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Posts from the ‘PaaS Forecast’ Category

North Bridge Venture Partners Future Of Cloud Computing Survey: SaaS Still The Dominant Cloud Platform

6-19-2013-4-19-15-AM-300x223North Bridge Venture Partners and GigaOM Research released the results of their third annual Future Of Cloud Computing Survey today, providing a glimpse into cloud computing adoption trends, inhibitors and drivers of long-term growth.

This year’s survey included 855 respondents selected across business users, IT decision makers and cloud platform and application vendors.  North Bridge and GigaOM Research report that a third of respondents are C-level executives in their organizations.

You can view a copy of the report results here from SlideShare.

The following are key take-aways from the report:

  • Cloud adoption continued to rise in 2013, with 75%  of those surveyed reporting the use of some sort of cloud platform – up from 67% last year. That growth is consistent with forecasts from GigaOM Research, which expects the total worldwide addressable market for cloud computing to reach $158.8B by 2014, an increase of 126.5% from 2011.  The survey also shows significant growth is yet to come in SaaS adoption for business systems and IT management.

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  • 63% of those surveyed report Software-as-a-Service (SaaS) is in use in their companies, growing 15% over 2012.  45% are using Infrastructure-as-a-Service (IaaS) today, attaining a growth of 29% from last year.  Platform-as-a-Service (PaaS) is expected to grow the fastest over the next five years, with 72% of respondents saying they expect to use PaaS in their organizations.
  • The survey results also included cloud segments and overall growth analysis forecasts from 451 Research Market Monitor Report.  The graphic showing CAGRs by IaaS, PaaS and SaaS is shown below, with comparisons of 2012 results and 2016 market forecasts.

  • 52% of organizations are using cloud-based applications to advance business priorities, compared with 36% that use applications that advance IT initiatives.
  • CRM, marketing (including marketing automation) social business & collaboration and file sharing cloud-based applications are in use by more than 50% of all organizations in the sample.
  • North Bridge Venture Partners reports that cloud investments by venture capitalists totaled $1.6B in 2010, increasing to $2.4B in 2011.  Investments in 2012 dropped to $1.8B and through May, 2013, venture-based investments in cloud computing application and services providers totaled $281M.  Subscription fee-based business models dominate with 77% of cloud vendors relying on this strategy.
  • Gaining greater business agility (54.5%), scalability (54.3%) and cost (48%) are the three main drivers of cloud adoption today according to the survey results.  Mobility was mentioned by 25% of respondents as a major driver for adopting cloud applications and platforms, behind cost.
  • Security concerns (46%), vendor lock-in (35%), interoperability (27%), concerns over reliability (22.3%) and complexity (21%) are the top inhibitors to cloud adoption.  Regulatory compliance (30%) and privacy (26%) are he next most frequently mentioned inhibitors to cloud computing adoption according to the survey.
  • 39% expect to increase training, and 17% expect to hire outside resources as a result of increased cloud adoption.
  • Amazon (14.3%), Microsoft (10.96%) and Google (7.88%) are the three most used cloud platforms by the organizations who responded to the survey.

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.

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.

SaaS-based Analytics and Business Intelligence Market Update, August 2011

Challenging, uncertain economic times accelerate sales cycles and lead to more closed deals for business intelligence software providers.  Companies get an urgency to reduce costs and risks, relying on the insights gained from these applications.

There’s an interesting dichotomy starting to emerge in how experts and analysts define just how these markets will mature however.  Both agree that economic uncertainty are growth catalysts yet they diverge on adoption rates, roadblocks, and which analytics and BI technology will dominate in the years ahead.

This week I read Balancing Custom And Packaged Apps In Your Application Portfolio Strategy by George Lawrie, Mike Gilpin and Adam Knoll from Forrester and the latest Hype Cycle of Business Intelligence, 2011 by a collection of Gartner authors led by Andreas Bitterer.  I’ve summarized the key points of each below.

Forrester Sees SaaS Applications Overtaking Custom Application Development

Forrester sees SaaS-based applications starting to replace in-house custom application development, gathering momentum through 2013.  Gartner, with their Hype Cycle for Business Intelligence, 2011 just released this week, shows BI platforms having greater near-term benefit than SaaS-based analytics and BI.  Custom application development projects are going to face continued pressure to keep up with business requirements that SaaS applications are proving able to handle more effectively and economically than ever before.

