The cloud rains on Big Software's parade

SAP's recent first-quarter miss is yet another sign that the cloud is killing traditional enterprise software

SAP has reported first-quarter sales and earnings that missed analysts' estimates. The reason: Cloud computing alternatives grew in popularity.

It's becoming a familiar story: Even the core enterprise systems that were supposed to be immune from cloudification -- those from IBM, Microsoft, Oracle, and SAP -- will die the death of a thousand cloud cuts. Big Software is feeling the cloud heat.

[ Cloud computing shares resources that were never shared before, creating a new set of risks and demanding a new set of security best practices. Learn those new security practices from the Digital Spotlight: Cloud Security PDF special report. | Stay up on the cloud with InfoWorld's Cloud Computing Report newsletter. ]

For example, IBM said last week that first-quarter sales fell almost 4 percent as customers -- because of the transition to cloud software -- become less reliant on buying servers and on mainframe capacity.

The expanding use of cloud computing is driving wholesale change in how we buy, deploy, and manage enterprise software systems. Enterprises continue to move to cloud providers, such as Amazon Web Services, rather than pay huge license fees to on-premise providers.

It's no secret that all larger, "legacy" enterprise software and hardware providers have their own cloud strategies. However, the continued decline in growth from quarter to quarter will be a good indicator as to how those strategies are panning out. Even if cloud sales are great, those sales will come at the cost of traditional business. AWS and other cloud providers without legacy customers don't have that problem.

A possible consequence is that the "legacy" providers will become weaker in the market. They won't be able to spend on the R&D to improve the software they've provided to your enterprise for years. As a result, the feature/function pipeline may slow down or stop altogether as spending shifts toward the construction of cloud-based systems or as the revenue to reinvest in the technology is just not there.

I suspect we'll see more declines in revenue at traditional enterprise software vendors due to the rise of cloud computing. It really is turning Big Software on its head.

It's time to begin dialing this shift into your IT plans. I know I have.

This article, "The cloud rains on Big Software's parade," originally appeared at InfoWorld.com. Read more of David Linthicum's Cloud Computing blog and track the latest developments in cloud computing at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.

From CIO: 8 Free Online Courses to Grow Your Tech Skills
Join the discussion
Be the first to comment on this article. Our Commenting Policies