A blog I wrote last year discussed the ugly market share war among the three top cloud infrastructure providers – Amazon Web Services (AWS), Microsoft Azure (Azure), and Google Cloud Platform (GCP.) Now we need to talk about how Independent Software Vendors (ISVs) like Oracle, Salesforce, and SAP are changing the battle with their industry-specific clouds.
Cloud IaaS vendors don’t have an industry cloud
The fact is that AWS, Azure, and GCP don’t really have industry clouds. These cloud IaaS vendors enable clients to run business applications and services on top of their cloud platforms, but haven’t built industry-specific application or process capabilities. They acknowledge that their clients want to focus more on building applications than infrastructure, which defeats their positioning in the industry cloud market. The core of what they offer is compute, data, ML/AI, business continuity, and security, and they rely on technology and service partners to build industry-relevant solutions. For example, GCP partnered with Deloitte for cloud-based retail forecasting, and AWS joined with Merck and Accenture for a medicine platform. They are also partnering with core business application vendors such as Cerner and Temenos.
Cloud SaaS providers have an edge
ISVs have continued to expand their industry cloud offerings over the past few years. For example, in 2016 Oracle acquired Textura, a leading provider of construction contracts and payment management cloud services, SAP introduced its manufacturing cloud in 2018, and in 2019 Salesforce launched its CPG and manufacturing clouds. Further, Oracle and SAP have built solutions for specific industries such as retail, healthcare, and banking by focusing on their core capability of ERP, supply chain management, data analytics, and customer experience. And while SFDC is still largely an experience-centric firm, it is now building customer experience, marketing, and services offerings tailored to specific industries.
So, what will happen going forward?
- Industry cloud will change: Today’s industry clouds are one more way of running a client’s business; however, they are still not business platforms. Going forward, industry clouds will become something like a big IT park where clients, partners, and other third parties come to a common platform to serve customers. It will be as much about data exchange among ecosystem players as it is about closed wall operations. Enterprises in that industry can take advantage of specific features they deem appropriate rather than building their own. And, they will become a “tenant” of the industry cloud vendor’s or ISV’s platform.
- Cloud vendors will heavily push industry cloud: AWS, Azure, and GCP will push their versions of industry cloud in 2020 and beyond, with strong marketing and commercial campaigns. They’ll likely be tweaking their existing offerings and creating wrappers around their existing services to give them an industry flavor. But, of course, the leading ISVs have already launched their industry clouds and will expand them going forward.
- Channel push will increase: Both the cloud infrastructure service providers and the ISVs will aggressively push their service partners – especially consulting firms like Accenture, Capgemini, Deloitte, and PwC. The cloud vendors will also push their technology partners to build solutions or “exclusively” migrate applications onto their clouds.
- Mega acquisitions: Historically, there hasn’t been any major acquisition activity between infrastructure providers and large software companies. But one of the top infrastructure providers might acquire a “horizontal” ISV that’s making inroads into industry clouds, like Salesforce or Workday, rather than buying a vertical industry ISV. Disclaimer: I am not at all suggesting than any such acquisition is in the cards!
So, what should enterprises do?
- Be flexible: Enterprises need to closely monitor this rapidly evolving market. Though the paths IaaS providers and ISVs take may not meaningfully conflict in the near future, there may be stranger partnerships on the horizon, and enterprises need to be flexible to take advantage of them.
- Be cautious: Because the cloud vendors’ channel partners are being pushed to sell their industry cloud offerings, enterprises need to fully evaluate them and their relevance to their businesses. Their evaluation should include not only business, technical, and functional, but also licensing rationalization, discount discussions, and talent availability for these platforms.
- Be open: As the market disrupts and newer leaders and offerings emerge, enterprises need to be open to reevaluating their technology landscape to adopt the best-in-class solution for their businesses. This is as much about an open mindset as it is about internal processes around application development, delivery, and operations. Enterprise processes and people need to be open enough to incorporate newer industry solutions.
What do you think about industry clouds? Please share with me at [email protected].