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Posts from the ‘2012 Cloud Predictions’ Category

Jan 17

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Roundup of Cloud Computing Forecasts and Market Estimates, 2012

The latest round of cloud computing forecasts released by Cisco, Deloitte, IDC, Forrester, Gartner, The 451 Group and others show how rapidly cloud computing’s adoption in enterprises is happening.  The better forecasts quantify just how and where adoption is and isn’t occurring and why.

Overall, this year’s forecasts have taken into account enterprise constraints more realistically  than prior years, yielding a more reasonable set of market estimates.  There still is much hype surrounding cloud computing forecasts as can be seen from some of the huge growth rates and market size estimates.  With the direction of forecasting by vertical market and process area however, constraints are making the market estimates more realistic.

I’ve summarized the links below for your reference:

  • According to IDC, by 2015, about 24% of all new business software purchases will be of service-enabled software with SaaS delivery being 13.1% of worldwide software spending.  IDC further predicts that 14.4% of applications spending will be SaaS-based in the same time period. Source: http://www.idc.com/getdoc.jsp?containerId=232239
  • The cloud computing marketplace will reach $16.7B in revenue by 2013, according to a new report from the 451 Market Monitor, a market-sizing and forecasting service from The 451 Group. Including the large and well-established software-as-a-service (SaaS) category, cloud computing will grow from revenue of $8.7B 2010 to $16.7B in 2013, a compound annual growth rate (CAGR) of 24%. https://451research.com/
  • Forrester forecasts that the global market for cloud computing will grow from $40.7 billion in 2011 to more than $241 billion in 2020. The total size of the public cloud market will grow from $25.5 billion in 2011 to $159.3 billion in 2020. Link to report excerpt is here.
  • Deloitte is predicting cloud-based applications will replace 2.34% of enterprise IT spending in 2014 rising 14.49% in 2020.  The  slide below  is from an excellent presentation by Deloitte titled Cloud Computing Forecast Change downloadable from this link.

  • Gartner predicts Small & Medium Business (SMB) in the insurance industry will have a higher rate of cloud adoption (34%) compared to their enterprise counterparts (27%).  Gartner cites that insurance industry’s opportunity to significant improve core process areas through the use of technology.  The following figure from the report, 2011 SMB Versus Enterprise Software Budget Allocation to Annual Subscriptions indicates the differences in software budget allocation for annual subscriptions by vertical market from the report:

2011 SMB Versus Enterprise Software Budget Allocation to Annual Subscriptions

  • Gartner is predicting that the cloud system infrastructure (cloud IaaS) market to grow by 47.8% through 2015. The research firm advises outsourcers not moving in that direction that consolidation and cannibalization will occur in the 2013 – 2014 timeframe  The providers named most often by respondents were Amazon (34%), SunGard (30%) and Verizon Business (30%). Of the global top 10 IT outsourcing market leaders, only CSC appears on the list. Source: User Survey Analysis: Infrastructure as a Service, the 2011 Uptake  Claudio Da Rold,  Allie Young.

External Service Providers Being Considered for IaaS (or Cloud IaaS)

Jan 2

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How Cloud Computing And ERP Mobility Are Reordering Gartner’s Hype Cycle for ERP

A good friend of mine recently became CIO of a financial services firm and was given his first major project last month: make the complete accounting, financial, and loan provider data and applications available 24/7 on any iPad or Android-based tablet from any office, at any time.

The majority of loan provider applications are cloud-based and his company is running NetSuite.  His corporate office is in Asia and cloud-based applications made it possible for the company to launch and operate in California within months.   He’s been given six months to transform this mobile vision into reality.

Another CIO of a major A&D manufacturer I recently visited wants vendors to challenge him more to get greater value from his investments in legacy data and ERP systems. Using ERP to run batch reports alone has nearly caused project schedules to slip, so the focus internally is on real-time system integration of project management and accounting systems.  He’s also been given the task of revamping accounting and financial systems by October, 2012, and they just started late last year.

