A cloud, of course, is a visible mass of droplets or frozen crystals floating in the atmosphere above the surface of the Earth or another planetary body. A cloud is also a visible mass attracted by gravity. Lately, Cloud Computing has been exerting a strong gravitational pull of its own, and has been attracting a whole mass of money. Cloud Computing is often the domicile of Software as a Service (SaaS) applications, – applications which run in the Internet “Cloud” – and neither the Enterprise nor its users need worry about “managing” resources to meet fluctuating demand.
After a lot of hype, SaaS is now solidly coming into its own, and is now increasingly being renamed “On Demand” software, which is certainly more euphonious. As we shall see, some of the same types of applications that originally fueled the”time-sharing” boom in the late ’60s and early ’70s are now leading the explosive growth Cloud Computing, but with some important differences.
Allow the curmudgeonly GoogleGazer a short walk down memory lane. As a 19-year old, back when Lyndon Johnson was still president, the GoogleGazer read an article in Business Week which reported that all you needed to do to attract venture capital money was to walk down Sand Hill Road in Menlo Park, CA and shout “time-sharing.” Venture money would pour on you. The idea back then was that we all needed slices of computing “on-demand” but only for short bursts of activity. Of course, back then the Teletype Model 33 was the “terminal” of choce, and its speed was limited to about 30 characters per second (300 bps), which certainly limited the use of time-sharing to applications requiring but limited date entry. Payroll data entry from branch offices, sales force management, light accounting and modeling were the prime applications. Ultimately, however, the PC revolution put the kibosh on timesharing, as for a small one-time investment users were no longer tethered to a money-guzzlng mainframe via maddeningly slow lines of communication charged for by the minute.
The concept behind timesharing, “hosted applications,” had enduring merit. In 2004, when we first started talking about “hosted applications,” Laurie Sullivan noted in Information Week,
Hosted enterprise applications are nothing new. They first emerged as time-sharing apps in the 1960s, when companies rented hardware and software computing resources because they lacked the money and expertise to run applications internally. Among those to first offer such services were IBM (NYSE: IBM) and General Electric. The strategy eventually morphed into the [ASP] application-service-provider model in the late 1990s. The business model for both approaches failed, giving rise to the next iteration of hosted applications.”The hosted, on-demand model is the third wave,” says Jim Shepherd, a senior VP at AMR Research. “The difference is this time, heavy hitters like IBM and Oracle are pushing the concept, so there’s no question as to whether it will survive. … The question now is, how big will it become?”
At the present time, SaaS is still a tiny part of computing, but it is growing rapidly. Customer-relationship-management software offered by vendors NetSuite, RightNow Technologies, and Salesforce.com has been the software most widely adopted. Newer On-Demand vendors with promising futures include Concur, focusing on travel and expense management, Ultimate Software, an established vendor focusing on HR, Payroll, and talent management, SuccessFactors, another experienced vendor of Performance and Talent Management solutions, and DemandTec, offering integrated merchandising and marketing solutions, The reason for these vendors’ success is that the software was [re]written specifically to function as hosted applications, and it’s all high maintenance and complex, encouraging the notion of “letting George do it.”
While the GoogleGazer is tempted to recite his mantra, plus ça change, plus c’est la même chose (the more things change, the more they stay the same), there are some notable differences between the limited timesharing offerings and what’s exciting today. SalesForce.com is perhaps the most advanced of all these vendors and not just because it has thoroughly integrated its applications with those of Google (others are doing that also), but because it has followed Google’s lead in making its applications available at the API-level with Force.com, greatly reducing the time and cost of developing new and unique applications that go far beyond SalesForce.coms roots in Customer Relations Management. Their free downloadable book on creating on-demand applications is highly recommended. Register free to download.
The GoogleGazer believes that the type of cloud-based offerings epitomized by Google and Force.com get us ever closer, tantalizingly close, to the holy grail of computing: building blocks of robust, reliable and updatable software, all hosted in the Internet Cloud, allowing all of us to stand on the tall shoulders of others while quickly creating totally unique, high-volume, industrial-strength applications that were heretofore the exclusive province of the exceedingly well-to-do big businesses (the Goldman Sachs “money is no object” kind). Throughout history, and certainly since the industrial revolution, the “democratization” that brings formerly one-of-a-kind, expensive widgets (be they tailored suites, custom-built carriages, automobiles, mainframe computing or whatnot) within reach of everyone has created new jobs, and improved the standard of living around the globe.
Previously, we mentioned Hummer Winblad as a VC in the forefront of funding Cloud-based solutions, and we wrote about Elastra, a company that they funded and which shows much promise. Their portfolio discloses many other interesting SaaS and Cloud-based investments, some of which we hope to cover in future posts. Many other VCs and hedge funds are entering the fray on a daily basis. As with anything s that is new and has modest barriers to entry, there will be many entrants, and not all will succeed.
For now, however, the visible clouds out there are all Cumulus humilis (what is commonly referred to as “fair weather cumulus“) clouds (the “what a beautiful day” kind). They are formed by rising warm air that has been heated by the ground, which in turn has been heated by the sun. They have a limited depth.
For now, this too defines On-Demand software, but like the weather, that can soon change.
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