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Posts from the ‘Analytics’ Category

SaaS Adoption Accelerates, Goes Global in the Enterprise

In working with manufacturers and financial services firms over the last year, one point is becoming very clear: SaaS is gaining trust as a solid alternative for global deployments across the enterprise.  And this trend has been accelerating in the last six months.  One case in point is a 4,000 seat SaaS CRM deployment going live in Australia, Europe, and the U.S. by December of this year.

What’s noteworthy about this shift is that just eighteen months ago an Australian-based manufacturer was only considering SaaS for on-premises enhancement of their CRM system.  What changed?  The European and U.S. distribution and sales offices were on nearly 40 different CRM, quoting, proposal and pricing systems.  It was nearly impossible to track global opportunities.

Meanwhile business was booming in Australia and there were up-sell and cross-sell opportunities being missed in the U.S. and European-based headquarters of their prospects. The manufacturer  chose to move to a global SaaS CRM solution quickly.  Uniting all three divisions with a global sales strategy forced the consolidation of 40 different quoting, pricing and CRM systems in the U.S. alone.  What they lost in complexity they are looking to pick up in global customer sales.

Measuring Where SaaS Is Cannibalizing On-Premise Enterprise Applications

Gartner’s Market Trends: SaaS’s Varied Levels of Cannibalization to On-Premises Applications published: 29 October 2012 breaks out the percent of SaaS revenue for ten different enterprise application categories.  The greener the color the greater the adoption.  As was seen with the Australian manufacturer, CRM continues dominate this trend of SaaS cannibalizing on-premise enterprise applications.

Additional take-aways from this report include the following:

  • Perceived lower Total Cost of Ownership (TCO) continues to be the dominant reason enterprises are considering SaaS adoption, with 50% of respondents in 2012 mentioning this as the primary factor in their decision.
  • CRM is leading all other enterprise application areas in net new deployments according to the Gartner study, with the majority of on-premise replacements being in North America and Europe.
  • Gartner projects that by 2016 more than 50% of CRM software revenue will be delivered by SaaS.  As of 2011, 35% of CRM software was delivered on the SaaS platform.  Gartner expects to see SaaS-based CRM grow at three time the rate of on-premise applications.
  • 95% of Web analytics functions are delivered via the SaaS model  whereas only 40% of sales use cloud today according to the findings of this study.
  • The highest adoption rates of SaaS-based applications include sales, customer service, social CRM and marketing automation.
  • SaaS-based ERP will continued to be a small percentage of the total market, attaining 10% cannibalization by 2012.  Forrester has consistently said this is 13%, growing to 16% by 2015.
  • Office suites and digital content creation (DCC) will attain compound annual growth rates (CAGR) of 40.7% and a 32.2% respectively from 2011 through 2016. Gartner is making the assumption consumers and small businesses will continue be the major forces for Web-based office suites through 2013.
  • The four reasons why companies don’t choose SaaS include uncertainty if it is the right deployment option (36%), satisfaction with existing on-premise applications (30%), no further requirements (33%) and locked into their current solution with expensive contractual requirements (14%).

Bottom Line: Enterprises and their need to compete with greater accuracy and speed are driving the cannibalization of on-premise applications faster than many anticipated; enterprise software vendors need to step up and get in front of this if they are going to retain their greatest sources of revenue.

Source:  Market Trends: SaaS’s Varied Levels of Cannibalization to On-Premises Applications Published: 29 October 2012 written by Chad Eschinger, Joanne M. Correia, Yanna Dharmasthira, Tom Eid, Chris Pang, Dan Sommer, Hai Hong Swinehart and Laurie F. Wurster

Using Search Analytics To See Into Gartner’s $232B Big Data Forecast

By combining search analytics and the latest Gartner forecast on big data published last week, it’s possible to get a glimpse into this areas’ highest growth industry sectors.  Big data is consistently a leading search term on Gartner.com, which is the basis of the twelve months of data used for the analysis.

