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Posts tagged ‘SaaS’

Feb 19

Gartner Predicts Infrastructure Services Will Accelerate Cloud Computing Growth

public cloud computing forecast 2011 - 2016As public cloud computing gains greater adoption across enterprises, there’s an increased level of spending occurring on infrastructure-related services including Infrastructure-as-a-Service(IaaS).  Enterprises are prioritizing how to get cloud platforms integrated with legacy systems to make use of the years of data they have accumulated.  From legacy Enterprise Resource Planning (ERP) to Customer Relationship Management (CRM) systems, integrating legacy systems of record to cloud-based platforms will accelerate through 2016.  I’ve seen this in conversations with resellers and enterprise customers, and this trend is also reflected in Gartner’s latest report on public cloud computing adoption, Forecast Overview: Public Cloud Services, Worldwide, 2011-2016, 4Q12 Update Published: 8 February 2013.  Below are the key take-aways from the report:

  • Global spending on public cloud services is expected to grow 18.6% in 2012 to $110.3B, achieving a CAGR of 17.7% from 2011 through 2016. The total market is expected to grow from $76.9B in 2010 to $210B in 2016. The following is an analysis of the public cloud services market size and annual growth rates:

Figure 1 Cloud Computing Growth

  • Gartner predicts that Infrastructure-as-a-Service (IaaS) will achieve a compound annual growth rate (CAGR) of 41.3% through 2016, the fastest growing area of public cloud computing the research firm tracks.  The following graphic provides insights into relative market size by each public cloud services market segment:

Figure2

  • Platform-as-a-Service (PaaS) will achieve a 27.7% CAGR through 2016, with Cloud Management and Security Services attaining 26.7% in the same forecast period.  Software-as-a-Service’s CAGR through 2016 is projected to be 19.5%.  The following graphic illustrates the differences in CAGR in the forecast period of 2011 – 2016:

Figure 3

  • Gartner is projecting the SaaS market will grow at a steady CAGR of 19.5% through 2016, having increased the forecast slightly (.4%) since its latest published report.  Global SaaS spending is projected to grow from $13.5B in 2011 to $32.8B in 2016.
  • CRM will continue to be the largest global market within SaaS, forecast to grow beyond $5B in 2012 to $9B in 2016, achieving a 16.3% CAGR through 2016.   The highest growth segments of the SaaS market continue to be office suites (49.1%), followed by digital content creation (34.0%).  The following graphic rank orders CAGRs across all public cloud services segments from the forecast period:

Figure 4

  • 59% of all new spending on cloud computing services originates from North American enterprises, a trend projected to accelerate through 2016.  Western Europe is projected to be 24% of all spending.  A graphic comparing total spending by geography and corresponding growth rates is provided below:

Figure 5

  • The following tables provide insights into each category of public cloud computing spending throughout the forecast period.  Please click on the tables to expand them for easier reading.

Table 1

Table 2

Table 3

Source:  Forecast Overview: Public Cloud Services, Worldwide, 2011-2016, 4Q12 Update Published: 8 February 2013.

Jan 31

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Roundup of Cloud Computing & Enterprise Software Market Estimates and Forecasts, 2013

157989221When the CEO of a rust-belt manufacturer speaks of cloud computing as critical to his company’s business strategies for competing globally, it’s clear a fundamental shift is underway.

Nearly every manufacturing company I’ve spoken with in the last ninety days has a mobility roadmap and is also challenged to integrate existing ERP, pricing and fulfillment systems into next-generation selling platforms.

One of the most driven CEOs I’ve met in manufacturing implemented a cloud-based channel management, pricing, quoting and CRM system to manage direct sales and a large distributor network across several countries.  Manufacturers are bringing an entirely new level of pragmatism to cloud computing, quickly deflating its hype by pushing for results on the shop floor.

There’s also been an entirely new series of enterprise software and cloud computing forecasts and market estimates published.  I’ve summarized the key take-aways below:

  • Enterprise sales of ERP systems will grow to $32.9B in 2016, attaining a 6.7% CAGR in the forecast period of 2011 to 2016.   CRM is projected to be an $18.6B global market by 2016, attaining a CAGR of 9.1% from 2011 to 2016.   The fastest growing category of enterprise software will be Web Conferencing and Team, growing at a 12.4% CAGR through the forecast period.  The following graphic compares 2011 actual sales and the latest forecast for 2016 by enterprise software product category.  Source:  Gartner’s Forecast Analysis: Enterprise Application Software, Worldwide, 2011-2016, 4Q12 Update Published: 31 January 2013

Figure 1 enteprise spending

Figure 2

figure 3 cloud computing

 public cloud forecast

Forrester Wave

  • IDC is predicting Cloud Services and enablement spending will hit $60 billion, growing at 26% through the year and that over 80% of new apps will be distributed and deployed on cloud platforms.  Their predictions also are saying that 2.5% of legacy packaged enterprise apps will start migrating to clouds.  Source: Top 10 Predictions, IDC Predictions 2012: Competing for 2020 by Frank Gens. You can download a copy of the IDC Predictions here: http://cdn.idc.com/research/Predictions12/Main/downloads/IDCTOP10Predictions2012.pdf

Dec 27

How Cloud Computing Is Accelerating Context-Aware Coupons, Offers and Promotions
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How Cloud Computing Is Accelerating Context-Aware Coupons, Offers and Promotions

Retailers and marketers often face the challenge of getting coupons, offers and promotions delivered at the perfect time and in the right context to their customers.

