Category Archives: SaaS

Amazon’s Advantageous Model for Cloud Investments

While catching up with industry developments earlier this week, I came across a Reuters piece on Amazon’s now well-established approach toward investments in startup companies. If you haven’t seen it, I recommend that you give it a read.

As its Amazon Web Services (AWS) cloud operations approach the threshold of a $1-billion business, the company once known exclusively as an online bookshop continues to search for money-making opportunities well beyond Internet retailing.

Privileged Insights

An article at GigaOM by Barb Darrow quotes Amazon CEO Jeff Bezos explaining that his company stumbled unintentionally into the cloud-services business, but the Reuters item makes clear that Amazon is putting considerably more thought into its cloud endeavors these days. In fact, Amazon’s investment methodology, which sees it invest in startup companies that are AWS customers, is an exercise in calculated risk mitigation.

That’s because, before making those investments, Amazon gains highly detailed and extremely valuable insights into startup companies’ dynamic requirements for computing infrastructure and resources. It can then draw inferences about the popularity and market appeal of the services those companies supply. All in all, it seems like an inherently logical and sound investment model, one that gives Amazon privileged insights into companies before it decides to bet on their long-term health and prosperity.

That fact has not been lost on a number of prominent venture-capital firms, which have joined with Amazon to back the likes of Yieldex, Sonian, Engine Yard, and Animoto, all of whom, at one time or another, were AWS customers.

Mutual Benefits

Now that nearly every startup is likely to begin its business life using cloud-based computing infrastructure, either from AWS or another cloud purveyor, I wonder whether Amazon’s investment model might be mimicked by others with similar insights into their business customers’ resource utilization and growth rates.

There’s no question that such investments deliver mutual benefit. The startup companies get the financial backing to accelerate its growth, establish and maintain competitive differentiation, and speed toward market leadership. Meanwhile, Amazon and its VC partners get stakes in fast-growing companies that seem destined for bigger things, including potentially lucrative exits. Amazon also gets to maintain relationships with customers that might otherwise outgrow AWS and leave the relationship behind. Last but not least, the investment program serves a promotional purpose for Amazon, demonstrating a commitment and dedication to its AWS customers that can extend well beyond operational support.

It isn’t just Amazon that can derive an investment edge from how their customers are using their cloud services. SaaS cloud providers such as Salesforce and Google also can gain useful insights into how customers and customer segments are faring during good and bad economic times, and PaaS providers would also stand to derive potentially useful knowledge about how and where customers are adopting their services.

Various Scenarios

Also on SaaS side of the ledger, in the realm of social networking — I’m thinking of Facebook, but others fit the bill — subscriber data can be mined for the benefit of advertisers seeking to deliver targeted campaigns to specific demographic segments.

In a different vein, Google’s search business could potentially give it the means to develop high-probability or weighted analytics based on the prevalence, intensity, nature, and specificity of search queries. Such data could be applied to and mined for probability markets. One application scenario might involve insiders searching online to ascertain whether prior knowledge of a transaction has been leaked to the wider world. By searching for the terms in question, they would effectively signal that an event might take place. (This would be more granular than Google Trends, and different from it in other respects, too.) There are a number of other examples and scenarios that one could envision.

Getting back to Amazon, though, what it is doing with its investment model clearly makes a lot of sense, giving it unique insights and a clear advantage as it weighs where to place its bets. As I said, it would be no surprise to see other cloud providers, even those not of the same scale as Amazon, consider similar investment models.

Cloud Buyers Put Vendors on Notice

No matter where you look in the vendor community, cloud-computing strategies proliferate. It doesn’t matter whether the vendors sell servers, storage, networking gear, management software, or professional services, they are united in their fervor to spin compelling private, public, and hybrid cloud narratives.

Secret Sauce or Sticky Glue?

At the same time, of course, many of these vendors seek competitive differentiation that features a proprietary secret sauce that ultimately serves more as glue than comestible, binding paying customers to them indefinitely.

Customers, many of which are familiar with the history of information technology, are cognizant of the vendor maneuvering. They’ve seen similar shows in the past, and they know how those productions usually end — with customers typically bound to technology investments they may not want to perpetuate while enmeshed in unhealthy relationships with vendors that delivered dependency disguised as liberation.

