Suppose as InfoWorld predicts the economy makes everyone look for IT outsourcing options and world goes SaaS/Cloud Computing/Hosted IT – what happens to all the infrastructure management vendors who sell a lot of software helping deploy and manage traditional on-premise systems such as AD, Exchange, SharePoint, SQL, and so on?

My thinking is that if the trend continues, short-term these vendors might get new lucrative contracts with hosted solution providers, but longer term they need to innovate or they will see their market starting to decline.

Here’s the rationale behind this.

Today if you want to outsource your IT there are still not enough real new SaaS multi-tenant architectures. Thus, even if someone starts hosting your messaging system or your document management and team collaboration – the chances are they are simply using traditional off-the-shelf commercial software. These are essentially not SaaS but ASP providers.

They are a great target because:

A. They need infrastructure management software to provide better efficiency and administrative scalability, and/or competitive advantage through additional services.

B. Good scalable existing on-premise infrastructure management software will just work in such environments.

If we take Windows Management products from Quest Software (full disclosure: I currently work for the company), I can easily see for example how ActiveRoles Server can give an ASP a great provisioning and delegation platform, Recovery Manager – rollback capabilities, and InTrust full audit trail for any administrative changes or user activity.

However, if the trend continues, we will see SaaS vendors taking the lead and getting the markets from ASPs (and on-premise deployments) by providing significantly better economics using economy of scale of customized multitenant architectures (again, see CY Lam’s post on that topic.)

These are not as exciting for the Quests, BMCs, and HPs of the world:

A. The environments are heavily customized or 100% proprietary so existing software will not work.

B. SaaS vendors tend to write their software themselves.

C. SaaS vendors in each market tend to consolidate to just a few competing systems.

Trying to sell a management system to these guys will probably mean a lot of heavy development for extremely small margins and a very small number of (albeit huge) customers (i.e. the SaaS vendors). Does not sound like a good market to address!

That means that the infrastructure management vendors need to either watch their market decline, or figure out the pains that SaaS customers are going to face, and how these could be resolved on the customer side.

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ASP, Cloud Computing, Infrastructure management, Quest Software, SaaS
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