Gartner’s Hype Cycle for ERP 

Considering these two extremes in the context of the Gartner Hype Cycle for ERP (shown below) and the recent report SaaS and Cloud ERP Trends, Observations, and Performance 2011  (free for download until January 9, 2012) published by Aberdeen last month several take-aways emerge.

  • CIOs are under increasing pressure in 2012 to enhance, modify even replace existing ERP systems while standardizing technology across the enterprise at the same time.  The most risk-averse way around this is to add applications to single instance ERP backbone systems, with analytics and Business Intelligence (BI) being the among the most in demand.
  • Cloud-based ERP in the Enterprise and Small & Medium Businesses (SMB) are accelerating along the Hype Cycle faster than Gartner indicates.  Enterprises are using Cloud-based ERP systems as part of their two-tier ERP system strategies due to the Total Cost of Ownership (TCO) and time-to-deploy advantages, and the flexibility of tailoring everything from user interfaces to workflows to their specific requirements.  Highly specialized Cloud-based ERP suites including those from Plex Systems are gaining traction due to their expertise in specific industries and the compliance-related challenges inherent within them. In SMBs, the cost and time-to-deploy are two major drivers with concerns over security being the biggest impediment to growth.  Gartner reports that they are seeing Cloud-based ERP adoption fastest in companies with fewer than 200 users overall.
  • Cloud-based ERP systems most often considered in industries that have high variable costs, rapid transaction cycles and tend towards higher Return on Invested Capital (ROIC).  Based on the research SaaS and Cloud ERP Trends, Observations, and Performance 2011 the industries who are the most willing to consider Cloud-based ERP versus on-premise are Financial Services (22% SaaS versus 44% on-premise); Healthcare (42% SaaS versus 58% on-premise); and Professional Services (56% SaaS versus 58% on-premise).
  • Large companies (over $500M in annual revenue) using Cloud-based ERP systems are opting for hosted deployments managed by their ERP vendor (10%) or an independent 3rd party (11%), with just 2% relying on a SaaS platform. Aberdeen defined small organizations as those with annual sales under $50M, midsize organizations having annual sales of $50M – $500M. The following is from SaaS and Cloud ERP Trends, Observations, and Performance 2011:
  • ERP mobility will be a dominant force from the shop floor to each sales call where quotes, orders and contracts deliver real-time order and pricing updates.  How a given manufacturer chooses to sell is even more important than what they sell in many industries. Equipping manufacturing, quality assurance, production scheduling, procurement and sales to have immediate data on what’s going on with orders, customers and suppliers is critical.  For the sales and service teams, real-time data is the fuel they run on.  There’s a chronic time shortage in many, many companies right now, and bringing greater ERP mobility from the shop floor to the sales call will increasingly be seen as a means to lessen the time crunch.  2012 is the year where mobility gets real across the enterprise with solid performance numbers being generated as a result.  For companies with large sales forces and service organizations, integrating to key ERP systems to gain real-time data will quickly lead to increased sales and higher gross margins on service and warranty repairs.
  • Gartner predicts that by 2015 enterprises who are successfully using extreme information management strategies (Big Data) will outperform competitors in their industry sectors by 20% in every available financial metric.  The following is the Priority Matrix for ERP, 2011 showing what Gartner believes to be transformational technologies and strategies in ERP.

Dec 26

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Analytics, Cloud Computing Challenge Flat Growth in Forrester’s Tech Market Outlook for 2012

It’s time to strip away the hype surrounding analytics, big data and cloud computing by asking how these technologies contribute  to excellent customer experiences and greater customer engagement.  Those are the real catalysts of market growth and the greatest disruptive forces at work in enterprise software today.

