according to MoneyTree Report, a collaborative research initiative between PricewaterhouseCoopers and the National Venture Capital Association. A graphic from the latest available data shows how software investments were 39% of all investments in Q4, 2014.
To determine which enterprise software startups have gained the greatest amount of funding since they were founded, Mattermark was used to rank order all enterprise start-ups. Mattermark uses a combination of artificial intelligence and data quality analysis to provide insights into over 1M companies, over 470K with employee data, and over 100,000 funding events.
Mattermark uses their Growth Score is the default ranking for all companies tracked in their service. This score is not meant to provide guidance on which startup to invest in. Rather it’s a measure of momentum across the metrics and KPIs that Mattermark measures.
Using their free trial, I completed the following analysis of cloud-based enterprise software startups. I’m not a consultant to Mattermark and never have been. As many Forbes readers find software investment data fascinating, I contacted Mattermark and asked for a free trial, which they graciously provided. You can download the list in Microsoft Excel format here.
A recent study completed by Gartner titled Survey Analysis: Adoption of Cloud ERP, 2013 Through 2023 published on January 24, 2014, written by Nigel Rayner advises CIOs and application leaders of financial services institutions to “consider cloud ERP as a potential replacement for aging core ERP systems that are out of support or running on an old technology platforms (such as mainframes).“
The methodology is based on a survey of Gartner Research Circle members from North America, EMEA, APAC and Latin America from companies that range in size from $10M to $10B.
Key take-aways of the study including the following:
- Including the 2% that already have core ERP in the cloud, a total of 47% of organizations surveyed plan to move their core ERP systems to the cloud within five years. This is because their ERP requirements tend to be focused around administrative ERP (financials, human capital management and procure-to-pay) where there is a wider range of cloud options (compared with manufacturing).
- In aggregate, 30% of respondents say that the majority of their ERP systems will be on-premises for the foreseeable future as can be seen from the following graphic.
- 30% of organizations surveyed said they planned to keep the majority of their ERP systems on-premise for the foreseeable future. Manufacturing organizations dominated this survey segment.
Why Cloud ERP Is Accelerating Faster Than Gartner Predicts
Two-tier ERP is the Trojan Horse of cloud ERP. If Gartner had asked their respondents about if and how cloud-based ERP systems are being considered and used in two-tier ERP strategies globally, their survey and previous forecasts would have been significantly different.
From researching and working with manufacturers where two-tier ERP strategies make perfect sense for extending their legacy ERP systems to move into new markets, the following key take-aways emerge:
- Achieving faster time-to-market while reducing cost of quality. This is quickly turning into a year of transition for many supply chains, with the shift most noticeable in aerospace and defense. Tighter project schedules driven by reduced budgets, coupled with more aggressive launch schedules is making this the year of the agile supplier. Cloud-based ERP systems are essential to suppliers in this industry especially.
- Legacy ERP systems lack scalability to support 21rst century compliance. One CIO who is a good friend jokingly refers to the legacy ERP systems populating each division of the manufacturing company he works for as fuel for his silos of excellence. His point is that legacy ERP systems don’t have the data models to support the current quality management and compliance requirements corporate-wide and are relegated to siloed roles in his organization. Cloud-based applications, specifically designed for ISO 9100, AS9100 Rev. C can do what legacy systems can’t, which is span across the aerospace manufacturer’s entire operations.
- SaaS-based manufacturing and distribution software will increase from 22% in 2013 to 45% by 2023. According to MintJutras, a leading research and advisory firm tracking ERP trends, a survey completed in 2013 shows SaaS-based applications will steadily grow from 22% of all manufacturing and distribution software installed to 45% within ten years. The catalyst for much fo this growth will be two-tier ERP system adoption.
- Microsoft’s New CEO knows the enterprise and cloud’s role in it. Satya Nadella has the daunting task of bringing innovation back into Microsoft. As Anshu Sharma writes in his blog post today Satya Nadella: Microsoft, Coffee and the Relevance Question provides an excellent analysis of the challenges and paradoxes faced by the new Microsoft CEO. It’s common knowledge in the Microsoft Partner community that the company runs one of the largest two-tier ERP system architectures in IT today, with an SAP R/3 instance in headquarters and Microsoft Dynamics AX running in each subsidiary.