Ideally, vendors and customers should enjoy mutually beneficial relationships, with each side deriving value from the engagements. Unfortunately, vendors seek not only to deliver value to customers, but also to differentiate themselves from their competitors, often by finding a way of locking the latter out of their customer base. Proprietary technologies — not so interoperable with the those offered by other vendors — often serve the purpose.

Won’t Get Fooled Again

In the realm of cloud computing, customers are trying not to get fooled again. They’re banding together on multiple fronts to ensure that their requirements are fully acknowledged in the development and realization of cloud-computing industry standards covering data portability, cloud interoperability, and cloud security. What they obviously fear is that big vendors, without customer oversight and constant vigilance, will find ways to gerrymander the standards process in their favor, perhaps to the long-term disadvantage of cloud-computing clientele.

With that in mind, organizations such as the Cloud Standards Customer Council (CSCC), announced by OMG in April, and the Open Data Center Alliance, launched last fall, have formed.

The Open Data Center Alliance bills itself as an independent IT consortium led by global IT organizations – including BMW, China Life, Deutsche Bank. JPMorgan Chase, Lockheed Martin, Marriott International, Inc. and other well-known corporate entities — that is committed to provide a unified vision for long-term data center and cloud infrastructure requirements. It pursues that objective through the development of a vendor-agnostic usage-model roadmap. Intel Corporation serves as a technical advisor to the alliance, which suggests that it is not without vendor representation.

For its part, the Cloud Standards Customer Council also is infused with vendor blood. Among its founding enterprise members are IBM, Kaavo, CA Technologies, Rackspace, and Software AG.  Organizations (and major IT buyers) that have joined the council include Lockheed Martin, Citigroup, State Street, and North Carolina State University.

It’s interesting that Lockheed Martin is involved with both the Open Data Center Alliance and the Cloud Standards Customer Council. That indicates that, while overlap between the two bodies might exist, Lockheed Martin believes each satisfies — at least for it needs and from its perspective — a distinct purpose.

Activist Language

The Cloud Standards Customer Council says it is an “end user advocacy group dedicated to accelerating cloud’s successful adoption, and drilling down into the standards, security, and interoperability issues surrounding the transition to the cloud.” It says it will do the following:

  • Drive customer requirements into the development process to gain acceptance by the Global 2000
  • Deliver customer-focused content in the form of best practices, patterns, case studies, use cases, and standards roadmaps.
  • Influence the standards development process for new cloud standards.
  • Facilitate the exchange of real-world stories, practices, lessons and insights.

Its tone, despite the presence of vendors among its founding members, is relatively activist regarding the urgent need for customer requirements and real-world insights as essential ingredients in the standards-making process.

It remains to be seen how the Cloud Standards Customer Council and the Open Data Center Alliance will evolve, separately and together, and it’s also too early to say whether customers will be entirely successful in their efforts to get what they want and need from cloud-computing standards bodies.

Nonetheless, there’s already a tension, if not a distrust, between buyers and sellers of cloud-computing technology and services. The vendors are on notice.

Cloud Pitch Puts Microsoft on Firmer Ground

Earlier this week in Washington, D.C., at its Worldwide Partner Conference (WPC), Microsoft made clear that it is serious about maintaining an industry-leadership position as businesses and enterprises make the transition from conventional data-center computing to cloud-based alternatives.

At the forefront of Microsoft’s pitch was the Windows Azure Platform Appliance (WAPA). Appliances aren’t new concepts. As hardware-based software-delivery platforms, they’ve been around for some time. But Microsoft’s conception of WAPA deviates from any conventional definition of a standard networked appliance. Although Microsoft calls it an appliance, its exact form factor has yet to be defined precisely.

Initially WAPA is likely to take the form of containerized infrastructure for data-center deployment. In time, much of its functionality might get squeezed into a rack. We just don’t know.

There’s a lot we don’t know about WAPA. The form factor, availability dates, pricing, how it will be sold to customers — all of that is to be determined by Microsoft and its partners.

Speaking of which, partners were and remain key considerations in Microsoft’s plans for cloud computing. Microsoft’s channel partners are critical to its success, and Microsoft needs top-drawer technology partners to bolster and disseminate its products and technologies in the marketplace.

