision-makers will shift their focus from reliability, security and integration concerns to strategic and tactical governance issues, ranging from planning, selection, deployment, monitoring and evaluation to optimization and monetization of cloud initiatives.
   • This trend was more subtle because most corporate decision-makers continue to have serious reliability, security and integration concerns about the cloud, but are also developing corporate policies and procedures to govern their planning, selection, deployment, monitoring and evaluation processes.
6. The rate of cloud company failures and M&A activities will escalate as many startups are unable to keep pace with rising customer expectations and intensifying competitive pressures, and established players attempt to accelerate their development efforts via acquisitions.
   • The magnitude of the Cloud movement permitted the vast majority of startups and established players to prosper. M&A activity has escalated as the year has gone along, capped off with SAP’s acquisition of SuccessFactors, Oracle’s purchase of RightNow and salesforce.com’s recent Rypple buy.
7. Vendors that provide cloud integration tools and professional services, in particular, will be key acquisition targets because they represent a critical component in pulling the various cloud piece-parts together. The acquisitions of Cast Iron Systems and Boomi are just the beginning on the tools side. Consolidation among cloud integration service firms will occur in the coming year.
   • A series of acquisitions by Appirio were the clearest example of this trend on the professional services side of the integration world. But, the number of Cloud integration and consulting companies continues to increase in response to growing demand. The lack of integration tool vendor acquisitions was a bit of a surprise.
8. Social networking will become a required component of enterprise applications, driven by the success of Salesforce.com’s Chatter. By offering Chatter free to a broader population of end-users within its existing accounts, Salesforce.com is not only raising the bar for its direct competitors, but also expanding and redefining its role within the enterprise.
   • Salesforce.com’s intensive marketing campaign promoting the virtues of the ‘Social Enterprise’ have brought broader attention to this idea. It has not only forced other Cloud vendors and established players to promote their social networking capabilities, it helped fuel Jive’s IPO.
9. Datamarts will become a cornerstone of a new generation of cloud-based Data-as-a-Service (DaaS) and Business Process as a Service (BPaaS) solutions, as well as industry benchmark services.
   • Salesforce.com rebranded Jigsaw as Data.com and unveiled Database.com, but examples of BPaaS didn’t get as much attention because they are taking shape within specific vertical markets.
10. New channel programs will be introduced, new channel partners will emerge and new revenue streams will be established. Ironically, the leading cloud vendors — such as Amazon, Google and Salesforce.com — will continue to have the toughest time building successful channel programs because of their direct sales heritage.
    • The success of THINKstrategies’ first Cloud Channel Summit is an indication of the level of interest in building successful partnerships in the Cloud. Although, channel executives from Amazon, Google and Salesforce.com were prominent speakers at this event who have made significant progress with their channel development programs, they all readily admit they are still searching for the right formula for success.

I’ve had the privilege of publishing my point of view on Sandhill.com regarding two of the blockbuster announcements over the past week,

• Will Google’s Purchase of Motorola Be a Path to Greater Android Success or Pandora’s Box?
• HP’s Software Transformation Cloudy without Consumer Channel to Market

Yesterday’s NY Times included a good article discussing the new challenges facing Google as it enters the smartphone business, echoing my concerns with this terrific quote,

“When Google decides to evict a small Web publisher from its ad service, it sends a computer-generated form letter with the bad news. It says the Web site “poses a risk of generating invalid activity.” Why, the publisher might ask? You will never find out from Google. The only appeal is to fill out a Web form. Good luck. You can’t talk to an algorithm.”

There was also a seminal commentary by Marc Andreessen, a member of the HP board of directors, in Saturday’s Wall Street Journal about how today’s Cloud-based Software-as-a-Service (Saas) is transforming nearly every industry, as well as the way we live and work, as a justification for HP’s dramatic strategic move to become more software centric.

Both announcements have significant channel implications and make our Cloud Channel Summit on November 7 even more timely.

Today’s official launch of Microsoft Office 365 squarely positions the company as the latest major contender seeking to win a share of the rapidly growing Cloud Computing marketplace.

Although Microsoft has been saying that it is “All In” and funding a TV ad campaign which has made the catchphrase “To the Cloud” popular, Microsoft 365 represents the company’s boldest offering to date. The company has been watching its Office suite suffer attacks from Google Apps for years. In fact, Google Apps are quickly becoming the basic productivity suite of choice for most new college graduates entering the workforce.