In addition, data from Gartner’s latest report, Big Data Drives Rapid Changes in Infrastructure and $232 Billion in IT Spending Through 2016 by Mark A. Beyer, John-David Lovelock, Dan Sommer, and Merv Adrian is also used.  These authors have done a great job of explaining how big data is rapidly emerging as a market force, not just a single market unto itself.  This distinction pervades their analysis and the following table showing Total IT Spending Driven by Big Data reflects the composite market approach.  Use cases from enterprise software spending, storage management, IT services, social media and search forecasts are the basis of the Enterprise Software Spending for Specified Sub-Markets Forecast.  Social Media Analytics are the basis of the Social Media Revenue Worldwide forecast.

Additional Take-Aways

  • Enterprise software spending for specified sub-markets will attain a 16.65% compound annual growth rate (CAGR) in revenue from 2011 to 2016.
  • Attaining a 96.77% CAGR from 2011 through 2016, Social Media Revenue Is one of the primary use case catalysts of this latest forecast.
  • Big Data IT Services Spending will attain a 10.20% CAGR from 2011 to 2016.
  • $29B will be spent on big data throughout 2012 by IT departments.  Of this figure, $5.5B will be for software sales and the balance for IT services.
  • Gartner is projecting a 45% per year average growth rate for social media, social network analysis and content analysis from 2011 to 2016.
  • Gartner projects a 20 times ratio of IT Services to Software in the short term, dropping as this market matures and more expertise is available.
  • By 2020, big data functionality will be part of the baseline of enterprise software, with enterprise vendors enhancing the value of their applications with it.
  • Organizations are already replacing early implementations of big data solutions – and Gartner is projecting this will continue through 2020.
  • By 2016 spending on Application Infrastructure and Middleware becomes one of the most dominant for big data in Enterprise Software-Specified Sub Markets.

  • $232B is projected to be sold in total across all categories in the forecast from 2011 to 2016. From $24.4B in 2011 to $43.7B in 2016, this presents a 12.42% CAGR in total market growth.

Search Analytics and Big Data

Big data is continually one of the top terms search on Gartner.com, and over the last twelve months, this trend has accelerated.  The following time series graph shows the weekly number of inquiries Gartner clients have made, with the red line being the logarithmic trend.

Banking (25%), Services (15%) and Manufacturing (15%) are the three most active industries in making inquiries about big data to Gartner over the last twelve months.  The majority of these are large organizations (63%) located in North America (59%) and Europe (19%).

What unifies all of these industries from a big data standpoint is how critical the stability of their customer relationships are to their business models.  Banks have become famous for bad service and according to the American Customer Satisfaction Index (ACSI) have shown anemic growth in customer satisfaction in the latest period measured, 2010 to 2011.  The potential for using big data to becoming more attuned to customer expectations and deliver more effective customer experiences in this and all services industries shows great upside.

Bottom line: Companies struggling with flat or dropping rankings on the ACSI need to consider big data strategies based on structured and unstructured customer data.  In adopting this strategy the potential exists to drastically improve customer satisfaction, loyalty, and ultimately profits.

Why CIOs Are Quickly Prioritizing Analytics, Cloud and Mobile

Customers are quickly reinventing how they choose to learn about new products, keep current on existing ones, and stay loyal to those brands they most value.  The best-run companies are all over this, orchestrating their IT strategies to be as responsive as possible.

The luxury of long technology evaluation cycles, introspective analysis of systems, and long deployment timeframes are giving way to rapid deployments and systems designed for accuracy and speed.

CIOs need to be just as strong at strategic planning and execution as they are at technology.  Many are quickly prioritizing analytics, cloud and mobile strategies to stay in step with their rapidly changing customer bases.  This is especially true for those companies with less than $1B in sales, as analytics, cloud computing and mobility can be combined to compete very effectively against their much bigger rivals.

What’s Driving CIOs – A Look At Technology Priorities

Gartner’s annual survey of CIOs includes 2,300 respondents located in 44 countries, competing in all major industries.  As of the last annual survey, the three-highest rated priorities for investment from 2012 to 2015 included Analytics and Business Intelligence (BI), Mobile Technologies and Cloud Computing.

