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    Cloud Software Programme TIVIT Cloud Software Programme TIVIT Document Transcript

    • Strategic Research Agenda 2.0 Cloud Software Program 1 Cloud Software Program Strategic Research Agenda (SRA) for Finnish Software Industry (Edited by Veikko Seppänen, Tommi Mikkonen and Pasi Tyrväinen) TIVIT Cloud Software Program (ICT SHOK) Tivit, Yritysten tutkimus- ja kehittämisrahoitus, Päätös 424/10, 07.05.2010, Dnro 2902/31/2009 www.cloudsoftwareprogram.fi www.tivit.fiThis work was supported by TEKES as part of the Cloud Software Program ofTIVIT (Finnish Strategic Centre for Science, Technology and Innovation in thefield of ICT).
    • Strategic Research Agenda 2.0 Cloud Software Program 2ContentsExecutive summary ................................................................................. 4Revisiting SRA 2009 ................................................................................ 6Global trends .......................................................................................... 7 Technology development ........................................................................................................ 7 Technologies and emerging ecosystems ....................................................................... 7 Role of open source solutions .......................................................................................... 10 HTML5 everywhere .............................................................................................................. 10 Proprietary versus open Web ........................................................................................... 11 Disruptive innovations ........................................................................................................... 13 Browser as a universal application or platform ........................................................ 13 Wide-spread adoption of mobile wallet........................................................................ 14 Data enrichment ................................................................................................................... 14 Cloud-based data stores .................................................................................................... 15 Potentially unanticipated events and surprises ............................................................ 15 Cloud as the state-of-practice almost overnight ...................................................... 16 Saturation of community Web solutions ..................................................................... 16 Rapid consolidation of mobile ecosystems ................................................................. 16 Software development challenges ................................................................................. 16 Areas of competitive advantages ...................................................................................... 17Understanding the sources of value ..........................................................18 Characterization of the current software markets ...................................................... 18 Global market and its relevance to the cloud business ......................................... 19 Value creation............................................................................................................................ 23 Value creation in cloud business models ..................................................................... 23 Application product suppliers and service providers .............................................. 24 Communication service providers .................................................................................. 25 Platform-as-a-service providers ..................................................................................... 25 Infrastructure-as-a-service providers .......................................................................... 26 Multiple kinds of brokers ................................................................................................... 26 Cloud users ............................................................................................................................. 26 In-house developers and IT development services ................................................ 26Strategic challenges and opportunities ......................................................27 Accelerating the change of the software industry ...................................................... 27 Emphasis to building software-based ecosystems .................................................. 27 Holistic process improvement for operational excellence ..................................... 27 Application platforms .......................................................................................................... 27 Software engineering in and for cloud services........................................................ 28
    • Strategic Research Agenda 2.0 Cloud Software Program 3Opportunities and challenges .............................................................................................. 28 Computing and data centers ............................................................................................ 28 Small application and game provider community ................................................... 28 Web as the platform ............................................................................................................ 29 Brokering.................................................................................................................................. 29 Hybrid and virtual private cloud support ..................................................................... 29 Video services ........................................................................................................................ 29 Service store capabilities ................................................................................................... 29 Disruption-tolerant cloud ................................................................................................... 30 Ecosystems of development tools and stores ........................................................... 30 New communication means .............................................................................................. 30 User-driven business ideas ............................................................................................... 30 Creation of new niche ecosystems ................................................................................ 30 Agile development and lean enterprises – cloud software factory ................... 30New research openings 2012-2017 .................................................................................. 31
    • Strategic Research Agenda 2.0 Cloud Software Program 4Executive summaryThe cloud paradigm is constantly evolving and it will further change the wayhow software is being utilized. For this reason it will provide entirely newopportunities to software, application and service firms. Many new cloudsolutions are indeed emerging to be applied by businesses and used byindividuals.The scope of applications will be expanded from serving core businessprocesses to an order of magnitude wider domain, including especially manysmall applications which could not provide a basis for profitable softwarebusiness during the packaged software era.The availability of a scalable cloud infrastructure will provide not only platformsbut also application components for developers, often with a fraction of thecost and very little upfront investments. Moreover, enterprise networkingfacilities, including trust management, are needed. The small threshold forsetting up and delivering secure cloud-enabled services will encourage smallbusinesses and thus increase the total volume of available services, also asbuilding blocks for other systems and solutions. This enables new kindinnovations and out-of-the box thinking also in many existing businesses. Apossibly disruptive consequence related to this is the potentially pivotal role ofsome small players entering into focal positions in ecosystems that used to bedominated by bigger players.Agility in service creation and software development will lead to shorter cyclesfrom ideas to actual profits. However, to make full use of the key cloudenablers, lean approaches need to be adopted and new technologies, methodsand tools taken into use. Furthermore, to be able to enter value creatingecosystems companies need consider what to offer to other participants, be ita new technology, application, or some other valuable outcome.Operational excellence continues thus to be important, when aiming at valuecreation and capture in cloud-enabled networks and faster returns ofinvestments, especially when the forming of such networks is just underway.In practice this means visibility throughout cloud service development andclose relationships between the focal company and its suppliers, customers andother stakeholders. Effective business processes and models are needed tofacilitate cloud transformation and implementation not only in smallcompanies, but also in well-established and bigger enterprises. How to makethis happen needs to be investigated, understood, and supported.
    • Strategic Research Agenda 2.0 Cloud Software Program 5Strategic research in cloud the software domain includes the following keyareas:  Shortening the cycle from ideas to cloud service implementations to sales and profits, making use of emerging business models, agile application development and management processes, and scalable cloud infrastructure solutions by o preparing organizations to identify new opportunities, establish new cloud-enabled business models, and create new cloud applications using agile and lean methods, o equipping with or developing tools and techniques to create and deploy new products and services for the cloud, and o making it safe, effective and scalable to launch, deploy and operate cloud services in the Web.  Exploring and utilizing competitive advantages to identify and grow cloud business ideas and solutions, and identify best earning logic, by o making use of the existing skills, but also acquiring and adopting new competences and entering into new network positions, o making explicit and supporting the key drivers of growth in regard to cloud opportunities, be it technology-driven, application-based or network-enabled, and o understanding the needs of cloud users, keeping in mind the reshaping of many value networks around end-users.  Ensuring the availability and scalability of the cloud infrastructure, by o developing, evaluating and exploiting open cloud solutions, o making use of and affecting on the harmonization and standardization of key cloud interfaces, and o implementing integrated security and trust management solutions for the cloud.  Developing cloud-enabled ecosystems and associated tools, by o ensuring the necessary competences in companies to create and adopt cloud-enabled ecosystems, o developing and adopting cloud-based tools for enterprise networks, o extending agile and lean practices and the use of enterprise networking facilities to the ecosystem level, and o building security, trust management and regulatory aspects into the emerging cloud-enabled ecosystems.  Ensuring effective software development and business processes to facilitate cloud transformation and implementation not only in small companies, but also in well-established and bigger enterprises.
