Skip to content

Posts tagged ‘Cloud computing forecasts’

Five Ways Cloud Service Providers Are Making Manufacturers More Competitive

  • manufacturing-execution-systemsEnterprises are only realizing 35% of the total potential value of their cloud deployments according to a recent Bain & Company study.
  • Companies that moved development to IaaS and PaaS clouds from Amazon Web Services (AWS) reduced downtime by 72% and improved application availability by 3.9 hours per user per year.

These and other key take-aways are from the recent Bain & Company study, Tapping Cloud’s Full Potential. The full report PDF is available for download here (free, no opt-in). The following graphic from the report illustrates the currently realized value of cloud deployments in enterprises today according to Bain & Company.

Capturing only one-third of the value of their workloads

The researchers found several critical drivers of cloud value with one of the most important being the strengthening and clarifying of a product and service focus. The following graphic illustrates the critical drivers of cloud value.

getting the most value

Cloud Service Providers Give Manufacturers The Ability To Stay Competitive

Cloud-first strategies designed to accelerate and strengthen shifts in emerging business models is paying off according to Bain’s research results.

Manufacturers choosing to pursue a cloud-first strategy are focusing on evolving their business models, processes, systems and performance quickly to stay in step with customers’ needs. For many manufacturers, their customers’ pace is faster than internal IT organizations can anticipate and react to.  CSPs are helping to close that gap.

Here are five ways CSPs are making manufacturers more competitive:

  • Bringing industry expertise to the shop floor level. The best CSPs serving manufacturers today have management teams that have decades of combined manufacturing experience in specific industries. The CEO of a specialty tools manufacturer remarked that his company’s cloud strategy was more focused on accelerating plant floor performance first.  Working with a CSP that had expertise in their industry, this manufacturer was able to gain greater supply chain visibility and improve forecast accuracy, all with cloud-based apps.
  • Solving legacy and 3rd party system integration problems so that cloud-based ERP, CRM, supply chain management (SCM) systems can scale quickly. When a rust-belt based manufacturer of heating, ventilation and air conditioning (HVAC) systems had the opportunity to grow their business by expanding into build-to-order customized products, their CSP partner made it possible to integrate an entirely new product configurator and cloud-based ERP system module to manage quote-to-cash. Today, 30% of corporate-wide profits are from build-to-order selling strategies.
  • Knowledge-sharing supplier networks are becoming more attainable for manufacturers thanks to cloud technologies and CSPs. All manufacturers have strategic plans that include greater integration of their supplier networks, with many seeking to create knowledge-sharing networks. One of the best studies of how to create a knowledge-sharing network is from Dr. Jeffrey Dyer and Dr. Kentaro Nobeoka based on their intensive work with Toyota. Their study, Creating And Managing A High Performance Knowledge-Sharing Network: The Toyota Case is a great read. The following graphic from the study illustrates the evolution of a knowledge-sharing network. Manufacturers are relying on cloud platforms and CSPs to enable shifts in network structures and nurture change management to create self-sustaining systems.

Evolution of network

  • Two-tier ERP adoption in manufacturing is growing as CSPs master cloud ERP systems. CSPs are moving beyond providing basic services, specializing in cloud ERP, CRM, SCM, pricing, services and legacy system integration to keep pace with manufacturers’ demands. In one high tech manufacturer, their CSP partner orchestrated the procuring and launch of their cloud-based two-tier ERP system integrated to an SAP instance in their headquarters. Today they operate production centers in Asia, North America and Australia, all coordinated through the main SAP instance in the U.S. headquarters.
  • Making Service Level Agreements (SLAs) more relevant to manufacturing business models. Instead of just getting SLAs for uptime, security and system stability, manufacturers are getting advanced manufacturing intelligence dashboards that provide visibility to the plant or production center level.

Bottom Line:  Manufacturers are increasingly relying on CSPs’ cloud, industry and integration expertise to support the transition many are making to new business models and get greater than 35% of the value from their cloud investments.

Additional resources on Cloud ERP systems:

Roundup of Cloud Computing Forecasts Update, 2013

tunnel-of-speed-forecast-of-saas-cloud-computing-final-300x201Time-to-market, more flexible support for business strategies by IT, and faster response time to competitive conditions are combining to accelerate cloud computing adoption today.

