Bill Loumpouridis

Bill Loumpouridis

Why did it take so long for Oracle, SAP, and Microsoft to truly embrace the cloud?

Business models are funny things. In the Internet Age, the right business model at the right time can catapult a company to fame and fortune practically overnight. Groupon, Zynga and others are a testament to this. Similarly, the inertial drag of an antiquated business model can be the root cause for the rapid demise of others. The tech industry is littered with many flameouts like Palm and RIM.

The obstacles that legacy, premise-based software vendors face to Cloud presence are not so much technical, as they are strategic and logistical. Channel sales and distribution models, which make up the bulk of sales for large legacy independent software vendors (ISVs), rely on one-time payouts for software licenses for their viability. These ISVs have bridged the gap in the short term by slapping “Cloud” stickers on their software CDs and providing financed leases to their software and then passing on the cost of the financing to their customers.

Another strategy is to hedge; buy a cloud company and live in both worlds simultaneously. SAP, with its purchase of Success Factors, and Oracle, with its purchase of RightNow, are buying access to Cloud distribution strategies as much as they are buying technology and customers.

2011 will be remembered as the year these slumbering giants finally woke up to the promise and potential of Cloud technology. Buying their way in is the only way to play catch-up, and that’s great because I hear that Larry Ellison throws great parties. The challenge in harmonizing these disparate architectures into holistic solutions, however, will be formidable.