Today's cloud-computing vendors focus on infrastructure, but that won't be the case for long. It can't be. As competing vendors seek to differentiate themselves, they're going to move "up the stack" into applications.
It's like the history of enterprise computing, played out in months and years instead of decades.
Oracle arguably set this strategy in motion when it acquired its way to a complete infrastructure-plus-applications portfolio to lower customer acquisition costs and improve its competitive differentiation for CIOs. IBM and Microsoft also went that route, though to differing degrees and in different ways.
Cloud-computing platform vendors are going to have to do the same thing, except they don't have the luxury of waiting.
It's not enough for cloud vendors to build the infrastructure and pray, "Field of Dreams" style, that customers will come. They won't. Not without applications and a host of other issues worked out for them, not by them.
Even Google, born in the cloud, recognizes this. Instead of forcing government customers into its public cloud, the company is building a dedicated cloud for government organizations in the U.S. Google's reasoning?
We also want to do our part to make it easier for government to transition to cloud computing. We recognize that government agencies have unique regulatory and compliance requirements for IT systems, and cloud computing is no exception. So we've invested a lot of time in understanding government's needs and how they relate to cloud computing. To help meet those requirements we're taking two important steps....
One step is certification, and the other is dedicated hosting. As much as Google may hope that its other prospective Google Apps customers won't have "unique...requirements," they do (or think they do). it's a losing battle to tell them otherwise, at least in the short term. If an enterprise giant like GE demands a private cloud, GE is going to get it.
This same pragmatism will drive Google and other cloud-infrastructure providers to build out their application suites. Why? Because enterprises that move to the cloud expect to see applications follow them there. Today, however, most enterprise applications don't work well in the cloud, leaving would-be enterprises buyers all dressed up with nowhere to go, in terms of the ability to run desired applications.
Vendors are jockeying to satisfy this demand for cloud-based applications. Google is already well on its way with Gmail and the rest of its Apps, and has been in the market lately for more, but others like Cisco, Microsoft, VMware, and IBM will be jumping into the M&A market to round out their offerings in order to deliver increasingly full application suites.
Microsoft has been actively courting developers to build cloud-ready applications for its Azure platform, while VMware bought into the Spring developer community for the same purpose. But in the winner-takes-most cloud platform war, the best short-term strategy is to provide applications, and not simply hope they get built.
Perhaps this is one reason IBM CEO Sam Palmisano claims to be undisturbed by Google's rise. IBM already has Lotus and more running in the cloud, and has a strong hold on enterprise wallets.
Some, like Red Hat or Amazon, may elect to sit it out and stick to their infrastructure-only guns, but such vows of paucity won't help potential service provider customers, and threaten to position them out of the longer-term battle for enterprise customers. Amazon can afford to refrain from seeking enterprise customers; Red Hat can't.
Microsoft is arguably best positioned in such a battle, at least from a portfolio perspective. After all, it has the applications--e.g., Exchange/Outlook, SharePoint, Office--that enterprises already use. What it doesn't have, at least, not yet, is experience running these applications in significant cloud deployments. But that will come.
Until it does, expect the big cloud-infrastructure vendors to buy competitive application offerings so as to distinguish their platforms to hosting and service providers. Sure, they can sell hosted Exchange, but that's a recipe for entrenching Microsoft in the cloud, just as happened on the "desktop" and server. Cisco et al. don't have much appetite for reliving Microsoft's glory.
Who are the likely targets? Zoho just became belle of the ball, of course, but there are others. I'd expect any application with either a significant following, like Acquia's Drupal, or significant cloud/hosting experience, like SugarCRM (Disclosure: I am an adviser to SugarCRM), to be up for grabs.
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