Application Strategy 2.0

Cloud computing and software as a service (SaaS) have clearly been game changers in the enterprise software industry. However, too often the cloud is painted as some offensive lineman ready to blindside on-premise systems in one rush. I wouldn’t go so far as to call Salesforce the Orlando Pace of enterprise software – but cloud computing and SaaS are certainly beginning to get in a few good tackles when it comes to gaining market share.

For over a decade, organizations have been taking advantage of SaaS solutions. Now, the technology that many derided as too simple, functionally inadequate and unreliable is becoming widely accepted and more aggressively adopted by companies the world over. This move to the cloud will undoubtedly have significant implications across the enterprise in the years to come, particularly when it comes to building an application strategy.

Given this evolution, traditional enterprise application strategies of standardizing around a single vendor are becoming less relevant. And companies looking to embrace the cloud will need a more modern application strategy. Below are a few things that forward-looking companies should consider.

Integrated Suite vs. Best-of-Breed Solutions

NetSuite CEO Zach Nelson is often quoted saying, “The suite always wins.” Not too long ago, he was right. Five or six years ago, it was common practice to standardize on one integrated suite of applications. But as cloud computing has emerged, new best-of-breed functionality has been developed by SaaS vendors. On-premise vendors have worked to keep pace, but the majority of functional innovations today are headed up by best-of-breed SaaS vendors.

As a result, companies in the enterprise are beginning to stray away from relying solely on integrated suites, and are instead searching for the best standalone products to help meet their business goals. This isn’t true for every application category, of course. But when it comes to standalone applications that can drive business innovation and growth, companies should consider a best-of-breed system.

“The things that are next to your customer, that are integral to your business model or that bring you closer to partners, those applications should be best of breed,” says Michael Fauscette, Group Vice President at IDC. “I think those are types of applications that companies are willing to invest in more.”

This strategy holds true for the enterprise, but the midmarket is a different story. While midmarket companies are often just as complex as an enterprise operation, they are often resource constrained. Because of this, many are turning to companies like NetSuite for a fully integrated ERP suite based on the affordable SaaS model. They may add on a few best-of-breed applications, but their main focus is on an integrated easy-to-manage, cloud-based suite.

Can We Take Out the Middleman?

In any discussion of the cloud, there is a buzz about cloud-based application programming interfaces (APIs) as they are thought to be the secret to easier, simpler integration and customization in the cloud. Traditionally, companies would purchase middleware as part of their application strategy, enabling their enterprise applications to share critical information. Some contend that thanks to these cloud-based APIs, middleware is no longer needed to connect two software applications.

It’s true that as technology has advanced, APIs have indeed improved. However, we are not yet at the point where the integration of a customer relationship management (CRM) and enterprise resource planning (ERP) system is going to happen completely off the shelf. Although system language has become more standardized, there is still a disparity between individual systems. Therefore a need remains for complex middleware products that allow the systems to communicate – whether on the ground or in the cloud.

So, a move to the cloud will not eliminate the need for middleware. In fact, customers’ need for a next-generation version of middleware is driving new developments. PaaS vendors are starting to come out with entire cloud platforms that have middleware incorporated into the SaaS stack. From the end-user’s point of view, the middleman vendor has disappeared, but he is still very much a part of the behind-the-scenes operation.

Journey to a Cloud Culture

This sort of development in the cloud has led to a false belief that a complete cloud adoption is on the horizon. Despite the fact that the cloud has proven itself in functionality, scalability and security, there are still certain culture barriers that need to be addressed. For example, manufacturers like to keep their product life-cycle management (PLM) design data behind a firewall. Is that safer than SaaS? No, not really. Does it make them feel better to be in control? Probably. There is a general cultural mindset that needs to be overcome before we see wide-scale cloud adoption across the enterprise.

I think the biggest change we are seeing in terms of strategy is that things are moving a lot faster now, and you have to be able to scale in order to keep up. You should still consider the same things when creating an application strategy as you did 20 years ago – what’s happening in the market? What are your business goals and needs? And can your IT architecture get you there?

It’s easy to get caught up in the hype of the latest trends, but when building an application strategy, companies should focus less on the buzz and more on their business goals. Whether that means going with on-premise, a private cloud, a public cloud or some hybrid, you have to determine what offers the best performance and business functionality to give you a competitive advantage in a connected, global, real-time, mobile economy. It’s a given that these will change over time based on product innovations, market pressures and changing business models, so your strategy needs to be scalable to grow with the cloud.

“[Your strategy is] not based on what the cool technology is. It’s based on what you need to get your job done effectively and compete in a global environment. If you don’t have that figured out, you’re out of a job,” says Fauscette.

Cloud computing is definitely changing the game, but it’s up to you whether or not you hold your own on the field. How is your company adjusting its application strategy to compete in the 2.0 landscape? Is there a secret to survival as we move into an increasingly cloud- and mobile-based economy? Let us know in the comment section below.

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