    • Strategic Research Agenda 2.0 Cloud Software Program 6Revisiting SRA 2009In this section, we shall revisit some of the main assumptions identified inCloud SW-SRA 1.0. The main statements and assumptions were as follows: • Increasing role of service businesses, • Paramount growth of cloud computing (even if not explicitly stated), • From agile development to lean organization as the de-facto approach, • Green IT making it big in a few years’ time, • No service to succeed without superior UX and flawless security, and • Breakthroughs to be possible only by combining the above elements.These assumptions have evolved in the following manner, based on the workperformed in the Cloud SW consortium: • Increasing role of service businesses • The role of service business has grown during the period, many of the organizations are complementing the existing business with service ecosystems, the most advanced have sustained proprietary, closed cloud service ecosystem support (cf. Microsoft, Google, Apple). • Paramount growth of cloud computing (even if not explicitly stated) • Currently dominant proprietary cloud ecosystem designs are emerging to increasingly open cloud ecosystems, building on open source software and open interfaces. • From agile development to lean organization in software • This trend has even gotten stronger during the last two years, and it is maybe best visible in Nokia’s shift to focus to Windows instead of Symbian. The whole development mode supports the shift to the new ecosystem. • Green IT making it big in a few years’ time • At the moment the big green trend is not directly visible. • No service succeeds without superior UX and flawless security • Superior UX has been a key differentiation factor, but security, trust and regulation aspects are not yet included in cloud solutions as key factors. • Breakthroughs are possible only by combining the above elements, • Currently there is no conclusive evidence to demonstrate this in practice.In this revised SRA, the following key topics are visible:  The role of ecosystems is brought to the front. The ways to build sustainable and scalable ecosystems and how to find feasible positions for smaller firms need to be elaborated.
    • Strategic Research Agenda 2.0 Cloud Software Program 7  Breakthrough of Web-related technologies and facilities (e.g., HTML5 and cloud computing) has reached the main stream and is becoming the de facto implementation approach even in other than pure browser-based applications (so-called hybrid applications).  In the long run, players in cloud ecosystems need to revise their access control mechanisms to allow addressing of trust and regulatory aspects in the ecosystem activities in a sustainable way.  Agility has become important in software development and is visible in business processes, too. Cycle times for introducing new services have reduced and are becoming an essential competing factor. Cloud-based enterprise networking facilities and agile, lean methods need however to be extended to the ecosystem level.Global trendsIn this section we will revisit some of the global trends that were identified inCloud SW-SRA 1.0. As the starting point, we accept the already identifiedtrends: on-going globalization, user experience, the importance of the Web asa communication platform, and stabilization of the main ecosystems.Technology developmentIn this subsection, we will address the most important technology-relatedtrends of the global software industry that have recently emerged. However,the view taken to them is the domestic Finnish perspective.Technologies and emerging ecosystemsOne of the most obvious changes in the field of software since the compositionof the Cloud SW-SRA 1.0 is the forming of ecosystem silos, inside each ofwhich users as well as developers are bound to certain technologies, services,and tools. While these may be freely available, the silos create boundariesthat are difficult to cross. One may not be able to leave a silo because the datarelated to the service remains as the property of the service provider. Anothervisible trend is that the services associated with the silos are converging, andmost likely in the end the same set of services will be available in all of them.The most important vendor-based silos, or ecosystems for that matter, and theassociated technologies are discussed below.  Apple. Apple is starting to offer a cloud service that users can deploy to access the same content from different devices. Furthermore, the service is associated with numerous features, such as those previously associated only with Apple’s AppStore. This may make the system even more attractive than the plain data storage cloud would be. At present it is open how Apple’s iCloud will be utilized in the long run.
    • Strategic Research Agenda 2.0 Cloud Software Program 8 However, at very least rumors exist that it would be in the future used as a platform for building a cloud-based mobile phone. Apple’s position is further backed by the fact that its application market hosts by far the biggest number of mobile applications.  Google. Available already at the time of the composition of Cloud SW- SRA 1.0, Google’s services including email, calendar, office appliances and software development facilities have been available for almost half a decade, although they have earlier played minor role for Google’s revenue compared to the search-based advertising. In addition, Google offers the Android platform that is an open source operating system for mobile devices. Within few years, the platform has become the most widely used smart-phone operating system, and since the acquisition of Motorola Mobile by Google during August 2011, questions about the openness of the platform have been raised. However, even with the present Android, it has been clear that the intention is the creation of a mobile solution that fits with Google’s own services.  Microsoft. The alliance of Microsoft and Nokia, announced in February 2011, created a third ecosystem for mobile development. While still unclear how the different details will turn out, there is a huge potential in the development of applications that combine mobile and desktop services created for Windows and to be integrated with the Web.In addition to the above mentioned and already established ecosystems, thereare some other that have shown potential, but not yet reached their fullmaturity. In the following, a few of them are briefly addressed:  Facebook. In the advent of the rumored Facebook mobile phone (http://www.wired.com/gadgetlab/2011/07/htc-status-facebook- phone/), the company remains a service provider building on its own cloud computing facilities. It follows the open source strategy for its datacenter software and hardware needs. However, provided with tight integration to its facilities, such a device could enable the creation of yet another ecosystem. Facebook has also brought the concept of open source to data center design with their Open Compute project (http://opencompute.org/). As data center design has previously been mostly proprietary, it is interesting to see how Open Compute will change the solutions and the competitive landscape in the coming years.  Amazon. Amazon’s EC2 seems to be the most commonly used cloud computing infrastructure, to the extent that it can be considered as the de-facto implementation of cloud computing. It has various closed and open source offerings mimicking its interfaces, but the service is still based on providing computing infrastructure as a service (IaaS), on top of which e.g. Linux distributions can be installed. However, there is a potential to extend it into a full-blown ecosystem, if so desired, with such PaaS offerings as cloud storage, databases and content distribution.
