Cloud computing has arrived on the market in a big way, with virtually every tech vendor, regardless of size, geography, or solution, vying for a cloud position. But in the race to the cloud, many tech vendors have forgotten that ever-critical customer relationship vehicle: the channel. Or, if they haven’t forgotten it, they’ve coaxed channel partners with the pat mantra, “Do more consulting” (“… while we take care of delivery”). To get channel partners’ perspectives on how the technology value chain is changing in an as-a-service delivery model world, Forrester recently teamed with Outsource Channel Executives (OCE) to survey executives of channel companies across 39 countries, from the local level to the global.
The results of the survey are in, and they tell quite a story: that there is a good deal of angst and confusion among channel partners over their role/value in the cloud services technology value chain; that they aren’t sitting on their hands, waiting for tech vendors to tell them what to do; and that they need a lot of help in transforming their marketing and business models in this new era of cloud computing.
Now, not all channel companies are going to be able to make that transformation (nor should they – after all, cloud computing will never represent 100% of the technology market). But there are going to be many that will try and fail, ultimately resulting in a 12%-15% channel company washout. So think about it – supply (the number of channel companies) goes down; demand (for channel partner assets) remains high. It’s those tech vendors that amp their channel game to enable their partners’ cloud aspirations that are going to come away as the new “channel chiefs.”
This past weekend, my wife wanted desperately to attend Jon Stewart’s “Rally to Restore Sanity and/or Fear,” to support the message of civility and moderation. An injured foot and problems with travel logistics kept her from attending, but we watched it on the Comedy Central network. It was, of course, a counterpoint to the “Restoring Honor” rally that Fox News’ Glen Beck held in August. However, there were two striking commonalities about the two rallies:
First, the ability of cable program show hosts to gather hundreds of thousands of people (estimates seem to be around 100,000 for the Beck rally and 200,000 for the Stewart rally) to travel to Washington for a rally. We’re not talking about rallies organized by a major political leader like President Obama or a media giant like Walter Cronkite with a TV audience of tens of millions of people. Instead, the TV personalities who hosted these events have cable audiences that on a good night may reach 3 to 5 million people.
Second, the absence of attention to substantive economic issues facing this country, such as persistent high unemployment, economic recovery strategies, education and competitiveness, global warming, or budget deficits and priorities. Instead, the rallies focused on culture, tone, and attitudes, with the Beck rally resembling a college homecoming event where the returning alumni complain about how the place has gone downhill since they left, while current seniors crack jokes and make fun of the old geezers wandering around the campus.
Sourcing executives are winding down 2010 and gearing up for 2011. Most of the sourcing executives we have spoken with recently are bullish about the year ahead, despite some looming uncertainty about the economy, particularly in Europe. Spend is opening up again, and buyers are investing in more strategic initiatives. But sourcing groups still struggle to balance low cost and high value.
Many of the sourcing groups currently working with Forrester are asking about cloud as a viable alternative to traditional deployment models. Cloud promises rapid deployment, potentially significant cost savings, and variable pricing in line with how buyers want to pay in the current economy. And cloud offerings continue to mature in areas where buyers previously had concerns (vendor viability, security, architecture, location of data). Cloud adoption is already over 25% in North America, and continues to grow in Europe (led by UK, but also growing in areas like Germany, France, the Nordics).
Most sourcing strategies around cloud consist of five key phases:
1. Understanding the evolving supplier landscape and market maturity across cloud offerings.
2. Educating business (and potentially IT) about the advantages and disadvantages of cloud.
3. Building decision frameworks to support cloud purchases.
4. Creating a contract negotiation and pricing strategy for cloud; building contract templates.
5. Working with business, vendor management, and IT to routinely evaluate ROI and decide whether to renew relationships or find alternatives (potentially cloud, hosted, on-premise, or hybrid).
