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Posts from the ‘IaaS Forecast’ Category

Amazon Web Services Leading Cloud Infrastructure as a Service App Development

IaaS Magic QuadrantEvangelizing development on any cloud computing or enterprise platform is challenging, costly and takes a unique skill set that can educate, persuade, sell and serve developers at the same time.

The companies who excel at this exude technical prowess and as a result earn and keep trust.  For Cloud Infrastructure as a Service (IaaS) platform providers, getting developers, both at partner companies and at enterprise customers to build applications, is a critical catalyst for future growth.

Assessing Cloud Infrastructure as a Service Providers with Inquiry Analytics  

Using the Magic Quadrant for Cloud Infrastructure as a Service, 2012 published October 18, 2012 as the baseline and shown above from Rueven Cohen’s excellent post last year, the five leaders were compared using the Inquiry Analytics Statistics: Topic and Vendor Mind Share for Software, 4Q12 published March 13th of this year.  Analyzing the five leaders in the Magic Quadrant using Inquiry Analytics shows that Amazon Web Services (AWS) was 57.1% of inquiry share worldwide for application development  during the 4th quarter of 2012.

From 4th quarter 2011 to 4th quarter 2012, Amazon Web Services showed just over 10% inquiry gain against the other vendors listed as leaders in the quadrant.  Only five vendors can be compared at once using the Gartner Inquiry Analytics tool so the leaders were included in the comparison first.

cloud IaaS

A second pass through the Inquiry Analytics was done comparing Amazon Web Services to the other vendors in the quadrant.  AWS had 63.6% of inquiries in the application development category during the 4th quarter of 2012 compared to non-leader vendors in the quadrant who were listed in the Inquiry Analytics database.  It was surprising to find that a few of the vendors listed in the Cloud IaaS Magic Quadrant don’t have data available in the Inquiry Analytics Statistics: Topic and Vendor Mind Share for Software, 4Q12 indicating inquiries.  During this pass, Rackspace share of inquiries between the 4th quarter of 2011 to the 4th quarter of 2012 declined just over 5% and Dell declines approximately 2%.

Bottom line: The land grab for developers is accelerating on IaaS and will be a major factor in who establishes a long-term cloud platform for years to come.

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 Releases Their Hype Cycle for Cloud Computing, 2012

Enterprises are beginning to change their buying behaviors based on the deployment speed, economics and customization that cloud-based technologies provide.  Gartner cautions however that enterprises are far from abandoning their on-premise models and applications entirely for the cloud.

Based on an analysis of the Gartner Hype Cycle for Cloud Computing, 2012, the best results are being attained by enterprises that focus on a very specific strategy and look to cloud-based technologies to accelerate their performance.  Leading with a strategic framework of goals and objectives increases the probability of cloud-based platform success. Those enterprises that look to cloud platforms only for cost reduction miss out on their full potential.

The Hype Cycle for Cloud Computing, 2012 is shown below:

Cloudwashing and Inflated Enterprise Expectations

While the hype surrounding cloud computing may have peaked, cloudwashing continues to cause confusion and inflated expectations with enterprise buyers.  This just slows down sales cycles, when more straightforward selling could lead to more pilots, sales and a potentially larger market. Cloud vendors who have the expertise gained from delivering cloud platforms on time, under budget, with customer references showing results are starting to overtake those that using cloudwashing as part of their selling strategies.