    • Strategic Research Agenda 2.0 Cloud Software Program 9 Amazon is mostly using proprietary technologies, but there are open source alternatives such as Eucalyptus that implement similar sets of features and APIs.  VMWare. While Amazon is the focal company in the Java oriented open cloud world, the Hypervisor centric virtualization solutions are the dominating trend in the incumbent corporations developing in-house cloud solutions. In this arena VMWare owned by EMC is in a key position and will be with the large installed base in the near term future.  Rackspace. One of the smaller IaaS players is Rackspace that is differentiating from Amazon by following the open source strategy in their cloud solution. The company is one of the main sponsors of the OpenStack (http://www.openstack.org/) IaaS offering, trying to leverage the open source approach to competing e.g. with Amazons EC2.The fashion how the different systems have been composed remain largelyhidden from a casual user. However, it is obvious that some vendors relyextensively on the use of open source software in their service implementation.Moreover, harmonization and standardization of the key interfaces of cloudsolutions should in more general terms affect widely across market segments.Centralized trustThe emergence of cloud computing has made trust boundaries increasinglycomplex. Identities on Web services are often linked to Google or Facebookaccounts or Apple IDs, and the services are identified with SSL certificatesprovided by certificate authorities. Breaches into these trusted parties haveoccurred, e.g., in the recent Comodo, DigiNotar and RSA cases, and resulted infurther security and privacy breaches to users that had placed trust on them.The current trust models place near complete trust in a handful of providers,such as SSL certificate authorities or such major cloud vendors as Apple andGoogle. The recent breaches have shown that this trust is sometimesmisplaced. More distributed models exist, but they are often complex anddifficult to understand and manage, in practice. A breakthrough inunderstandable, manageable and distributed trust would be a major enablerfor emerging cloud businesses.Also the incidents that have taken place indicate the same, that there is a needfor dependable, distributed trust mechanisms that need to be bothunderstandable and secure. Improvements on this area will lead to:  new business opportunities for technology providers,  enhanced security as one of the key enablers for services with high privacy, and  special requirements set by certain application domains of the cloud, such as health-care, to be addressed.
    • Strategic Research Agenda 2.0 Cloud Software Program 10Role of open source solutionsWhile it is unclear how some of the above companies have implemented theirproprietary applications and services, one of the striking trends of the latestyears is the ever-increasing importance of open source systems. The trendseems to be that when a successful piece of proprietary software is created, itsfunctions are rapidly imitated by open source systems offering almost thesame functionality. This is often the strategy employed by smaller companiestrying to enter a market dominated by a large company with its proprietarysoftware. The consequences of this transformation are many.To begin with, it is now easy to gather components that can be used as a basisof almost any system, ranging from very small embedded devices (embeddedLinux) to full-fledged cloud computing system (OpenStack, OpenCloud). Arelated, yet often overlooked issue is that in order to avoid a singleimplementation lock-in, at least de-facto open standard interfaces are anecessity for the option to change the implementation on the fly. Since opensource implementations are often composed from developers’ own perspective,compatibility problems may emerge even between the different versions of thesame system, not to mention situations when a new system is taken in use.Somewhat surprisingly, the rules of the open source world are not thatdifferent from proprietary implementations. It is considered to be rather easyto compose a running system out of readily available open source components.However, problems commonly emerge as one realizes that the composition ofthe components leads to the constant need to upgrade some of thecomponents. This has resulted in packaging of open source components into“Enterprise edition” versions that are a bundle of open source components withsuch added value as support contracts, cf. for example the Eucalyptus cloudcomputing platform.In the end, it may be necessary to invest a big effort in maintaining aparticular configuration for a single business over an extended period of time.Consequently, in addition to using open source software in the composition ofthe first system version, it is increasingly tempting to participate in thecommunity producing maintained stable configurations. Examples include Linuxdistributions, Qt variants, Linux desktops, and so forth.HTML5 everywhereThe forthcoming HTML5 standard complements the capabilities of the existingHTML standard with numerous new features. Although HTML5 is a general-purpose web standard, many of the new features aims squarely at making theWeb a better place for desktop-style Web applications. There are numerousadditions when compared to the earlier versions of the HTML specification.
    • Strategic Research Agenda 2.0 Cloud Software Program 11To begin with, the new standard will extend the set of available markup tagswith important new elements. These make it possible for example to embedaudio and video directly into Web pages, eliminating the need to use suchplug-in components as Flash for this kind of media. The standard will alsointroduce various new interfaces and APIs available for JavaScript applications.Conformance to HTML5 has been one of the most important drivers tocompetition among browser manufacturers, in addition to the raw performanceof some parts – and JavaScript in particular – of the browsers. Furthermore,the discontinuity of previous Microsoft technologies, such as SilverLight, thatare based on proprietary design, only makes the competition more intense.Consequently, the realm of HTML5 is expected to extend from that of thebrowser and Web as such towards many kinds of applications. This in turnrequires an increased understanding on how to mix technologies originatingfrom the Web with those that are commonly used for composing binaryapplications. The same discussion holds for methods used in the development.Many of the present software development methods have been largelyirrelevant in Web development, where instead more informal approaches havebeen common: if things render correctly in different browsers, the system isreleased. Due to the good recovery capabilities of browsers it is howevercommon that Web applications include many resident errors.The growing importance of HTML5 will also mean an increasing role of therendering capabilities of the browser. Since the Webkit browser seems to bethe de-facto implementation used in many contexts, detailed knowledge on itsinternals will become necessary. The same holds also for other open sourcebrowsers, including the Mozilla code base. For companies relying onproprietary browsers, such as Microsoft’s Explorer, the ability to use itscapabilities in different applications outside the Web content will be important.Time-to-market and efficiency in the cloudThe importance of reducing time-to-market and increasing efficiency will, ifpossible, be even higher for the cloud than earlier. This includes development,validation and launching of cloud applications, and not only from the viewpointof the process, but regarding organizations and business networks as a whole.Proprietary versus open WebGiven that the majority of useful information is available on the Web, for manypeople the browser has become the most commonly needed computer programthat they use. Therefore, although the browser was not originally designed tobe a software platform, the Web has become increasingly important as adeployment environment for various types of applications.
    • Strategic Research Agenda 2.0 Cloud Software Program 12In other words, systems that previously required substantial investments ordistribution costs are increasingly available as services on the Web. However,the use of the Web as a software platform has many facets. At least thefollowing categories of Web-related applications exist:  Browser-based systems are pure Web-based software that require nothing more than a standard browser to run, using only those capabilities that are offered by such browsers.  Custom runtimes assume a special runtime environment, such as Microsofts Common Language Runtime (for Microsoft Silverlight) or the Java Runtime Environment, for application execution. Applications are run outside the browser.  Plug-in based systems refer to hybrid solutions in which a custom runtime is made available using a browser plug-in.  Custom-built native "apps" are not really Web applications at all. However, they use the same network protocols to access the back-end services as the browser does. By using native graphics libraries, the look-and-feel of such applications can be customized specifically to the needs of the application and the device. The applications can also leverage device-specific features more comprehensively than a pure Web application. Furthermore, it is possible to use HTML5 and other browser technologies for rendering as well, provided that a suitable graphics object (e.g. webView or similar) is available in the widget library.Mozilla recently published their Manifesto that centers around the idea that theWeb is a global public resource to remain open, accessible, interoperable andsecure. The Web must be built around public and open standards, rather thanproprietary technologies that serve specific business interests. Following theseprinciples, Web applications should be built around technologies that are open,accessible and as interoperable as possible. Out of the applicationdevelopment technologies discussed above, the only category that fulfills thepromise of truly open Web applications are the browser-based systems, i.e.applications that require nothing more than a standard Web browser to run.However, in more general terms cloud evolution will require and benefit fromstandardizing technology, application and service interfaces.All the other approaches fail to deliver the true flexibility of the Web as anapplication platform, e.g., by relying proprietary technologies, additional plugincomponents or custom runtimes. For obvious reasons there are still numerouschallenges in the near term in moving towards truly open Web applications.For instance, the evolution of the browser itself is progressing rather slowly, somany of the APIs needed for developing comprehensive applications simply arenot available yet. In addition, native applications can offer considerable gainsin terms of performance, usability and API coverage in the short term.Furthermore, the use of the Web in mobile devices poses special challenges.
