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Posts from the ‘Enterprise software’ Category

BCG’s Value Creators Report Shows How Software Is Driving New Business Models

boston-300x211Boston 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).

bcg figure 1

  • 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.

bcg figure 2

  • 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 figure 3
  • 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.

bcg figure 4

  • 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.

bcg figure 5

  • Only 7% of customers are comfortable with their information being used outside of the purpose for which it was originally gathered.

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  • 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.

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  • 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.

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Making Analytics Pay In The Enterprise

global-analytics-300x2001With analytics and big data being so heavily hyped today, it is ironic the majority of business analysts often lack access to data and tools they need.

But things are changing with the next generation of analytics software coming to market.  A recent study by The Economist, “Big Data and the Democratisation of Decisions,” shows the severity of the big data analytics problem and which departments need the most support: customer service, human resources, marketing, strategy and business development.  The following is an infographic based on the study’s key findings. To be clear, all companies mentioned in this post are not and never have been clients of mine or companies I have worked for.

Unleashing Greater Insight in the Enterprise

The real analytics payoff in the enterprise begins when business analysts can achieve customer and market insights faster than their competitors.  In the consumer packaged goods industry, every week counts in a new product launch and product lifecycle.  In healthcare, lag times in customer service lead to patients seeking more responsive treatment alternatives.  The net result in each is lost revenue.

Analytics applications and platforms are increasingly being designed for self-service and the needs of business analysts first.  Instead of having to rely on IT for analytics, big data and advanced statistical analysis support, business analysts need to be able to complete projects on their own. Analytics applications are advancing quickly on this self-service dimension, making it possible for business analysts to get complex projects done in a fraction of the time it would have taken IT to staff and complete them.

Alliances and partnerships between analytics software providers are focused on getting business analysts the tools they need so they don’t have to rely on IT so much to get their work done.  The recent partnership announced between Alteryx and Revolution Analytics puts R-based predictive analytics directly in the hands business analysts is a case in point.

What’s noteworthy about this partnership above all others is the option it gives enterprises to integrate big data and other 3rd party sources into a common system of engagement. Business analysts can then use tools to design analytics and reporting workflows that align and stay in step with line-of-business needs over time.

alteryx-gallery1-300x1691Once an application or workflow is complete, business analysts can publish and distribute their analytics applications enterprise-wide. The Alteryx Analytics Gallery (shown to the right) gives customers the opportunity to share their analytics applications with each other.  The gallery is helping business analysts learn from each other, serving as a catalyst for broader analytic consumption.

This is the same model ServiceNow (NYSE:NOW) has been so successful with in the area of IT Service Management.  I attended Knowledge13 earlier this year and found their customer base to be one of the most enthusiastic I’ve ever met.  What ServiceNow has done IT Service Management, Alteryx is on its way to accomplishing in analytics.

Why All This Matters For Customers

Getting analytics applications and tools in the hands of business analysts significantly improves the customer experience and reduce errors at the same time. At Kaiser Permanente, business analysts focus on cost saving projects that improve customer service.

Kaiser has a continual stream of customer interactions across multiple channels going on daily.  Supported by legacy IT systems, Microsoft Excel spreadsheets and manual processes to keep the entire system working, the healthcare provider was seeing patient satisfaction levels drop as they didn’t have a clear view of their customers.  The legacy and manual systems also made coordinating customer service teams very difficult and replicating analytics tools very difficult.

Alteryx-Workflow-21

Kaiser Permanente was able to aggregate and cleanse the myriad of data sources they rely on and gain greater insights into their customer’s needs. Creating analytics and reporting workflows that business analysts and lean leaders in their Service Organization use to stay on top of customer needs has led to a five-fold increase in customer service performance according to Greg Hall, Senior Service Optimization Leader.

451 Research Summit: Enterprises Competing With Digital Infrastructure & Cloud Computing

bellagio1Enterprises are defining their own cloud strategies, their own way, ignoring vendor hype and requiring metrics that reflect security (61%), mean-time-to-recover from outages (57%), number of data center outages (51%).

This and many insights were gained from attending the 451 Research Hosting and Cloud Transformation Summit at the Bellagio Resort & Casino in Las Vegas last week. 451 Research provided a free pass to the event but did not cover travel, hotel or meals.

