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
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
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
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.)
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
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
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
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
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
Public cloud platforms, business services, and applications (software-as-a-service [SaaS]) will grow at a 22% CAGR between 2015 and 2020, reaching $236B. Cloud platform revenues, whose 2020 total of $64B will be 45% higher than Forrester projected two years ago. The much larger cloud application market will also grow faster, with the 2020 total of $155B being 17% higher than their 2014 projection. Source: The Public Cloud Services Market Will Grow Rapidly To $236 Billion In 2020.
SaaS 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:
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.
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.
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.
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).
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.
This year’s survey attracted an eclectic base of respondents, with median revenues of $4M a year, with 133 companies reporting less than $5M, and 57 over $25M. Annual Contract Value (ACV) across all respondents is $21K, with 17% of respondents reporting ACVs over $100K. Please see pages 3 & 4 of the study for a description of the methodology. Key take-aways from the study include the following:
SaaS GAAP revenue growth is accelerating in 2014 and is projected to increase further in 2015 from 44% to 46%. Median revenue growth in 2014 for all survey respondents was 44%, with the aggregate projected growth for 2015 reaching 46%. When SaaS companies with less than $2.5M in revenues are excluded, median GAAP growth was 35% in 2014 and is expected to reach that same level in 2015.
SaaS companies with mixed customer strategies are growing at 57% a year. Excluding respondent companies with less than $2.5M in revenues, a mixed customer strategy dominates all others. Concentrating on enterprises and small & medium businesses (SMBs) both drove 33% revenue growth of respondent companies this year.
40% of SaaS companies are using Amazon Web Services (AWS) to deliver their apps today. AWS is projected to increase to 44% three years from now, with Microsoft Azure increasing from 3% today to 6% in 3 years.
41% of all SaaS companies surveyed rely primarily on field sales. Factoring out the companies with less than $2.5M in revenue, field sales accounts for 32%.
Field sales dominates as the most effective sales strategy when median deal sizes are $50K or more. In contrast, inside sales dominates $5K to $15K deal sizes, and the Internet dominates deal sizes less than $1K. The following graphic provides insights into the primary mode of sales by median initial contract size.
16% of new Average Contract Value (ACV) sales is from upsells, with the largest companies being the most effective at this selling strategy. One of the strongest catalysts of a SaaS companies’ growth is the ability to upsell customers to a higher ACV, generating significantly greater gross margin in the process. SaaS companies with revenues between $40M to $75M increase their ACV by 32% using upsells. Larger SaaS companies with over $75M in sales generate 28% additional ACV with upsell strategies.
The highest growth SaaS companies are relying on upsells to fuel higher ACV. There is a significant difference between the highest and lowest growth SaaS companies when it comes to upsell expertise and execution. The following graphic provides an overview by 2014 GAAP revenue category of percent of ACV attributable to upsells.
60% are driving revenues with “Try Before You Buy” strategies, with 30% generating the majority of their revenues using this approach. On contrast, only 30% of companies generate revenues and ACV from freemium.
Cloud computing is the strongest technology investment sector for the third year in a row.
Biopharmaceuticals and robotics are the two sectors that have gained the greatest venture capital confidence from 2014 to 2015.
U.S. technology hubs (Silicon Valley/San Francisco, New York, Boston, Los Angeles & Chicago), Israel and Canada dominate while confidence continues to fall in Brazil and other emerging markets.
These and other insights are from Deloitte’s 2015 Global Venture Capital Confidence Survey. You can download a copy here (PDF, no opt-in, 70 pp.). Deloitte has also produced and made available infographics of the key findings here (PDF, no opt-in, 4 pp.). Deloitte & Touche LLP and the National Venture Capital Association (NVCA) collaborated on the eleventh annual survey, which was conducted in May & June of this year. The study assesses investor confidence in the global venture capital environment, market factors shaping industries and investments on specific geographies and industry sectors. Please see page 4 of the study for a description of the methodology.
Key take-aways include the following:
Global venture capital investors are most confident in cloud computing (4.18). Investors were asked to rate their confidence level in each sector. Confidence levels were measured on a scale of 1 to 5, with 5 representing the most confidence. Basis points indicate year-over-year changes. Mobile (4.05), Internet of Things (3.95) and enterprise software (3.82) are the top four sectors venture capitalists are the most confident in today. Biopharmaceuticals are experiencing the greatest increase in venture capital confidence today. Please the the graphic below for additional details.
