Tech Innovators should be Prepared to Capitalize on Enterprise Marketplace Hyperbole about Cloud Computing

On July 3, 2012, Daniel Ferry, who writes for the Motley Fool blog, published a post, Enterprise Software Firms Rush to Plant a Stake in the Cloud. We caught a whiff of hyperbole through several of Mr. Ferry’s statements, including:

  1. “Cloud computing is typically more efficient, as the machines that actually store and compute data in the cloud are far more powerful than local machines”
  2. ” It’s probably inevitable that most, if not all, enterprise customers will eventually migrate to the cloud.”
  3. “After just launching its cloud computing platform last month, enterprise giant Oracle (NASDAQ: ORCL) faces the daunting task of completely transforming its business model.”

There are a healthy number of additional quotes that we could add to the above from this post, but it should suffice to simply discuss each of these three to make our point. With regards to 1), in our experience Mr. Ferry’s contention that cloud servers are “. . . far more powerful than local machines” is simply not true. There is no reason whatsoever for a cloud services provider to use Intel Celeron powered computers in its data center. Likewise, these firms can opt to use Intel i7 chips or whatever they like. Indeed, cloud computing options for storage, computing speed, etc. are all variable features that follow very much the same lines as local computing — especially where local computing translates into an enterprise computing environment at, say, JP Morgan Chase or at a firm of comparable size.

With regards to 2), we entirely disagree with Mr. Ferry’s assumption. We do not need to retrace steps that we have already taken in past posts to this blog, but to sum up, we are firmly convinced that not all enterprises will “inevitably” migrate to the cloud. In fact, we think the “what you see is what you get” assumption will likely prove true 5 years from now, as it does today. In other words, enterprise businesses will use a combination of on premise, managed services and cloud applications.

Finally, with regard to 3), it’s a shame that Mr. Ferry apparently believes that the type of “extreme makeover” that he suggests will actually prove to be the case for Oracle. We think that Oracle has been leasing applications to customers for quite a while. Billing monthly lease payments is not much different than billing monthly subscription charges. We think that Oracle’s existing organization will do just fine if the task will amount to billing for monthly subscriptions. But we do not see the radical change that Mr. Ferry predicts; rather, we see largely status quo with incremental shifts between on premise vs. managed services vs. Software as a Service (SaaS) over time.

In sum, tech innovators looking to capitalize on enterprise IT markets should maintain a product development strategy, where it makes sense, that assumes a blend of enterprise computing platforms, at least for the next 5 to 10 years. If you would like to further a discussion with us on this topic, please contact us. You may telephone Ira Michael “Mike” Blonder at +1 631-673-2929 to further a discussion. You may also email Mike at imblonder@imbenterprises.com.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved

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