Sage Intacct, Oracle ERP Cloud, and Microsoft Dynamics 365 ERP are the three highest-rated ERP systems by their users.
86% of Unit4 ERP users say their CRM system is the best of all vendors in the study. The survey-wide satisfaction rating for CRM is 73%, accentuating Unit4 ERP’s leadership in this area.
85% of Ramco ERP Suite users say their ERP systems’ analytics and reporting is the best of all 22 vendors evaluated.
These and many other insights are from SoftwareReview’s latest customer rankings published recently in their Enterprise Data Quadrant Report, Enterprise Resource Planning, April 2021. The report is based entirely on attitudinal data captured from verified owners of each ERP system reviewed. 1,179 customer reviews were completed, evaluating 22 vendors. SoftwareReviews is a division of the world-class IT research and consulting firm Info-Tech Research Group. Their business model is based on providing research to enterprise buyers on subscription, alleviating the need to be dependent on vendor revenue, which helps them stay impartial in their many customer satisfaction studies. Key insights from the study include the following:
Sage Intacct, Oracle ERP Cloud, Microsoft Dynamics 365 ERP, Acumatica Cloud ERP, Unit4 ERP and FinancialForce ERP are most popular with their users. SoftwareReview found that these six ERP systems have the highest Net Emotional Footprint scores across all ERP vendors included in the study. The Net Emotional Footprint measures high-level user sentiment. It aggregates emotional response ratings across 25 questions, creating an indicator of overall user feeling toward the vendor and product. The following quadrant charts the results of the survey:
80% of Acumatica Cloud ERP users say their system helps create more business value, leading all vendors on this attribute. How effective an ERP system is at adapting to support new business and revenue models while providing greater cost visibility is the essence of how they deliver business value. The category average for this attribute is 75%. Of the 22 vendors profiled, 12 have scores at the average level or above, indicating many ERP vendors are focusing on these areas to improve the business case of adopting their systems.
86% of Sage Intacct ERP users say their system excels at ease of implementation, leading all vendors in the comparison by a wide margin. Implementing a new ERP system can be a costly and time-consuming process as it involves extensive training, change management, and integration. Ease of Implementation received a category score of 75% across the 22 vendors, indicating ERP vendors are doubling down investments to improve this area. Just 11 of the 22 ERP vendors scored above the category average.
The purpose of the index is to understand how business users perceive, plan for and utilize four key technologies: cloud, mobility, security and big data. Dell released the first wave of its results this week and will be publishing several additional chapters throughout 2016. You can download Chapter 1 of the study here (PDF, no opt-in, 18 pp.).
Key take-aways from the study include the following:
Orchestrating big data, cloud and mobility strategies leads to 53% greater growth than peers not adopting these technologies. Midmarket organizations adopting big data alone have the potential to grow 50% more than comparable organizations. Effective use of Bring Your Own Device (BYOD) mobility strategies has the potential to increase growth by 53% over laggards or late adopters..
73% of North American organizations believe the volume and complexity of their data requires big data analytics apps and tools. This is up from 54% in 2014, indicating midmarket organizations are concentrating on how to get more value from the massive data stores many have accumulated. This same group of organizations believe they are getting more value out of big data this year (69%) compared to last year (64%). Top outcomes of using big data include better targeting of marketing efforts (41%), optimization of ad spending (37%), and optimization of social media marketing (37%).
54% of an organization’s security budget is invested in security plans versus reacting to threats.Dell & TNS Research discovered that midmarket organizations both in North America and Western Europe are relying on security to enable new devices or drive competitive advantage. In North America, taking a more strategic approach to security has increased from 25% in 2014 to 35% today. In Western Europe, the percentage of companies taking a more strategic view of security has increased from 26% in 2014 to 30% this year.
IT infrastructure costs to support big data initiatives (29%) and costs related to securing the data (28%) are the two greatest barriers to big data adoption. For cloud adoption, costs and security are the two biggest barriers in midmarket organizations as is shown in the graphic below.
Cloud use by midmarket companies in France increased 12% in the last twelve months, leading all nations in the survey. Of the 11 countries surveyed, France had the greatest increase in cloud adoption within midmarket companies. French businesses increased their adoption of cloud applications and platforms from 70% in 2014 to 82% in 2015.
42% of manufacturers say big data and analytics as their highest priority in 2015.
56% of power distribution providers rank big data and analytics within their top three priorities for 2015.
61% of aviation companies consider big data and analytics their highest priority this year.
Bottom line: Digital manufacturing strategies are gaining ground as manufacturers adopt big data and analytics to improve operational effectiveness, time-to-market, new product development and increase product quality and reliability.
