Cloudonomics Journal

On-demand software distribution and retail e-commerce are key growth strategies for software manufacturers to enhance their online revenues and increase market share.

The online store presents unlimited opportunity for expansion - across the globe - to reach out to end consumers directly, which fuels revenue and customer growth. Cloud computing technology offers fundamental capabilities in terms of quality-of-service: scalability, availability, reliability, storage, and performance - these qualities are essential to mitigating the risks of running an online software distribution and e-commerce business. Cloud computing technology also brings flexible pricing, services, and business models that significantly reduce the overall cost and, more importantly, reduce the liabilities of such online software distribution and e-commerce operations. In this article, we'll discuss the case for cloud computing technology to transform the business of software distribution and related e-commerce through highly scalable online stores integrated with marketing and promotions strategy.

The shopping cart Internet applications and online retail stores offering items such as PCs, laptops, digital cameras, books, apparels, and air tickets are the most common and popular form of e-commerce over the Internet. They have proven themselves an excellent growth story. However, buying software online is relatively new, but definitely in great demand and has significant growth potential in the next wave of Internet e-commerce.

Buying and downloading software products online is called Electronic Software Distribution (ESD) and e-Commerce in business taxonomy. It's not new for many ISVs; however, the recent trend - Microsoft launched a whole new Online Store Experience in November 2008 - suggest that it's one of the key focus and improvement areas. With improving maturity levels, the modern software distribution and e-commerce system is no longer an isolated shopping cart; it has integrated marketing and promotions features along with various proactive customer engagement tools to improve customer acquisition and retention. It's also powered by advanced back-end customer intelligence, market analytics, customer targeting, and demand forecasting tools to improve market penetration.

Key Drivers for Software Distribution Business Transformation
The software house wants to increase market share, get a competitive edge, and lead the industry through differentiated services. One of the key strategies for growth and differentiation is modernizing and transforming software distribution and its related e-commerce. The latest business and technology trends such as Web 2.0, social networking, SOA, SaaS, and cloud computing are the key drivers and enablers for such a transformation to achieve the desired business goals efficiently. In Table 1, we articulate the key goal and business drivers for such technology focused business transformation. We also analyzed the impact of key business and technology trends and their impact on business goals of ISVs in Table 2.

Cloud Value Proposition for Next-Generation Software Distribution & Commerce
Based on this analysis, it's expected that the next-generation online store for software distribution will be built leveraging a combination of the latest technology and business trends. In general, SaaS brings business value in terms of flexible and economical business model rather than a "real technology value." Cloud computing technology complements it by realizing these flexible business models by "physical mapping of resources consumed" and that includes software, hardware, and IT services. Cloud computing brings a huge amount of virtualized hardware, required software, and IT staff. The cloud environment and hosted software applications are fully owned, managed, supported, and serviced by the cloud service provider. The cloud environment can be dedicated partly (shared cloud) or fully (private cloud) to a given client and managed by a cloud service provider. The service provider and the client negotiate the terms for pricing, quality-of-service, service level agreement (SLA), and operation level agreement (OLA). It implies that the cloud makes it feasible to realize the flexible business models offered by SaaS through physical means.

In the context of software distribution, the challenge is to balance IT investment in global expansion with actual growth through online stores. Even for large software developers, it's almost impossible to proactively plan IT scalability for global ops. It's also impractical to block large investments in terms of hardware, software, and operations when the size of the operations is initially small. What's required is a dynamic and on-demand scalability of IT assets and related services - as the online store grows across the globe. SaaS and cloud computing bring flexible business models and dynamic scalability together to realize the business value and facilitate growth economically. Table 3 articulates the value propositions of next-generation software distribution and commerce platform that will help realize the business goals identified earlier.

Although the benefits sound attractive, there are challenges in realizing cloud-based online stores, chiefly the availability of a mature and proven cloud technology platform and software commerce system. The cloud technology is still in the hype-cycle phase but has excellent potential; there's also a very high commitment by large software and hardware vendors. The key challenges to using cloud computing for practical business operations are summarized in Table 4.

Conclusion
Cloud computing technology has great potential to influence software distribution growth. It offers tremendous business value in terms of flexible business models, on-demand IT scalability and reduced IT liabilities. There are several service providers such as Digital River and Avangate that offer SaaS-based models for electronic software distribution and commerce platforms. These service providers also offer value-added services and related systems for integrating marketing, promotions, intelligence, analytics, forecasting and segmentation along with customer engagement tools.

However, the cloud platform, service providers, and compatible software systems are still evolving and have yet to mature for all practical purposes. We suggest software houses balance the practical constraints with upcoming trends and come up with a feasible future-proof solution. The option of iteratively migrating existing systems to a cloud environment can be evaluated. It's also suggested that new systems be architected and designed to comply with cloud infrastructure in addition to other technology trends to deliver a smart scalable online shopping and after-sales experience.

Resources

• Microsoft Integrates Electronic Software Distribution into Updated Windows Marketplace
• How Cloud Computing is Changing the World