Skip to content

Posts from the ‘Cloud Predictions 2012’ Category

Apr 2

3 Comments

Roundup of SaaS ERP Forecasts and Market Estimates, 2012

The latest round of SaaS ERP market forecasts are more grounded in the reality of CIO priorities and committed projects in 2012 than ever before.  And this is good news for the many vendors competing in the Financial Management Systems (FMS), Human Capital Management (HCM) and Manufacturing segments of the SaaS ERP market.

Two weeks ago in Houston I interviewed twenty-five different CIOs, IT Directors, CEOs and CTOs as part of a persona research study I am doing.  Their take on SaaS ERP was consistent with what this round-up shows, namely this type of SaaS application is best suited for extending beyond, not replacing, the main ERP systems and platforms.   I concentrated on SaaS ERP adoption in manufacturing and learned the following during my interviews:

  • Usability and speed of deployment are the two most common benefits CIOs mentioned in my survey during Convergence.  The economics of cloud computing is a topic that CFOs love to talk about, especially in the areas of value-based pricing and how that is determined.
  • When asked what kept them up at night, CIOs said it was the thought of a call from their boss (often the CFO) that a cloud system had been compromised or had completely gone down.  Security and reliability are holding back CIOs in manufacturing from adopting SaaS-based ERP systems more pervasively in their companies.
  • CIOs from aerospace and defense companies get the benefits of cloud computing, yet they have much bigger issues to deal with right now, like replacing financials in their existing ERP system and staying in compliance to government requirements.  Earned Value Management is a major focus they have as well.  SaaS-based ERP systems are interesting to them; they however would require a completely enclosed, locked-down implementation due to security requirements.
  • There are vast differences in how CIOs view cloud computing – something that the following forecasts don’t really capture.  For the CIOs who are strategists, cloud computing in general and SaaS ERP specifically is a consideration given the agility and time-to-market, providing customization is held to a minimum.  CIOs who came up through IT have a healthy degree of skepticism and see SaaS ERP as potentially useful for scaling out an operation yet never being the primary financial system.

Here are the latest SaaS ERP forecasts and market estimates:

  • Gartner released their latest SaaS revenue forecast last week predicting revenue will reach $14.5B this year, a 17.9% increase from 2011 of $12.3B, with strong growth predicted through 2015 when the market is expected to be $22.1B. Source: http://www.itjungle.com/tfh/tfh040212-story08.html
  • In the report Market Trends: Cloud Computing and SaaS Adoption in Manufacturing and Natural Resources, Worldwide, 2012 Gartner is predicting  59% of manufacturers will adopt IaaS during the 2011 – 2015 timeframe and 47% will be either piloting or using SaaS-based applications.  Gartner cites the need for greater business and supply chain agility as the factors driving this rapid adoption.  The following figure is from the Gartner report  Market Trends: Cloud Computing and SaaS Adoption in Manufacturing and Natural Resources, Worldwide, 2012.
  • Forrester forecasts SaaS ERP spending staying at 2% of the global ERP market, while Gartner forecasts 7% through 2012.  Gartner is projecting Project and Portfolio Management (29.1%) and Supply Chain Management (22.1%) will see the greatest growth rates through 2015.  Supply Chain Management is expected to reach $2.7B in revenue by 2015.  The Total Software Revenue Forecast for SaaS Delivery Within Enterprise Software is shown in the following table.  Source: Forecast: Software as a Service, Worldwide, 2010-2015, 1H11 Update Published: 22 June 2011 Analyst(s): Sharon A. Mertz, Chad Eschinger, Tom Eid, Chris Pang, Laurie F. Wurster
  • Gartner, IDC and Forrester all predict that Human Capital Management (HCM) will see the broadest adoption of all SaaS-based ERP components through 2015.  Vendors in this category include ADP, Concur, Cornerstone onDemand, HumanConcepts, Infor, Kenexa, Lumesse, Saba, SilkRoad, Sonar6, SuccessFactors, SumTotal Systems, Taleo, Ultimate Software and Workday.  Based on a recent Gartner Spending and Usage of SaaS Survey, 39% of manufacturers are piloting or using SaaS-based financials followed by 37% using Expense Management.The following figure illustrates their forecast, from the report  Market Trends: Cloud Computing and SaaS Adoption in Manufacturing and Natural Resources, Worldwide, 2012
  • Gartner’s IT Market Clock for ERP Platform Technology indicates that multitenant SaaS-based ERP is maturing rapidly, driven by time-to-market and cost advantages. The IT Market Clock is shown below, indicating SaaS ERP-based systems position relative to other ERP platforms now in use.  Vendors including  Epicor Express Editions, Glovia, Kenandy, NetSuite, Plex Systems, and SAP Business ByDesign compete in this segment.Source: IT Market Clock for ERP Platform Technology, 2011 Published: 19 September 2011 Analyst: Jim Shepherd.

