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.
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:
- 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
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.
DreamForce 2010 had energy, intensity and focus that is rarely seen in enterprise software events. There are many excellent summaries of the event with Michael Krisgman’s The new age of sexy enterprise software – Part 1: Salesforce.com gets mojo being one of the best.
The bottom line is that Salesforce.com is redefining enterprise software – not just at the marketing or user level – but at the developer level as well.
2010: The Year of the Trojan Horse
At the center of this year’s DreamForce is the transformation of Salesforce.com into an enterprise platform provider, an endorser of open APIs including REST (Representational State Transfer), which the Salesforce.com development community had been asking for over a year. As the Google Trend graphic shows, the timing of a REST-based Salesforce.com API couldn’t’ have been better, it is now leading other APIs in terms of interest in trending data and adoption. Please click on the Google Trends graphic to enlarge for easier viewing.
Like the REST announcement, the timing of the Heroku acquisition last week shows how committed Salesforce.com is to creating a world-class development platform. Having Ruby on Rails as part of the development suite of applications further accelerates this strategy of dominating development platforms. The VMWare alliance does the same for Java.
There’s also urgency for getting as many developers onto Salesforce.com platforms, you can sense that in the presentations from the VPs of Development and from Marc Benioff as well. The quicker they can reach critical mass with developers on the Force.com platform the quicker they can move on to entirely new application areas. Chris Brogan would call it escape velocity and in the world of Salesforce.com, it looks a lot like a Trojan horse strategy of having as many applications in the enterprise on their platform as quickly as possible.
In the coming months, there will be more API-based announcements, more of an endorsement of open APIs. JSON APIs for example will become increasingly important in this strategy. Salesforce.com is out to win the stack war with a developer and API-driven land grab. CloudStock showed this company knows how to excel at evangelism. Time will tell if the Trojan horse strategy, now in full force, succeeds.
Note: The following is an excellent presentation on open APIs presented last week at CloudStock by John Musser. The analysis of Open API trending and analysis is worth reading, Salesforce.com must be studying these statistics given the strategy directions they are choosing.
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There are plenty of sales teams exceeding their sales quotas today.
Much of their success comes from the commitment their companies have to creating sales training systems that are delivered over SaaS platforms. From Proctor & Gamble, which has a state-of-the-art sales training system delivered entirely over the Web, to General Electric who also has an exceptional sales training program and many others, there are companies investing heavily in SaaS-based training platforms for their sales and distribution networks. Many smaller software companies I have worked with use Force.com as the development platform to create their own sales and partner training systems entirely in-house as well. This area of SaaS application development is proliferating today. Here are several take-aways from the activity going on right now.
Of the thirteen companies I know of who have created their own sales training system entirely on a SaaS platform within the last year, seven have met or exceeded their sales quotas in their latest fiscal year. This is a 53% success rate.
What is going on is that the companies who beat their quotas launched their OnDemand training systems months before a major revenue event, including new product introductions and planned bundling campaigns. The result was a major increase in sales efficiency due to the accelerated and focused training.
- SaaS Training Systems Often Turn Into Competitive Analysis Hubs On Steroids. One enterprise software company is using Force.com as the platform of choice for creating an entire network of sites and portals on competitive analysis topics and projects. This has turned into an online community that unifies direct and channel partner sales with knowledge. It is very effective in distributing competitive pricing and strategy ideas on how to beat competitors on deals.
- Putting Tribal Knowledge to Work Selling. Taking the knowledge inside a company that is learned over time and getting it included in an online training system is invaluable. All companies in the 53% who are beating their quotas have done this. Their training managers are experts at gleaning tribal knowledge out of the company and getting it into the online learning systems so sales can use it to sell.
- Role-based learning that can be tailored to different selling scenarios is a must-have. This is what the Force.com platform does very well, it allows these companies, many of them in the B2B manufacturing arena, to create role-based learning paths and programs for their sales teams. Each member of a team has to go through the online training and score at a sufficient level to get more leads and get out to customers. The more they learn the more they earn.
Bottom line: Sales training is the secret weapon many companies are using to beat their competitors on deals today. The ability to deliver training anytime, anywhere on a SaaS platform just strengthens a sales force even more. Add in putting tribal knowledge to work and creating online competitive analysis hubs, and the competitive strengths of a company become even more formidable.
Bottom line: Reselling cloud computing services shows much potential as a market for technology platform and application providers. The challenge is the ability to tailor the services mix efficiently and accurately enough to capitalize on scalability and selective demand of mid-tier and small business end users.
Bottom line: The following video provides a topical, informative and useful update on the cloud computing landscape; it’s worth the 30 minutes to listen to and consider how rapid the development platforms are maturing.
Bottom line: Relying on the Force.com as the development platform, Chatter will be scalable across the Salesforce.com customer base immediately. Expect to see Chatter and its development community find innovative uses of this technology in selling, marketing automation, lead generation and service.
Bottom line: Most refreshing about this book is that Mr. Chou is striving to explain each of the seven business models with an unbiased analysis supported with company examples. He is on Twitter (@timothychou) and back in January asked for feedback on this book. If you have a passion for this area you might want to follow him on Twitter and see about helping out with the next edition.
Having struggled to gain a foothold in the enterprise, Google has this year gone after this market with increased focus and intensity. Part of this increased focus on the enterprise is going to involve exclusive events where CIOs have the chance to interact with industry thought leaders. The first of several events was held Monday of this week at the Googleplex.
For many enterprise software companies this is a very difficult subject as the control of the sales cycle is tantamount. Opponents argue that free software trials potentially derail sales cycles and give them less control.