As we have characterized through the first few posts on the topic of whether, in fact, it is inevitable that enterprise IT organizations will, en masse, migrate over to cloud computing options from on premises systems, it is now more than likely that, over the next near term, an increasing portion of these organizations will opt to proceed on a migration to either public or private cloud systems offered as a managed service by either ISVs, their OEMs, or their partners. The options include, as we just mentioned, managed services for either pure cloud computing or a hybrid combination of cloud and on premise systems.
The positive results of this likely trend include a lot healthier set of ISVs. Should enterprise organizations migrate, then ISVs will achieve a substantially lower cost of development, delivery, implementation and ongoing support for their customer bases. Margins should improve — at least initially — as OEMs and channel partners are forced to assume new roles, in order to accomodate the drastic changes in the market that will result.
Enterprise IT organizations should, themselves, benefit from reduced costs of support as well as a different purchasing structure that emphasizes periodic payments for 100% pure business expenses, in the form of monthly/quarterly/annual services subscription costs. In fact, a larger portion of the support requirement will be assumed by the ISVs, themselves. We, ourselves, subscribe directly to Microsoft’s Office 365 E3 plan, including the Dynamics CRM add on. Almost all of the task of customizing the applications that we receive have been assumed by Microsoft. The result has been zero additional cost for us beyond our monthly usage charges. We think that much larger businesses are enjoying even more favorable treatment under this offer.
But there are drawbacks that will accompany this trend. For ISVs, as we have just noted, a new requirement, to support end users, will have to be handled. As well — and we think, ultimately, of much greater importance — we think that ISVs will have to assume some substantial portion of the burden of security assurance, which portion will likely include indemnifying customers from the cost of security breaches, etc.
The entire security question is a two edged sword, for enterprise IT organizations as well as ISVs/OEMs/Partners. If ISVs abdicate, then market messaging — that cloud options are reliable, secure, and entirely dependable — will be compromised and worthless. On the other hand, if ISVs opt to indemnify customers from the costs of security problems, then a substantially higher operating cost may, in fact, arise.
In the next post we will look at how security vulnerabilities can end up as a “con” for enterprise IT organizations, as well.
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