    • Strategic Research Agenda 2.0 Cloud Software Program 13Disruptive innovationsDisruptive innovations tend at first to enter low-end market niches, thenevolve to satisfy main market needs and ultimately take over the market asthe new dominating approach. Many examples from the history of innovationsdemonstrate this evolution, such as 8” disks taking over 11” disk storages,cameras in phones competing against specialized camera equipment, etc.As the technology will be developed faster than the user requirements grow,the disruptive inferior technology will eventually match the needs of themainstream users with less cost to the previous technology generation. This inturn will direct majority of the technology development to the disruptivetechnology. Cloud-based applications can be viewed as a disruptive innovationin this regard, thinking for example g-mail and Google docs with their limitedfunctionality, but satisfying the needs of millions of low-end users, most ofwhom could not afford acquiring the old dominant solution targeted toprofessional users. Cloud can also change the basic logic of other areas thansoftware industry. In particular, cloud as a comprehensive, scalable and secureinfrastructure has a potential to cause changes in many service businesses.Browser as a universal application or platformThe rapid breakthrough of mobile apps – small applications that can be loadedto mobile devices and that are free or cost very little in comparison totraditional applications – have become commonplace at a speed and volumethat has been astonishing. While such applications have been available fordownload, with OpenBit from Finland paving the way on its own behalf, Applewas the first to make appstore a success story. Since then, almost all othermobile device vendors have introduced similar facilities. In reality, though, alarge number of the applications are not really new as applications, but thequestion is to provide simply an easier or more attractive way to make use ofexisting applications as mobile services.At the same time, the most popular applications in appstores have sometimesbeen made available in multiple appstores and as a browser application, too.For example, Angry Birds is available at http://chrome.angrybirds.com.Despite the success of mobile apps, there are recent claims regarding thedecreasing need for separate platforms, because the Web browser increasinglysatisfies the needs of both developers and users. The introduction of auniversal "platform application" that would combine everything that developersand users would needs into a single system, could definitely be a majordisruptive innovation.
    • Strategic Research Agenda 2.0 Cloud Software Program 14While cloud computing has become a common technology in desktopcomputing, the first announcements to use the same technologies in othercontexts have also been made. For instance Huawei has announced their goalto build a cloud phone (http://www.chinadaily.com.cn/cndy/2011-08/01/content_13019663.htm). We believe that the same trend will continueand that there will be more and more embedded devices to benefit from acommon "platform application" for cloud computing, with the associated cloudinfrastructure, service integration and development tools.Wide-spread adoption of mobile walletMicropayment is a financial transaction involving a very small sum of moneyand occurring usually online. The practical challenge associated withmicropayments is that the costs associated with individual transactions mustbe small in order to make every transaction count. While they have notreceived much attention by the wider public, micropayments have beenavailable for some time and offered by such service providers as PayPal, aswell as by various mobile phone and credit card operators. The rapid advancein this field makes it possible to adopt new business models, where the valueof an individual purchase is only few cents although the margin for thepayment operator is extremely small per purchase requiring huge volumes oftransactions to be feasible.Upon integrating the facilities associated with micropayments to mobile phonesand mobility in general, even more attractive possibilities will emerge. The so-called mobile wallet is applicable in a lot wider fashion than for instance creditcards due to the fact that mobile phones are being deployed very widelyindeed. The mobile wallet is also applicable in developing countries, whereordinary credit cards are beyond reach due to the costs associated with thenecessary infrastructure.Moreover, traditional currencies will be challenged by virtual currencies relatedto the emerging mobile and Web ecosystems. As an example, several gameproducers already accept internal virtual money so that it is exchangeable withmain stream currencies. It could be argued that in the future this type ofglobal virtual currencies emerge and may cause a disruption, bearing alsoremarkable societal implications.Data enrichmentThe raise of data analysis needs has opened new areas for business. Forexample social network providers have access to vast amounts of data that canbe analyzed to estimate things like hit movies or the popularity of differentmobile phone brands among consumers at large.
    • Strategic Research Agenda 2.0 Cloud Software Program 15The computing infrastructures needed to investigate big unstructured datamasses have also made it possible for such new systems to appear, includingin particular Hadoop.Hadoop was initially designed as an open source clone of the GoogleMapReduce parallel programming framework. In a nutshell, it consist of ahighly scalable non-POSIX file system HDFS and the MapReduce parallel dataprocessing framework. Hadoop is extensively used in production by Yahoo!,Facebook, and Twitter. It is being commercialized by Cloudera, Hortonworks (aYahoo! spin-off), IBM, and EMC (Greenplum HD/MapR), and is running onmore than 100 000 servers worldwide.One of the main attractions seems to be the cheap price per terabyte of theHDFS storage on commodity PC hardware, compared to traditional SAN/NASstorage solutions. The CEO of Hortonworks has claimed that half of the world’sdata will be stored in Apache Hadoop within five years.Cloud-based data storesAnother disruptive innovation is the emergence of cloud based data stores.These are sometimes called No-SQL databases, but the terminology is quicklychanging as the SQL query language question is not really the most relevant inthe discussion. Cloud-based data stores are, simplifying, a bunch oftechnologies grouped together to differentiate them from traditional relationaldatabases. First there are key-value stores that allow extremely scalablestorage of binary blob data, a prime example of this being the ApacheCassandra system. Google has a system called Megastore that allows efficientgeographic replication of data, while still being tailored for interactiveapplications. Both systems can be used as data store back-ends for large-scaleWeb applications, allowing for the consolidation of such applications.Another branch are systems like Apache HBase tailored for massive batchprocessing jobs, and allowing for easy integration with MapReduce based dataanalysis pipelines. Also systems like MongoDB are used in a smaller scale,because of the ease of use for programmers developing Web applications,while still enjoying some scalability benefits. What is common to all thesesystems is that they are highly scalable, making it possible to generate datastorage back-ends for software services that can be deployed in the Web.Potentially unanticipated events and surprisesAs evolution in software development has been progressing rapidly, it isobvious that there have been quite a number of surprises, too. Some of thethem have been much unanticipated, while other represent simply rapid break-through of solutions that have already been available, but in a small scale.
