Analytics, Cloud Computing Challenge Flat Growth in Forrester’s Tech Market Outlook for 2012
It’s time to strip away the hype surrounding analytics, big data and cloud computing by asking how these technologies contribute to excellent customer experiences and greater customer engagement. Those are the real catalysts of market growth and the greatest disruptive forces at work in enterprise software today.
Filtering forecasts of future technology adoption with a customer experience and engagement mindset is essential for separating hype from reality. Two excellent blog posts were published today that provide useful insights for doing this. Ray Wang’s Monday’s Musings: 10 Mega Business Trends To Watch For In 2012 provides pragmatic, insightful analysis of the progression going on from transactional to personal fulfillment systems. Many of the CIOs I’ve met with in the last two months are saying exactly what Ray has written regarding this transition. Paul Greenberg’s CRM 2012 Forecast – The Era of Customer Engagement – Part I delivers more insight than any of the financial or industry analyst reports I’ve read in the last twelve months on CRM and its intersection to social networks. He has defined customer engagement so thoroughly I am sure this post will be a classic, referenced for years to come. Both posts provide an excellent framework to evaluate the upcoming wave of new forecasts due out from research firms at the start of 2012.
Having recently read Forrester’s US Tech Market Outlook For 2012 and applying the concepts Ray Wang and Paul Greenberg discuss, here are several take-aways from that report:
- Total U.S. ICT market in 2011 was $962B with the majority being generated from software sales ($208B) followed by Telecom Services ($199B) and IT Consulting and Systems Integration Services ($188B). The following graphic illustrates the purchase of ICT product and services in the U.S. during 2011. As enterprise software companies are striving to deliver what Ray Wang is calling Experiential Systems, the majority of their core Intellectual Property (IP) was obtained from building Transactional Systems. Despite this conflict, software development methodologies including Agile give the industry a fighting chance at growth in 2012.
- Software continues to dominate both in total revenue ($208B) and growth rate, with 8.2% growth projected for 2012. In addition to analytics and Business Intelligence (BI), Forrester is predicting an increase in ERP, Middleware and SaaS-based application growth.
- Forrester is most optimistic in their forecasts for analytics, BI, Cloud Computing and Smart Computing. Cloud Computing forecasts at Forrester are indexed to sales levels of NetSuite, RightNow Technologies (Oracle), Salesforce.com, and Ultimate Software. Forrester is claiming these four vendors will generate a 23% increase in revenues in calendar Q1, 2012 over Q1, 2011, increasing and staying constant at 24% year-over-year growth from Q2 to Q4, 2012 relative to Q2 to Q4, 2011. Salesforce.com could accomplish this level of growth through acquisitions alone. They’re showing they can integrate newly acquired companies faster than Oracle, who they are challenging for global CRM market leadership in the 2012 – 2013 timeframe. When customer experience and engagement is taken into account, the forecast seems high. Salesforce knows how to translate trial users into customers. The question is can they do this fast enough in 2012 throughout the enterprise and mid-tier accounts to keep up their sales growth on track while reducing churn and increasing profitability.
- Smart Computing is defined by Forrester as platform technologies including specialized analytics, BI, service-oriented architecture (SOA) infrastructure, virtualization software, rules engines, and awareness-based technologies. Forrester is very optimistic about this area with a growth rate second only to cloud computing. Its index of the market is based on Informatica, Pegasystems, and Tibco Software. Forrester is predicting in calendar Q1, 2012 there will be 16% growth over Q1, 2011, followed by consistent 13% growth year-over-year for Q2 to Q4, 2012 relative to 2011. The following graphic compares growth of both Cloud Computing and Smart Computing.
- The inflexion point of Smart Computing will happen when analytics, BI and awareness-based technologies including RFID can be used to make customer experiences consistently positive and drive cultural change throughout a business to center on customers’ expectations. Paul Greenberg refers to this area of customer engagement in his blog post. I agree with him and see the real value of analytics not for reporting, but for being a barometer of just how customer-centric and focused on delivering exceptional customer experiences a company is becoming.
- In 2012, financial services, professional services, and manufacturing will be the three industries that dominate software purchases. Financial services (19%), professional services (15%) and manufacturing (14%) will be the largest buyers of enterprise software. Forrester believes that ERP replacements, supply chain management (SCM) and product lifecycle management (PLM) will all be proprieties in the coming twelve months.
Bottom line: Critiquing high growth technologies based on their contribution to customer experience, engagement and the creation of Customer Lifetime Value (CLV) is what matter most. Hopefully the new wave of forecasts for 2012 and beyond will take the customer – not just technology and statistical extrapolations – into account.