My research team at Forrester helps tech vendor strategists anticipate and navigate in rapidly changing market environments. We can't take a siloed view on specific product and service categories, but rather broaden our perspective in order to trace cross-market dynamics around key issues such as sustainability, globalization, collaboration, mobility, and cloud. This puts tech vendors in better positions to act on emerging demand signals, competitive scenarios, and opportunities to select best-fit partner, channel, or acquisition targets.
The market for dedicated solutions and services that help companies manage their energy, emissions, and overall sustainability strategy is still nascent. The evolution of sustainability at larger software and IT service vendors started with their internal efforts, which is an important factor framing their portfolio and go-to-market strategies.
As a result, there are still a significant number of vendors that are converting their internal capabilities to analyze, define, and implement sustainability into customer-facing software and/or service portfolios. These portfolios of services go well beyond green IT, increasingly focused to serve clients wrestling with hot topics such as enterprise carbon and energy management (ECEM), green supply chain, and sustainability performance management.
My colleague, Daniel Krauss, and I have recently completed a comprehensive round of interviews and analysis with many different players offering sustainability consulting services, including software, IT and business services, hardware, and even industrial companies (see Figure 1).
Technology innovation and business disruption are changing the software market today. Cloud computing is blurring the line between applications and services, and smart solutions are combining hardware with software into new, purpose-engineered solutions. We are happy to announce that we have launched our Forrester Forrsights Software Survey, Q4 2010, to predict and quantify the future of the software market and help IT vendors to tap into the insights from approximately 2,500 IT decision-makers across North America and Western Europe.
The survey will provide insights on the strategic direction and spending plans of enterprises from very small businesses to global enterprises, segmented by industry and country. In comparison with last year’s survey, we significantly boosted the sample size this year for the energy (oil and gas, utilities, and mining) and healthcare industries; we’ll be able to provide an in-depth analysis for these industries along with retail, financial services, high tech, and other industries.
Key themes for this year’s software survey include the following topics:
Cloud computing. Besides a 360-degree overview on current and future adoption rates of software-as-a-service (SaaS) for different software applications, we are going much deeper this year and have asked IT decision-makers about their cloud strategy for application replacement as well as for different data and transaction types.
Integrated information technology. Purpose-engineered solutions combining hardware with software are promising higher performance and faster implementation times. But do IT users really buy into single-vendor strategies?
Like thousands of Oracle clients and a dozen or so Forrester analysts, I was at Oracle OpenWorld last week. One of the big news items was the announcement of the availability of Fusion Applications. The creation of these new applications has been a massive effort, involving many of Oracle’s top software designers and developers working for over five years. My preliminary opinion, along with my colleagues, is that Fusion apps do have some useful new features and a better user interface than prior Oracle products, as well as providing a more credible SaaS option than Oracle's prior On Demand offerings.
However, there seems to me to be a lack of clarity as to how Fusion apps fit in the evolution of the Oracle family of apps. To its credit, Oracle has stated that it is going to be responsive to clients, not forcing them to convert to Fusion nor make staying on existing apps unattractive by not supporting and enhancing those apps. Instead, it wants to make Fusion apps so attractive that clients will want to adopt them, either (rarely) as a whole suite or (more likely) as step-by-step replacement or additions to existing app products. Still, that leaves unclear what Oracle sees as the endgame for Fusion vs. its other app products.
As I see it, there are four scenarios for how Fusion apps will relate over time to the existing portfolio of apps that Oracle has acquired and continues to support through its Applications Unlimited position:
Fusion apps take over and replace the other applications over time.
Fusion apps become yet another app product line, which co-exists with the other apps.
Fusion app features and functions percolate into and are absorbed into the other apps, which persist indefinitely.
Fusion apps provide new categories of applications, which get brought into the other app families as add-ons.
Enterprises are increasingly turning toward cloud deployment models (including SaaS, PaaS, IaaS, etc.), attracted by promises of fast deployment, lower upfront costs, and greater elasticity in pricing and consumption models. This trend has been further fueled by resource constraints (capital and people); cloud solution maturity (sophisticated functionality, customization, and integration); and “empowered” workers (seeking DIY technologies to drive business results). However, the growing use of cloud technologies creates new challenges and questions in areas like TCO, security, support, and vendor management.
