There is one thing about the cloud-based solutions that I started to wonder about not so long ago.. And I’ll get to that shortly, but I wanted to state the obvious first:
- Our cell phones become obsolete every 1-3 years. Not because they literally can’t function anymore, but because the operating system and the software installed on them stops being really supported
- Our laptops, servers, and desktops have to be replaced every few years. And that’s not because they can’t function anymore either – more often than not it’s simply because every new version of the software installed there is more demanding
- Many of us will change cars every few years.. Quite often, that won’t happen because our old cars can’t go another mile anymore, but simply because newer cars have some cool new features which are advertised to us and which we, somehow, want
In all those examples, we tend to buy newer versions of the products or services not because older versions have suddenly stopped to work. Rather, the circumstances and environment are telling us that we need to “upgrade”, and a lot of that push is, actually, coming from the producers of those products and services.
Don’t get me wrong – it’s great to see all the innovations.. it’s more a question of whether I have to upgrade because I need those innovations or whether there is just no way to avoid them, and, so, I have to upgrade to keep my hardware compatible with them.
So, getting back to the cloud, I think software delivery in the cloud is simply the ultimate version of the business model described in the examples above, and that’s why it’s so attractive to the vendors.
Consider this.. At some point, there started to appear cloud-only software vendors. SalesForce was one of them, Amazon was the other.. and, as it turned out, their business model was working. Which is not that surprising – why would not it? From the client standpoint, that was just another software delivered through a different channel, and it was good software with nice features. It worked for some clients, it did not work for the others, but it’s the same with any other product or service.
But look at it from the software vendor standpoint. Remember how Microsoft has been having troubles getting rid of Windows XP? It took what.. about 15 years to release a version of Windows that, finally, started to take over? And it’s arguable if it actually took over because it’s that much better or if there were other factors(such as the end of support for XP). Through all that time, Microsoft had to support Windows XP, they had to deliver patches, etc. Yet there also was Windows 2003, Windows 8, Windows 2008, etc. And if it were only Windows.. There were different versions of Dynamics CRM, different versions of Sharepoint, different versions of Office, BizTalk, SSIS, SQL.. you name it. Neither SalesForce, nor Amazon, nor any other cloud software vendor would ever have those problems. Normally, they have to support, at worst, 2 versions of the software (previous one.. where the clients are waiting to be upgraded.. and the most recent one). Besides, they can also deliver a much more clear marketing message since they can focus on the most recent version.
Basically, in retrospect.. I think on-premise delivery model has some obvious disadvantages from the software vendor perspective, so becoming a cloud software vendor can actually be a business strategy aimed at reducing those extra expenses and hassles associated with the on-premise software delivery. And that’s not something a company like Microsoft could have missed.
So, if you went a few years back, how would you turn a company like Microsoft into a cloud software vendor? You would not just say that, as of some particular date, the company is starting to deliver software in the cloud only. There are lots of on-premise clients, so you don’t want to lose that revenue. Instead, you would start creating the environment where going to the cloud makes sense for your clients.. which is, basically, all about making the same features available for less and/or adding new features which are just not available on-premise. And, of course, your would arm your marketing/sales teams with all the arguments they need to make this an offer the clients can’t turn down. One of those arguments would be that you, as a client, are always on the most recent version and you have the best possible feature set.. basically, you are always driving the newest car model.
There is nothing wrong with that, btw, since it’s what the businesses are supposed to be doing – staying profitable and/or increasing their profits.
Most of the discussions around cloud vs on-premise are focused on why the cloud is safer, more affordable, more feature-rich, etc. Those are all the arguments aimed at the potential clients, so, basically, that’s similar to selling a newer car to an existing car owner. First, you need to create a newer model that has better features. Then you have to come up with the right marketing/sales message.. But, in the end, it’s not necessarily that the client needs those features – it’s actually the other way around since the product vendor/service provider wants to keep selling those products/services in the cloud.
That’s why, I think, on-premise software model is, mostly, doomed. Not because it’s so inherently inconvenient for the clients to have the software installed in the on-premise environment, but simply because it’s more convenient/more profitable for many software vendors to deliver their software in the cloud. Although, maybe there is a “mixed” model where new versions of the software are simply pushed to your environment.. isn’t it what Windows 10 has been trying to do? Still, it’s not going to be the same on-premise we used to know.
So, since this blog is dedicated, mostly, to Dynamics, have a look at this article by Steve Mordue:
I would not necessarily agree with some of the reasoning there (because of what I wrote above. From the client standpoint, on-premise is not, necessarily, worse). However, it’s just the reality that, if you want to keep using the products like Dynamics 365, you likely have to adopt the cloud because that’s, obviously, the preferred delivery model for Microsoft now. Essentially, one might say that Microsoft is pushing its clients to the cloud.. But, with that, it’s also delivering some “collateral convenience” since many of the features you will find in the cloud are not available on-premise anymore.