Today Cloud.com, Zenoss and BitNami released the results of a recent survey to determine the key IT objectives and obstacles to cloud adoption. The survey respondent base consisted of the development communities from BitNami, CloudStack and Zenoss Core, all open source projects, and included more than 500 IT professionals. For an analysis of the results see Cloud Computing Survey Finds Scalability and Cost Savings Driving Cloud Adoption on CloudTweaks.com. The following Infographic is based on the survey results.
Mark MacLeod, General Partner, Real Ventures is a frequent advisor and contributor to the efforts of the Canadian-based Medical and Related Sciences (MaRS) . He often presents during their best practices speaking series and contributes to the organizations’ related incubator programs.
His latest presentation, SaaS Math, given on May 24th, is a pragmatic and hands-on look at which metrics are most relevant and valued by SaaS investors. I’ve included both the slides and video below.
Using Metrics to Define a Profitable SaaS Business Model
In this presentation Mr. MacLeod covers the key pricing decisions and metrics that need to be used for managing a recurring revenue business. He also explores the most important customer metrics for new ventures including Average Revenue Per User (ARPU), Cost of Acquisition (CAC) and Customer Lifetime Value (CLTV). Related metrics on acquisition, conversion, churn and referrals are also mentioned throughout the presentation and slides. He covers the specifics of SaaS pricing and how freemium can be effectively used in a SaaS business model. He ends the discussion with an analysis of early stage valuations.
Bottom line: The presentation SaaS Math provides a useful framework of analytics for software companies looking to attain recurring revenue targets while still investing heavily to grow their businesses.
Forecasting the global public cloud market is growing from $25.5B in 2011 to $159.3B in 2020 in the report Sizing the Cloud, Understanding And Quantifying the Future of Cloud Computing (April, 2011), Forrester Research has taken on the ambitious task of forecasting each subsegment of their cloud taxonomy. Forrester defines the public cloud as IT resources that are delivered as services via the public Internet in a standardized, self-service and pay-per-use way. The aggregate results of their forecasts are shown in the attached graphic.
The forecast range is from 2008 to 2020 and I’ve included several of the highlights from the study below:
Forrester breaks out Business Process-as-a-Service (BPaaS) in their public cloud taxonomy, not aggregating this area of cloud computing into IaaS or PaaS. This is unique as other research firms have not broken out this component in their cloud market taxonomies, choosing to include Business Process Management (BPM) as part of either infrastructure-as-a-service (IaaS) or platform-as-a-service (PaaS) subsegments. Forrester is predicting this category will grow from $800M in 2012 to $10.02B in 2020.
SaaS is quickly becoming a catalyst of PaaS and IaaS growth, growing from $33B in 2012 to $132.5B in 2020, representing 26% of the total packaged software market by 2016. Forrester is predicting that SaaS will also be the primary innovative force in public cloud adoption, creating applications that can be tailored at the user level. Forrester is bullish on public cloud growth overall, and their optimistic outlook can be attributed to the assumption of cloud-based applications being configurable at the user level, with little to no enterprise-wide customization required.
PaaS is forecasted to grow from $2.08B in 2012 to $11.91B in 2020. Forrester is defining PaaS as a complete preintegrated platform used for the development and operations of general purpose business applications. The research firm sees the primary growth catalyst of PaaS being corporate application development beginning this year. By the end of the forecast period, 2020, up to 15% of all corporate application development will be on this platform according to the report findings.
IaaS will experience rapid commoditization during the forecast period, declining after 2014. Forrester reports that this is the second-largest public cloud subsegment today globally, valued at $2.9B, projected to grow to $5.85B by 2015. After that point in the forecast, Forester predicts consolidation and commoditization in the market, leading to a forecast of $4.7B in 2020.
Mark MacLeod, General Partner, Real Ventures, discusses four tips of how to succeed with a Software-as-a-Service (SaaS) start-up. Real Ventures is a Montreal based venture capital and private equity partnership that specializes in early-stage investments in web, mobile, software, digital media, social and casual gaming. The majority of its investments are at the seed level, between conceptualization and the validation of the business model. Funded companies include Fabric Technologies and MConcierge Systems. Typical funding rounds are below $500K with $1M being at the higher-end.
Key take-aways from Mark MacLeod’s discussion on SaaS revenue models include the following key points:
Stakeholders and investors prefer recurring billing over one-time licenses – Investors in SaaS start-ups and seed investment rounds prefer recurring revenue models, as this approach reduces risk by providing greater revenue forecast accuracy. For customers, being able to forecast monthly costs makes recurring billing the most popular model on SaaS today. Mark also mentions how this fuels the dynamic of operating expense (OPEX) versus capital expense (CAPEX) budgeting on the part of customers. He makes the point that investors like the recurring revenue model because the lifetime value of customers can be more accurately tracked.