Microsoft’s latest proclamations, then, should be viewed as a concerted bid to get partners under its cloud-computing tent. Channel partners, who have been concerned about the implications of cloud business models on their current revenue and margins, also have grown anxious about whether Microsoft might encroach on their turf. Accordingly Microsoft was at pains this week to demonstrate that cloud computing is good not only for Microsoft but for its partners, too. Quoting from Computer Reseller News:

In a later keynote, Stephen Elop, president of Microsoft’s Business Division, sought to dispel the idea that channel partners can’t make money reselling Microsoft services. He cited a study the company made of 40 sales contracts for Microsoft Online Services through channel partners (average deal size $24,000) and concluded that each generated $167 per seat in revenue for solution providers. That included $35 per seat for providing managed services such as desktop management, $66 per seat for business consulting and customization work, $46 per seat for migration and integration services, and $20 per seat for provider-of-record fees.

“It is no longer a question of if, but when our customers should move to the cloud,” Elop said. “Increasingly our customers are purchasing suites of online services. Customers are speaking with their wallets.”

As for technology partners — Dell, HP, Fujitsu — Microsoft needs them to have skin in the proverbial game. It needs them to derive benefits not only from providing enterprise cloud services but also from selling their own hardware and software into enterprise accounts that favor private clouds rather than public ones. (And there are a great many enterprises that aren’t ready to take a blithe hop, skip, and jump toward the public cloud.)

The super-sized appliance approach gets three big system vendors onside, each of them offering unique complementary value and market coverage. Microsoft clearly has given this some thought, and it’s tapping Dell, HP, and Fujitsu for very specific reasons. Dell has been with Azure from the inception, providing the hardware and considerable assistance for Microsoft’s first Azure data center; HP has global services coverage and direct access to well-heeled enterprise customers; Fujitsu is strong in Asia and Europe, and it brings its own technological resources to the table.

In fact, what impressed me about Microsoft’s Azure announcement earlier this week was that it was so coherent, focused, logical, and purposeful — all the attributes typically absent from Microsoft’s consumer forays. True, Azure has advanced unevenly, and Microsoft still has to provide considerably more detail before we can evaluate it thoroughly, but I see an acuity and confidence from Microsoft that is at odds from its awkward and ungainly posturing in consumer markets.

This is an area where Microsoft can compete effectively, where it can leverage its installed base, corporate resources, expertise, and institutional knowledge. It’s where Microsoft needs to put more resources, not less. When one compares the smoothness and viability of this narrative with the stuttering tales Microsoft spouts on behalf of its Windows Phone 7 and slate/tablet misadventures, one finds it hard to believe they’re coming from the same company.

Railing Against Cloudspeak

I readily concede that I can be as obtuse as the next guy — maybe a lot more obtuse if the next guy is exceptionally bright. Try as I might, sometimes I just can’t comprehend what others are trying to say.

I suffered a severe onset of this condition in the late 90s when the “next big thing” materialized on a weekly basis and typically vaporized just as suddenly.

Back then, evanescence was portrayed as apotheosis. We had niggling questions about the cliches and impenetrable jargon that were deployed by marketers to describe the next big thing. But we didn’t want to be seen as dim and uncomprehending, so we refrained from demanding clear, transparent definitions and explanations. It was our loss.

Well, now we’re faced with cloud computing. It seems like a simple concept to me, but one with potentially serious implications, likely to result in further industry consolidation and sustained deflationary pressure. For the record, I define it, broadly speaking, as application services provided on demand, as needed, on a subscription basis. Google does it today, as do others.

Don’t get me wrong, though. I’m not a Luddite. I’m not trying to halt the march of progress (as if that were possible). I’m just asking for some candor, clarity, and honesty from those trying to sell us their particular interpretation of the cloud.

Maybe that’s too much to ask in an era of financial chicanery, dubious business ethics, and the utter disintegration of any semblance of a social compact (or community) in most Western nations. Still, ask I will. It’s a stubborn holdover from civics lessons I received in school.

