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Posts tagged ‘Amazon Web Services’

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

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.

The Marketing of Cloud Multitenancy: How Early Adopters Are Killing The Hype

It’s impressive how quickly the teams evaluating CRM cloud-based applications are learning how to deflate the hype surrounding multitenancy.

One gets the impression that hype-hunting has now become a sport in these teams.  In engineering-centric companies it’s a badge of honor to find out just how multitenant a cloud-based application or platform is.  Multitenancy isn’t the only area they are looking at, but given the massive amount of hype surrounding this issue on the part of vendors, it generates more attention because evaluation teams are skeptical.

Teams evaluating CRM applications aren’t satisfied with an easily customized and used graphical interface or series of workflows, they are getting more interested in the architecture itself .  In some cases they’ve been burned by claims of an application being SaaS-based when in fact the architecture is a glorified series of Citrix-like sessions running in the background or worse.  I have seen a healthy amount of skepticism in the evaluations going on right now and recently completed of SaaS applications and entire cloud platforms.  Gartner’s inquiry calls from corporate accounts must be accelerating as their clients look for guidance on how to sort out the multitenancy hype.

CRM, Multitenancy and the Hype Cycle for Cloud Computing

Gartner’s search analytics show that cloud computing and related terms had 29,998 searches in the last twelve months with cloud computing alone generating 10,062 searches.  SaaS and related terms had a search volume of 19,000.  These terms are among the most popular across all Gartner search terms for the last twelve months.  In comparison, CRM had over 42,000 searches in the same period.

It’s in this area of CRM applications where multitenancy has gone into hype overdrive. Looking for differentiators, some CRM vendors are claiming not just multitenancy – but their specific brand of it.  This confuses their prospects, which immediately energizes evaluation teams to do a more thorough job than they have ever done before.  By claiming their own type of multitenancy, CRM vendors are ironically not just slowing down their own sales cycles, they are making the entire industry slow down.  No wonder Gartner places multitenancy along the Peak of Inflated Expectations in the latest Hype Cycle for Cloud Computing which is shown below.

Making Sense of Elasticity and Multitenancy

It’s paradoxical that enterprise software vendors, especially those selling SaaS-based CRM applications,  are attempting to turn multitenancy into a differentiator.  What is needed is a greater focus on usability, flexibility in aligning workflows to specific needs, and better enterprise integration technologies.  Sell the value not the product features.

Given the confusion differentiating on multitenancy is creating and the calls Gartner is getting on this issue, they published Gartner Reference Model for Elasticity and Multitenancy.  It includes what Gartner believes a cloud services provider must implement in terms of a multitenant service in addition to what SaaS-based applications need to provide.  Here are their checklists for each area:

Multitenancy Service Requirements for Cloud Services Providers

  • Isolation of tenant data
  • Isolation of the tenant workspace (memory)
  • Isolation of tenant execution characteristics (performance and availability)
  • Tenant-aware security, monitoring, management, reporting and self-service administration
  • Isolation of tenant customizations and extensions to business logic
  • Continuous, tenant-aware version control
  • Tenant-aware error tracking and recovery
  • Tracking and recording of resources use per tenant
  • The ability to allocate resources to tenants dynamically, as needed and based on policy Horizontal scalability to support real-time addition/removal of tenant resources, tenants or users without interruptions to the running environment

Multitenancy in Cloud Application Services (Software as a Service) Applications

  • Be available 24/7, because of the potential global user base
  • Adopt new versions without disrupting the continuous operations of tenants, and preserve user customizations
  • Scale up or down on demand
  • Allow individual rollback and restore for each tenant
  • Not allow a “noisy neighbor” tenant to affect the performance of other tenants, or increase their costs
  • Be accessible from various locations, devices and software architectures to meet potentially global demand
  • Offer tenant-aware self-service

Gartner also released their Reference Architecture for Multitenancy, which is shown below.  One of the key assumptions of this model is that multitenancy is a mode of operation where multiple, independent and secured instances of applications run in a shared environment.  The model includes the seven different models of multitenancy Gartner has seen in their research.  These seven models, listed across the top of the model beginning with Shared Nothing and progressing to Custom Multitenancy are across the top of the model.

The majority of enterprises I’ve worked with are looking to the Shared Hardware approach in an attempt to create backward compatibility to their legacy applications via Virtual Machines. Another area of interest is the Shared Container approach which relies on a separate logical or physical instance of a DBMS, and often isolates its own business logic.  This is ideal for distributed order management systems and SaaS-based ERP systems for example.  Yet the legacy application support in this type of multitenancy can get expensive fast.