Many of these new entrants to the workforce are forgoing email altogether by relying more on Facebook, Twitter and text to communicate. In response to these trends, Salesforce.com is pushing its Facebook-like Chatter communications platform as a dramatic switch from traditional email.

IBM is also attacking the Microsoft Office franchise with its revamped LotusLive offering. And, VMware is pushing its Zimbra alternative. You can also expect Apple to put more emphasis on its web-based productivity tools to build on its iCloud platform which has already captured plenty of market attention.

All of these players recognize that the first step in the corporate migration process to the Cloud tends to be via email. While this seems like an easy place to start the journey to Cloud-based alternatives, there are still plenty of risks associated with moving in this direction, ranging from reliability to security.

One of THINKstrategies’ most recent clients, Exoprise, recently conducted a survey which found plenty of interest in Cloud-based email alternatives, but an equal amount of apprehension about the uncertainties regarding these offerings as well.

Exoprise has devised a Cloud-based tool which can help organizations evaluate their on-premise versus Cloud email alternatives by assessing current and projected usage patterns. It is offering free access to the assessment tool so IT and business decision-makers can determine if Microsoft 365 fit their needs.

Unlike in the case of Microsoft’s many ill-fated operating system adventures of the past which it was able to withstand because there was limited competition, a failure to jumpstart its Cloud offerings with Microsoft Office 365 will adversely impact its position in the market because of the growing success of Google Apps and other Cloud alternatives.

Therefore, you can expect Microsoft to put plenty of effort into making Office 365 a success to better position the company in the Cloud for the longhaul, even if it cannibalizes some of its traditional Office software revenue initially.

Plenty of has been written about last week’s disruption of Amazon’s Web Services (AWS) which took hundreds of organizations offline, including many rapidly growing start-ups and evolving aspects of enterprise operations.

(The best I’ve read summarizing the questions raised and lessons to be learned as a result of the AWS outage was by my friend Phil Wainewright.)

After suggesting at the beginning of last week that recent issues surrounding Google could derail the rapid growth of Cloud Computing services, it is obvious that Amazon’s problems must be added to the list of sobering events which will certainly cause many entrepreneurs and enterprise decision-makers alike to re-think their Cloud strategies and deployment tactics.

Google’s support issues, combined with Amazon’s service availability problems, clearly make real two of the three greatest fears which IT and business decision-makers face when considering the widening array of Cloud alternatives. The third primal fear regarding Cloud services is the potential for a serious security infraction. To date, Cloud providers have outperformed many organizations in fending off security threats. But, a well-publicized violation would raise serious concerns about the short-term viability of Cloud services for mission-critical, core applications and business processes.

I say ’short-term’ because we all have short memories, or maybe it is fairer to say higher tolerance levels than we realize when it comes to our fears regarding web-based services. For instance, Salesforce.com has only seen greater growth since it suffered a series of serious service disruptions in 2006, and has not seen any appreciable service abandonment as a result of subsequent outages more recently. Another example is NaviSite which suffered a outage that lasted nearly a week in 2007 and was recently acquired by Time Warner Cable for $230 million.

As I said back in December 2007, “Failure Doesn’t Matter”.

However, if these problems persist not only will Amazon’s credibility and competitive position be compromised, but the commodity-services oriented aspects of the Cloud Computing business will also be set back significantly.

In the meantime, the winners as a consequence of last week’s outage and Google’s support issues are the established players who may not be offering bleeding edge services at the lowest available costs, but are promising more reliable services at reasonable prices. For instance, folks at IBM timed things perfectly with their new SmartCloud services. And, Verizon completed the acquisition of Terremark just in time to capitalize on Amazon’s problems.

There are also lots of smaller players who can win greater attention as a result of Amazon’s outage. I spoke to SmartBear in the midst of the AWS issues last week to learn more about its acquisition of AlertSite and they were eager to discuss how their combined capabilities could help organizations mitigate the risks associated with Cloud availability and performance issues.

Hopefully, Amazon and other Cloud service providers will learn important lessons from last week’s outage which will lead to improved service quality going forward. In the meantime, this event will make corporate decision-makers more aware of the tough questions they must ask the Cloud providers about their services and the standards they should set for their performance.

As I suggested a year ago, I also expect last week’s outage to reset the competitive landscape and the criteria for success, moving the advantage from the price leaders to the quality service providers.

(Disclosure: I have done consulting work with Salesforce.com, NaviSite, IBM and Verizon.)

