Traditional software dead? Oracle reacts.

The development of cloud computing has promoted Software as a Service (SaaS) as yet another approach for companies to adopt IT applications at lower costs. Traditional software ownership is being challenged, focusing businesses to review their upgrade options and closely look at the way they work.

Smaller companies such as Workday and Salesforce.com are taking market share away from the larger players such as Oracle and SAP; eroding their application maintenance revenue streams. There definitely seems to be a trend where customers are more interested in cloud applications than on-premises application deployments. The objective for most companies turning to the cloud is to cut costs and provide a flexible way to run operations, compared to the alternative of pre-packaged applications installed on machines that carry multi-year service agreements.

In recent months the evidence is becoming clear. We are already seeing accounts such as Bayer AG, Zynga Inc and Activision Blizzard Inc. opting to move away from traditional package application vendors to adopt cloud based applications. Undoubtedly, this is great news for the smaller vendors and the SaaS marketplace as a whole as it not only pushes the envelope for innovation, but forces the larger vendors to react and compete.

Before customers rush to adopt SaaS there are a few essential points to take into consideration:

• Not all data can be stored outside the company; there will be a requirement to manage sensitive data internally.
• Hidden costs for integration. Some cloud computing models may actually cost more than the monthly subscription costs. Integrating various data sources to support current programs they may be running will require expertise from system integrators.