The United States (4.17), Israel (3.90) and Canada (3.60) dominate venture capital investors’ confidence while emerging markets including Brazil continues to fall. U.S. technology hubs including Silicon Valley/San Francisco, New York, Boston, Los Angeles and Chicago continue to retain and reinforce global venture capital investor confidence. The following graphic illustrates global venture capital investor’s confidence by nation.
Silicon Valley/San Francisco (4.28), New York (3.86) and Boston (3.77) are the top three U.S. metros global venture capital investors have the greatest confidence in. Los Angeles (3.43) and Chicago (3.22) are the fourth and fifth most trusted U.S. metros that venture capitalists have confidence in. $15.2B was invested by global venture capital investors in Silicon Valley/San Francisco according to the Deloitte study. The following graphic compares venture capitalist confidence levels and venture capital investment dollars received in 2015 through Q2.
Immigration reform (61%) and patent demand reform (36%) are the top two initiatives U.S.-based venture capitalists want addressed by policy leaders. For non-U.S. venture capitalists, tax incentives/credits (50%), infrastructure and job creation (both 41%) are the top two initiatives they would like to see public policy leaders take on in their home country.
Cloud computing continues across all sectors as the area global venture capital investors have the greatest confidence in. Confidence in biopharmaceuticals grew the fastest of any sector measured by the survey between 2014 and 2015, and this is the first year Deloitte is tracking investor confidence in the Internet of Things (IoT). A sector comparison is provided below.
Additional key take-aways from the study include the following:
The worldwide cloud computing market will grow at a 36% compound annual growth rate (CAGR) through 2016, reaching a market size of $19.5B by 2016.
38% of enterprises surveyed break out cloud computing budgets, while 60% include cloud-related spending as part of their enterprise-wide IT budgets. TheInfoPro asserts that cloud computing’s benefits of greater business orchestration and reduced time-to-market have led to a change in budgeting approaches.
The median enterprise cloud computing budget is $675,000 and the mean enterprise cloud computing budget is $8,234,438. The study found the largest enterprise cloud computing budget at $125M. The following graphic provides a distribution of cloud computing budgets by range.
Internal Private Cloud (35%), Cloud Provider Assessments/Strategy Planning (33%), Infrastructure-as-a-Service (IaaS) (31%) and Software-as-a-Service (30%) are the top four cloud computing-related projects enterprises are working on right now. Cloud Provider Assessments/Strategy Planning have seen the largest increase, attributable to more enterprises looking to better support strategic plans with more agile, efficient IT organizations.
83% of enterprises face significant roadblocks that hold them back from moving beyond cost reduction to faster time-to-market and better orchestration of their businesses. Respondents mentioned that politics, budget, time and staff are the main sources of roadblocks to getting more value out of their cloud computing investments. The majority of these roadblocks are not related to IT. They include lack of clarity regarding organization and budget (37%), resistance to change (16%) and lack of trust (visibility and reliability) (15%). The following graphic illustrates the enterprise cloud journey as defined in TheInfoPro Wave 5 Cloud Computing Study.
Consistent with many other enterprise cloud computing surveys, security is the biggest pain point and roadblock to cloud computing adoption (30%). Migration and integration of legacy and on-premise systems with cloud applications (18%) is second, and lack of internal process (18%) is third. The following graphic shows a rank ordering of cloud computing-related pain points.
One of the most common questions I get from students is where they can find free cloud computing and enterprise software research.
Few if any of my students work for companies who have subscriptions with the top analyst firms however. A small group of students are working on a start-up on the side and want to absorb as much market data as they can.
Many of my former students are also in IT management roles, and when they become interested in a specific cloud computing or enterprise topic over time, they write me and ask if I have any data on their subject of interest. I keep the following list updated from them too. To serve all these students I’ve been adding to the list shown below for a number of years. None of these companies are current or past clients and I hold no equity positions in any of them.
The requests are so prevalent in global competitive strategy courses I distribute this list at the beginning of the semester with the following disclaimers.
Many of the cloud computing and enterprise software companies pay to have white papers written and research done. Writing white papers and doing research for an enterprise software vendor client is a very lucrative business for many industry analyst firms. Ethical industry analysts will often insist that a disclaimer be included in the white paper and on the website stating that they and their firms were hired to write the paper or do the research and publish the report.
The reports are intellectual property of the firms publishing them. Enterprise software vendors often pay tens of thousands of dollars at a minimum for reprint rights and the right to provide them on their websites. I advise my students to seek out the copyright and quote policies of the research firm of interest if they plan on re-using the graphics in any published materials or in their blog posts. One for example, the Gartner Copyright and Quote Policy is shown here.