Last Friday, December 3, THINKstrategies rolled out a new Software-as-a-Service (SaaS)/Cloud Computing daily, online newspaper powered by Paper.li. This publication and the online service which creates it illustrate many of the exciting ingredients of the ‘Cloud’, some of the major implications and a few of the unanswered questions.

For the uninitiated, Paper.li is a relatively new, online service created by a privately-held startup, called SmallRivers, incorporated in Switzerland. It compiles links to web articles which have been tweeted or mentioned on Facebook regarding a particular set of user-designated subjects over a period of time (also user-configured) and displays them in a newspaper-style format.

I’ve long believed that Twitter out-performs Google as a search engine and alerting tool for the latest news and views on various topics of interest to me. Every day I’m amazed at how many articles and announcements I find via Twitter, which a Google search and my Google alerts fail to identify. Of course, it isn’t Twitter which is finding these items online, it is the people who tweet about them. It is the epitome of ‘crowdsourcing’, or more precisely ‘cloudsourcing’.

In the same way the iPod, iPhone and iPad have created vast universes of add-on products, Twitter has sparked a similar ‘cloud’-industry of new services attempting to capitalize on the explosive growth of daily tweets.

And, just as Twitter’s ultimate revenue-model was hard to recognize when it first rolled out, Paper.li’s potential revenue stream(s) is still taking shape. At the moment, it appears to be a classic freemium offer aimed at virally encouraging an ever-widening set of users to promote SmallRivers’ basic functionality in hopes that a sufficient subset will subscribe to its Pro custom development tool.

However, even the basic free version has an obvious adverstising appeal which has already gained some initial attention from potentially lucrative sponsors, such as Microsoft.

The bare-bones nature of the current version of Paper.li, along with the lack of revenue-sharing opportunities for users, has led to some mixed reviews in the blogosphere. However, my guess is that Paper.li is working feverishly to remedy these deficiencies to build on its early momentum.

A bigger question is what impact Paper.li will have on the traditional newspaper business, which is continues to struggle to pull out of a decade-long tailspin. Just as many newspapers are beginning to stabilize their revenues by fine-tuning their online businesses to counteract the devastating affect of Google’s onslaught and the dismal economy, Paper.li has created a new nightmare for these newspapers by empowering anyone to become an online newspaper publisher. It’s another example of the Web’s reverse-alchemy powers and its ability to flatten the competitive landscape of almost any industry.

I’m a perfect case in point of this phenomenon by not only launching THINKstrategies’ SaaS/Cloud Computing Daily, but throwing aside the Boston Globe as my homepage in favor of my own Paper.li page which contains far more relevant content to meet my needs and satisfy my interests.

The emergence of Paper.li renews many of the questions and concerns which have surrounded the impact of Google on traditional media. Has Google’s search engine and ancillary services undermined (i.e., stolen) traditional media or driven more traffic its way? Will Paper.li’s rapidly growing population of user-centric online publications steal away or attract more readers from traditional newspapers?

I welcome your perspectives on these questions and feedback about THINKstrategies’ SaaS/Cloud Computing Daily.

Dell’s acquisition of Boomi today is the latest example of the tech industry’s herd mentality.

In the same way that Dell followed HP’s example when it purchased Perot Systems after HP acquired EDS, Dell is now copying IBM’s acquisition of Cast Iron Systems with its own move into the integration business.

Besides trying to keep up with other ’systems’ vendors, Dell is also attempting to fortify its Cloud Computing capabilities which hinge on helping potential customers cost-effectively migrate and integrate data from various legacy applications and databases into a new set of cloud services.

Dell indicated at an analyst briefing in Boston last week that it wants to ‘move up the stack’ and build a platform which can help enterprises and independent software vendors (ISVs) develop and deliver applications. Dell can’t compete with the other major Platform-as-a-Service (PaaS) vendors — including Salesforce.com, Google and Microsoft — from a software development standpoint. But, it can challenge them and others, such as Amazon and IBM, from an Infrastructure-as-a-Service (IaaS) point of view.

Why Boomi?

Because it is small enough for Dell to digest easily to test the integration market opportunities and requirements. It is still assimilating Perot Systems into its operations and corporate culture, and may not have been ready to acquire a bigger player, like Informatica or Pervasive.

Why is Boomi selling at this time?

My sense is they were at risk of becoming a victim of their own success and their rapid growth was creating operational strains which would take significant new investment to offset. Rather than make this investment, Boomi’s investors and management team felt that the Dell deal would not only give them a solid ‘exit’ but also the corporate resources necessary to ‘cross the chasm’.