Of the enterprises I’ve spoken with over the last several months including several Fortune 500 corporations to small businesses just beginning to evaluate cloud-based CRM and manufacturing systems, one message resonates from all of them: they need enterprise applications that keep pace with how fast they want to move on new business strategies. The latest round of cloud computing forecasts reflect the urgency enterprises have of making IT a foundation for strategic business growth.

The following is a summary of the latest cloud computing forecasts and market estimates:

McKinsey Analysis

  • IDC predicts public IT cloud services will reach $47.4B in 2013 and is expected to be more than $107B in 2017. Over the 2013–2017 forecast period, public IT cloud services will have a compound annual growth rate (CAGR) of 23.5%, five times that of the IT industry as a whole. The growing focus on cloud services as a business innovation platform will help to drive spending on public IT cloud services to new levels throughout the forecast period. By 2017, IDC expects public IT cloud services will drive 17% of IT product spending and nearly half of all growth across five technology categories: applications, system infrastructure software, platform as a service (PaaS), servers, and basic storage. Software as a service (SaaS) will remain the largest public IT cloud services category throughout the forecast, capturing 59.7% of revenues in 2017. The fastest growing categories will be PaaS and Infrastructure as a service (IaaS), with CAGRs of 29.7% and 27.2%, respectively.  Source: IDC Forecasts Worldwide Public IT Cloud Services Spending to Reach Nearly $108 Billion by 2017 as Focus Shifts from Savings to Innovation.

IDC Forecast Public IT Spending

  • Informatica’s presentation titled Enable Rapid Innovation with Informatica  and MicroStrategy for Hybrid IT by Darren Cunningham, Informatica Cloud  and Roger Nolan, Informatica Data Integration and Data Quality contains a useful series of cloud market overviews supported by 451 Research Gartner, Forrester and IDC data.  A summary of the statistics section is shown below:

Informatica

adoption graphic from KPMG

  • Gartner predicts that in the next five years enterprises will spend $921B on public cloud services, attaining a CAGR of 17% in the forecast period.  Darryl Carlton, Research Director, APAC with Gartner recently presented Cloud Computing 2014: Cloud Computing 2014: ready for real business?  His presentation is full of insightful analysis and market forecasts from Gartner, with specific focus on Asia-Pacific.
  • Visiongain predicts the Platform-as-a-Service (PaaS) submarket is valued at $1.9B in 2013 growing to $3.7B in 2018, attaining a 14.3% CAGR for the period 2013-2018.  The following figure shows the firm’s forecast.  Source: Visiongain on Slideshare.
  • Gartner predicts that in the next five years enterprises will spend $921B on public cloud services, attaining a CAGR of 17% in the forecast period.  Darryl Carlton, Research Director, APAC with Gartner recently presented Cloud Computing 2014: Cloud Computing 2014: ready for real business?  His presentation is full of insightful analysis and market forecasts from Gartner, with specific focus on Asia-Pacific.
  • Visiongain predicts the Platform-as-a-Service (PaaS) submarket is valued at $1.9B in 2013 growing to $3.7B in 2018, attaining a 14.3% CAGR for the period 2013-2018.  The following figure shows the firm’s forecast.  Source: Visiongain on Slideshare.

visiongain forecast

marketscape

  • Boston Consulting Group writes that SaaS is a $15B market, growing at three times that rate of traditional software.  BCG estimates that SaaS is 12% of global spending on IT applications.  BCG interviewed 80 CIOs and found they were willing to consider SaaS solutions for 35% to 60% of their application spending.  BCG also evaluated how the economics of cloud software adoption vary for on-premises versus SaaS customers.  The following two charts from the completed study. Source: (Free, opt-in required) Profiting from the Cloud: How to Master Software as a Service

Profiting_Cloud_Ex1_lg_tcm80-138310 BCG Categories

Profiting_Cloud_Ex2_lg_tcm80-138309 BCG Economics

Asia Pacific Cloud Market Growth

451 Research: Cloud-Enabling Technologies Revenue Will Reach $22.6B by 2016

cloud-computing-forecastDefining Cloud-Enabling Technologies (CET) as those that are installed, delivered and consumed on-premises, Market Monitor a service of 451 Research recently released their annual forecast of virtualization, security and automation and management revenue through 2016. The report, Market Monitor Cloud-Enabling Technologies has taken a bottoms-up approach in defining the three primary categories they include in their definition of cloud-enabling technologies.  Market Monitor’s methodology is explained in the report’s summary here.