Enter cloud sourcing. Cloud sourcing typically refers to a model where third parties play a broker and consulting role in helping firms leverage the cloud strategically across business applications.
Cloud sourcing provides alternatives to traditional outsourcing, packaged application implementation, and application development. Cloud sourcing spans applications, utilities, and services. Cloud sourcing strategies include both the use of cloud applications such as salesforce.com and Workday to deliver business applications as well as the sourcing of complete managed processes via cloud applications plus associated services, such as offerings from Capgemini and Wipro.
Forrester will be part of an upcoming panel at Global Sourcing Forum in New York City on October 13 that discusses key elements of and considerations for cloud sourcing, including:
• How strategic sourcing decisions can include cloud-based solutions.
• What SaaS, Paas, IaaS, and BPO mean in the cloud context.
• Practical lessons and best practices for adopting cloud solutions.
• Challenges with cloud sourcing and how to overcome them.
• Emerging providers and solutions for cloud sourcing.
On September 15th between 11am-12pm EDT Forrester held an interactive TweetJam on the future of cloud computing including Forrester analysts Jennifer Belissent, Mike Cansfield, Pascal Matzke, Stefan Ried, Peter O’Neill , myself and many other experts and interested participants. Using the hashtag #cloudjam (use this tag to search for the results in Twitter), we asked a variety of questions.
We had a great turnout, with more than 400 tweets (at last count) from over 40 unique Tweeter’s. A high level overview of the key words and topics that were mentioned during the TweetJam is visualized in the attached graphic using the ManyEyes data visualization tool.
Below you will find a short summary of some key takeaways and quotes from the TweetJam:
1. What really is cloud computing? Let’s get rid of 'cloud washing!'
I will be joining Forrester's Tweet Jam on Cloud Computing today to add some commentary on the differences we're seeing in attitudes toward "cloud" as a delivery model and in adoption across countries. Interest and adoption differs significantly across countries. While in most countries the primary drivers of both Infrastructure-as-a-Service (IaaS) and Software-as-a-Service (SaaS) are around speed and flexibility, in others the primary drivers are cost. Interestingly, in India and Russia, the No. 1 driver for IaaS is "improving disaster recovery and business continuity." IT decision-makers in those markets prefer to rely on those focused on delivering infrastructure than on their own datacenter, for certain projects.
As for inhibitors, the main concerns are pretty common across countries: security and privacy issues, integration with existing infrastructure and applications, and uncertainty around to total cost of ownership. While many are driven by the desire to move from fixed cost to rotating costs (capex to opex), they remain concerned about the total costs in the long-run.
Have questions about cloud computing and the top challenges and opportunities it presents to vendors and users? Then join us for an interactive Tweet Jam on Twitter about the future of cloud computing on Wednesday, September 15th, 2010 from 11:00 a.m. – 12:00 p.m. EDT (17:00 – 18:00 CEST) using the Twitter hashtag #cloudjam. Joining me (@hkisker) will be my analyst colleagues Mike Cansfield (@mikecansfield), Pascal Matzke (@pascalmatzke), Thomas Mendel (@drthomasmendel), and Stefan Ried (@stefanried). We’ll share the results of our recent research on the long term future of cloud computing and discuss how it will change the way tech vendors engage with customers.
Looking through the current industry hype around the cloud, Forrester believes cloud computing is a sustainable, long-term IT paradigm. Underpinned by both technology and economic disruptions, we think the cloud will fundamentally change the way technology providers engage with business customers and individual users. However, many customers are suffering from "cloud confusion" as vendors' marketing stretches cloud across a wide variety of capabilities.
To help, we recently developed a new taxonomy of the cloud computing markets (see graphic) to give vendors and customers clear definitions and labels for cloud capabilities. With this segmentation in hand, cloud vendors and users can better discuss the challenges and benefits of cloud computing today and in the future.