In-house development makes more sense for specific analytics and reporting requirements,  yet will continually be eroded by SaaS-based applications that can meet most requirements at a lower cost.  Forrester has in the past said SaaS-based adoption of analytics applications in general and predictive applications specifically would be very slow due to data integration challenges.  This study points to a potential shift in their mindset, as the data shows SaaS-based analytics beginning to replace custom in-house developed applications.

Here are the key take-aways from the report:

  • Analytics processes are supported 79% of the time with custom application development.  Procure-to-pay (33%) and record-to-report (33%) are the second-most supported.  Multiple responses were allowed in the survey.
  • When asked which process areas they are automating with SaaS, analytics (33%), record-to-report (18%), order-to-cash  (15%), and purchase-to-pay (12%) were the most common responses.  There was a small sample size on the Forrester report and the most startling insight was how quickly respondent companies plan to migrate from custom application development to SaaS-based analytics and BI.
  • Nearly 50% of the respondents to the Forrester survey have between five and 19 SaaS-based applications today with 18% expecting to have 35 or more by 2013.  In addition 63% of respondents expect to deploy between five and 34 SaaS-based applications by 2013, a significant shift in just two years.
  • 36% of survey respondents say their  SaaS applications run completely standalone.  Another 36% mention they use a combination of on-premises Master Data Management (MDM) and process integration tools.  Ironically only 3% are deploying their applications on cloud-based MDM or process integration-based platforms.

Gartner’s Hype Cycle for Business Intelligence, 2011

Unlike the hype cycle for cloud computing, this hype cycle has fewer technology categories (25), a narrative firmly grounded in business process and strategy, and more practical and pragmatic insights versus just theoretical.  At 50 pages it’s  quick read and while there are many excellent points made, I have summarized the key take-aways pertaining to the highest hype points and SaaS adoption below:

  • Mobile Business Intelligence (BI) is the latest entry to the Hype Cycle for Business Intelligence based on the massive hype around analyzing locational and application data.  The hype surrounding the Apple iPad Series, Google Android and other tablet and smartphone platforms has made this one of the most hyped areas of the last year according to the analysis.
  • Consumerization, Decision Support, analysis of non-traditional data and “Big Data” are the areas of the greatest innovation today.  The hype cycle points to search, mobile, visualization and data discovery being the catalyst of Consumerization.  Predictive analytics, which is on the Slope of Enlightenment on this latest hype cycle, is critical to decision support.  The non-traditional and “Big Data” area of innovation is further supported by content, text analytics, in-memory DBMSs and columnar DBMSs.
  • SaaS-based Business Intelligence is at the apex of the Peak of Inflated Expectations yet will continue to have low adoption rates.  Gartner believes that the  lack of trust in third parties managing confidential data, and the inertia and fear many companies have in moving to a new architecture are slowing adoption.  This is in contrast to the survey Forrester released this week showing analytics being one of the most popular SaaS-based applications planned by 2013 in their base of respondents.
  • Gartner sees SaaS-based Business Intelligence of the most value to midsize and smaller organizations who lack IT staff yet have very specific, targeted information needs.  Website analytics, social media monitoring, dashboards, predictive analytics and Excel as a BI front-end all apply.  Both Forrester and Gartner agree on this point and see this type of custom development going away quickly internally.
  • There is a massive amount of hype surrounding in-memory computing, particularly from SAP at its Sapphire conferences .  Gartner believes that SAP’s vision of in-memory computing exceeds  in-memory analytics to include analytical and transactional processing.  As a result, In-Memory Database Management Systems are at the Peak of Inflated Expectations.


Source: Hype Cycle for Business Intelligence, 2011, Published 12 August 2011 | ID:G00216086 By Andreas Bitterer.  Gartner, Inc.