The rapid advances in cyber foraging, contextual computing and cloud computing platforms are succeeding at revolutionizing this aspect of the retail shopping experience.  Context-aware advertising platforms and strategies can also provide precise audience and segment-based messaging directly to customers while they are in the store or retail outlet.

What makes context-aware advertising so unique and well adapted to the cloud is the real-time data integration and contextual intelligence they use for tailoring and transmitting offers to customers.  When a customer opts in to retailer’s contextually-based advertising system, they are periodically sent alerts, coupons, and offers on products of interest once they are in or near the store.  Real-time offer engines chose which alerts, coupons or offers to send, when, and in which context.  Cloud-based analytics and predictive modeling applications will be used for further fine-tuning of alerts, coupons and offers as well.  The ROI of each campaign, even to a very specific audience, will be measurable.  Companies investing in cloud-based contextual advertising systems include Apple, Google, Greystripe, Jumptap, Microsoft, Millennial Media, Velti and Yahoo.

Exploring the Framework of Me Marketing and Context-Aware Offers

A few years ago, a student in one of my MBA courses in international marketing did their dissertation on cyber foraging and contextual mobile applications’ potential use for streamlining business travel throughout Europe.  As a network engineer for Cisco at the time, he viewed the world very systemically; instead of getting frustrated with long waits he would dissect the problem and look at the challenges from a system-centric view.  The result was a great dissertation on cyber foraging and the potential use of Near Field Communications (NFC) and Radio Frequency Identification (RFID) as sensors to define contextual location and make business travel easier.  One of the greatest benefits of teaching, even part-time, is the opportunity to learn so much from students.

I’ve been following this area since, and when Gartner published Me Marketing: Get Ready for the Promise of Real-Time, Context-Aware Offers in Consumer Goods this month I immediately read it.  Gartner is defining Me Marketing as real-time, context-aware offers in grocery stores. Given the abundance of data on transactions that occur in grocery stores, Gartner is predicting this will be the most popular and fastest-growing area of context-aware offers.  The formula for Me Marketing is shown below:

The four steps of the Me Marketing formula are briefly described as follows:

Me marketing framework for contextual coupons

 

  • Consumer Insight and Permission - The first step of the framework and the most difficult from a change management standpoint, this requires customers to opt in to receiving alerts, coupons, offers and promotions.  The best retailers also have invested heavily in security and authentication technologies here too.
  • Delivery Mechanism and In-the-Moment Context – The real-time offer engine is used to determining which coupons, offers and promotions are best suited for a specific customer based on their shopping patterns, preferences and locations.
  • Select Best Offer – Next, the real-time offer engine next defines a very specific product or service offer based on location, previous purchase history, social media analysis, predictive and behavioral analysis, and previous learned patterns of purchasing.
  • Redemption – The purchase of the item offered.  Initial pilots have shown that less frequent yet highly relevant, targeted offers have a higher redemption rate.  It is encouraging to see that early tests of these systems show that spamming customers leads to immediate opt-outs and in some cases shopping competitors.

A Short Overview of Contextual Advertising and the Cloud

Cloud-based systems and applications are necessary for retailers to gain the full value that contextual advertising can provide.  This includes the social context, with specific focus on aggregation and analysis of Social CRM, CRM, and social media content, in addition to behavioral analytics and sentiment analysis.  It also includes the previous browsing, purchasing, returns and prices paid by product for each customer.  Cloud-based integration architectures are necessary for making contextual advertising a reality in several hundred or even thousands of retail stores at the same time.

Geographical data and analysis is also essential.  RFID has often been included in cyber foraging and contextual advertising pilots, in addition to NFC.  As Global Positioning System (GPS) chip sets have dropped in price and become more accurate, companies including Google, Microsoft and Yahoo are basing their contextual advertising platforms on them.  Finally the activity or task also needs to have a contextual definition.