Here are the key take-aways from this report:

  • Cloud-Enabling Technologies defined as virtualization, security and automation and management global revenues will grow from $10.6B in 2012 to $22.6B in 2016, attaining a 21% Compound Annual Growth Rate (CAGR).

  • Cloud-as-a-Service revenues will grow from $5.7B in 2012 to $19.5B in 2016, attaining a 36% CAGR.  Market Monitor defines Cloud-as-a-Service as externally delivered services, specifically 3rd party, that are hosted and pay-as-you-go with the cloud being relied on as a service delivery and consumption model. The following graphic provides a comparison of Cloud-as-a-Service and Cloud-Enabling Technologies revenue forecasts by year from 2012 through 2016.

  • 451 Research forecasts that the majority of CET revenues will be from virtualization-based systems and services (66%).  This segment is projected to attain a 16% CAGR in the forecast period and serve as the foundation of Phase I CET Adoption shown in the following graphic.  Phase 2 of CET Adoption is projected to be dominated by the need for tools to manage and control virtualized environments.  Phase 3 is projected to signal a shift to internal IT resources and internal IT cloud service providers.

Predicting Enterprise Cloud Computing Growth

69% of enterprises who have separate budgets for cloud computing are predicting spending increases this year and into 2014.

This is one of several key take-aways from a research study published today by TheInfoPro, a service of 451 Research.  TheInfoPro Wave 5 Cloud Computing Study is based on research completed in the first six months of 2013, and relies on live interviews with IT management and primary decision-makers in midsize and large enterprises in Europe and North America. You can view details of TheInfoPro Cloud Computing Overview Program and methodology here.

Additional key take-aways from the study include the following:

  • The worldwide cloud computing market will grow at a 36% compound annual growth rate (CAGR) through 2016, reaching a market size of $19.5B by 2016.
  • 38% of enterprises surveyed break out cloud computing budgets, while 60% include cloud-related spending as part of their enterprise-wide IT budgets.  TheInfoPro asserts that cloud computing’s benefits of greater business orchestration and reduced time-to-market have led to a change in budgeting approaches.
  • The median enterprise cloud computing budget is $675,000 and the mean enterprise cloud computing budget is $8,234,438.  The study found the largest enterprise cloud computing budget at $125M.  The following graphic provides a distribution of cloud computing budgets by range.

cloud-computing-budget

  • Internal Private Cloud (35%), Cloud Provider Assessments/Strategy Planning (33%), Infrastructure-as-a-Service (IaaS) (31%) and Software-as-a-Service (30%) are the top four cloud computing-related projects enterprises are working on right now.  Cloud Provider Assessments/Strategy Planning have seen the largest increase, attributable to more enterprises looking to better support strategic plans with more agile, efficient IT organizations.

top-challenges-graphic2

  • 83% of enterprises face significant roadblocks that hold them back from moving beyond cost reduction to faster time-to-market and better orchestration of their businesses. Respondents mentioned that politics, budget, time and staff are the main sources of roadblocks to getting more value out of their cloud computing investments. The majority of these roadblocks are not related to IT.  They include lack of clarity regarding organization and budget (37%), resistance to change (16%) and lack of trust (visibility and reliability) (15%).  The following graphic illustrates the enterprise cloud journey as defined in TheInfoPro Wave 5 Cloud Computing Study.

deciphering-the-cloud-journey

  • Consistent with many other enterprise cloud computing surveys, security is the biggest pain point and roadblock to cloud computing adoption (30%).  Migration and integration of legacy and on-premise systems with cloud applications (18%) is second, and lack of internal process (18%) is third.  The following graphic shows a rank ordering of cloud computing-related pain points.

cloud-related-pain-points

451 Research: Platform-as-a-Service (PaaS) Fastest Growing Area Of Cloud Computing

public-cloud-computing-forecast-2011-2016The majority of cloud computing revenue in 2012 was generated from vendors with sales over $75M (66%) and who are privately held (77%), with Platform-as-a-Service (PaaS) projected to attain a 41% compound annual growth rate (CAGR) through 2016.

Market Monitor, a service of 451 Research, is also predicting 36% CAGR in cloud computing, growing from $5.7B in 2012 to $20B by the end of 2016 in their Cloud-as-a-Service overview report. Other research firms including Gartner have much higher forecasts for cloud computing in general and IaaS, PaaS and SaaS specifically.

