2016: All in the Cloud?

If there is one top-of-mind issue among CIOs today, it is Cloud computing. But how will it be positioned five years from now — as an innovation that brought about overriding change in the way IT delivers business service or, as some predict, something responsible for nothing more than incremental change to the familiar hosting arrangements and one that back in 2011 was wrapped in massive hype?

At a Gartner Summit in Sydney this week a panel of IT luminaries assembled to discuss the impact of Cloud computing and other IT innovations on enterprise computing in the next five years. One of the key possible scenarios raised by moderator Massimo Pezzini, Gartner Fellow and vice president, was that by 2016, over 50 per cent of all business applications independent software providers (ISVs) would be pure software-as-a-service (SaaS) providers.

The suggestion brought a mixed reaction from panellists.

“From an applications point of view we are all the better for using SaaS,” said Software AG vice president Business Infrastructure Solutions, Jignesh Shah.

“In markets like North America it already accounts for 20 to 25 per cent (of IT data storage). Also, it is important to keep in mind that when talking about applications, it is not just to do with big chunky applications like Oracle, but a whole plethora of specialised apps.

“If you look at the entirety of Cloud computing infrastructure today, SaaS is the only layer that is really making money. And the margin is growing, both from an enterprise (consumer) and vendor point of view.”

Andrew Bearsley, product lead HP Application Lifecycle Management, strongly disagreed with Pezzini’s hypothesis.

“I look at things from an applications and transformational perspective, and the reason I strongly disagree with any suggestion that by 2016 over 50 per cent of all ISVs will be pure SaaS providers is, quite simply, the word ‘pure’,” he said.

“What we’re going to see is more of a hybrid approach, where most vendors have a profitable lead offering in SaaS, but pragmatism is involved as well. It will continue to be important to provide products or services that allow data ownership to stay inside a company.

“This will be a challenge for some providers as SaaS is definitely a driving influence, but I think we will see the emergence of a hybrid model.”

In contrast, VMWare senior director of Application Platform Solutions, Matt Stodolnic, was not at all fazed by SaaS soon commanding 50 per cent of revenue and users.

“I have seen it grow and explode to the point where it is delivering a unified application to millions of people and just how important that is,” he said.

“Now, at VMWare, I see an ecosystem of tens of thousands of small ISVs that are shipping boutique products to a whole range of boutique industries. However, what I do not see is those companies being pure play SaaS delivery.

"This is especially the case given the innovation taking place in platforms where tenancy and data isolation can be achieved in the application platform infrastructure — and those same applications can be run in hosted environments or within a data centre”

Taking up the point, Gartner managing vice president Chris Haddad noted: “The successful software vendors will offer a choice of whether you run software on-premise, on your own infrastructure, or in the Cloud. Today, given increasing privacy obligations, organisations can have a global footprint without building data centres in every country to comply with government regulations. There is no question that software vendors will have to offer a pragmatic choice.”

As Pezzini summarised, come 2016 SaaS will assume increasing criticality, but it will be in a hybrid environment. Pure play SaaS software vendors will sell themselves short if they fail to deliver more diverse solutions.

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