Combining all three of these elements gives the context of the customer in the retail store.  The figure below is from Three-Dimensional Context-Aware Tailoring of Information.  This study also took into account how personas are used by companies building cloud-based contextual advertising systems.  The taxonomies shown in the figure are used for building personas of customers.

context aware technology

There are many pilot projects and enterprise-wide system tests going on right now in the area of cloud-based contextual advertising.  One of the more interesting is an application suite created entirely on Google App Engine, Android, and Cloud Services.  The pilot is explained in the study Exploring Solutions for Mobile Companionship: A Design Research Approach to Context-Aware Management.  The following figure shows a diagram of the suite.  This pilot uses Cloud to Device Messaging (C2DM) which is part of the Android API to link the Google App Engine server and Android client.  Google will most likely add more depth of support for C2DM as it plays a critical role in contextual system development.

context aware Google Ad Platform

Benefits of a Cloud-based Contextual Advertising Platform

For the customer, cloud-based advertising systems over time will learn their preferences and eventually impact the demand planning and forecasting systems of retailers.  This translates into the customer-centric benefits of products being out of stock less.  In addition, customers will receive more relevant offers.  The entire shopping experience will be more pleasant with expectations being met more often.

For the retailer, better management of product categories and more effective gross margin growth will be possible. Having real-time analytics of each coupon, offer and promotion will also give them immediate insights into which of their selling strategies are working or not.

For the manufacturer, the opportunity to finally understand how customers respond at the store level to promotions, programs including the results of co-op funds investment and pricing strategies will be known.  The manufacturers who partner with retailers using these systems will also have the chance at attaining greater product differentiation as their coupons, offers and promotions will only go to the most relevant customers.

References:

Me Marketing: Get Ready for the Promise of Real-Time, Context-Aware Offers in Consumer Goods Published: 24 December 2012 Analyst(s): Don Scheibenreif, Dale Hagemeyer

Tor-Morten Grønli, Ghinea, G., & Bygstad, B. (2013). Exploring Solutions for Mobile Companionship: A Design Research Approach to Context-Aware Management. International Journal of Information Management, 33(1), 227. http://www.sciencedirect.com/science/article/pii/S0268401212001259

Tor-Morten Grønli, & Ghinea, G. (2010). Three-Dimensional Context-Aware Tailoring of Information. Online Information Review, 34(6), 892-906. http://www.emeraldinsight.com/journals.htm?articleid=1896452

Nov 8

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Cloud Computing and Enterprise Software Forecast Update, 2012

The latest round of cloud computing and enterprise software forecasts reflect the growing influence of analytics, legacy systems integration, mobility and security on IT buyer’s decisions.

Bain & Company and Gartner have moved beyond aggregate forecasts, and are beginning to forecast by cloud and SaaS adoption stage.  SAP is using the Bain adoption model in their vertical market presentations today.

Despite the predictions of the demise of enterprise software, forecasts and sales cycles I’ve been involved with indicate market growth.  Mobility and cloud computing are the catalysts of rejuvenation in many enterprise application areas, and are accelerating sales cycles.  Presented in this roundup are market sizes, forecasts and compound annual growth rates (CAGRS) for ten enterprise software segments.

Key take-aways from the latest cloud computing and enterprise software forecasts are provided below:

  • Public and private cloud computing will be strong catalysts of server growth through 2015.  IDC reports that $5.2B in worldwide server revenue was generated in 2011 or 885,000 units sold.  IDC is forecasting a $9.4B global market by 2015, resulting in 1.8 million servers sold. Source:  IDC Worldwide Enterprise Server Cloud Computing 2011–2015 http://www.idc.com/getdoc.jsp?containerId=228916 
  • IDC reports that enterprise cloud application revenues reached $22.9B in 2011 and is projected reach $67.3B by 2016, attaining a CAGR of 24%.  IDC also predicts that by 2106, $1 of every $5 will be spent on cloud-based software and infrastructure. Report, Worldwide SaaS and Cloud Software 2012–2016 Forecast and 2011 Vendor Shares, Link: http://www.idc.com/getdoc.jsp?containerId=236184
  • 11% of companies are transformational, early adopters of cloud computing, attaining 44% adoption (as defined by % of MIPS) in 2010, growing to 49% in 2013.  This same segment will reduce their reliance on traditional, on-premise software from 34% to 30% in the same period according to Bain & Company’s cloud computing survey results shown below.  SAP is using this adopter-based model in their vertical market presentations, an example of which is shown here.

  • The global Platform-as-a-Service (PaaS) market is growing from $900M in 2011 to $2.9B in 2016, achieving a 26.6% CAGR.  At this projected rate, PaaS will generate an average of $360M a year in revenue between 2011 and 2016.  Gartner projects that the largest segments will be Application Platform Services (aPaaS) which generated 35% of total PaaS spending in 2011, followed by cloud application lifecycle services (12.5).    Source: Market Trends: Platform as a Service, Worldwide, 2012-2016, 2H12 Update Published: 5 October 2012 ID:G00239236.

