Skip to content

Posts tagged ‘Cloud computing forecasts’

May 10

Gartner Predicts Public Cloud Services Market Will Reach $397.4B by 2022

Gartner Predicts Public Cloud Services Market Will Reach $397.4B by 2022
  • Worldwide end-user spending on public cloud services is forecast to grow 23.1% in 2021 to total $332.3 billion, up from $270 billion in 2020.
  • Garter predicts worldwide end-user spending on public cloud services will jump from $242.6B in 2019 to $692.1B in 2025, attaining a 16.1% Compound Annual Growth Rate (CAGR).
  • Spending on SaaS cloud services is predicted to reach $122.6B this year, growing to $145.3B next year, attaining 19.3% growth between 2021 and 2022.  

These and many other insights are from Gartner Forecasts Worldwide Public Cloud End-User Spending to Grow 23% in 2021.  The pandemic created the immediate need for virtual workforces and cloud resources to support them at scale, accelerating public cloud adoption in 2020 with momentum continuing this year. Containerization, virtualization, and edge computing have quickly become more mainstream and are driving additional cloud spending. Gartner notes that CIOs face continued pressures to scale infrastructure that supports moving complex workloads to the cloud and the demands of a hybrid workforce.

Key insights from Gartner’s latest forecast of public cloud end-user spending include the following:

  • 36% of all public cloud services revenue is from SaaS applications and services this year, projected to reach $122.6B with CRM being the dominant application category. Customer Experience and Relationship Management (CRM) is the largest SaaS segment, growing from $44.7B in 2019 to $99.7B in 2025, attaining a 12.14% CAGR. SaaS-based Enterprise Resource Planning (ERP) systems are the second most popular type of SaaS application, generating $15.7B in revenue in 2019. Gartner predicts SaaS-based ERP sales will reach $35.8B in 2025, attaining a CAGR of 12.42%.
  • Desktop as a Service (DaaS) is predicted to grow 67% in 2021, followed by Infrastructure-as-a-Service (IaaS) with a 38.5% jump in revenue. Platform-as-a-Service (PaaS) is the third-fastest growing area of public cloud services, projected to see a 28.3% jump in revenue this year. SaaS, the largest segment of public cloud spending at 36.9% this year, is forecast to grow 19.3% this year. The following graphic compares the growth rates of public cloud services between 2020 and 2021.  
  • In 2021, SaaS end-user spending will grow by $19.8B, creating a $122.6B market this year. IaaS end-user spending will increase by $22.7B, the largest revenue gain by a cloud service in 2021. PaaS will follow, with end-user spending increasing $13.1B this year. CIOs and the IT teams they lead are investing in public cloud infrastructure to better scale operations and support virtual teams. CIOs from financial services and manufacturing firms I’ve recently spoken with are accelerating cloud spending for three reasons. First, create a more virtual organization that can scale; second, extend the legacy systems’ data value by integrating their databases with new SaaS apps; and third, an urgent need to improve cloud cybersecurity.

Conclusion

CIOs and the organizations they serve are prioritizing cloud infrastructure investment to better support virtual workforces, supply chains, partners, and service partners. The CIOs I’ve spoken with also focus on getting the most value out of legacy systems by integrating them with cloud infrastructure and apps. As a result, cloud infrastructure investment starting with IaaS is projected to see end-user spending increase from $82B this year to $223B in 2025, growing 38.5% this year alone. End-user spending on Database Management Systems is projected to lead all categories of PaaS through 2025, increasing from $31.2B this year to $84.8B in 2025. The following graphic compares cloud services forecasts and growth rates:

Nov 4

Cloud Computing Market Projected To Reach $411B By 2020

  • Worldwide public cloud services market revenue is projected to grow 18.5% in 2017 reaching $260.2B, up from $219.6B in 2016.
  • 2016 worldwide SaaS revenue exceeded Gartner’s previous forecast by $48.2B.
  • SaaS revenue is expected to grow 21% in 2017 reaching $58.6B by the end of this year.
  • Infrastructure as a Service (IaaS) is projected to grow 36.6% in 2017 alone, reaching $34.7B this year making this area the fastest growing of all cloud services today.