Analytics Are Fueling Digital Manufacturing Growth
Big data and analytics adoption by manufacturers is the first step many are taking to create a galvanized, intelligent digital thread that unifies every aspect of their value chains. For aerospace manufacturers whose supply chains are exceptionally complex, big data and analytics are revolutionizing value chains starting with suppliers and progressing through all operations.
The majority of manufacturers are relying on analytics to improve order accuracy, shipment & cycle time performance, and product quality. Those excelling at digital manufacturing strategies are gaining additional analytical insights into how they can make decisions more accurately, quicker and with lower potential costs and risks.
The manufacturing industry generates more data than any other sector of the global economy on a consistent basis. The more complex a given manufacturers’ operations are, the more valuable the insights gained from big data and analytics. The following comparison of big data analytics priorities by industry from a recent speech given by Jeff Immelt, CEO and President of General Electric illustrates this point:
10 Ways Analytics Are Accelerating Digital Manufacturing
The ten ways analytics is accelerating digital manufacturing adoption globally include the following:
Providing real-time operator intelligence (70%), remote monitoring and diagnostics (66%), and condition-based maintenance (59%) are the three most valuable areas for analytics GE customers mentioned in a recent survey. GE’s industrial customers are looking to tailor pre-built applications that can deliver the eight different functional areas shown in the graphic below. Manufacturers are looking to asset performance management as an integral part of their digital thread’s analytics and insight.
Using data modeling to improve production workflows is improving Earnings Before Interest & Taxes (EBIT) by 55% for a chemical manufacturer. Using analytics and data modeling to make more accurate, efficient decisions encompassing making or buying ingredients, choosing to substitute an ingredient or not, optimizing equipment usage and/or reliability and gaining incremental sales through increased production capacity is leading to a significant improvement in EBIT for a leading chemical manufacturer on a consistent basis. The following graphic provides insights into the contributions of each factor in improving EBIT performance.
Planning-execution integration in production centers and real-time production integration are two areas where analytics are having the greatest impact on manufacturers’ operating expenses (OPEX). When analytics are integrated as part of a digital manufacturing strategy, supply chains benefit when Web-EDI (Electronic Data Interchange) and real-time order conformation are implemented and analyzed for continual improvement.
Optimization tools (56%), demand forecasting (53%), integrated business planning (48%) and supplier collaboration & risk analytics (46%) are being rapidly adopted by manufacturers today, setting the foundation for digital manufacturing growth.Deloitte recently interviewed supply chain executives regarding the thirteen fastest-moving technical capacities they are using today and expect to use in the future. The following graphic provides an overview of supply chain capabilities current in use and what percent of each they expect to use in the future.
Analytics is integral to making the vision of Industrie 4.0 a reality. Industrie 4.0 is a German government initiative that promotes automation of the manufacturing industry with the goal of developing Smart Factories. Analytics is extensively used in manufacturing centers who are in the process of reengineering their entire operations to attain Industrie 4.0 compliance. Manufacturing value chains in highly regulated industries that rely on German suppliers and manufacturers are also relying on analytics extensively to guide their Industrie 4.0 journey. A recent Deloitte study of Industrie 4.0 adoption found that research and development (43%) will see the greatest transformational contribution from Industry 4.0.
Analytics is enabling manufacturers to also scale real time cloud-based operational intelligence, condition-based monitoring, monitoring & diagnostics and asset lifecycle management across global manufacturing centers. Capturing, aggregating, analyzing and taking action on analytics across all production centers using the GE Predix Cloud will also accelerate digital manufacturing growth over time. Integrating analytics, industrial and sensor data into a scalable series of data models and apps delivered as a Platform-as-a-Service (PaaS), GE will make this service commercially available in 2016. The following graphic illustrates how complex manufacturers could use Predix Cloud to improve operational efficiency and quality.
Analytics is providing greater insights into product, process, program and service quality, forcing manufacturers to revamp existing production centers and make them more efficient. Gaining greater insight into which production centers and factories are delivering the highest quality products and why is now possible. The vision of unifying quality across an enterprise quality management and compliance (ECQM) framework is now a reality, driving greater digital manufacturing growth as a result. The following graphic from Tableau is an example of a manufacturing quality dashboard.
Increasing production yields through the use of more effective supplier quality management and bill of material (BOM) planning integrated within production processes. Analytics is extensively being used today for supplier audits, supplier quality management and traceability. Capitalizing on the full value of these analytics is a strong catalyst for manufacturers to move closer to digitizing their operations. Check out SelectHub’s Supply Chain Management (SCM) Buyer’s Guide and leaderboard to learn more about the SCM landscape.