Before we talk about something, we should be able to define it. Socrates might have been a layabout and a carouser, but he got it right when he told students: “If you would speak with me, you must define your terms.”

I wish he were around today as a scribbler in the business press or a trade journalist. He’d force cloud-computing proponents to speak clearly, explain what they mean, and work through the implications and ramifications, if only because that’s what is owed to an audience.

A few months ago, in an address to the Churchill Club, Oracle’s redoubtable Larry Ellison railed against misty, murky cloudspeak. Referring to cloud computing, he said:

“Cloud? Clouds are water vapor. My objection to cloud computing is the fact that cloud computing is not only the future of computing, it is the present and the entire past. Google’s now cloud computing. Everybody’s cloud computing. … All it is, is a computer attached to a network. What are you talking about? What do you think Google runs on? It’s databases and operating systems and memory and processors! What are you talking about?”

Ellison asked that plaintive question back in September, and we’re still getting either too many different answers or none at all.

If you can answer the question — if you can give me a clear, relatively unambiguous definition of cloud computing — I ask that you do so. Please help me see the light through the darkening clouds.

Network World on Challenges Facing Security Vendors in China

An interesting article appears in Network World today regarding the challenges security-software vendors confront in trying to crack the Chinese market.

The obstacles are manifold, including product-localization issues, finding the right distribution channels, and product pricing.

Regarding product localization, China has not only its own language and dialects, but also its own unique types of malware. To address that challenge, McAfee has hired a research team to develop defenses against exploits that target popular Chinese applications.

Similarly, the channels through which Chinese buyers, particularly consumers, obtain security software are different from those preferred by Westerners. Whereas Americans and Europeans often adopt the anti-malware software that comes bundled on PCs, Chinese consumers prefer to download their own security software or to use online virus-scanning services. They also favor anti-malware subscriptions from Internet service providers.

Last but certainly not least, Chinese consumers of security software favor low-priced offerings, which come primarily from home-grown vendors such as Rising, Kingsoft, and Jiangmin. Western vendors of security software are among China’s consumer-market leaders measured in sales revenue, according to Gartner numbers cited in the article, but they lag in unit-volume market share and find themselves under pricing pressure.

The unique challenges of the Chinese market are worth bearing in mind as one attempts to grapple with how quickly, and how effectively, security-software vendors can increase sales in that part of the world.

Cisco Extends Security Portfolio with ScanSafe Acquisition

Cisco announced the acquisition of hosted-security vendor ScanSafe today. To acquire ScanSafe, Cisco will part with $183 million in cash and retention-based incentives. If all goes according to plan, the deal will close in Cisco’s fiscal second quarter of 2010, which equates to the calendar year’s first quarter.

Based in London and San Francisco, ScanSafe is a market leader in software-as-a-service (SaaS) Web security, serving customers that span small- and mid-size organizations as well as large enterprises. Among ScanSafe’s customers are Google, AT&T, and Sprint.

ScanSafe’s competitors include Blue Coat, Websense, Symantec, McAfee, Kaspersky, Purewire (now part of Barracuda), and Zscaler. According to market research from IDC, ScanSafe held more than 30 percent of the worldwide SaaS web security market, on a revenue basis, in 2008.

In a press release announcing the acquisition, Cisco said web security will be a $2.3 billon market by 2012. Presuming Cisco can expand upon and extend ScanSafe’s market presence, the networking giant looks well placed to see a return on its investment before long.

Cisco foresees ScanSafe meshing well with its IronPort on-premise content-security appliances. With the IronPort web-security appliances and ScanSafe’s web-based security services, Cisco’s security portfolio encompasses either premise or hosted security as well as a hybrid approach combining both.

When the acquisition closes, Scan Safe will be subsumed within Cisco’s Security Technology Business Unit (STBU).

What’s Gartner Saying?

As I perused Gartner’s press release announcing its “top 10 technologies and trends that will be strategic for most organizations in 2010,” two of the listed items annoyed me, though for slightly different reasons.

At the top of Gartner’s list of top 10 strategic technologies is cloud computing, that much-discussed but nebulous technological phenomenon that is reputedly taking hold in the minds and planning processes of enterprises worldwide.

