“Human sacrifice! Dogs and cats, living together! Mass hysteria!”

– Dr. Venkman, Ghostbusters

S**t Just Got Real

This past week, we witnessed the start of the ‘end of days‘ for traditional IT vendors.

There is a massive shift underway in enterprise IT. Although SaaS (Software as a Service) and cloud computing have existed for more than a decade, events this past week indicate that these technologies have crossed the chasm and gone mainstream. Traditional enterprise IT vendors are starting to feel the pain of  disruption. How else do you explain the once unthinkable occurring?

Dude, You Just Got Disrupted

I was working at Siebel when Marc Benioff started Salesforce. I had court-side seats to this latest technology disruptive wave.

Our (collective) initial reaction to Salesforce was to be dismissive.

At the time, Siebel had just been recognized as the fastest growing company in the United States. Our strategy was to grow market share as quickly as possible, so that when the market consolidated, we would have the majority, while the second and third place players fought for the scraps. Everyone else would be out of business.

We viewed Oracle and SAP as our primary competition for the CRM market pole position. Given our lead and momentum, we never considered that an upstart with a limited offering would ever be serious competition.

The Canary

I got early warning signals of the looming Salesforce threat (which I dismissed at the time) from friends and former classmates in venture capital. Their portfolio companies had immediate CRM needs and could not afford to take 12+ months and spend $1 million minimum to implement Siebel.

While Salesforce lacked the functional breadth and depth of Siebel, start-ups loved the fact that they could get started immediately and pay as they went. This enabled these companies to employ their capital elsewhere such as purchasing servers, T1 lines, routers, etc. (see where I am going here?)

Enter the Enterprise

Salesforce was able to validate and improve their solution with innovators and early adopters who needed an alternative to Siebel. Similar patterns began to emerge with mainstream adopters in larger enterprises as well. Remote offices and subsidiaries could not wait years for IT to roll out Siebel to their specific sites. They had immediate business needs and goals to deliver upon.

The (typical) intent of these groups was to use Salesforce as a stopgap solution until IT had the cycles and resources to roll out Siebel to their sites. The problem (for Siebel) was that by the time IT was finally ready, users had grown accustomed to the ‘temporary’ solution. Despite deficiencies in functionality, Salesforce provided other benefits that users appreciated (such as ubiquitous access across computers without having to worry about VPN, multi-factor authentication, RSA keys, etc.).

As such, the ‘temporary’ solution became permanent.

Micro to the Macro

The disruption we encountered at Siebel at the CRM micro-level is now playing out more broadly across enterprise IT. Just as innovators and early adopters (e.g., startups) preferred to subscribe to Salesforce, they were the first to see the benefits of subscribing to IT infrastructure in general (via Amazon Web Services and other cloud providers). Enterprise adoption is now following.

This is why the announcement last week was significant.

While I expect few concrete benefits for either Oracle or Microsoft, the fact that these once bitter rivals are willing to work more closely in an attempt to slow down Amazon Web Services (the enemy of my enemy is my friend) indicates how mainstream cloud has truly become.

Cloud just got real…