Source: From the Gartner Report Market Insight: Technology Opens Up Opportunities in SMB Vertical Markets September 6, 2012 by Christine Arcaris, Jeffrey Roster

 

How Industries Prioritize Analytics, Cloud and Mobile  

When  these priorities are analyzed across eight key industries, patterns emerge showing how the  communications, media and services (CMS) and manufacturing industries have the highest immediate growth potential for mobility (Next 2 years).  In Big Data/BI, Financial Services is projected to be the fastest-developing industry and in Cloud computing, CMS and Government.

In analyzing this and related data, a profile of early adopter enterprises emerges.  These are companies who are based on knowledge-intensive business models, have created and excel at running virtual organization structures, rely on mobility to connect with and build relationships with customers, and have deep analytics expertise.  In short, their business models take the best of what mobility, Big Data/BI and cloud computing have to offer and align it to their strategic plans and programs.  The following figure, Vertical Industry Growth by Technology Over the Next Five Years, shows the prioritization and relative growth by industry.

Source: From the Gartner Report Market Insight: Technology Opens Up Opportunities in SMB Vertical Markets September 6, 2012 by Christine Arcaris, Jeffrey Roster

How Mobility Could Emerge As the Trojan Horse of Enterprise Software

Bring Your Own Device (BYOD), the rapid ascent of enterprise application stores, and the high expectations customers have of continual mobile app usability and performance improvements are just three of many factors driving mobility growth.

Just as significant is the success many mid-tier companies are having in competing with their larger, more globally known rivals using mobile-based Customer Relationship Management (CRM), warranty management, service and spare parts procurement strategies.  What smaller competitors lack in breadth they are more than making up for in speed and responsiveness.   Gartner’s IT Market Clock for Enterprise Mobility, 2012 captures how mobility is changing the nature of competition.

Source: IT Market Clock for Enterprise Mobility, 2012 Published: 10 September 2012 Analyst(s): Monica Basso

 

Bottom Line – By excelling at the orchestration of analytics, cloud and mobile, enterprises can differentiate where it matters most – by delivering an excellent customer experience.  Mobility can emerge as an enterprise Trojan Horse because it unleashes accuracy, precision and speed into customer-facing processes that larger, complacent competitors may have overlooked.

Roundup of Big Data Forecasts and Market Estimates, 2012

From the best-known companies in enterprise software to start-ups, everyone is jumping on the big data bandwagon.

The potential of big data to bring insights and intelligence into enterprises is a strong motivator, where managers are constantly looking for the competitive edge to win in their chosen  markets.  With so much potential to provide enterprises with enhanced analytics, insights and intelligence, it is understandable why this area has such high expectations – and hype – associated with it.

Given the potential big data has to reorder an enterprise and make it more competitive and profitable, it’s understandable why there are so many forecasts and market analyses being done today.  The following is a roundup of the latest big data forecasts and market estimates recently published:

  • As of last month, Gartner had received 12,000 searches over the last twelve months for the term “big data” with the pace increasing.
  • In Hype Cycle for Big Data, 2012, Gartner states that Column-Store DBMS, Cloud Computing, In-Memory Database Management Systems will be the three most transformational technologies in the next five years.  Gartner goes on to predict that Complex Event Processing, Content Analytics, Context-Enriched Services, Hybrid Cloud Computing, Information Capabilities Framework and Telematics round out the technologies the research firm considers transformational.  The Hype Cycle for Big Data is shown below:

  • Predictive modeling is gaining momentum with property and casualty (P&C) companies who are using them to support claims analysis, CRM, risk management, pricing and actuarial workflows, quoting, and underwriting. Web-based quoting systems and pricing optimization strategies are benefiting from investments in predictive modeling as well.   The Priority Matrix for Big Data, 2012 is shown below:

  • Social content is the fastest growing category of new content in the enterprise and will eventually attain 20% market penetration.   Gartner defines social content as unstructured data created, edited and published on corporate blogs, communication and collaboration platforms, in addition to external platforms including Facebook, LinkedIn, Twitter, YouTube and a myriad of others.
  • Gartner reports that 45% as sales management teams identify sales analytics as a priority to help them understand sales performance, market conditions and opportunities.
  • Over 80% of Web Analytics solutions are delivered via Software-as-a-Service (SaaS).  Gartner goes on to estimate that over 90% of the total available market for Web Analytics are already using some form of tools and that Google reported 10 million registrations for Google Analytics alone.  Google also reports 200,000 active users of their free Analytics application.  Gartner also states that the majority of the customers for these systems use two or more Web analytics applications, and less than 50% use the advanced functions including data warehousing, advanced reporting and higher-end customer segmentation features.
  • In the report Market Trends: Big Data Opportunities in Vertical Industries, the following heat map by industry shows that from a volume of data perspective, Banking and Securities, Communications, Media and Services, Government, and Manufacturing and Natural Resources have the greatest potential opportunity for Big Data.

