The five highest-performing cloud computing stocks as of Q3, 2013 in the Cloud Computing Stock Index have proven prowess in closing enterprise-level deals, expertise in compliance and security, and years of infrastructure experience.
Twelve of the nineteen companies in the index delivered a positive return in the first three quarters of this year. NetSuite (NYSE:N) leads all companies in the index with an annualized gain as of calendar Q3 of 88.69% and has a dollar value of $16,078 on $10,000 invested on January 2nd of this year. Workday (NYSE:WDAY) attained an annualized gain of 81.49% as of Q3, and has a dollar value of $15,617 on $10,000 invested on January 2nd. Qualys (NASDAQ: QLYS) attained an annualized gain of 49.33% and delivered $13,498 on $10,000 invested from January 2nd to October 2nd of this year. The following table lists the top best performing cloud computing stocks in the index.
Seven of the nineteen companies in the index lost value, with Fusion-IO (NYSE:FIO) experiencing the greatest annualized loss in stock value of -51.03% and $10,000 invested on January 2nd of this year being worth $5,862 as of October 2nd. Rackspace (NYSE:RAX) had an annualized loss of -38.61%, with $10,000 invested on January 2nd being worth $6,943 as of October 2nd. The following table shows the five lowest-performing cloud computing stocks in the index.
The nineteen companies that comprise the Cloud Computing Stock Index attained a 19.41% return from October 3, 2012 to October 2, 2013. In the same period Microsoft gained 13.98%, Oracle, 7.05% and SAP, 4.83%. Please click on the index to expand it for easier viewing.
Specifics on the Cloud Computing Stock Index
I used The Cloud Times 100 as the basis of the index, selecting nineteen companies all of which are publically traded. The latest edition of the Cloud Computing Stock Index is shown here. The filter applied to these companies is that 50% or more of their revenues are generated from cloud-based applications, infrastructure and services. Please click on the index 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.
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.
Gartner published the report What’s Hot in CRM Applications in 2013, by Ed Thompson on June 20, 2013. The report covers areas of interest by clients in the four areas of marketing, sales, customer service and e-commerce.
The report states that “the 2013 What’s Hot list was compiled after examining Gartner inquiry volumes by topic. It was then supplemented by asking all Gartner CRM analysts to offer their opinions on what has been generating the most interest during all the client inquiries they have taken since the end of 2012 and in the beginning of 2013.”
Big data, cloud, social, mobile and the Internet of Things are the five catalysts that are driving inquiries in the hottest areas of interest. Gartner’s Ed Thompson, author of the report, states that “this is where our clients’ interests lie, although not their current CRM spending.” Technologies highlighted in red are the hottest in terms of interest, shown in the following table Highest CRM Application Priorities for 2013.
What This Says About the Future of CRM
Mobility is just one part of delivering an excellent customer experience.
It is surprising that Gartner clients aren’t looking to create a more unified strategy to customer experience across all channels at all times. As the report states, “The refreshing of an aging agent desktop with a new, more intelligent and unifying user interface has shot to the top of the heat charts once more.” The findings of this Gartner analysis make the highly promoted claims of usability by many CRM vendors look overly hyped. I think usability is the fastest path to greater system adoption of any CRM system, and that has to include mobile. It is surprising that a related technology in this area didn’t rise farther in the rankings.
Second, mobile sales on smartphones and tablets dominate, followed immediately by Social – Internal Collaboration and Social – Integration with Social Data. What is fascinating about this group of four top items in Sales is the indication that the behavior of how sales teams work individually and together is changing fast. Collaboration is a strong catalyst for Return on Investment (ROI) from social technologies and the sequence of these priorities in Sales underscores that.
Third, the vision of the mobile-enabled support representative able to be autonomous yet fully supported to solve customer problems is rapidly approaching. Of all patterns emerging from this data, this is one shows the greatest profit potential. Service Lifecycle Management (SLM) and the many forms of service management all have very significant profitability associated with them for manufacturers. The quicker this area of mobility moves, the faster SLM and Maintenance, Repair and Overhaul (MRO) strategies will grow – giving manufacturers and service providers the ability to mine their installed bases for more profits.
