#oow10 Part 3 Cloud Orthodoxy

Posted: September 23, 2010 in CRM, Economics, Technology
Tags: , , , ,

Writing about the seminal event for CRM at Oracle Open World — the public cloud computing debate between Larry Ellison and Marc Benioff respective CEO’s of Oracle and Salesforce.com — is tougher than coming up with rent and alimony.  There are so many threads to pull together and I have so much history following the debate that I might need multiple posts to get it right.  As I see it there are technical, economic, social and personal threads to this.

Technical

Oracle Open World 2010 may be seen in retrospect as the schism-point for cloud computing.  Until now, the two main camps did a passable job of playing nice with Oracle often discussing support for so-called hybrid implementations for instance.  But that façade was wearing thin and finally cracked this week.

On one hand Oracle introduced some important hardware that will propel its version of the cloud model for a long time to come.  On the other, Salesforce.com CEO Marc Benioff reiterated the advantages of multi-tenant cloud computing and made a strong case that cloud computing represents a new paradigm of interactive, social and highly mobile computing that supports new business models.  The debate will rage for years, but should it?

It has been clear for a long time that conventional computing involving private data centers running licensed software will not suddenly give up the ghost.  Too much time, money and expertise is invested in the status quo for it to go away quietly.  Oracle’s Exalogic compute server introduction is aimed at extending this paradigm by reducing the cost of conventional computing.

Oracle’s approach is to make computing resources ubiquitously available to customers for deployment at a moment’s notice.  This introduction will be seen by conventional data centers as an important advancement.  Though not the first to offer access to virtualized compute services, Oracle maintains that it has competitive advantages from owning the database, middleware and in some cases the operating systems.  It claims superiority because all systems are engineered to work together.  But implicit is this argument is the idea that the applications to be deployed already exist, an oversight that shouldn’t be ignored.

Benioff’s vision of the cloud starts where Ellison’s leaves off.  Benioff believes the future of computing is social and mobile and his forward looking approach seeks to claim net new application customers in the same companies Oracle sells to, which brings us to economics.

Economics

Paradigms shift.  Sometimes they move quickly and other times they move at a glacial rate.  They also overlap with old and new coexisting during the transition and often the highest evolution of the old paradigm also turns out to be its swan song.  Forget about the IT industry for a moment and think about the revolution passenger aircraft that replaced piston engines with jets.  The jet engine was the disruptive innovation of its day but it won a paradigm debate because it offered characteristics that included lower maintenance costs, speed and performance.  But piston driven aircraft didn’t disappear overnight.

The shift from piston driven passenger aircraft to jets took about twenty years and retired piston planes flew cargo for a long time after that.  Perhaps the highest evolution of this kind of plane was the Lockheed Constellation, a beautiful plane with numerous amenities but with piston engines, a dinosaur when it went into service.

Back to IT.  In some ways it’s interesting that we’re placing so much attention on cloud computing because the mainframe era is still with us.  There are still over six thousand mainframes running mission critical applications in enterprise computing.  My point is that while salesforce.com might have the keys to the future, there is still a lot of opportunity left in the older business model of licensed software.  I don’t know too many people who want to start a software company based on this model nor do I know anyone interested in building a three-hundred seat piston engine driven passenger aircraft.  But I should probably get out more.

I don’t believe the Exadata and Exalogic represent evolutionary dead ends like the Lockheed Constellation.  The industry needs the huge capacities these machines represent.  Their initial use in serving private clouds with virtualized systems is a good fit but as that paradigm sunsets I believe this technology or its successor will find a home in the larger conception of clouds.

Oracle has a large captive market to sell these new machines to.  Selling paradigm extending clouds in a box makes perfect sense for Oracle just as selling a multi-tenant cloud makes perfect sense for Salesforce.  Larry and Marc are each playing the hands they were dealt and these guys play well.  So look for more sniping from both camps.  It will be entertaining, which is why I was recently quoted comparing this situation to a low calorie beer commercial.

Speaking of beer, let’s get social.

Social

The paradigm shift that Marc Benioff and others ushered in ten years ago was about technology but if you look carefully, you can see that the paradigm is shifting again.  This time it is about computing at the user level rather than at the producer level.  That’s a good reason for why Benioff is promoting Cloud 2 and trying to distance himself from Ellison’s cloud even as the two debate who really has the secret sauce.

We all know about the impact that social media and its use are causing in our culture.  Ironically, if you listen to the Enterprise 2.0 crowd, all this socialization was supposed to have been adopted by business ten years ago.  But top down, command and control management initially rejected the idea of decentralization instead opting for better technological controls thus extending that hierarchical paradigm.  That’s a key reason sales force automation developed as it did, i.e. as a reporting tool.

Social media initially found a home in personal use and it is now transitioning to the enterprise as an overdue paradigm shift.  So the debate between Oracle and Salesforce can be seen in this light as a sideshow to the shift in corporate culture.  Of course, the shift has to be supported by software and so we have the debate.

Along with social models comes the need for mobility.  This might not seem intuitive but think about it, without mobility technology to serve social software, we can only be social some of the time.  And since we can’t ever hope to synchronize our activities social becomes an all or nothing proposition dependent on mobility at least some of the time.

The difference between the two computing paradigms comes into sharp focus over the idea of social integration.  Benioff’s cloud is fundamentally a social cloud leveraging the wisdom of crowds, which makes this cloud ascendant.  Benioff is putting a great deal of effort into socializing the enterprise.  Chatter is perhaps the best known social application in the Salesforce quiver but before Chatter there were the Sales Cloud and Service Cloud each of which leverages the wisdom of crowds to discover hidden information that enables enterprises to achieve goals faster and for less expense.

Chatter does for the enterprise what the Cloud offerings do for departments.  Using crowd wisdom techniques, Chatter surfaces information and knowledge that is usually hidden from view in an enterprise.  By making what was previously unknown at least knowable, Chatter unlocks a new source of productivity for the enterprise.  So far Oracle’s cloud paradigm has no answer for it.

Finally there is a personal thread running through all this.  We all know that Marc worked for Larry and that Marc credits Larry as one of his mentors.  Larry was also a very early investor in Salesforce and a member of the board.  The two appear to enjoy the rivalry and I suspect each realizes that having a foil on the other side of an argument is better than being alone in the market, even if you are the leader.  It generates press and free publicity as Benioff readily acknowledged in his keynote on Wednesday.

None of this should be taken to mean the situation won’t change.  It may be true that past is prologue but one’s history is not one’s fate.  As a very big company Oracle has become good at being what Oracle CRM leader Anthony Lye calls a fast follower.  Conversely, Salesforce is still relatively small and continues its nimble ways.  A future iteration of the debate spawned by Open World could easily expand into social strategies within the enterprise or between it and the customer.  It could also grow to include a debate over whose platform and development strategy is best.  The possibilities are vast and the options will fuel the conversation for a long time.

So, what did you think?

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