Translating time into dollars matters far more to many CEOs I’ve spoken with versus what platform their applications are running on.
What matters most is getting all they can out of every hour their business is operating. They are all focused on getting beyond the constraints that held their growth back in the past – everyone wants a growth accelerator today. For manufacturers especially, this includes applications with depth of functionality that can be quickly deployed regionally, and in more cases than ever, globally as well. Line-of-business leaders want applications that make an immediate impact on their entire value chain.
Just having a cloud strategy is not enough for any enterprise software company anymore. Owning the pain prospects and customers go through daily to get work done is all that matters. Every application and platform component needs to contribute to the goal of reducing customer’s challenges of doing business. In studying companies who excel at this, I’ve often used stock market indices to see how they compare to market averages and their competitors.
Charting Progress Using the Cloud Computing Stock Index
Creating and using stock indices to track the performance of specific industry and market sectors is a great way to cut through hype. I’ve been using these for over a decade to track industries and markets of interest, and have built the Cloud Computing Stock Index. You can download the latest summary here. If there are companies you think need to be included please let me know. I deliberately left out IBM, Google, Microsoft, Oracle and SAP as a prerequisite is that a firm derive at least 50% or greater revenue from cloud-based applications and services.
The graph below shows all-time performance of the Cloud Computing Index relative to Microsoft, Salesforce.com. NetSuite and Workday.
Key Take Aways
- NetSuite posted a 62.6% increase in stock performance, followed by Workday (+20.57%), Salesforce (+4.23%) and the Cloud Computing Index (+4%) with Microsoft seeing a 8.18% decline in share price during the period.
- NetSuite, Salesforce and Workday continue to gain new customers in the mid-tier and enterprise areas of the market based on depth of functionality, rapid application development (RAD), and increasing success creating alliances with system integration, selling and technology partners.
- Workday’s expertise in Human Capital Management is accentuated by the depth of analytics and trend analysis and expertise in cloud-based integrations. Their depth of functional expertise in these areas is leading to rapid growth.
- NetSuite is succeeding with its two-tier ERP selling strategy against long-standing ERP vendors including Oracle, SAP and others.
Bottom line: Salesforce, NetSuite and Workday show how developing cloud-based applications designed for ease of use and speed of deployment are winning new customers in the enterprise – and driving up their stock price as a result.
Specifics on the Cloud Computing Stock Index
I used The Cloud Times 100 as the basis of the index, and included the 23 following companies, all of which are publically traded. These include:
- Akamai Technologies.
- Amazon.com, Inc.
- ARM Holdings plc
- CA, Inc.
- Cisco Systems, Inc.
- Citrix Systems, Inc.
- EMC Corporation
- F5 Networks, Inc.
- Fusion-IO, Inc.
- Juniper Networks, Inc.
- Keynote Systems, Inc.
- NetSuite Inc
- Qualys Inc
- Rackspace Hosting, Inc.
- Red Hat, Inc.
- Riverbed Technology…
- Salesforce.com, inc.
- Symantec Corporation
- Trend Micro Incorporated
- VMware, Inc.
- Websense Inc.
- Workday Inc
Note: I do not hold equity positions or work for any of the companies mentioned in this blog post or included in the Cloud Computing Stock Index.
All enterprises, regardless of what they produce or the services they deliver, are really information businesses.
The accuracy, speed and precision of IT systems means the difference between winning or losing customers, keeping supply chains profitable, and solidly translating new concepts into revenue-producing products and services. The world’s best-run services businesses have customer-driven IT as part of their DNA; it is very much who these companies are internally.
In the recently published Garter report CEO and Senior Executive Survey 2013: 21 Top Companies Admired for Competitive IT completed between October and December, 2012, which was part of the 2013 CEO and Senior Business Executive Survey, C-level respondents were asked to name the companies they most admired in terms of their ability to apply IT-related business capabilities for competitive advantage. Respondents were also asked to limit their responses only to their own and related industries.
391 respondents participated in the survey with 147 being CEOs, 149, CFOs; 49, COOs; and 46 being board members including Chairman of the board and president. Geographic distribution included 152 respondents from North America; 124 from Europe; 78 from Asia/Pacific; 20 from Brazil; 12 from South Africa; and 5 from the Middle East with minimum company size being $250M in annual sales or above.
The following is the list of the world’s most admired companies using IT for competitive advantage.