Gartner has also compiled a Market Clock Recommendation Summary which is shown in the following table.  Of the CIOs I’ve spoken with during the persona research, the description of Multitenant SaaS is accurate.  No CIO I’ve spoken with is willing to bet their job on a rip-and-replace strategy for SaaS ERP; yet many are willing to extend their existing ERP systems using SaaS implementations to get up and running quickly at lower cost.  The one caveat nearly everyone mentions is little or no customization is necessary for SaaS ERP systems to be even evaluated by their companies.  Slight configuration is expected; however in-depth customization is not.

Bottom line: The persona research completed shows that the SaaS-based ERP growth is being helped by the transition occurring in the CIO ranks today.  More of them are strategists, who are expected to make business strategies happen, over and above just keeping the system dial tone on in their enterprises.

Mar 5

Sizing the Data Center Services Market, 2012

The Data Center Services (DCS) market is at a turning point today, with both Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) strategies potentially playing a pivotal role.

Traditionally data centers generate the majority of their business from colocation, data center outsourcing, and hosting.  The current and future impact of IaaS and PaaS is small but growing rapidly in this market.  Gartner estimates the global DCS market generated $150B globally as of 2011, projected to grow to $200B in 2012.

IaaS and PaaS Will Define The Future of the DCS Market

With IaaS generating $4B in global revenues in 2011 and PaaS is generating $1.4B, together they contributed 3.6% of the total DCS revenues last year.  The future direction of the DCS market, including the nature and trajectory of IaaS and PaaS, will be determined over the next three to five years by enterprise adoption of these platforms and the increasing move of enterprise applications to the cloud.  In sizing the DCS market, it’s useful to take a look at the forecasts from Gartner of cloud application infrastructure and cloud applications as a proportion of enterprise application software.  The following tables provide this analysis.

Cloud Application Infrastructure, Cloud Systems Infrastructure as a Proportion of Core ITO and Traditional Web Hosting (Dollars in Billions)

Source: Forecast: Public Cloud Services, Worldwide and Regions, Industry Sectors, 2010-2015, 2011 Update

Cloud Applications as a Proportion of Enterprise Application Software (Dollars in Billions)

Source: Forecast: Public Cloud Services, Worldwide and Regions, Industry Sectors, 2010-2015, 2011 Update

Mapping the Data Center Services Market – A First Approach

Gartner has proposed a Data Center Services Map and Market Compass for Enterprise Data Center Services, both of which are shown below.  Taken as taxonomies for organizing the market, they are effective, resembling value chains in their structure.  The Garter Data Center Services Map is shown below:

The Gartner Data Center Services Map

Source: Data Center Services: Regional Differences in the Move Toward the Cloud, 2012

Gartner’s Market Compass for Enterprise Data Center Services takes into account size, scope and management of data center (DC) applications by the use of sharing, pricing models and elasticity (Time to Provision Change) to create a market grid.  These are considered to be the six most differentiating factors in DC performance in this model.  The foundation of the Market Compass are shown below:

Gartner’s Market Compass for Enterprise Data Center Services

Source:Data Center Outsourcing, Hosting or Cloud? Use Gartner’s Market Map and Compass to Decide

The Garter Market Compass can further be used to define which solution sets in the DCS market best align with a given business’ strategic and IT needs.  Elasticity of infrastructure utility and cloud computing are, according to the analysis, the strongest growth factors in the DCS market today.

Analyzing the Six Main Segments of the Data Center Services Market with the Gartner Market Compass

Source: Data Center Outsourcing, Hosting or Cloud? Use Gartner’s Market Map and Compass to Decide

Bottom line: As more enterprise applications migrate to the cloud, DCS providers will be forced to rapidly improve the elasticity and time provisioning options their platforms provide.  All these changes will re-order the economics of cloud computing forcing DCS providers to greater level of flexibility that many have attained in the past.

Dec 26

8 Comments

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.

Follow

Get every new post delivered to your Inbox.

Join 100 other followers