What Both Agree On

Forrester’s survey shows SaaS eventually replacing custom application development while Gartner’s Hype Cycle for Business Intelligence shows the practical, pragmatic technologies including dashboards, predictive analytics combined with the more complex Business Activity Monitoring (BAM), Business Intelligence Platforms, and Data-Mining Workbenches delivering the most value.  Despite these differences, both agree on the following:

  • The overall market for BI, Analytics and Performance Management continues to grow at between 8 to 12% per year depending on the forecast used.  The following forecast is from the report  Market Trends: Business Intelligence, Worldwide, 2011-2014, 7 June 2011 | ID:G00213483 by Dan Sommer and James Richardson.
Source: Market Trends: Business Intelligence, Worldwide, 2011-2014, 7 June 2011 | ID:G00213483 by Dan Sommer and James Richardson
  • 2011 continues to see large, strategic deals for analytics and BI closing more rapidly than they have in the past.
  • SaaS-based analytics and BI continues to gain a greater share of spending in midsize and smaller companies.  Both also agree that the proliferation of smaller SaaS-based analytics and Bi vendors concentrating on a specific niche have successfully displaced in-house custom development of competitive applications.  Trust in the smaller vendor, their track record, customer references and financial viability are what are winning deals for SaaS-based analytics and BI software providers today.
  • The market transition from build to buy is now in full force as budgets become available again.  This is key assumption of both analyses and means that smaller, more niche-oriented SaaS-based analytics and BI vendors stand a chance to get new reference accounts and grow, despite a challenging economy.

Gartner Releases Their Hype Cycle for Cloud Computing, 2011

Calling the hype around cloud computing “deafening”, Gartner released their annual hype cycle for the 34 different technologies in a 75 page analysis today.  You can find the Hype Cycle at the end of this post and I’ve provided several of the take-aways below:

  • The industry is just beyond the Peak of Inflated Expectations, and headed for the Trough of Disillusionment. The further up the Technology Trigger and Peak of Inflated Expectations curve, the greater the chaotic nature of how technologies are being positioned with widespread confusion throughout markets. The team of analysts who wrote this at Gartner share that conclusion across the many segments of the Hype Cycle.
  • Gartner states that nearly every vendor who briefs them has a cloud computing strategy yet few have shown how their strategies are cloud-centric. Cloudwashing on the part of vendors across all 34 technology areas is accelerating the entire industry into the trough of disillusionment. The report cites the Amazon Web Services outage in April, 2011 as a turning point on the hype cycle for example.
  • Gartner predicts that the most transformational technologies included in the Hype Cycle will be the following: virtualization within two years; Big Data, Cloud Advertising, Cloud Computing, Platform-as-a-Service (PaaS), and Public Cloud computing between two and five years; and Community Cloud, DevOps, Hybrid Cloud Computing and Real-time Infrastructure in five to ten years.
  • There continues to be much confusion with clients relative to hybrid computing.  Gartner’s definition is as follows ”Hybrid cloud computing refers to the combination of external public cloud computing services and internal resources (either a private cloud or traditional infrastructure, operations and applications) in a coordinated fashion to assemble a particular solution”. They provide examples of joint security and management, workload/service placement and runtime optimization, and others to further illustrate the complex nature of hybrid computing.
  • Big Data is also an area of heavy client inquiry activity that Gartner interprets as massive hype in the market. They are predicting that Big Data will reach the apex of the Peak of Inflated Expectations by 2012.  Due to the massive amount of hype surrounding this technology, they predict it will be in the Trough of Disillusionment eventually, as enterprises struggle to get the results they expect.
  • By 2015, those companies who have adopted Big Data and extreme information management (their term for this area) will begin to outperform their unprepared competitors by 20% in every available financial metric. Early use cases of Big Data are delivering measurable results and strong ROI.  The Hype Cycle did not provide any ROI figures however, which would have been interesting to see.
  • PaaS is one of the most highly hyped terms Gartner encounters on client calls, one of the most misunderstood as well, leading to a chaotic market. Gartner does not expect comprehensive PaaS offerings to be part of the mainstream market until 2015.  The point is made that there is much confusion in the market over just what PaaS is and its role in the infrastructure stack.
  • SaaS performs best for relatively simple tasks in IT-constrained organizations. Gartner warns that the initial two years may be low cost for any SaaS-based application, yet could over time be even more expensive than on-premise software.
  • Gartner estimates there are at least 3M Sales Force Automation SaaS users globally today.

Bottom line: The greater the hype, the more the analyst inquiries, and the faster a given technology ascends to the Peak of Inflated Expectations. After reading this analysis it becomes clear that vendors who strive to be accurate, precise, real and relevant are winning deals right now and transcending the hype cycle to close sales.  They may not being getting a lot of attention, but they are selling more because enterprises clearly understand their value.