Using analytics to predict machine failures before they occur reduces downtime, production costs and increase customer satisfaction. In highly regulated industries production equipment is periodically audited and reviewed for conformance to specific standards. Integrating even the simplest sensor into production equipment can deliver valuable insights into what factors cause it to fail. Analytics are providing Failure Mode and Effects Analysis (FMEA) in real-time today, providing manufacturers with a glimpse into which equipment and machinery will most likely fail when. Knowing this can save literally millions of dollars in lost production time.
Adopting Pareto Analysis to continually improve schedule, quality and cost performance to the cell or production center level is driving digital manufacturing adoption. Determining which factors are enhancing or reducing product, process and program quality is now possible using advanced manufacturing analytics. Differentiating between the many symptoms of a quality problem and its root cause is now becoming possible, especially for companies pursuing digital manufacturing strategies.
Additional sources of information on the impact of analytics on digital manufacturing:
During 2012 the Enterprise Resource Planning (ERP) market experienced sluggish growth of just 2.2%, yet Software-as-a-Service (SaaS), financial management and Human Capital Management (HCM) applications showed potential for breakout growth.
Through the challenging times of the previous year however, SAP still retained worldwide market share leadership. These and other insights were recently published in the recent report, Market Share Analysis: ERP Software Worldwide, 2012 authored by Chris Pang, Yanna Dharmasthira, Chad Eschinger, Koji Motoyoshi and Kenneth F. Brant.
Overall market growth of just 2.2% and the top ten vendors owning 64% of the worldwide ERP market is leading Gartner to predict further consolidation of the industry.
SAP had just over $6B in total ERP software revenue in 2012, leading the worldwide market with 24.6% market share. Oracle had $3.12B and Sage, $1.5B in software revenues for 2012. Oracle’s market share was 12.8%, and Sage, 6.3%. The following graphic shows worldwide ERP market share for 2012.
Infor achieved 49.5% revenue growth in 2012, increasing their 2011 sales from $1B in 2011 to $1.5B in 2012. Their market share increased from 4.2% in 2011 to 6.2% in 2012.
Microsoft achieved 4.2% revenue growth in 2012, increasing revenue from $1B in 2011 to $1.1B in 2012. The majority of these sales are for the Microsoft Dynamics AX ERP system.
The fastest growing ERP vendors in 2012 include Workday, Cornerstone OnDemand, WorkForce Software, Ventyx and NetSuite.
Workday grew 114.7% in 2012, increasing revenue from $88.6M in 2011 to $190.3M in 2012.
Cornerstone OnDemand grew 61.5% in 2012, increasing revenue from $58.4M in 2011 to $94.3 in 2012.
WorkForce Software grew 39.8% in 2012, increasing revenue from $11.8M in 2011 to $16.5M in 2012.
NetSuite grew 34% in 2012, increasing revenue from $139.7M in 2011 to $187.1M in 2012.
Bottom line: SAP’s continued market dominance depends on how well the company orchestrates it core ERP strategy with the following areas: BusinessObjects 4.0, its highly regarded analytics suite; social application adoption (StreamWorks and SuccessFactors Jam); the many Cloud-based initiatives they have including SuccessFactors and BusinessbyDesign; mobility platform wins; and major wins with their SAP Sybase DBMS and HANA architectures.
The best manufacturers I’ve visited this year all share a common attribute: they are obsessed with making themselves as easy as possible to work with from a supply chain, distribution and services standpoint. Many are evaluating cloud-based manufacturing applications including Enterprise Resource Planning (ERP) and several have adopted cloud-based applications across their companies.
With so much interest, there is much confusion as well. I recently spoke with Cindy Jutras, founder and CEO of MintJutras. Her firm has recently completed a survey of SaaS adoption in manufacturing, distribution and other industries. She found the following:
49% of respondents in the manufacturing & distribution industries do not understand the difference between single- and multi-tenant SaaS architectures. Overall 66% of respondents to the survey did not know.
SaaS-based applications are 22% of all manufacturing and distribution software installed today, and will grow to 45% within ten years according to MintJutras.
The three most important characteristics of a SaaS solution in manufacturing and distribution include giving customers a measure of control over upgrades, consistent support for global operations and allowing for rapid and frequent upgrades.
Why Manufacturers Are Looking To Cloud Computing
Manufacturers are under constant pressure to increase accuracy, make process speed a competitive force, and capitalize on their internal intelligence and knowledge to make every supplier, distributor and service interaction count. The manufacturers spoken and visited with to gain the following insights are in the high tech, industrial and aerospace and defense industries, where rapid product lifecycles and short time-to-market schedules are commonplace.
Cloud-based strategies give these companies the chance to bring their own innate intelligence and knowledge into every sales situation. While on-premise systems could also do this, cloud-based systems were quicker to roll out, easier to customize and showed potential to increase adoption rates across resellers.