It will be interesting to see if Dell is able to do a better job assimilating and growing Boomi’s business than it has with some of its previous Software-as-a-Service (SaaS) acquisitions — Everdream, SilverBack Technologies and MessageOne.

By coincidence, I heard about today’s news while attending Pervasive Software’s IntegratioNEXTconference, down the road from Dell in Austin, TX. You can bet there were a lot of smiling faces among the Pervasive staff who expect Dell’s move to trigger additional integration vendor acquisitions. I’m sure Pervasive’s counterparts at Informatica, which is also hosting a partner conference this week, were equally excited about Dell’s move.

While speculation about a Boomi acquisition has been rising since the Cast Iron Systems purchase by IBM, Dell was not high on the list of potential suitors suggested by various industry observers, including myself. Instead, the clearer candidates seemed to be HP, SAP, Oracle, EMC or even Microsoft.

All these companies continue to be likely acquirers for the handful of remaining integration vendors, including Hubspan and SnapLogic, in addition to Pervasive and Informatica. Not to be overlooked as potential buyers are also Google and Cisco Systems.

Yesterday’s announcement by HP that it is cutting 9000 workers and hiring another 6000 as part of a $1 billion multi-year effort to redesign its data center operations and automate its enterprise services is the latest indication of the traumatic impact which today’s cloud computing phenomenon is having on the tech industry.

HP readily admitted in its announcement that its goal is to,

“…Consolidate Enterprise Services’ commercial data centers, management platforms, networks, tools and applications to create a more scalable, modernized and automated IT infrastructure that will better serve its clients’ needs.”

Although the company didn’t specify where its cuts would take place, I suspect that the bulk of the downsizing effort within the Enterprise Services division will involve offloading the legacy data center facilities and staff which came from the EDS acquisition.

My sources within the company have confirmed my original concerns about the acquisition that the EDS deal brought more baggage and little innovation to HP’s oldline outsourcing business.

Anybody who follows the traditional IT outsourcing business knows that it has suffered as a result of the emergence of more cost-effective and less risky cloud computing alternatives.

Like the incumbent software vendors (ISVs) who have had a tough time keeping pace with the rapid rise of Software-as-a-Service (SaaS) insurgents, traditional hardware (“systems”) vendors are facing a similar challenge in the Infrastructure-as-a-Service (IaaS) segment of the cloud computing market.

After years of internal infighting, which did little to bring about a clear cloud computing strategy or set of solutions, HP is now forced to make dramatic moves in order to ensure that it doesn’t fall significantly behind the cloud computing leaders–Amazon, Google, Rackspace, etc.

Unfortunately, HP’s housecleaning efforts will likely cause even more internal strife and distractions among the company’s employees before it produces tangible business benefits for its customers.

However, if HP doesn’t take these painful steps it risks far greater consequences as the cloud computing movement becomes mainstream.

HP’s efforts to rearchitect its operations and retool its staff is not only an important bellweather for tech vendors, but should send a clear message to CIOs and corporate executives with enterprise organizations as well. They should be taking a hard look at the way they operate to ensure it is relevant in today’s rapidly changing business environment.

I recently recorded two podcasts for TechTarget’s SearchCloudComputing web portal regarding the new IT skills and vendor management requirements which are critical in cloud computing.

In my latest column for E-Commerce Times, I suggest that “once again, Microsoft may be a late entrant in the market with a set of solutions that lag those offered by today’s industry innovators, but it is still in a good position to regain its momentum and become a dominant force in the rapidly evolving cloud computing marketplace.”

Click here to read why.

This week’s announcement that Microsoft and Intuit are linking their respective Platform-as-a-Service (PaaS) capabilities has attracted lots of attention and generated plenty of speculation. It is also the latest escalation of the PaaS wars I predicted would take center-stage this year.

Although Salesforce.com’s Force.com PaaS has gained the lion’s share of industry attention because of the company’s unparalleled marketing machine, I’ve felt that Intuit’s Partner Platform (IPP) represented a dark-horse in the PaaS race because of the vast installed base of small- and mid-sized businesses (SMBs) using Intuit’s QuickBooks and QuickBase, along with its powerful channel relationships.

I’ve also believed that Microsoft would make considerable progress in penetrating the cloud computing market this year, not because of the technical capabilities of its Azure PaaS, but because of its historical prowess in building a vast partner network of ISVs and developers.