Pay attention to the methodologies used in each report and realize they change over time. This is especially the case with the Gartner Magic Quadrant and MarketScopes. Gartner has been very active this year in refining the Magic Quadrant methodology for example.
The following are the list of cloud computing and enterprise software vendor sites that offer free downloads of cloud computing and enterprise software research:
BMC Software – Many free reports from Gartner, Forrester, The 451 Group and other research firms covering advanced performance analytics (APA), cloud computing, IT Service Management and long-term technology trends. Link: http://www.bmc.com/industry-analysts/reports/
Computer Associates – An extensive collection of cloud computing and enterprise software research organized into the following categories: cloud; data management; energy and sustainability management; IT automation; IT security; IT service management; mainframe; project and portfolio management; service assurance and virtual organizations. CA requires opt-in on the latest research as they use this site as part of their lead generation strategy. Link: http://www.ca.com/us/collateral/industry-analyst-reports.aspx
Cisco Systems – Data Center and Virtualization; includes the latest Current Analysis, Forrester, Gartner, IDC, Lippis and Yankee Group research reports covering Big Data, blade servers, cloud computing, Hadoop, unified data centers and many other topics. Be sure to click across the Computing, Network, Orchestration/Automation, and Network Services tabs to find additional research: Link: http://www.cisco.com/en/US/solutions/ns340/ns857/ns156/ns1094/analyst_reports.html
Microsoft – Balancing the need to support their enterprise applications today and create demand for cloud-based initiatives now and in the future, Microsoft’s series of analyst reports reflect their evolving business model. Microsoft has licensed the latest research from Enterprise Strategy Group (ESDG), Forrester, Gartner, IDC, Ovum, Yankee Group and others listed on this site. Link: https://www.microsoft.com/en-us/news/itanalyst/
Oracle – The most comprehensive collection of industry analyst research online for any enterprise software vendor, Oracle has hundreds of research reports available for viewing under their reprint licenses for free, and also for download. The reports are organized into corporate, infrastructure, systems, services, solutions, industries, enterprise applications and regions. Link: http://www.oracle.com/us/corporate/analystreports/index.html
SAS – The most extensive and well-organized online collection of analyst research on analytics and business intelligence (BI) available, SAS makes research available from fifteen analyst firms across six industries on this area of their website. You can find the SAS Analyst Viewpoints section of their website here: http://www.sas.com/news/analysts/
Symantec – Provides downloadable analyst reports in the areas of risk and compliance, endpoint security and management, information and identity protection, messaging security, backup and archiving, storage and availability management, services and emerging trends. ESG, Info-Tech Research Group, Forrester, Gartner and IDC reports are on this page for download. Link: http://www.symantec.com/about/industryanalysts/analystreports.jsp
Teradata – Extensive collection of industry analysis and research organized into the sections of Active Data Warehousing, Active Enterprise Intelligence, Enterprise Data Warehousing, Teradata Analytical Ecosystem and Teradata Integration Analytics. The latest market frameworks from Gartner, Forrester, IDC and other research firms are available for download. Link: http://www.teradata.com/analyst-reports/
IDG Enterprise recently published Cloud Computing: Key Trends and Future Effects Report, showing how enterprises continue to struggle with security, integration and governance while finding immediate value in collaboration and customer relationship management (CRM) applications.
IDG’s methodology is based on interviews with 1,358 respondents, stratified across CIO, Computerworld, CSO, InfoWorld, ITworld, and Network World websites, in addition to respondents contacted via email, and LinkedIn forums. 58% of respondents are from executive IT roles; 17% from Mid-level IT; 14% from IT professionals; 8% from middle-level business management and 3% non-manager roles were represented in the study. High tech industries are the dominant industry represented with 18% of respondents, followed by financial services, government and manufacturing (each accounting for 10% of respondents). Education (9%) and telecommunications & utilities (6%) are the other industries represented.
Key take-aways from the survey include the following:
49% of executive-level management see cloud computing as transformational to their business strategies. 40% are currently having their IT staff investigate the potential of cloud computing contributing to their businesses, 5% don’t see cloud as an option and 6% aren’t sure.
Amazon (32%), Microsoft (23%) and Google (20%) are most often considered thought leaders in the field of cloud computing by respondents to the IDG survey.
Enabling business continuity (43%), greater flexibility to react to changing market conditions (40%), speed of deployment (39%) and improving customer support or services (38%) are the top four drivers of investment in cloud computing technology according to the survey. The following graphic provides an analysis of each driver by level of relative importance. This image is from Cloud Computing: Key Trends and Future Effects Report.