- All cloud ERP providers including Microsoft intend to monetize two-tier as much as they possibly can, architecting their respective Cloud OS strategies and enterprise suites to capitalize on it. Microsoft released an overview of their Cloud OS strategies in the following presentation, which provides a thorough overview of their perspective of the hosting market and how it relates to their apps business. Also included is the following graphic, Cloud OS: Innovation at Scale. All of the factors taken together will drive up adoption of Microsoft Dynamics AX 2012 and streamline two-tier enterprise sales across all cloud ERP providers. Last year at Microsoft Worldwide Partner Conference the announcement was made that Microsoft Dynamics AX 2012 would be available on Windows Azure in July, 2014.
- Mobility is unifying the manufacturing shop floor to the top floor faster than anyone thinks. In traditional ERP systems mobile platforms are most often used for material handling, warehouse management, traceability, quality management, logistics and service tracking. From the discussions I’ve had with CIOs and a few CEOs of manufacturing companies, there’s a high level of interest in analytics, alerts and approvals on Android and Apple tablets. These apps and the speed of results they deliver are the new corporate bling. Intuitive, integrated and fast, these mobile apps make it possible for senior managers to check up on operations for wherever they are globally, in addition to approving contracts and being notified of events via alerts. For Gartner’s assessment of cloud ERP to have been complete in this survey, mobility also needed to be covered
Boston Consulting Group (BCG) recently released their fifth annual technology, media and telecommunications (TMT) value report. The 2013 TMT Value Creators Report: The Great Software Transformation, How to Win as Technology Changes the World (free, opt-in required, 41 pgs).
The five trends that serve as the foundation of this report include the increasing pervasiveness of software, affordable small devices, ubiquitous broadband connectivity, big-data analytics and cloud computing. BCG’s analysis illustrates how the majority of TMT companies that deliver the most value to shareholders are concentrating on the explosive growth of new markets, the rise of software-enabled digital metasystems, and for many, both.
The study is based on an analysis of 191 companies, 76 in the technology industry, 62 from media and 53 from telecom. To review the methodology of this study please see page 28 of the report.
Here are the key takeaways from this years’ BCG TMT Value Creators Report:
- BCG is predicting 1B smartphones will be sold in 2013, the first year their sales will have exceeded those of features phones. By 2018, there will be more than 5B “post-PC” products (tablets & smartphones) in circulation. There are nearly as many mobile connections in the world as people (6.8B) according to the United Nation’s International Telecommunication Union (ITU).
- 27 terabytes of data is generated every second through the creation of video, images social networks, transactional and enterprise-based systems and networks. 90% of the data that is stored today didn’t exist two years ago, and the annual data growth rate in future years is projected to be 40% to 60% over current levels according to BCG’s analysis.
- The ascent of communications speeds is surpassing Moore’s Law as a structural driver of growth. BCG completed the following analysis graphing the progression of microprocessor transition count (Moore’s Law) relative to Internet speed (bps) citing Butter’s Law of Photonics which states that the amount of data coming out of an optical fiber is doubling every nine months. BCG states that these dynamics are democratizing information technology and will lead to the cloud computing industry (software and services) reaching nearly $250B in 2017.
- BCG predicts that India will see a fivefold increase in digitally-influenced spending, ascending from $30B in 2012 to $150B in 2016, among the fastest of all nations globally according to their study. India will also see the value of online purchases increase from $8B in 2012 t5o $50B in 2016.
- 3D printing is forecast to become a $3.1B market by 2016, and will have an economic impact of $550B in 2025, fueling rapid price reductions in 3D printers through 2017. BCG sees 3D printing, connected travel, genomics and smart grid technologies are central to their digital metasystem. The following graphic illustrates the key trends in each of these areas along with research findings from BCG and other sources.
- Only 7% of customers are comfortable with their information being used outside of the purpose for which it was originally gathered.
