Cloud computing is not just one more way to deploy information systems. It represents a total shift in how IT resources are delivered and ultimately will replace most of not all internally-maintained IT infrastructure.
At least that's the view of Nicholas Carr, who gave a talk at a one-day conference on cloud computing organized last week in London by Google. If you've read Carr's work in the past, his presentation will be familiar. One main point: the on-premise deployment of systems such as Oracle and SAP today are analogous to the on-premise factory power-plants of the 19th century--ultimately replaced by public electric utilities. So, it will be with utility computing.
Carr also gets a little bit into IT budget ratios, which we track closely at Computer Economics. His analysis is spot on and is a strong argument for why cloud computing ultimately will prevail over on-premise systems.
Near the end of the presentation, Carr presented five models for adoption of cloud computing:
Internal clouds: large organizations take advantage of cloud computing technologies by moving their own large IT infrastructures to a cloud computing model.
Cloud as supplement: organizations retain their on-premise systems but use cloud computing to deploy new IT capabilities.
Cloud as replacement: organizations forgoing their own IT infrastructure altogether and going with cloud computing for everything. So far this is appealing, naturally, to smaller businesses.
Cloud as democratizer: cloud computing allowing individuals to have their "own data centers," leading to an explosion in innovation.
Cloud as revolution: cloud computing reducing the cost and increasing the accessibility of data processing, leading to new ways of embedding IT in new products and services.
You can view Carr's 30 minute talk here:
What about the major on-premise software providers, such as SAP and Oracle? Can they make the transition to cloud computing? Although both SAP and Oracle have cloud computing initiatives, such as SAP's Business ByDesign and Oracle's On-Demand CRM, I'm not hopeful. They have too much invested in, and receive too much of their margin, from their legacy products.
Consistent with this view, at the end of his presentation, Carr looks at cloud computing as a disruptive technology, a la Clayton Christensen. I was glad to hear that, as I've long felt that cloud computing strongly qualifies as a disruptive technology that does not give hope to the current market leaders in enterprise software. But that's the subject for another post.
From time to time I bring up issues that buyers should be aware of in evaluating SaaS providers--for example, business continuity concerns. But in the long run, I'm convinced these issues will be worked through. The transition will take some time, but the economics are too strong for cloud computing not to prevail. Therefore, even today, buyers should consider every IT decision in light of the options available in the cloud.
Update, Nov 1. Be sure to read the first comment on this post, from former SAP executive Nenshad Bardoliwalla, who essentially confirms my point.
Maria Simos at E-forecasting has put together an excellent slide show on her firm's forecast for US economic activity, in light of history since the mid-1800s. This is a must-see for anyone interested in where we're headed in the near future.
Bottom line: we're already out of recession.
Some key points:
US GDP is estimated at 3.6% growth in Q3, marking end of recession
Six month growth rate in September is at 0.5% growth--first time positive since August 2008
US leading indicator has gone up six-fold, growth rate above the long-term trend
US GDP growth will peak in the 3% range, then stabilize at 2% through 2012
Manufacturing sector growth has already hit bottom and has started to rebound
Inflation will worsen due to increases in the money supply
There is much more on consumer spending, export and imports, and global trends.
You can view the whole slide show below. (Skip quickly through the first 20 slides to get to the good stuff starting on slide 21.)
In the last part of the last keynote at Oracle Open World yesterday, Larry Ellison finally gave some specifics concerning Oracle's Fusion Applications, its next-generation of business software.
Technology foundation and user interface
These are the areas where Fusion really shines. The product is completely architected from the ground up on Oracle Fusion middleware, with a service-oriented architecture, allowing it to interoperate with existing Oracle applications as well as competitor applications and even custom systems, as long as they adhere to open standards. Fusion apps also incorporate role-based design, embedded analytics, and unified communications features, such as presence-awareness and chat.
