Cloud computing pushes vendors to seek new roles in IT value chain

By Bernard Golden, CIO |  Cloud Computing

Of course, hardware companies such as EMC and Hewlett-Packard are making lemonade out of their lemons. Several have announced IaaS offerings of their own. If users prefer to access hardware via a cloud offering, they figure, who better to provide the offering than a hardware vendor? This lets vendor find an outlet for their hardware while still providing what the market wants.

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The primary barrier to these vendor cloud initiatives lies within the vendors themselves. Most of their revenue, and all of their historic success, comes from the established products. While everyone can offer lip service to the new, innovative offerings, the reality is that the offerings represent a tiny sliver of revenue compared to the familiar products. Vendors' entire sales efforts are directed toward their established products, with the sales compensation program designed to reinforce selling those products. It doesn't take a genius to see that a sales force trained and paid to sell boxes is not going to expend significant effort pushing a lower-price, lower-margin, lower-commission option-even if customers prefer it.

For these companies to succeed, they will need a new go-to-market strategy aligned with the realities of cloud computing. There is vast literature on how to support innovation within an established company, with the majority recommendation coming down on the side of setting up a separate organization, with its own personnel and finances, to pursue innovation. This is much harder in practice than in the textbooks, but this approach, difficult though it is, has been shown to be the only viable one to foster innovation.

These travails will not be the province of hardware vendors alone. When a new technology comes along with a vastly different cost/benefit ratio, it eventually disrupts every segment of a market. No matter what niche of the vendor ecosystem you inhabit, you'll find change afoot as a result of cloud computing. The only question will be, will you embrace it, try to resist it, or, like Oracle, announce that you've been doing it all along?

Bernard Golden is the vice president of Enterprise Solutions for enStratus Networks, a cloud management software company. He is the author of three books on virtualization and cloud computing, including Virtualization for Dummies. Follow Bernard Golden on Twitter @bernardgolden.


Originally published on CIO |  Click here to read the original story.
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