Can cloud computing revive IT dinosaurs?

Grazed from Scoop.co.nz. Author: Editorial Staff.

What do IBM, Dell, HP, Oracle and SAP have in common? All are mature technology companies – the youngest is Dell formed in 1984 – and they all banking on cloud computing getting them out of the doldrums. There are a few things wrong with that idea.

First, it was cloud computing that got them into trouble in the first place. Hardware sales, particularly servers, fell as companies switched applications and processing to the cloud. Cloud hosted applications disrupt high-end software. It challenges high-margins, undermines the need for infrastructure and support than allows software giants to get away with huge costs.

Oracle, originally a software company but since buying Sun Microsystems with a large hardware business, is in a more nuanced position. It lost server sales to cloud computing while its software business is challenged by nimble, commoditised cloud-based apps. SAP faces just the app challenge…

Second, the old school companies have enjoyed relatively high margins in at least parts of their businesses. Even Dell’s commodity hardware margins were higher than the wafer thin margins Amazon squeezes from its IaaS – infrastructure as a service – business. Amazon makes money because of scale. Huge scale. According to Gartner, the company has five times the IaaS capacity of the next 14 competitors added together. The economics of scale mean each additional customer is cheaper to serve and sheer market size cuts the cost of acquiring customers. Amazon’s scale means it sits bestride the cloud market like a colossus…

Read more from the source @ http://www.scoop.co.nz/stories/HL1402/S00018/can-cloud-computing-revive-it-dinosaurs.htm

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