Just as cloud computing has both benefits and risks for users of the software, so do it has benefits and risks for software vendors as well.
Among the benefits are these.
Cloud Computing can provide a more predictable revenue stream than traditional licensing. Rather than the big chunks of money received each time they sell, a vendor gets per resource, per month revenues. That predictability is attractive for a bunch of reasons.
Cloud Computing can also lower support costs because you’ve got this shared multi-tenant resources that you’re maintaining. You don’t have to maintain redundant resources within your data centers.
Cloud Computing also can provide more knowledge about how customers use resources. A vendor can actually see what’s going on, can see directly what customers are doing. Which is really useful for things such as knowing how each customer uses the resources.
The risks though of software vendors adopting cloud computing are substantial.
The vendor must demonstrate real value upfront, because of the try before you buy option that’s typical in cloud computing. So the customer actually tries the application and they know whether or not it has real business value.
Revenue comes in more slowly because of the typical cloud computing pricing models. Per-user, per month can be a great thing over time for cloud computing vendors’ bottom line, but it takes longer to get revenue coming in than with selling big licenses upfront.
Cloud Computing can also lessen a vendor’s ability to sell customized services because multi-tenant applications can be harder to customize. So vendors that make a lot of money on services have found that moving to cloud computing can hurt that part of their business.
Cloud Computing can also bring new sales challenges, such as customers who are just not cloud-friendly, especially smaller software companies, it’s almost obligatory in some cases to have both cloud and an on-premises version of your resources because some customers will insist on both of them.
Finally, cloud computing requires really substantial business changes for on-premises resource companies, how they price, how they sell, how they pay commissions, all these things commonly have to change. It is a big decision. It’s a big change for a software company. Still, for most companies today, the reality is that cloud computing is ruling the world.