  • Big data: The next frontier for innovation, competition, and productivity is available for download from the McKinsey Global Institute for free.  This is 156 page document authored by McKinsey researchers is excellent.  While it was published last year (June, 2011), if you’re following big data, download a copy as much of the research is still relevant.  McKinsey includes extensive analysis of how big data can deliver value in a manufacturing value chains for example, which is shown below:

Gartner Hype Cycle for CRM Sales, 2012: Sales Turns to the Cloud for Quick Relief

Sales VPs for years have been test-driving SaaS-based CRM systems, piloting them with sales teams to see if using them leads to higher sales and greater customer retention.  Marketing VPs and Chief Marketing Officers (CMOs) also continue to pilot SaaS-based web analytics and marketing automation applications.

What’s been missing from these pilots is the ability to bring CRM, marketing automation, sales management and web analytics systems into existing enterprise IT architectures just as fast.  This is changing quickly.  CRM vendors have been quick to respond to the challenge, offering Application Programmer Interfaces (APIs), integration adapters, connectors and from larger vendors, integrated bus architectures.

What the Hype Cycle for CRM Sales, 2012 Means

CRM’s real value is in unifying an entire enterprise based on its ability to sell, serve and retain customers better than before. Gartner shows this is a high priority for its CRM clients by underscoring which technology and application areas of the hype cycle are responding to his market dynamic, and which aren’t.

This Hype Cycle also reflects the urgency I hear from Sales VPs who want to get in control of the complex compensation, quota, territory management, job appraisal and sales coaching responsibilities they have.  While each of these areas is essential, many companies, even those in enterprise software, have ignored these areas, allowing them to stay manually based. Gartner calls this area Sales Performance Management (SPM) and shows it has the highest benefit of all SaaS-based sales management applications in the next two years. Gartner’s analysis captures the time shortage that Sales VPs I know are facing; they have to get to high quota levels while also managing a diverse set of leadership responsibilities as well. The Hype Cycle for CRM Sales, 2012 (G00234919) is shown below:

 

  • Gartner estimates 35% of all CRM implementations today use SaaS, growing to over 50% by 2020 according to their projections. In 2011, more than $5 billion was invested in sales applications.
  • Cloud adoption varies significantly across CRM software categories with Web analytics achieving 95% adoption, Sales Force Automation achieving just over 50%, and Configure Price Quote (CPQ) achieving 40%.  Cloud-based Sales Performance Management has the highest compound annual growth rate (CAGR) of any CRM category according to inquiry and client calls.
  • Sales, Customer Service, Social CRM and Marketing are the four fastest-growing areas of enterprise Sales applications on SaaS.  Campaign Management is increasingly quickly, up from 19% using SaaS in 2010 to 29% in 2011.
  • Gartner sees significant growth in Configure Price Quote (CPQ), projecting a market of $300M in 2012, up from $240M in 2011.  Gartner is due out with a MarketScope on CPQ shortly, where the 15 major vendors it tracks in this area will be ranked.  40% of existing implementations are on SaaS, and that proportion is increasing relative to licensed versions.  Of the 15 vendors in this market, 12 have announced SaaS-based versions of their applications.
  • There are 3.8M Sales Force Automation SaaS users globally today.
  • By 2017, 25% of companies adopting CRM will have extended their customer service contact centers to include social media including Facebook, Twitter and other emerging online communities.  As of 2012, Gartner is seeing only 1% of companies integrate social media into their companies’ departments and workflows to ensure a consistent customer experience.
  • Price Optimization will experience transformational growth in two to five years. Gartner sees this area as one of the most promising across all CRM Sales as can be seen in the Priority Matrix for CRM Sales 2012 below from the Hype Cycle for CRM Sales, 2012.  The research firm has defined this market as including price analysis, price optimization and price execution.  Gartner estimates this market was $180M to $190M in 2010.  Vendor competing in this market include Accenture, Deloitte, Pros, Vendavo, Vistaar Technologies and Zilliant.

