The New IT era: Welcome to the services generation
It's clearly the era of cloud computing and everything as a service, and vendors built for that model or with the ability to adapt will lead the way.
As the market moves to greater consumption of services, companies that can help reduce the friction for their customers are more likely to do well, says Eric Hanselman, chief analyst at 451 Research. "The rewards will only go to those that understand how to make this service model work for their customers," Hanselman says.
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With many enterprises looking to move from huge data centers to software as a service and the cloud, vendors that focus their business around services have the best chance of winning, says Greg Meyers, vice president of global IT at bioscience company Biogen Idec. "Google, Amazon.com, Salesforce.com, and IBM come to mind," he says.
These companies already have businesses and profit centers "built around the concept of bundling hardware, software and services, which is what cloud is all about," Meyers says. "I think pure-play software and hardware companies like Oracle, SAP, and Dell might have a tougher time adjusting."
Those latter companies have disincentives to let go of the older sales model of moving software or boxes of hardware, Meyers says. He says a movement toward commoditized components in data centers will drive the hardware market away from branded big-iron companies to cheaper components from Asian manufacturers. As a result, margins will be squeezed for the pure-play hardware and software vendors, so they will need to rely on innovative leaps in technology to stay competitive.
Although it's hard to pick winners in the cloud market, "I wouldn't bet against Amazon or Google for anything," Meyers says. Microsoft is an interesting hybrid, he says. While its bread and butter is still selling software, like the other old-line software companies, Microsoft has shown it's embracing the cloud through offerings such as Office 365.
"Microsoft is somewhere caught in the middle," Meyers says. "But it has a big legacy business in software and are sort of dabbling in the cloud. With the new CEO on board, the first order of business should be determining what kind of company it wants to be."
Microsoft is working hard with the development community to make the transition to the cloud as simple as possible for customers, 451's Hanselman says. "It's made some dramatic missteps, but look at what it's been able to do" with the cloud, he says.
Oracle and other traditional enterprise software providers also have much work to do to make the transition to a service delivery model work well for their customers, and if they fail their customers are likely to abandon them for other service providers, Hanselman says.
One group of companies likely to thrive in the services environment is the large telecoms operators, principally AT&T and Verizon, says Jan Dawson, chief analyst at Jackdaw Research.
"These companies are building a combination of cloud services, connectivity, application performance management, application mobilization, and other capabilities, which are going to be very powerful going forward," Dawson says. "They have established relationships with many large enterprises and already provide ultrareliable infrastructure in the form of networks and to some extent hosting and data center services. As such, they're well positioned to expand incrementally into cloud services."