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Posts from the ‘Salesforce’ Category

Oct 31

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SaaS Adoption Accelerates, Goes Global in the Enterprise

In working with manufacturers and financial services firms over the last year, one point is becoming very clear: SaaS is gaining trust as a solid alternative for global deployments across the enterprise.  And this trend has been accelerating in the last six months.  One case in point is a 4,000 seat SaaS CRM deployment going live in Australia, Europe, and the U.S. by December of this year.

What’s noteworthy about this shift is that just eighteen months ago an Australian-based manufacturer was only considering SaaS for on-premises enhancement of their CRM system.  What changed?  The European and U.S. distribution and sales offices were on nearly 40 different CRM, quoting, proposal and pricing systems.  It was nearly impossible to track global opportunities.

Meanwhile business was booming in Australia and there were up-sell and cross-sell opportunities being missed in the U.S. and European-based headquarters of their prospects. The manufacturer  chose to move to a global SaaS CRM solution quickly.  Uniting all three divisions with a global sales strategy forced the consolidation of 40 different quoting, pricing and CRM systems in the U.S. alone.  What they lost in complexity they are looking to pick up in global customer sales.

Measuring Where SaaS Is Cannibalizing On-Premise Enterprise Applications

Gartner’s Market Trends: SaaS’s Varied Levels of Cannibalization to On-Premises Applications published: 29 October 2012 breaks out the percent of SaaS revenue for ten different enterprise application categories.  The greener the color the greater the adoption.  As was seen with the Australian manufacturer, CRM continues dominate this trend of SaaS cannibalizing on-premise enterprise applications.

Additional take-aways from this report include the following:

  • Perceived lower Total Cost of Ownership (TCO) continues to be the dominant reason enterprises are considering SaaS adoption, with 50% of respondents in 2012 mentioning this as the primary factor in their decision.
  • CRM is leading all other enterprise application areas in net new deployments according to the Gartner study, with the majority of on-premise replacements being in North America and Europe.
  • Gartner projects that by 2016 more than 50% of CRM software revenue will be delivered by SaaS.  As of 2011, 35% of CRM software was delivered on the SaaS platform.  Gartner expects to see SaaS-based CRM grow at three time the rate of on-premise applications.
  • 95% of Web analytics functions are delivered via the SaaS model  whereas only 40% of sales use cloud today according to the findings of this study.
  • The highest adoption rates of SaaS-based applications include sales, customer service, social CRM and marketing automation.
  • SaaS-based ERP will continued to be a small percentage of the total market, attaining 10% cannibalization by 2012.  Forrester has consistently said this is 13%, growing to 16% by 2015.
  • Office suites and digital content creation (DCC) will attain compound annual growth rates (CAGR) of 40.7% and a 32.2% respectively from 2011 through 2016. Gartner is making the assumption consumers and small businesses will continue be the major forces for Web-based office suites through 2013.
  • The four reasons why companies don’t choose SaaS include uncertainty if it is the right deployment option (36%), satisfaction with existing on-premise applications (30%), no further requirements (33%) and locked into their current solution with expensive contractual requirements (14%).

Bottom Line: Enterprises and their need to compete with greater accuracy and speed are driving the cannibalization of on-premise applications faster than many anticipated; enterprise software vendors need to step up and get in front of this if they are going to retain their greatest sources of revenue.

Source:  Market Trends: SaaS’s Varied Levels of Cannibalization to On-Premises Applications Published: 29 October 2012 written by Chad Eschinger, Joanne M. Correia, Yanna Dharmasthira, Tom Eid, Chris Pang, Dan Sommer, Hai Hong Swinehart and Laurie F. Wurster

Aug 3

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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.

Jul 27

Gartner Hype Cycle for CRM Sales, 2012: Sales Turns to the Cloud for Quick Relief

Sales VPs for years have been test-driving SaaS-based CRM systems, piloting them with sales teams to see if using them leads to higher sales and greater customer retention.  Marketing VPs and Chief Marketing Officers (CMOs) also continue to pilot SaaS-based web analytics and marketing automation applications.

What’s been missing from these pilots is the ability to bring CRM, marketing automation, sales management and web analytics systems into existing enterprise IT architectures just as fast.  This is changing quickly.  CRM vendors have been quick to respond to the challenge, offering Application Programmer Interfaces (APIs), integration adapters, connectors and from larger vendors, integrated bus architectures.

