Recession Is Good For Cloud Computing – Microsoft Agrees

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When the whole world was gloomy with onset of current recession, we (the
members of cloud computing community) are happy about it in a way. Every single
cloud computing evangelist will tell you that recession is good for cloud
computing. The reason is obvious

• CapEx is converted into OpEX
• Even the OpEx is drastically reduced

Add to this the other usual themes like better performance, redundancy, easy
scalability, etc., we have a perfect recipe for recession.

Back in those days, when John McCain was predicting that our economy is
fundamentally strong, Zoli predicted that

In fact I suspect the looming downturn will accelerate the
structural changes in the software industry: SaaS players will thrive, 
traditional on-premise vendors will shrink, many will
disappear.

He is not a prophet but he made a very solid prediction and summarized his
post as follows

In summary, Software businesses that combine good old business
sense: frugality, spending wisely, delivering value to businesses and
getting paid for it, with a new business model, SaaS are likely
winners in the downturn.  The rest are playing musical chairs.

He followed it up with another post highlighting what many others in the industry
told at that time. Everyone was confident that SaaS (and also the other
components of Cloud Computing) will thrive in the recession. But people with
high stakes in the traditional software world dismissed it as a marketing pitch
by companies trying to get foothold in the market through Cloud based offerings.

Time has passed since Zoli’s post. John McCain is back at the senate and
Sarah Palin is back in Alaska. Recession appears to be much deeper than what it
was then. Microsoft, the monopoly like player in the desktop world and who was
reluctant to embrace cloud computing till it ceded the market place to other
players like Google, has finally agreed that bad economy is good for cloud
computing. ENT News, a sister site of Redmond Channel Partner Online, quotes
Microsoft exec Doug Hauser as saying

A weakened economy will serve as a catalyst to push enterprises from
on-premise computing to accessing services over the Internet
cloud

Not only that, he seems to underline what we, the cloud evangelists, are
saying for a long time.

He said it was pretty much accepted that the small-to-medium business and
consumer spaces are "looking at [cloud computing] adoption anyway, regardless of
the economic climate."

Thank you Mr. Hauser. Thank you Microsoft. Do we really need to convince the
cloud skeptics anymore?

On an unrelated note, I want to use the same article to highlight one point
which is obvious by now. It is the enormous savings in SaaS compared to on
premise software. In the talk, Mr. Hauser highlights how Exchange as SaaS is
much cheaper than Exchange On Demand, in addition to giving more profits to
Microsoft.

Hauser described an Exchange implementation where an on-premise cost is $18 a
month per user for the software, of which Microsoft gets $3.

"For Exchange Online, we charge $10 a month per user per seat, so our net
gain is $7," he said. "The customer actually saves $8. There’s a huge benefit to
the customer; there’s a benefit to us. There are very similar economics to have
developer services in the cloud similar to those sorts of online
services.

Isn’t it time we stop highlighting the cloud economics and talk more about cloud
dynamics?