The Future for the Software Industry in Cloud Computing

Cloud computing is shifting how we purchase and use software. Already with the digitalization of music, written materials and video, the internet has evolved from an information center to a distributor of digital products and services.

Cloud computing enables a user to access services and store data over the internet. Gmail is a common example. With a username and password, you can access email and information from any device connected to the internet. There is no need for a user to save files or download software. Instead, Google stores data which it delivers to the user via an internet connection. One way to think about it is to imagine the computer as an ATM machine – no matter what ATM (or computer) used, the right account number and pin will access the respective account.

Now, cloud computing allows a user to access software applications over the internet without downloading or storing files. This phenomenon is shifting the traditional software industry into a new method of marketing and delivery: software as a service (SaaS).

To better understand SaaS, look at how it affected one of the most common software applications: the word processor. For decades, if you wanted to create documents you purchased Microsoft Office, downloaded it, ran it on your computer and saved the files to your hard drive. Now that’s changing. Today, you can connect to the internet, sign into Google Docs, create a document and save it without ever downloading software, opening an application, or saving a file to your hard drive. Better yet, you can then access that document from any computer or device connected to the internet.

So what’s the big deal – just a different way to do the same thing, right? Yes, until you consider this: Microsoft Office costs between $150 and $500 dollars depending on the package. Google Docs is free.

That’s right. Free. And nothing sells like free.

It is not just word processors that Google has developed. The entire Microsoft office including Excel and Powerpoint now has a Google counterpart. Microsoft responded by offering Office on the cloud for a $6 a month subscription fee, but six dollars is still more than free. The advent of Google Docs is an omen to the industry – convert to the cloud or perish.

Already, SaaS services have expanded into the highly competitive and lucrative markets of enterprise software. Subscription-based SaaS alternatives are forcing enterprise software companies like Massachusetts-based Endeca to evolve.

Endeca develops business information and customer management software. Traditionally Endeca sold its software to companies at a relatively high one-time cost. That company would then install the software on their computers and an IT department would maintain it. Today, however, a company looking for customer management software can buy a subscription to Google Enterprise for a low monthly cost without downloading software or hiring support. In response, Endeca developed a cloud-friendly version of their software which is now available through a SaaS subscription. Endeca didn’t just evolve; it improved.

Companies like Endeca that adapt to cloud computing are discovering opportunities for innovations, expanding markets and new industries, and Massachusetts is emerging as one of the centers for companies capitalizing on cloud computing opportunities and innovations.

One such company is EMC Corporation, an information backup and recovery company based in Hopkinton, MA. Software companies offering SaaS need processing and storage hardware to host their applications. In response, companies have begun offering platform as a service (PaaS). PaaS providers are like the ATM vendors; they provide the computing and storage hardware for software companies to host their SaaS applications. EMC Corporation has emerged as one of the leaders in PaaS services. From 2007 to 2008, EMC jumped from 46^th on the Boston Globe top 100 company list to 5^th, thanks in large part to the demands of expanding cloud computing. In 2011 they ranked 7^th, continuing to grow even through the recession.

Cloud computing has also made it possible for independent programmers and small companies to easily and cheaply publish and host their applications. While giants like Google have disrupted the status quo, new companies, entrepreneurs, and innovators are finding opportunities. New England, companies like Constant Contact, an email marketing company, have used SaaS to dominate their market and drastically increase revenue. Others like CloudSwitch have emerged in direct response to the cloud computing phenomenon to help companies transition into and manage cloud-based services. Throughout the region, new and existing companies are finding opportunities in the cloud.

Like all change, cloud computing will have its casualties and its victors. For New England companies at the vanguard of this new platform, the future in the cloud is looking up.

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