In this conclusion of the series, we examine “who” wins and who loses as a result of Microsoft’s “World Domination via Cloud” assault. Our “Free Market” economy, can be very Darwinian. When a company the size of Microsoft makes a seismic shift it creates a major disruption that for some is the equivalent of a tidal wave and for others merely a ripple, but felt by all.
So who are some of the losers?
Well obviously the existing cloud platforms will lose some market share as Microsoft elbows it way up to the table. Personally, I don’t think the term “Cloud” will be around much longer. “Cloud” is a euphemism for a new way to deliver software and services. In a few years, all software will be delivered this way and the term will become irrelevant, it will just be “software” again, or the increasingly popular “application”, but I digress.
The cloud platforms that had made a lot of headway before Microsoft woke up are in for a jolt. Take salesforce.com for example, Microsoft CRM online is equally as capable, for half the price. How long do you think it will be before Salesforce has to lower its subscription fees? Google Docs was just starting to gain traction, and now Microsoft Office is in the cloud, I can hear Schmidt saying “Oh well, we’re an advertising company anyway“. Competition in the cloud platform space is going to become very dog-eat-dog and prices will continue to drop as a result. I see a commodity market on the horizon. Providers will be lowering prices and negating the need for different versions at different price points, soon they will all be selling their fully loaded versions for a fraction of what they are asking today. And why not? Once the infrastructure is in place, it costs them pennies to add users and it will become a volume play… think Walmart.
We are also going to see massive consolidation. The big players will gobble up every little cloud company that is based on a “feature” and either incorporate their “feature” or just shut them down if they are replicating an existing feature. I predict that Google will fold up its Google Docs, because the only reason they had any clients was because Office was not there, and they will go after Facebook. Apple will hold its own because Apple loyalists don’t want to escape their cult. Salesforce is going to put up a fight, and it will be a dandy. I see Salesforce taking to the airwaves with TV commercials similar to Apple’s Microsoft bashing campaign of a few years ago. So that’s enough of my predictions.
Who else will suffer? About 95% of Microsoft’s existing Partners. I mentioned their dilemma in a previous post. The fact is that cloud is going to eliminate billions of dollars of current revenue. Technology revenue is going to shift from dollars on-premise, to pennies in the cloud, and the overall revenue pie will be reduced to a bite. In addition to Partners, hardware vendors who support the on-premise model with servers, routers, NAS devices, etc. will start dropping like flies and the survivors will be those that provide data-center equipment. Even companies that manufacture those DVDs that desktop software used to come on, will feel major heat. I also mentioned in a previous post, all those local companies who offered hosted solutions; they will be shuttering their doors as their opportunity window closes. Lastly, of course are the I.T. Department fiefdoms, their power eroded, they will finally release their inordinate and misplaced control over the enterprise. Very Darwinian indeed. Most of these losers can’t blame Microsoft alone, but rather the movement to the cloud overall, of which Microsoft has just added a significant amount of fuel.
Okay, enough doom and gloom, somebody was to come out on top in this right? Absolutely. and here are a few that come to mind:
ISPs. High speed and high data internet connections will be the new gold. All of those calculations and transactions that used to take place on that server in the backroom will now be piped back and forth through your ISP. We are used to having things happen fast, and the internet is not going to be as fast. When you hit save and have time to go get a cup of coffee, you are going to have an “ahah” moment. “I am saving a ton of money on my technology, only to lose it in productivity”. Software maker’s compression techniques will only get you so far… you are going to need a bigger pipe. Maybe this will be Google’s saving grace if they can get that “Gigabit” technology rolled out. I would also consider investing in Verizon; now that prior investors financed the Fios network, it might be time to cash in.