Gartner’s latest worldwide public cloud services revenue forecast published earlier this month predicts Infrastructure-as-a-Service (IaaS), currently growing at a 23.31% Compound Annual Growth Rate (CAGR), will outpace the overall market growth of 13.38% through 2020. Software-as-a-Service (SaaS) revenue is predicted to grow from $58.6B in 2017 to $99.7B in 2020. Taking into account the entire forecast period of 2016 – 2020, SaaS is on pace to attain 15.65% compound annual growth throughout the forecast period, also outpacing the total cloud market. The following graphic compares revenue growth by cloud services category for the years 2016 through 2020. Please click on the graphic to expand it for easier reading.

Catalysts driving greater adoption and correspondingly higher CAGRs include a shift Gartner sees in infrastructure, middleware, application and business process services spending. In 2016, Gartner estimates approximately 17% of the total market revenue for these areas had shifted to the cloud. Gartner predicts by 2021, 28% of all IT spending will be for cloud-based infrastructure, middleware, application and business process services. Another factor is the adoption of Platform-as-a-Service (PaaS). Gartner notes that enterprises are confident that PaaS can be a secure, scalable application development platform in the future.  The following graphic compares the compound annual growth rates (CAGRs) of each cloud service area including the total market. Please click on the graphic to expand it for easier reading.

Source: Gartner Forecasts Worldwide Public Cloud Services Revenue to Reach $260 Billion in 2017

May 20

1 Comment

Roundup Of Cloud Computing Forecasts, 2017

  • Cloud computing is projected to increase from $67B in 2015 to $162B in 2020 attaining a compound annual growth rate (CAGR) of 19%.
  • Gartner predicts the worldwide public cloud services market will grow 18% in 2017 to $246.8B, up from $209.2B in 2016.
  • 74% of Tech Chief Financial Officers (CFOs) say cloud computing will have the most measurable impact on their business in 2017.

Cloud platforms are enabling new, complex business models and orchestrating more globally-based integration networks in 2017 than many analyst and advisory firms predicted. Combined with Cloud Services adoption increasing in the mid-tier and small & medium businesses (SMB), leading researchers including Forrester are adjusting their forecasts upward. The best check of any forecast is revenue.  Amazon’s latest quarterly results released two days ago show Amazon Web Services (AWS) attained 43% year-over-year growth, contributing 10% of consolidated revenue and 89% of consolidated operating income.

Additional key takeaways from the roundup include the following:

  • Wikibon is predicting enterprise cloud spending is growing at a 16% compound annual growth (CAGR) run rate between 2016 and 2026. The research firm also predicts that by 2022, Amazon Web Services (AWS) will reach $43B in revenue, and be 8.2% of all cloud spending. Source: Wikibon report preview: How big can Amazon Web Services get?

Wikibon Worldwide Enterprise IT Projection By Vendor Revenue

Wikibon Worldwide Enterprise IT Projection By Vendor Revenue

Rapid Growth of Cloud Computing, 2015–2020

Rapid Growth of Cloud Computing, 2015–2020

Worldwide Public Cloud Services Forecast (Millions of Dollars)

Worldwide Public Cloud Services Forecast (Millions of Dollars)

  • By the end of 2018, spending on IT-as-a-Service for data centers, software and services will be $547B. Deloitte Global predicts that procurement of IT technologies will accelerate in the next 2.5 years from $361B to $547B. At this pace, IT-as-a-Service will represent more than half of IT spending by the 2021/2022 timeframe. Source: Deloitte Technology, Media and Telecommunications Predictions, 2017 (PDF, 80 pp., no opt-in).

Deloitte IT-as-a-Service Forecast

Deloitte IT-as-a-Service Forecast

  • Total spending on IT infrastructure products (server, enterprise storage, and Ethernet switches) for deployment in cloud environments will increase 15.3% year over year in 2017 to $41.7B. IDC predicts that public cloud data centers will account for the majority of this spending ( 60.5%) while off-premises private cloud environments will represent 14.9% of spending. On-premises private clouds will account for 62.3% of spending on private cloud IT infrastructure and will grow 13.1% year over year in 2017. Source: Spending on IT Infrastructure for Public Cloud Deployments Will Return to Double-Digit Growth in 2017, According to IDC.