I am not going to take the position that cloud computing isn’t important, or that it doesn’t have a potentially lucrative future, but I am going to take the position, alongside Oracle CEO Larry Ellison, that it is ambiguously and poorly defined by most of those who like to talk about it.

Alas, Gartner is no exception to that rule. Gartner, coming down the mountain with its tablet of 10 strategic technologies, says the following on the subject:

Cloud computing is a style of computing that characterizes a model in which providers deliver a variety of IT-enabled capabilities to consumers. Cloud-based services can be exploited in a variety of ways to develop an application or a solution. Using cloud resources does not eliminate the costs of IT solutions, but does re-arrange some and reduce others. In addition, consuming cloud services enterprises (sic) will increasingly act as cloud providers and deliver application, information or business process services to customers and business partners.

Could that have been more muddled? Does anybody understand what Gartner is on about? Shouldn’t we expect a modicum of clarity and cogency from a research firm that is paid so richly to tell enterprises and IT vendors what to think?

Yes, my apoplexy is in full-tilt boogie. But I feel my cause is righteous. So-called thought leaders should express their thoughts articulately and clearly. Coherence and intelligibility should not be negotiable.

Further down the list, Gartner says the following about another allegedly strategic technology, social computing:

Workers do not want two distinct environments to support their work – one for their own work products (whether personal or group) and another for accessing “external” information. Enterprises must focus both on use of social software and social media in the enterprise and participation and integration with externally facing enterprise-sponsored and public communities. Do not ignore the role of the social profile to bring communities together.

Again, the sentence structure and wording leave something to be desired, but I’ll put that objection aside. What I will not put aside, however, is my complaint that Gartner has not put forward a compelling reason for enterprises to countenance their employees spending time on social-networking sites while at the office, presumably during business hours.

Really, what’s the business case for untrammeled Facebook access at work? Shouldn’t employees who report to the office, you know, actually work there? Does Gartner realize that Facebook owns the content posted to it? How does that adhere to corporate or government policies relating to information confidentiality?

What’s the ROI-related business case for allowing employees to spend time on Facebook or MySpace? It’s impossible to know, because Gartner has stated no clear business argument for opening the social-networking floodgates.

I’m taken aback that Gartner has issued this press release. Not enough thought has gone into the substance and presentation of its content. That should be a worrying sign for the clientele that pay the company for its research and opinions.

Dell Tips Hand on Further Acquisitions

Eponymous CEO Michael Dell blitzed through the rain-soaked Bay Area yesterday, speaking at Oracle OpenWorld and to a Churchill Club audience.

On the whole, Dell’s remarks were neither as stridently partisan nor as frankly provocative as those Larry Ellison made to the same audiences recently, but he still offered a few comments worth parsing.

Dell’s disparagement of netbook computers captured considerable media attention. What he said is basically true: Today’s netbooks generally don’t possess the display size or performance characteristics to qualify them as replacements for full-fledged notebook PCs. That’s convenient for Dell, of course, because the profit margins on sales of netbooks fall well short of those attributable to notebooks.

Dell sells netbooks, but the company is positioning them as computers one would buy if one has never owned a computer before or can’t afford a more-capable system. I think Dell sees the netbook primarily as a developing-market play.

One of Dell’s other comments was potentially more revealing. Referring to the role of the server in the data center, he said the following:

“A lot of what goes on in the data center is being gobbled up by servers. We see switching, for example, rapidly collapsing into the servers. You’ve got virtualized switches, but even the switches that aren’t virtualized — they’re now sitting inside blade chassis.

Not that long ago, it looked like intelligence was getting sucked out of the server and it was going somehow into the network, but actually now it looks like it’s going the other way. The server is becoming the epicenter of the data center, and you’re seeing the switches get embedded inside the server. I’m sure there are plenty of other opinions out there.”

Yes, there are other opinions. Cisco might argue that the chassis switch is subsuming the server, and that the network retains considerable intelligence. Irrespective of whether one asserts the primacy of one over the other, though, both companies are arguing that servers and networks are converging in the data center. That has interesting implications for Dell’s strategic direction.

Based on what Dell has said regarding the server as the epicenter of the data center — with switches embedded inside the server — one can justifiably extrapolate that it’s only a matter of time before Dell gets into the networking game, likely with blade switches for its own servers.