What’s refreshing about 451 Group’s conferences is that each of their companies including 451 Research, Uptime Institute, and Yankee Group rely on solid methodologies to research their coverage areas and markets. This results in presentations that are packed with insight and are based on a solid foundation of interviews and research.  I had a chance to catch up with SoftLayer’s Lance CrosbySimon West and Andre Fuochi for an update on how the IBM acquisition is going, which is summarized in this post as well.  The slides shown are from Michelle Bailey, Vice President, Datacenter Initiatives and Digital Infrastructure’s excellent presentation given at the conference.

The following are the key take-aways from the summit:

  • Enterprises are defining their own cloud strategies, their own way, ignoring vendor hype and requiring metrics that reflect security (61%), mean-time-to-recover from outages (57%), number of data center outages (51%). When asked which metrics beyond Service Level Agreements (SLAs) service providers should report, respondents to the 451 Research survey provided the following insights, shown below:

  • The top three SaaS applications in two years will be for the enterprise, business support, and database platforms per 451 Research’s latest survey:

  • Infrastructure-as-a-Service (IaaS) growth is critical to off-premises hosting deployments succeeding in the next two years, as the following graphic illustrates:

  • 80%of enterprises would experience a severe impact to their operations if there was a cloud outage of just a day which make security and availability must-haves for any hosting and cloud services provider.  The following graphic breaks down the impact of service provider outage by time:
  • Worldwide Infrastructure-as-a-Service (IaaS) is projected to grow from $4.475B in 2013 to $10.23B in 2016, with Platform-as-a-Service (PaaS) growing from $2.23B in 2013 to $5.24B in 2016.  The following slide provides a breakout of forecast categories by hosting and cloud business categories:

Why Enterprises Need A Digital Infrastructure Playbook

The focal point of the summit was the launch of the digital infrastructure playbook.  Tony Bishop, Chief Strategy Officer, The 451 Group introduced the Digital Enterprise Playbook Series which you can download here. His presentation provided insights into how enterprises are struggling to align legacy IT, infrastructure including data centers, cloud, applications and system management to business goals while becoming more agile.

I had a chance to speak with Tony after his presentation and asked him why enterprises need a digital infrastructure playbook now.   “Digital transformation is breaking down the barriers to sustainable global prosperity by shifting power towards the individual,” he said. “This revolution will transform how enterprises create and deliver value. Digital enterprises will pursue and build dynamic infrastructure capabilities to innovate and differentiate customer experience, constantly empower employees and disseminate prescriptive knowledge across the enterprise.”

One of the most passionate and knowledgeable people I’ve ever met in infrastructure and IT research is Martin McCarthy, Chairman and CEO, The 451 Group.  He told me he’s seeing more pressure than ever for edge-to-core integration in the enterprise, which is forcing CIOs to be strategists over experts in cost reduction.  “Digital infrastructure will be the backbone enabling enterprise transformation in coming years. To blaze this trail, organizations need an ‘edge to core’ digital infrastructure playbook,” he said.   Presented below is a page from the Digital Enterprise Playbook Series:

The eight-striper wordmark of IBM, the letters...

IBM SoftLayer Update

  • IBM’s acquisition of SoftLayer is going excellently and many IBM divisions now are actively collaborating with the Softlayer team to migrate existing apps and develop new ones. Thank you Lance CrosbySimon West and Andre Fuochi for the update provided at the conference, it was invaluable.
  • Softlayer will be the foundation for a global cloud services infrastructure capable of delivering applications across multiple continents and thousands of users within hours, not days.  Lance Crosby explained the vision IBM has of delivering a continual stream of new applications and services over the global cloud services infrastructure network, which has the potential to turn into a high margin business quickly.
  • Softlayer is assisting with making the IBM Request for Proposal (RFP) more efficient based on their deep expertise in this critical area. Based on personal experience it can take anywhere from several weeks to up to several months for an RFP response.  SoftLayer has devised processes and systems that make RFP response times a fraction of that.
  • The majority of the top ten customers Softlayer has today are running large-scale clusters of Hadoop, with 40 Hadoop clusters being commonplace.  Lance Crosby mentioned these customers are very sophisticated in their use of Hadoop and many of them are in consumer products companies, looking to gain greater insights into customer behavior.
  • Bare metal servers running Hadoop are one of the fastest growing areas of the Softlayer business right now.  Simon West made an excellent point that running Hadoop on bare metal servers instead of through virtualized environment leads to a higher level of throughput, given Softlayer’s internal testing results.  Bare metal servers continue to accelerate in the industry and Softlayer’s executives confirmed they are seeing an acceleration of demand in this area.
  • An additional six data centers are planned for 2014, and SoftLayer has the capability to build one data center every two months of needed.  When asked what the global expansion plans are for SoftLayer since the acquisition, Lance Crosby told me London and Germany are of primary interest.  He also added that whenever the demand for a given nation reached between four and five thousand servers, Softlayer and IBM will consider building a data center in-country.