Worldwide Cloud IT Infrastructure Market Forecast

Worldwide Cloud IT Infrastructure Market Forecast

  • Platform-as-a-Service (PaaS) adoption is predicted to be the fastest-growing sector of cloud platforms according to KPMG, growing from 32% in 2017 to 56% adoption in 2020. Results from the 2016 Harvey Nash / KPMG CIO Survey indicate that cloud adoption is now mainstream and accelerating as enterprises shift data-intensive operations to the cloud.  Source: Journey to the Cloud, The Creative CIO Agenda, KPMG (PDF, no opt-in, 14 pp.)

Cloud investment by type today and in three years

Cloud investment by type today and in three years

AWS Segment Financial Comparison

AWS Segment Financial Comparison

  • In Q1, 2017 AWS generated 10% of consolidated revenue and 89% of consolidated operating income. Net sales increased 23% to $35.7 billion in the first quarter, compared with $29.1 billion in first quarter 2016. Source: Cloud Business Drives Amazon’s Profits.

Comparing AWS' Revenue and Income Contributions

Comparing AWS’ Revenue and Income Contributions

  • RightScale’s 2017 survey found that Microsoft Azure adoption surged from 26% to 43% with AWS adoption increasing from 56% to 59%. Overall Azure adoption grew from 20% to 34% percent of respondents to reduce the AWS lead, with Azure now reaching 60% of the market penetration of AWS. Google also increased adoption from 10% to 15%. AWS continues to lead in public cloud adoption (57% of respondents currently run applications in AWS), this number has stayed flat since both 2016 and 2015. Source: RightScale 2017 State of the Cloud Report (PDF, 38 pp., no opt-in)

Public Cloud Adoption, 2017 versus 2016

Public Cloud Adoption, 2017 versus 2016

  • Global Cloud IT market revenue is predicted to increase from $180B in 2015 to $390B in 2020, attaining a Compound Annual Growth Rate (CAGR) of 17%. In the same period, SaaS-based apps are predicted to grow at an 18% CAGR, and IaaS/PaaS is predicted to increase at a 27% CAGR. Source: Bain & Company research brief The Changing Faces of the Cloud (PDF, no opt-in).

60% of IT Market Growth Is Being Driven By The Cloud

60% of IT Market Growth Is Being Driven By The Cloud

  • 74% of Tech Chief Financial Officers (CFOs) say cloud computing will have the most measurable impact on their business in 2017. Additional technologies that will have a significant financial impact in 2017 include the Internet of Things, Artificial Intelligence (AI) (16%) and 3D printing and virtual reality (14% each). Source: 2017 BDO Technology Outlook Survey (PDF), no opt-in).

CFOs say cloud investments deliver the greatest measurable impact

CFOs say cloud investments deliver the greatest measurable impact

Cloud investments are fueling new job throughout Canada

Cloud investments are fueling new job throughout Canada

  • APIs are enabling persona-based user experiences in a diverse base of cloud enterprise As of today there are 17,422 APIs listed on the Programmable Web, with many enterprise cloud apps concentrating on subscription, distributed order management, and pricing workflows.  Sources: Bessemer Venture Partners State of the Cloud 2017 and 2017 Is Quickly Becoming The Year Of The API Economy. The following graphic from the latest Bessemer Venture Partners report illustrates how APIs are now the background of enterprise software.

