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Cloud Plans Getting More Cohesive

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Posted April 19, 2012 By Ann All     Feedback

A new study from Saugatuck Technology suggests organizations are taking a more cohesive approach to purchasing and deploying cloud-based software.

In the early years of this decade, it seemed like most companies needed cloud computing like a fish needed a bicycle – to steal a phrase from the late feminist Gloria Steinem. Now, however, a growing number of companies need the cloud like a fish needs water.

Two new studies highlight not only the inexorable advance of cloud computing, but also a growing sophistication in how companies aim to use it.

According to Gartner, global revenue from software-as-a-service will hit $14.5 billion this year, up nearly 18 percent from 2011 revenue of $12.3 billion.  That follows an increase of more than 20 percent in worldwide SaaS revenue from 2010 to 2011. Gartner is forecasting robust growth through 2015, when it expects SaaS revenue to reach $22.1 billion.

A new study from Saugatuck Technology foresees a big jump in cloud use between 2014 and 2016. Based on its survey, Saugatuck notes many companies plan to progress from on-premise software deployments to hybrid environments of on-premise plus cloud and, finally, to pure cloud. (A 13-page summary of the study is available at no cost, though registration is required.)

While just 10 percent of respondents tap cloud as their preferred model for deploying new enterprise software today, 39 percent of respondents expect it to be the preferred model in 2016.  Forty percent of respondents favor the hybrid model today. Sixty-three percent say the hybrid model will be used in 2014, but that number drops to 47 percent in 2016 as more believe they will use a pure cloud model.  

According to Bruce Guptill, senior vice president and head of research for Saugatuck Technology, his firm believes hybrid environments will actually end up being more popular than pure cloud deployments. Either way, cloud figures heavily into future deployment plans.

"Enterprise leaders tell us that they prefer to see more than half of all their new business software being cloud/SaaS-based within the next couple of years," Guptill said. "That indicates very clearly demonstrated business benefits that outweigh decades of familiarity and preferences for traditional software – not just topline cost savings."

Even more significant, Guptill said, is the increasingly cohesive way in which companies appear to view the cloud. "There’s a very broad movement toward enterprise-based acquisition, licensing and coalescence, to unify and manage SaaS/Cloud use and spending. SaaS/Cloud is no longer just a standalone, point-solution instance here and there; it’s part of the IT and business fabric."

Though reduced capital and/or operating costs, cited by 46 percent of respondents, is still the top benefit expected from cloud deployments, Guptill said benefits related to business operations and management improvements are rapidly gaining ground with respondents. Twenty-nice percent, for example, mention cloud's ability to speed time to market for new products and services.

CRM/salesforce automation and collaboration/communications rank highest in numbers of current deployments, followed by customer service/support and human resources/talent management, with at least 20 percent of respondents saying they already use cloud applications in those categories. Fewer deployments are seen in areas related to finance and accounting.

"As we see it, the closer we get to the 'money' inside the enterprise. the least likely we are to see massive SaaS/cloud use today and for the next few years. But even so, there is significant SaaS/cloud use there right now, usually in ways that add relatively inexpensive but needed functionality and collaboration/communication on top of established legacy systems and operations," Guptill said. "Human capital management/HR apps are really in the middle between external outreach and internal operations."

Importance of Cloud Integration

Data and privacy are the top concerns regarding SaaS deployments, mentioned by 59 percent of respondents. But concerns related to integration and customization also rank highly. This shows increased awareness of the benefits of interoperability, such as better economies of scale and enhanced ability to share business data, Guptill said. "SaaS deployment and management is becoming more about business use and management than about immediate gratification."

As companies adopt more strategic approaches to the cloud, the role of IT organizations will become less about maintenance and integration and more about creating and managing hybrid environments. As companies become more reliant on the cloud, Guptill said, "IT’s mission starts to trend toward understanding, architecting, and then managing increasingly hybridized IT and business function environments, which means that IT leaders and orgs have to become intimately familiar with business workflows."

This won't happen overnight, Guptill said. While companies will ultimately use cloud-based platform services and SaaS-integrated interfaces to integrate their software, systems and processes, IT organizations at first will rely on more traditional means of integration.

"We see a rapidly increasing role for enterprise IT as the in-house SaaS/Cloud/legacy integrator," Guptill said. "But that has to be tempered with, or supplemented by, increasing emphasis on design and architecture for hybridized IT in a huge variety of manners, likely shifting app-by-app or at least group-by-group. Constant re-thinking and innovating of how things get done becomes IT standard operating procedure in the very near future."

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