  • Social CRM (SCRM) for Sales is at the Peak of Inflated Expectations, with 90% of spending for these applications being generated from B2C companies.  Gartner expects B2B companies to lead the growth of these applications through 2015, increasing spending from 5% of total SCRM sales in 2011 to 30% by 2015.
  • SaaS-based CRM sales within enterprises are expected to reach $4.48B in 2012, growing to $6.3B in 2015.  The following table from the report Forecast: Software as a Service, Worldwide 2010-2015, 2H11 Update provides a frame of reference for SaaS-based CRM growth overall.

  • Salesforce leads all CRM vendors in market share growth, advancing 2.8% from 2010 to 2011 according to Gartner’s’ global market share analysis shown below. Salesforce attained 26.9% revenue growth from 2010 to 2011 ($1.3B to $1.6B) and 36.7% growth from 2011 to 2012 ($1.6B to $2.27B).  The future momentum of Salesforce is in unifying the enterprise, redefining corporate IT in the context of the customer. Their recent acquisitions show analytics, marketing automation and development platforms are key priorities.  The following table is from the report Market Share Snapshot: CRM Software, 2011 (G00233998).

Bottom line:  Making CRM strategies successful has to start with a common vision and urgency for results.  Both are happening quicker in CRM than ever before, driven by a much clearer understanding of what enterprises need and an impatience for results.

What’s Hot in CRM Applications, 2012

Serving the sales force is a mantra and mindset that resonates through the best companies I’ve ever worked with and for.

That priority alone can help galvanize companies who are adrift in multiple, conflicting agendas, strategies and projects.  Uniting around that goal – serving sales and getting them what they need to excel – can turn around even the most downtrodden companies.  And size doesn’t matter, the intensity of focus and commitment to excel  do.

That’s why the latest report from Gartner’s Ed Thompson, What’s “Hot” in CRM Application 2012, published last Thursday resonates with me.  He’s talking about how sales strategies need to be propelled by rapid advances in mobile technology, social CRM, sales content and collaboration, and clienteling to serve the sales force more thoroughly than ever before.  His assessment of what’s hot in CRM is a great foundation for getting behind the mantra of serving the sales force and engraining it into a corporate culture while getting full value from the latest technologies.

Here are the key take-aways from the report:

  • Software-as-a-Service (SaaS) delivery of CRM applications represented 34% of worldwide CRM application spending in 2011.  More than 50% of all Sales Force Automation (SFA) spending is on the SaaS platform.  Gartner clients who are successfully running SaaS are now looking at how to get value from Platform-as-a-Service (PaaS) in the context of selling strategies.
  • CRM spending grew 13% in 2011, fueled analytical, operational and social CRM growth.  Operational CRM represents 80% of all CRM spending and grew 10% in 2011.
  • Analytical CRM, in which Gartner includes predictive analytics and market segmentation analysis, grew a solid 10% in 2011 and is having a very strong year with inquiry traffic.
  • Social CRM grew 30% in 2011 in revenue terms and is 7% of total CRM spending globally as of 2011.   90% of Social CRM spending is originating in Business-to-Consumer (B2C) organizations with the remaining occurring in B2B.
  • Gartner is projecting that CRM will be one of the top three search terms on Gartner.com throughout calendar 2012 based on the trends and volume of calls they are seeing today.
  • CEOs see CRM as their #1 technology-enabled investment in 2012 according the query calls through April, 2012.
  • CRM is ascending rapidly in the priorities of CIOs in 2012, moving from 18th place to eight place  in the latest Gartner analysis.
  • The following table of Highest CRM Application Priorities, 2012 show what’s trending within Sales, Customer Service, E-Commerce and Marketing inquiries Gartner is receiving from its clients.  Consider these as leading indicators of interest.  Over time these areas will need to solidify for forecasts to be completed.
  • Apple iPads are the great maverick buy of 2012 with thousands being purchased by Sales and Marketing management with the immediate requirement of IT integration to these devices.   IT departments are scrambling on the security issues and lack of polices on BYOD.  In enterprise software, iPads are proving to be highly effective as demo platforms for new SaaS-based applications.  They have become the new sales bag of the 21rst century.
  •  High Tech, Life Sciences and Insurance are the three industries with the greatest levels of iPad adoption as of April 2012.  Gartner is predicting that by the end of 2012, 80% of all sales representatives in the pharmaceutical industry will be using iPads for their daily sales tasks.
  • Social or community customer service is the hottest area of growth for post-sales service with high-tech, media, travel, telecommunications, retail and education-based clients dominating client inquiries.

