SM: And how far along is that?
RT: Well, the skeleton is there for approval. The workflow engine is integrated inside the private cloud infrastructure. Now, on the public cloud side, the overriding request is clients want to have variability in their billing. That’s what is different about the cloud compared to a traditional hosting or outsourcing arrangement. What people are looking for is variability in one form or the other – if they need to save money, they can cut back on their usage and have that reflected immediately. They do not have to renegotiate contracts. So, how you deliver variability with all the different kinds of billing models, whether they be subscription, usage based, or any other types, I don’t necessarily see one type prevailing over another because it is workload dependent. For e-mail, the variability is how many mailboxes you sign up for; you pay by the number of mailboxes per month. For infrastructure services, it’s the number of virtual machines per hour, or gigabytes per month, whatever makes more sense. You can have many kinds of billing, but the common theme seems to be to be able to flex it based on real usage and not estimated usage.
SM: I am hearing from many application vendors, some of whom work with you, that they have moved their delivery from a licensing model to a SaaS-based model. This is a very difficult transition. In your practical experience, is this really happening? Are they really making the transition from a license model to a SaaS-based model?
RT: Are you saying you hear that from software vendors?
RT: I can’t speak to how difficult it is going to be, but I can say that most software vendors, including IBM, feel they need to be able to have that option. We started in our software group, a subset of our portfolio, where clients had demanded the option of having a SaaS pricing model. The thing is, not every client is going to be there tomorrow. So it’s more of an option than a replacement. Many of our clients are very happy with the way they license for the enterprise; others want to augment it or leverage more of a subscription base. So, let’s say for e-mail-we have clients who have enterprise licenses for some set of Lotus Domino e-mail server, and some of their end users are on LotusLive, which is a subscription based. So any software vendor needs to be looking at whether the client is looking at the product in terms of having a SaaS option and being able to work out the licensing accordingly. We have had discussions with a number of software vendors that are exploring having a SaaS version. It sense to have it hosted on IBM’s public cloud
SM: What about ERP? It was among the first systems to be computerized, and it’s been deeply integrated into the workflow of the enterprise. What is the case? I imagine there is a very high level of resistance for that going to the cloud even though some of the ERP vendors are interested in it.
RT: Well, I think ERP is one of the cases where over time having the option is going to be advantageous for vendors. I don’t see, given the amounts of customization, many enterprises having ERP systems and the work they have done to have it highly tuned. Remember, with the cloud it all comes back to what’s my return on investment if I change from what I am doing – that can be in the millions of dollars, in innovation, but more often than not, we want to be able to save some money in the process. What IBM does is we talk to the client, do consulting for the cloud, and do sort of a workflow heat map. This particular workflow is easy to move to the cloud and has a high value. You know, a Boston box with four quadrants for some workloads is easier to move and brings you higher value. Those are the ones you want to start with. Others are harder to move and could bring you value; those are next. ERP is one of those where you definitely can get some flexibility by moving certain ERP capabilities to a cloud-like delivery model, but it’s also harder to move than other traditional systems. You have to do an analysis to figure out what would be best. Smaller enterprises that haven’t done a lot of customization and have an ERP system that is pretty much out of the box are the ones that will prefer a SaaS-based model.