ISV’s will move away from Traditional Hosting Providers

Independent Software Vendors often launch Partner Programs and form partnerships for extend their channel and reach of revenue. Some of these revenue stream are traditional hosting providers (often referred as Technology Partners or Hosting Partners)  – providers of static non-dynamic / non-optimized hosting. Within the next 3-5 years, many ISV’s will be forced to break this relationship to persue new opportunities of self-control and service delivery.

With the launch of Windows Azure, Google Cloud and enterprise cloud solutions like CloudRig and vCloud, ISV’s are able to manage and control their own relationship of hosting – and managed those required resources. Many ISV’s still have legacy offerings and despite Microsoft’s push on Azure, many ISV’s will still not launch service on that platform. Hosting providers have to find new ways of adding value to the ISV’s, but my belief is a certain few cloud vendors will have knowhow to persue the opportunity to bundle the right services and products to prove a gardened relationship to the ISV’s.

The revenue channels and business model for SaaS formes nicely around Independent Software Vendors these days; their opportunity is enormous and only the right focus can help ISV’s pick the right cloud strategy. A resent survey I made with 130 ISV’s in Scandinavia 82% considered SaaS a great opportunity and 67% would invest in this opportunity within the next two years. 16% consider Azure as a platform, while 54% would rather have their legacy application prove their business case for Cloud Computing. Interesting number, but also interesting to follow these ISV’s.

Microsoft to deliver virtualized servers on Azure

Another swing At the Microsoft Hosting Industry

Our fear was real. We didn’t expect to see it, we actually thought it was a rumour; but Microsoft is on a colliding path towards hosters and service providers. Todays announcement at the Microsoft PDC 2009 events proved our fear as Microsoft is going to launch virtualized server-based offering with the Windows Azure platform. Not only is Microsoft pushing their Dynamic Data Center Initiative towards hosters and service provider while behind the scenes building a strong value proposition to target the exactly same customers. Confused? I was!

Not only did Microsoft cut prices on Online Services 50% without giving the same opportunities to their partners (SPLA partners; hosters red.), but also leading a strong competition against them. Confusion must arise at partners with the leading DDC initiative whilst Microsoft launching the same services. As Bob Muglia happy announced:

“Bet on our online services, Dynamics Online CRM and Windows Azure. Focused on providing applications, infrastructure, platform, and data, now all as a service “ready for business now…They’re the foundation of everything we do.”

Why does Microsoft build this disruption? As I wrote yesterday, there is many reasonable points for Microsoft to deliver a Cloud Computing strategy. Cloud is not an evolution in the IT industry; it is the revolution! And in every revolution, somebody has to die.

What Now?
For established players in the field there is only to innovate and include competitive services to compete; now against Microsoft. For these companies, investments into their data centers, customer footprint and assets is not a 1-2 year job-position, where you just shift to a new chair if the market is changing. Of cause the DDC and VMWare initiatives can help reduce your operational costs; but deliver a new value proposition is not an option. Debts and economies are built on 3-10 year financing plans – only option is to consider Linux, third party software etc.. For the new entrants – focus your business elsewhere. You have to become really aggressive and differentiated to grow a success.

Where we believed the outsources (enterprise big dedicated hosting providers) would perish to the SaaS business model, it now seems like these players have a great differentiation.

Question: “So I want to built a business in Saas?”
Well – make no doubt that SaaS and Cloud Computing will survive. Yesterdays SaaS providers (mainly hosters) will be disrupted by tomorrows true SaaS providers (ISVs). If you want to built a succeeding business – become an ISV. Business like,, and all deliver a true SaaS value proposition. This is there the next killer app, and killer business model is.

Azure VM Role –

Why Microsoft shouldn’t be a Cloud Computing Company

Just finished reading Paul Quickendens blog entry at CloudAve – make no mistake, I do agree with many of Paul’s points and arguments, but I have to ask myself: Why wouldn’t Microsoft go to Cloud Computing and is this so wrong?

At first – let’s go back and address some of Paul’s points. As started in the Innovator’s Solution and  Dilemma; companies cannot disrupt themselves within. But looking at Google, Netsuite, Salesforce – for a long period Microsoft’s old traditional business model have been disrupted. We faced nearly a whole generation, where Microsoft grew their market share, and stood as sole provider of killer applications. Basically we have to respect that Microsoft is a public company – focus is to build shareholder value and capital. And normally; we are human beings – and therefore reluctant to change… in five years time we have adopted the status quo.

So is Paul wrong? Definetly not! When a senior Microsoft official use a term like “they are going to Creatively Disrupt themselves”; you better think hard whats going on. Clearly some fragments of the Corporate structure is challenging the Partner model. It is not totally odd as Bill Gates left the company year ago, and the newcomer Kevin Turner is rumoured to be a hard nut against suppliers, partners and vendors in Wal-Mart. Ron Markezich with his remark made it clear, that some parts of the Microsoft partner sphere is going to perish.

For Microsoft the marketing phrase is; Azure and BPOs is for the partners. And with partners Microsoft address the independent software vendors (ISVs) and Systems Integrators (SIs). Basically Microsoft cannot deliver value with either Azure or BPOs without these Partners. As coming up from the hosting channel in Europe the last 9 years, I can only see what Paul’s is addressing as the partners whom invested heavily in driving the partner hosted business models, have to give room. But we, as providers of services can still capitalize on the marketing terms – although we are much closer to fail, than succeed.

So – conclusions. If Microsoft does not invest in this, another channel will arise and Microsoft will be disrupted. If Microsoft does invest in this, they will attack parts of their own partner channel but hit the opportunity. VMWare is going to serve the market, Google is there and is pushing hard. Have we seen the winner? No. We have seen the beginning to the end of this era – but you as a vendor, partner or customer have to build upon new choices. I strongly agree with Paul’s view – Microsoft would have won more hard and feelings by helping existing partners compete against their competitors. Reality is that Cloud Computing is a $42 billion market opportunity – today around $9 billion. Microsoft will compete against their own channel of those $9 billion (call it compromise their existing revenue), but also bridge the gap towards the $42 billion. You have the same opportunity – although investment sums are probably somewhat different, and unfortunately Microsoft is cause many partners to hold back investments that would be beneficial to all parts.

Paul – thank you for spinning the entry, and some thoughts.