Based on the very high interest in this blog and its cloud predictions we are planning to host a Forrester Teleconference entiteled "2012 — The Year The Cloud Matures: A Deeper Dive Into 10 Cloud Predictions For The Upcoming Year" on February 28th, 1-2pm EST/6-7pm UK time, where we will highlight and go through the 10 below predictions one by one. For more details and registration please follow the link to the: teleconference web page.
1. Multicloud becomes the norm
As companies quickly adopt a variety of cloud resources, they’ll increasingly have to address working with several different cloud solutions, often from different providers. By the end of 2012, cloud customers will already be using more than 10 different cloud apps on average. Cloud orchestration will become a big topic and an opportunity for service providers.
2. The Wild West of cloud procurement is over
While 2011 still witnessed different stakeholders within a company brokering (sometimes unsanctioned by IT) a lot of cloud deals, most companies will have established their formal cloud strategy by the end 2012, including the business models between IT and lines of business for their own, private cloud resources.
Some Reflections On The Deal For Competitors, Partners, and Customers
On December 3, SAP announced the acquisition of SuccessFactors, a leading vendor for human capital management (HCM) cloud solutions. SAP will pay $3.5 billion (a 52% premium over the Dec 2 closing price) out of its full battle chest and take a $1 billion loan. SuccessFactors brings about 1,500 employees, more than 3,500 customers, and about 15 million users to the table. In 2010, the company reported revenues of $206 million and a net loss of $12.5 million. A price of $3.5 billion is certainly a big premium, but the acquisition catapults SAP into the ranks of leading software-as-a-service (SaaS) solution providers — a business that will grow from $21.3 billion in 2011 to $78.4 billion by 2015 (for more information, check out our report “Sizing The Cloud”). The deal will certainly help SAP to achieve its 2015 target of $20 billion revenue and 1 billion users as it mainly targets the 500,000 employees that SAP’s already existing customers have. The deal is expected to close in Q1 next year. However, because most of the stocks are widely spread, stakeholders might hold back for now, waiting for possible counter bids from competition.
SAP is a paying a substantial premium to acquire SuccessFactors, a leading SaaS performance and talent management vendor. The press release of December 3, 2011 states that the deal price of $40 per share is a 52% premium over the Dec. 2 closing stock price. Even more startling is that SuccessFactors has a revenue run rate of roughly $300 to $330 million for 2011, and the acquisition price of $3.4 billion is more than 10 times revenue! Why then did SAP make this move?
SAP’s cloud strategy has been struggling with time-to-market issues, and its core on-premises HR management software has been at a competitive disadvantage with best-of-breed solutions in areas such as employee performance, succession planning, and learning management. By acquiring SuccessFactors, SAP puts itself into a much stronger competitive position in human resources applications and reaffirms its commitment to software-as-a-service as a key business model.
In my recent research for a soon-to-be-published Forrester Wave™ on human resource management systems (HRMS), I noted that SAP has more than 13,000 customers using its HCM suite. Yet the adoption of SAP’s learning and talent management products is much less (a few thousand, perhaps), which is noted in my colleague Claire Schooley’s “The Forrester Wave™: Talent Management, Q2 2011.” The talent management Forrester Wave also clearly shows that SAP’s embedded talent management offerings lag well behind the best-of-breed specialists in learning and performance management. The bottom line here is that SAP HCM customers predominantly run best-of-breed talent management solutions alongside their SAP core HRMS (i.e., the transactional employee system of record).
The shift towards the empowered consumer and employee is no more obvious than in Asia - particularly in Singapore, where a recent Google study showed that smartphone penetration is a whopping 62% (compared to 31% in the US). In fact, of the 11 countries in Asia surveyed, four of them (Singapore, Australia - 37%, Hong Kong - 35%, Urban China - 35%) had higher smartphone penetration rates than the US (and amongst 18-29 year olds, 84% of Singaporeans had smartphones, compared to 47% in the US!). With many of the more populous countries having young populations (average age: Philippines - 22.9, China - 35.5, India - 26.2, Indonesia - 28.2 - see World Factbook), the gen Y factor is driving employees to question whether the current way of working makes the most sense.
With so many young, mobile and connected employees, it is no surprise that CIOs across the region regularly complain about the company staff self-deploying devices, applications and services from the web or from app stores. The attitude of many IT shops is to shut it down - interestingly, the whole concept of "empowered employees" is quite "taboo" in some countries across the Asia Pacific region. A CIO recently told me that "smartphones and social media have come five years too soon" - referring to the fact he is planning to retire in five years, and that these technology-centric services are proving to be quite a headache for his IT department!