Fourth, predictive analytics and big data are reordering how marketing strategies are designed, implemented and managed. Given the increasing complexity of marketing automation systems and the strategies they support, predictive analytics and big data are starting to dominate the conversations I’ve personally had with Chief Marketing Officers (CMOs) and many demand generation professionals. I expect the predictive analytics aspects of marketing, combined with big data, to accelerate quickly over the next year.
Fifth, the rapid adoption of mobile-based platforms including the Apple iPad in the Configure, Price, Quote (CPQ) continues throughout the professional services, discrete and process manufacturing companies I often visit. One manufacturer I often work with on their CPQ strategies has the ability today to present a completed 3D model of the proposed product, embed it in a quote and e-mail it to the prospect all from an iPad. The future of CPQ is going to be dominated by mobility and enterprise support for key order management, pricing and product configuration options.
Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
North Bridge Venture Partners and GigaOM Research released the results of their third annual Future Of Cloud Computing Survey today, providing a glimpse into cloud computing adoption trends, inhibitors and drivers of long-term growth.
This year’s survey included 855 respondents selected across business users, IT decision makers and cloud platform and application vendors. North Bridge and GigaOM Research report that a third of respondents are C-level executives in their organizations.
You can view a copy of the report results here from SlideShare.
The following are key take-aways from the report:
Cloud adoption continued to rise in 2013, with 75% of those surveyed reporting the use of some sort of cloud platform – up from 67% last year. That growth is consistent with forecasts from GigaOM Research, which expects the total worldwide addressable market for cloud computing to reach $158.8B by 2014, an increase of 126.5% from 2011. The survey also shows significant growth is yet to come in SaaS adoption for business systems and IT management.
63% of those surveyed report Software-as-a-Service (SaaS) is in use in their companies, growing 15% over 2012. 45% are using Infrastructure-as-a-Service (IaaS) today, attaining a growth of 29% from last year. Platform-as-a-Service (PaaS) is expected to grow the fastest over the next five years, with 72% of respondents saying they expect to use PaaS in their organizations.
The survey results also included cloud segments and overall growth analysis forecasts from 451 Research Market Monitor Report. The graphic showing CAGRs by IaaS, PaaS and SaaS is shown below, with comparisons of 2012 results and 2016 market forecasts.
52% of organizations are using cloud-based applications to advance business priorities, compared with 36% that use applications that advance IT initiatives.
CRM, marketing (including marketing automation) social business & collaboration and file sharing cloud-based applications are in use by more than 50% of all organizations in the sample.
North Bridge Venture Partners reports that cloud investments by venture capitalists totaled $1.6B in 2010, increasing to $2.4B in 2011. Investments in 2012 dropped to $1.8B and through May, 2013, venture-based investments in cloud computing application and services providers totaled $281M. Subscription fee-based business models dominate with 77% of cloud vendors relying on this strategy.
Gaining greater business agility (54.5%), scalability (54.3%) and cost (48%) are the three main drivers of cloud adoption today according to the survey results. Mobility was mentioned by 25% of respondents as a major driver for adopting cloud applications and platforms, behind cost.
Security concerns (46%), vendor lock-in (35%), interoperability (27%), concerns over reliability (22.3%) and complexity (21%) are the top inhibitors to cloud adoption. Regulatory compliance (30%) and privacy (26%) are he next most frequently mentioned inhibitors to cloud computing adoption according to the survey.
39% expect to increase training, and 17% expect to hire outside resources as a result of increased cloud adoption.
Amazon (14.3%), Microsoft (10.96%) and Google (7.88%) are the three most used cloud platforms by the organizations who responded to the survey.
ServiceNow (NYSE:NOW) is a global leader in providing cloud-based services used by enterprises to streamline and automate their IT operations. They’re known for their expertise in IT Service Management (ITSM), speed of development cycles, and commitment to open source including MongoDB and NoSQL. ServiceNow also has one of the most enthusiastic, rapidly growing and loyal customer bases in enterprise software. Matt Schvimmer, VP Product Management at ServiceNow, credits the goal of attaining 100% customer referenceability combined with intensive focus on user experience design as contributing factors to their rapid growth, in addition to continuous feedback cycles they use for capturing and acting on customer feedback.
Update from ServiceNow’s Financial Analyst Day and Knowledge13
On May 13th they held their Financial Analyst Day at the Aria Resort & Casino in Las Vegas, the same location they hosted Knowledge13, their annual user conference held May 12th through the 16th. You can download a set of the slides presented at the Financial Analyst Day here, and view videos and presentations from Knowledge 13 here. ServiceNow executives are calling the next phase of their growth ERP for IT. Both in the Financial Analyst Day presentation and the presentation given by President and CEO Frank Slootman at the Pacific Crest Emerging Technology Summit on February, 13th, this concept is shown. Below is a slide from the February 13th presentation given at the Summit. You can download the slide deck from the Pacific Crest Emerging Technology Summit here.
Five Ways CIOs Can Prepare For The Cloud
I had the opportunity to catch up with Arne Josefsberg, CTO of ServiceNow during Knowledge13. He shared insights into how ServiceNow’s core customer base, predominantly CIOs and their IT Departments, are driving greater business value into their organizations using the Service Automation Platform. Arne mentioned that ServiceNow sees IT Operations Management (ITOM) and Platform-as-a-Service (PaaS) as critical to their growth, in addition to enabling those without programming expertise (ServiceNow calls them Citizen Developers) with intuitive, easily used application development tools.
He also shared lessons learned and five ways CIOs can prepare for the cloud, which are listed below:
Adopt Cloud Architectures With An Open Mind And See Them As Business Value Accelerators. Arne advises CIOs who are considering cloud-based initiatives to concentrate on capturing and communicating business value first, including time-to-market, cost and time savings advantages. Getting beyond a purely cost-cutting mindset is critical for IT to become a strategic partner with business units. He says that he’s seeing CIOs gain a greater voice in strategic planning initiatives by clearly defining the business value of cloud-based development while pursuing rapid application development.
Taking a leadership position in application development leads to gaining greater influence and involvement in strategic plans and initiatives. This point galvanizes the entire ServiceNow executive team, they all speak of enabling the Citizen Developer to create new applications on their platform without writing a single line of code. ServiceNow and their customer base have bonded on this issue of rapid application development. And watching Fred Luddy, Chief Product Officer of ServiceNow move quickly through application development and deployment scenarios during his keynote showed how deeply engrained this value is in the company’s DNA.
CIOs need to realize that their resource and human resource management needs in five years will shift to business transformation away from IT alone. There is a shortage of IT analysts and professionals who are adept at being business strategists, capable of leading transformational application development. IT analysts and experts need to be trusted partners with business units, continually moving IT-related barriers out of the way while streamlining new application development. Arne cited how General Electric is excelling on this dimension, consolidating 17 incident management systems into a single ServiceNow application. All that was possible because the IT teams at GE are an essential part of business unit operations.
CIOs need to move beyond managing IT using cost and efficiency alone and think in terms of opportunity-to-cost instead. Arne’s point is that the most respected and counted-upon CIOs he knows today are either making or have made this transition. They have moved beyond an IT legacy mentality of managing just to cost or efficiency. Instead, the CIOs emerging as strategists and core members of the executive team are aligning IT as a core part of their company’s ability to compete.
Use cloud architectures and rapid application development to make IT more strategic in scope now. The companies winning awards at Knowledge13 for their applications showed a common thread of anticipating and acting on the strategic needs of their business quickly, often delivering completed applications ahead of schedule and under budget.
Bottom line: Making IT strategic begins by moving away from the constraints of managing to cost and efficiency metrics alone. Cloud-based platforms and rapid application development technologies are assisting CIOs and their staffs to be more strategic, less tactical, more responsive and focused on line-of-business needs and requirements first.
Disclosure: ServiceNow paid for travel to Knowledge13. I’ve never held equity positions in ServiceNow, and they are not a client.
The future of customer relationships depends more on context than transactions. And this trend is accelerating, driven by the integration of social media into customer relationship management (CRM), rapid gains in usability of CRM and integration applications, and the global growth of the API economy.
Gaining a clear, contextually-based view of customers isn’t easy. Fine-tuning system integration to understand the nuances of customers, gain greater insights and infusing customer intelligence through a company requires more than APIs and cloud platform integration. It requires a precise strategy of integration to align customer data to ongoing strategies.
The bottom line is that customer-driven integration is reshaping CRM and will accelerate as cloud platforms, combined with APIs, reorder the customer relationship landscape.
Key take-aways from my interview with them include the following:
Cloud integration is one of the fastest growing areas of enterprise software today, made more complex by cloud platform providers creating their own unique approaches to APIs. What are the top three lessons you’ve learned navigating Scribe through the many potential product and services strategies cloud platforms are providing today?
The top that come to mind are understanding that your cloud platform vendor absolutely affects your product offering and making sure your offering is portable, that you’re not too deep in one vendor’s technology or platform.
There are a many new cloud services and platforms – you have to make a choice between an established, proven vendor or taking a chance as an early adopter of something new. We decided to be an early adopter and we’ve had mixed results, which at times caused problems for our customers. Customers don’t care who caused your slowdown or outage – they expect that you have service available no matter what. As a result, we had to build out sophisticated and sensitive monitors, fail-over and availability capacity.
One of the things we did, and it was fairly controversial at Scribe, was make sure our offering was highly portable. Given the vendor’s brand name, there were people who felt that there was no way something could go wrong and we were showing a vote of no confidence by not completely embracing the service. Others at Scribe were skeptical and insisted we not get too deep into this particular technology so we could pull the plug quickly if it didn’t work out. Even though it was not a popular decision, we made sure this portability was part of our architecture from day one and we’ve resisted getting too dependent on unique capabilities even though it could be easier from a development standpoint.
Keeping that discipline turned out to be a very smart move – we’ve since had to move parts of our offering to other platforms and services that could better accommodate our growth and capacity needs. As we compare notes with other integration companies with cloud offerings, we’re hearing similar stories. We want to focus on our features and services and we want to be able to make sure our platform is stable and performing for our customers. Having the ability to move parts and pieces of our architecture when we need to is critical as we grow. Our planning and roadmap now include a capacity review and all options are on the table, including changing technology platforms or vendors.
Many say enterprise software is quickly moving in the direction of an API economy. What are your thoughts on the API economy beginning with how you define it, and how will it change CRM in the next three years?
When we look at the enterprise software space and how it is still very challenging to integrate the data across these applications, it absolutely makes sense directionally. There are so many new technology stacks and platforms out there and the old ones aren’t going away either. APIs are a logical framework for people to access, share, and integrate data regardless of where it lives or how it’s stored.
This is really exciting for CRM. There is a lot of talk about the 360 degree view of the customer but the reality for most businesses is that actually getting all that data is still difficult and not standardized. If you’ve got a lightweight API to access any number of customer data points in and outside the business, CRM would be more a framework and platform to select and mash up those data feeds in a tailored presentation for particular roles in your business – sales, support, marketing, etc. You could put a very powerful, functionally relevant view of the customer at your employee’s fingertips. We’re already seeing that today with the ability to embed Google Maps, social feeds, and the like in CRM. But think about how incredible it could be for CRM if you were able to do that type of embed with virtually any data source.
In such a highly competitive, rapidly changing and technically complex market area, how do you continually innovate and generate new ideas?
The best way to describe how we innovate is that we take a clean sheet of paper approach when thinking about product. Our product team typically looks at the business problem first and gets very creative about how to achieve the desired outcome. We also take a hard look at the status quo and challenge “how can we do this completely different and better”? Our goal is to delight our partners and customers with product that they find easy to use and that gets the job done without a lot of hassle or drama. Sometimes it takes an unusual path and it typically isn’t your big, trendy items. For instance, most integration projects require a team of people to accomplish – experts in data, experts in business process, usually an outside consultant or professional services vendor. One of the things we heard in passing was what a pain in the neck it was to manage multiple clients and getting permission from the client’s IT organization to access the integration environment – one of those things you just talk about as an accepted pain of doing business. In response, our product team brought in social features like the ability to invite or de-invite members to a specific customer organization and allowing the owner of that customer organization to set permissions of what that member could do in their organization. In the grand scheme of things, this doesn’t seem like a big deal but today, that social user experience really excites our customers and partners and it’s become a key differentiator for Scribe.
For many enterprise software companies, selling through resellers is challenging. What key lessons has Scribe learned about making a reseller strategy for cloud integration services successful?
We’ve been selling through the channel for a long time now – understanding their business model and supporting their success is paramount to us as a business. Partners are all about standardization, efficiency, quality, and repeatability at scale – you need to be oriented to that outcome whether it’s product, programs, pricing, communications, or support. Who you are and what you provide needs to be consistent and fair to the entire community.
Our motto is “own the customer, respect the partner”. When we’re servicing a customer directly, we are very cognizant of the partner and we know that customer’s experience with Scribe can directly impact their relationship with that partner. You have to weigh your interactions with a customer against the whole of your partner relationship and calibrate accordingly. So we make sure that we give our customers the same touch and quality service as our partners. Your reputation with your partners and that partner community will dictate your success in the channel. You have a great reputation with your partners and you’ve got their back – they are going to reward you by being incredibly loyal. The top reason we hear from prospective partners looking to make a switch is “this vendor was really difficult to work with” or “this vendor failed in delivering to my customer and I need something now to get this customer back on track”.
The growth of the API economy has many parallels to growing a reseller-based business. How do you view these parallels and how do they open up greater avenues of innovation to benefit those companies using CRM today and in the future through resellers?
Where we see a distinct parallel is taking hold of a something like data or an application, and evolving it into a completely new and innovative offering, which completely transforms the experience of using it – for the better. With APIs it’s about evolving connectivity and access. In CRM, the most successful resellers reinvent the CRM application as a platform. They craft entirely new solutions on CRM that are imbued with their particular expertise in a vertical or a set of business processes that make CRM much more straightforward and easier to use. Often these offerings are unrecognizable from the original CRM. This innovation benefits business customers as the reseller is productizing their expertise and making CRM much more turnkey for them. At the end of the day, it isn’t about the particular CRM vendor or platform but more about the particular capabilities that a reseller has in their turnkey CRM offering. That’s a huge benefit to customers as they’re now able to focus on picking the right reseller and their expertise to help their business versus being distracted and consumed with the nuts and bolts of hand-tailoring the CRM application to fit their needs.
What are you seeing in terms of on-premise to cloud migration on the part of resellers? Are they bringing you more deals that are cloud-based versus on-premise? Does this vary between North America and EMEA (Europe, the Middle East & Africa)?
The reseller channel is going through an interesting evolution with cloud. What we’re seeing are resellers typically making two choices, going cloud or sticking with on-premise but focusing on larger, enterprise deals. We’re seeing some of our existing resellers re-aligning their offerings and services around cloud; they may continue to do premise deals but they aren’t leading with premise. We’re increasingly working with a third category of new partners who have entered the CRM business recently as exclusively cloud; typically these resellers represent multiple CRM vendors (Salesforce, Sugar, Dynamics CRM Online, etc.) in their practice.
Regardless of the partner orientation towards cloud, we are definitely seeing a shift towards cloud deals. EMEA is behind North America but is quickly closing the gap – we see growing adoption of cloud applications and there is an excitement and interest in EMEA for more cloud.
Can you walk me through the new product development cycles you use? How are you seeing the market cadence right now from a cloud integration perspective? Is it 6 months, or shorter than that for each new release?
The cloud is driving faster release & upgrade cycles overall. Customers use cloud applications in their everyday lives and those consumer applications typically have rapid response to feedback; it’s not unusual to get an update on your iPhone apps once a month. We’re seeing those same expectations in the business applications space – you shouldn’t be waiting 6-12 months or more for updates to the product. The nature of cloud allows us to be much more responsive giving us the flexibility to push out updates when we need to.
Our release cadence is 8 weeks. We might go longer to a 16- or 24-week cycle for a major release. Our connectivity release cycle is much faster. Each quarter we’re typically releasing 2-3 new connectors and 2-3 upgrades to existing connectors. This release cadence has been a real advantage for us in closing deals and building customer loyalty. Every two months we’re putting in enhancements and new features – many of those driven from direct customer feedback. We’ve won more than a few competitive and strategic wins because we were able to incorporate feedback from the prospect during the proof of concept or trial phase of those deals within a short period of time.
Earlier we spoke about how your company is successfully using personas to guide new product development. Can you comment on how personas guide the development and launch of new products?
Personas provide that guiding star for the development team to build towards. It’s not just the “what” and the “how”, it’s the “who” and the “why”. When we start with personas we’re talking about the business problem or goal that our customer is grappling with. That’s where the innovation we talked about earlier comes in – we try to solve for the real world business problem and an authentic user experience for our target customer. After we have the persona solidified, then we apply a particular technology approach and design. Starting with what success looks like to the customer keeps things very clear and real in terms of design, scope, what the product will and will not do.
The development team has a much clearer understanding who they are building product for and why it needs to be a certain way. If there is a question or difference of opinion about the user experience or the way a certain feature should work, we always go back to the persona. It’s a very efficient sanity check throughout the development process – would our persona really use this feature in this way, would they be comfortable working that way in real life, do they really need this feature or capability to do these extra 5 things we think they do?
Personas are very helpful in discouraging developing products that might be perceived as cutting edge to the tech community but ultimately don’t give the customer what they need and want. We like cool technologies and features, and we’ll put it in there but only if it fits the persona.
Has any customer measured the impact of Scribe integration solutions in the context of improved user experience and customer satisfaction? If so, can you share those figures?
An interesting question and one we asked in our recent State of Data Integration 2013 survey. What we found was that over 70% of our survey respondents had no formal process for evaluating the success of their integration and articulating the return on investment either in operational improvements or customer satisfaction. With a partner involved there is some improvement as the partner has to typically prove the success of their engagement but it’s not what we’d like it to be. It’s virtually impossible to get a customer to capture any meaningful metrics after the project has been completed.
What we’re finding is that partners and customers don’t know where to begin to measure the impact of their integration and there are no standard templates or resources to use as part of the project planning & tracking. This is a problem we’re tackling in the coming months, providing standard metrics that any partner or customer can use to track the success of their integrations.
What are the most important metrics to keep in mind when evaluating the performance of a cloud integration platform? How did these metrics influence the design, coding and launch of Scribe Online?
The most important metrics are usability and performance. The obvious one, performance comes in many flavors but the big ones we look at are the responsiveness of the platform user interface, the throughput and speed of the integrations, and the reliability/availability of the platform overall. These are table stakes. When we say usability, we mean how many customers are actually creating and running integration jobs? How often are they logged into the system and what are they doing? Are they adding new integration jobs? Using new connectors? How many customers are renewing and/or increasing their subscription levels? These are metrics we measure. If a customer were evaluating a platform, questions I’d be asking would be “how long does it take to get a typical integration project live and running?”, “do you require professional services and how much/how long does that engagement typically run?”, and when talking to references “did you get your integration project done in the time frame you expected?”
Usability is very, very important to us. You can have a platform that processes billions of rows a day but if it is difficult to configure, use, and maintain, customers are going to gravitate to vendors that have both performance and better usability.
Have you seen a shift in the types of CRM applications being integrated within the last twelve months, and do you see trending of these systems changing in the next three years? Why or why not?
In the past twelve months, we’ve seen a shift where customers appear to be doing less of the rip and replace with new CRM systems and more where they are adding on other, customer-facing applications with discrete functions like marketing automation, e-commerce, sales productivity, or support. We’re also seeing an uptick in two-tier CRM integrations where a division or line of business will use one vendor’s CRM for specific range of capabilities but want to integrate with the legacy or corporate CRM.
Certainly the CRM vendors are adding more capabilities and providing more complete platforms that include marketing automation, support, e-commerce, finance, and social. What will be very interesting in the next three years is if businesses will embrace these platforms completely or if they will use parts and pieces of these platforms and integrate them with existing application investments or other CRM platforms. For instance, would a business decide to purchase Salesforce Support Cloud and integrate that with NetSuite? We think given what we’re seeing in with legacy applications – that businesses have made major investments in and are still realizing value from these applications – that a rip and replace to a complete CRM platform from one major vendor might be a bit of stretch. Given that cloud integration is evolving quickly, it would seem that a business could put together best of breed cloud CRM apps just as they did with premise applications in the past.
Often integration in small and medium businesses, which is a market Scribe excels in, are complacent about the need to change and adopt a more unified CRM system. Is complacency is your biggest competitor? How do you overcome that in your channel development, marketing and selling strategies?