The question then arises: Where does Dell get that functionality? An acquisition (or acquisitions) seems the likeliest option. I’ll look at Dell’s potential networking moves in a subsequent post, considering both its current partnerships and how receptive certain vendors might be to an acquisition.

On the topic of acquisitions, Dell said his company will be “reasonably active,” is “rapidly developing” merger expertise, and is seeking more deals as part of a turnaround plan. The company announced its $3.9-billion takeover of Perot Systems Corp. last month, and will presumably take a bit of time to integrate that acquisition properly before making another sizable buy.

Nonetheless, Dell indicated further acquisitions are coming. Dell will look at acquisitions that bolster sales to corporate customers and will consider more purchases in the healthcare industry.

The corporate focus – Dell derives more than 80 percent of its revenue from enterprise customers – is the right one for the company. As for healthcare, it is Perot’s strongest vertical, ripe for government-subsidized automation and technological upgrades.

Said Dell:

“When you look at the health-care space, it’s the one sector of the economy that has the least amount of IT, and we see it as very promising for growth. There’s usually more technology at the grocery store than there is at your doctor’s office.”

Dell sees electronic medical records (EMR) as a potentially compelling application for software-as-a-service (SaaS) delivery. He must also be encouraged by US-government stimulus spending on healthcare, with about $20 billion pouring into healthcare information-technology initiatives.

That’s promising for Dell, as is the long-awaited refresh cycle for enterprise servers and desktops. Dell sees the server refresh occurring now, and he believes PC upgrades will commence in 2010.

On the refresh cycle, Dell said:

“I think there’s a powerful refresh cycle coming. It won’t come all at once, but we believe it’s going to happen as we get into the early part of next year on the client side–on server side it’s already started.

The average client device in business is running Windows XP, but that’s an eight-year old operating system. If you get the latest processor technology and Windows 7 and Office 2010, you will love your PC again, and we have not been able to say that for a long time–it’s a dramatic improvement in performance and capability.”

Dell might be asking too much. It’s one thing to call for an operating-system upgrade, which seems inevitable in light of Windows Vista’s market travails, but it might be a bridge too far to insist that enterprises also make an immediate switch to Office 2010. Microsoft might like the sound of those words, but I suspect corporate bean counters will be less enchanted.

What about Dell’s smartphone? Everybody, it seems, wants to know whether it’s got a future. It is being proffered by Dell’s consumer division, which, at first blush, might seen counterintuitive. After all, Michael Dell has said the company’s strategic focus, and its future acquisitions, will occur in the enterprise space. What’s up with a smartphone for consumers?

Remember, however, that Dell’s smartphone, the Dell Mini 3i, hasn’t come to America yet. Running the Android-based Open Mobile System (OMS) for China Mobile, the Mini 3i is carefully positioned to tap a unique opportunity, predicated on partnerships and customized content. It’s not a template for success in the USA or Europe, but Dell will take it, and perhaps run with the same approach in other developing markets.

Dell seems set on taking a modified version of its Android smartphone into the American market in 2010, but I think the company would be well advised to adopt an entirely different approach, better aligned with its enterprise strategy, in developed markets.

Although Dell sounded modestly optimistic notes on the global economy — saying a nascent recovery in the USA is several months ahead of developments in Europe — he also emphasized that Dell would continue to pursue cost cuts.

Despite Challenges, Google Apps on Right Course

Google initiates so many projects and technologies that it’s fair for us to wonder whether the company is fully committed to all of them. Some are trial balloons — not quite shots in the dark, but not yet clearly defined products with specific application scenarios, customers, and target markets in mind.

At this point, now that Google CEO Eric Schmidt is making sales calls on its behalf, Google Apps ought to be considered an offering to which Google is fully committed. The web-based collaboration suite has drawn a growing number of customers, some of whom are willing to pay for it.

In an interview with Steve Lohr of the New York Times, Schmidt and Google co-founder Sergey Brin divulged that nearly two million organizations — government agencies and departments, non-profit organizations, and enterprises — have adopted Google Apps. Counted among that cohort are a few large companies, such as Motorola and Genentech.

