Posts Tagged ‘information broker’

Research Report: 2011 Cloud Computing Predictions For Vendors And Solution Providers

This blog was jointly posted by @Chirag_Mehta (Independent Blogger On Cloud Computing) and @rwang0 (Principal Analyst and CEO, Constellation Research, Inc.)

Part 1 was featured on Forbes: 2011 Cloud Computing Predictions For CIO’s And Business Technology Leaders

As Cloud Leaders Widen The Gap, Legacy Vendors Attempt A Fast Follow
Cloud computing leaders have innovated with rapid development cycles, true elasticity, pay as you go pricing models, try before buy marketing, and growing developer ecosystems.  Once dismissed as a minor blip and nuisance to the legacy incumbents, those vendors who scoffed cloud leaders now must quickly catch up across each of the four layers of cloud computing (i.e. consumption, creation, orchestration, and infrastructure) or face peril in both revenues and mindshare (see Figure 1).  2010 saw an about face from most vendors dipping their toe into the inevitable.    As vendors lay on the full marketing push behind cloud in 2011, customers can expect that:

Figure 1. The Four Layers Of Cloud Computing

General Trends

  • Leading cloud incumbents will diversify into adjacencies. The incumbents, mainly through acquisitions, will diversify into adjacencies as part of an effort to expand their cloud portfolio. This will result into blurry boundaries between the cloud, storage virtualization, data centers, and network virtualization.  Cloud vendors will seek tighter partnerships across the 4 layers of cloud computing as a benefit to customers.  One side benefit – partnerships serve as a pre-cursor to mergers and as a defensive position against legacy on-premises mega vendors playing catch up.
  • Cloud vendors will focus on the global cloud. The cloud vendors who initially started with the North America and followed the European market, will now likely to expand in Asia and Latin America.  Some regions such as Brazil, Poland, China, Japan, and India will spawn regional cloud providers. The result – accelerated cloud adoption in those countries, who resisted to use a non-local cloud provider.  Cloud will prove to be popular in countries where software piracy has proven to be an issue.
  • Legacy vendors without true Cloud architectures will continue to cloud wash with marketing FUD. Vendors who lack the key elements of cloud computing will continue to confuse the market with co-opted messages on private cloud, multi-instance, virtualization, and point to point integration until they have acquired or built the optimal cloud technologies.  Expect more old wine (and vinegar, not balsamic but the real sour kind, in some cases) in new bottles: The legacy vendors will re-define what cloud means based on what they can package based on their existing efforts without re-thinking the end-to-end architecture and product portfolio from grounds-up.
  • Tech vendors will make the shift to Information Brokers. SaaS and Cloud deployments provide companies with hidden value and software companies with new revenues streams.  Data will become more valuable than the software code. Three future profit pools willl include benchmarking, trending, and prediction.  The market impact – new service based sub-categories such as data-as-service and analysis-as-a-service will drive information brokering and future BPO models.

SaaS (Consumption Layer)

  • Everyone will take the SaaS offensive. Every hardware and system integrator seeking higher profit margins will join the Cloud party for the higher margins.  Software is the key to future revenue growth and a cloud offense ensures the highest degree of success and lowest risk factors.  Hardware vendors will continue to acquire key integration, storage, and management assets.  System integrators will begin by betting on a few platforms, eventually realizing they need to own their own stack or face a replay of the past stack wars.
  • On-premise enterprise ISVs will push for a private cloud. The on-premise enterprise ISVs are struggling to keep up with the on-premise license revenue and are not yet ready to move to SaaS because of margin cannibalization fears,lack of   scalable platforms, and a dirth of experience to run a SaaS business from a sales and operation perspectives. These on-premise enterprise software vendors will make a final push for an on-premise cloud that would mimic the behavior of a private cloud. Unfortunately, this will essentially be a packaging exercise to sell more on-premise software.  This flavor of cloud will promise the cloud benefits delivered to a customer’s door such as pre-configured settings, improved lifecycle, and black-box appliance. These are not cloud applications but will be sold and marketed as such.
  • Money and margin will come from verticalized cloud apps. Last mile solutions continue to be a key area of focus.  Those providers with business process expertise gain new channels to monetize vertical knowledge.  Expect an explosion of vertical apps by end of 2011.  More importantly, as the buying power shifts away from the IT towards the lines of businesses, highly verticalized solutions solving specific niche problems will have the greatest opportunities for market success.
  • Many legacy vendors might not make the transition to cloud and will be left behind. Few vendors, especially the legacy public ones, lack the financial where with all and investor stomachs to weather declining profit margins and lower average sales prices.  In addition, most vendors will not have the credibility to to shift and migrate existing users to newer platforms.  Legacy customers will most likely not migrate to new SaaS offerings due to lack of parity in functionality and inability to migrate existing customizations.
  • Social cloud emerges as a key component platform. The mature SaaS vendors that have optimized their “cloud before the cloud” platform, will likely add the social domain on top of their existing solutions to leverage the existing customer base and network effects.  Expect to see some shake-out in the social CRM category. A few existing SCRM vendors will deliver more and more solutions from the cloud and will further invest into their platforms to make it scalable, multi-tenant, and economically viable.  Vendors can expect to see some more VC investment, a possible IPO, and consolidation across all the sales channels.


