Implications of Cloud Computing for ISVs

Cloud computing today is getting wide attention. The rapid adoption can be attributed to a latent need in the IT industry for a delivery mechanism that is ubiquitous, scalable and elastic, and at the same time does not incur premium costs. As a trend, the number of Cloud platform options has been steadily rising. Business cases have emerged for using this delivery mechanism that provides a clear ROI. And concurrently, the risks of this new technology are starting to become more manageable. This article will discuss the implications of the Cloud for a specific segment of the industry, referred to as Independent Software Vendors, or ISVs.

ISVs are focusing on how to position their products as a service, which for most customers are considered Operating Expenses, rather than Capital Expenditures. Software as a Service (SaaS) requires ISVs to use ready-to-provision infrastructure, something generally not available in house. The ISV must then factor in product readiness along with the existing product's user base, as well as new investments that must be made. The ISV should also understand the competitive price points for the new products, due to the lower entry-cost barrier for competitors. These factors drive a requirement for overall agility of business models, as well as technology investments. In addition, some customers may expect additional resources to be made available for peak needs. This elastic requirement will have a cascading effect through the entire product delivery mechanism - all the way into the underlying Cloud infrastructure that is consumed.

ISVs are realizing that new models will emerge for the value chains, allowing some of them to become aggregators and others to emerge as intermediaries, or arbitrators of information, data or services. ISVs can tap into the underserved SMB markets for new customers and also look at new geographies due to the global reach of the "as a service" model. ISVs may also choose to recreate an existing product on a newer cloud platform simply because the platform allows them access to new set of customers. At the same time, ISVs need to innovate on top of the services offered. They should find ways to monetize the underlying infrastructure services, rapidly offer newer versions, and also offer ways in which the data generated in their products can legally and appropriately be used to better serve the collective customer base.

On the product engineering side, the ISV has a choice of a variety of Cloud platforms. Some platforms offer built-in mechanisms for offering data as a service. Most platforms offer ready-made components for workflows, web-services, and transaction management. It is also commonplace to find support for services such as billing, monitoring, and management in these platforms. As the underlying Cloud technology evolves, the ISV will be confronted with more choices for technologies like metadata APIs, 4GL abstractions, and advanced subscription models. The ISV also needs to decide whether they should deploy applications on more than one platform and whether they should offer their products through a marketplace provided by the platform provider.

There are further ways in which an ISV can make use of the Cloud model. On the product management side, the product can have built-in hooks for monitoring customer usage. Product managers can use this instant data to determine if certain features have more traction, as compared to others. This will help them plan better products and lead to a more customer-friendly product roadmap. On the development side, Cloud environments can simplify testing of production issues by taking a complete snapshot of specific customer environments and working with a copy of live data to diagnose problems. Creating customer specific sandboxes can speed up resolution times and will allow the ISV to quickly determine if the issue is likely to affect all customers. This would help the ISV improve their direct reach to customers as well.

Cloud adoption will mean changes to all organizations inside of the ISV. Business teams will focus on ways to keep the costs in proportion to revenues. Customer satisfaction will be a key metric since the revenue will be subject to renewals. Engineering teams will need to focus on accelerated deployments and frequent iterations of the product. On the Support front, the cost of support needs to be managed as part of the complete subscription fee. This often means enhancing the self-help functionality available to customers to minimize support requirements for the ISV. Operations will be a new area for the ISV - and this may be a shared responsibility with the Cloud provider. The Operations team will focus on areas like hosting, metering, availability, security and capacity planning. As part of the global geographic market, Operations will need to manage a customer base that is spread around the world.

In addition, ISVs should consider whether their systems could scale 10-100 times in some cases, as global demand takes hold. While the Cloud provider can help on the infrastructure side, the complete business needs to be scalable as well. Further, ISVs will need to ensure that their pricing strategy reflects the true cost of operations and that they have levers to continuosly optimize margins. The Cloud will likely bring about newer technologies even faster than in the past, and ISVs must be prepared to adapt quickly. To do this, ISVs will need to think big, but start by acting small. ISVs must also be aware of the impact of the Cloud on their ecosystems and whether their current partners are adapting as well.

While it may seem daunting at first, the Cloud presents a unique opportunity for ISVs who can adapt to these changes. On the flip side, ISVs that cannot adapt may find themselves becoming less relevant in the very near future.

About the Author

Shreekanth Joshi heads the SaaS and Cloud practice at Persistent Systems, a leader in software product development services. You can contact Shreekanth at To learn more about Persistent and our SaaS / Cloud capabilities, visit us on the web at

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