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SaaS is a Game-changer
By Dhaval Valia
 In my earlier editorials, I have maintained that utility computing or cloud computing will emerge as a game-changer for the IT sector. We are at the beginning of this shift, and based on the recent big-ticket announcements I think I am right on target.
Microsoft last week signed a mega-billion dollar deal with the world’s second-largest service provider, the HP-owned EDS, to host and jointly sell Microsoft’s Business Productivity Online Suite (BPOS) to enterprises around the globe. This deal alone is expected to rake in as much as $3 billion in cloud services and professional services annually.
While the EDS deal may prove to be clincher for Microsoft, which has ambitious plans to eventually offer all its enterprise applications as services, it means a loss of business opportunity for the channel far in excess of $3 billion in providing hardware and software infrastructure to companies which will now avail of this infrastructure in the cloud.
A few such large deals could significantly impact the future of the traditional IT integrator. This brings me to the point I made at the start that cloud computing will change the rules of the game. It will lead to the consolidation of IT infrastructure, as in the case of the EDS-Microsoft partnership, which will certainly lead to the consolidation of the IT channel. The traditional revenue model of small IT integrators will be at risk because the small businesses they cater to will adopt cloud services due to its significant benefits.
This is not to say this scenario will take shape tomorrow. Cloud computing is still in a nascent stage, and there will be many trials and tribulations before it evolves into a mature model for infrastructure delivery. But when it happens, which could be in a three-to-five year time-frame, a large number of small integrators will be forced to become resellers of cloud services with no control on either the service delivery or the customer, both of which will be managed by either the hosting partner or the vendor.
This has already been demonstrated in Microsoft’s SaaS policy for the channel where the software major has clearly stated that it will manage the billing and delivery of services to the customer, while the partner will merely get a prescribed commission on the value of the annual subscription.
As elaborated in the cover story, many solutions providers have analyzed the potential risks of cloud computing to their existing business models, and have begun working toward remodeling them to ensure not just their business sustenance but also to make the most of the SaaS opportunities. |