Does cloud computing affect innovation?

Update: Paul Albright's title was incorrectly stated as CEO. He is GM and CMO.

Earlier this summer, Jonathan Zittrain wrote a New York Times OpEd piece that discussed his concerns with the cloud computing paradigm. Zittrain stated that, while it may seem on the surface that cloud adoption is as "inevitable as the move from answering machines to voice mail," he sees some real dangers.

Zittrain covered the usual concerns about data ownership, privacy, and the access that data placed in the cloud gives governments all over the world--a concern I certainly share. He went on to point out that these problems are solvable "with a little effort and political will," a view that I also adhere to.

To Zittrain, however, the biggest threat the cloud posed to computing wasn't privacy, but innovation--or a lack thereof:

This freedom is at risk in the cloud, where the vendor of a platform has much more control over whether and how to let others write new software. Facebook allows outsiders to add functionality to the site but reserves the right to change that policy at any time, to charge a fee for applications, or to de-emphasize or eliminate apps that court controversy or that they simply don't like. The iPhone's outside apps act much more as if they're in the cloud than on your phone: Apple can decide who gets to write code for your phone and which of those offerings will be allowed to run. The company has used this power in ways that Bill Gates never dreamed of when he was the king of Windows: Apple is reported to have censored e-book apps that contain controversial content, eliminated games with political overtones, and blocked uses for the phone that compete with the company's products.

When I first read Zittrain's words, I was concerned that he had a point--that the future of software would be a few big platform owners controlling user experience and functionality much the same way that Apple has for both the Mac and the iPhone. Where would the next radical disruption come from if none of the platforms would allow disruption?

However, my eyes were opened a little bit last week when I met with Paul Albright and Tom Fischer, CMO and CTO respectively of a business productivity software vendor called SuccessFactors. I went to the meeting expecting to talk cloud, hearing something about how SuccessFactors was going to change the cloud landscape. I'm not a business process guy (anymore), and I thought I was going to be bored to tears by Albright's explanation.

Instead, SuccessFactors wanted to talk to me about what they claimed was a new class of business software--one that would greatly improve business productivity. They called it "business execution software."

My eyes rolled.

To my surprise, however, what I found appeared to be a very innovative way of dealing with organizations, their goals, and their measurement. Unobtrusive, the new SuccessFactors business execution software and its related SuccessCloud SaaS (software as a service) offering aim to leverage the company's extensive experience in business performance measurement and create a real-time monitor of business execution against goals.

Sounds innovative to me.

(It is important to note that SuccessFactors isn't a "pure" SaaS play, but the SuccessCloud services are critical to the business execution story, so it qualifies as a SaaS cloud to me.)

So the question arises: why would one of the most successful SaaS offerings--if not the most successful--work so hard to disrupt the way performance measurement was done? And are there any guarantees that this innovation will continue if cloud computing becomes a dominant paradigm?

The answer came to me this weekend as I contemplated how to measure the SuccessFactors story against Zittrain's prediction. Innovation in SaaS, and probably in PaaS (platform as a service) and IaaS (infrastructure as a service) as well, is driven by competition--the same competition that drove shrink wrap vendors to innovate in the past. However, SaaS has an advantage: upgrades are easier, and all customers are guaranteed to upgrade at the same time, enabling rapid, iterative development and deployment.

Think the barrier to build and release an alternative is insurmountable? Think again. If an entrepreneur thinks they can beat SuccessFactors at their own game, they can build their alternative on Amazon Web Services, or Google App Engine, or Microsoft Azure, or any of a number of cloud platforms and infrastructures. They can build their own SaaS business against that software, or they can simply make the image/code available to be replicated by whoever wants their own instance. The important thing is: the fact that SuccessFactors owns their own data center gives them little advantage.

In the end, it is the ability to deliver application functionality that makes a cloud desirable, not simply the technology used to deliver functionality. So, in the enterprise SaaS category at least, innovation remains alive and well.