I ran into Stan Swete of Workday last week and he mentioned they had been carefully benchmarking upgrade costs vis-a-vis on-premise vendors. In turn, his ears perked up when I told him about NetSuite’s recent benchmark of energy efficiency in their cloud compared to on-premise.
While most SaaS/cloud vendors look ridiculously cheap in most TCO elements compared to their on-premise competitors, in the next wave (sooner than you think), they will be compared against each other.
So, last week in our conversation with Parker Harris of salesforce, the question came up – why would customers pay its storage costs compared to rates amazon and now Microsoft with Azure are bringing to market? Will it need to rethink its EMC infrastructure? From there the conversation moved to whether it needed the Oracle DBMS – whether it could afford to keep passing along those costs when vendors like Zoho and RightNow aggressively use open source components.
Cloud vendors have to take control of every aspect of their TCO. Like Google with its commoditized server chips. Like NetSuite imploring its reseller channel to deliver more services as software. Like Microsoft rethinking data center design and economics. Like salesforce going to market with smaller SIs like appirio, Model Metrics and others – not just the traditional SIs. Network costs. Systems management costs. Every aspect of the TCO.
Yes, that includes sales costs. As they grow, I am seeing some cloud vendors go back to the “big boys” for sales talent. Not sure that is smart. Because that continues to assume your competitors will continue to be Oracle and IBM. In the meantime, their future competition - other cloud vendors are scheming how to drastically lower their SG&A.
Update: plenty of other examples from readers. Helpstream leverages MySQL and the amazon cloud. Nenshad mentions PaaS below - Coda has leveraged salesforce.com's platform for speed and cost efficiency.