Shared Everything Multitenancy is ideal for quickly on-ramping and off-ramping applications, tenants and individual system users and is what nearly all enterprise vendors claim to do.  In reality only a handful do this well.  This approach to multitenancy is based on the Shared Container approach including support for shared DBMS sessions.  Salesforce.com’s Force.com platform, VMWare WaveMaker and Zoho Creator are all examples of companies who have successfully delivered Shared Everything multitenancy.

With so much to gain by positioning an application or solution suite in the 6th and 7th models, vendors are rushing to define their own versions of Shared Everything and Custom Multitenancy.  The land grab is on in this area of the multitenancy market right now.  IBM, Microsoft and Oracle are all expected to endorse and eventually have many of their cloud-based applications in the Shared Everything model.  Each of these companies and many others will have a multi-model based approach to selling multitenancy as well.

Gartner Reference Model for Elasticity and Multitenancy

Source:  Gartner Reference Model for Elasticity and Multitenancy

Bottom line: Enterprise software vendors can accelerate evaluation cycles and sell more by differentiating on the user experience and value delivered instead of trying to create fear, uncertainty and doubt (FUD) by creating their own definition of multitenancy.

Gartner Search Analytics Shows Spike in Hadoop Inquiries in 2012 – Good News For CRM

Hadoop was one of the most-searched terms on Gartner’s website in 2011 through 2012, spiking to 601.8% over the last twelve months alone.  Additional insights from the Search Analytics on Hadoop include the following:

  • 27% of all inquiries are from banking, finance and insurance industries, followed by manufacturing (14%), government (13%), services (10%) and healthcare (8%).
  • North America (75.9%) and EMEA (13.5%) are the two most dominant geographies in terms of query volume.
  • Here is the trend line from Gartner Search Analytics:

What’s driving Hadoop’s meteoric rise in searches is a combination of industry hype about big data, CIOs getting serious about using Hadoop distributions that minimize time and risk yet deliver value, and the dominant role Amazon is playing in bringing Hadoop into the cloud.  Today Amazon offers Elastic MapReduce as a Web Service that relies on a hosted Hadoop framework running the Elastic Compute Cloud (EC2) in conjunction with Amazon Simple Storage Service (S2).

Microsoft also scored a major hiring win this week announcing that Raghu Ramakrishnan, former chief scientist for three divisions of Yahoo is now with Microsoft. Raghu is now a technical fellow working in the Server and Tools Business (STB).  He’ll focus on big data and integration to STB platforms.  Big Data on Azure will accelerate now with him on-board.

Hadoop’s Potentially Galvanizing Effect on CRM and Social CRM Analytics

The quickening pace of Hadoop adoption in the enterprise is good news for CRM and especially social CRM. Analytics and Business Intelligence (BI) are the “glue” that unify CRM and keep it in context. One of Hadoop’s greatest potential contributions is the analysis, categorization and use of unstructured content.  Marketing and sales won’t have to run three or four systems to gain insights into customer data, they can run a single analytics platform that fuels the entire selling cycle and lifetime customer value chain of their businesses.  Hadoop has the potential to make unstructured content more meaningful while also reporting the impact of customer insights on financial performance, profitability and lifetime customer value.

Translating terabytes of customer, sales, services and partner data into meaningful analytics and business intelligence (BI) is emerging as a priority for CIOs, who are sharing responsibility for driving top-line revenue growth.   Hadoop shows potential to be the “glue” or galvanizing technology base that unifies all CRM and Social CRM strategies.

To get a perspective on how fast Hadoop is being evaluated and adopted it’s useful to look at the Hype Cycle for Data Management, the latest edition published July, 2011.   This is another indicator of how quickly Hadoop and big data are gaining in terms of CIO mindshare.  Big Data and extreme information management are on the technology Trigger area of the hype cycle.  The Hype Cycle for Data Management is shown below:

Bottom line:  CRM and Social CRM will benefit more than any other area of an enterprise as Hadoop’s adoption continues to accelerate.  CIOs are increasingly called upon to be strategists, and with the ability to translate terabytes of data into strategies that deliver dollars, look for Hadoop’s contributions to drive top-line revenue growth.

Roundup of Cloud Computing Forecasts and Market Estimates, 2012

The latest round of cloud computing forecasts released by Cisco, Deloitte, IDC, Forrester, Gartner, The 451 Group and others show how rapidly cloud computing’s adoption in enterprises is happening.  The better forecasts quantify just how and where adoption is and isn’t occurring and why.