  • The three most popular net-new SaaS solutions deployed are CRM (49%), Enterprise Content Management (ECM) (37%) and Digital Content Creation (35%).  The three most-replaced on-premise applications are Supply Chain Management (SCM) (35%), Web Conferencing, teaming platforms and social software suites (34%) and Project & Portfolio Management (PPM (33%). The following graphic shows the full distribution of responses. Source: User Survey Analysis: Using Cloud Services for Mission-Critical Applications Published: 28 September 2012

  •  In 2011, the worldwide enterprise application software market generated $115.1B in revenue, and is projected to grow to $157.6B by 2016, attaining a 6.5% CAGR in the forecast period. Gartner reports that 38% of worldwide enterprise software revenue is from maintenance and technical support; 17% from subscription payments; and 56% from ongoing revenue including new purchases.  An analysis of the ten enterprise software markets and their relative size and growth are shown in the figure below along with a table showing relative rates of growth from 2011 to 2016. Source: Forecast: Enterprise Software Markets, Worldwide, 2011-2016, 3Q12 Update Published: 12 September 2012 ID:G00234766

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

Apr 21

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What’s Hot in CRM Applications, 2012

Serving the sales force is a mantra and mindset that resonates through the best companies I’ve ever worked with and for.

That priority alone can help galvanize companies who are adrift in multiple, conflicting agendas, strategies and projects.  Uniting around that goal – serving sales and getting them what they need to excel – can turn around even the most downtrodden companies.  And size doesn’t matter, the intensity of focus and commitment to excel  do.

That’s why the latest report from Gartner’s Ed Thompson, What’s “Hot” in CRM Application 2012, published last Thursday resonates with me.  He’s talking about how sales strategies need to be propelled by rapid advances in mobile technology, social CRM, sales content and collaboration, and clienteling to serve the sales force more thoroughly than ever before.  His assessment of what’s hot in CRM is a great foundation for getting behind the mantra of serving the sales force and engraining it into a corporate culture while getting full value from the latest technologies.

Here are the key take-aways from the report:

  • Software-as-a-Service (SaaS) delivery of CRM applications represented 34% of worldwide CRM application spending in 2011.  More than 50% of all Sales Force Automation (SFA) spending is on the SaaS platform.  Gartner clients who are successfully running SaaS are now looking at how to get value from Platform-as-a-Service (PaaS) in the context of selling strategies.
  • CRM spending grew 13% in 2011, fueled analytical, operational and social CRM growth.  Operational CRM represents 80% of all CRM spending and grew 10% in 2011.
  • Analytical CRM, in which Gartner includes predictive analytics and market segmentation analysis, grew a solid 10% in 2011 and is having a very strong year with inquiry traffic.
  • Social CRM grew 30% in 2011 in revenue terms and is 7% of total CRM spending globally as of 2011.   90% of Social CRM spending is originating in Business-to-Consumer (B2C) organizations with the remaining occurring in B2B.
  • Gartner is projecting that CRM will be one of the top three search terms on Gartner.com throughout calendar 2012 based on the trends and volume of calls they are seeing today.
  • CEOs see CRM as their #1 technology-enabled investment in 2012 according the query calls through April, 2012.
  • CRM is ascending rapidly in the priorities of CIOs in 2012, moving from 18th place to eight place  in the latest Gartner analysis.
  • The following table of Highest CRM Application Priorities, 2012 show what’s trending within Sales, Customer Service, E-Commerce and Marketing inquiries Gartner is receiving from its clients.  Consider these as leading indicators of interest.  Over time these areas will need to solidify for forecasts to be completed.
  • Apple iPads are the great maverick buy of 2012 with thousands being purchased by Sales and Marketing management with the immediate requirement of IT integration to these devices.   IT departments are scrambling on the security issues and lack of polices on BYOD.  In enterprise software, iPads are proving to be highly effective as demo platforms for new SaaS-based applications.  They have become the new sales bag of the 21rst century.
  •  High Tech, Life Sciences and Insurance are the three industries with the greatest levels of iPad adoption as of April 2012.  Gartner is predicting that by the end of 2012, 80% of all sales representatives in the pharmaceutical industry will be using iPads for their daily sales tasks.
  • Social or community customer service is the hottest area of growth for post-sales service with high-tech, media, travel, telecommunications, retail and education-based clients dominating client inquiries.

Apr 2

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Roundup of SaaS ERP Forecasts and Market Estimates, 2012

The latest round of SaaS ERP market forecasts are more grounded in the reality of CIO priorities and committed projects in 2012 than ever before.  And this is good news for the many vendors competing in the Financial Management Systems (FMS), Human Capital Management (HCM) and Manufacturing segments of the SaaS ERP market.

