With the skyrocketing popularity of cloud computing, and with every major vendor talking about cloud strategy, have we reached the point where business software is approaching obsolescence? The short answer, in my opinion, is “no.” In this article we’ll look at reasons why the cloud is going to present new opportunities for business software to reach markets that the on-premise version might not, but also at why those on-premise applications will be around for years to come.
Courtesy of mathias-erhart (flickr)
The cloud, and all of the services and applications that can be offered through the cloud, offers to the small and medium business (SMB) services that might otherwise be well beyond their reach. Companies in the SMB segment may not have a dedicated IT employee, let alone a team of IT that can deploy and maintain many business applications, but an outsourced service provider or even a slightly savvy business owner can work with applications in the cloud.
One of the key examples where I believe there will always be a market for both on-premise, and cloud solutions is email. Cloud based email services offer solutions for sole proprietorships through million plus enterprises, and for many, the cloud based solution meets their needs. But even with dedicated private clouds, there’s always going to be limits in terms of customization or feature set that will make it unattractive to enterprises that need more. For them, an on premise solution is appropriate.
As another example, take the CRM application. It can cost tens of thousands of dollars to purchase, implement, and support even the lower end of CRM applications on premises by the time you factor in hardware, operating systems, and expertise. Larger implementations can run into the millions. For many SMBs, that is just simply not practical. They could implement one of the many quality OSS applications that are out there, but most SMBs don’t want to invest time in figuring out OSS software. They want something that “just works” and for someone who is not in IT, many quality applications need more than the casual user can handle. That’s where cloud providers of CRM solutions can come in, offering simple, affordable, web browser based solutions that fit the needs of the SMB market and can be implemented in hours rather than months.
Enterprise Resource Planning (ERP) solutions are another key category of business software that will enjoy new customers in the cloud, but will also keep a healthy on-premise market. ERP suites for medium to large businesses are typically customized to the business in order to provide exactly what the business needs. The implementation can stretch over years, and once a company has deployed an ERP, they will probably stay with that ERP for many years to come. ERP applications have simply been too costly for the SMB market, until now. Since they don’t need as much customization, and are flexible enough to adapt their business processes to meet the application’s limitations, cloud based ERP packages are a great solution for the SMB, and offer vendors a new market in which to grow. But their enterprise customers will still be there, requiring support and updates, for many years to come.
Even the humble office suites will remain for the foreseeable future. Cloud based versions of word processing, spreadsheet, and presentation software has been available for many years from major vendors including Microsoft and Google, and for basic use, work well. But companies that need their users to maintain full functionality while offline, or want to administer common settings across their user base, will continue to opt for the locally installed software suites, and that’s just fine.
Cloud computing means that businesses will have more choice, and that is good for everyone. I expect that the typical company, from 5 user to 5 million user, will adopt a mix of on-premise and cloud based solutions; each as appropriate to meet their needs, and their budget. The successful software vendors will be those that recognize this, embrace it, offer their customers a range of choices, and work diligently to ensure that all their offerings, locally installed and in the cloud, work together and offer uses a consistent experience.