Gartner Search Analytics Shows Spike in Hadoop Inquiries in 2012 – Good News For CRM

Hadoop was one of the most-searched terms on Gartner’s website in 2011 through 2012, spiking to 601.8% over the last twelve months alone.  Additional insights from the Search Analytics on Hadoop include the following:

  • 27% of all inquiries are from banking, finance and insurance industries, followed by manufacturing (14%), government (13%), services (10%) and healthcare (8%).
  • North America (75.9%) and EMEA (13.5%) are the two most dominant geographies in terms of query volume.
  • Here is the trend line from Gartner Search Analytics:

What’s driving Hadoop’s meteoric rise in searches is a combination of industry hype about big data, CIOs getting serious about using Hadoop distributions that minimize time and risk yet deliver value, and the dominant role Amazon is playing in bringing Hadoop into the cloud.  Today Amazon offers Elastic MapReduce as a Web Service that relies on a hosted Hadoop framework running the Elastic Compute Cloud (EC2) in conjunction with Amazon Simple Storage Service (S2).

Microsoft also scored a major hiring win this week announcing that Raghu Ramakrishnan, former chief scientist for three divisions of Yahoo is now with Microsoft. Raghu is now a technical fellow working in the Server and Tools Business (STB).  He’ll focus on big data and integration to STB platforms.  Big Data on Azure will accelerate now with him on-board.

Hadoop’s Potentially Galvanizing Effect on CRM and Social CRM Analytics

The quickening pace of Hadoop adoption in the enterprise is good news for CRM and especially social CRM. Analytics and Business Intelligence (BI) are the “glue” that unify CRM and keep it in context. One of Hadoop’s greatest potential contributions is the analysis, categorization and use of unstructured content.  Marketing and sales won’t have to run three or four systems to gain insights into customer data, they can run a single analytics platform that fuels the entire selling cycle and lifetime customer value chain of their businesses.  Hadoop has the potential to make unstructured content more meaningful while also reporting the impact of customer insights on financial performance, profitability and lifetime customer value.

Translating terabytes of customer, sales, services and partner data into meaningful analytics and business intelligence (BI) is emerging as a priority for CIOs, who are sharing responsibility for driving top-line revenue growth.   Hadoop shows potential to be the “glue” or galvanizing technology base that unifies all CRM and Social CRM strategies.

To get a perspective on how fast Hadoop is being evaluated and adopted it’s useful to look at the Hype Cycle for Data Management, the latest edition published July, 2011.   This is another indicator of how quickly Hadoop and big data are gaining in terms of CIO mindshare.  Big Data and extreme information management are on the technology Trigger area of the hype cycle.  The Hype Cycle for Data Management is shown below:

Bottom line:  CRM and Social CRM will benefit more than any other area of an enterprise as Hadoop’s adoption continues to accelerate.  CIOs are increasingly called upon to be strategists, and with the ability to translate terabytes of data into strategies that deliver dollars, look for Hadoop’s contributions to drive top-line revenue growth.

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)

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.

Transactions and Complex Selling: Strong Catalysts of Cloud Computing Growth

Enterprise software vendors need to challenge themselves to deliver significantly more value if the potential for cloud computing is going to be achieved .

Instead of just going for the low-end, easily customized processes within analytics, CRM, supply chain management, ERP, pricing or service, vendors need to take on the more challenging, complex hard-to-solve problems enterprises have.

