A Smart Cloud Computing Strategy

Even as the recession torches traditional software vendors like SAP (NYSE: SAP  ) , cloud computing is taking hold. Last week, salesforce.com (NYSE: CRM  ) said that its customer count ballooned 36% to 51,800 in the third quarter. Profits improved 55%.

Impressive, yes? I'll say, but for cloud computing to endure, it'll have to give IT managers and other industry participants more than just a good do-it-yourself, zero-infrastructure starter kit. NetSuite (NYSE: N  ) just booked a deal with Hewlett-Packard (NYSE: HPQ  ) that should help to achieve that goal.

HP will grant NetSuite access to its channel of 15,000 resellers in exchange for support resources. The result will presumably be a broader embrace of cloud computing among traditional systems integrators and value-added resellers -- firms that profit by customizing packaged software to fulfill a business need.

Think of what Accenture (NYSE: ACN  ) and India's Infosys (Nasdaq: INFY  ) do, but on a smaller, more specialized scale. Cloud computing has been considered a bane for VARs and SIs because of there's no "software" to customize; all the code resides on a distant web server.

As THINKstrategies founder Jeff Kaplan wrote recently:

These VARs and SIs have been uncertain about the impact of SaaS solutions and on-demand services on their businesses. In fact, many feel down right threatened by these services. There is no question that SaaS solutions and on-demand services eliminate much of the upfront planning and design, installation and integration, and ongoing support requirements (which have been the bread and butter of VARs and SIs' revenue streams), not to mention the margins they made on hardware and software product sales.

Or at least, they did before NetSuite altered the equation.

In my experience, Chief Information Officers rarely buy software licenses independently. More often, they'll engage project teams -- VARs and SIs, in other words. If NetSuite wins converts among those running projects for CIOs, it's a strategic win for shareholders and for cloud computing.

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Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. The Motley Fool's disclosure policy was at base camp on cloud 7 and an hour away from going for the summit as Tim was writing.


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