The end of Cloud history?

In 1989, Francis Fukuyama, then deputy director of the State Department's Policy Planning Staff (he has since taught at Johns Hopkins and Stanford among other institutions) predicted the fall of Communism and the world beyond in an article titled “The end of history”. In 1992 he elaborated his thoughts in a book. His view was optimistic – that Western democracy had prevailed and would survive as the “final form of human government”

Margaret Thatcher, one of the major contributors to the Fall of communism, and conservative herself is said to have reacted to Fukuyama’s article thus “The end of history? The beginning of nonsense….” No doubt, history marched on – there were wars in the Middle East, the EU and China both emerged as major global powers, Russia has not exactly disappeared.

Cloud computing is entering its third decade (NetSuite was founded in 1998, Salesforce a year later) and in many ways we can say it has won out over on-premise computing. And we can like Fukuyama say it is the end of cloud history, but how will the next decade and beyond play out?

Based on my research and consulting the last few months, we could see at least five scenarios emerge: 

a) Next-gen enterprise apps continue from current market leaders

The current crop of leaders – Workday, Salesforce, Oracle may continue to go from strength to strength. To SAP’s credit it has through its cloud acquisitions managed to survive the onslaught of those three and others and is poised to lead again. As I wrote a few weeks ago, it will take a next generation of apps with changing UX of voice interfaces and digital assistants, a lot more integration of automation like drones, robots, wearables and functionality which reflects today’s business practices not those brought forward from client/server world. This is a challenge for the incumbents. They want to keep selling what they have versus developing their next-gen of apps, and may give SAP a chance to get to leadership again. Having said that. in the last couple of decades, SAP has missed out on several trillion dollar markets as I wrote here. All these vendors are somewhat myopic – they keep looking at each other as competition and ignoring the white space around them.

b) A verticals led market

In the first two decades of cloud apps we mostly saw financials, hcm and crm functionality – horizontal across industries. Major chunks of functionality – utility billing, insurance claims processing, electronic medical records, retail merchandising,  manufacturing execution and countless others have stayed in client/server and prior architectures. By my estimate that leaves 80% of the market uncovered and opens opportunity for a new set of vendors (or outsoucers like Accenture) to come at enterprises with industry functionality partnered with horizontal functionality available  in the market today.  In other industries, large customers may themselves port their legacy industry applications to micro-services architectures.

c) Portfolio of technologies from multiple vendors

My colleague, Brian Sommer and I have looked at several business processes which the current apps leaders offer, and even there there are enough SMAC – social, mobile, analytical and cloud components you can use to craft far better purchase to pay or recruiting or shop floor capabilities. Customers prefer to buy versus build but many are finding they can combine components from multiple software, hardware, sensor and other vendors and create far more relevant and cost efficient processes.

d) A data led world

A radical new way to think of applications may be emerging. As John Wookey explained “And rather than ask people to type data into a system and then spit it back at them, {which is honestly what most applications do) ...ask for data and then give it back to you…you start with the idea of, here's the business objective, AND there's all the data in the world. What kind of an application would you build? The analogy I always use is Waze, which is to me, like the application that showed the best value or the best shift that will happen. When you go from a world in which you have an app that shows you red lines, yellow lines and green lines on a hard to read Google Maps, which is kind of what used to be in the traffic apps, if you remember them. To Waze. No one cares what the traffic is like in that area. What they care about is finding the best route to get home. How do I get from A to B as quickly, easily as possible. And tell me my options in doing that. And then feed me, turn by turn what I should be doing.”

We are starting to see vendors talk about machine learning – but those are in context of their current flows. Workday has Prism analytics which bring data together from multiple sources, SAP is talking about intelligent apps, but a new wave of business applications which works backwards from goals and objectives may be emerging. It could be data centric vendors like Google and others like IBM with Watson type capabilities which lead in this market

e) An infrastructure led world

The fastest growing segment of the cloud market today is that around IaaS. Amazon and Microsoft with their massive data center footprint and platform ecosystems could start through acquisitions and partnerships start to redefine the application landscape.

The problem with infrastructure led vendors is usually they think in speeds and feeds not features and functions or business outcomes. As an example, Oracle could have run away with the cloud apps market in the last decade, especially with SAP’s issues. They could have replaced hosting in tens of thousands of their PeopleSoft, JD Edwards, EBS and other customer bases with their IaaS. They have chosen to chase after Amazon. They could have listened to their legacy customer base which went to third party maintenance. These customers consistently ask for support of their customizations and improvements in ticket resolution. Oracle responds with “ours is more trusted – secure”. It’s ships passing in the night.

Yes, we are approaching a pivot in the cloud apps market. This is where the geopolitics were in 1989. The next decade and beyond will be tumultuous – exciting for some, disrupting to others.

It is the end of cloud apps 1.0.