Market Monitor relies on a bottoms-up forecasting methodology that includes revenue analysis and forecasts from 309 cloud-services providers and technology vendors across 14 sectors. Their taxonomy defining Cloud as a Service is shown in the following graphic:

taxonomy cloud as a service

Here are the key take-aways from the report:

  • The cloud computing market will grow from $5.7B in 2012 to $20B in 2016, attaining a 36% CAGR over the forecast period.  The following graphic from the report shows the breakout of revenue on a yearly basis throughout the forecast period.

forecast breakout

  • Platform-as-a-Service (PaaS) will attain a 41% CAGR through 2016, generating 24% of total cloud revenues.  71% of PaaS revenues will be generated by vendors over $75M in sales according to the study.
  • Infrastructure-as-a-Service (IaaS) will attain a 37% CAGR through 2016, generating 51% of cloud revenue.  69% of IaaS revenues will be generated by vendors over $75M in sales according to the study.
  • SaaS will attain a 29% CAGR through 2016 and the distribution of revenue by vendor size shows how fragmented this area of the market is.  The following is a summary table from the report showing distribution of sales by vendor and category.

distribution table

Citrix Sees Strong Cloud Sales Growth, Snaps Up Reuven Cohen As Chief Cloud Advocate

saas-200x300Citrix (NASDAQ: CTXS) continues to successfully launch and manage products in the areas of cloud, desktop, mobile and networking, reporting net revenue of $730M for their latest quarter (Q2, 2013), up 19% from Q2, 2012.  Product license revenue is up 21% from Q2, 2012 to $227M for the latest quarter as well.  In the interest of full disclosure, I have never held a position in Citrix stock and do not today, and they have never been a client.

The following table is from their 2Q13 Financial Results presentation:

Managing Multiple Businesses And Making It Look Easy

Citrix continues to be a fascinating company to watch as it successfully competes across a broad range of businesses.  Cloud management, mobility and desktop management platforms, online collaboration, networking and security, and server virtualization are all revenue-generating businesses in the company today.

And while the majority of acquisitions in enterprise software struggle to deliver revenue or even fail, Citrix has been able to bolster is collaboration, enterprise mobility and telecom and networking businesses with solid additions.  Acquiring Zenprise in December, 2012 to bolster its mobile device management (MDM) strategy has led to increased sales, as has the acquisition of Podio in April of last year to augment its Online Services Division (OSD).  In June of last year Citrix also acquired ByteMobile, which gives the company entry into the telecom/carrier market.

At Citrix Synergy 2013 held May 22 – 24 of this year in Anaheim, California the company hosted the Citrix Financial Analyst Track.  You can download the presentation from this track here.  This presentation shows how challenging it can be to manage a business with multiple revenue streams across a broad base of technologies.  The following slide taken from the Citrix Financial Analyst Track illustrates just how quickly Citrix is growing and how mobile & desktop, SaaS and networking & cloud are contributing to their growth.

The addressable market opportunity for Citrix given the breadth of their product strategies is reflected in this slide, also from the Citrix Financial Analyst track:

Why Citrix Snapped Up Reuven Cohen

With so much growth potential in their cloud-based businesses, Citrix needed a seasoned veteran from the cloud computing industry who had both developed and managed new cloud platforms, products and services to the stack level.

They chose Reuven Cohen as their first-ever Chief Cloud Advocate based on his entrepreneurial expertise in Infrastructure-as-a-Service (IaaS) including being the founder and CEO of Enomaly which was sold to Virtustream in 2012. He is also actively involved in the National Institute of Standards Technology (NIST) cloud definition, and is a GSA Cloud IaaS BPA awardee, presented Great Britain’s G-Cloud initiative to the Parliament, and is an active delegate in the Sino-EU America Cooperation Workgroup.

He is responsible for leading Citrix’s cloud advocacy efforts with a specific focus on increasing the volume, reach and influence of Citrix’s extensive portfolio of cloud solutions used by more than 260,000 customers and 100 million end users across the globe.  He’ll also be responsible for increasing the adoption of several Open Source initiatives at Citrix as well.   Here are a few of the current Citrix open source projects now underway:

Apache CloudStack, an open source software designed to deploy and manage large networks of virtual machines, as a highly available, highly scalable Infrastructure as a Service (IaaS) cloud computing platform.

