McKinsey & Company recently published How Big Data Can Improve Manufacturing which provides insightful analysis of how big data and advanced analytics can streamline biopharmaceutical, chemical and discrete manufacturing.
The article highlights how manufacturers in process-based industries are using advanced analytics to increase yields and reduce costs. Manufacturers have an abundance of operational and shop floor data that is being used for tracking today. The McKinsey article shows through several examples how big data and advanced analytics applications and platforms can deliver operational insights as well.
The following graphic from the article illustrates how big data and advanced analytics are streamlining manufacturing value chains by finding the core determinants of process performance, and then taking action to continually improve them:
Big Data’s Impact on Manufacturing Is Growing
In addition to the examples provided in the McKinsey article, there are ten ways big data is revolutionizing manufacturing:
- Increasing the accuracy, quality and yield of biopharmaceutical production. It is common in biopharmaceutical production flows to monitor more than 200 variables to ensure the purity of the ingredients as well as the substances being made stay in compliance. One of the many factors that makes biopharmaceutical production so challenging is that yields can vary from 50 to 100% for no immediately discernible reason. Using advanced analytics, a manufacturer was able to track the nine parameters that most explained yield variation. Based on this insight they were able to increase the vaccine’s yield by 50%, worth between $5M to $10M in yearly savings for the single vaccine alone.
- Accelerating the integration of IT, manufacturing and operational systems making the vision of Industrie 4.0 a reality. Industrie 4.0 is a German government initiative that promotes automation of the manufacturing industry with the goal of developing Smart Factories. Big data is already being used for optimizing production schedules based on supplier, customer, machine availability and cost constraints. Manufacturing value chains in highly regulated industries that rely on German suppliers and manufacturers are making rapid strides with Industrie 4.0 today. As this initiative serves as a catalyst to galvanize diverse multifunctional departments together, big data and advanced analytics will become critical to its success.
- Better forecasts of product demand and production (46%), understanding plant performance across multiple metrics (45%) and providing service and support to customers faster (39%) are the top three areas big data can improve manufacturing performance. These findings are from a recent survey LNS Research and MESA International completed to see where big data is delivering the greatest manufacturing performance improvements today. You can find the original blog post here.
- Integrating advanced analytics across the Six Sigma DMAIC (Define, Measure, Analyze, Improve and Control) framework to fuel continuous improvement. Getting greater insights into how each phase of a DMAIC-driven improvement program is working, and how the efforts made impact all other areas of manufacturing performance is nascent today. This area shows great potential to make production workflows more customer-driven than ever before.
- Greater visibility into supplier quality levels, and greater accuracy in predicting supplier performance over time. Using big data and advanced analytics, manufacturers are able to view product quality and delivery accuracy in real-time, making trade-offs on which suppliers receive the most time-sensitive orders. Managing to quality metrics becomes the priority over measuring delivery schedule performance alone.
- Measuring compliance and traceability to the machine level becomes possible. Using sensors on all machinery in a production center provides operations managers with immediate visibility into how each is operating. Having advanced analytics can also show quality, performance and training variances by each machine and its operators. This is invaluable in streamlining workflows in a production center, and is becoming increasingly commonplace.
- Selling only the most profitable customized or build-to-order configurations of products that impact production the least. For many complex manufacturers, customized or build-to-order products deliver higher-than-average gross margins yet also costs exponentially more if production processes aren’t well planned. Using advanced analytics, manufacturers are discovering which of the myriad of build-to-order configurations they can sell with the most minimal impact to existing production schedules to the machine scheduling, staffing and shop floor level.
- Breaking quality management and compliance systems out of their silos and making them a corporate priority. It’s time for more manufacturers to take a more strategic view of quality and quit being satisfied with standalone, siloed quality management and compliance systems. The McKinsey article and articles listed at the end of this post provide many examples of how big data and analytics are providing insights into which parameters matter most to quality management and compliance. The majority of these parameters are corporate-wide, not just limited to quality management or compliance departments alone.
- Quantify how daily production impacts financial performance with visibility to the machine level. Big data and advanced analytics are delivering the missing link that can unify daily production activity to the financial performance of a manufacturer. Being able to know to the machine level if the factory floor is running efficiently, production planners and senior management know how best to scale operations. By unifying daily production to financial metrics, manufacturers have a greater chance of profitably scaling their operations.