Be data driven – The best-managed SaaS start-ups rely heavily on standard metrics and many of their own unique measures of performance to better understand and predict revenue and costs. Mark contends that all SaaS start-ups need to be data-driven to not only understand their existing customers, but also see how their levels of use and satisfaction are influencing potential new customers. The best SaaS start-ups measure every aspect of application use and customer experience. These in-house custom analytics are a competitive advantage for any SaaS start-up, as these application-specific metrics can provide insights for further product development and customer loyalty programs.
Pricing decisions are the most complex to make– The greater the hard benefits in terms of measurable, recurring cost reduction or revenue generation, the greater the price that can be charged, according to Mark’s experiences funding SaaS start-ups. He also mentions the cost of a direct sales force, market position, and relative benefits delivered as factors in making a pricing decision.
Always go for customer prepay options when possible – Prepayment is critical for a SaaS start-up, not only for cash flow but more importantly because it shows that customers trust the application to deliver value over the long-term. It is a great proxy for how much value a customer sees in the application over time.
One of the most interesting and intriguing companies that are quickly gaining enterprise customers is Box.net.
In speaking with friends who are directors of IT and a few CIOs, the buzz on Box.net has grown so fast that they are looking at enterprise licensing for it. They’re also saying it is becoming the portal of choice for highly distributed teams that have already logged hundreds of hours using it globally.
In the following video clip CEO and Co-Founder Aaron Levie explains how his company has been able to out-innovate larger competitors in the enterprise market by relying on what appears to be Agile-based development methods and the SaaS platform to launch applications faster than entrenched competitors. His insights into competing on speed using the SaaS platform while outflanking larger, and slower moving competitors is worth listening to.
O’Reilly Media’s Strata, Making Data Work Conference held February 1rst – 3rd, 2011 in Santa Clara, California was one of the most interesting and multifaceted events of the year. Included were presentations on data science, real-time data processing and analytics, data acquisition and crowdsourcing, visualization, in addition to many other topics. You can find the complete list of speaker slides and videos for the event at this link, Strata 2011 Speaker Slides & Videos.
What enriches this conference is the quality of the case studies presented. Be sure to check out the presentation from DJ Patil of LinkedIn on Innovating Data Teams. His discussion illustrates just how critical big data is to LinkedIn and how their approach to managing it enriches the user experience, and is transforming LinkedIn functionality at the same time.
One of the best overall presentations features Dr. Werner Vogels, CTO of Amazon.com titled Data Without Limits. The video is provided below and provides a glimpse into how pervasive AWS is becoming as a foundation for accessing, aggregating and transforming data in real time.
During the last four months of 2010 the pace of published forecasts on cloud computing, IaaS, PaaS and SaaS forecasts quickened, yielding an eclectic and at times conflicting view of this emerging market. From the daily Google Alerts, RSS feeds, e-mail subscriptions and offers to buy research reports on cloud computing received, the pace is being matched by the variety of research being completed.
I did a quick review of the term “cloud computing” on Google Insights for Search, which produced the following graphic. Google Insights for Search is an excellent analytical tool, as it will render a forecast based on previous results and show geographic concentrations. Please click on the image to expand it for easier viewing.
Cloud Computing Was Gartner’s Most Popular Inquiry Topic Last Year
Gartner analyst Ben Pring sums it all up when he writes in the report, The Influence of Cloud in Outsourcing, 2010-2011 that cloud computing was the #1 area of inquiry for the advisory firm in 2010. The Google Insights analysis and the proliferation of reports underscore that point.
2011: When Cloud Computing Customer Results Became King
You can debate which area of the hype cycle the industry is on, yet after reviewing all these forecasts and projections the urgent need for real-world results is clear. As 2011 begins, any software company who has measurable results from customers, not just projections, of their cloud and SaaS-based strategies will be much further ahead of the mainstream.
Hopefully this year the research firms will cite more users than ever before an anchor these forecasts, as varied as they are, back to customer results. That said, the energy and intensity going into forecasting the cloud computing and SaaS markets is impressive.
Here is the roundup of cloud computing forecasts and predictions for 2011:
Experton Group is forecasting that the German cloud computing market is forecast to grow from EUR 1.14 billion in 2010 to EUR 8.2 billion in 2015. This is equal to average annual growth of 48 percent. In 2015, cloud computing will account for around 10 percent of total IT expenditure in Germany. Around half of revenue in 2015 will be generated from cloud services, with a third coming from investment in cloud infrastructure, mainly data centres. The use of so-called ‘private clouds’ by businesses will account for EUR 2.6 billion in revenues by 2015, up from EUR 400 million in 2010. Source: http://professional.wsj.com/article/TPDMEUR00020101007e6a700061.html
Gartner predicts worldwide software as a service (SaaS) revenue within the enterprise application software market is forecast to reach $9.2 billion in 2010, up 15.7 percent from 2009 revenue of $7.9 billion. The market is projected for stronger growth in 2011 with worldwide SaaS revenue totaling $10.7 billion, a 16.2 percent increase from 2010 revenue. These market forecasts are included in the report Forecast Analysis: Software as a Service, Worldwide, 2009-2014, Update.
