All of these factors taken together will provide enterprise computing buyers with more effective foundations of arguing for more thorough measures of application performance. The net result will be much greater visibility into how cloud computing is actually changing the global economics of the enterprise computing industry.
III. Final Report:
Introduction
The foundational aspects of cloud computing's economic advantage are predicated on how efficiently this approach to propagating enterprise-wide applications across entire organizations at a very reasonable cost. The technological factors of this technology platform, along with its accompanying infrastructure stability, fault redundancy, multitenancy, security and user experience advancements, have made it an area of continued research & development focus by many leading corporations and universities. As a result there is a wealth of both empirical and theoretical knowledge with regard to cloud computing as a technology platform alone. The myriad of those developments form the foundation of a disruptive shift in the economics of enterprise software, including a complete redefinition of how Total Cost of Ownership (TCO) is used today for evaluating and choosing SaaS-based applications over traditional, and more expensive on-premise applications (Bhutta, Huq, 2002). While the TCO advantages of cloud-based applications and platforms are very compelling, there is a lingering doubt in the minds of many Chief Information Officers (CIOs) with regard to their long-term viability and value. CIOs are given the responsibility of stabilizing the enterprise it infrastructure for the companies they work for; their ideal situation is having no risk and no strategic challenges to deal with during their tenure (Carr, 2011). They are in essence the keepers of the it infrastructure dial-tone.
Yet cloud computing, with its disruptive economic forces and as this study shows, significantly lower Total Cost of Ownership (TCO) indexed to SLA performance, can deliver significantly greater business gains over time. As has been often cited in Dr. Clayton Christensen's book the Innovator's Dilemma, the role of new market entrants is to often change the economics of a given industry by making more streamlined, cost-effective technologies more strategic over time. This is the identical paradigm that is reshaping the cloud computing industry today globally, and is especially evident in the area of Customer Relationship Management, which is experiencing the most rapid adoption rates of any category. For purposes of this study, a comparison of TCO performance between on-premise CRM applications and cloud-computing CRM applications has been made. These results are indexed by services revenue of each company, which is an indicator of how profitable Service Level Agreements (SLA) is for each vendor. From the cloud computing vendor's perspective, SLAs are often used as a means to gain trial and eventual adoption of enterprise-wide cloud computing applications. For the o-premise vendor, their maintenance revenue stream, as has been mentioned before, form the majority of their recurring revenue stream over time. To ensure complete coverage of the market, the top three market share leaders will be covered in this analysis. The following chart provides an analysis of the worldwide CRM market share leaders in 2012, which is the latest available data from it research advisory firm Gartner Inc. In their report Market Share Analysis: Customer Relationship Management Software, Worldwide, 2012 published April 18, 2013 this firm showed that Salesforce.com has the majority of worldwide CRM market share with 14%, followed by SAP at 12.9%, Oracle at 11.1% and Microsoft at 6.3%. Only Salesforce.com generates all of its revenues using a cloud-based architecture. Figure 1, Worldwide CRM Software Spending by Vendor, 2012 illustrates the distribution of worldwide CRM software sales by vendor.
Figure 1: Worldwide CRM Software Spending by Vendor, 2012
Source: (Gartner, 2013)
SAP, Oracle and Microsoft each rely on the traditional enterprise software model of having a series of relative high up-front costs, followed by a recurring maintenance fee over time. This is in contrast to the business model cloud-based application providers use including Salesforce.com, who relies on a subscription-based business model. Large-scale enterprise deployments that are on-premise often take several months to gain funding approval of, and in the case of 400 seat implementations or more, must also go through a rigorous budgeting process (Stanic, 2003). This is because the initial costs of enterprise-wide application support and platforms can be well over $1 million or more. For cloud-based applications however, enterprises pay subscription fees and consulting fees for business process reviews. An emerging best practice today by early adopters of cloud computing...
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