- Service becomes strategic and a contributor to customers’ goals by monitoring products and proactively providing preventative maintenance recommendations. Manufacturers are starting to look at the more complex products they produce as needing an operating system to manage the sensors onboard. These sensors report back activity and can send alerts for preventative maintenance. Big data and analytics will make the level of recommendations contextual for the first time so customers can get greater value. General Electric is doing this today with its jet engines and drilling platforms for example.
Additional sources of information on Big Data in Manufacturing:
- Attitudes on How Big Data will Affect Manufacturing Performance. Posted by Greg Goodwin on Thu, Mar 06, 2014. LNS Research. http://blog.lnsresearch.com/blog/bid/194972/Attitudes-on-How-Big-Data-will-Affect-Manufacturing-Performance-DATA From Value to Vision: Reimagining the Possible with Data Analytics, David Kiron, Renee Boucher Ferguson and Pamela Kirk Prentice, MIT Sloan Management Review, March 2013. http://sloanreview.mit.edu/reports/analytics-innovation/introduction/
- Merck Optimizes Manufacturing With Big Data Analytics, Information Week, Doug Henschen. April 2, 2014. http://www.informationweek.com/strategic-cio/executive-insights-and-innovation/merck-optimizes-manufacturing-with-big-data-analytics/d/d-id/1127901
- Takeaways from the MIT/Accenture Big Data in Manufacturing Conference. Posted by Greg Goodwin on Wed, Nov 27, 2013. http://blog.lnsresearch.com/blog/bid/190482/Takeaways-from-the-MIT-Accenture-Big-Data-in-Manufacturing-Conference
- The Internet of Things and the future of manufacturing. McKinsey and Company. Executives at Robert Bosch and McKinsey experts discuss the technology-driven changes that promise to trigger a new industrial revolution. June 2013 | by Markus Löffler and Andreas Tschiesner. http://www.mckinsey.com/insights/business_technology/the_internet_of_things_and_the_future_of_manufacturing
- The Rise of Industrial Big Data: Leveraging large time-series data sets to drive innovation, competitiveness and growth — capitalizing on the big data opportunity, GE Intelligent Platforms White Paper, April 2012. http://www.ge-ip.com/library/detail/13170
- When Big Data Meets Manufacturing. Stephen Chick, Serguei Netessine, INSEAD Professors of Technology and Operations Management and Arnd Huchzermeier, Chaired Professor of Production Management at WHU-Otto Beisheim School of Management | April 16, 2014. http://knowledge.insead.edu/operations-management/when-big-data-meets-manufacturing-3297
87% of enterprises believe Big Data analytics will redefine the competitive landscape of their industries within the next three years. 89% believe that companies that do not adopt a Big Data analytics strategy in the next year risk losing market share and momentum.
These and other key findings are from a Accenture and General Electric study published this month on how the combination of Big Data analytics and the Internet of Things (IoT) are redefining the competitive landscape of entire industries. Accenture and GE define the Industrial Internet as the use of sensor, software, machine-to-machine learning and other technologies to gather and analyze data from physical objects or other large data streams, and then use those analyses to manage operations and in some cases to offer new, valued-added services.
Big Data Analytics Now Seen As Essential For Competitive Growth
The Industrial Internet is projected to be worth $500B in worldwide spending by 2020, taking into account hardware, software and services sales according to Wikibon and previously published research from General Electric. This finding and others can be found on the home page of the Accenture and GE study here: How the Industrial Internet is Changing the Competitive Landscape of Industries.
The study also shows that many enterprises are investing the majority of their time in analysis (36%) and just 13% are using Big Data analytics to predict outcomes, and only 16% using their analytics applications to optimize processes and strategies. Moving beyond analysis to predictive analytics and optimization is the upside potential the majority of the C-level respondents see as essential to staying competitive in their industries in the future.
A summary of results and the methodology used are downloadable in PDF form (free, no opt in) from this link: Industrial Internet Insights Report For 2015.
Key take-aways from the study include the following:
- 73% of companies are already investing more than 20% of their overall technology budget on Big Data analytics, and just over two in ten are investing more than 30%. 76% of executives expect spending levels to increase. The following graphic illustrates these results:
- Big Data analytics has quickly become the highest priority for aviation (61%), wind (45%) and manufacturing (42%) companies. The following graphic provides insights into the relative level of importance of Big Data analytics relative to other priorities in the enterprises interviewed in the study:
- 74% of enterprises say that their main competitors are already using Big Data analytics to successfully differentiate their competitive strengths with clients, the media, and investors. 93% of enterprises are seeing new competitors in their market using Big Data analytics as a key differentiation strategy. The single greatest risk enterprises see from not implementing a Big Data strategy is that competitors will gain market share at their expense. Please see the following graphic for a comparison of the risks of not implementing Big Data strategy.
