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:
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:
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.
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.
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.
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.
(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 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.
NTT 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.
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.