Most Admired Companies Making IT A Competitive Advantage
Hospital Corporation of America
JP Morgan Chase
Proctor & Gamble
- Customer-driven IT is the single most admired trait of all 21 companies in the list. Associated with this attribute is the proven ability of these enterprises to manage complex e-commerce systems & platforms, support multichannel management, in addition to continually show the ability to innovate quickly.
- Enterprises need to consider how the business successes their investments in IT are enabling can be used for branding and recruitment. Providing benchmark performance data and stories of how IT helped create entirely new markets and solve customer problems needs to be used for recruiting. Many of the 21 companies mentioned are doing this, using success stories as a catalyst for driving recruitment efforts for analytics, cloud computing and systems integration experts.
- Don’t underestimate the disruptive power of cloud computing and mobility to completely re-order enterprise systems quickly. Gartner mentions that there are enterprises whose IT organizations would have made the list had they not slowed down. While not directly stated, Gartner warns IT departments to not become complacent over time. From personal experience working in IT departments however, it is clear that complacency is a leading career hazard. It’s imperative for CIOs to keep challenging their organizations to stay intensely focused on new developments, seeking out how they can be used to strengthen business strategies.
- Four of the top five factors that most impressed respondents about the admired companies are customer-related. Customer-facing IT (15%); followed by an integrated/standardized/unified IT organization and process framework (13%); exceptional use of CRM (11%); customer-centered innovation (9%); and product design & offerings (9%) are the most mentioned attributes of the highest-performing companies. Multiple responses were allowed to this area of the survey. The following graphic provides an analysis of which factors most impressed the C-level executives who were respondents to the survey.
The latest round of cloud computing and enterprise software forecasts reflect the growing influence of analytics, legacy systems integration, mobility and security on IT buyer’s decisions.
Bain & Company and Gartner have moved beyond aggregate forecasts, and are beginning to forecast by cloud and SaaS adoption stage. SAP is using the Bain adoption model in their vertical market presentations today.
Despite the predictions of the demise of enterprise software, forecasts and sales cycles I’ve been involved with indicate market growth. Mobility and cloud computing are the catalysts of rejuvenation in many enterprise application areas, and are accelerating sales cycles. Presented in this roundup are market sizes, forecasts and compound annual growth rates (CAGRS) for ten enterprise software segments.
Key take-aways from the latest cloud computing and enterprise software forecasts are provided below:
- Public and private cloud computing will be strong catalysts of server growth through 2015. IDC reports that $5.2B in worldwide server revenue was generated in 2011 or 885,000 units sold. IDC is forecasting a $9.4B global market by 2015, resulting in 1.8 million servers sold. Source: IDC Worldwide Enterprise Server Cloud Computing 2011–2015 http://www.idc.com/getdoc.jsp?containerId=228916
- IDC reports that enterprise cloud application revenues reached $22.9B in 2011 and is projected reach $67.3B by 2016, attaining a CAGR of 24%. IDC also predicts that by 2106, $1 of every $5 will be spent on cloud-based software and infrastructure. Report, Worldwide SaaS and Cloud Software 2012–2016 Forecast and 2011 Vendor Shares, Link: http://www.idc.com/getdoc.jsp?containerId=236184
- 11% of companies are transformational, early adopters of cloud computing, attaining 44% adoption (as defined by % of MIPS) in 2010, growing to 49% in 2013. This same segment will reduce their reliance on traditional, on-premise software from 34% to 30% in the same period according to Bain & Company’s cloud computing survey results shown below. SAP is using this adopter-based model in their vertical market presentations, an example of which is shown here.
- The three most popular net-new SaaS solutions deployed are CRM (49%), Enterprise Content Management (ECM) (37%) and Digital Content Creation (35%). The three most-replaced on-premise applications are Supply Chain Management (SCM) (35%), Web Conferencing, teaming platforms and social software suites (34%) and Project & Portfolio Management (PPM (33%). The following graphic shows the full distribution of responses. Source: User Survey Analysis: Using Cloud Services for Mission-Critical Applications Published: 28 September 2012
- In 2011, the worldwide enterprise application software market generated $115.1B in revenue, and is projected to grow to $157.6B by 2016, attaining a 6.5% CAGR in the forecast period. Gartner reports that 38% of worldwide enterprise software revenue is from maintenance and technical support; 17% from subscription payments; and 56% from ongoing revenue including new purchases. An analysis of the ten enterprise software markets and their relative size and growth are shown in the figure below along with a table showing relative rates of growth from 2011 to 2016. Source: Forecast: Enterprise Software Markets, Worldwide, 2011-2016, 3Q12 Update Published: 12 September 2012 ID:G00234766