It was great to hear NetSuite CEO, Zach Nelson’s keynote yesterday as he spoke about the true nature of cloud computing. In some ways, NetSuite is a year or two behind other cloud providers because it’s primarily an ERP solution though the company also offers integrated CRM. In ERP the non-cloud competition is slinging the same mud that we saw in CRM a little while ago. Competition is saying things like SaaS doesn’t scale or it isn’t customizable or that it can’t handle complex processes. Poppycock. So it was refreshing to hear Nelson take on the challenges one by one offering plenty of data to confront the noise.
Of course the established vendors of ERP solutions aren’t going to give up without fight so the result is half way product attempts that can certainly confuse the market. There are plenty of solutions that offer to take over the hosting and management of servers and systems but the reality is that those approaches only move the data center down the street; they don’t do anything to provide true cloud computing. I call this paradigm extension simply because it enables those vendors to continue business as usual without much additional investment.
The cloud data center approach preserves the one license to one customer model and is a reincarnation of the ASP (application service provider) model that first burned bright and then burned out ten years ago. Back then the economics made it impossible for a vendor to make money on a hosted solution simply because you couldn’t put enough users on the servers to break even. That’s why SaaS became so popular.
Today ASP is attempting a comeback. Applications have been rebuilt in browsers and the number of users that can fit on a server is much larger. However, the cloud data center approach still segregates customers using a single tenant model meaning it’s still very expensive to operate and therefore buy.
If this script plays out as it did in CRM, I think the conventional ERP vendors will eventually scramble to do real multi-tenant cloud computing. By then it will be late in the process and I expect a few vendors will have business model issues as they try to explain to shareholders why revenues are in freefall.