- 65% of enterprises are focused on monitoring assets to identify operating issues for more proactive maintenance. 58% report having capabilities such as connecting equipment to collect operating data and analyzing the data to produce insights. The following graphic provides an overview of Big Data monitoring survey results:
- Increasing profitability (60%), gaining a competitive advantage (57%) and improving environmental safety and emissions compliance (55%) are the three highest industry priorities according to the survey. The following table provides an analysis of the top business priorities by industry for the next three years with the shaded areas indicating the highest-ranked priorities by industry:
- The top three challenges enterprises face in implementing Big Data initiatives include the following: system barriers between departments prevent collection and correlation of data for maximum impact (36%); security concerns are impacting enterprises’ ability to implement a wide-scale Big Data initiative (35%); and consolidation of disparate data and being able to use the resulting data store (29%), third. The following graphic provides an overview of the top three challenges organizations face in implementing Big Data initiatives:
Gartner presented their top 10 strategic technology trends for 2015 at their annual Gartner Symposium/ITxpo 2014 held in Orlando earlier this month. Computing Everywhere, the Internet of Things (IoT) and 3D Printing are projected to be the three most important strategic technology trends in 2015.
3D Printing Will Continue To Revolutionize Prototyping And Manufacturing
3D printing is forecast to reach a tipping point in the next three years due to streamlined prototyping and short-run manufacturing. Improving time-to-market, ensuring greater accuracy of highly customized products, and reducing production costs over the long-term are three of the many benefits companies are adopting 3D printing for today. Be sure to read Larry Dignan’s excellent post covering the conference and top ten strategic technology trends, 3D printing turns strategic in 2015, says Gartner.
Taking Analytics To The Next Level in 2015
Advanced, persuasive and invisible analytics, context-rich systems, and smart machines also are included in the top 10 strategic technology trends for 2015. Given how quickly analytics is maturing as a technology category, it’s understandable why Gartner ranked this area as the 4th most strategic. In 2015, analytics will move beyond providing dashboards with metrics and Key Performance Indicators (KPIs) to a more intuitive series of applications that give business analysts the flexibility to define models and test them in real-time. Alteryx and Tableau are interesting companies to watch in this area and Tableau Public is worth checking out and learning due to its advanced visualization features (free, opt-in).
Cloud Computing Becomes Part Of The New IT Reality
The last four technology trends Gartner mentions include cloud/client computing, software-defined applications and infrastructure, Web-scale IT and risk-based security and self-protection.
The following graphic provides an overview of the top 10 strategic technology trends for 2015.
35% of all ads posted for engineering jobs in the last 30 days prioritize 3D printing and additive manufacturing as the most sought-after skill.
Wanted Analytics’ latest analysis of the 3D printing and additive manufacturing job market found that IT and management expertise were the second most common skill sets mentioned in ads seeking to recruit engineers. Key take-aways from their study and the growing market for engineers with 3D printing skills are provided below:
- The number of job ads requiring workers with 3D printing skills increased 1,834% in 4 years and 103% when comparing August 2014 to August 2013. The following graphic illustrates the accelerating growth of 3D printing and additive manufacturing expertise needs of employers over the last four years.
- Wanted Analytics found that the most in-demand jobs requiring 3D printing and additive manufacturing expertise include the following:
- Industrial Engineers
- Mechanical Engineers
- Software Developers, Applications
- Commercial and Industrial Designers
- Marketing Managers – High demand for marketing and selling expertise as manufacturers, software and service providers look to launch new business models that capitalize on 3D printing’s many business advantages.
- Manufacturing has the highest number of positions for 3D printing and additive manufacturing skills, with the following industries generating the majority of the jobs in this field today:
- Other Computer Peripheral Equipment Manufacturing
- Colleges, Universities, and Professional Schools
- Tire and Tube Merchant Wholesalers
- Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing
- Aluminum Sheet, Plate, and Foil Manufacturing
- Demand for freelance 3D printing and additive manufacturing expertise is flourishing globally. Elance has an impressive 76,979 portfolio samples used by freelancers to promote their 3D printing, 3D modeling and additive manufacturing expertise. There are 2,444 freelancers actively looking for 3D printing, 3D modeling and additive manufacturing projects, and 88 projects currently open.