One manufacturing manager explained how during a new product launch the speed and volume of collaboration was so rapid on between suppliers and distributors that an allocation situation was averted. That he said, made senior management believers. These epiphanies are happening daily in manufacturing.
Based on my visits with manufacturers, here are the ten ways they are using cloud computing to revolutionize manufacturing:
Capturing and applying company-wide intelligence and knowledge through the use of analytics, business intelligence (BI), and rules engines. For the many manufacturers who rely on build-to-order, configure-to-order and engineer-to-order strategies as a core part of their business models, using cloud-based platforms to capture knowledge and manage rules is accelerating. A key part of this area is mobility support for analytics, BI and rules engine reporting and analysis.
Piloting and then moving quickly to full launch of supplier portals and collaboration platforms, complete with quality management dashboards and workflows. Among the manufacturers visited, those in high tech are the most advanced in this area, often implementing Vendor Managed Inventory (VMI) and demand management applications that deliver real-time order status and forecasts.
Designing in services is now becoming commonplace, making cloud integration expertise critical for manufacturers. From simplistic services integration on iPhones to the full implementation of voice-activated controls including emergency assistance in the latest luxury cars, adding in services integrated to the cloud is redefining the competitive landscape of industries today. Revising a product or launching an new product generation with embedded services can mitigate price wars, which is why many manufacturers are pursing this strategy today.
Accelerating new product development and introduction (NPDI) strategies to attain time-to-market objectives. Using cloud-based platforms in high tech manufacturing is growing today as time-to-market constraints are requiring greater collaboration earlier in design cycles.
Managing indirect and direct channel sales from a single cloud platform tracking sales results against quota at the individual, group and divisional level is now commonplace across all manufacturers visited. Dashboards report back the status by each rep and for sales managers, the profitability of each deal.
Using cloud-based marketing automation applications to plan, execute and most important, track results of every campaign. Marketing is under a microscope in many manufacturers today, as marketing automation applications have promised to deliver exceptional results and many manufacturers are still struggling to align their internal content, strategies and ability to execute with the potential these systems promise.
Automating customer service, support and common order status inquiries online, integrating these systems to distributed order management, pricing, and content management platforms. Manufacturing industries are at varying levels of adoption when it comes to automating self-service. The cost and time advantages in high tech are the highest levels of adoption I’ve seen in visiting manufacturers however.
Increasing reliance on two-tier ERP strategies to gain greater efficiencies in material planning, supplier management and reduce logistics costs. Manufacturers are also using this strategy to gain greater independence from a single ERP vendor dominating their entire operations. Several manufacturers remarked that their large, monolithic ERP systems could not, without intensive programming and customization, scale down to the smaller operational needs in distributed geographic regions. Cloud-based ERP systems are getting the attention of manufacturers pursuing two-tier ERP strategies. Acumatica, Cincom, Microsoft, NetSuite and Plex Systems are leaders in this area of ERP systems.
Reliance on cloud-based Human Resource Management (HRM) systems to unify all manufacturing locations globally. This often includes combining multisite talent management, recruiting, payroll and time tracking. Contract manufacturer Flextronics uses Workday to optimize workforce allocations across their global manufacturing centers for example.
Bottom Line: Using cloud-based systems to streamline key areas of their business, manufacturers are freeing up more time to invest in new products and selling more.
When the CEO of a rust-belt manufacturer speaks of cloud computing as critical to his company’s business strategies for competing globally, it’s clear a fundamental shift is underway.
Nearly every manufacturing company I’ve spoken with in the last ninety days has a mobility roadmap and is also challenged to integrate existing ERP, pricing and fulfillment systems into next-generation selling platforms.
One of the most driven CEOs I’ve met in manufacturing implemented a cloud-based channel management, pricing, quoting and CRM system to manage direct sales and a large distributor network across several countries. Manufacturers are bringing an entirely new level of pragmatism to cloud computing, quickly deflating its hype by pushing for results on the shop floor.
There’s also been an entirely new series of enterprise software and cloud computing forecasts and market estimates published. I’ve summarized the key take-aways below:
Enterprise sales of ERP systems will grow to $32.9B in 2016, attaining a 6.7% CAGR in the forecast period of 2011 to 2016. CRM is projected to be an $18.6B global market by 2016, attaining a CAGR of 9.1% from 2011 to 2016. The fastest growing category of enterprise software will be Web Conferencing and Team, growing at a 12.4% CAGR through the forecast period. The following graphic compares 2011 actual sales and the latest forecast for 2016 by enterprise software product category. Source: Gartner’s Forecast Analysis: Enterprise Application Software, Worldwide, 2011-2016, 4Q12 Update Published: 31 January 2013
IDC is predicting Cloud Services and enablement spending will hit $60 billion, growing at 26% through the year and that over 80% of new apps will be distributed and deployed on cloud platforms. Their predictions also are saying that 2.5% of legacy packaged enterprise apps will start migrating to clouds. Source: Top 10 Predictions, IDC Predictions 2012: Competing for 2020 by Frank Gens. You can download a copy of the IDC Predictions here: http://cdn.idc.com/research/Predictions12/Main/downloads/IDCTOP10Predictions2012.pdf
In working with manufacturers and financial services firms over the last year, one point is becoming very clear: SaaS is gaining trust as a solid alternative for global deployments across the enterprise. And this trend has been accelerating in the last six months. One case in point is a 4,000 seat SaaS CRM deployment going live in Australia, Europe, and the U.S. by December of this year.