As I am completing more research on personas, I’m finding what CIOs really look for in SaaS apps.  Flexibility and ease of workflow support, intuitive user interface design without sacrificing functionality, and support for analytics, business intelligence and knowledge management systems integration are all mentioned often.

Nearly all of them also mention that the existing generation SaaS applications on the sell-side, from CRM to order capture and order management aren’t taking on the more challenging areas of their strategies.  The result is the CIOs are still relying on legacy, on-premise apps in areas of their companies that are ready for change to SaaS-based applications.  Cloud platforms are taking on these more complex, challenging problem areas, yet innovation still lags the needs in the market.

Transactions Are The Fuel of Cloud Infrastructure Growth  

CIOs are focusing on how to exceed the expectations of their internal customers at the workflow and interface level while infusing SaaS apps with analytics, business intelligence and knowledge management support.  What’s missing is the killer transaction platform layer and transaction-based applications.  Gartner’s report, A Workforce Without Humans: Three Ways Technology Will Eliminate Skilled Jobs in the U.S. Through 2020 by Kenneth F. Brant by Johan Jacobs has the following graphic which shows CIO’s estimates of migration to cloud-based IT infrastructure and applications which supports this point.

Source: Maverick Research: A Workforce Without Humans: Three Ways Technology Will Eliminate Skilled Jobs in the U.S. Through 2020 by Kenneth F. Brant by Johan Jacobs

Much of the report is based on the results of Gartner’s 2011 survey of U.S. CIOs. Additional insights from the survey include the following:

  • Virtualization and cloud computing are the two top-ranked U.S. CIO technology priorities for 2011.
  • 83% of U.S. CIOs estimated that more than half of their transactions would be conducted on a cloud infrastructure by 2020.
  • 79% of the respondents predicted that more than half of their transactions would be completed on applications leased using the SaaS platform by 2020.

For cloud infrastructure platforms and SaaS applications to deliver that level of transaction volume and support, there needs to be a major shift in how enterprise vendors develop software. Making better use of analytics, business intelligence and knowledge in the enterprise is key. Designing applications that make information and knowledge sharing intuitive is critical.

The following figure from the same report cited earlier shows the relationship of technologies to potential business value.  Many CRM and sell-side vendors tend to focus on being a substitute or just barely delivering increases in human productivity.

Going after the hard work of optimizing pricing strategies, call centers, making multichannel selling strategies profitable and getting the most out of social networks to make the customer experience exceptional will deliver major gains in productivity.  It’s been my experience during the persona interviews that for any SaaS vendor to really excel here they need to get beyond human productivity and make it possible for enterprises to deliver exceptional customer experiences daily.

Creating SaaS applications that take on real complexity earns trust too, which no amount of pure efficiency can compete with.

Source: Maverick Research: A Workforce Without Humans: Three Ways Technology Will Eliminate Skilled Jobs in the U.S. Through 2020 by Kenneth F. Brant by Johan Jacobs

An Example: SaaS in Manufacturing

The following table compares the strategies and systems used in a typical manufacturing company.  Enterprise apps vendors for the most part are focused on make-to-stock and assemble-to-order automation and efficiency (SAP ByDesign for example).

As the continuums move from left to right, the process, systems and strategy challenges exponentially increase.  As a result there are only a few vendors who can manage the more complex engineer-to-order requirements in manufacturing for example. Transactions there are very small in number, yet orders of magnitude more profitable.  This is just an example of many areas in enterprises that need major improvement.

Instead of just focusing on the easy processes and strategies on the left, vendors need to go after the more difficult, complex selling and transaction challenges on the right.  This is why CIOs want SaaS applications that are easy to customize from a user interface and workflow standpoint, while at the same time supporting analytics, BI and knowledge management.  The goal is to slot them into these more challenging areas of their business and transform their company’s intelligence and expertise into profitable growth.

Bottom line: The true catalyst of cloud computing growth isn’t just SaaS economics; it’s how effectively enterprise software vendors address the very difficult transaction, order management and selling challenges their potential customers face all the time. When that happens, the many optimistic forecasts of cloud adoption in the enterprise will take a step closer to being fulfilled.

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