The cloudy future of enterprise applications

Business people get the cloud far more readily than technologists. Who cares how many virtual machines you can fit on a hypervisor? The mechanics of cloud computing are just a means to an end: it is real-world results that matter.

The business person sees the bigger picture of a digitally connected world. The cloud simply means the ability to interact with others and get things done, wherever you happen to be. We live in an era when a combination of cheap, ubiquitous connectivity and incredibly smart, compact devices have connected us all to a global treasure trove of information and resources. We hold the computing power to easily harness all those assets in the palm of our hand.

This is inexorably giving rise to a new class of enterprise applications that take advantage of these emerging technology-driven capabilities — to automate and speed up a new wave of business activities. These are the activities around the edge of the enterprise that we found unthinkable to automate using previous generations of computing.

Systems of engagement

Today the connected cloud of smart devices means that we can interact with customers, prospects, partners and outbound staff anywhere in the world and do so more efficiently and rapidly than ever before. We can access information and powerful computing resources on demand to provide real-time context for our decisions and actions. Unbelievably, we are still just at the beginning of this massive revolution in capabilities, which will soon be augmented by the advent of ever smarter and connected devices, accompanied by cohorts of robots and instantly-printed 3D objects.

The term systems of engagement, coined by business guru Geoffrey Moore, aptly describes these new digitally connected applications that automate the outward-facing interactions of the enterprise. In recent presentations, including one I attended at a Box event in London last November, Moore has explained the characteristics of this new class of applications:

• Inclusive because of the ease of access from connected devices into cloud resources.
• Emotional because of the range of interactions and context, from images and video through to touch and voice, that is possible in a digitally sophisticated, broadband connected device.
• Ubiquitous due to the portability of today’s devices and the pervasive connectivity they plug into.

There’s much more that Moore explains far more eloquently than I can. What I can add is my perceptions of how this evolution is impacting the applications enterprises are investing in today.

Enterprise blind spot

One question that I’ve found quite intriguing over the past few years has been why enterprise IT has such a blind spot about the extent of spending on cloud applications. I first highlighted this almost three years ago, when a report from Forrester showed how the vast majority of enterprise spending on public cloud services was spent on SaaS — and would remain above 50 percent through the end of the decade.

I’ve often quoted this statistic, while privately wondering if the survey would ultimately prove to be an inaccurate outlier. But this year IDC has published a survey that confirms the finding:

Software as a service (SaaS) will remain the largest public IT cloud services category throughout the forecast, capturing 59.7 percent of revenues in 2017.

The blind spot is simple to explain: IT people are looking the wrong way, focusing on their existing systems of record and paying scant attention to the emerging systems of engagement.

• Systems of record make up the bulk of the established enterprise IT estate. They are the legacy of the client-server era, when huge strides were made in automating the established processes and core transactions of the enterprise. They do this using a document-centric framework that in many cases still owes much to the original transformation of paper forms into green-screen data entry.
• Systems of engagement add a powerful new set of application capabilities that are centered on evolving processes and outward-facing interactions. They automate and enable business activities that early generations of technology were simply not capable of handling. They do this using a conversation-centric framework that at last makes it possible to break free from the paper-based patterns of the client-server era.

As I mapped out last year in my posts on Two-tier: systems of record and engagement and Enterprise apps reborn in the cloud, the subtle shift in investment towards systems of engagement is masking a more fundamental shift in which systems of record are increasingly taking a back seat.

In larger enterprises they still remain important systems and of course, like the mainframe, they will never go away entirely. But increasingly, and overwhelmingly so in smaller enterprises, they will gradually become subsumed into the larger and far more agile connected infrastructure of the systems of engagement that surround them and which connect the enterprise to its customers, staff and trading partners, as illustrated in the accompanying graphic.

Eaten alive

When I’m speaking to an enterprise audience about this shift, I somewhat unfairly end by posing a question about the failing video rental chain Blockbuster. I’m sure that the IT leadership at Blockbuster had plans to virtualize and automate its datacenter, taking advantage of what cloud computing has to offer for its systems of record. But all the while, Blockbuster’s business model was being eaten alive by Netflix, its online nemesis, which developed cloud-based systems of engagement that completely reinvented what it means to rent movies on demand.

Enterprises that, like Blockbuster in my conjecture, think of cloud computing simply as an alternative location for their existing business automation systems are, in my view, disastrously missing the point. Most business models are up for grabs in this new digitally connected world, as Marc Andreessen memorably highlighted in his seminal article on Why software is eating the world. Those enterprises that are too slow to invest in systems of engagement and the business transformation they can enable will not survive the transition into this new era. More on that in the next and final post in this series.

Disclosure: Box is a diginomica partner.

Image credits: Feature image © tiero – Fotolia.com; IDC chart courtesy of IDC; enterprise apps graphic @philww