APIs are fueling a revolution in cloud enterprise apps

APIs are fueling a revolution in cloud enterprise apps

Additional Resources:

Dec 22

4 Comments

Five Key Take-Aways From North Bridge’s Future Of Cloud Computing Survey, 2015  

  • bostonSaaS is the most pervasive cloud technology used today with a presence in 77.3% of all organizations, an increase of 9% since 2014.
  • IT is moving significant processing to the cloud with 85.9% of web content management, 82.7% of communications, 80% of app development and 78.9% of disaster recovery now cloud-based.
  • Seeking simple and clear relationships, over 50% of enterprises opt for online purchasing or direct to provider purchasing of cloud services. Online buying is projected to increase over the next two years up to 56%.
  • Vendor leadership/consolidation continues to take hold with 75% of enterprises using fewer than ten

These and many other insights are from North Bridge Growth Equity and Venture Partners’ Future of Cloud Computing Survey published on December 15th. North Bridge and Wikibon collaborated on the study, interviewing 952 companies across 38 different nations, with 65% being from the vendor community and 35% of enterprises evaluating and using cloud technologies in their operations  The slide deck is accessible on SlideShare here:

Key takeaways from the study include the following:

  1. Wikibon forecasts the SaaS is worth $53B market today and will grow at an 18% Compound Annual Growth Rate (CAGR) from 2014 to 2026. By 2026, the SaaS market will be worth $298.4B according to the Wikibon forecast. The fastest growing cloud technology segment is Platform-as-a-Service (PaaS), which is valued at $2.3B today, growing at a CAGR of 38% from 2014 to 2026.  Infrastructure-as-a-Service (IaaS) has a market value of $25B and is growing at a 19% CAGR in the forecast period.  Please see the graphic from the report below and a table from Wikibon’s excellent study, Public Cloud Market Forecast 2015-2026 by Ralph Finos published in August.

SaaS Graphic from North Bridge study

 

Public Cloud Vendor Revenue Projection

  1. Cloud-based applications are becoming more engrained in core business processes across enterprises. The study found that enterprises are migrating significant processing, systems of engagement and systems of insight to the cloud beyond adoption levels of the past.  81.3% of sales and marketing, 79.9% of business analytics, 79.1% of customer service and 73.5% of HR & Payroll activities have transitioned to the cloud. The impact on HR is particularly noteworthy as in 2011; it was the third least likely sector to be disrupted by cloud computing.
  1. 78% of enterprises expect their SaaS investments to deliver a positive Return on Investment (ROI) in less than three months. 58% of those enterprises who have invested in Platform-as-a-Service (PaaS) expect a positive ROI in less than three months.
  1. Top inhibitors to cloud adoption are security (45.2%), regulatory/compliance (36%), privacy (28.7%), lock-in (25.8%) and complexity (23.1%). Concerns regarding interoperability and reliability have fallen off significantly since 2011 (15.7% and 9.9% respectively in 2015).
  1. Total private financing for cloud and SaaS startup has increased 4X over the last five years. North Bridge and Wikibon found that average deal size rose 1.8X in the same period. The following graphic provides an overview of cloud and SaaS finance trends from 2010 to present.

cloud and saas financing

 

Oct 23

Businesses Adopting Big Data, Cloud & Mobility Grow 53% Faster Than Peers

  • London sykline duskOrchestrating big data, cloud and mobility strategies leads to 53% greater growth than peers not adopting these technologies.
  • 73% of midmarket companies say the complexity of their stored data requires big data analytics apps and tools to better gain insights from.
  • 41% of midmarket companies are using big data to better target marketing efforts.
  •  54% of midmarket companies’ security budgets are invested in security plans versus reacting to threats.

These and many other insights are from Dell’s second annual Global Technology Adoption Index (GTAI 2015) released last week in collaboration with TNS Research. The Global Technology Adoption Index surveyed IT and business decision makers of mid-market organizations across 11 countries, interviewing 2,900 IT and business decision makers representing businesses with 100 to 4,999 employees.

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..

orchestrating tech for greater growth

  • 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%).

top outcomes

  • 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.

security strategic

  • 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.

security costs

  • 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.

Sources: Dell Study Reveals Companies Investing in Cloud, Mobility, Security and Big Data Are Growing More Than 50 Percent Faster Than Laggards. October 13, 2015

 

Oct 16

Gartner Top 10 Strategic Technology Trends For 2016

2016 Gartner technology trends graphicGartner announced their top 10 strategic technology trends for 2016 at the Gartner Symposium/ITxpo held October 4 – 8th in Orlando. David Cearley, Vice President and Gartner Fellow, presented the company’s Top Ten Strategic Technology Trends for 2016.  You can find the video here.