OpenDaylight, a community-led, open, industry-supported framework, for accelerating adoption, fostering new innovation, reducing risk and creating a more transparent approach to Software-Defined Networking.

The Xen Project, the home for various virtualization technologies powering the world’s largest clouds in production and is the foundation of many commercial products.

XenServer, an open source project and community managed by Citrix. The project develops open source software for securely running multiple operating systems and applications on a single device, enabling hardware consolidation and automation to reduce costs and simplify IT management of servers and applications.

Congratulations to Reuven on being named Chief Cloud Advocate at Citrix, I am sure he’ll accomplish much in his new role.

IDG Cloud Computing Survey: Security, Integration Challenge Growth

cloud computing survey 2IDG Enterprise recently published Cloud Computing: Key Trends and Future Effects Report, showing how enterprises continue to struggle with security, integration and governance while finding immediate value in collaboration and customer relationship management (CRM) applications.

IDG’s methodology is based on interviews with 1,358 respondents, stratified across CIO, Computerworld, CSO, InfoWorld, ITworld, and Network World websites, in addition to respondents contacted via email, and LinkedIn forums.  58% of respondents are from executive IT roles; 17% from Mid-level IT; 14% from IT professionals; 8% from middle-level business management and 3% non-manager roles were represented in the study.  High tech industries are the dominant industry represented with 18% of respondents, followed by financial services, government and manufacturing (each accounting for 10% of respondents).  Education (9%) and telecommunications & utilities (6%) are the other industries represented.

Key take-aways from the survey include the following:

  • 49% of executive-level management see cloud computing as transformational to their business strategies.  40% are currently having their IT staff investigate the potential of cloud computing contributing to their businesses, 5% don’t see cloud as an option and 6% aren’t sure.
  • Amazon (32%), Microsoft (23%) and Google (20%) are most often considered thought leaders in the field of cloud computing by respondents to the IDG survey.
  • Enabling business continuity (43%), greater flexibility to react to changing market conditions (40%), speed of deployment (39%) and improving customer support or services (38%) are the top four drivers of investment in cloud computing technology according to the survey.  The following graphic provides an analysis of each driver by level of relative importance.   This image is from Cloud Computing: Key Trends and Future Effects Report.

  • Accelerating business value by providing access to critical business data and applications (56%); serving as a catalyst of IT innovation (56%); enabling greater employee collaboration (54%); and enabling greater levels of IT agility (54%) are the top four benefits enterprises are gaining from cloud-based applications.  The following graphic provides an analysis of how cloud computing technology is impacting each of the areas shown in respondent’s enterprises. This image is from Cloud Computing: Key Trends and Future Effects Report.

  • Financial Services and high tech companies are projected to have the largest cloud computing budgets based on the survey.  Enterprises are expected to invest an average of $1.5M in cloud-based services during the 2013 – 2014 timeframe.  IDG projects that large companies will spend $2.8M relative to small and medium-sized businesses investing $486K on average.
  • Chief Financial Officers (CFOs) (35%) are the hardest to convince regarding the value of cloud computing, followed by the board of directors or equivalent (24%), the CEO (24%), and the Chief Operating Officer (COO) (16%) third. Chief Marketing Officers (CMO) are the easiest to convince, with just 6% of respondents mentioning this group of executives being a challenge to convince regarding the value of cloud computing.
  • The percentage of organizational IT budgets allocated to SaaS increased from 8% in 2012 to 13% in 2013 according to the last two IDG Enterprise Cloud Computing surveys.  Infrastructure-as-a-Service (IaaS) increased to 10% of overall IT budgets, up from 7% in 2012.  In aggregate, 44% of IT budgets are spent on cloud computing today, increasing to 51% by 2015 in the base of enterprises interviewed for the study.
  • Enterprises continue to migrate applications to the cloud that increase collaboration and enhance customer relationships first.  Collaboration and conferencing solutions (38%), e-mail and messaging (35%) and Customer Relationship Management (CRM)/Sales Force Automation (SFA) (27%) are the top three applications being migrated to the cloud in the enterprises surveyed.  The following graphic shows which applications are moving to the cloud today and the plans for migrating applications in the next 12 months, and over the next 1 to 3 years.  This image is from Cloud Computing: Key Trends and Future Effects Report.