- Freelance exchange ODesk currently has 2,395 freelancers listed as 3D printing specialists and designers and 78 projects currently open.
- Guru.com lists 367 freelancers with 3D printing expertise available and 180 open projects.
- CAD Crowd has 3,760 3D printing freelance experts and provides a global map of their locations, which is shown below.
3D printing’s potential to revolutionize manufacturing is quickly becoming a reality.
From relatively simple make-to-stock to complex, engineer-to-order production strategies in aerospace, defense, discrete and industrial production, 3D printing technologies are redefining the manufacturing value chain. Investors including venture capitalists, wealth management firms and nearly every market research firm covering high technology has published 3D printing forecasts or market estimates.
A summarized list of 3D printing market forecasts and estimates is provided below:
- Canalys predicts the global 3D printing market will grow from $2.5B in 2013 to $16.2B by 2018, attaining a CAGR of 45.7% in the forecast period. For additional information see 3D printing market to grow to US$16.2B in 2018. The following table compares 2013, 2014 and 2018 forecasts and relative market growth by 3D printers, services and materials.
- IBISWorld forecasts the U.S. market for 3D printer manufacturing in the U.S. will reach $1.4B in 2014, attaining a Compound Annual Growth Rate (CAGR) of 22.8% from 2009 to 2014. The U.S. market will grow at a CAGR of 15.7% from 2014 to 2019. IBISWorld’s report includes market shares, and shows 3D Systems Corporation with 19.5% followed by Stratasys with 18.4%. You can read the IBISWorld report, 3D Printer Manufacturing in the US, February 2014 here (free, no opt-in).
- IDC predicts that worldwide 3D printer unit sales and installed base will grow at a combined compound annual growth rate of 59% through 2017, with the value of shipments attaining a 27% CAGR in the forecast period. IDC’s excellent presentation titled 3D Printing – A Transformative Opportunity for Print and Manufacturing written by Robert Parker and Keith Kmetz was part of the IDC Directions 2014 briefing sessions earlier this year. The following slide from the presentation compares 3D printer market units, installed base and value of shipments. IDC also predicts the Average Selling Value will also drop at a -19% CAGR through 2017.
- 3D printers will grow from a $288M market in 2012 to $5.7B in 2017, attaining an 81.9% CAGR in the forecast period according to research by Wells Fargo Wealth Management. According to this firm’s compiled research, shipments of 3-D printers are expected to grow at a CAGR of 95% a year from 2012 to 2017 with revenue expected to grow at 82% in the same forecast period. Well Fargo Wealth Management found that 3-D printing revenue is estimated to have achieved just 8% of its global market potential as of 2014, making the market opportunity worth $21–$28 billion by 2017. Wells Fargo Wealth Management published the report Beyond 2014: Evolving Opportunities in Technology providing these insights and the following charts showing the growth of 3D printing shipments and revenue:
- The market for 3D printing products and services grew to $3.07B in 2013 attaining a compound annual growth rate (CAGR) of 34.9%, the highest in 17 years according to Wohlers Associates. According to industry expert Wohlers Associates the growth of worldwide revenues over the past 26 years has averaged 27%, with the CAGR for the past three years (2011–2013) reaching 32.3%.For additional information see the Wohlers Report 2014 Uncovers Annual Growth of 34.9% for 3D Printing and Additive Manufacturing Industry. Wohlers Associates is one of the most knowledgeable firms tracking 3D printing, they have involved in this market for decades.
- 67% of manufacturers surveyed are currently implementing 3D printing either in full production or pilot and 25% intend to adopt 3D printing in the future. A study by Price Waterhouse Cooper (PwC) of 3D printing adoption in the global aerospace industry’s MRO (maintenance, repair and overhaul) parts market estimates $3.4B annual savings in material and transportation costs alone. PWC’s recent report published in June, 3D Printing and the New Shape of Industrial Manufacturing, provides a wealth of insights into the adoption of 3D printing in manufacturing. The following graphic from the report compares adoption rates by small and large firms.
