The impact of cloud services on independent software vendors: Should we step into cloud?

Abstract

Cloud services have become one of the most popular industry terms since Google and IBM invested to build large data centers that users can program and research over the Internet. In practice, IT corporations often annually pay independent software vendors considerable license fees to save the cost of software upgrade and technology support. Although cloud services are considered a cost-down solution for small or medium IT corporations, there are some limitations making IT corporations hesitate to adopt it. In this research, we examine the investment strategy and profit for cloud service providers to better understand the business model of cloud services. We find that a cloud service provider with R&D capability will prefer vertical competition rather than partnering with an independent software vendor. In addition, for independent software vendors, maintaining a loose partnership is better than a tight one. Finally, we suggest that an independent software vendor shouldn't support its cloud partner to enhance service security and compatibility, both of which may reduce its overall profit. © 2012 Springer-Verlag Berlin Heidelberg.