Key take-aways from his presentation and the trends announced are provided below:

  • Enterprise 3D-printing shipments will attain a 64.1% Compound Annual Growth Rate (CAGR) through 2019. David Cearley mentioned during his keynote that jet engines are being 3D printed today.  He gave the example to illustrate that 3D printing will continue to gain adoption in more demanding manufacturing environments including aerospace, automotive, energy, medical devices and military-based markets and industries.
  • Emergence of an entirely new class of business models based on smart machine technologies, advanced analytics and big data. Combining machine learning, continued adoption of Internet of Things (IoT) sensors and supporting data models, and advanced intelligence to interpret and act on the data, Gartner’s predictions set the stage of an entirely new class of business models. Manufacturing-as-a-Service and paying only for the production time used in a factory are within reach for more companies than before based on these predictions.
  • The device mesh will expand to include IoT-based devices that scale well beyond the enterprise. Gartner is predicting that in the next three years traditional computing and communication devices, including desktop and mobile devices will increasingly be augmented by wearable devices, home electronics including appliances with sensors, transportation-based sensors and data collection devices, and environmental devices all capable of capturing data in real-time.
  • A digital mesh will continue to proliferate, aligning apps and devices to individuals’ specific roles and tasks.  Gartner sees this digital mesh as an expanding series of devices, services, platforms, informational networks and individuals that integrate together and provide contextual intelligence and enabling greater collaboration. The proliferation of the digital mesh will lead to more ambient, contextually intelligent and intuitive app design over time Gartner predicts.
  • The next twelve months will also see the proliferation of algorithm-based businesses enabling automated background tasks including smart machines. Gartner’s technology trends for 2016 set a solid foundation for the growth of globally-based smart factories and production centers. Acumatica, Plex Systems and other Cloud ERP providers are ideally positioned for this trend, having proven their ability to provide manufacturing intelligence from the shop floor to the top floor. In addition to cloud platforms, these algorithm-based businesses will need to support unstructured data analysis including latent semantic indexing (LSI), data taxonomy and classification algorithms to ensure data fidelity and scalability, and more robust analytics and predictive modeling systems.
  • Combining algorithms, analytics, data architectures and smart machines have the potential to revolutionize manufacturing quickly. General Electric’s Predix platform, IBM’s IoT Foundation and several other cloud-based IoT platforms are already making progress on transforming the vision of algorithm-based smart machine production strategies into a reality for manufacturers globally.
  • Gartner sees a new IT reality taking shape. Adaptive security, advanced systems, Internet of Things (IoT), mesh app & service architectures are the catalysts of the new nature of IT that Gartner is predicting.

A graphic illustrating the top 10 strategic trends is show below:

top ten technology trends 2016

Sources:

Gartner Identifies the Top 10 Strategic Technology Trends for 2016.  Press Release Announcement, October 6, 2015.

Video replay of the keynote: The Top 10 Strategic Technology Trends for 2016

Oct 3

2 Comments

Roundup Of Cloud Computing Forecasts And Market Estimates Q3 Update, 2015

  • cloud computing forecastThe global SaaS market is projected to grow from $49B in 2015 to $67B in 2018, attaining a CAGR of 8.14%.
  • Global spending on Infrastructure-as-a-Service (IaaS) is expected to reach $16.5B this year, an increase of 32.8% from 2014.
  • Cloud applications will account for 90% of worldwide mobile data traffic by 2019, compared to 81% at the end of last year.

These and other insights are from recent cloud computing forecasts and market estimates published by research and advisory consultancies including International Data Corporation (IDC), Forrester, Gartner, Ovum, Wikibon and others.

While the methodologies differ significantly, the findings from a recent Economist Intelligence Unit study provide the galvanizing thread across this diverse set of data.  The Economist found that the most mature enterprises are now turning to cloud strategies as a strategic platform for growing customer demand and expanding sales channels. The study found low-maturity or lagging cloud adopters focus on costs more than growth.