What’s noteworthy about this shift is that just eighteen months ago an Australian-based manufacturer was only considering SaaS for on-premises enhancement of their CRM system. What changed? The European and U.S. distribution and sales offices were on nearly 40 different CRM, quoting, proposal and pricing systems. It was nearly impossible to track global opportunities.
Meanwhile business was booming in Australia and there were up-sell and cross-sell opportunities being missed in the U.S. and European-based headquarters of their prospects. The manufacturer chose to move to a global SaaS CRM solution quickly. Uniting all three divisions with a global sales strategy forced the consolidation of 40 different quoting, pricing and CRM systems in the U.S. alone. What they lost in complexity they are looking to pick up in global customer sales.
Measuring Where SaaS Is Cannibalizing On-Premise Enterprise Applications
Additional take-aways from this report include the following:
Perceived lower Total Cost of Ownership (TCO) continues to be the dominant reason enterprises are considering SaaS adoption, with 50% of respondents in 2012 mentioning this as the primary factor in their decision.
CRM is leading all other enterprise application areas in net new deployments according to the Gartner study, with the majority of on-premise replacements being in North America and Europe.
Gartner projects that by 2016 more than 50% of CRM software revenue will be delivered by SaaS. As of 2011, 35% of CRM software was delivered on the SaaS platform. Gartner expects to see SaaS-based CRM grow at three time the rate of on-premise applications.
95% of Web analytics functions are delivered via the SaaS model whereas only 40% of sales use cloud today according to the findings of this study.
The highest adoption rates of SaaS-based applications include sales, customer service, social CRM and marketing automation.
SaaS-based ERP will continued to be a small percentage of the total market, attaining 10% cannibalization by 2012. Forrester has consistently said this is 13%, growing to 16% by 2015.
Office suites and digital content creation (DCC) will attain compound annual growth rates (CAGR) of 40.7% and a 32.2% respectively from 2011 through 2016. Gartner is making the assumption consumers and small businesses will continue be the major forces for Web-based office suites through 2013.
The four reasons why companies don’t choose SaaS include uncertainty if it is the right deployment option (36%), satisfaction with existing on-premise applications (30%), no further requirements (33%) and locked into their current solution with expensive contractual requirements (14%).
Bottom Line: Enterprises and their need to compete with greater accuracy and speed are driving the cannibalization of on-premise applications faster than many anticipated; enterprise software vendors need to step up and get in front of this if they are going to retain their greatest sources of revenue.
Enterprises are beginning to change their buying behaviors based on the deployment speed, economics and customization that cloud-based technologies provide. Gartner cautions however that enterprises are far from abandoning their on-premise models and applications entirely for the cloud.
Based on an analysis of the Gartner Hype Cycle for Cloud Computing, 2012, the best results are being attained by enterprises that focus on a very specific strategy and look to cloud-based technologies to accelerate their performance. Leading with a strategic framework of goals and objectives increases the probability of cloud-based platform success. Those enterprises that look to cloud platforms only for cost reduction miss out on their full potential.
While the hype surrounding cloud computing may have peaked, cloudwashing continues to cause confusion and inflated expectations with enterprise buyers. This just slows down sales cycles, when more straightforward selling could lead to more pilots, sales and a potentially larger market. Cloud vendors who have the expertise gained from delivering cloud platforms on time, under budget, with customer references showing results are starting to overtake those that using cloudwashing as part of their selling strategies.
Additional take-aways from the Gartner Hype Cycle for Cloud Computing include the following:
Cloud Email is expected to have a 10% adoption rate in enterprises by 2014, down from the 20% Gartner had forecasted in previous Hype Cycles. This represents modest growth as the adoption rate of this category had been between 5 and 6% in 2011.
