So now we know. It is to be full-scale war in the cloud.
After the best part of a decade in which the business applications establishment came under assault from the enfants terrible in the cloud, the big guys are hitting back. First Microsoft, then SAP and now Oracle - the competitive landscape is rapidly changing for relative newcomers like Salesforce.com, SuccessFactors and NetSuite.
By submitting your email address, you agree to receive emails regarding relevant topic offers from TechTarget and its partners. You can withdraw your consent at any time. Contact TechTarget at 275 Grove Street, Newton, MA.
Calling them newcomers of course is something of a fallacy. Salesforce.com is 13 years old and a $2bn revenue company. Its claims to the IT mainstream are legitimate and far from those of the aspiring upstart that many of the traditional on-premise applications firms had hoped to characterise it and other cloud apps firms.
That state of denial - there are no other words for it - are now at an end, and not before time. There are real-world examples of enterprise-scale cloud application deployments that prove the validity of the challenge posed by the "upstarts". Take Siemens' decision to oust SAP and replace its HR applications with cloud replacements from SuccessFactors - a rollout to 420,000 staff in over 80 countries. That's been the world's largest cloud deployment for some time now - although there is now a bigger one yet to be announced.
In the face of this cloudy advance, the old guard has at times seemed uncertain of how to respond. That's been completely understandable up to a point. If you're a traditional, licence-based, on-premises company, your business model is based around what NetSuite CEO Zach Nelson has described as "selling customers licences and daring them to install them".
The licence to print money that was on offer to on-premise applications vendors was summed up by Gartner analysts a few years ago when they used to talk about the number of unused Siebel licences that sat on IT department shelves - the price the customer had to pay for the licensing brackets that the software firm used. You need 52 seats? You buy a licence for 50-100 seats and leave 48 of them on the shelves. Sorry about that, dear customer, but them's the breaks.
But in the cloud model, you're paying for a subscription service that theoretically can scale up and down according to customer needs. Of course, it's not quite as simple as the "pay per drink" claims that cloud evangelists propound - and there's now increasingly a push for enterprise licensing models in the cloud - but it's certainly a more flexible buying model for customers - and a more unpredictable sales and revenue model for providers.
If you're an on-premise firm used to the tried-and-tested licence model, why would you want to rush into a less easy-to-forecast alternative? The answer of course is because customers want you to do it and if you won't do it, then they'll pick up the phone to the likes of Salesforce.com and Workday and RightNow.
So we've seen the Damascene conversion of the old guard to the new cloud model. Microsoft has cloud religion now and it's got it with an evangelical fervour that means it is seemingly impossible for any Microsoft executive to give a speech anywhere in the world without trumpeting the cloud. SAP's taken longer to come to terms with the cloud, but it's getting there now with its low end Business ByDesign push.
The last bastion of resistance came from Oracle - or rather from Lawrence J Ellison himself who worked himself up into apoplectic frenzies of indignation at the very mention of the word cloud. His rejection of the term - "What is a Cloud? It's water vapour!" - was curious as Ellison of course had long been the majority shareholder in NetSuite (a personal investment) and provided some financial backing for Salesforce.com in its early days.
The Oracle distancing from the cloud was curious for another reason: Oracle began its own meteoric rise on the back of the denial by a different software establishment old guard of a seismic shift in the industry. Back in the 1980s, before Oracle rose to prominence, there was only one database game in town and it was called Cullinet.
But it was Cullinet's - and in particular its CEO John Cullinane's - refusal to come to terms with the emergence of the relational data model that gave Oracle the market gap to exploit. Cullinane's role as the Larry Ellison of his day has long been replaced by the memory of him as a software King Canute trying to hold back the relational tide. Glug, glug, glug
So surely Ellison wouldn't make the same mistake now as the cloud waters started to rise up around his ankles? Of course he wouldn't. The first shift in his stance came at the 2010 Oracle OpenWorld conference where he staked a claim that the firm's Exalogic hardware was really cloud computing. The purists mocked - cloud doesn't come in a big metal box, they cried. Ellison didn't care.
But it's in the latter half of 2011 that the game has changed. Two critical events happened at this year's OpenWorld event in San Francisco. The first was the - at the time - baffling decision to expel Salesforce.com CEO Marc Benioff from his keynote slot. Benioff has been turning up at OpenWorld for the past three years to preach his own version of the cloud, parking his tanks on the Oracle lawn, but in a way that was still respectful of his hosts. There was name calling and tit-for-tatting by Ellison and Benioff, but it was essentially rooted in a mutual respect.
Something went wrong this year. Ellison gave a lacklustre - and widely criticised - keynote speech on the opening night of OpenWorld which Benioff himself criticised on Twitter and Facebook. The next thing he knew, Oracle had bumped the scheduled Salesforce.com slot and Benioff - ever the canny marketer - turned the situation around into a PR masterclass that stole all the headlines away from Oracle.
At the time, commentators dismissed this as spat between two CEOs, another example of the type of ego-based tussles that have characterised Silicon Valley for decades. But it's now clear that there was more to it than that. The next day, the second significant event occurred with a visibly energised Ellison back on form to deliver a barnstorming closing keynote in which he fired off some vicious comebacks at Salesforce.com - "the roach motel of cloud computing" - and announced the Oracle Public Cloud.
Oracle was out and proud and in the cloud game - that much was clear. What wasn't yet clear was just how serious it was about to get to demonstrate this. At the end of October the cloud computing pureplays got one hell of a Halloween fright when Oracle announced its takeover of RightNow to flesh out the Public Cloud.
The deal is still subject to approval, but assuming it completes successfully the addition of RightNow's offerings to the Oracle Public Cloud seems to spell a head-on challenge for Salesforce.com that will make the cloud CRM marketplace a feistier place to be in 2012 and beyond.
But there's more to it than that. When the RightNow deal was announced, the press release contained what can only be read as a shopping list of future acquisitions in the cloud space, headed up by HR and talent management.
The priority given to HR is easily explained. Cloud pureplay Workday has been causing some pain points for Oracle's installed PeopleSoft customer base. Oracle insiders suggest that Workday has rapidly risen to the upper echelons of Ellison's "things to be dealt with" list.
But what this shopping list inevitably sparks is further speculation about who will be next? Which cloud pureplay might fall prey to Oracle? Or SAP? Or any of the other on premise enterprise firms that want/need to beef up their cloud credentials.
The RightNow acquisition is the most dramatic takeover to date, but it's most certainly not the last. As one cloud pureplay CEO noted: "There's only so many times that you can prod a sleeping tiger before it wakes up and bites you."
Everyone is now in the cloud game. 2012 is going to be a turbulent time for the cloud apps market. Buyer - or rather subscriber - beware.
Stuart Lauchlan is editor of BusinessCloud9 and will be chairing the third Business Cloud Summit at the Novotel West in London on 5 December where the prospects for the cloud computing applications market in 2012 will be on the agenda - details can be found at www.businesscloudsummit.com.
Tickets for the summit are £499 each, but Computer Weekly readers can apply for a complimentary pass by going to www.businesscloudsummit.com/conference-registrationand using the registration code CW1.