We’re seeing SMBs are as savvy as our largest enterprise customers about integration. They get the need for an integrated CRM system to keep competitive. SMBs are requiring integration in the first phases of their CRM implementation and are asking partners about it. That’s a big shift from 4-5 years ago where partners had to educate the customer about the benefits of integration and why spending money/time/resources on integration are valuable. It’s less complacency that is our biggest obstacle with SMBs – its education and outreach that there are affordable, easy-to-use integration options out there for the SMB that allow them to realize the same business benefits as the big companies. If you define complacency as the common belief that there is just nothing out there right now for the SMB, then yes, it’s a competitor. We have been aggressive in recruiting partners who specialize in SMB and making sure our cloud integration platform have the features and capabilities so these partners can service a large volume of smaller customers quickly and cost-effectively. We also work with our partners with other marketing outreach to educate the SMB that integration is possible and how to best approach that first integration project. And it goes back to that usability metric – we want the SMB to have an easy time with integration – so that means proving it with our selling, our marketing, and our partner channel. All of it needs to be approachable and reinforce that integration is accessible and can be realized by the SMB.
What are Scribe’s top three goals for 2013, and how are you tracking to them?
Our top three goals in 2013 are to continue build out the features and services in our cloud platform, continue to offer more customer data connectivity, and continue to build out our ecosystem of ISVs and partners using our online platform. We’ve had excellent success in all three areas – we’ve announced partnerships and connectivity to Marketo, Silverpop, and ExactTarget and we continue to build and enhance the platform. The interest in the channel and the ISV community is very strong – we have as much incoming as we do active outreach – and we expect more ISV partnership announcements later this year.
When you and your company look three years into the future, what will cloud integration look like?
In three years, integration should be ubiquitous in most business applications. It’s not just about APIs – it’s about customers being able to connect quickly, easily, and seamlessly to other applications without having to stitch code together or understand what entities and methods to use. When we use consumer applications today, we don’t care or think about things like how to send a Tweet to my Facebook feed – we just press a button and it happens. I think you’ll see more turnkey integrations based on common business processes that business users can provision and manage within the user interface of their business application instead of using a separate application. There will always be a market for more sophisticated, unique integration needs but common business practices such as sales order processing should be something a business analyst or system administrator could invoke within a CRM or ERP user interface, perform some light customizations as needed, and provision.
Evangelizing development on any cloud computing or enterprise platform is challenging, costly and takes a unique skill set that can educate, persuade, sell and serve developers at the same time.
The companies who excel at this exude technical prowess and as a result earn and keep trust. For Cloud Infrastructure as a Service (IaaS) platform providers, getting developers, both at partner companies and at enterprise customers to build applications, is a critical catalyst for future growth.
Assessing Cloud Infrastructure as a Service Providers with Inquiry Analytics
From 4th quarter 2011 to 4th quarter 2012, Amazon Web Services showed just over 10% inquiry gain against the other vendors listed as leaders in the quadrant. Only five vendors can be compared at once using the Gartner Inquiry Analytics tool so the leaders were included in the comparison first.
A second pass through the Inquiry Analytics was done comparing Amazon Web Services to the other vendors in the quadrant. AWS had 63.6% of inquiries in the application development category during the 4th quarter of 2012 compared to non-leader vendors in the quadrant who were listed in the Inquiry Analytics database. It was surprising to find that a few of the vendors listed in the Cloud IaaS Magic Quadrant don’t have data available in the Inquiry Analytics Statistics: Topic and Vendor Mind Share for Software, 4Q12 indicating inquiries. During this pass, Rackspace share of inquiries between the 4th quarter of 2011 to the 4th quarter of 2012 declined just over 5% and Dell declines approximately 2%.
Bottom line: The land grab for developers is accelerating on IaaS and will be a major factor in who establishes a long-term cloud platform for years to come.
Using analytics to better understand the cloud computing job market is fascinating.
One of the most advanced companies in this area is Wanted Analytics, who aggregates job postings from over 500 job boards and maintains a database of over 600 million unique job listings. They specialize in business intelligence for the talent marketplace, providing insights into how one company’s salary range compares to competitors for the same position, also calculating the difficulty to hire a given type of candidate. They’ve developed a unique Hiring Scale to accomplish this.