Accelerating business value by providing access to critical business data and applications (56%); serving as a catalyst of IT innovation (56%); enabling greater employee collaboration (54%); and enabling greater levels of IT agility (54%) are the top four benefits enterprises are gaining from cloud-based applications. The following graphic provides an analysis of how cloud computing technology is impacting each of the areas shown in respondent’s enterprises. This image is from Cloud Computing: Key Trends and Future Effects Report.
Financial Services and high tech companies are projected to have the largest cloud computing budgets based on the survey. Enterprises are expected to invest an average of $1.5M in cloud-based services during the 2013 – 2014 timeframe. IDG projects that large companies will spend $2.8M relative to small and medium-sized businesses investing $486K on average.
Chief Financial Officers (CFOs) (35%) are the hardest to convince regarding the value of cloud computing, followed by the board of directors or equivalent (24%), the CEO (24%), and the Chief Operating Officer (COO) (16%) third. Chief Marketing Officers (CMO) are the easiest to convince, with just 6% of respondents mentioning this group of executives being a challenge to convince regarding the value of cloud computing.
The percentage of organizational IT budgets allocated to SaaS increased from 8% in 2012 to 13% in 2013 according to the last two IDG Enterprise Cloud Computing surveys. Infrastructure-as-a-Service (IaaS) increased to 10% of overall IT budgets, up from 7% in 2012. In aggregate, 44% of IT budgets are spent on cloud computing today, increasing to 51% by 2015 in the base of enterprises interviewed for the study.
Enterprises continue to migrate applications to the cloud that increase collaboration and enhance customer relationships first. Collaboration and conferencing solutions (38%), e-mail and messaging (35%) and Customer Relationship Management (CRM)/Sales Force Automation (SFA) (27%) are the top three applications being migrated to the cloud in the enterprises surveyed. The following graphic shows which applications are moving to the cloud today and the plans for migrating applications in the next 12 months, and over the next 1 to 3 years. This image is from Cloud Computing: Key Trends and Future Effects Report.
59% of enterprises are still identifying which IT operations are the best candidates for cloud hosting. 33% have identified all IT operations that they are comfortable having hosted in the cloud, given the current security of cloud infrastructure and application design.
The three most important factors in selecting a SaaS application provider include the ability to configure and customize the cloud application to meet specific business needs (40%), consistent cloud application performance and availability (38%) and security certification and practices of the SaaS provider (34%).
61% of enterprises have at least one application that is cloud-based in their organizations today. This increased from 57% in 2012. 24% of enterprises are planning to implement cloud applications in the next 12 months and 15% are planning to between 1 to three years from now.
In enterprises with less than 1,000 employees, CEOs (52%) are the most influential role in cloud purchasing, followed by the CIO (39%) and IT/networking staff (33%). In enterprises over 1,000 employees, the CIO (60%), followed by the IT/networking management (47%) and CTO or IT network architect (45%) are the three most influential roles in the cloud purchasing process.
42% of cloud-based projects are eventually brought back in-house, with security concerns (65%), technical/oversight problems (64%), and the need for standardization (on one platform) (48%) being the top three reasons why.
The top three challenges to implementing a successful cloud strategy in enterprise vary significantly between IT and line-of-business (LOB). For IT, concerns regarding security (66%), integration stability and reliability (47%) and ability of cloud computing solutions to meet enterprise/industry standards (35%) challenge adoption. The following table compares the perceptions of IT and line-of-business leaders. This image is from Cloud Computing: Key Trends and Future Effects Report.
North Bridge Venture Partners and GigaOM Research released the results of their third annual Future Of Cloud Computing Survey today, providing a glimpse into cloud computing adoption trends, inhibitors and drivers of long-term growth.
This year’s survey included 855 respondents selected across business users, IT decision makers and cloud platform and application vendors. North Bridge and GigaOM Research report that a third of respondents are C-level executives in their organizations.
You can view a copy of the report results here from SlideShare.
The following are key take-aways from the report:
Cloud adoption continued to rise in 2013, with 75% of those surveyed reporting the use of some sort of cloud platform – up from 67% last year. That growth is consistent with forecasts from GigaOM Research, which expects the total worldwide addressable market for cloud computing to reach $158.8B by 2014, an increase of 126.5% from 2011. The survey also shows significant growth is yet to come in SaaS adoption for business systems and IT management.
