The hype and backlash surrounding cloud applications shares many similarities with the market dynamics that occurred when organizations shifted from homegrown solutions to third-party commercial applications. As Mark Twain said, “History does not repeat itself, but it does rhyme.” Cloud applications are an evolution, not a revolution. They continue ongoing trends and are an inevitable part of the future IT infrastructure for most organizations. This post outlines the parallels in the adoption of these two technologies and identifies some implications for software firms, whether they offer cloud-based solutions today or not.
Empowering managers and end-users
The original third-party applications promised to harness the power of the organization’s data and put it in the hands of employees and enable them to access the information they needed, when they needed it. Most third-party applications delivered compared to legacy, homegrown solutions. Today cloud applications position their key advantage around these same themes of putting data into the hands of employees and managers where and when they need it.
Executives and end-users needs drive adoption
Thirty years ago IT departments were not unhappy with their home grown-legacy systems; some were quite proud of them. However, third-party applications promised features and functionality that home-grown systems could not provide or could but would take too long to develop. Third-party applications claimed they understood business processes and departmental needs better than the engineers in the IT department. They promised ease of use and more intuitive interfaces. All of these things were true at the time. Most third-party applications were a giant leap forward in the end-user experience. Cloud applications further refined this trend.
Adoption resistance and hurdles
Not everyone was in favor of moving to third-party solutions. Both management and IT had arguments against moving away from homegrown systems including:
- Loss of control: Organizations worried about losing control of their applications and data by relying on a third-party vendor.
- Need for customization: Many argued that third-party applications would not provide the level of flexibility and customization that businesses needed and a homegrown system could provide.
- Security concerns: The IT department was suspicious of any code that it didn’t create and own. It worried that third-party applications had vulnerabilities that could exploited.
- IT job security: Some believed the IT department would be a barrier to third-party applications because it would reduce their power and influence within the organization – they were the masters of the homegrown systems.
All of these had a degree of truth to them, but eventually the market realized these concerns were overblown and the benefits gained outweighed the downsides. Echoes of all these concerns can be heard in the anti-cloud rhetoric of today.
Point solutions on the edges first
Most organizations took a conservative approach to adopting third-party applications by starting with point solutions on the edges of their operations. With time third-party applications migrated to mission critical applications. Cloud applications are experiencing a similar migration.
The rest of the story is well known
Homegrown solutions went into rapid decline as third-party applications became the norm. Things got better for the end-user. Organizations became more productive. Security improved. Over time the gains made were forgotten and the criticisms once reserved for homegrown systems were leveled at third-party applications. Cloud applications appeared on the scene and promised to put data in the hands of the employees that needed it when they needed it, in a user friendly fashion, and be built with business processes in mind. Concerns about security, loss of control, and a need for customization surfaced as the barriers to using cloud applications.
So what are the implications of these similarities for today’s enterprise software vendors?
Eventually “cloud” will not be a differentiator; it will be an expected deployment option. The pace of this transition will vary by industry and application but all are headed in the same direction. Software vendors that do not have a cloud option will see their addressable market shrink. Vendors that do not have a cloud option or plans will have their technology road map questioned. Those that rely on a cloud deployment as a key differentiator will have to seek new value propositions.
Psychological barriers regarding security and loss of control will fall, but not disappear. Organizations and IT decision makers will see vendor size and brand equity as surrogates for safety and weigh perceived safety against best of breed functionality in purchase decisions.
IT will remain a key stakeholder and be a primary point of entry and management. The IT department has evolved along with each change in technology that heralded its death and will continue to do so.
Once the noise surrounding cloud fades what will remain is the same set of product and marketing challenges that software vendors have always had: creating products and services that add value and talking about them in a way that resonates with prospects.