- BCG reports that mobile infrastructure investments in Europe have fallen 67% from 2004 to 2014. Less than 1% of mobile connections in Europe were 4B as of the end of 2012, compared to 11% in the U.S. and 28% in South Korea. European operators have also been challenged to monetize mobile data as well, as the following figures illustrate.
- Big Data is attracting $19B in funding across five key areas according to BCG’s analysis. These include consumer data and marketing, enterprise data, analytical tools, vertical markets and data platforms. A graphical analysis of these investments is shown below.
Alan Kay’s saying that the best way to predict the future is to create it resonates through the best cloud computing and enterprise software predictions for 2014. Constraints that held start-ups back from delivering sophisticated new apps and services are disappearing fast. The dynamics of one of my favorite books, The Innovator’s Dilemma by Clayton Christensen, are in full force across the cloud and enterprise landscape.
There are many predictions being generated right now and instead of writing yet another set, I’m providing a listing of those that are the most interesting and thought-provoking. They are listed below:
- 10 Cloud Computing Predictions for 2014 – In-depth analysis of ten predictions including how more companies will realize they are really in the software business, private cloud computing having a moment of truth and continued adoption of cloud brokerages. This set of predictions is an interesting read and provides useful insight. I’d just add that as application developers go, so goes an industry, a point Bernard Golden refers to in this post.
- Analytics Eats the World in 2014 – George Mathew of Alteryx is one of the most driven people I’ve ever met about analytics programming and development. He’s very focused on breaking down constraints that hold analysts back from getting more value from their data. His predictions provide insight into how business analysts’ roles are changing based on rapid advances in analytics app development, model development and use.
- Changing Cloud Scapes in 2014 – Jeff Kaplan, Managing Director of THINKstrategies provides ten insightful predictions regarding the continued adoption of cloud computing platforms in the enterprise. His fourth prediction, “Although horizontal cloud solutions will continue to experience significant growth, vertical market solutions aimed at specific industries will grow even more rapidly” is starting to emerge today. The recent success of Veeva Systems supports his prediction and points to next year seeing more vertical market solutions being successfully launched.
- Cloud computing experts forecast the market climate in 2014 – Excellent summary of seven cloud computer experts’ predictions for 2014 including Mark Eisenberg, Roger Jennings, Paul Korzeniowski, David S. Linthicum, Tom Nolle, Dan Sullivan and Mark Szynaka. Highlights include IDC analysts predicting the “Over the 2013 to 2017 forecast period, public IT cloud services will have a compound annual growth rate [CAGR] of 23.5%, five times that of the IT industry as a whole,” and PaaS will lead IaaS and SaaS with a CAGR of 29.7%. What’s useful about these set of predictions is the breadth of expertise reflected in market statistics, market and technology projections and insights shared.
- My One Big Fat Cloud Computing Prediction for 2014 – I have been following the industry analysis, writing and research of Joe McKendrick for years based on the excellent insight he provides. Joe predicts that cloud computing is set to become mainstream computing, period. He cites Cisco’s research showing the majority of data center will be cloud-based and shares his perspective of the market. Joe has an innate sense of how enterprises adopt and use technology and this post reflects that expertise.
- SaaS predictions for 2014 – Chris Kanaracus is predicting that multitenancy will fade away as a major concern in SaaS, geographic depth of coverage will accelerate with cloud vendors announcing new data center openings around the world, and more vertical market adoption of SaaS. He also prefaces his predictions with the Gartner forecast for SaaS (software as a service) quoting their figures of the total market will toping $22 billion through 2015, up from more than $14 billion in 2012.
- Top Predictions about Software Companies in 2014 – In-depth analysis and predictions of which companies are going to be the most interesting to watch in 2014 and predictions regarding the enterprise software landscape. This post provides a great overview of how industry veterans see enterprise software changing as a result of cloud computing as well.
- Troubling, Challenging 2014 ERP Predictions – Brian Sommer’s predictions are the most thought-provoking and honest of any written so far this year. He writes “for an ERP vendor to sell CX (customer experience) software and then mistreat their own customers so badly is more than ironic (or moronic). It’s a death wish. Yet, it happens.” If there is only one set of predictions you read from this list, be sure to read this set.