  • 59% of enterprises are still identifying which IT operations are the best candidates for cloud hosting.  33% have identified all IT operations that they are comfortable having hosted in the cloud, given the current security of cloud infrastructure and application design.
  • The three most important factors in selecting a SaaS application provider include the ability to configure and customize the cloud application to meet specific business needs (40%), consistent cloud application performance and availability (38%) and security certification and practices of the SaaS provider (34%).
  • 61% of enterprises have at least one application that is cloud-based in their organizations today.  This increased from 57% in 2012.  24% of enterprises are planning to implement cloud applications in the next 12 months and 15% are planning to between 1 to three years from now.
  • In enterprises with less than 1,000 employees, CEOs (52%) are the most influential role in cloud purchasing, followed by the CIO (39%) and IT/networking staff (33%).  In enterprises over 1,000 employees, the CIO (60%), followed by the IT/networking management (47%) and CTO or IT network architect (45%) are the three most influential roles in the cloud purchasing process.
  • 42% of cloud-based projects are eventually brought back in-house, with security concerns (65%), technical/oversight problems (64%), and the need for standardization (on one platform) (48%) being the top three reasons why.
  • The top three challenges to implementing a successful cloud strategy in enterprise vary significantly between IT and line-of-business (LOB).  For IT, concerns regarding security (66%), integration stability and reliability (47%) and ability of cloud computing solutions to meet enterprise/industry standards (35%) challenge adoption.    The following table compares the perceptions of IT and line-of-business leaders.  This image is from Cloud Computing: Key Trends and Future Effects Report.

Roundup Of Small & Medium Business Cloud Computing Forecasts And Market Estimates, 2013

Small & Medium Business cloud computing What sets apart the fastest-growing small businesses is their an innate strength at turning data and information into results.

It’s becoming easy to spot a smaller business who is going to break out and grow quickly.  They often have these qualities:  they highly value knowledge, expertise and speed over seniority or cronyism; they have successfully managed a geographically distributed supply chain, production and service operations early in their history; and long before they reach $20M in sales they have learned how to balance domestic and international customer demands.  In short, they learned fast how to compete and win business globally.

Over the last several months research firms and enterprise software vendors have released studies on cloud computing adoption in small & medium businesses (SMBs).

The following are the key take-aways from these studies:

  • Forrester forecasts that channel partners will increase their reliance on cloud software and services from 22% to 27% from 2013 to 2014.  The majority of this growth will be in SMBs. For additional details please see the free reprint of the report, Cloud Channel Trends, 2013 To 2014 by Tim Harmon and Jonathan Silber, February 28, 2013.  You can download the reprint here (no opt in required): http://www.forrester.com/pimages/rws/reprints/document/90001/oid/1-LMIK8X
  • 61% of SMBs who responded to a recent survey are using cloud-based solutions today, with an additional 5% planning to add cloud services in the next six months.  69% of SMBs with fewer than 20 employees and 55% of SMBs with 250 to 999 employees are using cloud-based applications today. North American SMBs are more likely to use cloud-based applications co these services than EMEA (64% compared to 56%). Source: State of SMB IT 1H 2013 Semi-Annual Report On Small And Midsize Business Technology Plans & Purchase Intent (Opt-in required): http://www.spiceworks.com/marketing/state-of-smb-it/ The following is a graphic from the report:

figure 1 smb cloud adoption

  • SMB spending on cloud solutions will grow by almost 20% over the next five years, with 3 in 10 midsize firms adopting public cloud solutions.  IBM is offering a free download of the IDC report, Cloud Computing in the Midmarket: Assessing the Options in 2013 (no opt-in required): http://idcdocserv.com/995  IDC’s graphical definition of how their Primary Market and Secondary Market IT Product Taxonomy maps to the NIST Taxonomy is shown below:

figure 2 smb cloud adoption

  • Cisco predicts the U.S. SMB commercial-services market addressable by service providers will grow to more than $200B by 2015. Also included is an analysis of how fundamental differences in business segments drive IT behavior, as the following table illustrates. Source: What Do SMBs Want from Commercial-Services Providers? Insights from Cisco’s U.S. Research on SMB Services Delivery  Link:http://www.cisco.com/web/about/ac79/docs/sp/SMB-Cloud-Survey.pdf. Please click on the image to expand it for easier reading.

