At last month’s Cloud Business Summit in New York, hosted by Saugatuck Technologies, one presenter remarked that none of the new solutions coming out of Silicon Valley these days is on-premises software. It’s all cloud now. Should it be?


This is a huge issue for software providers, whether everything should be delivered as a cloud service, versus installed and run at customers’ sites. For a vendor, the move to cloud is fraught with risk — going from guaranteed streams of license revenue to lower-cost monthly subscription rates, for example. Plus, software providers need to evolve to become data center operators — a different type of business, with more demanding, time-sensitive requirements than simply servicing their own staffs. Does every software publisher really want to get into the data center business?

In a qualitative survey of representatives of the 16 largest vendors names in IT, conducted by IT Channel Insight, eight out of ten “do not believe that on-premise software vendors should shift their overall strategy to cloud.” The assumption, says report author Richard Muscat Azzopardi, is that “those companies who were made by selling on-premise software still see cloud as a great addition to the portfolio rather than a replacement.”Add to that it’s a lot easier for cloud customers to bolt to another provider, or at least gradually work another one in. In fact, it seems many leading cloud vendors are happy to still maintain a place for on-premises software.
This finding is also a reminder that most of the world’s enterprises — especially the mid to large-size ones — still run the bulk of their core applications and systems on on-premises machines. It’s interesting that the vendors — who want to give the impression that everything in the world now resides in the cloud — provide such candor. Indeed, no matter how compelling the cloud proposition may be, and no matter how much of a megabucks savings is promised and might even be realized, the cost of moving major applications and systems off existing servers is a steep one.
There are costs of migrating from an on-premises system to a cloud-based model. A recent cloud cost analysis from ISACA outlines some of them: rewriting applications to operate in a virtualized environment, reformatting data to suit SaaS provider formats, setting up federated identity and access management, and implementing processes to manage the cloud. In addition. there may need to be additional bandwidth investments, as well as hardware investments so infrastructure components may need to be upgraded to integrate with cloud services.
And let’s not even get started with the costs of hiring consultants to help with the transition and new configurations. There is also the training IT and business users will require to get up to speed with the new system.  Don’t forget the compliance reviews, and, finally, there may be costly business disruptions.
So, there’s a good case to be made for maintaining an on-premises software business for the foreseeable future –though it’s likely to continue to shrink while the cloud-borne share will keep growing. Vendors may push for cloud, but as with any new systems migration, it’s a process of years, and even decades. Rumor has it there are still a lot of DEC VAX systems, circa 1990, still running mission-critical applications.
But when the migration decision is made, cloud is an acceptable option now. Lately, the cloud industry leaders Azzopardi spoke with have noticed a change in attitude toward cloud among their corporate clients. There’s a great deal of confidence in the cloud model that wasn’t there even just a couple of years ago.  Business users — versus IT departments — are especially comfortable with the cloud approach  As Orakwue Nnamdi, vice president of infrastructure cloud services at Dell put it: “Technology vendors are increasingly selling to lines of business and actual end users instead of the IT organization or CIO. Employees can directly buy technology (cloud) without huge capital investments or corporate approvals.”
There’s also a convergence with the mobile computing phenomenon,  as observed by Eran Farajun, executive vice president at Asigra: ”A cloud service can be deployed to and accessed from anywhere as long as there is an internet connection. This was perfectly defined by  the consumerization of IT (BYOD), cloud computing is helping to blur the lines between personal use of technology and business use of technology. By having information stored in the cloud and accessible anywhere, the device used to access that information is less important.”
So, in answer to the question posed in the title of this post, “If you ran a software company, would you go all-cloud,” the answer may be yes for a new startup reaching out to new markets. But again, unless you are selling apps through an app store, being a software company now may also means being a data center provider. And for established vendors, it’s a bit more complicated.

By: Joe McKendrick
Original Article: http://www.forbes.com/sites/joemckendrick/2012/12/12/if-you-ran-a-software-company-would-you-go-all-cloud/?ss=cloud-computing