In the cloud era, it’s getting tougher and tougher to make it as a traditional enterprise software vendor.
The latest example: Oracle. In the last quarter, rapid growth for Oracle’s cloud services wasn’t enough to offset the slowdown in sales of its traditional wares; the cloud accounts for only 8 percent of the Oracle business.
The trouble at Oracle is the same trouble experienced by IBM, EMC VMware, Dell, and so on: As more and more enterprises view public clouds as the go-to solution, the news gets worse and worse for the traditional big names.
Even if traditional providers move into cloud services, each dollar of cloud services they sell comes at the expense of not selling $2 of the legacy stuff. In essence, these enterprises cannibalize their old-school business model, especially those sweet high margins.
On the enterprise IT side, there’s also the question of whether you should adopt these traditional enterprise software providers’ cloud offerings or go instead to the cloud-native providers like Amazon Web Services, Microsoft Azure, Workday, and Salesforce.
IT can’t simply jettison the traditional providers, of course. You likely have no choice but to pay the license fees to keep your older stuff running, as well as to purchase more hardware to maintain internal requirements.
However, enterprises are sick of paying for hardware, software, and maintenance — not to mention license fees — which biases them against deeper relationships with traditional providers.
Most have been waiting for other enterprises to succeed in the cloud before they make the leap themselves. Now that these successes are visible, we’ll see a mass movement over the next three to five years. And the big enterprise technology outfits will likely be left behind.
Their only alternative is to adapt to a rapidly changing market and take drastic measures to course-correct to new, innovative markets, even beyond cloud. However, I’m not sure they can make that leap. To make that jump, they’ll have to sacrifice near-term profits in the hopes of long-term gains, which is a tough sell at any big company. And that explains the “status quo” behaviors we’ve seen at most traditional enterprise providers.