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(I’ve had the chance to meet with quite a few customers, partners and industry pundits over the past several months, and this is the first in an ongoing series where I’ll share some of what I’ve learned — along with a few of my own observations.)

 

Fact: cloud computing and on demand solutions are here to stay and will only grow in importance.  There is no disputing the growing relevance and value customers are deriving today and will realize tomorrow. 

 

  • 25+% compound growth — and growing according to IDC, Gartner and other analyst firms
  • The ability to leverage commercial cloud infrastructure to significantly reduce operating costs by virtualizing on-premise systems
  • Solutions that are easier to buy, deploy and use – a fundamental and welcome shift for the software and IT services industries
  • The ability to help people work much more effectively together to drive specific business outcomes

 

As importantly, the onus is on vendors to manage the customer and solution lifecycle.  It’s about time that we’re on the hook to monitor, manage and administer these systems.  This time, we’re responsible for lifecycle management, and this is driving a great deal of innovation that ultimately reduce the cost of provisioning and managing these systems.  That’s good for everyone… including customers who will inevitably continue to deploy and manage or have a service partner host their own packaged applications.

 

But is this a panacea?  Is software really dead?  Most of the customers I talk to don’t think so.

 

One thing I have learned from working with hundreds of small and midsize companies is that one size or approach doesn’t fit all.  This is even more evident when I talk to CIO’s of larger firms.  There are real and fundamental reasons why companies continue to purchase, deploy, and even customize packaged software on-premise or via hosting partners, including uniqueness in their value chains, specific requirements in their industry, or a myriad of complex regulations across multiple countries.

 

Will on demand and cloud computing represent the only means for customers to consume software and services?  I’m convinced the answer is an emphatic no.  That said, this is a fundamental shift in the market and a key part of the future of this industry and how we deliver value to all types of organizations and the people who run them.  I’m betting my career on it.   

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  1. Martin English
    There are different types of XYZ as a Service…. An example close to my heart is Infrastructure, where I can use something like AWS to install an IDES version of the latest release to show the business what they will get.  Another use-case is using external cloud infrastructure for major developments – this resolves technical issues (NOT the management issues) around running major development projects in paralell, while minimising capex.
    SAAS, on the other hand, has new issues we need to face – for example, introducing an error in apiece of code thats being tested via Ramp-up has a different effect from an error in a piece of code thats used by ALL your customers.
    Finally, the issues being perceived as the show stoppers are really management or contractual issues (i.e.’data security’ is really a governance issue). The real issue is whether we can trust the telecoms (i.e. Net Neutrality) or rely on them or the cloud vendors to be around next let alone next year.
    Many of the current analysts / noisemakers in this space have a consumer background (where they feel entitled to ***** about less than five 9’s availabilty from a free service), not an enterprise background wher peopl expect good business relationships to last decades, and that you get what pay for.o
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  2. Zal Parchem
    Jef – being an SVP of On Demand, I see you are betting your career on it!  Being a newbie to the “cloud”, I have quite a few questions and, since I live in the SAP B1 world, I am keenly interested in how this plays out for the small companies (10 to 12 users)of the SMB arena; more so the “human side”.  I am absolutely certain there are more questions than answers right now, and a big dose of “hype” has come into the picture.  The point brought out by Martin’s “Net Neutrality” players is a good one I had not thought of but valid(more on what roles or responsibilities they have in the chain, not so much on next year’s existence – although that can be a discussion point). How does the vendors, SAP, providers handle the types of questions found here:  Why the Cloud for SAP B1? . Are there talking points on this?  I have already gotten several Emails asking about the questions posed – if they would only post them where all can see (another story)!  Can you help?  Regards – Zal
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    1. Jeff Stiles Post author
      Zal –

      I’ll take a shot at providing my points of view on a couple of your key questions:

      1) WHY would a company make a decision to go into this “cloud” after putting so much time, money, and effort into one of their most significant business drivers?

      I’m not seeing a lot of existing B1 customers virtualizing their existing deployed systems by leveraging commercial cloud infrastructure.  We’re seeing this happen a great deal with larger customers with more complex SAP Business Suite and SAP Business All-in-One landscapes.  As you know, Business One is pretty easy to manage in an on premise deployment, and there isn’t as much cost saving available by moving instances to the cloud.

      On the other hand, customers who are new to B1 and are looking for a subscription-based, partner hosted solution (or for that matter, considering an on demand solution like Business ByDesign) are typically making deployment decisions based on the ability to reduce labor costs in managing/operating the systems.  In addition, the ability to conserve precious cash is probably the most common business driver.  There are certainly trade-off’s between purchasing out of Operating Expense (OpEx) versus Capital Expense (CapEx) including depreciation… but it’s fair to say cash is king!

      On the subject of dual involvement of Business and IT (not a question per se, but you make very good points)… I couldn’t agree more about the need for vendors to engage with both IT and lines of business.  More importantly, I see SaaS driving a shift in job functions / responsibilities across IT and Business.  I’ve heard the term ‘BizTech’ to describe this… business folks need to develop some savvy around technology, and vice-versa.  By the way, because of the very different requirements around deployment of an on demand solution like Business ByDesign, we’re seeing a real shift in the skills / competency mix and the actual consulting engagements of service providers.  My prediction:  business process acumen and change management skills will be much more in demand the purse technical consulting skills.

      Regards,

      Jeff

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      1. Zal Parchem
        Perfect- thanks.  Have been hearing a lot about the “customers already with SAP B1” and the “customers new to SAP B1” differences.  I understand what Gary is saying in the other post about value, however sometimes the dollars do come into play and get in the way!

        LOL – I have been a “BizTecher” all my life!  Not sure if it has been heavier on one side or the other though. Regards – Zal

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