Cloud Infrastructure Services Continue to Disrupt the Traditional Software Supply Chain

On Thursday Amazon launched the AWS Marketplace — a new way for customers to buy and run software within Amazon’s EC2 Platform. Although Amazon Web Services (AWS) has offered a limited set of software infrastructure for some years, it has not yet offered a wide array of developer tools or business software. This announcement changes that.

Amazon continues to release new products and features at a torrid pace, but what’s interesting here is the broader industry movement to offering traditional software “as-a-Service.” We’re not talking about Software-as-Service (SaaS) here, we’re talking about traditional software sitting on top of Infrastructure-as-a-Service (IaaS), but paid for by the customer as it’s used.

It may seem like a minor distinction, but it’s not. As we’ve discussed in the past, true SaaS solutions are built from the ground-up on a multitenant architecture, which means the “pay-as-you-go” model is inherent in the solution, given that the infrastructure, code and support are shared across thousands of customers.

Offering traditional on-premises software as a service has, up to this point, been extremely difficult. One of the primary reasons for this is because the original software vendor has little incentive to move to this model given that it potentially cannibalizes existing revenue streams. Now that Amazon is purported to be a nearly $1 billion dollar business, and now that the large, traditional service providers like CSC, HP and IBM (as well as others) are investing heavily in the IaaS space, software vendors now have a very strong incentive to re-evaluate their legacy licensing approaches to make sure they are represented on these growing platforms.

This is what we’re now starting to see — the extension of the “as-a-Service” model into the traditional software supply chain — should be an interesting ride.

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About the author

Stanton helps enterprise IT and sourcing leaders rationalize and capitalize on emerging technology opportunities in the context of the global sourcing industry. He brings extensive knowledge of today’s cloud and automation ecosystems, as well as other disruptive trends that are helping to shape and disrupt the business computing landscape. Stanton has been with ISG for more over a decade. During his tenure he has helped clients develop, negotiate and implement cloud infrastructure sourcing strategies, evaluate and select software-as-a-service platforms, identify and implement best-in-class service brokerage models, and assess how the emerging cloud master architecture can be leveraged for competitive advantage. Stanton has also guided a number of leading service providers in the development of next-generation cloud strategies. Stanton is a recognized industry expert, and has been quoted in CIO, Forbes and The Times of London. You can follow Stanton on Twitter: @stantonmjones.