Big Data will deliver transformational benefits to enterprises within 2 to 5 years, and by 2015 will enable enterprises adopting this technology to outperform competitors by 20% in every available financial metric. Gartner defines Big Data as including large volumes processed in streams, in addition to batch. Integral to Big Data is an extensible services framework that can deploy processing to the data or bring data to the process workflow itself. Gartner also includes more than one asset type of data in their definition, including structured and unstructured content. The Priority Matrix for Cloud Computing, 2012 is shown below:
Master Data Management (MDM) Solutions in the Cloud and Hybrid IT are included in this hype cycle for the first time in 2012. Gartner reports that MDM Solutions in the Cloud is getting additional interest from Enterprise buyers as part of a continual upward trend of interest in MDM overall. Dominant vendors in this emerging area include Cognizant, Data Scout, IBM, Informatica, Oracle and Orchestra Networks, are among those with MDM-in-the-cloud solutions.
PaaS continues to be one of the most misunderstood aspects of cloud platforms. The widening gap between enterprise expectations and experiences is most prevalent in this market. Gartner claims this is attributable to the relatively narrow middleware functions delivered and the consolidation fo vendors and service providers in this market.
By 2014 the Personal Cloud will have replaced the personal computer as the center of user’s digital lives.
Private Cloud Computing is among the highest interest areas across all cloud computing according to Gartner, with 75% of respondents in Gartner polls saying they plan to pursue a strategy in this area by 2014. Pilot and production deployments are in process across many different enterprises today, with one of the major goals being the evaluation of virtualization-driven value and benefits.
SaaS is rapidly gaining adoption in enterprises, leading Gartner to forecast more than 50% of enterprises will have some form of SaaS-based application strategy by 2015. Factors driving this adoption are the high priority enterprises are putting on customer relationships, gaining greater insights through analytics, overcoming IT- and capital budget-based limitations, and aligning IT more efficiently to strategic goals.
More than 50% of all virtualization workloads are based on the x86 architecture. This is expected to increase to 75% by 2015. Gartner reports this is a disruptive innovation which is changing the relationship between IT and enterprise where service levels and usage can be tracked.
Bottom line: Gartner’s latest Hype Cycle for Cloud Computing shows that when cloud-based platforms are aligned with well-defined strategic initiatives and line-of-business objectives, they deliver valuable contributions to an enterprise. It also shows how Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) are the catalysts of long-term market growth. The following slide from the presentation High-Tech Tuesday Webinar: Gartner Worldwide IT Spending Forecast, 2Q12 Update: Cloud Is the Silver Lining (free for download) also makes this point.
The economics of public cloud computing are accelerating the pace of change occurring in enterprise software today.
Many of the scenarios that Clayton Christensen insightfully describes in The Innovator’s Dilemma are playing out right now in many sectors of this industry, shifting the balance of purchasing power to line-of-business leaders away from IT. True to the cases shown in the book, new entrants are bringing disruptive innovations that are being successfully used to attack the most price-sensitive areas of the market. Winning customers at the low-end and making their way up-market, new entrants are changing the customer experience, economics and structure of the industry. Salesforce.com is a prime example of how the insights shared in The Innovator’s Dilemma are alive and well in the CRM market for example. This is an excellent book to add to your summer reading list.
Defining The Public Cloud
The National Institute of Standards and Technology (NIST) have defined the public cloud in their latest definition of cloud computing in their September, 2011 brief you can download here (The NIST Definition of Cloud Computing). The NIST defines public cloud as “the cloud infrastructure is provisioned for open use by the general public. It may be owned, managed, and operated by a business, academic, or government organization, or some combination of them. It exists on the premises of the cloud provider.” In addition the NIST defines three models including Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS). Gartner’s definition of public cloud computing is comparable yet includes Business Process as a Service (BPaaS) and Cloud Management and Security.
A quick check of the term public cloud on Google Insights shows the rapid ascent of interest in this area. A graphic from Google Insights is shown below:
Public Cloud Adoption in the Enterprise
In the many conversations I’ve had with CIOs and CEOs of manufacturing companies the role of cloud computing comes up often. There’s a very clear difference in the thinking of CIOs who see their jobs as selectively applying technologies to strategic needs versus those who are focused on compliance and risk aversion. The former see their enterprises moving to public and hybrid clouds quickly to better integrate with dealers, distributors and suppliers at a strategic level.
The public cloud’s pervasiveness in the enterprise is growing rapidly. This market dynamic is reflected in the report, Forecast: Public Cloud Services, Worldwide, 2010-2016, 2Q12 Update (ID:G00234814). Gartner breaks out forecasts into the areas of Cloud Business Process Services/Business Process as a Service (BPaaS), Application Services/Software as a Service (SaaS), Application Infrastructure Services/Platform as a Service (PaaS), System Infrastructure Services/Infrastructure as a Service (IaaS) and Cloud Management and Security Services. Highlights from the report are presented in the following five areas:
Cloud Business Process Services/Business Process as a Service (BPaaS)
Gartner is predicting that BPaaS will grow from $84.1B in 2012 to $144.7B in 2016, generating a global compound annual growth rate of 15%.