- What Should CMOs Do In 2014? IDC’s Top Ten Predictions – Gil Press provides in-depth analysis of IDC’s predictions of how the role of CMO will change in 2014. He’s summarized the key points of the recent webinar including market forecasts from IDC, providing his insight and expertise in this post. IDC is predicting that digital marketing investment will exceed 50% of total program budget by 2016, up from 39% in 2013 and that by the end of 2014, 60% of CMOs will have a formal recruiting process for marketers with data skills.
International Data Corporation recently presented their top ten technology predictions for 2014. Frank Gens, Senior Vice President and Chief Analyst at IDC hosted a webinar to present the research firm’s predictions for 2014 including the research firm’s latest cloud computing market forecast. You can see a replay of the webinar and get the predictions documents at IDC Predictions 2014. They are briefly summarized below:
- Emerging markets will return to double-digit growth of 10%, driving nearly $740B or 35% of worldwide IT revenues and, for the first time, more than 60% of worldwide IT spending growth. IDC also predicted that in 2014 the number of smart connected devices shipped in emerging markets will almost double that shipped in developed markets. In addition, IDC predicts that over the next seven years emerging markets cloud spending will grow seven-fold versus three-fold in developed markets. IDC is predicting IT spending in Western Europe will be marginally up, with U.S. and Japan spending marginally down.
- Worldwide IT spending will grow 5% year over year to $2.1 trillion in 2014. Spending will be driven by 3rd Platform technologies, which will grow 15% year over year and capture 89% of IT spending growth. Smartphones and tablets will lead 2014 growth, accounting for over 60% of total IT growth. Excluding mobile devices, IT growth will only by a modest 2.4%. The graphic shown to the right was shared during the webinar today, explaining the 3rd platform and its contribution to market growth.
- Within the 3rd Platform, value will start to migrate “up the stack”, from infrastructure as a service (IaaS) to platform as a service (PaaS) and from generic PaaS to data-optimized PaaS. The latter will be most evident as Amazon Web Services rolls out an avalanche of platform-as-a-service offerings for developers and higher value services for businesses. This will force incumbent IT suppliers – the companies that won market leadership in the 2nd Platform era – to urgently reconfigure themselves to fight for position in the 3rd Platform marketplace.
- The mobile device onslaught will continue in 2014 with sales of tablets growing by 18% and smartphones by 12%. The Android community, led by Samsung, will maintain its volume advantage over Apple, while Apple will hold onto its value edge with higher average selling prices and an established ecosystem of apps. But Google Play (Android) app downloads and revenues are making dramatic gains and the “app ecosystem value gap” will be significantly narrowed in 2014. And the clock will be ticking louder for Microsoft, which needs to quickly double mobile developer interest in Windows. Frank Gens presented the following graphic to support this prediction:
- Cloud spending, including cloud services and the technology to enable these services, will surge by 25% in 2014, reaching over $100B. IDC explained the $100B figure includes software, services and cloud infrastructure. IDC also expects to see a dramatic increase in the number of datacenters as cloud players race to achieve global scale. This will be accompanied by a similar expansion in the variety of workload-specialized cloud infrastructure services, leading to new forms of differentiation among cloud service providers. Finally, a pitched battle will be joined for the developers that can create the cloud-based applications and solutions that will fuel the market’s growth. IDC predicts that by 2017, 80%+ of new cloud apps will be hosted on six PaaS platforms.
- Spending on big data technologies and services will grow by 30% in 2014, surpassing $14 billion as demand for big data analytics skills continues to outstrip supply. Here the race will be on to develop “data-optimized cloud platforms”, capable of leveraging high volumes of data and/or real-time data streams. Value-added content providers and data brokers will proliferate as enterprises (and developers) look for interesting data sources as well as applications that help them to understand their customers, products, and the markets in which they exist. IDC is also predicting that big data analytics services 2014 spending will exceed $4.5B, growing 21% over 2013.
- Social technologies will become increasingly integrated into existing enterprise applications over the next 12-18 months. In addition to being a strategic component in virtually all customer engagement and marketing strategies, data from social applications will feed the product and service development process. IDC expects enterprise social networks will become increasingly available as standard offerings from cloud services providers. This will enable enterprises to further embed social into the workflow, rather than having a separate “social layer.” IDC also predicts that by 2017, 80% of Fortune 500 companies will have an active customer community, up from 30% today. By 2016, 60% of the Fortune 500 will deploy social-enabled innovation management solutions.