- PwC predicts that within three to five years 3D printing technologies will be used for producing military, commerical and complex weapon parts and system components. In the recent research note 3D Printing: A Potential Game Changer for Aerospace and Defense, PwC provided a 3D printing adoption map, which is shown below. PwC observes that “as quality and speed continue to improve, 3D printing will become a viable process for an ever-increasing number of applications, including traditional production parts. No one knows how rapidly the technology will take to mature, but most experts believe it will make significant strides within the next five years.”
Amazon Web Services, Coursera, Google, MIT Courseware and Microsoft are accelerating the depth and variety of cloud computing courses, courseware and learning materials they are freely making available online.
Over the last six months since the last Roundup Of Free Cloud Computing Online Courses, Amazon Web Services has added an additional series of free instructional videos, self-paced labs and selected free courses in the seven areas their AWS Training programs focus on. Microsoft’s Virtual Academy has grown to include more courses, training material and entire section of free downloadable books from Microsoft Press. Google’s continual additions to the Developer Academy include online courses to learn more about Google AppEngine, Python App Engine and Google Cloud SQL.
Coursera and the University of Maryland, University of New Mexico and Vanderbilt University are all offering free courses on Android, mobile and web application development. MIT Courseware continues to add useful courses across the broad spectrum of subjects they cover. The dominant theme of all courses is a new focus on creating and launching a new cloud computing application during the course.
Update on Cloud Computing Online Courses – Full Index Available For Download
One of the best indicators of how serious a software company is about their developer evangelism strategy is how much they invest in free training, easily accessible knowledge, and work to break down learning barriers. Amazon Web Services, Google and Microsoft are each accelerating these areas quickly. Each are choosing to freely provide valuable training videos, books and content in the hope of attracting and educating more developers.
In addition to these extensive evangelism efforts, there are several excellent courses and educational programs available entirely online at various price points. You can find entire roundup of cloud computing online courses and programs here (in PDF) and also in Microsoft Word.
The following table compares the free cloud computing online courses. Please click on the graphic to expand for easier reading.
- DePaul University College of Computing and Digital Media is offering a Cloud Computing Technologies Program where students will build their own cloud applications. Using Amazon Web Services, IBM, Microsoft and Salesforce cloud platforms, students will learn how to create and manage cloud-based applications. The eleven-week in-depth program in the principles, methods, and technologies of Cloud Computing. The program provides a broad understanding of the different leading Cloud Computing technologies.
- Stanford University is offering CS309A – Cloud Computing one of the most sought-after online courses in this field, from September 23rd to December 16th, 2014. This class includes discussions with cloud computing industry leaders and CEOs who share their vision of the future of software-powered businesses. Previous guest speakers include Hamish Brewer, CEO, JDA Software, Godfrey Sulliva, CEO, Splunk, Human Shah, CEO, RMS, Rob Bearden, CEO, Hortonworks, Bill Ruh, VP & Corporate Officer, GE Global Software and Aaron Levie, CEO, Box. The course is taught by Timothy Chou, a widely recognized pioneer in cloud computing. He has been teaching introductory computer architecture at Stanford for 15 years. He has an extensive background in cloud computing and is a high energy, engaging speaker. You can find his LinkedIn profile here.
From manufacturers looking to gain greater insights into streamlining production, reducing time-to-market and increasing product quality to financial services firms seeking to upsell clients, analytics is now essential for any business looking to stay competitive. Marketing is going through its own transformation, away from traditional tactics to analytics- and data-driven strategies that deliver measurable results.
The high level of interest and hype surrounding analytics, Big Data and business intelligence (BI) is leading to a proliferation of market projections and forecasts, each providing a different perspective of these markets.
Presented below is a roundup of recent forecasts and market estimates:
- The Advanced and Predictive Analytics (APA) software market is projected from grow from $2.2B in 2013 to $3.4B in 2018, attaining a 9.9% CAGR in the forecast period. The top 3 vendors in 2013 based on worldwide revenue were SAS ($768.3M, 35.4% market share), IBM ($370.3M, 17.1% market share) and Microsoft ($64.9M, 3% market share). IDC commented that simplified APA tools that provide less flexibility than standalone statistical models tools yet have more intuitive graphical user interfaces and easier-to-use features are fueling business analysts’ adoption. Source: http://www.idc.com/getdoc.jsp?containerId=249054
- A.T. Kearney forecasts global spending on Big Data hardware, software and services will grow at a CAGR of 30% through 2018, reaching a total market size of $114B. The average business expects to spend $8M on big data-related initiatives this year. Source: Beyond Big: The Analytically Powered Organization.