Two weeks ago in Houston I interviewed twenty-five different CIOs, IT Directors, CEOs and CTOs as part of a persona research study I am doing.  Their take on SaaS ERP was consistent with what this round-up shows, namely this type of SaaS application is best suited for extending beyond, not replacing, the main ERP systems and platforms.   I concentrated on SaaS ERP adoption in manufacturing and learned the following during my interviews:

  • Usability and speed of deployment are the two most common benefits CIOs mentioned in my survey during Convergence.  The economics of cloud computing is a topic that CFOs love to talk about, especially in the areas of value-based pricing and how that is determined.
  • When asked what kept them up at night, CIOs said it was the thought of a call from their boss (often the CFO) that a cloud system had been compromised or had completely gone down.  Security and reliability are holding back CIOs in manufacturing from adopting SaaS-based ERP systems more pervasively in their companies.
  • CIOs from aerospace and defense companies get the benefits of cloud computing, yet they have much bigger issues to deal with right now, like replacing financials in their existing ERP system and staying in compliance to government requirements.  Earned Value Management is a major focus they have as well.  SaaS-based ERP systems are interesting to them; they however would require a completely enclosed, locked-down implementation due to security requirements.
  • There are vast differences in how CIOs view cloud computing – something that the following forecasts don’t really capture.  For the CIOs who are strategists, cloud computing in general and SaaS ERP specifically is a consideration given the agility and time-to-market, providing customization is held to a minimum.  CIOs who came up through IT have a healthy degree of skepticism and see SaaS ERP as potentially useful for scaling out an operation yet never being the primary financial system.

Here are the latest SaaS ERP forecasts and market estimates:

  • Gartner released their latest SaaS revenue forecast last week predicting revenue will reach $14.5B this year, a 17.9% increase from 2011 of $12.3B, with strong growth predicted through 2015 when the market is expected to be $22.1B. Source: http://www.itjungle.com/tfh/tfh040212-story08.html
  • In the report Market Trends: Cloud Computing and SaaS Adoption in Manufacturing and Natural Resources, Worldwide, 2012 Gartner is predicting  59% of manufacturers will adopt IaaS during the 2011 – 2015 timeframe and 47% will be either piloting or using SaaS-based applications.  Gartner cites the need for greater business and supply chain agility as the factors driving this rapid adoption.  The following figure is from the Gartner report  Market Trends: Cloud Computing and SaaS Adoption in Manufacturing and Natural Resources, Worldwide, 2012.
  • Forrester forecasts SaaS ERP spending staying at 2% of the global ERP market, while Gartner forecasts 7% through 2012.  Gartner is projecting Project and Portfolio Management (29.1%) and Supply Chain Management (22.1%) will see the greatest growth rates through 2015.  Supply Chain Management is expected to reach $2.7B in revenue by 2015.  The Total Software Revenue Forecast for SaaS Delivery Within Enterprise Software is shown in the following table.  Source: Forecast: Software as a Service, Worldwide, 2010-2015, 1H11 Update Published: 22 June 2011 Analyst(s): Sharon A. Mertz, Chad Eschinger, Tom Eid, Chris Pang, Laurie F. Wurster
  • Gartner, IDC and Forrester all predict that Human Capital Management (HCM) will see the broadest adoption of all SaaS-based ERP components through 2015.  Vendors in this category include ADP, Concur, Cornerstone onDemand, HumanConcepts, Infor, Kenexa, Lumesse, Saba, SilkRoad, Sonar6, SuccessFactors, SumTotal Systems, Taleo, Ultimate Software and Workday.  Based on a recent Gartner Spending and Usage of SaaS Survey, 39% of manufacturers are piloting or using SaaS-based financials followed by 37% using Expense Management.The following figure illustrates their forecast, from the report  Market Trends: Cloud Computing and SaaS Adoption in Manufacturing and Natural Resources, Worldwide, 2012
  • Gartner’s IT Market Clock for ERP Platform Technology indicates that multitenant SaaS-based ERP is maturing rapidly, driven by time-to-market and cost advantages. The IT Market Clock is shown below, indicating SaaS ERP-based systems position relative to other ERP platforms now in use.  Vendors including  Epicor Express Editions, Glovia, Kenandy, NetSuite, Plex Systems, and SAP Business ByDesign compete in this segment.Source: IT Market Clock for ERP Platform Technology, 2011 Published: 19 September 2011 Analyst: Jim Shepherd.

Gartner has also compiled a Market Clock Recommendation Summary which is shown in the following table.  Of the CIOs I’ve spoken with during the persona research, the description of Multitenant SaaS is accurate.  No CIO I’ve spoken with is willing to bet their job on a rip-and-replace strategy for SaaS ERP; yet many are willing to extend their existing ERP systems using SaaS implementations to get up and running quickly at lower cost.  The one caveat nearly everyone mentions is little or no customization is necessary for SaaS ERP systems to be even evaluated by their companies.  Slight configuration is expected; however in-depth customization is not.