With those thoughts in mind, here’s my take on the strategic business implications of this alliance,

1. Both companies are aggressively attempting to catch up to Salesforce.com’s Force.com PaaS initiatives both in terms of mindshare and marketshare. Both companies want to quickly expand their reach into the ISV/developer community to strengthen their competitive position in the PaaS market. (Disclosure: I’ve written a series of whitepapers on behalf of Salesforce.com regarding the Force.com capabilities.)
2. Both companies also want to demonstrate the ‘openness’ of their PaaS capabilities to offset the alliances which Salesforce.com has made with Amazon, Google and Facebook, and capitalize on accusations that Salesforce.com’s Force.com PaaS is limited because it is built on a ‘proprietary’ language.
3. Gaining greater market penetration via access to the other party’s installed base of customers and partners is a given, but capitalizing on their respective functional capabilities and channel relationships is important.
4. Intuit is primarily seeking to make its IPP more attractive to developers by expanding the functionality it can provide its PaaS users. Adding Microsoft’s development and collaboration tools, including the Business Productivity Online Suite (BPOS) which consists of SharePoint Online, Communications Online, Exchange Online, and Office Live Meeting gives developers greater functional capabilities to satisfy their customers’ needs.
5. Microsoft is primarily interested in adding the service management capabilities embedded in Intuit’s Partner Platform (IPP) which include service provisioning and monitoring, along with pay-as-you-go billing and pricing. Adding these capabilities makes Azure more relevant to developers from a business perspective.

While this alliance is squarely focused on small businesses, it could also appeal to the regional offices or small divisions of larger enterprises. It could also attract crossover opportunities in the consumer market, especially when you consider the growing influence of consumerization in the corporate world.

But, most importantly it could open new opportunities within traditional channels and create new channel opportunities for cloud services and vendors. Salesforce.com, Google, Amazon and Facebook have not made much progress penetrating the channel and will face serious challenges gaining the trust and confidence of traditional channel organizations who feel threatened by the cloud computing phenomenon. Intuit and Microsoft can leverage their established relationships with key channel companies to overcome their concerns.

This alliance is the most recent in Microsoft’s escalating efforts to regain its dominant position in the software market which has been quickly slipping away with the accelerated growth of SaaS and broader cloud computing services. Microsoft also announced earlier this month that it is teaming with HP in a three-year, $250 million initiative to develop and deliver a new generation of cloud-based solutions.

Conspiracy theorists will also point out that Microsoft announced last June that it is discontinuing its Money software service, which leaves a convenient gap for Intuit to fill with its QuickBooks solutions.

While ‘coopetition’ is not a new idea or business practice in the tech industry, this week’s Microsoft-Intuit alliance is certainly an important new test of the concept. Whether this proves to be a win-win relationship or simply a Machiavellian maneuver by these companies remains to be seen.

It is also important to note that this isn’t a mutually exclusive alliance. Microsoft is already working with Amazon, for instance. In fact, it will probably spark additional discussions and agreements with the other players by both parties.

Google’s new Nexus One Android phone has created a lot of buzz as a ‘game-changer’ in the smart-phone business. Many believe this device, and Google’s new business model which supports it, could redefine the phone industry.

It is always exciting to witness a company challenge the status quo in an established industry by offering a bold new value-proposition to customers.

Yet, most companies have responded to today’s economic malaise and extended downturn with a risk-adverse, reflective stance which has manifested itself in more aggressive cost-cutting strategies rather than more innovations.

I can’t blame them for shying away from the innovation tact. The cynic in me also recoils from the business pub jargon which would have us believe that any company can adopt a bold strategy to recreate themselves in this type of environment.

However, there is plenty to be said for taking this risk and attempting to redefine your business in such a way that you also redefine an industry.

When Apple was struggling to stay alive in the computer business, it decided to recreate itself into a media distribution company, and look at what iTunes, iPod and the iPhone have produced. They’ve redefined the music, movie and broader entertainment industry while also breathing new life into its core computer business.

Or, when Amazon was trying to elevate itself above the clutter of web-based retailers, it rediscovered its roots as a distribution company and started selling processing power by the ‘drink’, giving birth to the cloud computing business. In turn, Amazon Web Services (AWS) has redefined the IT industry.

Apple and Amazon set out to disrupt markets when they were first born, but their originally targets were the computer and retail markets, not media and IT.

While both of these companies had the advantage of bold leaders and plenty of brain-power to push them into new markets, they still represent compelling case study examples for others to emulate.

Let me know of other companies you think fall into this category of innovators, or if you’re looking for help redefining your business and industry.