What the Hype Cycle for CRM Sales, 2012 Means

CRM’s real value is in unifying an entire enterprise based on its ability to sell, serve and retain customers better than before. Gartner shows this is a high priority for its CRM clients by underscoring which technology and application areas of the hype cycle are responding to his market dynamic, and which aren’t.

This Hype Cycle also reflects the urgency I hear from Sales VPs who want to get in control of the complex compensation, quota, territory management, job appraisal and sales coaching responsibilities they have.  While each of these areas is essential, many companies, even those in enterprise software, have ignored these areas, allowing them to stay manually based. Gartner calls this area Sales Performance Management (SPM) and shows it has the highest benefit of all SaaS-based sales management applications in the next two years. Gartner’s analysis captures the time shortage that Sales VPs I know are facing; they have to get to high quota levels while also managing a diverse set of leadership responsibilities as well. The Hype Cycle for CRM Sales, 2012 (G00234919) is shown below:

 

  • Gartner estimates 35% of all CRM implementations today use SaaS, growing to over 50% by 2020 according to their projections. In 2011, more than $5 billion was invested in sales applications.
  • Cloud adoption varies significantly across CRM software categories with Web analytics achieving 95% adoption, Sales Force Automation achieving just over 50%, and Configure Price Quote (CPQ) achieving 40%.  Cloud-based Sales Performance Management has the highest compound annual growth rate (CAGR) of any CRM category according to inquiry and client calls.
  • Sales, Customer Service, Social CRM and Marketing are the four fastest-growing areas of enterprise Sales applications on SaaS.  Campaign Management is increasingly quickly, up from 19% using SaaS in 2010 to 29% in 2011.
  • Gartner sees significant growth in Configure Price Quote (CPQ), projecting a market of $300M in 2012, up from $240M in 2011.  Gartner is due out with a MarketScope on CPQ shortly, where the 15 major vendors it tracks in this area will be ranked.  40% of existing implementations are on SaaS, and that proportion is increasing relative to licensed versions.  Of the 15 vendors in this market, 12 have announced SaaS-based versions of their applications.
  • There are 3.8M Sales Force Automation SaaS users globally today.
  • By 2017, 25% of companies adopting CRM will have extended their customer service contact centers to include social media including Facebook, Twitter and other emerging online communities.  As of 2012, Gartner is seeing only 1% of companies integrate social media into their companies’ departments and workflows to ensure a consistent customer experience.
  • Price Optimization will experience transformational growth in two to five years. Gartner sees this area as one of the most promising across all CRM Sales as can be seen in the Priority Matrix for CRM Sales 2012 below from the Hype Cycle for CRM Sales, 2012.  The research firm has defined this market as including price analysis, price optimization and price execution.  Gartner estimates this market was $180M to $190M in 2010.  Vendor competing in this market include Accenture, Deloitte, Pros, Vendavo, Vistaar Technologies and Zilliant.

  • Social CRM (SCRM) for Sales is at the Peak of Inflated Expectations, with 90% of spending for these applications being generated from B2C companies.  Gartner expects B2B companies to lead the growth of these applications through 2015, increasing spending from 5% of total SCRM sales in 2011 to 30% by 2015.
  • SaaS-based CRM sales within enterprises are expected to reach $4.48B in 2012, growing to $6.3B in 2015.  The following table from the report Forecast: Software as a Service, Worldwide 2010-2015, 2H11 Update provides a frame of reference for SaaS-based CRM growth overall.

  • Salesforce leads all CRM vendors in market share growth, advancing 2.8% from 2010 to 2011 according to Gartner’s’ global market share analysis shown below. Salesforce attained 26.9% revenue growth from 2010 to 2011 ($1.3B to $1.6B) and 36.7% growth from 2011 to 2012 ($1.6B to $2.27B).  The future momentum of Salesforce is in unifying the enterprise, redefining corporate IT in the context of the customer. Their recent acquisitions show analytics, marketing automation and development platforms are key priorities.  The following table is from the report Market Share Snapshot: CRM Software, 2011 (G00233998).

Bottom line:  Making CRM strategies successful has to start with a common vision and urgency for results.  Both are happening quicker in CRM than ever before, driven by a much clearer understanding of what enterprises need and an impatience for results.

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