Bottom line: The persona research completed shows that the SaaS-based ERP growth is being helped by the transition occurring in the CIO ranks today.  More of them are strategists, who are expected to make business strategies happen, over and above just keeping the system dial tone on in their enterprises.

Jan 2

200213603-001
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How Cloud Computing And ERP Mobility Are Reordering Gartner’s Hype Cycle for ERP

A good friend of mine recently became CIO of a financial services firm and was given his first major project last month: make the complete accounting, financial, and loan provider data and applications available 24/7 on any iPad or Android-based tablet from any office, at any time.

The majority of loan provider applications are cloud-based and his company is running NetSuite.  His corporate office is in Asia and cloud-based applications made it possible for the company to launch and operate in California within months.   He’s been given six months to transform this mobile vision into reality.

Another CIO of a major A&D manufacturer I recently visited wants vendors to challenge him more to get greater value from his investments in legacy data and ERP systems. Using ERP to run batch reports alone has nearly caused project schedules to slip, so the focus internally is on real-time system integration of project management and accounting systems.  He’s also been given the task of revamping accounting and financial systems by October, 2012, and they just started late last year.

Gartner’s Hype Cycle for ERP 

Considering these two extremes in the context of the Gartner Hype Cycle for ERP (shown below) and the recent report SaaS and Cloud ERP Trends, Observations, and Performance 2011  (free for download until January 9, 2012) published by Aberdeen last month several take-aways emerge.

  • CIOs are under increasing pressure in 2012 to enhance, modify even replace existing ERP systems while standardizing technology across the enterprise at the same time.  The most risk-averse way around this is to add applications to single instance ERP backbone systems, with analytics and Business Intelligence (BI) being the among the most in demand.
  • Cloud-based ERP in the Enterprise and Small & Medium Businesses (SMB) are accelerating along the Hype Cycle faster than Gartner indicates.  Enterprises are using Cloud-based ERP systems as part of their two-tier ERP system strategies due to the Total Cost of Ownership (TCO) and time-to-deploy advantages, and the flexibility of tailoring everything from user interfaces to workflows to their specific requirements.  Highly specialized Cloud-based ERP suites including those from Plex Systems are gaining traction due to their expertise in specific industries and the compliance-related challenges inherent within them. In SMBs, the cost and time-to-deploy are two major drivers with concerns over security being the biggest impediment to growth.  Gartner reports that they are seeing Cloud-based ERP adoption fastest in companies with fewer than 200 users overall.
  • Cloud-based ERP systems most often considered in industries that have high variable costs, rapid transaction cycles and tend towards higher Return on Invested Capital (ROIC).  Based on the research SaaS and Cloud ERP Trends, Observations, and Performance 2011 the industries who are the most willing to consider Cloud-based ERP versus on-premise are Financial Services (22% SaaS versus 44% on-premise); Healthcare (42% SaaS versus 58% on-premise); and Professional Services (56% SaaS versus 58% on-premise).
  • Large companies (over $500M in annual revenue) using Cloud-based ERP systems are opting for hosted deployments managed by their ERP vendor (10%) or an independent 3rd party (11%), with just 2% relying on a SaaS platform. Aberdeen defined small organizations as those with annual sales under $50M, midsize organizations having annual sales of $50M – $500M. The following is from SaaS and Cloud ERP Trends, Observations, and Performance 2011:
  • ERP mobility will be a dominant force from the shop floor to each sales call where quotes, orders and contracts deliver real-time order and pricing updates.  How a given manufacturer chooses to sell is even more important than what they sell in many industries. Equipping manufacturing, quality assurance, production scheduling, procurement and sales to have immediate data on what’s going on with orders, customers and suppliers is critical.  For the sales and service teams, real-time data is the fuel they run on.  There’s a chronic time shortage in many, many companies right now, and bringing greater ERP mobility from the shop floor to the sales call will increasingly be seen as a means to lessen the time crunch.  2012 is the year where mobility gets real across the enterprise with solid performance numbers being generated as a result.  For companies with large sales forces and service organizations, integrating to key ERP systems to gain real-time data will quickly lead to increased sales and higher gross margins on service and warranty repairs.
  • Gartner predicts that by 2015 enterprises who are successfully using extreme information management strategies (Big Data) will outperform competitors in their industry sectors by 20% in every available financial metric.  The following is the Priority Matrix for ERP, 2011 showing what Gartner believes to be transformational technologies and strategies in ERP.

Sep 3

Enterprise Software as a Service Market Forecast: The Future is Already Here – It’s Just Not Evenly Distributed

The prescient quote by William Gibson aptly describes the worldwide Software as a Service (SaaS) market today, especially in the enterprise.

