Transitioning From The Enterprise To The Cloud

By George Gilbert

This post originally appeared on GigaOm here.

Moore’s Law has enabled new applications by powering computing on an exponential price/performance curve. But increasingly, the proliferation of a new generation of large-scale applications is being constrained by another price/performance curve that hasn’t shown much improvement: IT operations and the cost of delivery. To create ever more sophisticated applications that can be delivered from public or private clouds, we have to ride a delivery cost curve that looks more like Moore’s Law. Otherwise, we’ll choke on our systems.

Timothy Chou, ex-president of Oracle On Demand, has written a book (“Cloud: Seven Clear Business Models“) that takes a fresh perspective on cloud computing. To him, the key promise of the cloud is to reduce the cost of delivering applications by improving IT operations. Traditional legacy applications such as Oracle or SAP have a fully loaded cost of delivery of $1,000-$1,500 per user per month. Several years ago, Oracle On Demand got that cost down to $50-$100, whether it was Oracle-hosted or customer-hosted. SalesForce.com has squeezed that cost down even more to $7-$10, though admittedly just for the much lighter-weight CRM portion of the suite.

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By Juergen Urbanski and George Gilbert

VMWare’s Opportunity to Expand Into and Potentially Disrupt Adjacent Markets

By George Gilbert and Juergen Urbanski

We’ve talked to a fair number of VMware customers and investors over the past few weeks.  In the process, we’ve repeatedly been asked whether VMWare is done with its phase of hyper-growth.  While it isn’t likely to grow anywhere near triple digits again, it is likely to grow into a strategic platform provider for both data centers and desktops, though this will require solid execution in a tough macro environment.  Its opportunity comes from its chance to both expand and disrupt a series of large adjacent markets.  The ripple effects of this sea change in computing will also affect many markets which VMware has no plans to compete in, though that will be fodder for future posts.  (Disclosure: the authors own shares in VMware)

VMware’s biggest near-term challenge is that it over-sold both units and high levels of functionality with their enterprise license agreements.  These ELA’s were an attempt to encourage customers to deploy more virtual servers with richer functionality ahead of Microsoft’s entry into the market this past summer.  While this may have had some success in making adoption of Microsoft technology more challenging in some accounts, it has actually had unintended side effects.  It left VMware competing with its own inventory of licenses already on the shelves of its customers.  While VMWare works its way out of that near-term hole, some have lost sight of the bigger picture opportunity.

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