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Leadership / Strategy

Tapas Vs buffet enterprise apps: Which better for your wallet and waistline?

Still think the cloud is mostly b.s.? This is the reason why, even if it is, or at least over 50% of it is, people are still (and indeed, increasingly) compelled by it: Spandex America used to spend 3% of its revenue paying for SAP to run. Now it pays NetSuite 0.15%.

That was one of the highlight data points of last week’s Business Cloud Summit 2010 conference in London, where various luminaries of the cloud-y world braved both Tube strikes and Snowmaggedon to meet and talk about whither next for the technology.

According to the man behind that savings stat – Zach Nelson, CEO of NetSuite, which provides a set of financials as a SaaS – it’s going to be a place where "Stone Age Software" won’t really be viable any more.

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"Far too much line of business software was designed before the first browsers – that’s before 1993," he told delegates. "So you have a lot of companies trying to work in an environment where their products just weren’t designed for – and, like SAP, trying to use the old pricing models: R/3 costs in a cloud deployment just won’t cut it. And we also have a situation with a lot of end users think their job is still to shock servers back into life, not concentrate on what they should be doing, which is providing value-add to the business they work in."

That Spandex example is NetSuite’s current ‘poster boy’ for how well it can compete with such "pre 1993" software. It seems the firm – yes, the same one that makes those "poly-estalene filament fibres" but mainly for textiles, not heavy metal guitarist gear (and to be accurate is actually to be called Asahi Kasei Spandex America, the South Carolina operating base of the bigger company).

Spandex says by moving off R/3 to the cloud application it’s saved $1m in cost already, plus it can now ditch the WAN that alone was billed for $20,000 a month; the "3%" figure is an amalgamation, it seems, of all the associated costs of running an on-premise app, including licence, salary and infrastructure.

If you can see value in this approach but don’t like the Stone Age Software metaphor, you may be more inclined, possibly, to pick up on how Nelson’s peer Greg Gianforte, CEO of a cloud software firm called RightNow, characterises the move away from how we used to consume enterprise apps: "It’s about tapas versus full, groaning table buffets."

Nelson’s way of selling the cloud is not opex so much as capex – the idea that this way of delivering software by its very nature has to be cheaper. "Take professional services," he told the audience. "In the good old days, a vendor like me figured that would be an additional three to six times the cost of the licence I sold you. Now, professional services are 20% of my P&L, and I am totally happy about that as I have more than enough business coming in."

Granted, these are two ebullient CEOs of two cloud firms that at the moment are doing well. But challenges like Gianforte’s closing remark, allied to all this promising data, does make one wonder what business reasons one could mount for continued cloud agnosticism. That remark? It’s of the same species as Nelson on "shocking servers back to life" and just as challenging regarding what the CIOs role and should be going forward:

"Is your job servicing the data centre or serving the business?"

Hard to argue with – even in the midst of Snowmaggedon.
This article is from the CBROnline archive: some formatting and images may not be present.