What Fusion will include
Those counting on Fusion to be a comprehensive successor for Oracle's existing products, however, will be disappointed. According to Ellison, when Fusion first reaches general availability, it will not provide the breadth of functionality currently available in Oracle's existing portfolio. This has been self-evident, but now Oracle has made it official.
Specifically, Fusion will only address the following horizontal functions:
Customer Relationship Management
Project Portfolio Management
Governance, Risk, And Compliance
Human Capital Management
Supply Chain Management
Ellison specifically mentioned manufacturing (both process and discrete) and public sector as two sectors that would not be addressed by Fusion Apps, at least initially. But it would also appear that any Oracle customers or prospects looking for industry-specific functionality (e.g. retail, life sciences, etc.) would not find Fusion to be a complete solution.
The roadmap: "Fusion + Other Stuff from Oracle"
Here's the big disappointment. In nearly the last sentence of his keynote, Ellison indicated that Fusion apps would be available "next year." That would be 2010. So literally, Oracle could release Fusion apps next December--14 or 15 months from now--and still meet Ellison's timetable. Until then, for most customers, Fusion is just a roadmap.
Although Oracle asserts that the apps are “code complete,” the product is in what Oracle calls “in-house beta.” Customers have been brought in to test applications installed on Oracle premises as part of this program. There are no live customers currently, but early adopters are signing on as we speak.
On the other hand, you could spin the Fusion timetable in positive light. The fact that software sales are depressed right now as a result of the recession means it is a good time for Oracle to be making this transition. In addition, I would rather see Oracle take the time to get it right with Fusion than rush it into general availability only to suffer a loss of credibility when new customers encounter problems.
But even when Fusion does reach general availability, most Oracle customers will need to consider Fusion apps along with industry-specific modules from existing Oracle products. Unless an organization only needs the horizontal functionality in the bullet points listed earlier, we're talking about Oracle selling Fusion apps in combination with other Oracle products. A manufacturing industry prospect would need to buy Fusion apps plus manufacturing modules from Oracle's E-Business Suite or J.D. Edwards, for example. A retail industry prospect would need to buy Fusion apps, plus Oracle's Retek products. "Fusion + Other Stuff from Oracle" will be the roadmap, at least until Oracle can roll all that industry-specific functionality into Fusion.
Compounding the problem, Oracle's existing products are a moving target. From other information gleaned during Open World presentations, it's clear to me that Oracle's development organization is not standing still with its current portfolio. For example, I saw some very deep CRM functionality recently introduced for municipal government in Oracle's E-Business Suite. I don't know when Oracle would be able to incorporate such functionality into Fusion.
From the quick screen shots and demo scenarios presented during Ellison's keynote, it appears Fusion apps will be a great product. But the limited functional coverage of the initial release for Fusion means, as I noted, that most Oracle customers and prospects will need to sign up for Fusion in combination with other, existing, Oracle products. For existing customers, the more straightforward path would be to simply stay with Oracle's existing products, for which Oracle has promised to continue support under its Apps Unlimited program. And new sales prospects may find "Fusion + Other Stuff from Oracle" a muddled sales pitch.
Update:Merv Adrian blogs that he was less impressed with the Fusion news than with the news on Oracle's database and BI offerings.
Update:Jim Holincheck has a good post with lots of details about the functionality included in the Fusion's Human Capital Management (HCM) module.
Salesforce.com: more than an itty-bitty application
I'm spending a couple of days at the Oracle Open World conference this week and decided to find out a little bit more about Salesforce.com and its relationship with Oracle. Why? A couple of weeks ago, Oracle's CEO Larry Ellison made some not-so-kind comments about the term "cloud computing" in general, and Salesforce.com in particular.
"Let's look at [Salesforce.com's] technology," he said. "They buy computers. They rent a room. Uh, they put the computers in the room. They buy electricity and plug it in. They then buy an Oracle database to run on those computers and then they buy Oracle middleware to build their applications. Oh, excuse me, and then they build this little itty-bitty application for salesforce automation. ... Most of the technology at Salesforce.com is ours."