Additional take-aways from the Gartner Hype Cycle for Cloud Computing include the following:

  • Cloud Email is expected to have a 10% adoption rate in enterprises by 2014, down from the 20% Gartner had forecasted in previous Hype Cycles.  This represents modest growth as the adoption rate of this category had been between 5 and 6% in 2011.
  • Big Data will deliver transformational benefits to enterprises within 2 to 5 years, and by 2015 will enable enterprises adopting this technology to outperform competitors by 20% in every available financial metric.  Gartner defines Big Data as including large volumes processed in streams, in addition to batch.  Integral to Big Data is an extensible services framework that can deploy processing to the data or bring data to the process workflow itself. Gartner also includes more than one asset type of data in their definition, including structured and unstructured content.  The Priority Matrix for Cloud Computing, 2012 is shown below:

  • Master Data Management (MDM) Solutions in the Cloud and Hybrid IT are included in this hype cycle for the first time in 2012.  Gartner reports that MDM Solutions in the Cloud is getting additional interest from Enterprise buyers as part of a continual upward trend of interest in MDM overall.  Dominant vendors in this emerging area include Cognizant, Data Scout, IBM, Informatica, Oracle and Orchestra Networks, are among those with MDM-in-the-cloud solutions.
  • PaaS continues to be one of the most misunderstood aspects of cloud platforms.  The widening gap between enterprise expectations and experiences is most prevalent in this market.  Gartner claims this is attributable to the relatively narrow middleware functions delivered and the consolidation fo vendors and service providers in this market.
  • By 2014 the Personal Cloud will have replaced the personal computer as the center of user’s digital lives.
  • Private Cloud Computing is among the highest interest areas across all cloud computing according to Gartner, with 75% of respondents in Gartner polls saying they plan to pursue a strategy in this area by 2014.  Pilot and production deployments are in process across many different enterprises today, with one of the major goals being the evaluation of virtualization-driven value and benefits.
  • SaaS is rapidly gaining adoption in enterprises, leading Gartner to forecast more than 50% of enterprises will have some form of SaaS-based application strategy by 2015.  Factors driving this adoption are the high priority enterprises are putting on customer relationships, gaining greater insights through analytics, overcoming IT- and capital budget-based limitations, and aligning IT more efficiently to strategic goals.
  • More than 50% of all virtualization workloads are based on the x86 architecture. This is expected to increase to 75% by 2015.  Gartner reports this is a disruptive innovation which is changing the relationship between IT and enterprise where service levels and usage can be tracked.

Bottom line: Gartner’s latest Hype Cycle for Cloud Computing  shows that when cloud-based platforms are aligned with well-defined strategic initiatives and line-of-business objectives, they deliver valuable contributions to an enterprise.  It also shows how Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) are the catalysts of long-term market growth.  The following slide from the presentation  High-Tech Tuesday Webinar: Gartner Worldwide IT Spending Forecast, 2Q12 Update: Cloud Is the Silver Lining (free for download) also makes this point.

Forecasting Public Cloud Adoption in the Enterprise

The economics of public cloud computing are accelerating the pace of change occurring in enterprise software today.

Many of the scenarios that Clayton Christensen insightfully describes in The Innovator’s Dilemma are playing out right now in many sectors of this industry, shifting the balance of purchasing power to line-of-business leaders away from IT.  True to the cases shown in the book, new entrants are bringing disruptive innovations that are being successfully used to attack the most price-sensitive areas of the market.  Winning customers at the low-end and making their way up-market, new entrants are changing the customer experience, economics and structure of the industry.  Salesforce.com is a prime example of how the insights shared in The Innovator’s Dilemma are alive and well in the CRM market for example.  This is an excellent book to add to your summer reading list.

Defining The Public Cloud

The National Institute of Standards and Technology (NIST) have defined the public cloud in their latest definition of cloud computing in their September, 2011 brief you can download here (The NIST Definition of Cloud Computing). The NIST defines public cloud as “the cloud infrastructure is provisioned for open use by the general public. It may be owned, managed, and operated by a business, academic, or government organization, or some combination of them. It exists on the premises of the cloud provider.”   In addition the NIST defines three models including Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS).  Gartner’s definition of public cloud computing is comparable yet includes Business Process as a Service (BPaaS) and Cloud Management and Security.