- Datacenters represent the physical foundation underneath the cloud, and are thus a crucial component of the 3rd Platform. As cloud-dedicated datacenters grow in number and importance, the market for server, storage, and networking components will increasingly be driven by cloud service providers, who have traditionally favored highly componentized and commoditized designs. The incumbent IT hardware vendors, who have struggled to sell into this market, will be forced to adopt a “cloud-first” strategy, designing new innovations for initial release and widespread adoption in cloud service provider datacenters.
- The 3rd Platform will deliver the next generation of competitive advantage apps and services that will significantly disrupt market leaders in virtually every industry. A key to competing in these disrupted and reinvented industries will be to create industry-focused innovation platforms (like GE’s Predix) that attract and enable large communities of innovators – dozens to hundreds will emerge in the next several years. IDC predicts that most of these industry platform players will not reinvent the cloud underpinnings they need, but will build on top Amazon, Microsoft, IBM, Salesforce, and others’ platforms. In 2014, it will be critically important for these IT leaders to find these emerging industry platform players and win their business.
- The 3rd Platform will continue to expand beyond smartphones, tablets, and PCs in 2014 to the Internet of Things (IoT). With IoT momentum building in 2014, IDC expects to see new industry partnerships to emerge as traditional IT vendors accelerate their partnerships with global telecom service providers and semiconductor vendors to create integrated offerings in the consumer electronics and connected device spaces. This kind of collaboration and coordination will be necessary to reach the 30 billion autonomously connected end points and $8.9 trillion in revenues that IDC believes the IoT will generate by 2020.
Source: IDC Predicts 2014 Will Be a Year of Escalation, Consolidation, and Innovation as the Transition to IT’s “3rd Platform” Accelerates
What sets apart the fastest-growing small businesses is their an innate strength at turning data and information into results.
It’s becoming easy to spot a smaller business who is going to break out and grow quickly. They often have these qualities: they highly value knowledge, expertise and speed over seniority or cronyism; they have successfully managed a geographically distributed supply chain, production and service operations early in their history; and long before they reach $20M in sales they have learned how to balance domestic and international customer demands. In short, they learned fast how to compete and win business globally.
Over the last several months research firms and enterprise software vendors have released studies on cloud computing adoption in small & medium businesses (SMBs).
The following are the key take-aways from these studies:
- Forrester forecasts that channel partners will increase their reliance on cloud software and services from 22% to 27% from 2013 to 2014. The majority of this growth will be in SMBs. For additional details please see the free reprint of the report, Cloud Channel Trends, 2013 To 2014 by Tim Harmon and Jonathan Silber, February 28, 2013. You can download the reprint here (no opt in required): http://www.forrester.com/pimages/rws/reprints/document/90001/oid/1-LMIK8X
- 61% of SMBs who responded to a recent survey are using cloud-based solutions today, with an additional 5% planning to add cloud services in the next six months. 69% of SMBs with fewer than 20 employees and 55% of SMBs with 250 to 999 employees are using cloud-based applications today. North American SMBs are more likely to use cloud-based applications co these services than EMEA (64% compared to 56%). Source: State of SMB IT 1H 2013 Semi-Annual Report On Small And Midsize Business Technology Plans & Purchase Intent (Opt-in required): http://www.spiceworks.com/marketing/state-of-smb-it/ The following is a graphic from the report:
- SMB spending on cloud solutions will grow by almost 20% over the next five years, with 3 in 10 midsize firms adopting public cloud solutions. IBM is offering a free download of the IDC report, Cloud Computing in the Midmarket: Assessing the Options in 2013 (no opt-in required): http://idcdocserv.com/995 IDC’s graphical definition of how their Primary Market and Secondary Market IT Product Taxonomy maps to the NIST Taxonomy is shown below:
- Cisco predicts the U.S. SMB commercial-services market addressable by service providers will grow to more than $200B by 2015. Also included is an analysis of how fundamental differences in business segments drive IT behavior, as the following table illustrates. Source: What Do SMBs Want from Commercial-Services Providers? Insights from Cisco’s U.S. Research on SMB Services Delivery Link:http://www.cisco.com/web/about/ac79/docs/sp/SMB-Cloud-Survey.pdf. Please click on the image to expand it for easier reading.