63% of those surveyed report Software-as-a-Service (SaaS) is in use in their companies, growing 15% over 2012. 45% are using Infrastructure-as-a-Service (IaaS) today, attaining a growth of 29% from last year. Platform-as-a-Service (PaaS) is expected to grow the fastest over the next five years, with 72% of respondents saying they expect to use PaaS in their organizations.
The survey results also included cloud segments and overall growth analysis forecasts from 451 Research Market Monitor Report. The graphic showing CAGRs by IaaS, PaaS and SaaS is shown below, with comparisons of 2012 results and 2016 market forecasts.
52% of organizations are using cloud-based applications to advance business priorities, compared with 36% that use applications that advance IT initiatives.
CRM, marketing (including marketing automation) social business & collaboration and file sharing cloud-based applications are in use by more than 50% of all organizations in the sample.
North Bridge Venture Partners reports that cloud investments by venture capitalists totaled $1.6B in 2010, increasing to $2.4B in 2011. Investments in 2012 dropped to $1.8B and through May, 2013, venture-based investments in cloud computing application and services providers totaled $281M. Subscription fee-based business models dominate with 77% of cloud vendors relying on this strategy.
Gaining greater business agility (54.5%), scalability (54.3%) and cost (48%) are the three main drivers of cloud adoption today according to the survey results. Mobility was mentioned by 25% of respondents as a major driver for adopting cloud applications and platforms, behind cost.
Security concerns (46%), vendor lock-in (35%), interoperability (27%), concerns over reliability (22.3%) and complexity (21%) are the top inhibitors to cloud adoption. Regulatory compliance (30%) and privacy (26%) are he next most frequently mentioned inhibitors to cloud computing adoption according to the survey.
39% expect to increase training, and 17% expect to hire outside resources as a result of increased cloud adoption.
Amazon (14.3%), Microsoft (10.96%) and Google (7.88%) are the three most used cloud platforms by the organizations who responded to the survey.
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.
Last year, four out of every ten CRM systems sold were SaaS-based, and the trend is accelerating.
In the recent Gartner report Market Share Analysis: Customer Relationship Management Software, Worldwide, 2012 published April 18, 2013 the authors provide insights into why the worldwide CRM market experienced 12% growth in 2012, three times the average of all enterprise software categories. Gartner cites demand they are seeing from their enterprise clients for CRM systems that can help acquire customers, analyze and act on customer behaviors, and increase all-channel management performance. Big data inquiries are also increasing in CRM, driven by the interest enterprise clients have in getting more value from social network data and interactions.
Key take-aways from the report include the following:
The CRM worldwide market grew from $16B to $18B attaining a 12.5% growth rate from 2011 to 2012.
80% of all CRM software in 2012 was sold in North America and Western Europe. North America CRM sales grew 16.6% from 2011 to 2012. The highest growth regions of CRM sales between 2011 to 2012 included Greater China (26.9%) and Latin America (24.3%).
Salesforce.com is the world’s leading CRM software vendor with 14% market share in 2012 ($2.5B in sales), surpassing SAP (12.9%, $2.3B in sales), Oracle (11.1%, 2.01B in sales), Microsoft (6.3%, $1.1B in sales), IBM (3.6%, $649M in sales) and all others. The top ten vendors worldwide generated $10.9B in sales alone in 2012.
Worldwide CRM software spending by subsegment shows Customer Service and Support leading all categories with 36.8% of all spending in 2012 ($6.6B), followed by CRM Sales (26.3%, $4.7B), Marketing (includes marketing automation) (20%, $3.6B) and e-commerce (16.9%, $3B). The following chart shows the distribution of revenue by category:
40% of all CRM software sold in 2012 worldwide was SaaS-based. Gartner states that they are seeing their enterprise clients seek out easier-to-deploy CRM systems compared to on-premise alternatives. The report states that many enterprises are now replacing their legacy systems with SaaS-based CRM systems as well. Enterprise clients also report that SaaS-based CRM systems are delivering net-new applications that deliver complementary functionality not possible with legacy and previous-generation CRM platforms.
Ten fastest growing CRM vendors as measured in revenue Annual Growth Rate (AGR) in 2012 include Zoho (81.2%), Hybris (78.6%), Teradata (70.4%), Bazaarvoice (56.2%), Marketo (54.3%), Kana (44.2%), Demandware (43.9%), IBM (39.4%), Technology One (37.1%) and Neolane (36%).
Communications, media and IT services were the biggest spenders on CRM in 2012 due to their call center requirements. Manufacturing including Consumer Packaged Goods (CPG) was second, and banking & securities were third.