A quick check of the term public cloud on Google Insights shows the rapid ascent of interest in this area.  A graphic from Google Insights is shown below:

Public Cloud Adoption in the Enterprise 

In the many conversations I’ve had with CIOs and CEOs of manufacturing companies the role of cloud computing comes up often.  There’s a very clear difference in the thinking of CIOs who see their jobs as selectively applying technologies to strategic needs versus those who are focused on compliance and risk aversion.  The former see their enterprises moving to public and hybrid clouds quickly to better integrate with dealers, distributors and suppliers at a strategic level.

The public cloud’s pervasiveness in the enterprise is growing rapidly.  This market dynamic is reflected in the report, Forecast: Public Cloud Services, Worldwide, 2010-2016, 2Q12 Update (ID:G00234814).  Gartner breaks out forecasts into the areas of Cloud Business Process Services/Business Process as a Service (BPaaS), Application Services/Software as a Service (SaaS), Application Infrastructure Services/Platform as a Service (PaaS), System Infrastructure Services/Infrastructure as a Service (IaaS) and Cloud Management and Security Services.  Highlights from the report are presented in the following five areas:

Cloud Business Process Services/Business Process as a Service (BPaaS)

  • Gartner is predicting that BPaaS will grow from $84.1B in 2012 to $144.7B in 2016, generating a global compound annual growth rate of 15%.
  • Of the eight subsegments Gartner is tracking in their BPaaS forecast, Cloud Payments (17.8%) Cloud Advertising (17.1%) and Industry Operations (15.1%) are expected to have the greatest compound annual growth rates (CAGR) in revenues generated by 2016.
  • In terms of revenue generated, Cloud Advertising is projected to grow from  $43.1B in 2011 to $95B in 2016, generating 17.1% CAGR in revenue growth through 2016.
  • Cloud Payments are forecast to grow from $4.7B in 2011  to $10.6B in 2016, generating a CAGR of 17.8% worldwide.
  • E-Commerce Enablement using BPaaS-based platforms is expected to grow from $4.7B in 2011 to $9B in 2016, generating a 13.6% CAGR in revenue globally.

Application Services/Software as a Service (SaaS)

  • SaaS-based applications are expected to grow from $11.8B in 2012 to $26.5B in 2016, generating a CAGR of 17.4% globally.  Gartner tracks ten different categories of SaaS applications in this latest forecast with CRM, ERP, and Web Conferencing, Teaming Platforms, and Social Software Suites being the three largest in terms of global revenue growth.
  • The three fastest-growing SaaS areas include Office Suites (40.7%), Digital Content Creation (32.2%) and Business Intelligence applications (27.1%) having the highest CAGRs from 2011 through 2016.
  • SaaS-based CRM will see the largest global revenue growth of all categories, increasing from $3.9B in 2011 to $7.9B in 2016, achieving a 15.1% CAGR worldwide.
  • Web Conferencing, Teaming Platforms, and Social Software Suites will grow from $2B in 2011 to $3.4B in 2016, generating an 11.2% CAGR.  Gartner is including Enterprise 2.0 applications in this category.
  • SaaS-based ERP is forecasted to grow from $1.9B in 2011 to $4.3B in 2016, achieving a 17.3% CAGR.
  • Supply Chain Management (SCM) is an area that Forrester, Gartner, IDC and others have predicted significant growth in.  Gartner’s latest forecast for SaaS-based SCM is $1.2B spent in 2011 growing to $3.3B in 2016, representing a 21.1% CAGR.

Application Infrastructure Services/Platform as a Service (PaaS)

  • Gartner forecasts the worldwide enterprise market for PaaS platforms will grow from $900M spent in 2011 to $2.9B in 2016, representing a 26.6% CAGR.
  • Growth rates by PaaS subsegment include the following: Application Development (22%), Database Management Systems (48.5%), Business Intelligence Platform (38.9%) and Application Infrastructure and Middleware (26.5%).
  • Application Infrastructure and Middleware is expected to be the largest revenue source in PaaS for the next four years.  Gartner reports this subsegment  generated $649M in 2011, projected to grow to $2.1B in 2016, generating $1.5B in revenue and a 26.5% CAGR.