- Cloud-based Business Intelligence (BI) is projected to grow from $.75B in 2013 to $2.94B in 2018, attaining a CAGR of 31%. Redwood Capital’s recent Sector Report on Business Intelligence (free, no opt in) provides a thorough analysis of the current and future direction of BI. Redwood Capital segments the BI market into traditional, mobile, cloud and social business intelligence. The following two charts from the Sector Report on Business Intelligence illustrate how Redwood Capital sees the progression of the BI market through 2018.
- Enterprises getting the most value out of analytics and BI have leaders that concentrate more on collaboration, instilling confidence in their teams, and creating an active analytics community, while laggards focus on technology alone. A.T. Kearney and Carnegie Mellon University recently surveyed 430 companies around the world, representing a wide range of geographies and industries, for the inaugural Leadership Excellence in Analytic Practices (LEAP) study. You can find the study here. The following is a graphic from the study comparing the characteristics of leaders and laggards’ strategies for building a culture of analytics excellence.
- The worldwide market for Big Data related hardware, software and professional services is projected to reach $30B in 2014. Signals and System Telecom forecasts the market will attain a Compound Annual Growth Rate (CAGR) of 17% over the next 6 years. Signals and Systems Telecom’s report forecasts Big Data will be a $76B market by 2020. Source: http://www.researchandmarkets.com/research/s2t239/the_big_data
- Big Data is projected to be a $28.5B market in 2014, growing to $50.1B in 2015 according to Wikkbon. Their report, Big Data Vendor Revenue and Market Forecast 2013-2017 is outstanding in its accuracy and depth of analysis. The following is a graphic from the study, illustrating Wikibon’s Big Data market forecast broken down by market component through 2017.
- SAP, IBM, SAS, Microsoft, Oracle, Information Builders, MicroStrategy, and Actuate are market leaders in BI according to Forrester’s latest Wave analysis of BI platforms. Their report, The Forrester Wave™: Enterprise Business Intelligence Platforms, Q4 2013 (free PDF, no opt in, courtesy of SAS) provides a thorough analysis of 11 different BI software providers using the research firm’s 72-criteria evaluation methodology.
- Amazon Web Services, Cloudera, Hortonworks, IBM, MapR Technologies, Pivotal Software, and Teradata are Big Data Hadoop market leaders according to Forrester’s latest Wave analysis of Hadoop Solutions. Their report, The Forrester Wave™: Big Data Hadoop Solutions, Q1 2014 (free PDF, no opt in, courtesy of MapR Technologies) provides a thorough analysis of nine different Big Data Hadoop software providers using the research firm’s 32-criteria evaluation methodology.
- IDC forecasts the server market for high performance data analysis (HPDA) will grow at a 23.5% compound annual growth rate (CAGR) reaching $2.7B by 2018. In the same series of studies IDC forecasts the related storage market will expand to $1.6B also in 2018. HPDA is the term IDC created to describe the formative market for big data workloads using HPC. Source: http://www.idc.com/getdoc.jsp?containerId=prUS24938714
- Global Big Data technology and services revenue will grow from $14.26B in 2014 to $23.76B in 2016, attaining a compound annual growth rate of 18.55%. These figures and a complete market analysis are available in IDC’s Worldwide Big Data Technology and Services 2012 – 2016 Forecast. You can download the full report here (free, no opt-in): Worldwide Big Data Technology and Services 2012 – 2016 Forecast.
- Financial Services firms are projected to spend $6.4B in Big Data-related hardware, software and services in 2015, growing at a CAGR of 22% through 2020. Software and internet-related companies are projected to spend $2.8B in 2015, growing at a CAGR of 26% through 2020. These and other market forecasts and projections can be found in Bain & Company’s Insights Analysis, Big Data: The Organizational Challenge. An infographic of their research results are shown below.
Just over $4B was invested in software deals by venture capitalists (VCs) during Q1, 2014, four times as much as biotechnology.
Software deals netted out 42% of all dollars invested in the first quarter of 2014, with biotechnology receiving 11%. VCs invested $816M in IT Services or 9% of all dollars, making this the third largest investment category. Interest in IT Services continues to accelerate, with dollars invested in this category increasing 33% compared to the prior quarter.