    • Strategic Research Agenda 2.0 Cloud Software Program 16Cloud as the state-of-practice almost overnightOne tends to overestimate or underestimate the time needed for a newtechnology to mature. With cloud technologies the former is definitely thecase, because cloud computing has become the business as usual, at veryleast when considering the level of computing power available in the cloud. Atthe same time, however, for instance effective means to build high-end clouddata centers remain to be resolved. There are also numerous other challengesto tackle, such as interoperability between different clouds and security.Saturation of community Web solutionsOne of the most popular services – if not the most popular – of the Web withits more than 750 million users, the number of Facebook users is still growing.However, for the first time there are also some signs that the number of itsusers may be stagnating. At present it is still too early to state whether or notthe stagnation of largest-scale community Web services is plausible, but it isclear that such would lead to the fragmentation of user bases and markets.Rapid consolidation of mobile ecosystemsA major unanticipated event would be the rapid consolidation of mobileecosystems. Motorola Mobile was acquired by Google. A major rationale for theacquisition may have been Motorola’s patent portfolio and its manufacturingwill continue as a separate activity. However, the acquisition also signals thatmobile ecosystems are facing a remarkable transition period(http://techcrunch.com/2011/08/15/breaking-google-buys-motorola-for-12-5-billion/). Nokia and Microsoft formed an alliance to compete against Apple andGoogle not only with regard to operating systems and mobile devices, but alsoin mobile apps (http://www.microsoft.com/presspass/press/2011/feb11/02-11partnership.mspx). We expect that even further consolidation and surpriseswill be seen. Furthermore, as already demonstrated by Huawei by its cloudphone, innovations may increasingly arise from the Far East - in part based onthe sole size and growth of the Asian market.Software development challengesDespite the increasing interest in cloud computing and the facilities of the Web,software developers remain rather hesitant in adopting new methods and toolsin use. The mainstream approaches used in software development are still thesame that have been there for the past many years, including requirementsmanagement and version management systems, bug reporting databases, andautomated build and testing facilities.
    • Strategic Research Agenda 2.0 Cloud Software Program 17Although these would be residing in the cloud, they would remain non-integrated and used as separate applications, each of which somewhere in theWeb. In other words, not that much efforts have been placed to integratethem into something that would lead to better communication amongdevelopers, easier access to information, and in general a faster and moreflexible and robust approach to develop software. Even team-level agility is notenough, but agile and lean enterprises must be built and that needs specialskills, knowledge and expertise on agile and lean transformation. This can beconsidered software development as service in the cloud and for the cloud.Areas of competitive advantagesThere are two megatrends in the domain of cloud software that posechallenges to the software industry: increasing speed of changes in the globalbusiness environment, and continuing cost-benefit needs posed by lower-costsoftware development companies of countries in Asia, Middle-East, Africa andelsewhere. Such companies have an increasing capability of building high-quality software. There is no other choice than to be competitive andproductive enough at the level of the enterprise as a whole an in the relevantecosystems. This can provide benefits that are not achieved by simply havinglower hourly software development costs.Furthermore, there is more evidence available that companies should notoutsource their critical development activities, or too much of their operations,without losing their competitiveness. At the same time the trend of usingmore and more software everywhere is continuing. In particular, almost everybusiness is becoming software-driven. so that its capability to quickly and cost-efficiently transform innovations and new technologies into profits is based onsoftware. The needs for speed, agility and cost-effectiveness have thus rapidlyincreased, and the trend is continuing. No one can survive in this kind ofenvironment with the old ways of developing software. Even team-level agilityis not enough, but agile and lean enterprises must be built.Moreover, companies need to make good decisions on how to combine externaland in-house software assets to create innovative new solutions. Reducing thetime it takes to move from an idea to the market and profits is becomingincreasingly critical, even at the expense of the provided feature set.Software industry benefits directly from investments in the education providedby universities and polytechnics. In Finland this has resulted not only intosuch enterprise-scale success stories as Nokia, but has also produced a livelysector of small and medium-sized companies, not to mention such open sourceinnovations as Linux and MySQL, the latter two being sources for significantcommercial businesses as well.
    • Strategic Research Agenda 2.0 Cloud Software Program 18In addition to the engineering excellence, Finland is also known from a longtradition of interest in and adoption of software development methods, toolsand processes. This has benefitted companies in quality improvement andsoftware engineering practices. However, these have to be combined withcapabilities to develop new products and services, as well as to create newbusinesses and ecosystems. Overall, the ongoing trends will intensify thecompetition in a significant way. At the moment it seems unlikely that theFinnish software companies could challenge such global players as Google orAmazon, not at least with the same service concepts as these companies areoffering. It seems more likely that in order to be competitive, Finnish softwarecompanies should have their own individual and imaginative service mix thatwould build on both engineering, operational and business excellence, andaddress "niche-enough" market segments to start with. Success stories likeAngry Birds can follow.Understanding the sources of valueIn this section, we will address the issue of value creation in the future cloudsoftware businesses. Thereby we also make an attempt to evaluate and justify,where the future business opportunities would lie.Characterization of the current software marketsThe annual sales of software products by the primary software industry isaround 200 M€ and the sales of IT services is over 400 M€, including softwaredevelopment and integration services, as well as process and technologyconsulting (Source: Datamonitor 2009). Most of this revenue comes frombusiness customers and the public sector. In addition, individual end-usershave increasingly started to pay for software and software-based services.Firms in the secondary software industry represent some 40% of the developerheadcount in Finland (Source: ETLA) and 60% (Source: EU) in Europe. Theydevelop software embedded in services and products, such as search andadvertisement, wireless equipment, outsourced business processes (cf.accounting through the Web as an example), and games. Both enterprises andindividual end-users consume services provided by these firms.Software product businesses focus on their market share in the visiblesoftware market, as well as try to find and reach new markets. The cloudapproach in general and the software-as-service delivery concept have beenused for this purpose. Already well-established software companies tend tofocus on improving their internal operations, trying to reduce their softwaredevelopment costs by the means of outsourcing, improving in-house processesand reusing existing software in the form of components, reference products,applets, mash-ups and open source programs (see Figure A).
    • Strategic Research Agenda 2.0 Cloud Software Program 19Figure A. Software development based businesses.There are however no silver bullets for identifying new software-basedbusiness opportunities, because the potential markets are so vast. One of thetwo megatrends stemming already from the early days of computing is thatthe number of users is approaching infinite, taking especially the futureubiquitous smart environment into account. Moreover, as their role isreshaping towards producers, it will become necessary to reconsider the valuecreating business networks also what is shown in Figure A, to better and fastergrasp the opportunities related to end-users acting as prosumers.The other obvious megatrend is that the price of a piece of software per use isnot only approaching zero, but in some cases becoming negative. This meansthat software is given for free to the users or that they are paid to deploy it asa value carrier for other offerings. In many cases, however, softwaredevelopment costs and usage fees are simply invisible, because they areembedded in services and products.In the future it may become even more difficult to cash directly from a piece ofsoftware, as opposed to capturing the software value from successful serviceor product delivery and deployment. As depicted in the figure, this tends tocause pressures to the value creation phase to decrease costs and therebyincrease the value capture marginal on the delivery side.Global market and its relevance to the cloud businessThe main sectors of the global ICT market are depicted in Table A.