System Infrastructure Services/Infrastructure as a Service (IaaS)

  • With a projected CAGR of 41.7%, this segment is the fastest growing of the five Gartner included in their public cloud forecast.  From $4.2B in revenue generated in 2011 to $24.4B in 2016, IaaS is expected to grow by just over $20B in the forecast period globally.
  • CAGR by IaaS segment from 2001 to 2016 include Compute (43.2%), Storage (36.6%) and Print (16%).
  • The Compute subsegment is expected to see the greatest revenue growth globally, growing from $3.3B in 2011 to $20.2B in 2016, generating a 43.2% CAGR.

Cloud Management and Security Services

  • Comprised of Security, IT Operations Management and Storage Management, Cloud Management and Security Services generated $2.3B in 2011 with a forecast of $7.9B in 2016, generating a 27.2% CAGR.
  • IT Operations Management (38.2%), Storage Management (30.6%) and Security (23.7%) each have relatively high CAGRs through 2016.

Bottom line:  Of the five areas Gartner includes in their forecast, BPaaS  and its subsegments show trending towards greater support for enterprise-wide transaction and e-commerce management. With 76% of the entire 2012 public cloud forecast being in the BPaaS segment, it is clear Gartner is seeing strong interest on the part of enterprise clients to spend in this area.

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.

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.

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)

Gartner Releases Hype Cycle for Networking and Communications, 2011

It is ironic that a framework meant to define the relative level of hype associated with new technologies adds in seven new ones, an increase of 20% within just a year.

Are all those technologies really significant enough to be included in a framework whose purpose is to cut through hype?   With less than 1% adoption throughout enterprises for over 50% of these technologies, it may be time for a more rigorous screening process.

After reading this Hype Cycle several dominant themes emerge. They include modernization of IT infrastructure to support greater scalability and security, consolidation of IT hardware investments, recognition of hybrid clouds being a central part of networking strategies, and location-based technologies having the potential to re-define logistics, supply chain and customer service strategies.  That’s a lot of ground to cover in a single Hype Cycle, and to be fair, Gartner says this is an aggregated view of the market.  Yet there is still the issue of technologies being included that have not shown any real value to enterprises yet.

Presented below is the Hype Cycle for Networking and Communications, 2011 and key take-aways.

Source:  2011 Gartner, Inc.  Hype Cycle for Networking and Communications, 2011 David A. Willis, Publication Date: 24 August 2011 ID Number: G00216400

Key Take-Aways:

  • Gartner is predicting the technologies that will experience the fastest growth include Virtual I/O, Gigabit Ethernet, Long-Distance Live Virtual Machine Migration, Energy Efficient Ethernet,  Context Delivery Architecture, and Video Telepresence.
  • Hosted Virtual Desktops, OpenFlow (technology also known of as software-defined networking (SDN), Transcoderless and Software-Based Videoconferencing Infrastructures, Mobile Enterprise Applications via SaaS, 802.11ad (Wi-Fi at multi-Gigabit speeds) , 802.16-2009 (consolidates dated WiMAX standards) and Mobile Satellite Services are the latest technologies Gartner has added to this Hype Cycle.  Of these, Mobile Enterprise Applications with SaaS have the most significant potential effect on Total Cost of Ownership (TCO) on CRM and customer-facing enterprise applications.  None of these have greater than 1% adoption in the enterprise today however.
  • Gartner is projecting over 1B smartphones and media tablets will be sold globally by 2015.  This explosive growth is forcing enterprises to react much faster than they initially expected to mobile security, mobile device management, and application support is an essential services.  A recent survey completed by Gartner indicates that CIOs fully expect to support up to three mobile operating systems by 2012 and that 20% of devices will be employee-owned by that year.  Presented below is their forecast for smartphones and media tablets through 2015. The following forecast is from their report, Emerging Technology Analysis: Mobile Business Intelligence, 13 July 2011, ID:G00214124 by Bhavish Sood, Andreas Bitterer, James Richardson.
Worldwide Smartphone and Media Tablet Shipments, 2010-2015
  • Mobile Enterprise Applications via SaaS will see the greatest growth in vertical or specialized and Small & Medium Business (SMB) segments.  It is evident from their analysis that TCO estimates may confuse enterprise buyers into thinking initial set-up costs for SaaS will lead to a lower price than licensed, premise-based applications.  This will not always be the case despite the hype around SaaS economics today.  This Hype Cycle could have been stronger and more prescriptive for enterprise IT buyers by discussing SaaS economics in greater detail.
  • Gartner goes into great depth on location-aware technology yet doesn’t make that convincing of a connection to enterprise-level strategies, initiatives and programs.  There is much technological discussion on GPS, assisted GPS (A-GPS), Wi-Fi, Enhanced Observed Time Difference (E-OTD) and Enhanced GPS (E-GPS) yet hardly any analysis of how this fits into the enterprise.
  • Gartner sees the majority of enterprise cloud-based systems being hybrid.  The Hype Cycle provides a glimpse into private and public clouds being integrated together for workload sharing.  There needs to be more focus on how this will work for a business process standpoint to be of value however.
  • Mobile consumer application platforms (MCAPs) will increasingly become multi-platform based.  Gartner is predicting that Messaging-Based, Browser-Based, Thick Clients/Rich Clients and Streaming Audio/Video will dominate consumer application platforms within the next two years.  They also see this area as the most transformational of all technologies analyzed in the Hype Cycle.

Bottom line: The best way to deflate hype in any industry is to insist on real, measurable results.  From choosing communications and networking solutions to including nascent technologies in a research framework, results attained by real customers are all that really matter.

Sizing the Public Cloud Services Market

Gartner’s latest forecast of the public cloud services market predicts that by 2015, this worldwide market will be worth $176.8 billion, achieving a five-year compound annual growth rate (CAGR) of 18.9%.

Their latest forecast is based on defining the public cloud services market from revenue generation, not an IT spending perspective.  This is in contrast to the public cloud services forecast IDC also released this week, stating that public IT cloud services spending would reach $72.9B by 2015.  Of the two approaches, the one that is revenue-based delivers a more granular, detailed look at Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS) challenges and opportunities for growth (see tables below for details).  The Gartner report, Public Cloud Services, Worldwide and Regions, Industry Sectors, 2010-2015, 2011 Update, was published on June 29, 2011.

Gartner’s decision to base their methodology on revenue generated versus pure IT spending opens up the potential to evaluate entirely new business models based on services growth.  The forecast is based on revenue either directly or indirectly generated from the sales of services and from sales to enterprise or consumers.  Business process services are defined in this forecast as any process that can be delivered as a service over a scalable, elastic and secure connection over the web.  This includes advertising, payroll, printing, e-c0mmerce, in addition to applying applications and systems infrastructure. Presented below are key take-aways and analysis from the reports.

Key Take-Aways

  • By 2015, the total market will be worth $176.8 billion, which represents a five-year compound annual growth rate (CAGR) from 2010 of 18.9%. The largest part of this is revenue derived from advertising that is used to provide IT services ($77.1 billion in 2015), which represents an addition to the total size of the IT market.
  • The transition of software from licensed to service models continues, but it has yet to reach breakthrough proportions (9.6% in 2010, rising to 13.8% in 2015). Traditional outsourcing services also continue to transition to cloud delivery models, involving a high degree of service standardization. Gartner continues to take a conservative view of revenue recognition in terms of SaaS adoption compared to other research firms as is shown in the following table.