Overall, this year’s forecasts have taken into account enterprise constraints more realistically  than prior years, yielding a more reasonable set of market estimates.  There still is much hype surrounding cloud computing forecasts as can be seen from some of the huge growth rates and market size estimates.  With the direction of forecasting by vertical market and process area however, constraints are making the market estimates more realistic.

I’ve summarized the links below for your reference:

  • According to IDC, by 2015, about 24% of all new business software purchases will be of service-enabled software with SaaS delivery being 13.1% of worldwide software spending.  IDC further predicts that 14.4% of applications spending will be SaaS-based in the same time period. Source: http://www.idc.com/getdoc.jsp?containerId=232239
  • The cloud computing marketplace will reach $16.7B in revenue by 2013, according to a new report from the 451 Market Monitor, a market-sizing and forecasting service from The 451 Group. Including the large and well-established software-as-a-service (SaaS) category, cloud computing will grow from revenue of $8.7B 2010 to $16.7B in 2013, a compound annual growth rate (CAGR) of 24%. https://451research.com/
  • Forrester forecasts that the global market for cloud computing will grow from $40.7 billion in 2011 to more than $241 billion in 2020. The total size of the public cloud market will grow from $25.5 billion in 2011 to $159.3 billion in 2020. Link to report excerpt is here.
  • Deloitte is predicting cloud-based applications will replace 2.34% of enterprise IT spending in 2014 rising 14.49% in 2020.  The  slide below  is from an excellent presentation by Deloitte titled Cloud Computing Forecast Change downloadable from this link.

  • Gartner predicts Small & Medium Business (SMB) in the insurance industry will have a higher rate of cloud adoption (34%) compared to their enterprise counterparts (27%).  Gartner cites that insurance industry’s opportunity to significant improve core process areas through the use of technology.  The following figure from the report, 2011 SMB Versus Enterprise Software Budget Allocation to Annual Subscriptions indicates the differences in software budget allocation for annual subscriptions by vertical market from the report:

2011 SMB Versus Enterprise Software Budget Allocation to Annual Subscriptions

  • Gartner is predicting that the cloud system infrastructure (cloud IaaS) market to grow by 47.8% through 2015. The research firm advises outsourcers not moving in that direction that consolidation and cannibalization will occur in the 2013 – 2014 timeframe  The providers named most often by respondents were Amazon (34%), SunGard (30%) and Verizon Business (30%). Of the global top 10 IT outsourcing market leaders, only CSC appears on the list. Source: User Survey Analysis: Infrastructure as a Service, the 2011 Uptake  Claudio Da Rold,  Allie Young.

External Service Providers Being Considered for IaaS (or Cloud IaaS)

Rethinking Cloud ROI from a Customer’s Perspective

Seeing the proliferation of cloud ROI, TCO and cost calculators brings to mind my economics professors who strove with a passion to reduce complex consumer decisions into simple, very powerful formulas.  Like these calculators pervading the market, my economics professors showed a passion for accuracy, precision and measured perfection.

The only trouble is that people, companies and markets defy and will deliberately not conform to an equation, cause-and-effect strategy or series of artificial incentives to get them to change.  If there is one single, loudly reverberating fact in this economy, it is that marketing and selling strategies based on economic theory alone are failing.  The business benefits of cloud computing need to be more integrated into these ROI and TCO calculators to make them relevant.  They need to reflect more of the customers’ needs to be useful.

It’s Time To Bring The Customer and Their Strategies Into The Equation

Of the many white papers, e-books and websites all claiming to translate cloud computing server usage and capacity planning metrics into business benefits, the Open Groups’ white paper published in 2010 delivers useful insights.  The research and analysis was produced by Cloud Business Artifacts (CBA) project of The Open Group Cloud Computing Work Group.  You can find the entire document here.

The following table is from the section on building ROI for Cloud Computing using Key Performance Indicators (KPIs) and Metrics.  While this table is a start, what’s  missing  are more metrics related to the Web customer experience.  There needs to be more measures of whether customer experiences were successful or not by application, and if and how SaaS-based applications contributed to customers’ expectations being exceeded or not.

One of the biggest benefits all ROI and TCO calculators attempt to quantify is speed of cost reduction and time reduction, but what about speed of strategy execution? For many of these online tools, prospects using them would have no idea how their investment will accelerate their goals.  All they see are costs related to the technology.  Not much if any analysis is provided how the technology relates to their strategies being attained more quickly, completely and profitably.

