Cloud clash: Software vendors vs. cloud providers

Amazon.com has announced a new online marketplace in its Amazon Web Services that lets customers use software and services from a variety of software providers at an hourly metered rate. Software providers like IBM, Microsoft, SAP, and CA offer products for sale on the site as well. There are also free open source applications, such as Drupal and SugarCRM.

Amazon.com's rationale is simple: Provide software to run on the AWS site to sell more AWS storage and compute units, and thus make more money. But the move could put software providers, and thus their customers, in a difficult position.

On the upside, software providers could find that the AWS marketplace provides greater access to new business, which would help grow their business. On the downside, AWS could end up providing access to some software that they're trying to license, so they lose those traditional big-ticket license deals in exchange for smaller income from renting the software via AWS.

I figure that there are going to be a ton of these kinds of offerings pop up as the cloud computing market matures. The larger cloud providers will begin to adopt business models that are in direct competition with the traditional software providers' most lucrative business model. Worse, those traditional software companies that have moved to the SaaS rental model -- and thus helped IT be comfortable with it -- will have paved the way for the cloud providers they host on to move in. After all, few SaaS providers self-host, so they're dependent on the infrastructure providers like AWS that are now showing interest in directly renting software via SaaS.

This is a risk that many software providers looking to build SaaS offerings on the larger cloud providers' infrastructure did not anticipate. And once you've set up a SaaS business on any cloud -- yours or someone else's -- the costs and risks of porting that SaaS offering to another cloud can lock them in to where they are. 

That may argue for software providers, both new and established, to consider using smaller cloud providers for their infrastructure, as they would be less likely to compete with them. It would be ironic if Amazon.com's AWS marketplace provides a reason for many of its lucrative clients -- software providers -- to look elsewhere.

                                                                                                                                                           (courtesy:infoworld.com)