  • Application and systems infrastructure are projected to grow the fastest in terms of revenue generation through 2015, with advertising-related revenue being a significant proportion of the total public cloud services market through the forecast period.  The following table breaks out public cloud revenue globally by business process services, applications, application infrastructure and systems infrastructure.
  • The high-tech, manufacturing and financial services sectors and the public sector will continue to be the most-aggressive adopters of cloud services through 2015.  Presented below is a table comparing cloud services revenue by industry sector.
  • The North American market continues to be, by far, the largest regional market representing 60% of the global market currently, but growth in China remains of interesting potential.
  • Financial services organizations in aggregate represent the largest users of public cloud services.
  • Some smaller countries will demonstrate very high growth (more than 25%) in e-commerce cloud services, because of high growth in underlying retail e-commerce. The Census Bureau of the U.S. Department of Commerce estimates that e-commerce sales in the fourth quarter of 2010 accounted for 4.3% of total U.S. retail sales.

Bottom line: Taking a revenue-based approach to defining cloud services shows how critical the application and system infrastructure is to overall market growth.  Gartner predicts the fastest growing revenue generating segment of public clouds will be storage services (89.5%) followed by Compute Services (47.8%) and supply management (39.5%).

Roundup of Cloud Computing and Software-as-a-Service (SaaS) Forecasts, June 2011

The gap is beginning to close between the value SaaS-based applications have the potential to deliver and what customers are achieving.

While SaaS-based software vendors are making major strides in integration, reliability, system performance and usability, it is the enterprise buyer’s skepticism and high standards forcing the market to move forward.  The latest series of market forecasts and surveys reflect greater use of actual customer results and a quickening pace of progress.

Performance-Driven Cultures and SaaS Adoption

Measuring business outcomes using industry standard and company-specific metrics typifies companies getting the best results.  A lack of clarity or confusion around strategy based goals leads to low adoption and eventual abandonment of SaaS initiates.  Sales and sales operations VPs are winning the debates against home-grown or internal system development based on speed of deployment, usability and integrated analytics of SaaS applications.  Based on the surveys and research completed this year, the best SaaS implementations are designed on a firm foundation of measurable results including quantifying risk.

Performance-driven cultures have a higher success rate with SaaS pilots, are more thorough in defining their own infrastructure (IaaS) and platforms (PaaS), and also know what success looks like from a metrics-driven standpoint.   The graphic, Performance-Driven Culture: The Metrics Continuum, shown to the left, was originally published in Gartner’s Predicts 2011: Enterprise Architecture Shifting Focus to Business Value Outcomes Report, November, 11, 2010 Philip Allega, et.al supports this point.  Please click on the graphic to expand it for easier reading.

Hype is Prolonging the Peak of Inflated Expectations

The bottom line is all really matters is measurable, repeatable performance when enterprises evaluate their SaaS strategies.  Many marketing, sales, sales operations and service VPs must defend their choice of SaaS over legacy system upgrades or internal system development.  Resistance to change and complacency in IT is slowly killing many companies who must step up and keep pace with their customers to survive. People are betting their jobs on this technology.  Many in marketing, sales and service want to know how to improve and measure business strategy performance.  That’s one of the main inflexion points in SaaS marketing today.

 The reality for enterprise users is that nothing gets purchased, no matter how wonderful the claims, unless there are strong metrics that link them back to business performance.  That’s what is deflating hype in this market faster than any other factor.  You can download the Gartner Hype Cycle for Cloud Computing 2010 from the link (no opt-in).  Please click on the graphic to download the Gartner Hype Cycle for Cloud Computing 2010.