Key take-aways from the round-up are provided below:

cloud mobile data

  • 57% of IT architects and tech professionals are running apps on the Amazon Web Services (AWS) platform today.  Rightscale’s 2015 State of the Cloud Report found that AWS adoption is over 4X greater than Microsoft Azure IaaS and 5X that of Rackspace Public Cloud.  Rightscale found that AWS, Microsoft Azure IaaS, Azure PaaS, Rackspace Public Cloud and VMWare vCloud Air are the top five public cloud platforms used in enterprises today. Source: RightScale 2015 State Of The Cloud Report

Public Cloud Usage

paas market trends

PaaS Market Share

  • Goldman Sachs is forecasting the cloud infrastructure and platform market will grow at a 19.62% CAGR from 2015 to 2018, reaching $43B by 2018. Their recent market analysis also forecasts that the global market for cloud infrastructure and platforms will grow from $21B this year to $43B by the end of the forecast period.  Source:  How Big Can The Amazon Web Services Business Grow In The Future?

goldman sachs cloud computing

IaaS Market Window

cloud maturity

hosted private cloud computing adoption

  • 46% of surveyed firms in the European Union (EU) are using advanced cloud services relating to financial and accounting software applications, customer relationship management or to the use of computing power to run business applications. In 2014, almost twice as many firms used public cloud servers (12%) versus private cloud servers (7%). The following graphic illustrates the degree of dependence on cloud computing, by economic activity, EU-28, 2014. Source: Eurostat Statistics Explained.  Cloud computing – statistics on the use by enterprises.

degree of dependence

  • 64% of Small & Medium Businesses (SMBs) are already using cloud-based apps, with average adoption being 3 apps.  78% of businesses indicate that they are considering purchasing new solutions in the next 2-3 years creating the potential to move the average number of applications used to 7, with 88% consuming at least one service.  Source: The small business revolution: trends in SMB cloud adoption.

cool infographic

  • Worldwide spending on enterprise application software will grow 7.5% to reach $149.9B in 2015, increasing to more than $201B in 2019 with accelerating cloud adoption driving new software sales. Gartner’s analysis of enterprise software spending shows that alternative consumption models to traditional on-premises licenses are accounting for more than 50% of new software implementations; these include SaaS, hosted license, on-premises subscriptions and open source.  Gartner also predicts that by 2020, about a quarter of organizations in emerging regions will run their core CRM systems in the cloud, up from around 10 percent in 2012. Source: Gartner Says Modernization and Digital Transformation Projects Are Behind Growth in Enterprise Application Software Market.

Additional resources:

Apr 25

Five Ways Cloud Service Providers Are Making Manufacturers More Competitive

  • manufacturing-execution-systemsEnterprises are only realizing 35% of the total potential value of their cloud deployments according to a recent Bain & Company study.
  • Companies that moved development to IaaS and PaaS clouds from Amazon Web Services (AWS) reduced downtime by 72% and improved application availability by 3.9 hours per user per year.

These and other key take-aways are from the recent Bain & Company study, Tapping Cloud’s Full Potential. The full report PDF is available for download here (free, no opt-in). The following graphic from the report illustrates the currently realized value of cloud deployments in enterprises today according to Bain & Company.

Capturing only one-third of the value of their workloads

The researchers found several critical drivers of cloud value with one of the most important being the strengthening and clarifying of a product and service focus. The following graphic illustrates the critical drivers of cloud value.

getting the most value

Cloud Service Providers Give Manufacturers The Ability To Stay Competitive

Cloud-first strategies designed to accelerate and strengthen shifts in emerging business models is paying off according to Bain’s research results.

Manufacturers choosing to pursue a cloud-first strategy are focusing on evolving their business models, processes, systems and performance quickly to stay in step with customers’ needs. For many manufacturers, their customers’ pace is faster than internal IT organizations can anticipate and react to.  CSPs are helping to close that gap.

