The Cloud Threat to the Software Business

In the business market, cloud computing — computer resources and services delivered remotely — will progress at a rate largely shaped by two constituencies: the customers and the major software companies. The big software suppliers, including IBM, Microsoft and Oracle, have all hopped on the cloud bandwagon, but with a twist. They talk of the cloud transforming the distribution of software, but not much about its potential to upend the economics of the traditional corporate software business. These companies have huge software businesses, relying on large annual sales contracts, licensing and subscription fees, and maintenance charges. The insurgents in the cloud market, led by Amazon, see private clouds as mainly a means of account control for software’s old guard, holding onto customers and high profit margins. “Private clouds are essentially the same thing that large, established companies have offered for years as managed services,” said Adam Selipsky, vice president of product management and developer relations for Amazon Web Services, its cloud unit. “It amounts to a rebranding.” Perhaps, but many customers do find moving toward the underlying cloud technology a big money-saver, even in a private cloud setting.