Of the eight subsegments Gartner is tracking in their BPaaS forecast, Cloud Payments (17.8%) Cloud Advertising (17.1%) and Industry Operations (15.1%) are expected to have the greatest compound annual growth rates (CAGR) in revenues generated by 2016.
In terms of revenue generated, Cloud Advertising is projected to grow from $43.1B in 2011 to $95B in 2016, generating 17.1% CAGR in revenue growth through 2016.
Cloud Payments are forecast to grow from $4.7B in 2011 to $10.6B in 2016, generating a CAGR of 17.8% worldwide.
E-Commerce Enablement using BPaaS-based platforms is expected to grow from $4.7B in 2011 to $9B in 2016, generating a 13.6% CAGR in revenue globally.
Application Services/Software as a Service (SaaS)
SaaS-based applications are expected to grow from $11.8B in 2012 to $26.5B in 2016, generating a CAGR of 17.4% globally. Gartner tracks ten different categories of SaaS applications in this latest forecast with CRM, ERP, and Web Conferencing, Teaming Platforms, and Social Software Suites being the three largest in terms of global revenue growth.
The three fastest-growing SaaS areas include Office Suites (40.7%), Digital Content Creation (32.2%) and Business Intelligence applications (27.1%) having the highest CAGRs from 2011 through 2016.
SaaS-based CRM will see the largest global revenue growth of all categories, increasing from $3.9B in 2011 to $7.9B in 2016, achieving a 15.1% CAGR worldwide.
Web Conferencing, Teaming Platforms, and Social Software Suites will grow from $2B in 2011 to $3.4B in 2016, generating an 11.2% CAGR. Gartner is including Enterprise 2.0 applications in this category.
SaaS-based ERP is forecasted to grow from $1.9B in 2011 to $4.3B in 2016, achieving a 17.3% CAGR.
Supply Chain Management (SCM) is an area that Forrester, Gartner, IDC and others have predicted significant growth in. Gartner’s latest forecast for SaaS-based SCM is $1.2B spent in 2011 growing to $3.3B in 2016, representing a 21.1% CAGR.
Application Infrastructure Services/Platform as a Service (PaaS)
Gartner forecasts the worldwide enterprise market for PaaS platforms will grow from $900M spent in 2011 to $2.9B in 2016, representing a 26.6% CAGR.
Growth rates by PaaS subsegment include the following: Application Development (22%), Database Management Systems (48.5%), Business Intelligence Platform (38.9%) and Application Infrastructure and Middleware (26.5%).
Application Infrastructure and Middleware is expected to be the largest revenue source in PaaS for the next four years. Gartner reports this subsegment generated $649M in 2011, projected to grow to $2.1B in 2016, generating $1.5B in revenue and a 26.5% CAGR.
System Infrastructure Services/Infrastructure as a Service (IaaS)
With a projected CAGR of 41.7%, this segment is the fastest growing of the five Gartner included in their public cloud forecast. From $4.2B in revenue generated in 2011 to $24.4B in 2016, IaaS is expected to grow by just over $20B in the forecast period globally.
CAGR by IaaS segment from 2001 to 2016 include Compute (43.2%), Storage (36.6%) and Print (16%).
The Compute subsegment is expected to see the greatest revenue growth globally, growing from $3.3B in 2011 to $20.2B in 2016, generating a 43.2% CAGR.
Cloud Management and Security Services
Comprised of Security, IT Operations Management and Storage Management, Cloud Management and Security Services generated $2.3B in 2011 with a forecast of $7.9B in 2016, generating a 27.2% CAGR.
IT Operations Management (38.2%), Storage Management (30.6%) and Security (23.7%) each have relatively high CAGRs through 2016.
Bottom line: Of the five areas Gartner includes in their forecast, BPaaS and its subsegments show trending towards greater support for enterprise-wide transaction and e-commerce management. With 76% of the entire 2012 public cloud forecast being in the BPaaS segment, it is clear Gartner is seeing strong interest on the part of enterprise clients to spend in this area.
The latest round of SaaS ERP market forecasts are more grounded in the reality of CIO priorities and committed projects in 2012 than ever before. And this is good news for the many vendors competing in the Financial Management Systems (FMS), Human Capital Management (HCM) and Manufacturing segments of the SaaS ERP market.
Two weeks ago in Houston I interviewed twenty-five different CIOs, IT Directors, CEOs and CTOs as part of a persona research study I am doing. Their take on SaaS ERP was consistent with what this round-up shows, namely this type of SaaS application is best suited for extending beyond, not replacing, the main ERP systems and platforms. I concentrated on SaaS ERP adoption in manufacturing and learned the following during my interviews:
Usability and speed of deployment are the two most common benefits CIOs mentioned in my survey during Convergence. The economics of cloud computing is a topic that CFOs love to talk about, especially in the areas of value-based pricing and how that is determined.
