Cloud Computing and SaaS: a lecture by Phil Wainewright – Part 1

More than a week ago I attended SafeNet and IGT event discussing monetization of cloud applications. In this event I had the pleasure of meeting and hearing Mr. Phil Waineright who lectured on the industry of Cloud Computing, including specifics for ISV as SaaS vendors. Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant. The presentation started with a technical PowerPoint problem, so it was a bit amusing as he started the lecture in a spontaneous manner.

The lecture begins with an overview of the cloud and SaaS markets including basic definitions. Mr. Waineright expresses his visionary outlook in the following words –

People think: oh, cloud is a technology problem, it’s a way of making my technology work better, and to think about that is to ignore the bigger picture”.

He presents a strong determination that Google search is a SaaS and he describes a strong synergy between the cloud computing and the `explosion` of mobile or social applications. Describing the 3 layers, Waineright describes SaaS, as the most powerful of the three and is also noting that it holds 50% of the cloud computing market. SaaS is the fastest to grow with a rate of 25% a year on average (by IDC analysts) comparing to a decline in software licenses sales. I can strengthen the latter with Forrester research forescast that In 2011, SaaS will be a $21.2 billion market and grow to $92.8 billion in 2016. {block:More} Read More {/block:More} Why move to the cloud? Time and money 

Waineright explains his obvious answer by saying that “time and money” means that the ISV’s customer does not need to invest in upfront costs and wait for months for the application to be deployed. He also talks about the accelerated pace of innovation supported by the SaaS model.

  “… some ISVs will make that mistake as well .. You can’t make break through savings in cost of operations by adopting and emulating the cloud architecture using virtualizations and automated operations…you have to go to a multi-tenant architecture in order to exploit the economies of scale”,

Waineright holds a definitive position on the multi-tenancy conversion issue by saying that cloud computing is not a “Relocation Exercise” He states that there is no other choice but to invest the money and the efforts to make sure that the technology supports the model of SaaS and the `economies of scale`.

 ”..the difference between using public cloud and having a private cloud instance can be up to 40 times difference in economies of scale. Even for a large enterprise …will still get cost 10 times more per server instance”. .

This statement together with his recent blog post “Private cloud discredited”, make it seems that Waineright does not believe that the private cloud is a strategic option. I agree with this viewpoint and I think that the private cloud is a tool to support this temporary stage of moving applications and data into the public cloud. I find that there is strong debate about this “temporary stage”, as it seems that for enterprises it can take long years to rebuild their IT from scratch in the cloud.

 “Software vendors who embrace the cloud, are actually soaking up revenue that previously was spent on servers’ infrastructure and database administrators … You can save your customers all of that expense and it becomes part of your margin ..”.

I totally agree that the enterprise which already decided strategically on moving to the cloud will be a perfect match for the model presented. Today we are still wondering what are the immediate motivations of an enterprise that already invested a lot of money over the years and today has a full control over stable IT environment and operations. I think that we can expect that this organization will be hesitant with shifting to the cloud. Taking that in mind together with the “uncertainty of the cloud” (still a common phrase) the debate is still around. The shift to the cloud decision must be made and real actual actions are being taken today only by the visionary and early adopters organizations, though as I consider myself an optimist I believe that we are about to be surprised in the very near future.

… Part 2 will include the lecture audio and the presentation itself with more insights.

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