Stripping away the hyperbole, let's break down Ellison's analysis. He thinks that the value of Salesforce.com is in its IT infrastructure, most of which is provided by Oracle. The CRM application is just a small part of the total solution and therefore a small part of the value that Salesforce.com's customers receive.
What's wrong with this picture Let's stipulate that in terms of lines of code, the application layer is a small part of the overall technology running at Salesforce.com. I don't know what the percentage is, but let's assume it's 5%. Does that mean that the application only contributes 5% of the value that customers derive from Salesforce.com? I don't think so. Strip away the application, and Salesforce.com customers get nothing. Furthermore, it would imply that all a software vendor needs to do is build its application on Oracle technology and it will deliver value. That argument, of course, is ludicrous.
Of course, Oracle technology can be used to build on-premise solutions as well as software-as-a-service (SaaS) solutions, such as Salesforce.com. Is there anything special about SaaS in terms of delivering customer value?
Cloud computing delivers innovation Yesterday, to answer these questions, and also to have a little fun, I took my Flip video camera and set out with my fellow Enterprise Advocate, Vinnie Mirchandani, to see how cloud computing was represented at Oracle Open World.
There are a lot of vendors on the exhibit floor offering cloud computing and SaaS solutions. But finding one willing to go on camera to talk about this subject wasn't easy. So, I was happy when Kendall Collins, Chief Marketing Officer at Salesforce.com, agreed to an interview. I'll let Kendall speak for Salesforce.com in this four-minute clip:
What is striking to me in this short clip is the single example of how cloud computing delivers value in a way that's just not possible with an on-premise system. The salesforce-to-salesforce functionality that Kendall describes above is only possible when multiple organizations are resident on a multi-tenant system. To achieve this sort of functionality with an on-premise system would either require extensive EDI links, or custom systems using Web APIs. In any event, it would most likely take an organization years to develop such a system using on-premise deployment.
This doesn't mean that cloud computing is the best solution to every problem. Many SaaS providers do not yet have the out-of-the-box functionality to match an Oracle E-Business Suite, for example. But that may be changing. As SaaS becomes a more accepted means of software delivery, these solutions will become more mature, displacing on-premise systems in more organizations.
And this might prove to be the real threat to Oracle, which might explain Ellison's hyperbole on this subject. It's possible that years from now, Oracle will be mainly known as an infrastructure provider to the Salesforce.coms of the world, who deliver the real value.
Update, Oct. 14.Bruce Richardson reports on the presentation by Marc Beniof, CEO of Salesforce.com at Oracle Open World.
by Frank Scavo, 10/13/2009 08:05:00 AM | permalink | e-mail this!
I'm attending a couple of days at Oracle's user conference in San Francisco this week. Tonight, Larry Ellison and Scott McNealy took the stage as a united team representing Oracle and Oracle's latest acquisition, Sun Microsystems.
Larry Ellison, true to form, spoke mostly about Oracle's competition, specifically IBM, claiming Oracle's database running on Sun processors are faster than IBM's DB2. He reassured Sun's customers that Oracle would invest even more in Sun's products than Sun has. And, he also said the right things about continuing to invest in MySQL, Sun's open source database management system.
So, for Oracle and Sun fans: plenty of red meat. For the rest of us, we'll need to wait to see how the Oracle/Sun combination plays out in reality. And, those of us on the enterprise software side of the house would really like to hear about Oracle's progress on its Fusion applications roadmap.
In the meantime, take a look at what its like at the Moscone Center in San Francisco, with thousands of Oracle Open World attendees streaming into the Ellison-McNealy keynote.
Update: On Monday, several analysts present at Oracle Open World recorded videos of their first impressions of the conference:
Here's Vinnie Michandani:
And Ray Wang's take:
Finally, here are my thoughts:
by Frank Scavo, 10/11/2009 09:30:00 PM | permalink | e-mail this!
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