    • Strategic Research Agenda 2.0 Cloud Software Program 20Table A. Main sectors of the global ICT market1).Sector Size Annual growthSW Industry 229 Mrd$ (2010) 3.1%IT Services and SW 625 Mrd€ 1.0%Telecommunications 1 400 Mrd€ 2.9%Internet Marketing 30-35 Mrd$ (09) ~20%Add-based services(Global Marketing ~400 Mrd)Games 42 Mrd$ (07) 10%Music & Movies 66 Mrd$ (10) 1% 1) Embedded software is included in the Telecommunications sector. Other industrial sectors in which embedded software is developed are not included because of the lack of uniform data.The main segments have not been radically changed during the past years,except perhaps the role of Internet-based marketing that illustrates thepenetration of Web-based electronic commerce from business customers toconsumers. In terms of the size it is still an emerging segment. Computergames have become one of the core software business segments, somethingthat was envisioned several years ago, but did not happen then. Games alsoillustrate the power of global branding, comparably to the best-knownexamples from the early software product era. This has become even morepervasive due to the Internet, social media regarding opportunities to makeuse of the brand globally that were not available to the manufacturers earlier.As can be seen from the table, the IT and SW and telecommunicationsindustries are large and mature, with only modest growth figures. Some otherindustries re at the same time growing much faster and have already reacheda significant size, taking also room from the already more "traditional" digitalbusinesses, such as the music industry. In Finland, the total size of the ITindustry in 2010 was 7-2 Billion euros, with 54 400 employees working for it.The amount of software revenue and service revenue related to software in2010 was estimated to be 3.2 Billion euros, with 5.0% of yearly growth(Source: Software industry survey 2011). From the point of view of individualcompanies, the global figures of the industrial segments and their growth ratesare only showing that there are significant opportunities available and alsoseveral new areas of growth.A high-level model on how business opportunities are developed from theirrecognition to successful implementation can be depicted as in Figure B.
    • Strategic Research Agenda 2.0 Cloud Software Program 21 Market Needs, Non- or under-employed Resources Business Concepts Business Plans Businesses Formed Successful EnterprisesFigure B. Evolution from market needs to successful business.Evolution starts from evaluating an opportunity that can be either animprecisely defined market need or represent the case of non-employed orunder-employed resources or capabilities. The evaluation of the opportunityfocuses on the question, whether the identified market need or resourceavailability is sufficiently sized and significant, and if the companys capabilitiesfit with the opportunity characteristics better than existing configurations.Thinking of the cloud-enabled opportunities as a whole, it has been recentlyestimated that the cloud will replace the personal computer “as the center ofusers digital lives” already by 2014 (Source: Gartner 2012). This viewillustrates the depth of the change that is ongoing regarding the present era ofsoftware industry and software-based industrial and consumer applications.A business concept is used to define the core notions on how the market needis addressed or the companys resources can be deployed. It grows furtherinto a full-blown business model that includes not only the business concept,but also a financial model estimating the value created and its distributionbetween the company, its customers, suppliers and other partners.How this kind of evolution becomes a part of a relevant value creation andcapture network, and what is the position of an individual company or itsbusiness in such a network may, however, be more important. The roles ofsoftware businesses in value networks and ecosystems are changing, asalready indicated above.Some software businesses are, however, still following the traditional businessmodels and value networks (Figure C), where applications and enablinginfrastructures are separated, as well as development, integration and serviceprovisioning types of businesses. Other businesses already forming entirelynew value networks (Figure D), based heavily on placing the end-users ontothe top of and pulling software offerings together into services so that formerdeveloper and integrator businesses are adjacent to the value network core,rather than located in the core any more.
    • Strategic Research Agenda 2.0 Cloud Software Program 22 Business consultant End-user organization Analysis & design Use Industry consultant Implementation Provisioning Operation Application SW supplier Information APPLICATION Application content Analysis service provider supplier & design INFRASTRUCTURE System Operation integrator Implementation Provisioning Infrastructure Infrastructure SW supplier service providerFigure C. Former business roles (Source: Messerschmitt & Szyperski 2001).Figure D. Roles of businesses in the emerging cloud software industry. Onefirm may operate in multiple roles. Yellow arrows represent 24/7 services, bluearrows off-line transactions.How the emerging value network evolution might shape the roles of cloudsoftware players in terms of value creation is discussed in more details next.
    • Strategic Research Agenda 2.0 Cloud Software Program 23Value creationEmerging opportunities for innovation and value-creating roles can beidentified, for example as follows: service-based business models, such as Webas the platform, cloud-capable mobile applications, and mashups; accelerationof the ecosystem transition of incumbent businesses; and reference/proof-of-concept of implementations, as well as establishment of new ecosystems.Value creation in cloud business modelsThe core logic of business is that companies create value for their customersand try to capture value for themselves in return. This ability to create andcapture value forms a basis for competitive advantage and success ofcompanies. For practical business, the value creation concept has oneimportant implication, which relates to how the value of product and servicesare determined. Usually the valuation of offering is too much product -centricand focusing on technological aspects. However, the offering by itself does notcreate value, but the value is created when customers use or consume it. Thebasic logic of value creation can be designed and expressed in the form ofbusiness model. A simple way to crystallize business model is through thekinds of elements shown in Figure E.Figure E. Value creation logic (Source: Ahokangas & Myllykoski 2011).It is important to understand how value is created through business models.For example, superior utilization of cloud technologies does not by itselfguarantee success. It is the ability to create value for or with customers thatreally determines it, and to do it better than competitors from the customers’perspective. When utilizing cloud the entire relationship with customerstypically changes.
    • Strategic Research Agenda 2.0 Cloud Software Program 24This leads to a need for new resources, capabilities and processes, too. Alsothe revenue logic may change radically, because the cloud can provideopportunities for innovative revenue generation. Moreover, the nature ofcompetition as a whole is changing. There will be more and more competitionbetween ecosystems rather than between individual firms. Customer value iscreated through a set of complementing products, services and processes frommultiple players of the same value creation network.Application product suppliers and service providersApplication product suppliers have traditionally gained their revenue fromselling packaged shrink-wrapped products sold through retail channels, value-added resellers and more recently trough Web stores. Most of the revenue hasbecome from the first sale, while upgrades and maintenance fees have formedaround 20% of it, and training has been provided as an additional service. Thechanging the role application product suppliers to act as of software-as-a-service (SaaS) suppliers affect software businesses in many ways:  Revenue can be converted to monthly recurring revenue providing delayed but predictable and steadily increasing income stream. This may even double the valuation of the firm.  Market share and customer base will remain critical. Marketing and sales costs will remain or increase to form even one half of the revenue.  Automation of software delivery reduces upgrading and versioning costs.  Use of Infrastructure-as-a-Service (IaaS) enables cost-efficient scalability of the infrastructure needed for providing SaaS, as well as improves the global availability of the offering.  Providing applications as a service reduces the risk of piracy, increasing thereby revenue streams.  Automation of the application providers’ processes will become a must.  Current professional applications can be sold to new low-end market segments, because of the less expensive SaaS solutions or services with revenue coming only from advertising.  It will be profitable to produce and deliver smaller applications than what has been feasible in the case of packaged software.  Application stores and Web distribution are low-cost delivery channels.  About one half of the current software application market is expected to be delivered as a service after a few years, yielding to a global market of approximately 100 Billion euros.  Business users in mature markets prefer predictable rental models to pay-per-use models.  Large enterprises prefer purchasing SaaS applications into intranet due to the better cost structure and security, to provide a single point of service, and to reduce maintenance costs, but with the cost of minimized customizability.