So, with the company’s commitment to Google Apps no longer in question, we can turn to the earnest question of how far and how fast Google Apps can go in its quest for enterprise adoption. After all, even with Google’s enthusiastic marketing and unflagging corporate support, Google Apps will meet resistance from prospective customers.

One salient objection to the application suite involves availability. Google has had some well-publicized service outages. Those will have to be severely mitigated and kept to a bare minimum if Google is to make steady progress against incumbents Microsoft Office and Lotus Notes. Whenever these outages occur, one can be sure Microsoft and IBM will call attention to them.

Related to availability concerns are those pertaining to the security of cloud-based applications. Google works hard to implement measures that safeguard the privacy and security of customer data, but it needs to do more if it is to put this issue to rest. The company must redouble its efforts to work closely with security vendors and experts. It needs to see the big picture — and the big opportunity — and any vestiges of a not-invented-here mindset must be swept aside. Reaching out to those with common cause in cloud security is in Google’s enlightened self-interest.

Another factor is market inertia. Basically, customers — their IT departments and application users alike — are comfortable and familiar with their behind-the-firewall servers and desktop applications. As we have all discovered, at one time or another, change can be disruptive and threatening. In this area, Google has done its utmost to make the transition painless and seamless.

Although the New York Times piece mentioned a report from Forrester Research that found only 10 percent of those using Microsoft Outlook said they would be happy to have their e-mail switched, that’s a red herring. As many comments beneath the article pointed out, Google Web Apps supports IMAP and POP email accounts, allowing users to continue using their favorite desktop email clients (including Outlook) if they’re not inclined to switch to a browser-based interface.

Microsoft Exchange would go away, of course, but most knowledge workers wouldn’t care as long as they still had their familiar email clients and could still collaborate effectively with colleagues, partners, and customers.

It will take time for Google Apps to build on its base of early adopters and win over the majority of the marketplace. Still, I increasingly think it’s only a matter of time, that Google’s web-based model will prevail, and that Microsoft and IBM are fighting rearguard actions to preserve diminishing revenue streams from existing franchises. Both incumbents need to formulate strategic plans that go beyond defensive postures, but that’s not easily done by public companies under constant quarterly pressure to “beat the Street.”

With its franchise not under threat — with revenue from search advertising providing a lucrative cornerstone on which to build new palaces of wealth — Google finds itself in an enviable position. Unlike its enterprise-collaboration rivals, Google has little to lose and much to gain.

Strategic Alliance between McAfee and Verizon Business Aims for the Clouds

The phrase “strategic alliance” is abused, cheapened, and trivialized through rampant overuse in the information-technology industry. Occasionally, however, a strategic alliance warrants the designation.

Take, for example, the strategic alliance announced today by McAfee and Verizon Business. This is an extensive, far-ranging partnership, bringing together each company’s respective strengths today and extending them ambitiously into the future.

The highlight of the partnership is the companies’ commitment to jointly develop and market a suite of next-generation, cloud-based, managed-security solutions for enterprise and government customers. If this initiative is executed well and brought to fruition, it has the potential not only of being lucrative for McAfee and Verizon, but also of providing a secure foundation for the widespread adoption and proliferation of enterprise-class cloud computing.

But the announcement wasn’t just about the future. A range of initiatives and services are available immediately.

As of now, for example, Verizon Business will offer its customers McAfee’s full range of enterprise security solutions. The McAfee offerings will broaden the choice of security solutions available to Verizon Business’ customers while helping McAfee expand its distribution channel. That’s a double-edged sword, of course, because there is no question Verizon Business will compete against, and often overwhelm, preexisting McAfee channel partners.

Verizon Business also will offer McAfee’s PCI (Payment Card Industry) compliance services to banks and other organizations that support merchants that handle fewer than 20,000 e-commerce transactions or up to one million credit card transactions annually. It’s potentially a big market, encompassing a group of retailers that accounts for nearly a third of all credit-card transactions.

McAfee and its customers also will gain access to Verizon Business’ network of 1,200 security professionals, providing a lot of feet on the street capable of designing, implementing, and integrating security solutions.

