Customers will continue to have mixed IT environments for a long time

The latest round of cloud computing and enterprise software forecasts reflect the growing influence of analytics, legacy systems integration, mobility and security on IT buyer’s decisions.

Bain & Company and Gartner have moved beyond aggregate forecasts, and are beginning to forecast by cloud and SaaS adoption stage.  SAP is using the Bain adoption model in their vertical market presentations today.

Despite the predictions of the demise of enterprise software, forecasts and sales cycles I’ve been involved with indicate market growth.  Mobility and cloud computing are the catalysts of rejuvenation in many enterprise application areas, and are accelerating sales cycles.  Presented in this roundup are market sizes, forecasts and compound annual growth rates (CAGRs) for ten enterprise software segments.

Key take-aways from the latest cloud computing and enterprise software forecasts are provided below:

• Software as a Service (SaaS) and cloud-based business application services will grow from $13.4 billion in 2011 to $32.2 billion in 2016, a five-year CAGR of 19.1%. Source:  Market Trends: Platform as a Service, Worldwide, 2012-2016, 2H12 Update Published: 5 October 2012 ID:G00239236.

• Public and private cloud computing will be strong catalysts of server growth through 2015.  IDC reports that $5.2B in worldwide server revenue was generated in 2011 or 885,000 units sold.  IDC is forecasting a $9.4B global market by 2015, resulting in 1.8 million servers sold. Source:  IDC Worldwide Enterprise Server Cloud Computing 2011–2015 http://www.idc.com/getdoc.jsp?containerId=228916 

• IDC reports that enterprise cloud application revenues reached $22.9B in 2011 and is projected reach $67.3B by 2016, attaining a CAGR of 24%.  IDC also predicts that by 2106, $1 of every $5 will be spent on cloud-based software and infrastructure. Report, Worldwide SaaS and Cloud Software 2012–2016 Forecast and 2011 Vendor Shares, Link: http://www.idc.com/getdoc.jsp?containerId=236184

• According to the Cisco Global Cloud Index, global cloud traffic will account for nearly two-thirds of total data center traffic by 2106.  Cisco is forecasting cloud traffic as a percent of total data center traffic will grow from 39% in 2011 to 64% in 2016.  Cisco is also predicting that by 2016, three out of five data center workloads will be processed in the cloud. The Cisco Global Cloud Index also includes many  insightful documents including the Cisco Global Cloud Index: Forecast and Methodology, 2011–2016 and the  Cisco Global Cloud Index Supplement: Cloud Readiness Regional Details.  The following video provides an excellent analysis of the Top Trends behind the Cisco Global Cloud Index (2011 — 2016).

• 11% of companies are transformational, early adopters of cloud computing, attaining 44% adoption (as defined by % of MIPS) in 2010, growing to 49% in 2013.  This same segment will reduce their reliance on traditional, on-premise software from 34% to 30% in the same period according to Bain & Company’s cloud computing survey results shown below.  SAP is using this adopter-based model in their vertical market presentations, an example of which is shown here.

• Bain and Company has defined a Cloud Go-To-Market System and is actively promoting it in their research insights and other publications.  Examples of Bain’s research on cloud computing include Selling the cloud, The five faces of the cloud, How Rackspace turns customers into brand fanatics, and Identifying and monetizing cloud computing’s five customer types.  The Bain and Company Cloud Go-To-Market Strategy framework is shown below.

• Gartner is predicting Infrastructure-as-a-Service (IaaS), cloud management & security devices, and Platform-as-a-Service (PaaS) are growing from $7.6B in 2011 to $35.5B in 2016, a CAGR of 36%.  Source:  Forecast Analysis: Enterprise Infrastructure Software, Worldwide, 2011-2016, 3Q12 Update Published: 18 October 2012 ID:G00234775.

• The global Platform-as-a-Service (PaaS) market is growing from $900M in 2011 to $2.9B in 2016, achieving a 26.6% CAGR.  At this projected rate, PaaS will generate an average of $360M a year in revenue between 2011 and 2016.  Gartner projects that the largest segments will be Application Platform Services (aPaaS) which generated 35% of total PaaS spending in 2011, followed by cloud application lifecycle services (12.5).    Source: Market Trends: Platform as a Service, Worldwide, 2012-2016, 2H12 Update Published: 5 October 2012 ID:G00239236.

• The three most popular net-new SaaS solutions deployed are CRM (49%), Enterprise Content Management (ECM) (37%) and Digital Content Creation (35%).  The three most-replaced on-premise applications are Supply Chain Management (SCM) (35%), Web Conferencing, teaming platforms and social software suites (34%) and Project & Portfolio Management (PPM (33%). The following graphic shows the full distribution of responses. Source: User Survey Analysis: Using Cloud Services for Mission-Critical Applications Published: 28 September 2012

•  In 2011, the worldwide enterprise application software market generated $115.1B in revenue, and is projected to grow to $157.6B by 2016, attaining a 6.5% CAGR in the forecast period. Gartner reports that 38% of worldwide enterprise software revenue is from maintenance and technical support; 17% from subscription payments; and 56% from ongoing revenue including new purchases.  An analysis of the ten enterprise software markets and their relative size and growth are shown in the figure below along with a table showing relative rates of growth from 2011 to 2016. Source: Forecast: Enterprise Software Markets, Worldwide, 2011-2016, 3Q12 Update Published: 12 September 2012 ID:G00234766

•  The Gartner forecast for Global IT spending by vertical market shows transportation, insurance, banking and securities, and communications, media and services (CM&S); and manufacturing providing g the greatest growth opportunities through 2016.  The following graphic shows the industries graphed by Annual Growth Rate (AGR) and Compound Annual Growth Rate (CAGR). Source: Forecast Analysis: Enterprise IT Spending by Vertical Industry Market, Worldwide, 2010-2016, 3Q12 Update Published: 7 November 2012

Source: Forbes
Reprinted with permission from Louis Columbus

Louis Columbus

Louis has experience in marketing, product management, sales and industry analyst roles in the enterprise software and IT industries. He is serving as Microsoft Enterprise Systems Senior Manager at Cincom, where his responsibilities include new product introductions, messaging, marketing strategy, business development, and competitive strategy.