Summary
Cloud computing is already successful in the consumer and SMB market, but still has not penetrated the enterprise market. One or more killer apps could change that. IBM’s move to tie business analytics to the cloud could have a major impact on the SME market.
Analysis
Despite the hype surrounding cloud computing, it has yet to penetrate to any significant degree into the enterprise market. Concerns about security and reliability, combined with the absence of a clear reason for adoption, has effectively prevented enterprises doing more than just testing the waters.
Most enterprises already have a significant investment in IT infrastructure and staff to manage it. They also have an environment that is relatively stable, both in terms of applications and infrastructure. That status quo won’t be disturbed unless and until some “killer app” appears that provides a clear incentive to migrate to the cloud. Business analytics could provide such a killer app, for at least one specific market segment.
Very large enterprises (Wal-Mart, Visa, etc.) have invested billions of dollars in IT infrastructure and data collection and analysis. Their businesses are completely dependent on the information gleaned from analyzing those oceans of data. Such analyses could be detecting patterns of fraud in banking or transaction systems, detecting purchase patterns in retail stores, or a myriad of other key business metrics.
Smaller enterprises do not typically have the resources and ability to do those kinds of analyses, and are thus unable to compete successfully with the behemoths. These smaller enterprises in many cases can collect the data, but don’t have access to either the IT infrastructure or the software to do the relevant analysis, and their businesses are not large enough to justify the investment in such.
IBM’s plan to offer business analytics in the cloud should provide a compelling story to these smaller enterprises. Using the cloud for the analysis means only paying for the IT infrastructure for a few days each month. While that doesn’t provide the ongoing analysis a company such as eBay requires, it is still a major step forward for smaller enterprises. Further, by tying the analysis software to the cloud, IBM can provide a package that offers compelling value for many smaller enterprises. The infrastructure is the cloud, the software is Cognos, and with a little professional services this becomes a complete package that offers a new revenue channel to IBM and previously unobtainable analyses to smaller enterprises.
The SMB market isn’t likely to be interested in this offering for the near future, since in most cases they don’t have even the resources necessary to collect the data. Very large enterprises that have already made heavy investments aren’t likely to dump those to migrate to IBM’s offering. That still leaves a rather large market segment of enterprises big enough to collect the data and benefit from the analyses, but not big enough to do it on their own.