“… and they lived happily ever after.” This is the typical ending of most Hollywood movies, which is why I am not a big fan. I much prefer European or independent movies that leave it up to the viewer to draw their own conclusions. It’s just so much more realistic. Keep this in mind, please, as you read this blog, because its only purpose is to present my point of view on what’s happening in the cloud BI market, not to predict where it’s going. I’ll leave that up to your comments — just like your own thoughts and feelings after a good, thoughtful European or indie movie.
First of all, let’s define the market. Unfortunately, the terms SaaS and cloud are often used synonymously and therefore, alas, incorrectly.
SaaS is just a licensing structure. Many vendors (open source, for example) offer SaaS software subscription models, which has nothing to do with cloud-based hosting.
Cloud, in my humble opinion, is all about multitenant software hosted on public or private clouds. It’s not about cloud hosting of traditional software innately architected for single tenancy.
The growing realization for SaaS buyers is that if they overlook the details of their SaaS contracts, chances are they’ll pay for it later. Forrester analyzed the thousands of inquiries we receive every quarter to understand the hot button topics in the SaaS space for the first half of 2011. When it comes to on-demand services, we found that people paid more attention to the following three factors in the first half of 2011 than ever before:
Pricing and discounts. It came as no surprise that people are most concerned about money and are looking for guidance around SaaS pricing and discounts more than anything else. Many of our clients want to benchmark themselves against peers. For example, one client asked, “Is there some benchmark data to compare pricing on B2C web portal (PaaS or SaaS) solutions?” Forrester’s take? Unlike traditional software, most SaaS pricing is publicly available on vendor websites. However, pricing and pricing models are still in flux for many emerging areas of SaaS. Even in more established areas, like HR and CRM, discounts can range as high as 85% for large or strategic clients.
The past few years haven’t been kind to software developers. Having the equivalent of a US master’s in computer science and having spent the first 20+ years of my professional life developing mission-critical software products and applications, I have had a hard time adjusting to the idea that developing software applications is a cost to avoid or a waste of time for many CIOs and application development leaders. It seems to me that we have been giving more emphasis to contracts, legal issues, SLAs, and governance concerns but forgetting about how IT can really make a difference – through software development.
Nevertheless, outsourcing kept increasing, and packaged apps exploded onto the scene, and software developers “outplaced” from enterprises. People started to believe they could get more value and good-quality software cheaper…but could they really?
With BT, digitalization, and customer centricity exploding, today is the perfect moment for application development leaders to review their application development sourcing strategy and align it to their BT strategy.
Why? Many reasons, including:
Software is the most important enabling technology for business innovation.
Clients use software every day. It’s become part of their life, and they enjoy the experience. Better software makes a better experience.
HP this week really stirred up the Converged Infrastructure world by introducing three new solution offerings, one an incremental evolution of an existing offering and the other two representing new options which will put increased pressure on competitors. The trio includes:
HP VirtualSystem - HP’s answer to vStart, Flex Pod and vBlocks, VirtualSystem is a pre-integrated stack of servers (blade and racked options), HP network switches and HP Converged Storage (3Par and Left Hand Networks iSCSI) along with software, including the relevant OS and virtualization software. Clients can choose from four scalable deployment options that support up to 750, 2500 or 6000 virtual servers or up to 3000 virtual clients. It supports Microsoft and Linux along with VMware and Citrix. Since this product is new, announced within weeks of the publication of this document, we have had limited exposure it, but HP claims that they have added significant value in terms of optimized infrastructure, automation of VM deployment, management and security. In addition, HP will be offering a variety of services and hosting options along with VirtualSystem. Forrester expects that VirtualSystem will change the existing competitive dynamics and will result in a general uptick of interest it similar solutions. HP is positioning VirtualSystem as a growth path to CloudSystem, with what they describe as a “streamlined” upgrade path to a hybrid cloud environment.
Cloud computing continues to be hyped. By now, almost every ICT hardware, software, and services company has some form of cloud strategy — even if it’s just a cloud label on a traditional hosting offering — to ride this wave. This misleading vendor “cloud washing” and the complex diversity of the cloud market in general make cloud one of the most popular and yet most misunderstood topics today (for a comprehensive taxonomy of the cloud computing market, see this Forrester blog post).
Software-as-a-service (SaaS) is the largest and most strongly growing cloud computing market; its total market size in 2011 is $21.2 billion, and this will explode to $78.4 billion by the end of 2015, according to our recently published sizing of the cloud market. But SaaS consists of many different submarkets: Historically, customer relationship management (CRM), human capital management (HCM) — in the form of “lightweight” modules like talent management rather than payroll — eProcurement, and collaboration software have the highest SaaS adoption rates, but highly integrated software applications that process the most sensitive business data, such as enterprise resource planning (ERP), are the lantern-bearers of SaaS adoption today.