Another interesting aspect to the relationship is Verizon Business’ commitment to provide data-center outsourcing services to McAfee. Verizon Business will help McAfee consolidate its data centers, enabling the latter to improve round-the-clock management of its web-hosting operations and set the stage for rollout of cloud-based security services.

Speaking of which, the cloud-based security services will be managed and operated by Verizon Business. The services will include McAfee security technologies such as firewalls, intrusion prevention services, anti-malware, content control, and SSL VPNs.

A McAfee spokesperson said some of the cloud-based security services are being used now by a small number of customers, but that wider availability is scheduled for mid 2010. That availability will span North America, South America, Europe, and the Asia-Pacific region.

From top to bottom, the partnership is a major breakthrough for McAfee. It will result in some friction with channel partners, but the upside for McAfee more than compensates for the diplomatic overtime its field representatives will have to endure.

It’s a good deal for Verizon Business, too, enabling it to extend its push into managed services. The partnership also allows Verizon to establish a credible security foundation for cloud-based application services, which have understandable appeal to service providers with prodigious hosting facilities.

The partnership stands as a testament to the technology and thought leadership McAfee has established in framing its vision for cloud security. It got out ahead of the curve — and ahead of its competitors — in staking those claims.

Having that edge in a new and potentially lucrative market will serve it well. The consumer anti-malware franchises that Symantec and McAfee built are under increasing attack from free products, including Microsoft Security Essentials (MSE), which is more than good enough to eat into the market share and revenue of the incumbents, especially in a new economic reality that favors parsimony.

McAfee has adapted well, changing its emphasis and apportioning its resources accordingly. The company has more than held its own against Symantec in enterprise markets, and it has taken a leadership position in cloud security. The strategic partnership with Verizon Business represents strong validation that McAfee is on the right course.

IBM’s LotusLive iNotes More Defensive than Offensive

IBM is getting into the web-based email and collaboration game, but I wonder how dedicated the company will be to seeing the effort through.

While Microsoft is merely using its web-based Exchange Online and Office Web Apps as complements and cloud-based extensions to its Exchange and Office franchises, Google has no desktop-software empire to defend. As such, Google has been more aggressive, packing together more features and functionality and being more ambitious in its online-collaboration aspirations.

IBM is likely to follow Microsoft’s lead, doing enough to staunch Google’s incursions onto its turf, but not doing enough to prevent Google from winning customers that are enthusiastically committed to the web-based model. How many customers there are in that category remains to be seen, but IBM has lost an account or two to Google — Fairchild Semiconductor is one — and Google touts Genentech Inc. and Salesforce.com as customers.

All of which explains the motivation and reasoning behind LotusLive iNotes, which includes web-based email, calendar, and contact-management services. IBM says LotusLive iNotes is ideal for employees that don’t “require all the capabilities of full-featured email and collaboration software, or for employees that currently have no access to company email.”

IBM has limited the market reach of the product, however, by skimping on features and functionality and by limiting the amount of storage allocated to each user. IBM expects LotusLive iNotes to find patronage at small- and medium-sized businesses and at some larger companies whose employees are often on the go and away from their desks.

There’s no question that Google Apps is a fuller collaboration suite. In addition to providing web-based email, calendar, and contact-management capabilities, Google also supplies word processing, spreadsheet, and presentation applications, plus a video channel. There’s a price differential, though. Google Apps Premier Edition is priced at $50 per user annually; IBM’s LotusLive iNotes starts at $36 per user annually.

Google’s service outages are another factor in the equation. IBM timed this announcement well, just after some notable Google availability issues that could discourage enterprise customers from taking the company seriously as a messaging alternative to IBM or Microsoft. In announcing LotusLive iNotes, IBM took every opportunity to highlight Google’s recent foibles.

I see the IBM move as more defensive than offensive. IBM is taking technology it purchased from Outblaze, a Hong Kong-based company, and using it to extend (but not to replace) its Lotus Notes franchise. Like Microsoft, IBM won’t be in a rush to cannibalize a profitable franchise in email and collaboration.

With web-based technologies, IBM will do what it must do to repel Google, but it will refrain from pushing too far, too fast. The margins on Lotus Notes are better than anything IBM could sustain with web-based services. That is why IBM is touting a hybrid approach that incorporates both server-based and web-based elements.