Source: http://www.gartner.com/it/page.jsp?id=1492814
Gartner analysts write in the report Predicts 2011: New Relationships Will Change BI and Analytics, that by 2013, 33% of business intelligence functionality will be consumed via handheld devices, and 15% of BI deployments will combine BI, collaboration and social software into decision-making environments. By 2014, 30% of analytic applications will use in-memory functions to add scale and computational speed. In addition, 30% of analytic applications will use proactive, predictive and forecasting capabilities and 40% of spending on business analytics will go to system integrators, not software vendors. All of this is predicated on the security and scalability of cloud-based analytics.
Source: Predicts 2011: New Relationships Will Change BI and Analytics
International Data Corporation (IDC) expects the automated software quality (ASQ) and emerging testing as a service (TaaS) segments of the market to generate a 35.9% CAGR from 2009 – 2014 and $954 million in projected revenue in 2014.
Source: Worldwide Automated Software Quality Software as a Service and Testing as a Service 2010–2014 Forecast and 2009 Vendor Shares: Driving Cloud Quality http://www.idc.com/research/viewdocsynopsis.jsp?containerId=225003§ionId=null&elementId=null&pageType=SYNOPSIS
TechMarketView predicts the value of the UK cloud computing market will more than double between now and 2014 from £2.4bn to £6.1bn according to the study UK Software and IT Services Market Forecast published in December by the firm.
MarketsandMarkets.com in their report, Cloud Computing Market – Global Forecast (2010 -2015) predicts that the global cloud computing market is expected to grow from $37.8 billion in 2010 to $121.1 billion in 2015 at a CAGR of 26.2% from 2010 to 2015. SaaS is the largest contributor in the cloud computing services market, accounting for 73% of the market’s revenues 2010. Source: http://www.marketsandmarkets.com/Market-Reports/cloud-computing-234.html
Pike Research has released the report, Cloud Computing Energy Efficiency which is one of the most ambitious to date in quantifying the sustainability advantages of cloud computing. The analysis states that the adoption of the cloud computing services will lead to a 38% reduction of the worldwide data center energy expenditures by 2010. Data center energy cost reductions will lower total data center energy costs from $23.3bn in 2010 to $16.0bn in 2020, and cause a 28% reduction in GHG emissions from 2010 levels is another key finding of the report. Source: http://energyefficiency.cleantechnology-business-review.com/news/cloud-computing-to-cut-38-of-data-center-energy-costs-by-2020-pike-research-071210
Renub Research has made the following predictions in their latest report titled Cloud Computing – SaaS, PaaS, IaaS Market, Mobile Cloud Computing, M&A, Investments, and Future Forecast, Worldwide.Here are the key take-aways from the summary sent to me of the study:
Worldwide Cloud Computing market is growing at a rapid rate and it is expected to cross $25 Billion by the end of 2013
Renub predicts the Platform as a Service (PaaS) market size will reach US$ 400 Million by the year 2013
Renub also predicts that Infrastructure as a Service (IaaS) market will increase at a CAGR value of 52.53% for the period spanning 2010 – 2013
US Federal IT budget devoted to Cloud Computing Spending will reach nearly US$ 1 Billion by 2014
Happy New Year and I hope you find these links useful. I’ve been tracking this activity a while and thought this would be a good time to publish the list.
In July, SAP bravely broke ranks with the “big is better and ERP is VERY serious business ” messaging the company had seemingly been frozen in for years with a break-out marketing video they produced with Epipheo Studios. If you have not checked out Ephipheo, be sure to. They are doing excellent work across a range of clients.
Earlier this week SAP released their second Epipheo Studios video of the year, SAP Business ByDesign — SaaS Made Simple!
This video attacks the perception many small businesses have of ERP systems being large, unresponsive, complex, difficult to use, and costly. All of this is done with self-deprecating humor, while showing how Business ByDesign can scale to the needs of a small, quickly growing business. It is very well done and worth checking out.
The emerging field of data science is a fascinating one that has major implications on the potential of cloud-based analytics, CRM, search, supply chain management and logistics.
