IDC’s Chris Ilg, Director of Market Research, Infrastructure, Channels and Alliance discusses the impact the cloud will have on the channel moving forward.
Key points Chris makes during this video include the following:
- Resellers see private clouds as a great opportunity for value-added services and many are making the shift away from selling purely hardware as a result.
- Public Cloud Services providers are actively recruiting resellers as there is a land grab for market share right now.
- Professional Services is the greatest profit opportunity, with the reseller being the trusted advisor to move applications into the cloud and provide legacy system integration.
- Resellers need to move away from hardware and software margins now to stay financially viable; IDC surveys show a short runway to the move to services before a reseller shakeout begins.
- Converged architectures and convergent infrastructures are acting to disintermediate resellers in the short term according to IDC.
- Emerging opportunities for resellers today include unified communications and collaboration, mobile computing including tablets, security services and consulting, and digital signage.
- Distributors need to get beyond their traditional role of pick, pack, and ship operations and become knowledge leaders for the channel, delivering strategic services in the process. Providing guidance to resellers on how to make the transition to cloud services is critical.
- Vendor partner programs can be confusing and difficult to navigate. Distributors need to be the leaders on these programs, especially on certifications and specializations on behalf of resellers.
- Solutions Distributor is a term being used more and more as these businesses seek to differentiate from their traditional logistics and pick, pack and ship operations. Ingram Micro and Tech Data investing in advanced technologies divisions that set the foundation for services selling by resellers are cases in point. The goal of these divisions is to call at high levels in enterprises and sell services and programs that can scale across an entire business instead of just selling hardware or software.
- M&A activity is picking up in distribution to attain global reach and set the foundation for future Cloud Services selling.
A recent report published by Standard & Poor’s Equity Research Services on the computer software industry makes for interesting reading.
Zaineb Bokhari, Application Software Analyst authored the 47-page report. He has shown how the software industry is going through a fundamental restructuring due to the impact of SaaS, open source, and the many variations in licensing programs.
His analysis also shows how these factors taken together form a powerful catalyst of long-term disruption to business models. At one point, the study predicts the end of perpetual licensing due to the time-to-value contributions of SaaS-based applications. The report is available for download to Equity Research Services clients, including many college and university online libraries that have Standard & Poor’s subscriptions.
Here are the key take-aways from reading this report:
- IDC expects the market for global packaged software to grow at a compound annual growth rate (CAGR) of 5.8% from 2009 to 2014. Over the same period, IDC projects software-as-a-service will grow at a 25.3% CAGR.
- Standard & Poor’s reports that the SaaS category is still dwarfed by traditional packaged software, which IDC sized at $272 billion in 2009 (versus $13.1 billion for SaaS).
- According to IDC’s forecasts, the size of the SaaS will rise from just under 5% of the size of the packaged software market in 2009 to more than 11% by 2014.
- Standard & Poor’s expects corporate spending on enterprise software and related maintenance to grow in the low to mid-single-digit range (i.e., 3%–6%) in 2010, with some segments expanding at above-average levels.
- Overall revenues from SaaS delivery models reached $13.1 billion in 2009, a growth rate of 34.2% from 2008 according to IDC. IDC expects this revenue to rise to $40.5 billion by 2014, a compound annual growth rate (CAGR) of 25.3%. This is dwarfed by the $272 billion that IDC believes was spent globally on software in 2009.
- Application development and deployment is projected to have the most rapid growth of all segments, attaining a 39.2% CAGR from 2009 – 2014. Please see the table below, Worldwide Software-as-a-Service Revenues Forecast by Segment for a year-by-year breakout of this category.
- Infrastructure software is forecasted to grow at a 27.4% CAGR through 2014, totaling 11,345 instances by 2014 according to IDC. The year-by-year breakouts are also included in the following table.
- Applications are expected to have 20.4% CAGR through 2014 based in units and attain a 50.8% market share of all SaaS segments by 2014.
Bottom line: Enterprise software pricing models must change to stay in step with customers’ expectations of more value for their maintenance and licensing fees. The evolving economics of cloud and SaaS-based application deployment are in the process of permanently re-ordering enterprise software.
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Despite much of the hype around cloud computing and its promised ability to transform businesses, an article in Financial Times, Cloud computing in businesses shows how these technologies are redefining tax services’ business models. The report published today provides insights into how ADP Tax Services Division can now profitably sell tax services to medium-sized companies for the first time.
Accessing New Markets With a Standardized Business Model
Standardizing their tax services and delivering them over cloud-based architectures has allowed ADP to entire markets that were not accessible before. Previously, ADP relied on a professional services model based on billable hours. While very profitable in larger businesses, the billable hours model could never scale into the medium business market ADP sees as critical to their growth.
The report also discusses how IBM is revamping its cloud strategy and includes analysis of cloud adoption by Frank Gens of International Data Corporation (IDC).
Bottom line: What’s insightful about this report is that it concentrates on which business processes can be streamlined first and made more effective using cloud technologies.
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Bottom line: The economics of enterprise software are about to go through a major shift, forcing software vendors to be more focused on how to deliver value at the business strategy level than ever before.
International Data Corporation (IDC) does a consistently excellent job summarizing their IT predictions and then regularly critiquing them throughout the year.
In the following five minute video, Frank Gens, Senior VP and Chief Analyst, discusses the top10 predictions most impacting IT in 2010. Included is an assessment of cloud computing’s extensive adoption and growth. If you are interested in downloading the predictions please visit the microsite IDC has created for this series. It’s excellent.