Mobile. No surprise here. One of the benefits of cloud is that it gives you access to your stuff on any device. The only reason that you might have to go back to your office computer is that you don’t have a mobile device. If you think iPads have been hot, you ain’t seen nothing yet. Sure, smartphones are going to see a huge surge, but you can’t conveniently do much work on a smartphone… the tablet is the compromise. Tablet makers are in for a heyday. While there will be a lot more iPads sold, they suffer from a similar drawback to smartphones, after all an iPad is just a big iPhone. The flaw that Apple and Android and Microsoft to date all have is the “app” architecture. For the most part apps are scaled down, feature limited versions of full programs. If you are sitting in front of your desktop computer, you will not pick up your tablet or smartphone to do any work because of these limitations. I am not saying they are useless, on the road you can accomplish a lot with them, just not quite enough. Enter those sneaky bastards from Microsoft again, with that damn Windows 8. Windows 8 seeks to fulfill the promise of a common operating system. Your desktop, your smartphone and your tablet all running the same thing, all capable of performing the same tasks. I don’t know if I will want to draft a contract on my smartphone, but knowing I could is pretty impressive. I will be first in line when the Surface Pro (Microsoft’s first in-house tablet) comes out. I expect a slew of tablet manufacturers to build tablets for this operating system, but I also expect Apple and Google to respond and I give Apple better odds. The Android operating system has become so bastardized that I don’t know if Google can ever get that Genie back in the bottle to fix it. Apple on the other had has held tight control, maybe too tight. I expect to see them removing some self-imposed limitations to compete with Microsoft.
Cloud Consultants. I don’t know exactly what we will be called when the term Cloud goes away, but those of us who are focused on cloud solutions should do quite well. The “bite” of the revenue pie that will be left will be for us alone. For the foreseeable future “Migrations” will be the name of the game. Moving all of you into the cloud, from wherever you are now, is going to take a long time. But long before all of you get there, “Integrations” will become a huge business as everybody will want all of their stuff to be linked together and we can forever say goodbye to data silos. “Customizations” will become an even bigger business as everybody will seek to create a competitive advantage when they are all sharing the same underlying platforms as their rivals. “Cloudification” (I made that up) will become a huge business as every vertical industry solution provider will seek to convert their server-based software to a cloud model in response to demand from their customers. Vertical expertise will be the mantra of all these cloud consultants and they will walk in your door with an understanding of your industry that you never experienced before. Yay, no more paying for them to learn your business!
Business. Plummeting costs, massive overhead reductions, new capabilities that will provide a level of speed and agility that will take a while to even understand, yet alone harness. But ultimately, a return of the control of their future, free of the bonds and limits of their I.T. infrastructure. How much more focused will organizations be when I.T. is no longer a factor in their operations? I dunno, but if you think about how much time, money and energy you have invested over the years, just to keep up with the middle of the pack, and having all that time, money and energy available to deploy in whatever the hell makes your business grow… that can’t be bad.
The biggest winner? SMB (Small and Mid-sized Business). The subscription model will equalize the playing field. Just like websites did (you have no idea how many big company appearing websites front 2-man operations). Its one thing to have a new client assume you are as big as your much larger rival based on an equivalent public facing website, it’s quite another to have the actual level of technology behind your operation to back it up. By eliminating the infrastructure and software costs, a one man company can now access the same enterprise-grade technology that General Motors has… for a few bucks a month. Integrated CRM systems, long the secret sauce if the enterprise, will become a staple of every little business at the local chamber. While it may take years for enterprise to overcome the notion of writing off their huge in-place investments and move to the cloud: SMBs will start tomorrow. In almost no time at all, SMBs will not only be nimble and agile, which has been their only advantage so far, but they will have significantly more efficient processes than their big competitors. Take for example the Legal field, which is a defined vertical for us. Ten attorney firms, having better technology that the five hundred person firm. Or Community Banks, another vertical focus of ours, being able to provide their customers with better insight and more tools than “Intergalactic Bank”. Oh yes, SMBs have always been a mild thorn in enterprises’s side, they are about to become a major gut shot.
Summary. While I started this post on the premise of Microsoft’s entry to the cloud, as I re-read it, it really has more to do with the effect that the cloud overall will have on the way we will do things from now on. I hope I made you think about your future, and not just that I am an opinionated ass. Your comments are welcome.