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Posts from the ‘PaaS’ Category

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.

Inside Windows Azure, the Cloud Operating System with Mark Russinovich

Mark Russinovich, Technical Fellow on the Windows Azure team, explains how Azure continues to be developed as an OS for the data center including support for shared compute, disk and network resources and distributed application services.  He also covers SQL Server integration and process management, support for queuing, structured storage and SQL storage.

The following video was recorded May 19th at the Microsoft Tech-Ed held in Atlanta, GA and runs just over an hour.  It’s a great briefing on how Windows Azure is evolving to support configurable Platform-as-a-Service (PaaS) architectures.  You can also download the slides from this session here Inside Windows Azure, the Cloud Operating System with no opt in from the Microsoft Channel 9 website.

Gartner Search Analytics Shows Spike in Platform as a Service (PaaS) Inquiries in 2011

Trends of search terms from user accounts and topics of their inquiries form the catalyst of research agendas in many IT advisory firms.  At Gartner these two factors and others like them are commonly regarded as leading indicators of future IT spending.

Gartner has been delivering short analyses of these subject areas to clients in the form of reports, with the latest being Search Analytics Trends: Platform as a Service published on June 9, 2011.  This report covers user search activity from April, 2009 to March, 2011. For purposes of the report, Platform-as-a-Service (PaaS) is defined as cloud application infrastructure services delivered as a service.  Gartner makes the point that PaaS includes no traditional software license and is expensed on a metered or utility basis.  Presented below is the time series of searches by month from the report.

A few key take-aways emerge from the report, and they are presented below:

  • Cloud Middleware Services including Platform-as-a-Service (PaaS) are still unknown to many Gartner IT user clients.  As a result this area is seen with skepticism by many of their clients.  In studies of PaaS adoption from other analysts at Gartner and Forrester, it is evident that internal software development will make or break the credibility of PaaS initiatives for the long-term.
  • When Gartner IT users search for PaaS on the website and throughout online research, the four most common secondary terms are IaaS and SaaS (7.05%), Magic Quadrant (6.12%) and cloud (5.72%).  Clearly Gartner IT user clients are looking to define their own technology stack in this area and looking for a framework of reference of where PaaS fits into their own IT plans and architectures.  The competitive intensity across the analyst community will most likely go up as a result of the uncertainty many IT buyers have over PaaS.
  • The top three vendors that Gartner IT users search for are Microsoft (18%), Amazon (13%) and Tata (11%).  Additional vendors include IBM (11%), Salesforce.com (11%), SAP (7%), Google and Oracle (4%).

Bottom line: The key to PaaS adoption in larger enterprises, many of which are IT user clients of Gartner, is how successfully Independent Software Vendors (ISVs) clarify their value proposition and how their apps add value to the platform layer.

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