Filtering forecasts of future technology adoption with a customer experience and engagement mindset is essential for separating hype from reality.  Two excellent blog posts were published today that provide useful insights for doing this.  Ray Wang’s Monday’s Musings: 10 Mega Business Trends To Watch For In 2012 provides pragmatic, insightful analysis of the progression going on from transactional to personal fulfillment systems.  Many of the CIOs I’ve met with in the last two months are saying exactly what Ray has written regarding this transition.   Paul Greenberg’s CRM 2012 Forecast – The Era of Customer Engagement – Part I delivers more insight than any of the financial or industry analyst reports I’ve read in the last twelve months on CRM and its intersection to social networks.  He has defined customer engagement so thoroughly I am sure this post will be a classic, referenced for years to come.  Both posts provide an excellent framework to evaluate the upcoming wave of new forecasts due out from research firms at the start of 2012.

Having recently read Forrester’s US Tech Market Outlook For 2012 and applying the concepts Ray Wang and Paul Greenberg discuss, here are several take-aways from that report:

  • Total U.S. ICT market in 2011 was $962B with the majority being generated from software sales ($208B) followed by Telecom Services ($199B) and IT Consulting and Systems Integration Services ($188B).  The following graphic illustrates the purchase of ICT product and services in the U.S. during 2011.  As enterprise software companies are striving to deliver what Ray Wang is calling Experiential Systems, the majority of their core Intellectual Property (IP) was obtained from building Transactional Systems.  Despite this conflict, software development methodologies including Agile give the industry a fighting chance at growth in 2012.
  • Software continues to dominate both in total revenue ($208B) and growth rate, with 8.2% growth projected for 2012.  In addition to analytics and Business Intelligence (BI), Forrester is predicting an increase in ERP, Middleware and SaaS-based application growth.
  • Forrester is most optimistic in their forecasts for analytics, BI, Cloud Computing and Smart Computing.  Cloud Computing forecasts at Forrester are indexed to sales levels of NetSuite, RightNow Technologies (Oracle), Salesforce.com, and Ultimate Software.  Forrester is claiming these four vendors will generate a 23% increase in revenues in calendar Q1, 2012 over Q1, 2011, increasing and staying constant at 24% year-over-year growth from Q2 to Q4, 2012 relative to Q2 to Q4,  2011. Salesforce.com could accomplish this level of growth through acquisitions alone. They’re showing they can integrate newly acquired companies faster than Oracle, who they are challenging for global CRM market leadership in the 2012 – 2013 timeframe.  When customer experience and engagement is taken into account, the forecast seems high.  Salesforce knows how to translate trial users into customers.  The question is can they do this fast enough in 2012 throughout the enterprise and mid-tier accounts to keep up their sales growth on track while reducing churn and increasing profitability.
  • Smart Computing is defined by Forrester as platform technologies including specialized analytics, BI, service-oriented architecture (SOA) infrastructure, virtualization software, rules engines, and awareness-based technologies.  Forrester is very optimistic about this area with a growth rate second only to cloud computing. Its index of the market is based on Informatica, Pegasystems, and Tibco Software.  Forrester is predicting in calendar Q1, 2012 there will be 16% growth over Q1, 2011, followed by consistent 13% growth year-over-year for Q2 to Q4, 2012 relative to 2011.  The following graphic compares growth of both Cloud Computing and Smart Computing.

  • The inflexion point of Smart Computing will happen when analytics, BI and awareness-based technologies including RFID can be used to make customer experiences consistently positive and drive cultural change throughout a business to center on customers’ expectations.  Paul Greenberg refers to this area of customer engagement in his blog post.  I agree with him and see the real value of analytics not for reporting, but for being a barometer of just how customer-centric and focused on delivering exceptional customer experiences a company is becoming.
  • In 2012, financial services, professional services, and manufacturing will be the three industries that dominate software purchases.  Financial services (19%), professional services (15%) and manufacturing (14%) will be the largest buyers of enterprise software.  Forrester believes that ERP replacements, supply chain management (SCM) and product lifecycle management (PLM) will all be proprieties in the coming twelve months.

Bottom line: Critiquing high growth technologies based on their contribution to customer experience, engagement and the creation of Customer Lifetime Value (CLV) is what matter most. Hopefully the new wave of forecasts for 2012 and beyond will take the customer – not just technology and statistical extrapolations – into account.

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