Today, Forrester has published its report “Sizing The Cloud”. This report applies Forrester’s sizing methodology for emerging markets to the cloud computing market for the first time. This methodology allows us not only to apply our growth assumptions to the current numbers for cloud markets, but also to take into account when those markets will hit saturation and see commoditization, affecting the price of a cloud service over time. The result? The first serious attempt to size the cloud computing market for the next 10 years.
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?
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).
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:
Last week Verizon Wireless announced it will begin selling Apple’s iPhone 4 to customers in February 2011. The new relationship between Verizon Wireless and Apple terminates the exclusive relationship AT&T had with Apple since 2007 to distribute iPhones in the US. Verizon Wireless will be able to address pent-up demand for iPhones among existing customers, as well as from customers who switch from competitors such as Sprint and T-Mobile to gain access to these devices. The introduction of Verizon’s iPhone also impacts the competitive smartphone landscape, mobile application developers, network operators, and other participants in the mobility ecosystem. Details regarding the Verizon Wireless iPhone announcement are highlighted in the report “Verizon’s iPhone Sets The Battleground For iPhone 5,” written by my colleague Charles Golvin.
Verizon’s iPhone and AT&T’s iPhone will look and cost the same, however Verizon Wireless has not yet announced the cost of voice and data service for these devices. There are also key differences in Verizon’s iPhone, which have important implications on enterprise smartphone purchasing decisions. Verizon’s iPhone will not have a multimode chip, so these devices will only roam onto CDMA networks, which are used in Verizon’s network. CDMA network technology is not as common in other countries so firms with employees who travel internationally may find this to be a limitation. Also, the timeline for replacing corporate liable smartphone devices is often 18 months. Therefore, although Verizon Wireless will begin offering the iPhone 4 in February, enterprise smartphone contract renewal cycles may mean these devices do not make their way into the hands of employees for more than a year.
On December 5th, Verizon Wireless launched its Long Term Evolution (LTE) network in 38 cities and in over 60 airports. This deployment signals the beginning of the 4G/LTE wars. The fuss over 4G/LTE networks is based on significantly faster network speeds which enable a smoother, faster, less jittery video experience for customers. Verizon’s LTE network is expected to run nearly 10 times faster than the company’s 3G EVDO network with downstream speeds of 5 Mbps to 12 Mbps and upstream speeds of 2Mbps to 5Mbps.
Initially, Verizon Wireless is taking a land grab approach to marketing its LTE network service primarily to business customers who can connect to the Internet using their laptops. Data plans start at $50 per month for 5GB of data, or $80 per month for 10B of data. Additional data use above these data plan caps will cost $10 per GB. Lower price point plans which would appeal to cost conscious consumers were not identified. Verizon plans to offer LTE enabled smartphones in mid 2011.
The $50 per month baseline LTE data pricing plan is undercutting Verizon’s current 3G data access prices. Why undercut 3G data prices? Because the 4G/LTE competitive landscape is heating up. Clearwire is deploying a WiMax network in 68 markets, and T-Mobile is positioning its HSPA+ network as 4G in more than 80 markets. In addition, Verizon is hoping to capture a significant share of customers in the 4G market before AT&T jumps into the 4G arena in 2011, so expect more 4G/LTE announcements and increased competition for 4G customers in the coming year.
With its latest public cloud offering, T-Systems not only comes close to Amazon’s EC2 pricing, it might even be cheaper than Amazon. The €4 billion, German headquartered IT services firm announced today a public beta running from November 2010 to February 2011.
Although Amazon recently made a time-bombed version of its EC2 available for free, a real, unlimited service still costs in the range of $0.095 per hour for a small server of one core with 1.7 GB RAM in Europe. Last week, Forrester had the chance to look at a beta version of T-Systems’ public cloud offering. Although no pricing has been announced officially, the beta showed the price for a virtual machine of a similar size to the aforementioned Amazon machine starting at €0.2/hour. T-Systems inidcated that they even like to go below the Amazon pricing! T-Systems has been working for more than a year with cloud provisioning tools from Zimory to manage the virtualization of larger-scale server and landscape compositions. Leveraging this experience, T-Systems manages to drive efficiency even further than the current economies of scale, which makes this aggressive move possible.
Is T-Systems planning to seriously compete with Amazon in the future and does it make sense for a traditional large enterprise IT services and hosting firm to compete with low-price public cloud offerings?
T-Systems’ public cloud beta shows a continuous memory sizing in a state-of-the-art self-service portal.
During the past year, many companies have revisited their corporate mobility initiatives, device support, and mobile application deployment strategies. In addition, a growing number of firms are prioritizing mobility initiatives as a key strategic focus, expanding the use of smartphone devices, and investing in a range of mobile applications to address the needs of employees in various roles.
As the population and diversity of smartphones making their way into firms increases, so do the challenges for IT organizations. Below are key drivers of increased corporate mobility complexity:
Most enterprises support multiple wireless networks.
Many firms also support a wide variety of mobile devices.
New segments of mobile workers are emerging.
Employees use a wide range of mobile applications.
Some employees choose non-approved devices.
Smartphone security concerns loom over mobile adoption.
Last week, Microsoft unveiled its Windows Phone 7 software, which is dramatically different from this company’s previous software for mobile devices. This new mobile operating system software provides an improved user interface, animated icons, a colorful touchscreen, and personalization features which enable users to customize aspects of the phone’s appearance and performance. In addition, these smartphones work with Sharepoint servers, which are being deployed by enterprises.
Sixty mobile operators, including América Móvil, AT&T, Deutsche Telekom, O2, Orange, SFR, SingTel, Telstra, Telus, and Vodafone, will be supporting Windows Phone 7 in 30 countries. In the US, Windows phones will be available in November. AT&T will sell Windows phones from HTC, Samsung, and LG Electronics, and T-Mobile USA will offer phones from HTC and Dell Inc.
Even with these distribution channels, Microsoft faces tough competition in the smartphone arena. The US smartphone market is dominated by Research in Motion’s BlackBerry devices, Apple iPhones, and devices that run on Google’s Android operating system. Given this intense competition, Microsoft is going to be fighting for fourth place in the US. Microsoft has a better chance to capture a significant share of the smartphone market in developing regions, including China and Latin America, where customers are not tied to Android or Apple smartphone devices.
The mobility priorities of small and medium-size businesses (SMBs) are increasingly similar to those of enterprise organizations. Results from Forrester’s survey of IT decision-makers in SMB organizations with between 20 and 999 employees in North America and Europe show that 3 of the top 10 telecom initiatives in SMBs this year are related to mobility. More specifically, 43% of SMBs identify supporting more mobile devices or smartphones as a key telecom initiative. Supporting more smartphone devices includes increasing the number of employees who use smartphones for work activities, as well as broadening the types of smartphone devices and operating systems supported by the organization.
When it comes to mobile application initiatives, 44% of SMB firms identify supporting more mobile applications for employees who work out of the office as a critical priority to help these workers remain more productive while they are on the road. It is more interesting that 33% of surveyed firms identify supporting more mobile applications for employees who work in the office as a key priority. These employees are not traditionally the focus of mobile application deployment because they spend a majority of time working at their desks. However, they could benefit from productivity enhancing mobile applications such as document viewing applications, business unit reports, or access to mobile time sheet or expense applications when they are away from their desks. Examples of workers in this category include customer service employees, administrative assistants, and marketing personnel.