Here are five ways CSPs are making manufacturers more competitive:

  • Bringing industry expertise to the shop floor level. The best CSPs serving manufacturers today have management teams that have decades of combined manufacturing experience in specific industries. The CEO of a specialty tools manufacturer remarked that his company’s cloud strategy was more focused on accelerating plant floor performance first.  Working with a CSP that had expertise in their industry, this manufacturer was able to gain greater supply chain visibility and improve forecast accuracy, all with cloud-based apps.
  • Solving legacy and 3rd party system integration problems so that cloud-based ERP, CRM, supply chain management (SCM) systems can scale quickly. When a rust-belt based manufacturer of heating, ventilation and air conditioning (HVAC) systems had the opportunity to grow their business by expanding into build-to-order customized products, their CSP partner made it possible to integrate an entirely new product configurator and cloud-based ERP system module to manage quote-to-cash. Today, 30% of corporate-wide profits are from build-to-order selling strategies.
  • Knowledge-sharing supplier networks are becoming more attainable for manufacturers thanks to cloud technologies and CSPs. All manufacturers have strategic plans that include greater integration of their supplier networks, with many seeking to create knowledge-sharing networks. One of the best studies of how to create a knowledge-sharing network is from Dr. Jeffrey Dyer and Dr. Kentaro Nobeoka based on their intensive work with Toyota. Their study, Creating And Managing A High Performance Knowledge-Sharing Network: The Toyota Case is a great read. The following graphic from the study illustrates the evolution of a knowledge-sharing network. Manufacturers are relying on cloud platforms and CSPs to enable shifts in network structures and nurture change management to create self-sustaining systems.

Evolution of network

  • Two-tier ERP adoption in manufacturing is growing as CSPs master cloud ERP systems. CSPs are moving beyond providing basic services, specializing in cloud ERP, CRM, SCM, pricing, services and legacy system integration to keep pace with manufacturers’ demands. In one high tech manufacturer, their CSP partner orchestrated the procuring and launch of their cloud-based two-tier ERP system integrated to an SAP instance in their headquarters. Today they operate production centers in Asia, North America and Australia, all coordinated through the main SAP instance in the U.S. headquarters.
  • Making Service Level Agreements (SLAs) more relevant to manufacturing business models. Instead of just getting SLAs for uptime, security and system stability, manufacturers are getting advanced manufacturing intelligence dashboards that provide visibility to the plant or production center level.

Bottom Line:  Manufacturers are increasingly relying on CSPs’ cloud, industry and integration expertise to support the transition many are making to new business models and get greater than 35% of the value from their cloud investments.

Additional resources on Cloud ERP systems:

Nov 24

1 Comment

Roundup of Cloud Computing Forecasts Update, 2013

tunnel-of-speed-forecast-of-saas-cloud-computing-final-300x201Time-to-market, more flexible support for business strategies by IT, and faster response time to competitive conditions are combining to accelerate cloud computing adoption today.

Of the enterprises I’ve spoken with over the last several months including several Fortune 500 corporations to small businesses just beginning to evaluate cloud-based CRM and manufacturing systems, one message resonates from all of them: they need enterprise applications that keep pace with how fast they want to move on new business strategies. The latest round of cloud computing forecasts reflect the urgency enterprises have of making IT a foundation for strategic business growth.

The following is a summary of the latest cloud computing forecasts and market estimates:

McKinsey Analysis

  • IDC predicts public IT cloud services will reach $47.4B in 2013 and is expected to be more than $107B in 2017. Over the 2013–2017 forecast period, public IT cloud services will have a compound annual growth rate (CAGR) of 23.5%, five times that of the IT industry as a whole. The growing focus on cloud services as a business innovation platform will help to drive spending on public IT cloud services to new levels throughout the forecast period. By 2017, IDC expects public IT cloud services will drive 17% of IT product spending and nearly half of all growth across five technology categories: applications, system infrastructure software, platform as a service (PaaS), servers, and basic storage. Software as a service (SaaS) will remain the largest public IT cloud services category throughout the forecast, capturing 59.7% of revenues in 2017. The fastest growing categories will be PaaS and Infrastructure as a service (IaaS), with CAGRs of 29.7% and 27.2%, respectively.  Source: IDC Forecasts Worldwide Public IT Cloud Services Spending to Reach Nearly $108 Billion by 2017 as Focus Shifts from Savings to Innovation.

