Cloud computing isn’t going to dominate the tech landscape but will raise a ruckus for software sellers. Google and Amazon will be cloud-computing winners, but the booty will be comparatively little. And there is a race to supply a cloud developer stack for both clients and corporation shoppers. Those are just some of the key takeaways from a Bernstein Report dubbed The Long View : Netbooks, Wireless and Cloud Computing–Client Software’s Imperfect Hurricane . The report, which I discussed in my Microsoft research Thu. , is prominent as it maps out the cloud landscape and puts Amazon in its place.
Bernstein researcher Jeffrey Lindsay observes that Amazon’s much-ballyhooed cloud-computing efforts–S3, EC2 et al–are more on the “gee-whiz factor,” and showing the company as something more than an e-tailer, than truly delivering money. “Although Amazon was maybe a leader of cloud Internet services, and some analysts got swept up in the ‘Books to Bits’ hype, we assume the cash generated by Amazon’s Net services are effectively negligible,” Lindsay writes in a research note. But before we get into that dialogue, let’s outline the landscape. Lindsay has served up this beneficial chart that lines up the cloud stack that assorted sellers are making an attempt to build. Whilst Lindsay forgot some sellers, the chart offers a handy overview:. What’s outstanding is how much Sun Microsystems has been a player in cloud infrastructure yet has did not capitalize.
A lot of the focus is on Amazon, Google, and Microsoft.
Bottom line : Microsoft will take a success from cloud computing and software as a service, but not as much as people think. Sure, SaaS is taking share in human resources and shopper relationship management software, but only ten p.c of corporations manage their documents on the web.
The explanations Office will stay entrenched are interesting. Whilst Google Apps and Open Office from Sun have just about all the functionality of Microsoft’s Office, the conversion of documents is still not 100 % effective, though Open Office comes extraordinarily close indeed. In a test, Open Office could open a Word version of one of our revealed notes with formatting that was over 98 % correct.
Open Office could in a similar fashion open one of our fiscal models drafted in Excel–over 3Mb, and using a selection of Microsoft functions with iterative calculation.
Once again, the document opened just about completely, but a small change was wanted to make sure that the model converged correctly. Google Docs did less well and could not handle the Excel model, but opened our Word note and saved about ninety p.c of the formatting. Though these programs are just about comparable in functionality and can offer further functionality, re permitting users to at the same time edit documents–which the customer versions of Word and Excel can’t do–we still perceive substantial reluctance on the part of users and IT departments to use them. Our own IT department cited many compliance and security issues offsetting against the employment of Open Office and Google Apps–some of them inaccurate–even though termination of our company contract with Microsoft would save a substantial sum of cash. The hangup : Companies do not want to reconstruct templates, convert existing spreadsheets, and query future support for open-source document formats.
We are expecting the software and applications environment to stay heterogeneous for the obvious future–more in accordance with Microsoft’s vision than Google’s.
We disagree with the “computers as a utility” and “device as dumb terminal” models, where all applications run in the cloud, mostly on the grounds that even today’s best networks are a hundred % available and trustworthy, and that devices still perform massively better when they have at least some of their own processing power–taking some of the load off the net processing and connection, and permitting processing to resume when the devices themselves are not connected.”.
Early assessments of Google’s revenue potential from cloud computing were, we think, seriously exaggerated.
Whilst we think that Google’s efforts in the cloud space, and initiatives like Google Apps will appeal to customers and little companies, we don’t expect that they may displace more than ten p.c of Microsoft’s Office software franchise, at best.
Even dishing out a degree of incremental Google search money to the increased Internet traffic coming from use of Google Apps, we don’t expect Google Apps earnings to surpass $1.5 bn. by 2012. Lindsay gives Google Apps props for the Postini purchase, and landing state and academic accounts. But “there are signs that its product development team looks to be committing their familiar mistake of failing to enhance its products adequately to ward off its competitors. Google lost its first prize account, General Electrical , with four hundred thousand seats, to start-up ZoHo in September.”. And eventually, Amazon Internet Services has a huge opportunity, but is truly chump change thru 2012. Though S3 is an example of roughly twenty identifiable services, including infrastructure services ( e.g.
Alexa Internet Search and Info Services ), we doubt they can, as now configured, ( they ) generate even $50 million every year by 2012. This compares with Amazon’s retail earnings for 2008, which are anticipated to be $19 bn. and predicted to reach roughly $30 bn. by 2012. Here’s a look at Lindsay’s estimates for S3 money, which is piled into the “other” category, which includes Internet services, Kindle, and other stuff, on Amazon’s takings statement. Rather than a tough return, Lindsay surmises that Amazon is following the Internet services trail for more soft benefits.
In summation, we think Amazon’s Net Services are not a major expansion or money generator for the company. Instead, they supply benefits like PR positioning of Amazon as a “technology” company instead of simply ( as ) a web retailer. They also provide fascinating projects for Amazon’s developers, who otherwise would be basically limited to developing the shopping platform. This, we think, enables Amazon to draw in a higher caliber of engineers and developers than ( can ) its rivals, like eBay.
That last point is awfully interesting–especially for somebody like me, who is strongly entrenched on the Amazon Net Services bandwagon. Makes you go “hmmm,” as you contemplate Amazon’s motives with its Internet services foray.
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