    • Strategic Research Agenda 2.0 Cloud Software Program 25Communication service providersCommunication service providers (CSPs, telecom operators) are adopting therole of brokering and bundling both infrastructure and application services toindividual and enterprise customers:  CSPs with processes to the market, deliver and charge small services have the competences, reliability, brand and infrastructure needed to act as distributors. The possibility to charge monthly billions of customers is a great competitive advantage in most markets. Large-scale adoption of digital wallets may, however, reduce this benefit soon.  Margins of CSPs and other channels are reducing, maybe below 15%.  CSPs can integrate services to packages, as well as provide on-line help and scalable security solutions.  Individual CSPs have a challenge to be attractive delivery channels for SaaS developers due to smaller customer reach than such global firms as Apple, if the SaaS provider has to tailor or integrate the service to each CSP. Standardization may help in this, unless the market becomes too fragmented for it.Platform-as-a-service providersTraditional operating system vendors and other platform developmentcompanies are transforming into Platform-as-a-service (PaaS) providers. AlsoCSPs and some new entrants have already adopted this role. PaaS operate onmarkets, where they need to attract both application providers developing newapplications and customers willing to use and buy these applications:  PaaS is a focal role in an ecosystem providing high risk and high market opportunity. It is usually a horizontal role, but the platform can also be specific to a niche market, due to the market segment needs, regulation requirements, or alike.  Potential players include vertically integrated global firms (Apple, Google, Microsoft), global niche players (Force.com, Tier-1 CSPs), market / geographical / regulation niches (Tier-2 CSPs, potentially also some Finnish software firms), open source communities, and tool platforms.  The PaaS field will remain as a battle-field of fierce market share competition with some of the current top players remaining and a couple of new major PaaS providers appearing.  Tool providers on the net are emerging and will decrease the threshold to develop and manage new service applications, thereby increasing their visibility and overall role.  Platform providers will have fierce fights over winning the best application developers, who appreciate ease of use, one-stop-shop service and large potential customer base.  The market volume of the PaaS businesses is easily hidden in vertically integrated firms, but was expected to be round $1-2 Billion in 2009.
    • Strategic Research Agenda 2.0 Cloud Software Program 26Infrastructure-as-a-service providersInfrastructure-as-a-service (IaaS) offers added value for its customers byproviding on-demand computing and data storage capacity.Multiple kinds of brokersGovernance and integration of on-demand services in user organizationsrequires tools and service processes. IT service firms can adopt this role byproviding governance brokering as a service. Brokers can also provideintegration of multiple services into one-stop-shopping service bundles orintegrated services. Platform providers are also natural-born brokers. Freeinfrastructure can be monetized by lending it, using infrastructure brokers.Cloud usersAccording to Gartner’s very recent (2012) analysis the cloud will result in aradical change from the viewpoint of individual users, and thereby open manynew opportunities to businesses: “Every user can now have a scalable andnearly infinite set of resources available for whatever they need to do.”Although also technological and infrastructure changes will be remarkable, thesole availability of the cloud to the masses of users – but for each and everyone as an individual, will create entirely new types of benefits.Overall, the volume of users activities based on the cloud will grow a lot, andthe users can be more self-reliant “than ever before.” They can make their ownchoices regarding cloud services, applications, and content “from a nearlylimitless collection on the Internet.” This should create a totally new culture ofself-service “that users expect in all aspects of their digital experience.” Inother words, the users can create and make use of their digital personalitiesonline, in the cloud.In-house developers and IT development servicesLarge firms will still maintain in-house software developer pools and use ITservices for supporting their business opportunities:  Standard products do not provide competitive advantage.  Integration will still be a critical issue in fine-tuning processes.  Security and governance are easier to order from within the firm.  Continuous agile development is cost-efficient with in-house resources.  Private and hybrid cloud approaches will be needed.
    • Strategic Research Agenda 2.0 Cloud Software Program 27Strategic challenges and opportunitiesThis section outlines the main challenges and opportunities that arise from theemerging cloud context, as it has been reviewed above.Accelerating the change of the software industryBased on the overall trends, the following recommendations can be made, thatif taken into account, would help the industry in their way towards competitiveedge of cloud-based business.Emphasis to building software-based ecosystemsEcosystems and ecosystem-based thinking are the indispensable ingredient ofcloud-based business models. In a way, this can be seen as a culmination andintensification of the movement in the industry from products towardsservices, a movement that has been distinctive feature of the whole era fromthe year 2000 onwards.Holistic process improvement for operational excellenceBoth business and software development take place in networked ecosystemsof many actors, and advanced means are needed to tackle this complexity.Sustaining world-class competitiveness requires a rigorous and holistic strategythat encompasses the whole organization. Lean enterprise level thinking is anencouraging approach towards this direction. Innovation can, however, takeplace at many levels, such as products, services, processes, and the way ofworking. The key is therefore to involve everybody in the organization inreaching operational excellence.Application platformsIn order for the industry to succeed, companies must participate in the buildingof new and innovative application platforms, either for existing ecosystems orwith the intention to create totally new value creation networks.Building of cloud-based application platforms with all the needed services is farfrom trivial. At the moment there are not many first-hand research resultsavailable on this, regarding especially empirical studies, and therefore morework is clearly needed.