Coursera, edX Offer Free Online Courses As Cloud Computing Learning Options Proliferate

StanfordThe value and variety of online cloud computing programs being offered by leading colleges and universities is proliferating.

Focusing on the learning needs of IT professionals who need to apply cloud technologies to solve complex business problems, many of these programs and courses sell out before classes begin. This is because CIOs’ career paths are increasingly defined by how well they apply cloud technologies to the unique challenges and problems their businesses face. For CIOs and other members of senior management, getting a solid education on cloud computing’s business benefits is essential for managing effectively today, increasing their long-term marketability and career growth.

These programs are designed for C-level executives and senior managers to get up to speed quickly, often including guest CEOs of prominent software companies as part of the curriculum.  Stanford’s course offered this fall online and on campus has five different CEO guest speakers including Aaron Levie, CEO of Box.net for example.  These programs have an entirely different set of learning objectives versus certifications.  For an excellent analysis of cloud certifications please see David Linthicum’s recent post Are you on the right cloud computing career path?   Also excluded are vendor-sponsored certification programs as the intent of many of these is to promote a very specific view of cloud computing that aligns with their product and service strategies.

Here are key take-aways from following this area:

  •  Georgia Institute of Technology is partnering with Coursera, offering Health Informatics in the Cloud, beginning on September 16th for free.  Coursera is an education company that partners with many of the worlds’ leading colleges and universities to offer free online courses to anyone, anywhere.  They have partnered with 62 universities in 16 countries and offer over 300 courses as of today.
  • University of California, Berkeley is partnering with EdX offering Software as a Service (CS169.2X) beginning August 13th for free.  MIT and Harvard partnered to create EdX, a non-profit organization that is committed to bringing the best of higher education to students around the world.  EdX offers MOOCs (massive open online courses) in addition to interactive online courses in the subject areas of law, history, science, engineering, business, social sciences, computer science, public health, and artificial intelligence (AI).
  • Stanford University’s CS309A looks like one of the best being offered this fall, with five different CEO guest speakers including Hamish Brewer, JDA Software; Godfrey Sulliva, Splunk; Bob Beardon, Horton Works; and Aaron Levie, Box.net.  Dr. Timothy Chou, former president of Oracle OnDemand and Lecturer at Stanford University for over three decades is teaching the course.
  • The following is a comparison of the cloud computing courses and programs designed for senior management starting this fall.  Those entries in green are the free courses that take just minutes to enroll in.  Please click on the image to expand it for easier reading.

Cloud Computing

Best- And Worst-Performing Cloud Computing Stocks In The First Half Of 2013

Cloud computing stocks continue to show wide variation in performance throughout the first half of this year.

Ten of the twenty companies in the Cloud Computing Stock Index delivered returns to shareholders with NetSuite leading with a 37.30% share gain, delivering $13,730 on $10,000 invested on January 2, 2013.

To more fully define the stock performance of these companies, I’ve added Earnings Per Share (EPS), Price/Earnings Ratio, Year-To-Date (YTD) Total Gains or Loss, Annualized Gain or Loss, and Total Dollar Value of $10,000 invested on January 2, 2013.  You can download the latest version of the Cloud Computing Stock Index here.  The filter applied to these companies is that 50% or more of their revenues are generated from cloud-based applications, infrastructure and services.  Additional details of the index are provided at the end of this post.

 

Best Performing

Name

Symbol

(1/2/13 – 7/5/13)Total Gain or Loss

Annualized Gain or Loss

Total Dollar Value of $10K invested in this stock on Jan. 2, 2013 as of July 5th:

NetSuite Inc

N

37.30%

87.55%

$13,730.00

Keynote Systems, Inc.

KEYN

36.18%

84.53%

$13,618.00

CA, Inc.

CA

26.67%

59.83%

$12,667.00

Workday Inc

WDAY

23.81%

52.77%

$12,381.00

Cisco Systems, Inc.

CSCO

22.60%

49.82%

$12,260.00

Symantec Corporation

SYMC

18.84%

40.84%

$11,884.00

Amazon.com, Inc.