These findings are from the latest edition of The MoneyTree Report, a quarterly study of venture capital investment in the United States produced by PricewaterhouseCoopers and the National Venture Capital Association (NVCA) using Thomson Reuters data. You can find the full data sets of the study here in Microsoft Excel format. The MoneyTree Report Q4 2013/ Full-year 2013 is also available in PDF form here and there is no opt-in to download it.
Take-Aways From The Study
- A total of $9.5B in 951 deals was invested in the first quarter of this year, up 12% in dollars and down 14% in the number of deals compared to the 4th quarter of 2013. In the previous quarter, a total of $8.4B was invested in 1,112 deals.
- In 2013, $11B (37%) of all venture investments were in software, $4.6B (16%) in biotechnology and $2.96B (10%) were in Media and Entertainment. The following graphic shows the distribution of amounts invested by industry in 2013. Please click on the graphic to expand for easier reading.
- In the first quarter of 2014, software companies also received three times the number of deals of the next closest industry category, Media & Entertainment. 46% or 126 software deals were completed in Q1, compared to 40 in Media & Entertainment. Biotechnology companies were third with 8% or 22 deals. The following graphic provides a comparison of deals by industry for Q1, 2014. Please click on the graphic to expand it for easier reading.
- Kleiner Perkins Caufield & Byers, First Round Capital, New Enterprise Associates, Inc. and Andreessen Horowitz LLC completed the most venture capital deals in 2013, as the graphic below shows. Please click on the graphic to expand for easier reading.
- Software’s dominance in Q1, 2014 relative to other industries is evident in the following graphic, showing 42% of dollars invested followed by biotechnology (11%) and IT Services (9%). The study data shows nine of the 17 industries are shrinking it terms of venture investments. Telecommunications is down 68%, Networking and Equipment down 47% and semiconductors, down 17%. Please click on the graphic to expand it for easier reading.
- Overall first-time financing decreased 25% to $1.2B in Q1, with a corresponding 24% drop in the number of companies to 271.
- 48% of dollars invested during Q1 into companies receiving venture capital for the first time are in the software industry. 46% of the deals to 126 companies who captured $571M in Q1 lead to this industry dominating first sequencing investments.
- Top regions where startups received funding in Q1 include Silicon Valley (50% of all VC funding), New England (11%) and the New York Metro Area (10%). The Los Angeles/Orange County area was fourth with 5% of all venture funding in Q1, 2014.
Microsoft’s latest study shows enterprises’ pace of cloud computing adoption continues to accelerate. Nearly half of the respondents (45%) report they have cloud-based applications running in production environments. 58% report that they selectively target new applications and projects for cloud computing.
Microsoft commissioned 451 Research to complete one of the most comprehensive global surveys to date of hosting and cloud computing, titled Hosting and Cloud Go Mainstream releasing the results earlier this month. The 74 page slide deck of results provides a wealth of insights into the current and future state of hosting and cloud computing. 451 Research constructed the methodology to include interviews with 2,000 companies and organizations of all sizes from 11 countries, with more than a third of respondents coming from the United States. Microsoft and 451 Research provided the slides showing the result of screener questions, which provides a useful context for analyzing the survey results.
Here are the key take-aways from the study:
- 45% of enterprises globally are running production-level cloud computing applications today. North America and Asia have the greatest percentage of enterprises reporting broad implementation of production cloud-based applications (17% each). North America has the greatest percentage of enterprises in the discovery and evaluation phase of cloud computing adoption at 29%.
- 58% of global enterprises are selectively target new applications for cloud computing, with 18% heavily relying on cloud computing for new projects. The following graphic shows the distribution of organizations’’ approaches to using cloud computing for new applications or IT projects.
- SaaS (71%) and Hosted Infrastructure Services (69%) are the two most common IT services currently purchased today, with 14% growth forecasted in each by 2016. The fastest growing category is Platform-as-a-Service (PaaS), with 37% purchasing these services today projected to grow another 26% in two years.
- SaaS is most prevalent in enterprises with over 500 employees, and Hosted Infrastructure Services, in government and education. Please see the graphic below for the distribution of responses by IT service and organization type.
- Spending on hosted private clouds will increase from 28% of spending today to 32% in 2016, with traditional dedicated infrastructure services dropping from 48% to 42%.
- The majority of SaaS users are employees (45%) followed by businesses (which could be interpreted as suppliers and the broader supply chain) (22%), consumers (18%) and business partners (including distribution channels (14%).