And what about enabling channels to sell more effectively?  Launching products on time, synchronized across online and offline channels and having consistency of messaging, pricing, services – in short the entire user experience– is rarely if ever mentioned.  Ironically the greater the focus on ROI and TCO calculators, the greater the lack of focus on creating a truly exceptional customer experience while attaining complex selling strategies.

It’s time for the industry’s vendors to wake up and realize that they are selling for the most part to nonconformists not robots.  ROI and TCO calculators that don’t reflect what customers really want to accomplish and stay centered on technology alone are missing huge opportunities to sell on value.

Bottom line: The comfort that comes from attempting to take the chaos of a market and crystalize it into an equation is an illusion – the real test of a vendor’s value is being able to navigate customers to their goals using technology when necessary, not as a crutch.

Cloud ROI and TCO Calculators

Amazon Web Services Economics Center  http://aws.amazon.com/economics/

Amazon Web Services Simple Monthly Calculator http://calculator.s3.amazonaws.com/calc5.html

Astadia Cloud Computing ROI Calculator http://www.astadia.com/products-and-services/IT-cloud-transformation/roi/

Azure ROI Calculator (written in Silverlight)  http://azureroi.cloudapp.net/

Commentary: http://social.msdn.microsoft.com/Forums/en/windowsazure/thread/c4155f48-d51f-4c14-b79c-3f8248ac9646

Azure TCO calculator http://www.microsoft.com/windowsazure/offers/

Cloud Business Review – Cloud Migration ROI Calculatohttp://www.cloudbusinessreview.com/cloud-migration-roi-calculator.html

EMC ROI Analyst (requires opt-inhttps://roianalyst.alinean.com/emc/Welcome.do

GetApp Cloud Computing Calculator http://www.getapp.com/cloud-computing-roi-calculator

Google Cloud Calculator http://www.gonegoogle.com/#/company-name

Rackspace Load Balancer Calculator http://www.rackspace.com/cloud/cloud_hosting_products/loadbalancers/pricing/

Salesforce.com Force.com Business Case Calculator (ROI) http://www.salesforce.com/platform/tco/calculator.jsp?d=70130000000EfON&internal=true

Stelligent ROI Calculator http://stelligent-roi.appspot.com/

VMWare ThinApp Calculator http://roitco.vmware.com/ThinApp/

Sources:

Open Group Publishes Guidelines on Cloud Computing ROI http://cloudcomputing.sys-con.com/node/1376952

Private cloud discredited, part 1 http://www.zdnet.com/blog/saas/private-cloud-discredited-part-1/1204?tag=mantle_skin;content

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.

Performance Architecture for Cloud

Adrian Cockcroft, Director, Cloud Architecture at Netflix posted the following presentation, Performance Architecture for Cloud on Slideshare yesterday.  In this presentation, he shares the concerns Netflix has with AWS Load Balancer limitations, and how SimpleDB needs a memcached front end in addition to several other limitations Netflix has found.  He makes additional recommendations through the presentation deck that are worth checking out given the extent of the AWS outage over the last four days.  His brief but insightful coverage of Performance Tools Architecture and assertion that AWS is challenged by data center tools and metrics is prescient given the outage that occurred.

Of the hundreds of blog posts, videos and stories filed by industry and mainstream media on the AWS outage, the following are the three best I’ve seen.  Ray Wang’s post, Monday’s Musings: Lessons Learned From Amazon’s Cloud Outage is excellent along with George Reese’s thorough and excellent blog post  AWS Outage: The Cloud’s Shining Moment and Phil Wainewright’s Seven lessons to learn from Amazon’s outage.  All three posts are excellent for getting informed perspectives on the AWS outage and how companies need to plan and respond.

Building Powerful Web Applications in the AWS Cloud


Jinesh Varia, Technology Evangelist at Amazon.com created the following presentation to illustrate how Amazon EC2 instances are being used for creating high performance Web applications.   He relies heavily on the integration technologies that unify the AWS Cloud Stack, which is shown to the right.  To see a larger image of the stack, please click on it.

What is interesting about this slide deck is the detail it provides in explaining the more complex programming concepts of AWS.  He provides useful insights into how  Cloud Elasticity as an application platform component works through the use of detailed system-level diagrams.  For example slides 21 and 22 are examples that show how Cloud Elasticity can be achieved with AWS Scaling Zones.

There are system-level definitions of AWS workflows including security that rely on EC2 instances as well.  At 70 slides, this is an excellent overview of Web application development on AWS.

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