figure 3 smb cloud adoption

  • Hosting and cloud services provider Parallels projects that the worldwide SMB SaaS applications market was $14.5B in 2012 today and will grow to $33.8B by 2015, attaining a 32% Compound Annual Growth Rate (CAGR).  Please see the following illustration of a breakdown by region over the forecast period.  Source: Profit from the Cloud 2013 Global Parallels Global SMB Cloud Insights  Opt-in required, Link:  http://www.parallels.com/fileadmin/parallels/documents/smb-reports/2013/2013_SMB_Brochure_Global_web.pdf.  Please click on the image to expand it for easier reading.

figure 4 smb cloud adoption

  • The latest research note from Bain & Company predicts revenue growth for SaaS companies will triple between 2011 and 2014.  The note also includes a revenue projection by category and is shown below. Source: The cloud reshapes the business of software by Ravi Vijayaraghavan http://www.bain.com/Images/BAIN_BRIEF_The_cloud_reshapes_the_business_of_software.pdf.  Please click on the image to expand it for easier reading.

figure 5 smb cloud adoption

  • SMEs overwhelmingly prefer to buy or acquire  these critical systems (43%) rather than lease or pay for use (23%) in an SAP-sponsored survey by Oxford Economics.  The study found that the tools most commonly used by SMEs are business management software (48%), mobile (46%), and analytics (44%). Cloud computing adoption is expected to jump from 35% to 47% in three years. An infographic summarizing the results is below. You can get the survey results here: http://cdn.news-sap.com/wp-content/blogs.dir/1/files/SAP-SME-analysis-presentation.pdf . Please click on the image to expand it for easier reading.

figure 1a smb cloud adoption

Best- And Worst-Performing Cloud Computing Stocks In The First Half Of 2013

Cloud computing stocks continue to show wide variation in performance throughout the first half of this year.

Ten of the twenty companies in the Cloud Computing Stock Index delivered returns to shareholders with NetSuite leading with a 37.30% share gain, delivering $13,730 on $10,000 invested on January 2, 2013.

To more fully define the stock performance of these companies, I’ve added Earnings Per Share (EPS), Price/Earnings Ratio, Year-To-Date (YTD) Total Gains or Loss, Annualized Gain or Loss, and Total Dollar Value of $10,000 invested on January 2, 2013.  You can download the latest version of the Cloud Computing Stock Index here.  The filter applied to these companies is that 50% or more of their revenues are generated from cloud-based applications, infrastructure and services.  Additional details of the index are provided at the end of this post.

 

Best Performing

Name

Symbol

(1/2/13 – 7/5/13)Total Gain or Loss

Annualized Gain or Loss

Total Dollar Value of $10K invested in this stock on Jan. 2, 2013 as of July 5th:

NetSuite Inc

N

37.30%

87.55%

$13,730.00

Keynote Systems, Inc.

KEYN

36.18%

84.53%

$13,618.00

CA, Inc.

CA

26.67%

59.83%

$12,667.00

Workday Inc

WDAY

23.81%

52.77%

$12,381.00

Cisco Systems, Inc.

CSCO

22.60%

49.82%

$12,260.00

Symantec Corporation

SYMC

18.84%

40.84%

$11,884.00

Amazon.com, Inc.

AMZN

11.10%

23.23%

$11,110.00

 

Worst Performing

Name

Symbol

(1/2/13 – 7/5/13)Total Gain or Loss

Annualized Gain or Loss

Total Dollar Value of $10K invested in this stock on Jan. 2, 2013 as of July 5th:

Rackspace Hosting, Inc.

RAX

-46.78%

-71.39%

$5,322.00

Fusion-IO, Inc.

FIO

-41.21%

-65.13%

$5,879.00

F5 Networks, Inc.

FFIV

-31.57%

-52.88%

$6,843.00

VMware, Inc.

VMW

-29.94%

-50.63%

$7,006.00

Riverbed Technology…

RVBD

-24.91%

-43.34%

$7,509.00

Red Hat, Inc.

