Open vs. Closed: The Cloud Wars

Posted by masgeeks on Oct 10, 2012 8:44 AM EDT
The New York Times; By Quentin Hardy
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For all the freedom promised by cloud computing, businesses may be really looking at less choice and more constraint than ever before. Whether that happens is the technology industry’s next great battleground.

For all the freedom promised by cloud computing, businesses may be really looking at less choice and more constraint than ever before. Whether that happens is the technology industry’s next great battleground.

On one side are large incumbent tech providers like Oracle and Hewlett-Packard, who already have broad portfolios of technology and deep corporate relationships after years of selling products. On the other are younger companies, whose products and services were built for cloud computing and thus may offer more innovative approaches.

At its recent annual customer showcase, Oracle’s chief executive, Larry Ellison, made much of his company’s “engineered systems” approach to cloud computing, a merger of hardware and software that he argued enables faster performance and better security. Oracle, which has been around for three decades, also guarantees fast service response times to customers who buy the full Oracle “stack,” a term covering everything from computing’s most elemental hardware to its most advanced software applications, instead of competing products. Buy from many, Oracle says, and you won’t get the same service.

Similarly, Hewlett-Packard will soon introduce business printers capable of scanning and storing information in the cloud. This data can be analyzed too, but only if you use Hewlett-Packard’s cloud systems. H.P. is also offering cloud computing systems in “pods” that combine its servers, data storage, and management software in a single integrated package.

On the other side, the cloud storage company Box announced Tuesday a service that enables customers of several specialized cloud software companies to share their data broadly among these companies. The idea is that customers of SugarCRM, a maker of sales management software, could collaborate internally and externally (with permissions and controls) by sharing select data onto the software of Jive Software, which is used in corporate communications. Others in the partnership include Concur, Cornerstone OnDemand, DocuSign, Eloqua, FuzeBox, NetSuite, Zendesk – and Oracle, but probably just for its databases, which are used widely in the cloud.

If Oracle and H.P. are offering a vertical integration, Box is trying to sell a horizontal integration of diverse software applications, which would provide customers more choice.

“It will enable a bigger shift to ‘best of breed’ solutions,” said Aaron Levie, chief executive of Box. “Larry’s position is ‘Just buy Oracle.’ This is dramatically opposed to having everything on one stack.”

The “single stack” approach falls into a traditional business of offering better service and more features if you buy from a single source. It is known as “lock in,” in which there is a very high cost in time, energy and data in moving off a single provider. Consumers see it in things like Apple’s iTunes, which is hard to merge with other online music systems while retaining the same quality of service.

Businesses tend to complain about lock in, because prices can creep up once the lock is on. But they like it, too, as it eases the complexity from choosing and servicing a corporate system. The informal term for having a sole vendor is “a single throat to choke,” and that is considered a good thing.

The single throat approach makes it hard for new companies to break in, and for unforeseen innovation to take place, however. Cloud companies selling to business have tried to get around this by offering services that can be easily purchased and used over the Internet by anyone. Amazon Web Services, for example, has been able to sell computing and storage to engineers all over a company without ever knocking on the chief information officer’s door. So did social networking company Yammer, which was so successful that it was acquired by Microsoft.

Whichever approach, the vertical stack or the horizontal choice, comes to dominate, it’s likely that much of the early experimentation will give way to alliances and uniform approaches as corporations move to cloud computing.

“You’re crazy if you think you’ll never have to sell to a C.I.O. now,” Mr. Levie said. As the cloud takes over more of business computing, the information managers “have to be supported in security, compliance and regulatory functions,” he said. “You’ll see the competition between vertical stacks and best-of-breed horizontal solutions.”

It’s hard to say what makes things “best,” however. One hazard in Mr. Levie’s approach is the different look and feel of all of these independent cloud providers. Even if they work better, it’s tiring for the average worker to move in and out of different Web designs all day.

Design, as much as actual performance, could be the deciding factor in this competition.

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