- Hosting and cloud services provider Parallels projects that the worldwide SMB SaaS applications market was $14.5B in 2012 today and will grow to $33.8B by 2015, attaining a 32% Compound Annual Growth Rate (CAGR). Please see the following illustration of a breakdown by region over the forecast period. Source: Profit from the Cloud 2013 Global Parallels Global SMB Cloud Insights Opt-in required, Link: http://www.parallels.com/fileadmin/parallels/documents/smb-reports/2013/2013_SMB_Brochure_Global_web.pdf. Please click on the image to expand it for easier reading.
- SMEs overwhelmingly prefer to buy or acquire these critical systems (43%) rather than lease or pay for use (23%) in an SAP-sponsored survey by Oxford Economics. The study found that the tools most commonly used by SMEs are business management software (48%), mobile (46%), and analytics (44%). Cloud computing adoption is expected to jump from 35% to 47% in three years. An infographic summarizing the results is below. You can get the survey results here: http://cdn.news-sap.com/wp-content/blogs.dir/1/files/SAP-SME-analysis-presentation.pdf . Please click on the image to expand it for easier reading.
As public cloud computing gains greater adoption across enterprises, there’s an increased level of spending occurring on infrastructure-related services including Infrastructure-as-a-Service(IaaS). Enterprises are prioritizing how to get cloud platforms integrated with legacy systems to make use of the years of data they have accumulated. From legacy Enterprise Resource Planning (ERP) to Customer Relationship Management (CRM) systems, integrating legacy systems of record to cloud-based platforms will accelerate through 2016. I’ve seen this in conversations with resellers and enterprise customers, and this trend is also reflected in Gartner’s latest report on public cloud computing adoption, Forecast Overview: Public Cloud Services, Worldwide, 2011-2016, 4Q12 Update Published: 8 February 2013. Below are the key take-aways from the report:
- Global spending on public cloud services is expected to grow 18.6% in 2012 to $110.3B, achieving a CAGR of 17.7% from 2011 through 2016. The total market is expected to grow from $76.9B in 2010 to $210B in 2016. The following is an analysis of the public cloud services market size and annual growth rates:
- Gartner predicts that Infrastructure-as-a-Service (IaaS) will achieve a compound annual growth rate (CAGR) of 41.3% through 2016, the fastest growing area of public cloud computing the research firm tracks. The following graphic provides insights into relative market size by each public cloud services market segment:
- Platform-as-a-Service (PaaS) will achieve a 27.7% CAGR through 2016, with Cloud Management and Security Services attaining 26.7% in the same forecast period. Software-as-a-Service’s CAGR through 2016 is projected to be 19.5%. The following graphic illustrates the differences in CAGR in the forecast period of 2011 – 2016:
- Gartner is projecting the SaaS market will grow at a steady CAGR of 19.5% through 2016, having increased the forecast slightly (.4%) since its latest published report. Global SaaS spending is projected to grow from $13.5B in 2011 to $32.8B in 2016.
- CRM will continue to be the largest global market within SaaS, forecast to grow beyond $5B in 2012 to $9B in 2016, achieving a 16.3% CAGR through 2016. The highest growth segments of the SaaS market continue to be office suites (49.1%), followed by digital content creation (34.0%). The following graphic rank orders CAGRs across all public cloud services segments from the forecast period:
- 59% of all new spending on cloud computing services originates from North American enterprises, a trend projected to accelerate through 2016. Western Europe is projected to be 24% of all spending. A graphic comparing total spending by geography and corresponding growth rates is provided below:
- The following tables provide insights into each category of public cloud computing spending throughout the forecast period. Please click on the tables to expand them for easier reading.
Source: Forecast Overview: Public Cloud Services, Worldwide, 2011-2016, 4Q12 Update Published: 8 February 2013.