RHT

-11.47%

-21.46%

$8,853.00

Key Take-Aways:

  • NetSuite leads the index with a 37.3% gain in their stock price, and $10K invested in their stock on January 2nd of this year would be worth $13,730 as of July 5th.  Cloud-based Enterprise Resource Planning (ERP) systems acceptance is accelerating, evidenced by the success NetSuite is having with their two-tier ERP strategy and recent announcement they are moving into manufacturing.  Their recent alliance with Oracle also shows upside potential.   A cloud-based ERP provider leading the index is good news for Acumatica and Plex Systems especially, the leader in cloud-based ERP systems for manufacturing and one of the most enthusiastic customer bases in enterprise software.  Both of these companies are privately held or they would have been included in the index.
  • The 20 companies that comprise the Cloud Computing Stock Index attained a 29.6% return from July 10, 2012 to July 5, 2013.  The Dow Jones Industrial Average (DJIA) gained 18.83%;  Microsoft, 14.02%; Oracle, 7.17%; and SAP, 27.51%.  The following chart compares the performance of each. Please click on the index to expand it for easier viewing.

  • Widespread adoption of Amazon Web Services, success using the Kindle series of tablets as customer acquisition tools for digital content, market leadership of the online retail landscape, and successful pilots of the AmazonFresh online grocery business in Los Angeles and Seattle are all fueling Amazon’s stock performance this year.

Specifics on the Cloud Computing Stock Index

I used The Cloud Times 100 as the basis of the index, and included the 20 following companies, all of which are publically traded.  The latest edition of the Cloud Computing Stock Index is shown here.  Please click on the index to expand it for easier viewing.

 Note: I do not hold equity positions or work for any of the companies mentioned in this blog post or included in the Cloud Computing Stock Index.  

CIOs On Cloud Computing Adoption: Conquer Complexity And Help Us Grow

CIONTT Europe recently completed a study that found 56% of CIOs and Senior IT leaders see complexity of their own Information and Communications Technology (ICT) systems as the biggest barrier to their organization’s enterprise-wide adoption of the cloud.  The survey contends that cloud adoption continues to be tactical in nature as a result of the inordinate complexity of existing and legacy ICT platforms.

Completed in April and May of this year in the United Kingdom, the study Growing Pains In The Cloud, 300 CIOs Express Their Views About Barriers To Cloud Adoption (opt in required) was completed by Vanson Bourne and included 300 interviews of CIOs and Senior IT leaders from public and private organizations with 250+ employees.

While the study was completed in the UK, the findings are applicable to enterprises globally looking to use cloud computing to better align business and IT strategies.  59% of CIOs and IT Leaders surveyed say that enabling alignment of business and IT strategies using cloud infrastructure is their number one priority.

Key take-aways from the study include:

  • 53% said that launching new services and applications more quickly is a key request they receive from business units. In the transport and logistics sector four fifths (80%) of CIOs confirmed launching new services and applications is their most important business focus.
  • 60% of IT leaders are concerned that cloud providers don’t  appreciate how complex legacy ICT systems are, and fear migration to the cloud could fail.  A common concern of respondents is how vendors tend to oversimplify their cloud solutions despite the inordinate complexity of ICT legacy platforms and systems.
  • 46% of the IT leaders polled agree that cloud is a great enabler of ‘bring your own device’ and flexible working, through enabling remote access to data and applications.  The challenge is making cloud infrastructure work seamlessly with legacy platforms and applications.
  • 68% have had cloud-based systems in place for two years or less.  The following graphic shows the distribution of cloud adoption by industry included in the study.
  • 77% of CIOs and Senior IT leaders report cloud-based infrastructure is in use today in their enterprises.  87% of CIOs in media and retail, and 84% of CIOs from telecommunications and ICT companies have already implemented a cloud-based infrastructure as well.  The following graphic illustrates the use of cloud as part of respondent’s ICT infrastructures.
  • 28% of the CIOs surveyed stated their legacy systems were too expensive (or valuable) to abandon altogether.  The implication is that CIOs and Senior IT leaders expect cloud platforms to eventually handle the complexity of their core business systems while also meeting compliance requirements internal and external to their organizations.
  • The four industries with the highest concentration of legacy ICT systems include Financial Services (30%), Media & Retail (31%), Transport and Logistics (31%) and Public Sector (30%).  CIOs in these industries show the highest resistance to cloud adoption in the study.  6% of CIOs said they have no plans to adopt cloud computing.

Bottom line:  CIOs are looking for cloud solution providers that recognize just how uniquely complex their businesses are and can address legacy system integration challenges head-on.  With 59% saying they have responsibility for aligning business and IT strategies, greater cloud adoption at the enterprise level is inevitable.

Follow

Get every new post delivered to your Inbox.

Join 392 other followers

%d bloggers like this: