Analysts critique NetSuite cloud victory claims

Mainframes were supposed to die out 25 years ago, and are still here, so on-premise software is likely to be around for some time, says Gartner

Analysts have levelled criticism at claims by NetSuite CEO Zach Nelson that the battle between cloud and on-premise applications has been all but won by cloud-based providers.

Nelson, speaking at a media event in Sydney claimed that the ability to customise cloud-based applications will be the reason companies abandon on-premise applications.

Additionally he said that the other important factor in favour of cloud applications was the ability for customers to migrate these customisations.

Commenting on Nelson’s view, Gartner analyst Brian Prentice said the key thing for IT managers to keep in mind was that the technology around portable customisation was not specifically bound to a SaaS architecture.

"I agree that the ability to customise a SaaS solution is important and if it can be done in a way that allows for automatic porting, so much the better, [but] will this single-handedly result in SaaS beating on-premise? Nope," he said.

"There are on-premise applications that allow the same thing – porting customisation code with application upgrades. Onyx Software was doing this nearly a decade ago [and] I think this is also possible in Microsoft Dynamics CRM and also AX. I am sure there others."

Prentice said the likely scenario for the foreseeable future was that cloud and on-premise will co-exist as one of the great challenges still facing cloud computing are meaningful service-level agreements.

"I'm not necessarily calling this out as an issue for NetSuite but it is the case with other providers. Let’s also keep in mind that people were predicting the demise of the mainframe a quarter of a century ago. They’re still here!" he said. "While I think Cloud will continue to expand it doesn’t mean that there is a zero-sum game with on-premise. The more interesting dynamic is how cloud grows the market beyond what it is today or what it could be if there was only on-premise offerings."

Prentice was also critical of Nelson’s claim that in general cloud customers were more concerned about the availability and security of their data than the country in which it was stored, arguing that it was important to acknowledge that data location was becoming an issue.

"How that gets resolved and whether that means there needs to be country-specific data centres has yet to be figured out," he said. "Again, the key issue is providers addressing these issues in their service level agreements and users have a more nuanced understanding of what service levels they need in what conditions."

IBRS advisor James Turner said it was understandable why a cloud vendor, such as NetSuite, would argue that the location of the data centre was not important.

“Cloud vendors like to pitch the cloud as a big fluffy thing, and you don't really need to bother your pretty little head with the details. But the reality is that local organisations have local responsibilities,” he said. “You can't expect a company director to sign off on any document which says 'our super special data is somewhere out there and love will see us through'. Cloud vendors at the moment will live or die depending on the willingness of customers to entrust their data to the cloud.”

Turner said it was inevitable that cloud computing would become a significant component of most organisations’ architecture, however, how much data got handed over to cloud providers would depend on how transparent the cloud providers were willing to become.

“We've seen this same scenario with PCI DSS. I argue that the only organisations that should bother becoming PCI DSS compliant are the ones that intend to become cardholder data handling specialists; for everyone else, hand it over to a third party processor,” he said.

“But even in that scenario you're obliged to verify that your third party processor is PCI DSS compliant. So, until the cloud vendors are prepared to put skin in the game, they will only get the scraps.”

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