Here are short summaries of the latest cloud computing and SaaS forecasts published recently:

  • Gartner is forecasting enterprise-based spending for Software-as-a-Service (SaaS) applications  will grow at a 16.3% compound annual growth rate through 2015. SaaS will grow at nearly double the pace of licensed enterprise applications during the forecast period.  Licensed applications will grow at a n 8.5% CAGR during the same period. The following  table, Total Software Revenue Forecast for SaaS Delivery Within the Enterprise Application Software Markets, 2007-2015 (Millions of U.S. Dollars) compares enterprise software spending by application category for the forecast period. Source: http://my.gartner.com/portal/server.pt?open=512&objID=260&mode=2&PageID=3460702&id=1728009&ref=

     Total Software Revenue Forecast for SaaS Delivery Within the Enterprise Application Software Markets, 2007-2015  (Millions of U.S. Dollars) 

     

  • The Asia-Pacific (APAC) Software as a Service (SaaS) market is expected to grow from $390M in 2008 to $4.3B in 2015, at an estimated CAGR of 41.0% from 2008 to 2015. The appeal and reach of software as a service (SaaS) continue to grow rapidly among enterprises in Asia Pacific. Australia & New Zealand (ANZ) is the largest regional SaaS market in Asia Pacific. SAAS is gaining momentum in ANZ because of the markets resemblance to the North American market with better broadband penetration, availability of applications getting delivered in SaaS mode and overall greater adoption of IT in general. Source: http://professional.wsj.com/article/TPMTPW000020110214e72e002k2.html
  • Cloud middleware systems markets at $1.5B in 2010 are forecast to reach $4.3B, worldwide by 2017.  Cloud computing middleware represents the base for development of all cloud computing infrastructure as it supports systems integration and systems self-provisioning.  Market leaders are predicted to be Akamai, IBM, Google, Microsoft, and Oracle. Source: http://wintergreenresearch.com/
  • Infonetics Research forecasts the overall managed security services market, including CPE, SaaS, and cloud services, to reach just under $17B by 2015.  SaaS and cloud-based security services are expected to make up close to half of the overall managed security services market opportunity by 2015 Worldwide SaaS revenue is forecast to grow dramatically over the next few years, with a compound annual growth rate (CAGR) of 23% from 2010 to 2015.  Source: WSJ Journal 
  • Cloud service adoption is up 61% from 2010 and 45% of multinational corporations (MNCs) already use cloud sourcing for at least some elements of key IT services.  Cable & Wireless and Ovum partnered to create this white paper, full of excellent insights and research data: http://www.cw.com/assets/content/pdfs/resource/ovum-cloud-wp.pdf
  • 60 percent of companies worldwide said cloud computing is a top IT priority for the next year, the sentiment is even higher in the C-suite with three in four (75 percent) C-level executives reporting cloud computing as top of mind.  According to an Avanade Research and Insights’ Global Survey: Has Cloud Computing Matured? Third Annual Report, June 2011, there is also significant purchasing of cloud services without the IT department’s knowledge, with nearly 20% of all purchases never reviewed with the CIO. Source: Avanade Research Report  
  • By 2014, cloud computing services will grow to a $45B industry a year (IDC) and SaaS to grow at 21% CAGR to touch $17.6B.  Microsoft recently published the following presentation, Grow Your Business with Cloud – Are You Ready?  You can download a copy of the presentation by clicking on the presentation to the right.
  • The global cloud computing market is expected to grow from $37.8B in 2010 to $121.1 B in 2015 at a  CAGR of 26.2% from 2010 to 2015 according to Yankee Group. SaaS is the largest segment of the cloud computing services market, accounting  as it did for 73% of the market’s revenues in 2010. The IaaS and PaaS markets are still at a nascent stage and  currently hold a small share of the Cloud computing services market. However, these are expected to witness  moderate growth due to their flexibility and cost effectiveness.Source: CSS Corp. Analysis.
  • Project and Portfolio Management (PPM) software emerged in 2009 as a fast-growing market for SaaS, with a compound annual growth rate (CAGR) of more than 40% projected for the next five years according to Gartner. PPM software consumption environments are changing radically, with hosted and SaaS options — as a result, most traditional on-premises vendors are forced to provide SaaS alternatives to counter new entrants and SaaS-only PPM vendors.  Source:  Competitive Landscape: SaaS Project and Portfolio Management Software, Worldwide, 2011 published 6 April 2011.
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