Cloud Computing and Software as a Service (SaaS) Point the Way to the Future

There is a now-unstoppable trend toward downplaying the role of packaged software that is installed on the desktop, relying instead on internet-based applications hosted in the cloud. This accelerated dramatically with the onset of the Coronavirus and working-from-home. The trend is called Software as a Service (SaaS). In fact, Sun Microsystem’s famous positioning line of long standing, “The network is the computer,” pretty well sums up this movement, a thought that “uses the internet as the computing platform of the future.” Microsoft, Google, IBM, Salesforce, Oracle and other leading firms are quickly enhancing their own suites of internet-based applications.

Cloud computing is the use of remote servers, often owned and operated by third-party service providers, to store and access data and software, as opposed to servers owned by the user. Firms that offer cloud services run clusters of computers networked together, often based on open standards. Such cloud networks can consist of thousands of computers. Cloud services enable a client company to immediately increase computing capability without any investment in physical infrastructure. (The word “cloud” is also broadly used to describe any data or application that runs via the internet.) The concept of cloud computing is key to the growing use of SaaS.

The Coronavirus pandemic accelerated movement of data from in-house servers to the cloud significantly. Gartner forecasted that global spending on public cloud services on a broad basis would reach $563.6 billion in 2023. The firm further forecasted growth of 20.4% to reach $678.8 billion in 2024.

Spending on cloud infrastructure is spiraling as well. Gartner reported cloud application infrastructure services (Platform as a Service, or PaaS) spending of $145.3 billion in 2023 and forecast growth of 21.5% in 2024 to reach $176.5 billion.

Amazon.com was one of the earliest companies to offer cloud services, and it remains a leader in this field. Since it must operate immense server capacity anyway, Amazon decided in early 2006 to offer cloud computing services, on its servers, to outside parties. Amazon Web Services (AWS) have been extremely popular. Using AWS requires no long-term contract or up-front investment. Charges are reasonable and usage-based (a few cents per gigabyte per month, in the U.S.). Remote servers, remote storage and the Amazon SimpleDB database are among the most popular AWS tools. Amazon, Microsoft and Google are investing vast sums to build new data centers for cloud services. Artificial intelligence (AI), including tools like ChatGPT, is a key trend driving cloud services demand.

Software that is sold and operates only via the cloud is a growing trend. Adobe Systems, Inc., for example, a maker of extremely popular design software, is selling its biggest software products as online services only available by subscription to Adobe Creative Cloud.

SPOTLIGHT: Hybrid Cloud

The hybrid cloud is a data strategy where some applications and data are moved to cloud-based systems, while highly sensitive data or certain functions are kept on client-owned, local systems. Microsoft began offering hybrid cloud services in 2017 by allowing customers to run a portion of its Azure cloud on in-house servers (built to Microsoft specifications) which work smoothly with Azure data centers. The firm added Azure Stack, a rugged platform designed to support military data needs. Another option is Azure Arc, which affords customers the ability to store more data on their own servers. In 2020, Amazon joined the hybrid cloud movement by offering AWS (Amazon Web Services) server racks called Outposts for local use combined with software that connects it to the AWS cloud. Outposts customers include Disney animators (who demand almost instantaneous connections between in-house data and cloud data), Verizon Communications (needing faster 5G browsing speeds) and Fox Corp. (for video production needs). 2021 saw Microsoft launching Windows 365 (in July) and Windows 11 (in October).

Both are cloud-based and part of Microsoft’s efforts to regain global operating system market share (which was 85% in 2011 but only 30% in 2021). Windows 365 can be utilized by Apple users without the need to go through Apple’s proprietary App Store.

The result of these efforts has become a wide variety of software that is accessed only via the internet instead of the desktop. Some software can be accessed for free, but many rich software applications are rented to the user by subscription or by fees based on the amount of time used. The growing use of smartphones is accelerating this trend. Also, the sharing of data, whether for business collaboration (such as Microsoft’s Office 365 and Salesforce’s customer management solution) or simply for fun (such as Facebook), has simplified dramatically thanks to the cloud. Business models and profit streams are being altered as a result.

A major goal of publishing software in the cloud is for the user to be able to eliminate much of the money and staff effort that an organization typically invests in building, managing and updating software in the traditional manner on a computer network. At the same time, the cloud enables software providers to build steady streams of renewable subscription revenues. Salesforce, a customer relationship management (CRM) software leader, has achieved great success by selling only internet-based (SaaS) access to its tools. NetSuite is another major provider of internet-based applications. Its offering for businesses includes CRM, enterprise resource planning (ERP), accounting, ecommerce and much more, all on a subscription basis. Among the advantages of SaaS are no software to purchase and no software to install or maintain.

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