Global adoption and growth of SaaS within enterprises is unevenly distributed yet growing rapidly.  One of the primary catalysts moving this forward are Amazon Web Services, Google, Microsoft, Salesforce and other platform providers lowering the barriers to creating new applications, continually investing in security technologies, and streamlining rapid prototyping, testing, and release of SaaS applications.

This week Salesforce showed how extensive the momentum is in their global base of developers during Dreamforce ’11.  The Developer Zone had the most innovation per square foot of any venue at this conference.  Insights gained from visiting the sessions at Dreamforce, speaking with Force evangelists and tech staff, and also with attendees form the basis of the following analysis and insights.  On Friday of last week Gartner also released the report, Forecast: Software as a Service, All Regions, 2010-2015 by Sharon A. Mertz, Chad Eschinger, Tom Eid, Yanna Dharmasthira, Chris Pang, Laurie F. Wurster, Tsuyoshi Ebina, Hai Hong Swinehart, which validated several of the trends seen in the Developer Zone at Dreamforce ’11.

Forecasting the Growth of SaaS in the Enterprise, 2015

In speaking with developers, vendors and after reviewing the Gartner report, here are several insights gained that illustrate how SaaS adoption will vary by region over the next four years:

  • APIs are getting more adept at managing multi-party transactions across all platforms.  Marc Benioff and Chuck Phillips alluded to this when Infor announced Inforce this week at Dreamforce.  It was also evident in how partners in the Developer Zone were demonstrating frameworks for supporting more advanced enterprise software application development.  These included supply chain management, the ability to manage complex project plans more effectively using apps based on these APIs, and greater control over collaboration development.  Gartner published their total software revenue forecast for SaaS delivery, 2007 – 2015 back in June, and a table from that analysis is shown below.  Their forecast reflects in large part depth of REST APIs which are part of Web Services.   This table is from the report, Forecast: Software as a Service, Worldwide, 2010-2015, 1H11 Update, 22 June 2011, ID:G00213816, Sharon A. Mertz, Chad Eschinger, Tom Eid, Chris Pang, Laurie F. Wurster.
  • Graphical interface flexibility, usability options, localization, and local language support dominate EMEA concerns about SaaS.  In Dreamforce sessions attended and in the Gartner report, it’s clear Salesforce is struggling to make localization work more effectively via their programming platforms and tools in EMEA.  This came out during many of the discussions in the Developer Zone as well.  All platform providers are facing this challenge, yet the pace of new API enhancements shows significant potential.  As a result the forecast for SaaS revenue in Western Europe is forecasted to be $2.66B in 2011 growing to $4.8B in 2015, achieving a compound annual growth rate (CAGR) of 17% according to Gartner.
  • Total Cost of Ownership (TCO) is aggressively pushed by Salesforce in the U.S. yet is most effective in EMEA.  This became evident in discussions and presentations, and also was validated by the recent Gartner report.  Salesforce also has extensive TCO calculators on its Force developer sites for the U.S. yet ironically they are finding they are most effective in EMEA sales cycles.
  • Based on my informal poll 20% of iPad-to-Salesforce account demos failed at Dreamforce.    Dozens of companies were hyping their iPad clients at Dreamforce, yet I found nearly one in five failed to deliver reliable performance. While the sample is hardly scientific, it does show that the iPad to Salesforce integration so heavily hyped by so many vendors is still nascent.  It’s as if these companies invested so much on iPad clients they ran out of time to make the back-end integrations work reliably.  Gartner found that lack of integration is the single greatest inhibitor to SaaS growth in North America.
  • Ease of speed and deployment, limited capital expense, and lower TCO are the most critical factors driving SaaS growth in U.S. enterprises today.  This became evident from listening to customer testimonials during the many vendor sessions in Moscone West, in addition to discussions with developers.  The impact of these factors is also evident in the total software revenue forecast for SaaS delivery within enterprise application software markets by region, 2008 – 2015.   This is from the Gartner report, Forecast: Software as a Service, All Regions, 2010-2015. Sharon A. Mertz, Chad Eschinger, Tom Eid, Yanna Dharmasthira, Chris Pang, Laurie F. Wurster, Tsuyoshi Ebina, Hai Hong Swinehart.

  • CRM continues to dominate SaaS usage across all enterprise applications, closely followed by Web conferencing and e-learning in North America and Northern Europe.  Both North America and Northern Europe have comparable adoption trends regarding these SaaS applications, with Western and Southern Europe lagging in terms of adoption and spending.
  • Asia/Pacific continues to be the most fragmented of all regions when it comes to SaaS adoption in the enterprise.  Countries with greater stability of their Internet infrastructures including Australia, Hong Kong, Singapore and South Korea are experiencing greater SaaS growth, and also contributing to Salesforce’s success in these regions.  Salesforce has 14.5% CRM share in this region, third behind SAP and Oracle. Emerging countries are the most rapid adopters of SaaS-based accounting, e-mail and collaboration-based apps.
  • China, India and Malaysia are experiencing the most rapid adoption of SaaS-based enterprise applications in the Asia/Pacific region.  WiPro’s decision to invest so heavily in Dreamforce as a promotional event is a case in point.  The Developer Zone had  several companies from this region offering their programming and system integration services as well.