When asked what kept them up at night, CIOs said it was the thought of a call from their boss (often the CFO) that a cloud system had been compromised or had completely gone down. Security and reliability are holding back CIOs in manufacturing from adopting SaaS-based ERP systems more pervasively in their companies.
CIOs from aerospace and defense companies get the benefits of cloud computing, yet they have much bigger issues to deal with right now, like replacing financials in their existing ERP system and staying in compliance to government requirements. Earned Value Management is a major focus they have as well. SaaS-based ERP systems are interesting to them; they however would require a completely enclosed, locked-down implementation due to security requirements.
There are vast differences in how CIOs view cloud computing – something that the following forecasts don’t really capture. For the CIOs who are strategists, cloud computing in general and SaaS ERP specifically is a consideration given the agility and time-to-market, providing customization is held to a minimum. CIOs who came up through IT have a healthy degree of skepticism and see SaaS ERP as potentially useful for scaling out an operation yet never being the primary financial system.
Here are the latest SaaS ERP forecasts and market estimates:
Gartner released their latest SaaS revenue forecast last week predicting revenue will reach $14.5B this year, a 17.9% increase from 2011 of $12.3B, with strong growth predicted through 2015 when the market is expected to be $22.1B. Source: http://www.itjungle.com/tfh/tfh040212-story08.html
In the report Market Trends: Cloud Computing and SaaS Adoption in Manufacturing and Natural Resources, Worldwide, 2012 Gartner is predicting 59% of manufacturers will adopt IaaS during the 2011 – 2015 timeframe and 47% will be either piloting or using SaaS-based applications. Gartner cites the need for greater business and supply chain agility as the factors driving this rapid adoption. The following figure is from the Gartner report Market Trends: Cloud Computing and SaaS Adoption in Manufacturing and Natural Resources, Worldwide, 2012.
Forrester forecasts SaaS ERP spending staying at 2% of the global ERP market, while Gartner forecasts 7% through 2012. Gartner is projecting Project and Portfolio Management (29.1%) and Supply Chain Management (22.1%) will see the greatest growth rates through 2015. Supply Chain Management is expected to reach $2.7B in revenue by 2015. The Total Software Revenue Forecast for SaaS Delivery Within Enterprise Software is shown in the following table. Source: Forecast: Software as a Service, Worldwide, 2010-2015, 1H11 Update Published: 22 June 2011 Analyst(s): Sharon A. Mertz, Chad Eschinger, Tom Eid, Chris Pang, Laurie F. Wurster
Gartner, IDC and Forrester all predict that Human Capital Management (HCM) will see the broadest adoption of all SaaS-based ERP components through 2015. Vendors in this category include ADP, Concur, Cornerstone onDemand, HumanConcepts, Infor, Kenexa, Lumesse, Saba, SilkRoad, Sonar6, SuccessFactors, SumTotal Systems, Taleo, Ultimate Software and Workday. Based on a recent Gartner Spending and Usage of SaaS Survey, 39% of manufacturers are piloting or using SaaS-based financials followed by 37% using Expense Management.The following figure illustrates their forecast, from the report Market Trends: Cloud Computing and SaaS Adoption in Manufacturing and Natural Resources, Worldwide, 2012
Gartner’s IT Market Clock for ERP Platform Technology indicates that multitenant SaaS-based ERP is maturing rapidly, driven by time-to-market and cost advantages. The IT Market Clock is shown below, indicating SaaS ERP-based systems position relative to other ERP platforms now in use. Vendors including Epicor Express Editions, Glovia, Kenandy, NetSuite, Plex Systems, and SAP Business ByDesign compete in this segment.Source: IT Market Clock for ERP Platform Technology, 2011 Published: 19 September 2011 Analyst: Jim Shepherd.
Gartner has also compiled a Market Clock Recommendation Summary which is shown in the following table. Of the CIOs I’ve spoken with during the persona research, the description of Multitenant SaaS is accurate. No CIO I’ve spoken with is willing to bet their job on a rip-and-replace strategy for SaaS ERP; yet many are willing to extend their existing ERP systems using SaaS implementations to get up and running quickly at lower cost. The one caveat nearly everyone mentions is little or no customization is necessary for SaaS ERP systems to be even evaluated by their companies. Slight configuration is expected; however in-depth customization is not.
Bottom line: The persona research completed shows that the SaaS-based ERP growth is being helped by the transition occurring in the CIO ranks today. More of them are strategists, who are expected to make business strategies happen, over and above just keeping the system dial tone on in their enterprises.