    • Strategic Research Agenda 2.0 Cloud Software Program 28Software engineering in and for cloud servicesRelated to the application platforms, software engineering related research isneeded regarding both the use and building of cloud services (i.e. in the cloudand for the cloud). Moving a majority of the tool support into the cloud canbring remarkable benefits, too. It is therefore useful to consider softwaredevelopment tools as potentially very important cloud applications.Software development teams can benefit from having integrated tools in thecloud for example by avoiding the trap of multiple and differing installations oftoolsets. Teams using agile practices can benefit for example from havingcloud-based continuous integration means in their use when they need themmost. Software development related data can reside in the cloud and therebybe collected and utilized in a very effective manner for project managementand process improvement needs.It must also be noted that moving towards cloud based software engineering isaltogether a formidable task for the software industry. Especially establishedplayers need to invest in due time in making the paradigm change to happenin practice and remain competitive. The cloud transformation will be morepervasive and deeper than just improving the process to the next quality level.In essence, if the software development and management process isineffective, the cloud transformation is in danger – cloud is software, after all.Opportunities and challengesThe following opportunities and challenges can be foreseen, based on what hasbeen said above.Computing and data centersOne of the implications of the work carried out in the Cloud Software programis that competence on IaaS services needs to be strengthened, and morecommunication capacity to main markets is needed. Finland still lacks its ownultra-high-speed connections to the rest of the world.Small application and game provider communityOn-demand infrastructure and the availability of open source software andPaaS services have minimized the threshold to create small applications andinvestment needed to start new businesses. Global reach of application storesand the piracy protective nature of on-demand applications make it easier todeliver and sell small applications.
    • Strategic Research Agenda 2.0 Cloud Software Program 29The success of software game firms should attract the attention new talents,investors and facilitator organizations. An implication resulting from this is theimportance of new venture support, along with support to new businesses inmore general terms. Market success may, however, be difficult due tounexpected customer behavior and the dominance of large players in theexisting markets.Web as the platformPlatform functionality and development tools will become available, becausemany Web services do not require an special installation efforts. Fastapplication development needs are constantly increasing, and therefore also arace on winning tools is going on. For example graphic-intensive or multimediaapplications may, however, not be suitable for the Web-based environment.BrokeringGovernance and integration of on-demand services in user organizationsrequire tools or services. Brokering systems and services are needed in manyplaces of the ecosystem, and therefore multiple business opportunities.Hybrid and virtual private cloud supportMaking use of the external capacity on demand is profitable for peak loads.Hybrid and public cloud systems have security problems. Also selling freecapacity to external users has security risks. Security solutions and brokeringservices for hybrid, virtual private and sold capacity solutions will be neededfor these reasons.Video servicesCapturing value on content has become difficult, but it is still possible tocharge for video services and develop video service businesses further.Service store capabilitiesIn addition to easy development and on-demand delivery, software businessesneed marketing and sales capabilities. One part of this is the use of stores orprovisioning of service store capability by the firm itself. This includescomponents, such as identification service, authentication, brokering, andpayment. Not all these services are available at the moment. Development andeasy deployment of service store capabilities are therefore needed.
    • Strategic Research Agenda 2.0 Cloud Software Program 30Disruption-tolerant cloudCloud services depend on network connections, and services can becomeunavailable without them. Development and easy deployment of disruptiontolerance capabilities and services are thus needed.Ecosystems of development tools and storesPlatform functionality moves to the Web services used via browsers.Developers wish to deliver and sell applications with the same environment.Integration of platforms, stores and development tools form strong integratedcores for ecosystems. There is thus a need to integrate browser development,store and platforms.New communication meansFacebook has already replaced e-mail to some degree, as well as manyalternative instant messaging tools. Music and video-on-demand services havereplaced stored media. New wireless devices are being adopted fast.Integration of these all into new form factors and applications is going on, andidentification of new communication applications provides opportunities.User-driven business ideasCommunity platforms provide common means for application distribution. Fastdevelopment of new services emerging from user demands provides entirelynew opportunities. Development of community applications provides a majorchallenge, also with regard to the processes and tools, and taking the usersthemselves into the development process as prosumers rather than onlyconsumers.Creation of new niche ecosystemsSoftware development becomes even more networked and will be operated inecosystems. Specific competences of a developer community may be utilizedbest in growing ecosystems, which also utilize open source. Practices todevelop cloud ecosystems need to be learned by the community.Agile development and lean enterprises – cloud software factoryWhen looking for means to fight outsourcing and off-shoring, incumbent firmssearch cost effectiveness, transparency and cycle-time reduction from agiledevelopment and lean enterprise concepts. Development and dissemination ofagile and lean methods must be continued, towards the cloud software factory.
    • Strategic Research Agenda 2.0 Cloud Software Program 31New research openings 2012-2017From the business viewpoint the focus in the coming years should be insupporting a change towards smaller, leaner and more competitiveecosystems, as well as growing the emerging ecosystems around mid-sizeenterprises. This can be catalyzed by business and ecosystem creation pilots.On the other hand, surveys of existing systems, ecosystem assessments andother similar initiatives need to be continued. Significant increase of interestineffective building of software and software-based based ecosystems isexpected. The future of software development must not lie in the increase ofproductivity per se, but in the cleverness of exploiting software assets thathave business value.Holistic process improvement and operational excellence-related initiatives canbe identified to sustain transparent asset development and deployment needs.The movement towards participating in and building of new applicationplatforms should be encouraged by the means of research. To accelerate this,further pilots are needed and should be extended across the domestic borders.Services aimed at consumer markets are mainly based on viral marketingmodels. Research of these models and their application provides freshopportunities for revenue generation to software businesses.Research of cloud software will be focusing on following main areas andthemes during the next two years:  Shortening the cycle from ideas to businesses in the cloud domain (operational excellence, best practices), by preparing organizations to the agile approach in identifying new business opportunities, software development and deployment activities; equipping with or developing tools and techniques for the creation of new products and services in the cloud; and making it easy to develop, deploy, utilize and manage business and ecosystem operations through cloud-supported services.  Developing cloud-enabled ecosystems and associated tools, by creating competence for the firms to create and adapt to cloud-enabled ecosystems; developing and adopting cloud-based tools for enterprise networks; and extending agile and lean practices to the ecosystem level.  Exploring the competitive advantages of firms to create and grow cloud business ideas and actual businesses, by making use of new ideas, natural strengths, existing and acquired or developed new competences and networks of the firms; and utilizing existing competences to create new key technologies for the cloud environment.  Fulfilling requirements for superior user experience, by understanding and making use of the kinds of experiences that are necessary to secure key positions among cloud users and seamless multi-service access to delightful and dynamic features in cloud services.
    • Strategic Research Agenda 2.0 Cloud Software Program 32 Enabling ecosystems to address the trust management challenges of the new era. Following, making use and affecting the emerging harmonization and standardization of cloud technology, application and service interfaces – including not only cloud solution development, but also content creation for and usage through the cloud. Assessing and advancing the strategic positioning of cloud-enabled businesses in terms of the ecosystem roles: developers of the cloud (offerings created for the cloud), adopters of the cloud (offerings that come with or through the cloud), and users of the cloud (offerings that are created by using the cloud). In practice, this would thus mean creating new or transforming existing offerings to cloud services, changing the delivery channels of existing or new offerings to the cloud, and making use of the cloud in developing new or existing offerings. Advancing further the innovative and business-driven way of carrying out research and development work, as practiced in the Cloud Software program. Finally, the increasing turbulence in the global business environment and the continuing challenge posed by lower-cost software development countries must be taken seriously enough. Here the role played by the lean enterprise approach will be very important.