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Thought Leaders In Cloud Computing: Fred van den Bosch, CEO Of Librato (Part 2)

Posted on Wednesday, Aug 4th 2010

By guest author Shaloo Shalini

SM: Let me dig a little more on the topic of ERP. Most companies have made a lot of investment in ERP integration – that is going to be very hard to exit from and move into the cloud. I see it as one of the later categories for adoption.

FB: Well, not for small and medium-sized businesses, I would say. They don’t have as extensive an integration as some of the large companies, where it is obviously more difficult. Things like e-mail are happening in cloud extensively, and that is outside the ERP area. You want to look at more commodity-like features. Those are obviously happening on a large scale. Even for larger companies it would be interesting to switch over to a cloud service instead of running their own e-mail service in-house.

SM: You mention EDA moving into the cloud. EDA doesn’t necessarily lend itself very well to clouds. What specifically were you thinking about?

FB: What I see as a company is from the perspective of our customer involvement in that space. Some of the EDA software packages that companies use are very expensive packages. We are talking to a couple of independent software vendors (ISVs) that operate in EDA. They are now motivated to start offering their solutions as cloud-based services because they see a lot of small or medium-sized companies that cannot afford to pay the kind of license fees they usually charge. You may not need their software on a continuous basis, or it may be needed during certain periods when you are trying to push designs heavily. These vendors are thinking of making their software available for short-term or on-demand use rather than as a licensed software package. It seems that they will be able to crack a class of users that today is out of reach for them due to the cost factor.

SM: I don’t see a lot of traction – there is no investment going on in the EDA space. Isn’t that a dysfunctional industry?

FB: That’s an interesting viewpoint. Well, there is Synopsys, and there are other ISVs that are also doing relatively well. I can’t name names because what I am referring to are the initiatives that may not be well publicized. But I know that in several companies there are initiatives going on in this area. Whether that’s going to be in the forefront of cloud adoption is a different question – I do see that the obvious applications like e-mail happening in the cloud.

SM: I agree that the real adoption is happening in e-mail. I was talking to the founder of YouSendIT, a secure large file transfer service. The types of cloud services that YouSendIT offers make a lot of sense for large companies.

FB: Yes. These are examples of more commodity-style capabilities that are showing up as cloud services. There is not much differentiation in commodity areas. That is why I think you cannot add real value by doing it yourselves. Such commodity-style functions would go to the cloud first.

SM: In terms of evolution, trends, and general direction, what are your thoughts on business models and the return on investment (ROI) situation in the cloud?

FB: I am not sure that I completely understand what you mean by business models in the cloud. In terms of ROI, the benefit of cloud computing is that it is clearly a lot easier to assign IT expenses to specific projects since it eliminates the need for fixed costs. If I have a project or function in my organization that uses certain models of cloud resources, then I can assign those resources for a specific project. That way I can better calculate the ROI than if I have a large IT infrastructure that is a fixed cost that I somehow have to distribute in my organization. As far as ROI is concerned, the cloud will make it much easier to look at the ROI of specific IT investments in the cloud for specific project and specific businesses.

SM: Are you seeing anything interesting other than the fact that we have already arrived at the service-based or subscription-based business model and are moving away from the license and maintenance model? Are you seeing any variations on it? Would you like to see variations on the existing cloud business models?

FB: I think the business model itself will probably tend to depend on the kind of service that is being offered. The general trend is for the pay-for-how-much-you-use model, where your costs become variable costs instead of fixed software costs depending on how much you actually use the service. What form that takes will differ depending upon the features offered to you. If it is e-mail, pricing is on the number of mail boxes and their size. If it is sales force automation, then it is some function of the number of users and maybe the number of accounts that you are trying to manage. I don’t think there is a single way of addressing this in the cloud, but it depends heavily on the feature that is being offered.

This segment is part 2 in the series : Thought Leaders In Cloud Computing: Fred van den Bosch, CEO Of Librato
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