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Saturday, January 7, 2012

Enterprise App Store in the Cloud

If you are using the iPhone, iPad or one of the Android portable devices,  you are already familiar with the concept of an "App Store".

The Apple App Store opened on July 10, 2008 via an update to iTunes. On July 11, the iPhone 3G was launched and came pre-loaded with iOS 2.0.1 with App Store support; new iOS 2.0.1 firmware for iPhone and iPod Touch was also made available via iTunes. As of June 6, 2011, there are at least 425,000 third-party apps officially available on the App Store. As of January 18, 2011, the App Store had over 9.9 billion downloads and at 10:26 AM GMT on Saturday, January 22, 2011, the 10 billionth app was downloaded from Apple App Store. As of late 2011, 200 million iOS users have downloaded over 18 billion apps from its App Store.

And although the Android platform is a relative new commer to the App market, it now boasts 400,000 Apps with over 10 billion downloads.

So, the paradigm shift has occurred.  Mobile devices users (which before too many more years will make up the majority of computer users) now expect to be able to search for an App in the cloud and then download it to their device, pay for it with a credit card and start using it immediately. It is just the way "things" are suppose to work. So, why aren't we doing this in the enterprise software market?

Software-as-a-Service (SaaS)
Software-as-a-Service (SaaS) is the closest thing to the App Store model in the enterprise market. SaaS, sometimes referred to as "on-demand software," is a software delivery model in which software and its associated data are hosted centrally, typically with a Cloud Service Provider (CSP) or directly from the software vendor, and are typically accessed by users using a thin client, normally using a web browser over the Internet.

SaaS has become a common delivery model for most business applications, including accounting, collaboration, customer relationship management (CRM), enterprise resource planning (ERP), invoicing, human resource management (HRM), content management (CM) and service desk management. SaaS has been incorporated into the strategy of all leading enterprise software companies.  Please note that the term software as a service (SaaS) is considered to be part of the nomenclature of cloud computing, along with Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) which is the topic of my next Blog post.
According to a Gartner Group estimate, SaaS sales in 2010 reached $10B, and were projected to increase to $12.1b in 2011, up 20.7% from 2010. Gartner Group estimates that SaaS revenue will be more than double its 2010 numbers by 2015 and reach a projected $21.3b. Customer relationship management (CRM) continues to be the largest market for SaaS. SaaS revenue within the CRM market was forecast to reach $3.8b in 2011, up from $3.2b in 2010.So, where is the Enterprise App Store that houses and enables users to download Enterprise Class SaaS Apps?

The Enterprise App Store
The Enterprise App Store doesn't really exist, to any great degree, because the infrastructure and business model is much more complicated in the enterprise market than it is in the consumer market.  And, due to the quarter over quarter financial pressues, the legacy software vendors are "dragging their feet" on moving to this model as it will completely change their revenue models and the transition could prove to  be a short term disaster for profits and stock prices.  In the long run, an Enterprise App Store delivery model should generate more revenues with dramatically higher margins.

Nevertheless, Amazon and several of the other Cloud Service Providers (CSPs) are beginning to offer application catalogues that resemble the Apple and Android App Stores.  And, there are rumors that several of the Auzre cloud platform providers are also developing the infrastructure and backoffice administration to support an Enterprise Class App Store in the Cloud.

Where it Runs
One of the major differences between downloading a single application to an iPhone and downloading an enterprise class application for use throughout an organization is where and how it runs.  Obviously, the iPhone app runs on a single iPhone.  However, the enterprise app will more than likely have to run in a virtual environment on a server and will have to provide access to multiple users.    This is a much different configuration and will require a much more robust infrastructure.

Another major difference is pricing.  Many iPhone and Android apps are free and very few cost more than a few dollars.  In addition, users can download them and pay for them, as an example, with the credit card they have on file with iTunes. Enterprise apps on the other hand may cost hundreds of thousands of dollars and won't be paid for via a credit card.  Once again, the infrastructure and backoffice administrative systems to support this new model are much different.

Further, thanks to $.48 per hour per server pricing from CSPs like Amazon, use pricing is also another variable that enterprise App users will begin to demand.  Instead of paying $250.000 per year for an SMB enterprise ERP system, users may want to pay $100 per hour per instance or per user for the time that they are actually using the App.  And, once again, the infrastructure and backoffice administrative systems to support these requirements are much different than anything that has been done in the past.

The New Enterprise App Paradigm in the Cloud
The new Enterprise App paradigm in the cloud will enable enterprise users to access the cloud (where all of their data now resides) from any computing device (more likely a mobile devices as time marches on) and choose which Apps they want to use.  The system (more than likely supported by a major CSP) will pull an instance of the requested App out of an App library, configure it to support the needs of the user and then charge the user's enterprise for the time that the App is actually used.  This may sound crazy.  But, this paradigm is not that far away.  And, once one of the major CSPs begins to offer this as a first mover, the market will explode and the rest of the CSPs will have to follow or perish (i.e. how viable would a smart phone be that didn't enable you to download applicaions?).

Targets of Opportunity
The target markets for an Enterprise App Store are wide spread with both operational and financial benefits for both large and small enterprises.  However, there are a few vertical application domains with applications that are not used on a daily basis that appear to pose great initial targets of opportunity.  An example of this type of App would be within the eDiscovery market wtih Early Case Assessment (ECA) platforms.  Enterprises that may be reluctant to spend $250,000 per year for a ECA tool under the current legacy distribution model where the amount of usage is highly variable,  might be keen to enter into an agreement to have access to a virtual ECA solution with a pricing schedule that only charges them when they use the system.   I am not sure that the legacy ECA tool vendors are going to be pleased with this new paradigm (See above).  But, its the direction that the market is headed and therefore they had better start to make adjustments in their delivery models and also had better prepare their stockholders for the changes in the revenue stream.

SummaryIt only took comsumers a fews years to embrace the iPhone and Android App Store model and download almost 30 billion applications from the cloud.  As I always say, the train has left the station on how users want their apps served up.  So, now its just a matter of how long it takes the enterprise software vendors and the Cloud Service Providers to get their collective acts together and offer the same delivery paradigm for enterprise Apps.

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