Instead of relying purely on latent semantic indexing or the Google PageRank algorithm to define relevance of a search, data science techniques analyze content and its context to determine relevance. Google today looks at the content of a page; data science considers its surrounding data and relevance.
Earlier this month TechCrunch published the blog post Marissa Mayer’s Next Big Thing: “Contextual Discovery” — Google Results Without Search. The techniques of contextual discovery Google is experimenting with rely on a very rapid aggregation and transforming of data, which are part of the methodologies of data science. When Google moves fully into contextual discovery the potential exists for cloud-based analytics, CRM, search, supply chain management and logistics to be completely revolutionized by solving the big data problems associated with each of these areas.
In CRM, this would mean finally being able to access external and internal content (including the massive amount of data on social networks), aggregate the data, and transform it into meaningful analysis. The vision of social CRM would be realized once data science serves as the catalyst of contextual search or as Google calls it, contextual discovery.
Exploring Data Science
Two of the best blog posts are both from O’Reilly Radar on the emerging topic of data science. What is data science? By Mike Loukides and Six months after “What is data science?” by Mac Slocum O’Reilly Radar are worth reading and giving some serious thought to. O’Reilly also has also created a free report titled What is Data Science, which can be downloaded here.
Authors Mike Loukides and Mac Slocum set the foundation for how transformational data science has the potential of being by concentrating on the nascent area of data products. A data product is the result of accessing, aggregating and transforming content regardless of its location – and capturing data on its attributes – not just the data itself. Both authors point to reference systems and guided reference engines on e-commerce sites as just the beginning. Yet after reading their assessments and listening to Roger Magoulas, O’Reilly’s Director of Research, interviewed about data science below there are many more potential uses of this evolving area.
Potential Impact of Data Science on Analytics
The blog posts by Mike Loukides and Mac Slocum go into detail explaining how each area of data science is in varying levels of maturity. After reading these over and considering the big data problems in cloud-based analytics, CRM, search, supply chain management and logistics, the following methodology starts to make sense:
Access – For data science to realize its full potential there needs to be a technology layer that provides for real-time access to structured and unstructured content both within and outside an enterprise. More than a traditional Enterprise Application Integration (EAI) layer the technologies driving data access need to selectively pull all available content from every unstructured and structured data source available. Mike Loukides mentions Google Goggles and how MapReduce has made this application possible. Hadoop as a means to create greater access across federated content has much potential in this phase as well.
Aggregate – Called data conditioning by Mike Loukides, the aggregation phase is where contextual discovery happens. This could be accomplished through contextual search filters, taxonomies defined by specific alerts, or the use of the MapReduce and Hadoop query and relevance tools in use today.
Transform – Where Hadoop could be used for driving data analysis and as Mike Loukides calls this level of analysis, data jiujitsu. Examples are mentioned by both Mike Loukides and Mac Slocum including the Hadoop Online Prototype (HOP), which does real-time stream processing and several others. The impact of the access, aggregate and transform methodology on visualization is available at Flowing Data, one of the best sites on the Web for seeing how MapReduce, Hadoop and other data science-related techniques are taking on massive amounts of data and delivering insights.
Conclusion
Solving the big data problems of social media monitoring, sentiment analysis, forming a scalable platform for social CRM, integrating CRM, supply chain management and logistics data to demand management – and tying all of these areas to financial performance – is potentially achievable with data science. Deployed as a cloud-based platform opens up even greater potential for getting the most use of social networks, free data sources, and third-party databases than is possible today.
Be sure to check out the video below of Roger Magoulas, O’Reilly’s Director of Research, where he was interviewed about data science.
Frank Gens, Senior Vice President & Chief Analyst for IDC, shares insights from his firm’s predictions for 2011 and beyond in the areas of cloud computing, Platform-as-a-Service (PaaS), public and private cloud services.
Here are a few of the many take-aways in this 5 minute video:
Public cloud services adoption will grow at over five times the rate of the IT industry to $29B in 2011, up 30% from 2010 reaching $55B by 2014. E-mail and collaboration will be the foundation, and entirely new application segments will drive incremental growth.
Private cloud services will grow to $13B in 2011, growing much faster than public cloud. IDC predicts that Salesforce.com and Google will partner with infrastructure providers to create private cloud appliances of their public cloud offerings.
15% of industry revenue and 30% of industry growth will be from public and private cloud services in 2011.
Cloud management systems and solutions will embrace public and private clouds and will see Accenture, Cisco, CA, IBM, Microsoft, Oracle and others enter this market with enterprise-ready solutions in the next year.
On-premise applications will go through a transformation of supporting private cloud integration, providing enterprise accounts with the option of migrating to the cloud if they choose to.
The term “cloud computing” as a buzzword will be gone by 2012, as these technologies are expected to become ubiquitous.
