The latest round of cloud computing forecasts released by Cisco, Deloitte, IDC, Forrester, Gartner, The 451 Group and others show how rapidly cloud computing’s adoption in enterprises is happening. The better forecasts quantify just how and where adoption is and isn’t occurring and why.
Overall, this year’s forecasts have taken into account enterprise constraints more realistically than prior years, yielding a more reasonable set of market estimates. There still is much hype surrounding cloud computing forecasts as can be seen from some of the huge growth rates and market size estimates. With the direction of forecasting by vertical market and process area however, constraints are making the market estimates more realistic.
I’ve summarized the links below for your reference:
- According to IDC, by 2015, about 24% of all new business software purchases will be of service-enabled software with SaaS delivery being 13.1% of worldwide software spending. IDC further predicts that 14.4% of applications spending will be SaaS-based in the same time period. Source: http://www.idc.com/getdoc.jsp?containerId=232239
- The cloud computing marketplace will reach $16.7B in revenue by 2013, according to a new report from the 451 Market Monitor, a market-sizing and forecasting service from The 451 Group. Including the large and well-established software-as-a-service (SaaS) category, cloud computing will grow from revenue of $8.7B 2010 to $16.7B in 2013, a compound annual growth rate (CAGR) of 24%. https://451research.com/
- Forrester forecasts that the global market for cloud computing will grow from $40.7 billion in 2011 to more than $241 billion in 2020. The total size of the public cloud market will grow from $25.5 billion in 2011 to $159.3 billion in 2020. Link to report excerpt is here.
- Deloitte is predicting cloud-based applications will replace 2.34% of enterprise IT spending in 2014 rising 14.49% in 2020. The slide below is from an excellent presentation by Deloitte titled Cloud Computing Forecast Change downloadable from this link.
- Gartner predicts Small & Medium Business (SMB) in the insurance industry will have a higher rate of cloud adoption (34%) compared to their enterprise counterparts (27%). Gartner cites that insurance industry’s opportunity to significant improve core process areas through the use of technology. The following figure from the report, 2011 SMB Versus Enterprise Software Budget Allocation to Annual Subscriptions indicates the differences in software budget allocation for annual subscriptions by vertical market from the report:
2011 SMB Versus Enterprise Software Budget Allocation to Annual Subscriptions
- Gartner is predicting that the cloud system infrastructure (cloud IaaS) market to grow by 47.8% through 2015. The research firm advises outsourcers not moving in that direction that consolidation and cannibalization will occur in the 2013 – 2014 timeframe The providers named most often by respondents were Amazon (34%), SunGard (30%) and Verizon Business (30%). Of the global top 10 IT outsourcing market leaders, only CSC appears on the list. Source: User Survey Analysis: Infrastructure as a Service, the 2011 Uptake Claudio Da Rold, Allie Young.
External Service Providers Being Considered for IaaS (or Cloud IaaS)
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.
Forecasting the global public cloud market is growing from $25.5B in 2011 to $159.3B in 2020 in the report Sizing the Cloud, Understanding And Quantifying the Future of Cloud Computing (April, 2011), Forrester Research has taken on the ambitious task of forecasting each subsegment of their cloud taxonomy. Forrester defines the public cloud as IT resources that are delivered as services via the public Internet in a standardized, self-service and pay-per-use way. The aggregate results of their forecasts are shown in the attached graphic.
The forecast range is from 2008 to 2020 and I’ve included several of the highlights from the study below:
- Forrester breaks out Business Process-as-a-Service (BPaaS) in their public cloud taxonomy, not aggregating this area of cloud computing into IaaS or PaaS. This is unique as other research firms have not broken out this component in their cloud market taxonomies, choosing to include Business Process Management (BPM) as part of either infrastructure-as-a-service (IaaS) or platform-as-a-service (PaaS) subsegments. Forrester is predicting this category will grow from $800M in 2012 to $10.02B in 2020.
- SaaS is quickly becoming a catalyst of PaaS and IaaS growth, growing from $33B in 2012 to $132.5B in 2020, representing 26% of the total packaged software market by 2016. Forrester is predicting that SaaS will also be the primary innovative force in public cloud adoption, creating applications that can be tailored at the user level. Forrester is bullish on public cloud growth overall, and their optimistic outlook can be attributed to the assumption of cloud-based applications being configurable at the user level, with little to no enterprise-wide customization required.
- PaaS is forecasted to grow from $2.08B in 2012 to $11.91B in 2020. Forrester is defining PaaS as a complete preintegrated platform used for the development and operations of general purpose business applications. The research firm sees the primary growth catalyst of PaaS being corporate application development beginning this year. By the end of the forecast period, 2020, up to 15% of all corporate application development will be on this platform according to the report findings.
- IaaS will experience rapid commoditization during the forecast period, declining after 2014. Forrester reports that this is the second-largest public cloud subsegment today globally, valued at $2.9B, projected to grow to $5.85B by 2015. After that point in the forecast, Forester predicts consolidation and commoditization in the market, leading to a forecast of $4.7B in 2020.
The following presentation includes an overview of cloud computing adoption trends from Forrester Research, followed by presentations by the Chief Technology Officers of Savvis and Gomez. Taken together, all three presentations shown below provide a realistic assessment of cloud computing adoption and performance.