I am often asked which companies I think will be the most dominant names in IT 10 years from now, thanks to cloud computing. My answer often surprises those who ask; not because the two companies I believe will be the most recongnized names in cloud-based IT services aren't considered players today, but rather because of why I believe they will be so recongized.
In this, the first of two posts exploring the companies that can best exploit the cloud model, I'll identify those two companies and explain why they best fit the needs of a large percentage of IT service customers. Then, in the second part of this series, I will explore several companies that will challenge those two leaders, possibly taking a leadership spot for theirselves.
But before I get into who these leaders are, I have to explain why success in cloud computing will be different in 10 years than it is today.
Why today's clouds don't represent tomorrow's biggest opportunity
Think about what cloud computing promises. Imagine being a company that relies on technology to deliver its business capability, but does not sell computing technology or services itself. Picture being able to deliver a complete IT capability to support your business, whatever it is, without needing to own a data center--or at least any more data center than absolutely necessary.
Imagine there being a widely available ecosystem to support that model. Every general purpose IT system (such as printing, file sharing or e-mail) has a wide variety of competing services to choose from. Common business applications, such as accounting/finance, collaboration/communications and human resources, have several options to choose from. Even industry specific systems, such as electronic health records exchanges and law enforcement data warehouses, have one or more mature options to choose from.
Need to write code to differentiate your information systems? There will be several options to choose from there, as well. Most new applications will be developed on platform as a service options, I believe, with vendors meeting a wide variety of potential markets, from Web applications to "big data" and business intelligence to business process automation. However, if you want (or need) to innovate the entire software stack, infrastructure services will also be readily available.
With such a rich environment to choose from, what becomes your biggest problem? I would argue that's an easy question to answer: integration. Your biggest problem by far is integrating all of those IT systems into a cohesive whole.
In fact, we see that today. Most cloud projects, even incredibly successful ones like Netflix's move to Amazon Web Services, focus efforts within one cloud provider or cloud ecosystem, and usually include applications and services that were developed to work together from the ground up. While there have been attempts to move and integrate disparate IT systems across multiple clouds, none of them stand out as big successes today.
While some may argue that's a sign of the nascent nature of cloud, I would argue that its also a sign that integrating systems across cloud services is just plain hard.
Why integrated services will drive the most revenue
Now imagine you are founding a small business like a consultancy or a new retail store. You need IT, you need it to "just work" with minimal effort and/or expertise, and you need it to be cost effective. What are you going to be looking for from "the cloud?"
There, again, I would argue the answer is easy: start-ups and small businesses will be seeking integrated services, either from one vendor, or a highly integrated vendor ecosystem. The ideal would be to sign up for one online account that provided pre-integrated financials, collaboration, communications, customer relationship management, human resources management, and so on.
In other words, "keep it simple, stupid." The cloud will someday deliver this for new businesses. But there are very few companies out there today that can achieve broad IT systems integration. I would argue the two most capable are Microsoft and Google.
"What?!?," you might be saying. "Both of those companies have been tagged as fading dinosaurs by the technorati in the last year. Why would anyone want to lock themselves into one vendor for IT services when the cloud offers such a broad marketplace--especially those two?"
To answer that, we need to look a little more closely at each vendor's current offerings, and stated vision.
Microsoft: it's all about the portfolio, baby!
Microsoft stands out for its breadth of offerings. While its infrastructure as a service and platform as a service offerings (both part of Azure) are central to its business model, it's the applications that will ultimately win them great market share.
Already, offerings such as Office 365 provide cloud-based versions of key collaboration and communications capabilities for a variety of business markets. However, Microsoft CEO, Steve Balmer, has also that every Microsoft product group is looking at how to either deliver their products in the cloud, or leverage the cloud to increase the utility of their products.
As every product group within Microsoft pushes to "cloudify" their offerings, I am betting similar effort will be put in to making sure the entire portfolio is integrated.
Combine the Dynamics portfolio with Sharepoint and Lync and add "Oslo"-based tools to integrate across system or organizational boundaries, and you've got a heck of an IT platform to get started with. Add in Azure, and you have the development platform services to allow you to customize, extend, or innovate beyond the base capabilities of Microsoft's services.
Google: Bringing consumer success to business
What impresses me most about Google's move towards the cloud has been its pure focus on the application. Google doesn't put forth offerings targeted at providing raw infrastructure. Even Google App Engine, one of the poster children of the platform as a service model, is built with making a certain class of applications--perhaps not surprisingly, Web applications--as easy to develop as possible. Most of the integration of the underlying platform elements has been done for the developer already.
However, it's when you look at its consumer application portfolio, and how it's modifying those applications for business, that you can see its real strength. Google takes chances on new Web applications all the time, and those who succeed--either by building a large user base, or by actually generating revenue--draw additional investment aimed at increasing the application's appeal to a broader marketplace. Google Mail is the most mature of these options, but Google Apps is not far behind.
What appears to be happeninging now, however, is a concerted effort by Google to build an ecosystem around its core application offerings. The Google Apps Marketplace is a great example of the company trying to build a suite of applications that integrate with or extend its base Google Apps and mail offerings.
Add the company's nascent suite of communications and collaboration tools, such as Google Voice and Buzz, and signs of integration among all of their offerings, and you can see the basis of a new form of IT platform that will especially appeal to small businesses and ad hoc work efforts.
There are no guarantees in cloud
As you can see, Microsoft and Google have the basic tools and expertise to deliver on the one-stop shop IT services model, and both have proven to me that they have the desire as well. However, neither company is a shoe-in for success in this space. There are two reasons for this, the most important of which is neither company has what I would call a spotless execution record. In fact, both have struggled mightily to impose change on their core business models.
Both companies will have to align their various efforts to see this vision through, even as it disrupts current markets. Each has plenty of applications that show great promise, but both are also a long way away from proving they can deliver on a one-stop shop vision.
The other reason is that there are a variety of worthy competitors vying for the "one-stop" throne. You may have been asking by now about Amazon, Salesforce.com, VMware, or the hosting companies, and telecoms. In the second post of the series, I'll outline my favorites to displace the two leaders, including one that may surprise you.
In the meantime, I think cloud services targeting developers will still get most of the press for the next several years. Achieving an integrated IT platform that serves multiple business markets is extremely difficult, and will take a true commitment and concerted effort by the company or companies that ultimately achieve that vision.