Monday’s Musings: The Hidden Value In SaaS Deployments

Gains In SaaS Adoption Driven By Speed And Cost Savings…

Preliminary data from Q4 earnings data show continued traction among SaaS solutions.  Expect SaaS deployments to gain steam in 2010 as organizations finalize their SaaS apps strategies to take advantage of 7 key benefits:

  1. Richer user experience – SaaS apps bring Web 2.0 usability to the enterprise world through rich internet applications using Adobe Air, HTML 5, Microsoft Silverlight, and other tools.
  2. Rapid implementation – SaaS applications focus on configuration and integration, not hard core implementation.  Users can be up in weeks, not months.
  3. Frequent cycles of innovation - At present, most vendors introduce new functionality, enhancements, and bug fixes on frequent refresh cycles.  Some vendors provide as frequent as weekly updates, others – seasonal.
  4. Minimal upgrade hassles – Users focus on minimal testing scenarios and receive updates all at once.  In applications with significant regulatory and tax updates, SaaS applications reduce the cost of compliance by as much as 77%.
  5. Always on deployment – Organizations can expect average up-time levels at 99.95% or higher for most applications.  These results often exceed existing on-premise performance.
  6. Subscription pricing – Subscription pricing reduces the capital burden of common on-premise payment models.
  7. Scalability – Organizations can add or subtract users as needed without worrying about procuring new hardware and other infrastructure.

Moreover, latest Information Week Analytics survey reaffirms several key benefits of SaaS adoption – time to market and cost savings (see Figure 1).

Figure 1. Information Week Analytics Survey Confirms Trends In Adoption

Information Week Analytics 2010 SaaS survey

…Yet, Aggregated Information Provides The Differentiated Value To Clients

Despite the obvious benefits with SaaS deployments, three hidden advantages will emerge with market maturity:

  • Benchmarking. SaaS vendors sit on a tremendous treasure trove of data.  Participating organizations could opt-in to share secure and masked information for the purposes of business optimization.
  • Trending. Organizations could also opt-in to identify larger market trends.  Trending information could be used to help organizations with planning.
  • Prediction. More sophisticated organizations will take SaaS vendor trending data and design new algorithms to support predictive analytics.  The richness and consistency of the data set will improve accuracy.

The Bottom Line For SaaS Vendors – Create Additional Value As An Information Broker

The end game for SaaS vendors may not be a re-creation of the on-premise world in the Cloud.  In fact, those vendors with a true multi-tenant SaaS model may turn out to find additional revenue streams as information brokers.  Expect demand for premium information-on-demand services to begin with benchmarking and evolve to prediction.  For example, imagine the benefits gained by organizations who consume the latest buying behavior data from their CRM vendors.  Organizations could turn to HCM vendors for geographical salary or hiring trends.  Customers of financial vendors could better predict credit risk factors.  A key requirement – customers must trust their SaaS vendor’s data ownership and privacy policies before the industry makes this transformation.  With acceptance, vendors will have more reasons to move to a SaaS offense.

The Bottom Line For Organizations – Determine Your Data Rights Before You Sign The Contract

Organizations in SaaS deployments will want to preserve the their data rights and minimize their cost structures to consume aggregated information.  A few key areas should be considered:

  • Data usage. Organizations generally assume that the data belongs to the organization while the software belongs to the SaaS vendor.  To be safe, organizations will want to be clear that rights to use data will require an organization’s permission.  In addition, the disposition of data should be made clear
  • Data access. Organizations should expect unhindered access to raw data, queries, and extraction.  Access to data should not require additional fees.
  • Aggregated data cost. Organizations participating in aggregated data programs should be given preferential treatment not only in cost, but also access to data.  The cost of this “stone soup” approach should be factored in pricing.

Your POV

Where are you in your SaaS deployment?   Have you thought about these long-term benefits? Looking for assistance with crafting, validating, or reviewing your SaaS Apps Strategy?  Do you have a different point of view? Please post or send on to rwang0 at gmail dot com or r at softwareinsider dot org and we’ll keep your anonymity.

Other Useful SaaS Strategy Links

20091222 Tuesday’s Tip: 10 Cloud and SaaS Apps Strategies For 2010

20091012 Research Report: Customer Bill of Rights – Software-as-a Service

20090602 Tuesday’s Tip: Now’s The Time To Consider SaaS Software Escrows

20081028 Tuesday’s Tip: SaaS – Integration Advice

20090714 – R ‘Ray’ Wang – “Opinion: Moving to a SaaS Offensive”

20070903 Trends: What’s all the fuss about True SaaS, OnDemand, Hosting?

20091208 Tuesday’s Tip: 2010 Apps Strategies Should Start With Business Value

20091109 Monday’s Musings: SaaS, SOA, Integration and How To Make A Peanut Butter And Jelly Sandwich In The Cloud

Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.