Enterprise System Spectator blog: ERP and enterprise system vendor evaluation, selection, and implementation.

The Enterprise System Spectator

Monday, March 17, 2008

Cloud computing: can Microsoft turn from servers to services?

As everyone knows, Microsoft rose to its dominant position as a software provider. Today, however, it faces threats of disruption from players such as Google, which delivers software functionality as a service, over the Internet.

The new approach is dubbed "cloud computing," because the software that provides the service does not reside on a specifically-identified computer but is deployed over the Internet (which is often depicted graphically as a cloud) from any number of networked computers. The user has no idea of where the host computer is or what operating system it is running. The application is just out there "in the cloud," as so to speak.

A threat to Microsoft
Market leaders spend a lot of time thinking about how they can lose their market position. As Andy Grove, founder of Intel said, "Only the paranoid survive." The trend toward cloud computing, or software as a service, certainly is a threat to a company that depends on organizations buying servers and installing software. So Microsoft's current strategy, at least the one it offers publicly, is "software plus services." That is, it continues to sell software, but it is also offering hosted versions of its popular Exchange messaging system and Sharepoint collaboration system.

Which brings us to Phil Wainewright's view of Microsoft's strategy: "bunkum." In a Feb. 1 post, he wrote:
The attempt to define software as somehow separate and parallel to services is what exposes Microsoft’s software-plus-services notion as bunkum. Software is the stuff that powers services. Before the Web existed, the easiest way to get those services was to install a software package. Now that the Web exists, the easiest way to get those services is to click a link and let someone else run the software. That’s what Google does. That’s what Yahoo! has always done. These companies aren't doing away with software; they’re huge consumers of it. When Salesforce.com talks about ‘No Software’ what it really means is ‘Lots more software, but we’ll take care of it for you.’ The software becomes part of the service provider’s infrastructure.
Now, in a new post, Wainewright says that Microsoft may already be realizing that software-plus-services will not be enough to counter the threat of cloud computing. He points to recent comments by Microsoft's chief strategy officer Ray Ozzie, which suggest that, "despite the public bluster, Microsoft’s top brass already secretly realize that they must put services, not software, at the center of their world view." Read Wainewright's whole post for Ozzie's comments that reflect his view of Microsoft's need to make a more complete turn to services.

Dynamics a laggard in cloud computing
Where does this leave Microsoft in terms of its enterprise applications, Dynamics? Microsoft is way behind the curve in deploying these products in the cloud. It is just now getting ready to release CRM Live, the software-as-a-service (SaaS) version of its Dynamics CRM product. As far as its other Dynamics products, such as Axapta (AX) and Great Plains (GP), the only SaaS deployments are hosted versions offered by some Microsoft business partners.

The slow progress in moving its Dynamics applications to the cloud is not a big deal right now, as most small and mid-size businesses are still thinking in terms of on-premise deployments of software. (CRM is the one area where the SaaS model has taken hold, where its ubiquitous access characteristics are an advantage in serving sales users that have no fixed work location.) But as cloud computing becomes a more accepted way of delivering enterprise system functionality, providers that do not have a credible solution are going to be at a disadvantage.

Both Oracle and SAP are making major investments in the new model. SAP in particular is developing its new SMB offering, BusinessByDesign, from scratch to run in the cloud. As for Microsoft, it's no doubt difficult to embrace a business model that undermines the way it got to be an industry leader. But if it does not do so, it's likely to lose its position, not just in enterprise applications but the whole nine yards.

Update, Mar. 18. In the comments section, Michael Sheehan notes that cloud computing and SaaS are really not the same thing. I agree, and I was a bit sloppy in using the terms somewhat interchangeably. In my mind, SaaS is any software functionality delivered as a service, whether it be a dedicated system hosted by the service provider, a multi-tenant system providing services to multiple customers, or a system deployed in the cloud. I suppose in some organizations, the cloud could be used to deploy a system that is used by the organization itself. So, although cloud computing is often used as a way of deploying SaaS, they are not synonyms.

On his own blog, Sheehan points to this post by Paul Wallis that goes into much more detail on the evolution and relationship of supercomputing to grid computing to utility computing to cloud computing.

Related posts
Microsoft Dynamics revenue growth less than stellar
Microsoft Dynamics: management changes spell lack of direction

by Frank Scavo, 3/17/2008 09:32:00 AM | permalink | e-mail this!