Source: Gartner, Hype Cycle for Cloud Computing, 2011 David Mitchell Smith Publication Date: 27 July 2011 ID Number: G00214915 © 2011

Predicting Cloud Computing Adoption Rates

From conservative, single digit adoption rates to hockey-stick projections of exceptional growth, analyst firms, venture capitalists and government ministries are weighing in on how they see cloud adoption progressing.

While each of the adoption rate predictions vary significantly in terms of their methodologies and results, all rely on the assumption that SaaS applications including CRM will continue to gain momentum.  The user adoption rates vary on how fast the momentum is, yet all share this assumption.  Speed, increased user adoption rates, and the ability to more closely align software to business goals are cited most often as the biggest benefits.

Where the projections vary most is whether enterprises will eventually migrate the majority of their applications to the cloud or not.  Forrester, Gartner and others see a hybrid cloud architecture emerging in the enterprise and forcing the issue of legacy systems migration by 2015.  As would be expected, vendor-driven research sees an “all or nothing” world in the near future.

Sanity Check

Wanting to see how reliable the figures were showing rapid cloud adoption in the enterprise, I did a quick sanity check.  Taking the  distribution of sales by segment for Salesforce.com and their annual revenue growth rate, then normalizing it across all segments, enterprise emerges as their strongest segment by a wide margin in 2015.  It had a 15%+ compound annual growth rate (CAGR) from 2011 – 2015 just taking their current sales by segment distribution of sales and extrapolating forward.  Data points like this and the market factors behind them is why SaaS is often used in these studies as a leading indicator of broader cloud adoption.

Adoption Rate Round-Up

  • Forrester found that SaaS will outgrow all other cloud services, achieving 37% adoption in 2011 growing to 50% by 2012.  In previous studies Forrester has shown that SaaS is a major growth catalyst of ongoing investment in IaaS and PaaS in enterprises. Source: Source:  Forrsights: The Software Market In Transformation, 2011 And Beyond Shifting Buying Preferences Lead To New Software Priorities by Holger Kisker, Ph.D. with Pascal Matzke, Stefan Ried, Ph.D., Miroslaw Lisserman  Link: http://bit.ly/ijJy70  The following table is from the report:

  • Microsoft Global SMB Cloud Adoption Study released in March, 2011 is one of the most comprehensive done this year on this topic. Of the many findings, the study predicts  39 % of SMBs expect to be paying for one or more cloud services within three years).  One of the best studies on cloud adoptions done this year Source: Study Results Document (PDF (22 pages): http://bit.ly/gN8yTx

  • North Bridge Venture Partners, GigaOM PRO and over a dozen research partners completed the study The Future of Cloud Computing 2011.  The study found 13% expressed high level of confidence in cloud computing for enterprise applications, with 40% experimenting and 10% saying they will never use cloud-based platforms as they are too risky. A presentation of the results can be found here:

Source: http://futureofcloudcomputing.drupalgardens.com/2011-future-cloud-computing-survey-results

  • Springboard Research (Forrester) completed a study of cloud computing adoption in Asia finding 31% of companies with 50 or fewer PCs will adopt cloud-based applications in 18 months, 56% with up to 500 PCs.  The key findings are available for download from the source URL below the infographic.

                                     Microsoft Asia is making this available for download here: http://bit.ly/jWjOj1

  • TechTarget published their analysis of virtualization and cloud computing adoption in the study, State of virtualization and cloud computing: 2011.  Of the many findings, a few of the most significant is how pervasive VMware ESXi 4 and later (vSphere) is throughout enterprises today.  The study also shows that 7% of those interviewed had implemented cloud computing in 2010, growing to 9% in 2011 – quite conservative compared to many of the other adoption rate analyses completed.  You can find the results here: http://searchdatacenter.techtarget.com/feature/State-of-virtualization-and-cloud-computing-2011
  • Yankee Group has found that in 2011, 41 percent of very large enterprises (more than 10,000 employees) have already deployed or are considering deployment of platform as a service (PaaS) within the next 12 months, compared to just 32 percent in 2010.  They have also found that mobility is most significant factor driving cloud adoption in the enterprise. Source: http://professional.wsj.com/article/TPCHWKNW0020110722e77q0004d.html

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%).

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