Cloud Based Platforms- What’s All the Excitement About?

At the beginning of 2006, Salesforce.com introduced a visionary concept that is changing the way corporations buy applications. They merged a cloud based business platform with consumer oriented marketplace concepts, resulting in the AppExchange. Less than two years later and they have over 700 partners participating in the ecosystem.

It turns out that this is just the tip of the iceberg. Nearly every significant technology company has introduced a similar combination- Cisco/WebEx Connect, Microsoft Live/Online/Dynamics, Amazon S3, Oracle On-Demand, Sugar Exchange, SAP A1S, Google Gears and recently NetSuite SuiteBundler.

What’s behind this trend?

From one perspective, there is an open field opportunity to be the next dominant platform provider for business software, and the battle lines are being drawn.

But from my perspective this is much more than a turf battle. It turns out that the efficiencies offered by cloud based platforms benefit all of the parties in the equation - the platform provider, partner community and the end-customer.

From the platform’s viewpoint, these new apps extend their footprint in the enterprise, raising switching costs and thereby reducing churn. They can also monetize their excess bandwidth in new ways, both to their installed base with platform licenses as well as with the partner ecosystem via marketing services.

To the partner, the platform can dramatically reduce time to value, lower customer acquisition costs, and turn large fixed upfront costs into much smaller variable costs.

The end customer gets to better leverage their investment in the anchor tenant (in the case of AppExchange, the anchor tenant is salesforce.com).

Probably the most powerful aspect of these platforms, however, is that they enable a third option for IT- best in class applications developed by third parties that are Native to the platform. In the past IT had to choose between one or the other- “jack of all trades” suite providers that were tightly integrated or best of breed applications with poor interoperability. Now customers can have their cake and eat it to- best of breed native apps that share a common data and services’ bus- and are fully interoperable "out of the box".

As the first company to build applications from the ground up on these new platforms, we are experiencing the movement first-hand. At an ever increasing rate the mantra we are hearing from the ecosystem buyers is "we want native apps".