- Telephone conversations with customer support specialists is the most valuable form of communication (just over 60%) across all support channels. It is also the most preferred channel for SaaS support.
- Business applications (17%), databases (14%) and e-mail 12%) are the top three application spending categories today in hosted and cloud applications. The following graphic breaks out spending by hosting and cloud configuration.
- Having a well-defined architecture for security (7.7 out of 8.0), understanding who the end-users are (7.6) and train users to be cautious with access & security (7.5) in addition to having a well-defined architecture for performance (7.5) are the three top best practices for cloud computing projects.
- 44% of enterprises globally have “shadow IT”, meaning business units are spending their own budget on cloud computing projects outside of the IT approval processes. The following graphic provides the breakdown by type of organization included in the survey.
- 87% of respondents globally would recommend cloud computing to a peer or colleague and 13% would not. When asked why or why not, respondents most often mentioned a good experience and better service/it works (approximately 17%), followed by improving costs/cost effective/cheaper (approximately 16%). Security issues and concerns (25%) and uncertainty/it’s too new (approximately 16%) are the reasons for not recommending cloud computing.
By 2018, CIOs expect it to play a critical role in enabling their organizations strategic vision according to IBM’s latest study, Moving from the back office to the front lines – CIO insights from the Global C-suite Study. The IBM study and recent cloud computing forecasts and market estimates illustrate how quickly CIOs’ roles are changing.
CIOs in high performance enterprises are increasingly seeing the world much more like their CEO counterparts. Both are now focusing more on how cloud computing can improve customer engagement and operational performance while anticipating market and macro-economic factors. IBM’s study provides a glimpse into their Institute for Business Value’s 1,600 face-to-face conversations with CIOs from 70 countries and 20 industries worldwide.
Here are the key take-aways from the report including an infographic summarizing key points of the study:
- Cloud computing has rapidly accelerated from 30% of CIOs mentioning it as a crucial technology for customer engagement in 2009 to 64% today.
- 67% of CIOs IBM interviewed are actively looking into how cloud technologies can better serve and collaborate with customers.
- 84% of CIOs are focusing on mobility solutions to support closer customer engagement, 83% are evaluating business analytics and optimization and 64%, cloud computing. The following graphic shows a comparison of how priorities have changed between 2009 and 2013.
- CIOs in outperforming enterprises are nearly twice as likely as their peers (59% versus 31% for underperformers) to have a cohesive strategy for uniting the digital and physical elements of their businesses. One respondent CIO from a banking firm in The Netherlands stated that “We want to create an integrated, 24/7 customer experience across channels and services.” The following infographic summarizes key points of the analysis.
- Cloud-related tech spending by businesses is forecast to triple from 2011 to 2017 according to IHS Technology. By 2017, enterprise spending on cloud computing will amount to a projected $235.1B, triple the $78.2B spent in 2011 according to the research firm’s analysis. In 2014, global business spending for infrastructure and services related to the cloud will reach an estimated $174.2B, up 20% from the amount spent in 2013. Source: Cloud- Related Spending by Businesses to Triple from 2011 to 2017.
- Centaur Partners predicts that total SaaS revenue will shift from just over 10% of the total enterprise software market in 2010 to just over 16% by 2015, and predict that SaaS and cloud-based business application services revenue will have grown from $13.5B in 2011 to $32.8B in 2016. The following graphic is from their latest SaaS Market Overview presentation.
- Bain & Company predicts that direct spending on hardware, software and services could top $70B by 2017 based on the proliferation of the Internet of Things (IoT). The research brief, Is your company ready for the Internet of Things? predicts that companies that can capitalize on mobility, analytics and cloud computing will have the highest probability of success. Bain & Company also presented their taxonomy of market growth by enterprise spending category below, projecting software and applications will generate $180B in sales by 2017.
- IDC is predicting that the cloud software market will surpass $75B by 2017 attaining a five year compound annual growth rate of 22% in the forecast period. IDC also found that current organizations using the cloud expect to spend 53.7% of their IT budget on cloud-based applications and platforms in the next 24 months. Major benefits of the cloud for IT operations include reducing the size of the IT budget, improving IT staff productivity, and simplifying and standardizing IT infrastructure. For other departments, benefits include improved resource utilization, enabling business units to control IT solutions more directly, and launch revenue generating services faster with more efficient time-to-market strategies. These findings are from the Cisco infographic based on IDC research data titled Midsize Enterprises Leading The Way With Cloud Adoption.