Wall Street Journal Raises Questions About the Cloud

Posted on March 26th, by thinkstrategies in Uncategorized. 1 Comment

Debating the meaning of ‘cloud computing’ has become a popular pastime among analysts, journalists, vendors and even customers.

The latest entrant into the discussion is the Wall Street Journal which published an article today entitled, “The Internet Industry Is on a Cloud — Whatever That May Mean.” (Registration may be required.)

In addition to raising the fundamental question about how to properly define cloud computing, the WSJ article also mentions Oracle CEO/Chairman’s Larry Ellison’s comments over the past few years downplaying the market opportunity for cloud computing and Software-as-a-Service (SaaS) solutions.

Although I’ve offered my own views on this topic before in this space, here are some additional thoughts in response to the WSJ article:

1. What is cloud computing?

Cloud computing is a set of web-based enabling tools and services which permit users to acquire computing capabilities to build or support applications, or perform specific functions on a pay-as-you-go basis.

2. What are the key characteristics of cloud computing?

Web-based, easily provisioned, highly economical, very flexible and reliably scalable.

3. How is cloud computing segmented, e.g. SaaS, PaaS, etc.?

Everyone uses SaaS and cloud computing interchangeably, starting with Salesforce.com and the press. THINKstrategies distinguishes them in the following way – Cloud computing has emerged a broad set of loosely coupled web-based enabling tools and services in response to the success of SaaS. SaaS solutions are ‘packaged’ applications acquired in a pay-as-you-go fashion and delivered via the Web. PaaS is an integrated set of development and delivery tools and services which permit a vendor or user organization to build their own SaaS solutions.

4. What makes this different than the old ASP model?

ASPs were outsourcers who were simply moving the same old crappy apps out of the customer’s data center and operating it in a centralized and remote data center. They didn’t have a better pricing model or offer any new functionality.

Today’s SaaS/PaaS/cloud computing solutions have been built to reside on the web, where it can better serve a more dispersed and mobile customer base with more user-friendly and flexible pricing and packaging.

5. Why has Larry Ellison resisted the SaaS/cloud computing movement?

It is a Machiavellian subterfuge aimed at downplaying the market opportunity to discourage potential competitors, such as SAP, from entering the market.

Ironically, Ellison originated the idea of the ‘thin client’ during the dot.com boom and Oracle was a pioneer in the ASP era. Today, Oracle is a major supplier of database systems for many of the largest SaaS companies, including Salesforce.com. 

Oracle is also the purveyor of a widening array of on-demand software services, starting with Siebel On-Demand and most recently adding Sourcing On-Demand. And of course, Ellison is also a personal investor in Salesforce.com and NetSuite.

6. Why is cloud computing a major transformation of the IT/software industry and not just another overhyped trend?

First, because SaaS/cloud computing solutions are delivering measurable business benefits, and generating high customer satisfaction and referral rates.

Second, corporate executives and end-users need and want a better way to acquire and utilize technology and business applications to meet their rapidly changing business and workplace requirements.

Third, a new generation of workers—Generation “F” for Facebook, as Gary Hamel described in the WSJ Tuesday—are entering the market who have grown up online and will demand web-based services to do their jobs.

Finally, because today’s tough economic climate demands that organizations of all sizes fundamentally change the way they do business, and few will resist the temptation to revamp the way they procure and use technology and applications so they can get a better ROI at a lower TCO.

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