Forrester’s Forrsights Software Survey, Q4 2010 has quantified for the first time how enterprise demand is shifting from traditional licensing models to subscriptions and other licensing models, such as financing and license leasing. However, the shift to subscriptions for business-applications-as-a-service is the major driver of this change. Traditional enterprise licenses are slowly decreasing, and Forrester predicts that subscriptions for SaaS applications will drive alternative license spending up to 29% — as early as 2011. This demand-side change goes beyond front-office applications like CRM. In 2011 and 2012, enterprises will opt for “as-a-service” subscriptions for more back-office applications, such as ERP, instead of licensed and on-premise installations. Detailed data cuts by company size and region are available to clients from our Forrsights service.
Base: 622 (2007), 1,026 (2008), 537 (2009), and 930 (2010) software decision-makers predicting license spending for the coming year Source: Enterprise And SMB Software Survey, North America And Europe, Q3 2007; Enterprise And SMB Software Survey, North America And Europe, Q4 2008; Enterprise And SMB Software Survey, North America And Europe, Q4 2009; Forrsights Software Survey, Q4 2010
What does this means for existing independent software vendors (ISVs) and infrastructure vendors?
I found the RSA Conference completely exhausting, but also intellectually invigorating. (Shameless plug: you can see me speaking on an RSA Keynote panel about the future of authentication here.) I came away with a much clearer picture of the trends shaping the future evolution of our market.
The first one I want to talk about is the reemergence of the endpoint as a key element of security architecture.
As our IT environments have evolved, we’ve moved a lot of our security controls into the network and into applications. While these technologies and services will remain relevant and investment in them will continue to increase, I predict a radical swing back to the endpoint as a focus for security.
I see this driven by four major market trends:
Virtualization. With virtualization, security functions that existed on the network (firewall, IPS, WAF, etc.) are moving on the host, integrating through APIs like vShield to capture inter-VM traffic. Moreover, it makes no sense to copy the model we have today of procuring a different function from different vendors and putting multiple agents onto servers. Instead, we will inexorably, and quickly, follow what happened at the desktop: vendors will consolidate functions into single-agent "suites" with unified management and reporting.
Let me start off this post on a downbeat note: Improving sustainability is not a high priority for companies, according to data from the recent Forrester survey of business decision-makers. The survey, part of Forrester's Forrsights research, was fielded to 2,600 executives with budget authority at companies in Europe, North America, and Asia during the fourth quarter of 2010.
When we asked these corporate decision-makers about their company's top business priorities, revenue growth was #1, customer retention #2, and cost-cutting #3 (see Figure 1 below). Improving the corporate sustainability posture? Oops, it's down at #10, with just 10% of respondents indicating that sustainability is one of their firm's high priorities for 2011. When we cut those numbers by industry grouping, utilities/telecoms and public sector/healthcare are highest, with 15% prioritizing sustainability, compared with a low of just 7% in financial services.
Now, I'd like to contrast that eye-opening data with a much more optimistic set of figures from our recent research about the growth of sustainability consulting services. My colleague Daniel Krauss and I have worked with many of the large consultancies over the past few years and seen their sustainability practices grow from practically nothing to very substantial businesses.
Among 21 consulting firms that we surveyed late last year, 17 have a dedicated sustainability practice, and five of those count more than 1,000 practitioners (see Figure 2).
Cisco watchers have been wondering whether the company’s realignment is to take advantage of much-talked about market transitions or to hunker down for battle with the current generation of formidable competitors (like HP, Huawei, Juniper). Some might see this week’s appointment of Gary Moore as COO as an indication that the business has lacked operational excellence, but that’s easy to reject. I remember sitting down with Randy Pond nearly 10 years ago (he was EVP operations -- the de facto COO for Cisco at the time) and talking about operational priorities required to profitably take advantage of market transformations and build world class capabilities across Cisco’s complex environment. At the time, Cisco was a complex combination of acquisitions (like Crescendo where Randy had been VP Operations) and contract manufacturing around the globe. Operational excellence has always a hallmark at Cisco; that’s not the central issue facing the company. Instead, it is facing a fundamental transition to “incumbent” status. Cisco is now the object of every competitor’s attention, and high-growth markets that are large enough to make a substantive impact are increasingly hard to find.
Yesterday we received the very sad news that our great friend and wonderful colleague Julie Giera passed away earlier this week. Although we were well aware of the fact that Julie had been battling breast cancer for several years, I still find it difficult to comprehend the news – in particular since we had lost another great analyst colleague – Andrew Parker – only a few months earlier.
Julie was one of the great stars and a leading voice of Giga Information Group – the analyst firm later to be acquired by Forrester in 2003. She was instrumental in establishing and extending the Giga brand and influence across a wide community of different stakeholders, including many CIOs as well as the senior executives of many tech vendors. She later continued that fame with Forrester where she quickly became a thought leader around the broader IT services market change issues. Julie was one of the founding members of the vendor strategy research team and many of the key reports that she authored over the last years are still relevant today and represent key highlights of our team’s research portfolio. A lot of her great research can still be viewed and downloaded online, so check out the following:
This was quicker than expected. As stated in my last report on the enterprise carbon and energy management (ECEM) software market, we expected that Oracle, among some other players, will catch up on the ECEM market opportunity as it materializes. We projected a period of hypergrowth over the next three years, taking the ECEM software market from an estimated $316 million in 2011 to $903 million in 2013. You'll find our market definitions for carbon and energy management software and overview of the vendor landscape here.
Oracle announced on Friday its acquisition of Ndevr's Greenhouse Gas (GHG) Accounting Software with the intent to expand its current portfolio of sustainability solutions and offer improved capabilities to monitor, analyze, and report energy consumption and related emissions. Australia-based Ndevr was founded in 1998 as a JD Edwards partner, has been a certified Oracle partner for 10 years, and employs today approximately 80 consultants.
The beginning of a new year is always packed with planning sessions to recap the past year, reshuffle priorities, validate progress of corporate and product/service strategies, and come up with a road map to convert thoughts and concepts into actions.
We analysts in Forrester’s vendor strategy practice are regularly involved in these planning and strategy sessions, to act as an independent and objective mirror for higher and mid-level management layers at tech vendors and service companies. Together we map out and identify the implications of macro business and technology trends. In one of those sessions that I was recently invited to, the focus was on future business models in the tech industry. We can offer instant feedback if a vendor’s direction is in line with our market observations and advise them to refine their approaches to be best positioned for the future.
During 2011, I am going to leverage some of the information I have gathered over the past year and display in a couple of slides some key data points on an aggregated basis of vendor and market criteria, helping companies map themselves against industry peers and the market opportunity. I hope you will find them useful as either good discussion starters internally or for planning and validation purposes. I am planning to update these slides on a regular basis to present a fresh and condensed view on key supply- and demand-side indicators.
The first set, which I am offering today, is two slides (see below) targeted toward leaders in charge of their companies' efforts for sustainability consulting services business or evaluating if their companies should move into this market opportunity. Figure 1 contains key vendor criteria such as organizational setup and services mix, while Figure 2 summarizes our market estimates and forecast for 2010 and 2011.