Are You Generating Your Own Electricity?

To say that there’s a lot of interest in cloud computing today is probably a gross understatement. Both Forrester Research and Gartner are predicting that more than 40% of companies will get most of their software from the cloud by 2015, up from 3% today. This represents a 1,400% increase in just four years. So what’s driving this rapid adoption of the cloud?

The best analogy might come from the past. At the turn of the last century, every company that needed electricity to run its business used its own generators to create power. This was a natural evolution from the water wheels and other mechanical solutions used before the invention of electrical power. But this approach required capital expense, installation effort, and continual maintenance, and it wasn’t very efficient at a macro level. Generating electricity also wasn’t the core of these businesses. Companies generated their own electricity because that was their only option at the time. 

It didn’t take very long before some bright individuals realized that they could offer a much more efficient, flexible, and economical solution by creating a “network” for delivering power. By having a network in place, fewer locations could generate power at much larger capacities, leveraging huge economies of scale. Teams that were 100% focused on power generation could operate these central facilities, relieving their customers from having to develop their own power generation expertise. It also allowed their customers to avoid the significant capital and maintenance expense that came with owning their own power generators. With a power grid (network) now in place, companies quickly moved from generating their own power to buying power-as-a-service.

Fast-forward 100 years. Most companies have their own data centers, servers, storage solutions, and backup solutions that require capital expense, installation effort, and continual maintenance, and they aren’t very efficient at a macro level. But now with the Internet (network) in place, there are a few software and service companies such as Salesforce, Amazon (AWS), Microsoft (Azure), Google, Savvis, and Infor that are following in the footsteps of the Edisons. They’re building huge industrial data centers that are much larger, more capable, and more available than what companies need and can afford to build for themselves. These providers are leveraging significant economies of scale and labor that come with multi-tenant solutions. Teams focus 100% of their time on managing and maintaining the equipment and software, allowing customers to avoid the significant capital and maintenance expense of owning their own data centers and servers. With the Internet now fully in place, companies are quickly moving to buying Software-as-a-Service.

Does this mean that all software will now be consumed as a service? Probably not. Some companies today still generate their own power because of their special business needs. But it does mean that a rapidly growing number of companies will probably move most of their solutions to the cloud as the analysts predict. Remember that companies 100 years ago really didn’t want to generate their own power. They just wanted the electricity. Today companies don’t want to generate their own software solutions. They just want the functionality.

Now you have a choice. Are you ready to quit generating your own software delivery solutions and move to Software-as-a-Service instead? I’d love to hear your feedback. Please leave a comment to this post.


Posted by Jim Plourde, Vice President, SaaS Systems, Infor