I recently had a chance to test-drive their analytics applications. Using the parameters to analyze all cloud computing jobs that pay $100,000 a year or more for the analysis, I ran several queries. Key takeaways include the following:
San Jose-Sunnyvale-Santa Clara, CA leads the MSAs with a salary range $118K to $144K and one of the highest Hiring Score index values of 81, meaning it is very difficult for employers to find candidates who are qualified for their open positions. Bridgeport-Stamford-Norwalk, CT is next with a salary range of $117K to $143K and a Hiring Index Score of 75. The SMA for San Francisco-Oakland-Fremont, CA shows a salary range of $114K to $140K and a relative high Hiring Scale of 88. Salary range for cloud computing professionals charted by metropolitan statistical area (MSA) is shown below:
Professional, Scientific and Technical Services (31%), Information Technologies (30%) and Manufacturing (12%) lead the top ten industries hiring cloud computing professionals in positions paying $100K or more. Wanted Analytics uses the NAICS taxonomy to organize this area of their database.
A total of 5,299 positions are open today for Computer Software Engineers, Applications and Architects as is shown in the following graphic. What is surprising is the rapid increase in Marketing Managers (1,076 positions), Sales Representatives, Wholesale and Manufacturing, Technical and Scientific Products (576 positions) and Sales Engineers (452 positions). Wanted Analytics uses the Standard Occupational Classification (SOC) taxonomy too organize this area of their database. The results are shown in the graphic below:
In 2013, expect to see the pace of mergers and acquisitions for cloud computing, mobile and analytics technologies accelerate as software vendors look to fill gaps in their product and service strategies. This and other key insights of how cloud computing is reshaping the merger and acquisition landscape can be found in the latest Price Waterhouse Coopers (PwC) report published today.
Enterprise Software Players: In Search of Sticky Revenue and Higher Margins
The major catalysts driving cloud deals forward in 2013 are enterprise software companies’ need to redefine their business models and find sources of sticky revenue that can replace for many of them, dwindling maintenance revenue streams. Knowing that the annuity model of cloud computing works best with multiyear payments required at the beginning of a customer engagement, enterprise software companies are looking to strengthen this area of their product portfolios. Third, the faster cloud acquisitions can be integrated into their legacy systems, the more upsell can be achieved with their large installed bases of customers. The greatest challenge many of them face however is selling entirely new cloud applications to entirely new customers they’ve never sold to before. The potential of these entirely new markets however is going to be a valuation multiplier in 2013 and beyond.
Here are the key take-aways from PwC’s report:
Software and Internet deals represented 57% of transactions closed in 2012, a figure that PwC has seen steadily grow over the last two years. Cumulative value for software and Internet deals represented 53% of total 2012 deal value, an increase from 51% in 2011. Software deals represented over a third of 2012 technology deals, generating 35% of deal volume and 36% of deal value for the year A comparison of both years and technology sectors are shown in the following graphic:
PwC takes a cautionary, conservative tone in this report showing how overall IT spending growth finished the year at an anemic 1.2% while technology deal volumes and values dropped by just under 20% from the prior year.
The report cites Gartner and Forrester’s optimistic IT spending forecasts for IT growth predicting a recovery in 2013 followed by accelerating growth in 2014 according to Forrester.
PwC is seeing SaaS, mobile devices, analytics and Big Data as the drivers of current and future M&A growth and a fundamental shift in deal volumes to software and Internet deals based on these technologies. The report says the most promising areas of M&A activity in 2013 are mobile application development start-ups who have the intellectual property it would take years for enterprise software companies to create on their own.
Analytics will move from being a differentiator to the cost of doing business, a key point made in the PwC analysis. PwC claims that analytics M&A will accelerate across all enterprise software vendors as they seek to fill gaps in their product and service strategies, and position themselves for growth in specific areas of the emerging industries using Big Data.
PwC reports that monthly deal volumes for software remained relatively even throughout 2012, hovering at 8-9 transactions per month and averaging just over 20 per quarter. The average deal value of $433M for 2012 was slightly lower than 2011 levels of $438M but an increase in the number of deals in excess of $500M helped to keep average deal values high. The report also shows how 2012 saw 18 deals (21% of volume) in excess of $500M closed, the majority of which closed in the latter half of the year. Fourteen deals greater than $1B closed in 2012, an increase of 8 deals (133%) over 2011. The following is a graphic comparing software sector deals by volume and value:
Bottom line: The land grab is on for intellectual property in the fields of mobile application development, analytics and cloud computing as enterprise software vendors look to fill gaps in their product and service strategies.