Bottom line: SaaS adoption continues to accelerate globally across enterprise software, growing from $12B in 2011 to $21B in 2015, achieving a 16.3% CAGR annually. Platform providers are knocking down the barriers to market growth by using events including Dreamforce to educate, entertain and enable developers to quickly turn concepts into applications.

Jul 24

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Predicting Cloud Computing Adoption Rates

From conservative, single digit adoption rates to hockey-stick projections of exceptional growth, analyst firms, venture capitalists and government ministries are weighing in on how they see cloud adoption progressing.

While each of the adoption rate predictions vary significantly in terms of their methodologies and results, all rely on the assumption that SaaS applications including CRM will continue to gain momentum.  The user adoption rates vary on how fast the momentum is, yet all share this assumption.  Speed, increased user adoption rates, and the ability to more closely align software to business goals are cited most often as the biggest benefits.

Where the projections vary most is whether enterprises will eventually migrate the majority of their applications to the cloud or not.  Forrester, Gartner and others see a hybrid cloud architecture emerging in the enterprise and forcing the issue of legacy systems migration by 2015.  As would be expected, vendor-driven research sees an “all or nothing” world in the near future.

Sanity Check

Wanting to see how reliable the figures were showing rapid cloud adoption in the enterprise, I did a quick sanity check.  Taking the  distribution of sales by segment for Salesforce.com and their annual revenue growth rate, then normalizing it across all segments, enterprise emerges as their strongest segment by a wide margin in 2015.  It had a 15%+ compound annual growth rate (CAGR) from 2011 – 2015 just taking their current sales by segment distribution of sales and extrapolating forward.  Data points like this and the market factors behind them is why SaaS is often used in these studies as a leading indicator of broader cloud adoption.

Adoption Rate Round-Up

  • Forrester found that SaaS will outgrow all other cloud services, achieving 37% adoption in 2011 growing to 50% by 2012.  In previous studies Forrester has shown that SaaS is a major growth catalyst of ongoing investment in IaaS and PaaS in enterprises. Source: Source:  Forrsights: The Software Market In Transformation, 2011 And Beyond Shifting Buying Preferences Lead To New Software Priorities by Holger Kisker, Ph.D. with Pascal Matzke, Stefan Ried, Ph.D., Miroslaw Lisserman  Link: http://bit.ly/ijJy70  The following table is from the report:

  • Microsoft Global SMB Cloud Adoption Study released in March, 2011 is one of the most comprehensive done this year on this topic. Of the many findings, the study predicts  39 % of SMBs expect to be paying for one or more cloud services within three years).  One of the best studies on cloud adoptions done this year Source: Study Results Document (PDF (22 pages): http://bit.ly/gN8yTx

  • North Bridge Venture Partners, GigaOM PRO and over a dozen research partners completed the study The Future of Cloud Computing 2011.  The study found 13% expressed high level of confidence in cloud computing for enterprise applications, with 40% experimenting and 10% saying they will never use cloud-based platforms as they are too risky. A presentation of the results can be found here:

Source: http://futureofcloudcomputing.drupalgardens.com/2011-future-cloud-computing-survey-results

  • Springboard Research (Forrester) completed a study of cloud computing adoption in Asia finding 31% of companies with 50 or fewer PCs will adopt cloud-based applications in 18 months, 56% with up to 500 PCs.  The key findings are available for download from the source URL below the infographic.

                                     Microsoft Asia is making this available for download here: http://bit.ly/jWjOj1

  • TechTarget published their analysis of virtualization and cloud computing adoption in the study, State of virtualization and cloud computing: 2011.  Of the many findings, a few of the most significant is how pervasive VMware ESXi 4 and later (vSphere) is throughout enterprises today.  The study also shows that 7% of those interviewed had implemented cloud computing in 2010, growing to 9% in 2011 – quite conservative compared to many of the other adoption rate analyses completed.  You can find the results here: http://searchdatacenter.techtarget.com/feature/State-of-virtualization-and-cloud-computing-2011
  • Yankee Group has found that in 2011, 41 percent of very large enterprises (more than 10,000 employees) have already deployed or are considering deployment of platform as a service (PaaS) within the next 12 months, compared to just 32 percent in 2010.  They have also found that mobility is most significant factor driving cloud adoption in the enterprise. Source: http://professional.wsj.com/article/TPCHWKNW0020110722e77q0004d.html
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