AMZN

11.10%

23.23%

$11,110.00

 

Worst Performing

Name

Symbol

(1/2/13 – 7/5/13)Total Gain or Loss

Annualized Gain or Loss

Total Dollar Value of $10K invested in this stock on Jan. 2, 2013 as of July 5th:

Rackspace Hosting, Inc.

RAX

-46.78%

-71.39%

$5,322.00

Fusion-IO, Inc.

FIO

-41.21%

-65.13%

$5,879.00

F5 Networks, Inc.

FFIV

-31.57%

-52.88%

$6,843.00

VMware, Inc.

VMW

-29.94%

-50.63%

$7,006.00

Riverbed Technology…

RVBD

-24.91%

-43.34%

$7,509.00

Red Hat, Inc.

RHT

-11.47%

-21.46%

$8,853.00

Key Take-Aways:

  • NetSuite leads the index with a 37.3% gain in their stock price, and $10K invested in their stock on January 2nd of this year would be worth $13,730 as of July 5th.  Cloud-based Enterprise Resource Planning (ERP) systems acceptance is accelerating, evidenced by the success NetSuite is having with their two-tier ERP strategy and recent announcement they are moving into manufacturing.  Their recent alliance with Oracle also shows upside potential.   A cloud-based ERP provider leading the index is good news for Acumatica and Plex Systems especially, the leader in cloud-based ERP systems for manufacturing and one of the most enthusiastic customer bases in enterprise software.  Both of these companies are privately held or they would have been included in the index.
  • The 20 companies that comprise the Cloud Computing Stock Index attained a 29.6% return from July 10, 2012 to July 5, 2013.  The Dow Jones Industrial Average (DJIA) gained 18.83%;  Microsoft, 14.02%; Oracle, 7.17%; and SAP, 27.51%.  The following chart compares the performance of each. Please click on the index to expand it for easier viewing.

  • Widespread adoption of Amazon Web Services, success using the Kindle series of tablets as customer acquisition tools for digital content, market leadership of the online retail landscape, and successful pilots of the AmazonFresh online grocery business in Los Angeles and Seattle are all fueling Amazon’s stock performance this year.

Specifics on the Cloud Computing Stock Index

I used The Cloud Times 100 as the basis of the index, and included the 20 following companies, all of which are publically traded.  The latest edition of the Cloud Computing Stock Index is shown here.  Please click on the index to expand it for easier viewing.

 Note: I do not hold equity positions or work for any of the companies mentioned in this blog post or included in the Cloud Computing Stock Index.  

Roundup Of Mobile Apps & App Store Forecasts, 2013

mobile app developmentFaced with shorter time-to-market schedules, challenging cost constraints, and ever-increasing customer expectations, manufacturers are accelerating their use of mobility applications. They’re also using them to galvanize production, finance and selling strategies into a unified direction so customers’ expectations can better set and exceeded.

One manufacturer’s CIO summed it up well when he said they hit an inflexion point when their marketing analytics showed over 60% of dealers were looking up product and pricing data on their smartphones and tablets instead of their laptops, a 4X increase in just five months.

The following is a roundup of mobile apps and app store forecasts reflects the urgency all enterprises, including manufacturers, have to get results from their mobility strategies:

mobile application usage

  • 84% of smartphone shoppers use their phones while in a physical store and 30% use their smartphones to find information instead of asking store employees. according to a study released this month from Google.  The study, How Mobile Is Transforming the Shopping Experience in Stores, can be downloaded here. The study also found that 65% prefer mobile sites and search, and 35% prefer apps, not surprising for a study sponsored by Google.  There are several interesting findings in the report, including the finding the in-store price comparisons are the most common mobile activity across the eight categories included in the study.

In store price comparisons

market-shares1

  • IDC’s prediction of how mobility will drive intelligent systems adoption, in addition to device management research on smartphone and tablet adoption is covered in the presentation, The Mobility Game Changer; Why The Workplace Will Never Be The Same. The following graphic shows IDC”s forecast of mobile-based intelligent device shipments by market and industry.

mobility analysis

Mobile App Store Forecasts

  •  90% of global mobile app store downloads in 2013 are forecast to be free, increasing to 93% in 2017.  73.2B free downloads will occur in 2013, increasing to 287.9B by 2017.  Paid-for downloads will increase from 8.1B in 2013 to 21.6B in 2017.  Source: Gartner Market Trends: Mobile App Stores, Worldwide, 2012.
  • In-app purchase will drive 41% of the store revenue in 2016. While the market is moving toward free and low-priced apps, in-app purchase will increase in both the number of downloads and in the contribution to the store revenue. As a result, we see a shift in user spending from upfront purchases to in-app purchases.   Source: Gartner Report Market Trends: Mobile App Stores, Worldwide, 2012.
  • 99% of the paid-for app store downloads cost less than $3 each. Similar to free apps, lower-priced apps will drive the majority of the downloads. We estimate that apps between $0.99 and $2.99 will account for 87.5% of the paid-for downloads in 2012, up from 86.8% in 2011. That percentage will further increase to 96% by 2016. Source: Gartner Report Market Trends: Mobile App Stores, Worldwide, 2012.
  • Global mobile app store revenue is projected to reach $24.5B in 2013, increasing to $74B in 2017.  Paid-in downloads (69%); in-app purchase (17.3%) and advertising (13.7%) are the three revenue sources in 2013.  In 2017, revenue shifts significantly to paid-for downloads contributing 45.2% of revenue, in-app purchases, 40.9% and advertising, 13.9%.  Source: Gartner Report Market Trends: Mobile App Stores, Worldwide, 2012. 

Five Ways CIOs Can Prepare For The Cloud: Lessons Learned From ServiceNow

ServiceNow2ServiceNow (NYSE:NOW) is a global leader in providing cloud-based services used by enterprises to streamline and automate their IT operations.  They’re known for their expertise in IT Service Management (ITSM), speed of development cycles, and commitment to open source including MongoDB and NoSQL.  ServiceNow also has one of the most enthusiastic, rapidly growing and loyal customer bases in enterprise software.  Matt Schvimmer, VP Product Management at ServiceNow, credits the goal of attaining 100% customer referenceability combined with intensive focus on user experience design as contributing factors to their rapid growth, in addition to continuous feedback cycles they use for capturing and acting on customer feedback.

Update from ServiceNow’s Financial Analyst Day and Knowledge13 

On May 13th they held their Financial Analyst Day at the Aria Resort & Casino in Las Vegas, the same location they hosted Knowledge13, their annual user conference held May 12th through the 16th.  You can download a set of the slides presented at the Financial Analyst Day here, and view videos and presentations from Knowledge 13 here.   ServiceNow executives are calling the next phase of their growth ERP for IT. Both in the Financial Analyst Day presentation and the presentation given by President and CEO Frank Slootman at the Pacific Crest Emerging Technology Summit on February, 13th, this concept is shown.  Below is a slide from the February 13th presentation given at the Summit.  You can download the slide deck from the Pacific Crest Emerging Technology Summit here.

ERP for IT

Five Ways CIOs Can Prepare For The Cloud

HS_Arne_Josefsberg (1)I had the opportunity to catch up with Arne Josefsberg, CTO of ServiceNow during Knowledge13.  He shared insights into how ServiceNow’s core customer base, predominantly CIOs and their IT Departments, are driving greater business value into their organizations using the Service Automation Platform.  Arne mentioned that ServiceNow sees IT Operations Management (ITOM) and Platform-as-a-Service (PaaS) as critical to their growth, in addition to enabling those without programming expertise (ServiceNow calls them Citizen Developers) with intuitive, easily used application development tools.

He also shared lessons learned and five ways CIOs can prepare for the cloud, which are listed below:

  • Adopt Cloud Architectures With An Open Mind And See Them As Business Value Accelerators.  Arne advises CIOs who are considering cloud-based initiatives to concentrate on capturing and communicating business value first, including time-to-market, cost and time savings advantages.  Getting beyond a purely cost-cutting mindset is critical for IT to become a strategic partner with business units.  He says that he’s seeing CIOs gain a greater voice in strategic planning initiatives by clearly defining the business value of cloud-based development while pursuing rapid application development.
  • Taking a leadership position in application development leads to gaining greater influence and involvement in strategic plans and initiatives.  This point galvanizes the entire ServiceNow executive team, they all speak of enabling the Citizen Developer to create new applications on their platform without writing a single line of code.  ServiceNow and their customer base have bonded on this issue of rapid application development.  And watching Fred Luddy, Chief Product Officer of ServiceNow move quickly through application development and deployment scenarios during his keynote showed how deeply engrained this value is in the company’s DNA.
  • CIOs need to realize that their resource and human resource management needs in five years will shift to business transformation away from IT alone.  There is a shortage of IT analysts and professionals who are adept at being business strategists, capable of leading transformational application development.  IT analysts and experts need to be trusted partners with business units, continually moving IT-related barriers out of the way while streamlining new application development.  Arne cited how General Electric is excelling on this dimension, consolidating 17 incident management systems into a single ServiceNow application.  All that was possible because the IT teams at GE are an essential part of business unit operations.
  • CIOs need to move beyond managing IT using cost and efficiency alone and think in terms of opportunity-to-cost instead. Arne’s point is that the most respected and counted-upon CIOs he knows today are either making or have made this transition.  They have moved beyond an IT legacy mentality of managing just to cost or efficiency.  Instead, the CIOs emerging as strategists and core members of the executive team are aligning IT as a core part of their company’s ability to compete.
  • Use cloud architectures and rapid application development to make IT more strategic in scope now.  The companies winning awards at Knowledge13 for their applications showed a common thread of anticipating and acting on the strategic needs of their business quickly, often delivering completed applications ahead of schedule and under budget.

Bottom line: Making IT strategic begins by moving away from the constraints of managing to cost and efficiency metrics alone.  Cloud-based platforms and rapid application development technologies are assisting CIOs and their staffs to be more strategic, less tactical, more responsive and focused on line-of-business needs and requirements first.

Disclosure: ServiceNow paid for travel to Knowledge13.  I’ve never held equity positions in ServiceNow, and they are not a client.

2013 ERP Market Share Update: SAP Solidifies Market Leadership

SAP Headquarters, Building 1

SAP Headquarters, Building 1 Source: Wikipedia

During 2012 the Enterprise Resource Planning (ERP) market experienced sluggish growth of just 2.2%, yet Software-as-a-Service (SaaS), financial management and Human Capital Management (HCM) applications showed potential for breakout growth.

Through the challenging times of the previous year however, SAP still retained worldwide market share leadership.  These and other insights were recently published in the recent report, Market Share Analysis: ERP Software Worldwide, 2012 authored by Chris Pang, Yanna Dharmasthira, Chad Eschinger, Koji Motoyoshi and Kenneth F. Brant.

Key Take-Aways

  • Overall market growth of just 2.2% and the top ten vendors owning 64% of the worldwide ERP market is leading Gartner to predict further consolidation of the industry.
  • SAP had just over $6B in total ERP software revenue in 2012, leading the worldwide market with 24.6% market share.  Oracle had $3.12B and Sage, $1.5B in software revenues for 2012.  Oracle’s market share was 12.8%, and Sage, 6.3%. The following graphic shows worldwide ERP market share for 2012.

ERP Market Share 2012 Stats

  • Infor achieved 49.5% revenue growth in 2012, increasing their 2011 sales from $1B in 2011 to $1.5B in 2012.  Their market share increased from 4.2% in 2011 to 6.2% in 2012.
  • Microsoft achieved 4.2% revenue growth  in 2012, increasing revenue from $1B in 2011 to $1.1B in 2012.  The majority of these sales are for the Microsoft Dynamics AX ERP system.
  • The fastest growing ERP vendors  in 2012 include Workday, Cornerstone OnDemand, WorkForce Software, Ventyx and NetSuite.
  • Workday grew 114.7% in 2012, increasing revenue from $88.6M in 2011 to $190.3M in 2012.
  • Cornerstone OnDemand grew 61.5% in 2012, increasing revenue from $58.4M in 2011 to $94.3 in 2012.
  • WorkForce Software grew 39.8% in 2012, increasing revenue from $11.8M in 2011 to $16.5M in 2012.
  • NetSuite grew 34% in 2012, increasing revenue from $139.7M in 2011 to $187.1M in 2012.
  • SaaS-based ERP revenues are projected to grow from 12% worldwide in 2013 to 17% in 2017.  The following graphic from the report Gartner’s Market Trends: SaaS’s Varied Levels of Cannibalization to On-Premises Applications published: 29 October 2012 shows this progression.  You can find a research roundup at the previous post SaaS Adoption Accelerates, Goes Global in the Enterprise, which provides additional insights into which factors are driving SaaS adoption.

SaaS Revenue Market Sizing

Bottom line:  SAP’s continued market dominance depends on how well the company orchestrates it core ERP strategy with the following areas: BusinessObjects 4.0, its highly regarded analytics suite; social application adoption (StreamWorks and SuccessFactors Jam); the many Cloud-based initiatives they have including SuccessFactors and BusinessbyDesign; mobility platform wins;  and major wins with their SAP Sybase DBMS and HANA architectures.

10 Ways Cloud Computing Is Revolutionizing Manufacturing

manufacturing floorThe best manufacturers I’ve visited this year all share a common attribute: they are obsessed with making themselves as easy as possible to work with from a supply chain, distribution and services standpoint.  Many are evaluating cloud-based manufacturing applications including Enterprise Resource Planning (ERP) and several have adopted cloud-based applications across their companies.

With so much interest, there is much confusion as well.  I recently spoke with Cindy Jutras, founder and CEO of MintJutras.  Her firm has recently completed a survey of SaaS adoption in manufacturing, distribution and other industries.  She found the following:

  • 49% of respondents in the manufacturing & distribution industries do not understand the difference between single- and multi-tenant SaaS architectures.  Overall 66% of respondents to the survey did not know.
  • SaaS-based applications are 22% of all manufacturing and distribution software installed today, and will grow to 45% within ten years according to MintJutras.
  • The three most important characteristics of a SaaS solution in manufacturing and distribution include giving customers a measure of control over upgrades, consistent support for global operations and allowing for rapid and frequent upgrades.

Cindy Jutras Research May 8 2013

Why Manufacturers Are Looking To Cloud Computing  

Manufacturers are under constant pressure to increase accuracy, make process speed a competitive force, and capitalize on their internal intelligence and knowledge to make every supplier, distributor and service interaction count.  The manufacturers spoken and visited with to gain the following insights are in the high tech, industrial and aerospace and defense industries, where rapid product lifecycles and short time-to-market schedules are commonplace.

Cloud-based strategies give these companies the chance to bring their own innate intelligence and knowledge into every sales situation.  While on-premise systems could also do this, cloud-based systems were quicker to roll out, easier to customize and showed potential to increase adoption rates across resellers.

One manufacturing manager explained how during a new product launch the speed and volume of collaboration was so rapid on between suppliers and distributors that an allocation situation was averted.  That he said, made senior management believers.  These epiphanies are happening daily in manufacturing.

Based on my visits with manufacturers, here are the ten ways they are using cloud computing to revolutionize manufacturing:

  • Capturing and applying company-wide intelligence and knowledge through the use of analytics, business intelligence (BI), and rules engines.  For the many manufacturers who rely on build-to-order, configure-to-order and engineer-to-order strategies as a core part of their business models, using cloud-based platforms to capture knowledge and manage rules is accelerating. A key part of this area is mobility support for analytics, BI and rules engine reporting and analysis.
  • Piloting and then moving quickly to full launch of supplier portals and collaboration platforms, complete with quality management dashboards and workflows.  Among the manufacturers visited, those in high tech are the most advanced in this area, often implementing Vendor Managed Inventory (VMI) and demand management applications that deliver real-time order status and forecasts.
  • Designing in services is now becoming commonplace, making cloud integration expertise critical for manufacturers.  From simplistic services integration on iPhones to the full implementation of voice-activated controls including emergency assistance in the latest luxury cars, adding in services integrated to the cloud is redefining the competitive landscape of industries today.  Revising a product or launching an new product generation with embedded services can mitigate price wars, which is why many manufacturers are pursing this strategy today.
  •  Accelerating new product development and introduction (NPDI) strategies to attain time-to-market objectives. Using cloud-based platforms in high tech manufacturing is growing today as time-to-market constraints are requiring greater collaboration earlier in design cycles.
  • Managing indirect and direct channel sales from a single cloud platform tracking sales results against quota at the individual, group and divisional level is now commonplace across all manufacturers visited.  Dashboards report back the status by each rep and for sales managers, the profitability of each deal.
  • Using cloud-based marketing automation applications to plan, execute and most important, track results of every campaign.  Marketing is under a microscope in many manufacturers today, as marketing automation applications have promised to deliver exceptional results and many manufacturers are still struggling to align their internal content, strategies and ability to execute with the potential these systems promise.
  • Automating customer service, support and common order status inquiries online, integrating these systems to distributed order management, pricing, and content management platforms.  Manufacturing industries are at varying levels of adoption when it comes to automating self-service.  The cost and time advantages in high tech are the highest levels of adoption I’ve seen in visiting manufacturers however.
  • Increasing reliance on two-tier ERP strategies to gain greater efficiencies in material planning, supplier management and reduce logistics costs.  Manufacturers are also using this strategy to gain greater independence from a single ERP vendor dominating their entire operations.  Several manufacturers remarked that their large, monolithic ERP systems could not, without intensive programming and customization, scale down to the smaller operational needs in distributed geographic regions.  Cloud-based ERP systems are getting the attention of manufacturers pursuing two-tier ERP strategies.  AcumaticaCincomMicrosoftNetSuite and Plex Systems are leaders in this area of ERP systems.
  • Reliance on cloud-based Human Resource Management (HRM) systems to unify all manufacturing locations globally.  This often includes combining  multisite talent management, recruiting, payroll and time tracking.  Contract manufacturer Flextronics uses Workday to optimize workforce allocations across their global manufacturing centers for example.

Bottom Line:  Using cloud-based systems to streamline key areas of their business, manufacturers are freeing up more time to invest in new products and selling more.

How Cloud Computing Is Redefining the M&A Landscape

Cloud Computing M&AIn 2013, expect to see the pace of mergers and acquisitions for cloud computing, mobile and analytics technologies accelerate as software vendors look to fill gaps in their product and service strategies. This and other key insights of how cloud computing is reshaping the merger and acquisition landscape can be found in the latest Price Waterhouse Coopers (PwC) report published today.

The US Technology M&A insights: Analysis and Trends in US Technology M&A Activity 2013 provides an excellent overview of merger, acquisitions, private equity, divestures, cross-border transactions across the five key industry sectors.  The report, free for download, covers the Internet, IT Services, hardware and networking, software, and semiconductor sectors.

Enterprise Software Players: In Search of Sticky Revenue and Higher Margins

The major catalysts driving cloud deals forward in 2013 are enterprise software companies’ need to redefine their business models and find sources of sticky revenue that can replace for many of them, dwindling maintenance revenue streams.  Knowing that the annuity model of cloud computing works best with multiyear payments required at the beginning of a customer engagement, enterprise software companies are looking to strengthen this area of their product portfolios.  Third, the faster cloud acquisitions can be integrated into their legacy systems, the more upsell can be achieved with their large installed bases of customers.  The greatest challenge many of them face however is selling entirely new cloud applications to entirely new customers they’ve never sold to before.  The potential of these entirely new markets however is going to be a valuation multiplier in 2013 and beyond.

Here are the key take-aways from PwC’s report:

  • Software and Internet deals represented 57% of transactions closed in 2012, a figure that PwC has seen steadily grow over the last two years. Cumulative value for software and Internet deals represented 53% of total 2012 deal value, an increase from 51% in 2011. Software deals represented over a third of 2012 technology deals, generating 35% of deal volume and 36% of deal value for the year   A comparison of both years and technology sectors are shown in the following graphic:

Figure 1 PWC Report

  • PwC takes a cautionary, conservative tone in this report showing how overall IT spending growth finished the year at an anemic 1.2% while technology deal volumes and values dropped by just under 20% from the prior year.
  • The report cites Gartner and Forrester’s optimistic IT spending forecasts for IT growth predicting a recovery in 2013 followed by accelerating growth in 2014 according to Forrester.
  • PwC is seeing SaaS, mobile devices, analytics and Big Data as the drivers of current and future M&A growth and a fundamental shift in deal volumes to software and Internet deals based on these technologies.  The report says the most promising areas of M&A activity in 2013 are mobile application development start-ups who have the intellectual property it would take years for enterprise software companies to create on their own.
  • Analytics will move from being a differentiator to the cost of doing business, a key point made in the PwC analysis.  PwC claims that analytics M&A will accelerate across all enterprise software vendors as they seek to fill gaps in their product and service strategies, and position themselves for growth in specific areas of the emerging industries using Big Data.
  • PwC reports that monthly deal volumes for software remained relatively even throughout 2012, hovering at 8-9 transactions per month and averaging just over 20 per quarter. The average deal value of $433M for 2012 was slightly lower than 2011 levels of $438M but an increase in the number of deals in excess of $500M helped to keep average deal values high. The report also shows how 2012 saw 18 deals (21% of volume) in excess of $500M closed, the majority of which closed in the latter half of the year. Fourteen deals greater than $1B closed in 2012, an increase of 8 deals (133%) over 2011.  The following is a graphic comparing software sector deals by volume and value:
Figure 2 PWC Report

 Bottom line: The land grab is on for intellectual property in the fields of mobile application development, analytics and cloud computing as enterprise software vendors look to fill gaps in their product and service strategies.

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