 Reader Comments:

In my opinion, Software + services just highlights the fact that the user can have a choice in how they consume those services. They are not limited to the web interface that is provided by the service vendor.
As an example, check out the public timeline at twitter and look at all the different "software" clients that are being used. If users are going to choose desktop software to read and send 140 characters of text, why would they choose a web interface for a more complex application.
The reach that the web has provided has been the strength of the web browser to date, but with the notion of software + services, desktop software should have that same level of connectivity. Products like Silverlight and Adobe Air are really just desktop apps in browser clothing.
The real shift that is coming is not the architecture of the software, but how we pay for it. And I would say Microsoft have quite a head start on their competition when it comes to getting users to pay for stuff, regardless if it is software or a service.
Does cloud computing really mean the same thing as SaaS? I think they are very different concepts. But perhaps I am misinterpreting you equating the two as the same. But I believe I understand what you are saying that some companies are offering their SaaS using Cloud Computing (others are not, obviously, and using traditional hosted servers).

Interesting read though. I am personally concerned about cloud computing in general (especially the way you say "The user has no idea of where the host computer is or what operating system it is running. The application is just out there "in the cloud," as so to speak.")

The buzz over cloud computing is worrisome. I mused a bit about it here.

Thanks for the words though! Very thought provoking!

-Michael Sheehan (Technology Evangelist for ServePath)
Post a Comment

Links to this post:


Powered by Blogger

(c) 2002-2016, Frank Scavo.

Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.

About the Enterprise System Spectator.

Frank Scavo Send tips, rumors, gossip, and feedback to Frank Scavo, at .

I'm interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.

Selecting a new enterprise system can be a difficult decision. My consulting firm, Strativa, offers assistance that is independent and unbiased. For information on how we can help your organization make and carry out these decisions, write to me.

My IT research firm, Computer Economics provides metrics for IT management, such as IT spending and staffing benchmarks, ROI/TCO studies, outsourcing statistics, and more.

Go to latest postings

Search the Spectator!
Join over 1,700 subscribers on the Spectator email list!
Max. 1-2 times/month.
Easy one-click to unsubscribe anytime.

Follow me on Twitter
My RSS feed RSS News Feed

Computer Economics
ERP Support Staffing Ratios
Outsourcing Statistics
IT Spending and Staffing Benchmarks
IT Staffing Ratios
IT Management Best Practices
Worldwide Technology Trends
IT Salary Report

Get these headlines on your site, free!


2014 Best Independent ERP Blog - Winner

2013 Best ERP Writer - Winner

Alltop. We're kind of a big deal.
Constant Contact 2010 All Star Technobabble Top 100 Analyst Blogs

Key References
Strativa: Business strategy consulting, strategic planning
Strativa: IT strategy consulting
Strativa: Business process improvement, process mapping, consultants
Strativa: IT due diligence
Strativa: ERP software selection consulting and vendor evaluation
Strativa: CRM software selection consulting and vendor evaluation
Strativa: Project management consulting, change management
StreetWolf: Digital creative studio specializing in web, mobile and social applications
Enterprise IT News: diginomica

Spectator Archives
May 2002
June 2002
July 2002
August 2002
September 2002
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
April 2003
May 2003
June 2003
July 2003
August 2003
September 2003
October 2003
November 2003
December 2003
January 2004
February 2004
March 2004
April 2004
May 2004
June 2004
July 2004
August 2004
September 2004
October 2004
November 2004
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
January 2006
February 2006
March 2006
April 2006
May 2006
June 2006
July 2006
August 2006
September 2006
October 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
July 2008
August 2008
September 2008
October 2008
November 2008
December 2008
January 2009
February 2009
March 2009
April 2009
May 2009
June 2009
July 2009
August 2009
September 2009
October 2009
November 2009
December 2009
January 2010
February 2010
March 2010
April 2010
June 2010
July 2010
August 2010
September 2010
October 2010
November 2010
December 2010
January 2011
February 2011
March 2011
April 2011
May 2011
July 2011
August 2011
September 2011
October 2011
November 2011
December 2011
January 2012
February 2012
March 2012
April 2012
May 2012
June 2012
July 2012
September 2012
October 2012
December 2012
January 2013
February 2013
March 2013
May 2013
June 2013
July 2013
September 2013
October 2013
December 2013
January 2014
February 2014
March 2014
April 2014
May 2014
June 2014
July 2014
August 2014
September 2014
October 2014
November 2014
December 2014
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
September 2015
October 2015
November 2015
February 2016
May 2016
June 2016
July 2016
August 2016
September 2016
October 2016
Latest postings