IDC Forecast Public IT Spending

  • Informatica’s presentation titled Enable Rapid Innovation with Informatica  and MicroStrategy for Hybrid IT by Darren Cunningham, Informatica Cloud  and Roger Nolan, Informatica Data Integration and Data Quality contains a useful series of cloud market overviews supported by 451 Research Gartner, Forrester and IDC data.  A summary of the statistics section is shown below:

Informatica

adoption graphic from KPMG

  • Gartner predicts that in the next five years enterprises will spend $921B on public cloud services, attaining a CAGR of 17% in the forecast period.  Darryl Carlton, Research Director, APAC with Gartner recently presented Cloud Computing 2014: Cloud Computing 2014: ready for real business?  His presentation is full of insightful analysis and market forecasts from Gartner, with specific focus on Asia-Pacific.
  • Visiongain predicts the Platform-as-a-Service (PaaS) submarket is valued at $1.9B in 2013 growing to $3.7B in 2018, attaining a 14.3% CAGR for the period 2013-2018.  The following figure shows the firm’s forecast.  Source: Visiongain on Slideshare.
  • Gartner predicts that in the next five years enterprises will spend $921B on public cloud services, attaining a CAGR of 17% in the forecast period.  Darryl Carlton, Research Director, APAC with Gartner recently presented Cloud Computing 2014: Cloud Computing 2014: ready for real business?  His presentation is full of insightful analysis and market forecasts from Gartner, with specific focus on Asia-Pacific.
  • Visiongain predicts the Platform-as-a-Service (PaaS) submarket is valued at $1.9B in 2013 growing to $3.7B in 2018, attaining a 14.3% CAGR for the period 2013-2018.  The following figure shows the firm’s forecast.  Source: Visiongain on Slideshare.

visiongain forecast

marketscape

  • Boston Consulting Group writes that SaaS is a $15B market, growing at three times that rate of traditional software.  BCG estimates that SaaS is 12% of global spending on IT applications.  BCG interviewed 80 CIOs and found they were willing to consider SaaS solutions for 35% to 60% of their application spending.  BCG also evaluated how the economics of cloud software adoption vary for on-premises versus SaaS customers.  The following two charts from the completed study. Source: (Free, opt-in required) Profiting from the Cloud: How to Master Software as a Service

Profiting_Cloud_Ex1_lg_tcm80-138310 BCG Categories

Profiting_Cloud_Ex2_lg_tcm80-138309 BCG Economics

Asia Pacific Cloud Market Growth

Sep 26

451 Research: Cloud-Enabling Technologies Revenue Will Reach $22.6B by 2016

cloud-computing-forecastDefining Cloud-Enabling Technologies (CET) as those that are installed, delivered and consumed on-premises, Market Monitor a service of 451 Research recently released their annual forecast of virtualization, security and automation and management revenue through 2016. The report, Market Monitor Cloud-Enabling Technologies has taken a bottoms-up approach in defining the three primary categories they include in their definition of cloud-enabling technologies.  Market Monitor’s methodology is explained in the report’s summary here.

Here are the key take-aways from this report:

  • Cloud-Enabling Technologies defined as virtualization, security and automation and management global revenues will grow from $10.6B in 2012 to $22.6B in 2016, attaining a 21% Compound Annual Growth Rate (CAGR).

  • Cloud-as-a-Service revenues will grow from $5.7B in 2012 to $19.5B in 2016, attaining a 36% CAGR.  Market Monitor defines Cloud-as-a-Service as externally delivered services, specifically 3rd party, that are hosted and pay-as-you-go with the cloud being relied on as a service delivery and consumption model. The following graphic provides a comparison of Cloud-as-a-Service and Cloud-Enabling Technologies revenue forecasts by year from 2012 through 2016.

  • 451 Research forecasts that the majority of CET revenues will be from virtualization-based systems and services (66%).  This segment is projected to attain a 16% CAGR in the forecast period and serve as the foundation of Phase I CET Adoption shown in the following graphic.  Phase 2 of CET Adoption is projected to be dominated by the need for tools to manage and control virtualized environments.  Phase 3 is projected to signal a shift to internal IT resources and internal IT cloud service providers.

« Older Entries