AWS Inducing a Cloud service related Clash between Cloud Providers and Software Sellers

Amazon Web Services is hosting an online forum which brings together buyers and sellers of software services at an hourly rate. The same forum is to be used by the software sellers like Microsoft, Sap, CA and IBM to sell their software programs. Open source applications like SugarCRM and Drupal are also available for free in this forum.

Applications being run on AWS at an hourly rate would result in Amazon selling more compute and storage units and increasing their revenue. The establishment of forum however is not necessarily beneficial for the software sellers and customers of Amazon.

The benefit for software vendors is that their market reach would increase if they choose to sell via Amazon but they are also losing money on selling their licensed software programs since the usage of those software programs will be provided on the forum at an hourly rate, without the need for customers to purchase the license. In real terms, the software vendors are exchanging the huge amount of revenue from selling the licensed software with the small amount of hourly fee charged on the online forum for the usage of those software programs.

As the cloud computing market advances, the offers same to the one by AWS would increase in number. Such offers would induce competition between cloud computing business models and the business models followed by software sellers. The development of the SaaS rental model by the software companies and IT industry’s growing comfort with it have encouraged the cloud computing service providers to step in and adopt the same model as well. Dependence on providers like AWS to host the SaaS rental model has also reduced the benefit of the model for software vendors.

The risk that is attached to setting up the whole rental model on a cloud is that the cloud shifting costs are immense and prove to be a hindrance to the software vendors who want to change their cloud providers.

For the reasons mentioned above, it is advisable for the software sellers to choose smaller cloud providers to host their rental models because they are less likely to be able to turn into the competition for the software sellers who hired them in the first place.