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Cloud Computing Challengers: Pundits Cheer for Their Clients

A happy quack to the reader who alerted me to Briefings Direct. The link pointed me to a transcript of a discussion among a group of analysts. I am fascinated by the prognostications of pundits. The deepening economic crisis and miserable track record of large information technology projects make me hungry for information about the future. These pundits are responsible for approaches to systems that some  companies embrace. I could draw a connection between pundits and the present crisis in information technology, but I will not. Instead, let me capture the points that I noted as I worked my way through “BriefingsDirect Analysts Handicap Large IT Vendors on How Cloud Trend Impacts Them.” The set up is that cloud computing is a trend and the large information technology vendors are horses in a race. The participants in this discussion will, in theory, give the odds for selected vendors’ in the cloud computing horse race.

First, one of the pundits asserts that Microsoft “has the most to lose.” I believe that “lose” means revenues from on premises licensing of Office and products such as SQL Server. Okay, I understand that point and I see a grain of truth in the “most to lose” remark. One thought I have is that Microsoft is spending to make its software and services’ strategy viable. The spending coupled with erosion of on premises revenue ups the ante. Maybe the Briefings Direct session will focus on the economics of the Microsoft “to be” architecture.

Second, one of the panelists points to big companies like IBM and SAP who sell direct and who have established reseller channels. The idea is that these vendors are trying to maximize their sales impact. I am uncomfortable with the implication that big vendors have their act together. SAP, one of the companies with this sell direct and rely on an ecosystem approach, is in a tar pit. SAP’s missteps may be a glimpse of what will happen when more big companies with zero track record in offering software from data centers on a subscription basis try to make money. Again, the combination of capital investment and lack of experience may make these initiatives bleed red ink. IBM, for instance, tried Internet services and dumped the business to AT&T. IBM is a consulting company that also pushes software and hardware. There are too many assumptions about big companies succeeding in the cloud for me to be optimistic.

Third, the notion that cloud computing is a wide open race is intriguing. I think cloud computing, like telephony in the early 20th century, is one of the those utility services. If a single company has an advantage, that company could make it difficult for competitors to get sufficient market traction to survive. Customers unwittingly act to make a monopoly come into existence. I see a hint of this in Google’s dominance of Web search and advertising. A company like Google or maybe Google itself could capture a dominant position. The Google Effect, then, is companies without Google’s technology advantage and customer base spending to catch up. Google keeps moving forward incrementally and retains its dominant position. I think that Google’s 70 share of Web search could be replicated in other cloud markets as well. The diversity dies out even some vendors offer better solutions.

Who will win? IBM, Microsoft, Oracle, or SAP?

Fourth, the cloud approach means “flex sourcing”; that is, (I think) using what you need in the cloud and having some software on premises. My thought is that this is a commonsense approach. I don’t think “commonsense” applies to cloud services. The cost and complexity of on premises systems is probably a deal breaker for many organizations in today’s economic climate. The shift to cloud services may be forced upon companies. If a flash point exists, the cloud shift could be somewhat sudden, maybe like the emergence of the Internet as a utility. In that type of situation, the rules go out the window. Commonsense says, “That’s not likely to happen” as the shift occurs. These pundits are supporting the status quo and the status quo is crumbling as they opine.

Finally, one of the pundits suggests that a Microsoft – Yahoo tie up is good for Microsoft. This point caps a discussion of tie ups for cloud services; for example, Amazon and Oracle. Wow. I am not sure if Microsoft has the technical savvy to fix up the nicks and scratches in the Yahoo infrastructure at the same time it is struggling to build out and optimize its own data centers. I think the cheerleading for the big companies ignores the fundamental problem of getting from “to be” to “as is.” I am no Google fan goose, but I think the GOOG is going to stomp on some of these assertions relative to Microsoft and the other big companies mentioned in this discussion.

You will want to read this discussion. I think it surfaces some of the reasons why large companies are destined to flame out and crash in the cloud computing air race. To close, let me present the quote of the session:

Microsoft has really done something spectacular here, because it all comes back to the developer. What the developer does drives what software you run on the server, in many cases. What Microsoft has done with the Software-plus-Services program initiative, right now, today, using the 3.5 .NET framework in Windows 2008, you can write code that can be dropped in the cloud or on the desktop automatically. You can just write a rule that says, “If I reach a certain service level agreement (SLA), just kick this piece of code to the cloud.”

Great notion, but it doesn’t work very well. Ah, punditry at its finest. Google was mentioned three times. These pundits have not discerned Googzilla’s approach.

Stephen Arnold, December 15, 2008

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