Cloud computing has changed the world. It’s revolutionized the way we work, the way we do business, and how we interact with devices, services, and each other in our daily lives. But like many game-changing technologies, there was a time when it looked like it would never really catch on – at least in the business environment. You remember the old objections: “We’ve invested a lot in our hardware and I can’t justify the cost of cloud servers.” “Our software has been continually customized over the years and we can’t afford to change it.” “Our data is very sensitive and is more secure in on-premises systems than in the cloud.”
Yet nothing grabs attention like success, and the cloud provided the springboard for the explosive growth of a number of well-known industry disrupters. Traditional leaders were suddenly followers in danger of being left behind. In a short span of time, the cloud has become standard across both the private and public sectors. According to IDC, 74% of businesses run software-as-a-service (SaaS) applications, 65% are currently managing a hybrid cloud environment, and 94% plan to deploy multiple clouds.
The rise of these sophisticated cloud computing environments enables every company to become a software company and build intelligent capabilities. Companies can then connect these capabilities such as artificial intelligence (AI), machine learning (ML), blockchain, and the Internet of Things, into their applications to create a competitive advantage.
IDC conducted a series of in-depth interviews with 12 independent software vendors (ISVs) around the world. In the second of a series of blogs based on this research, we consider these cloud opportunities in more detail and why a proven cloud platform is key to success in this dynamic new business environment.
Enabling the intelligent enterprise
Early cloud adoption focused on SaaS and infrastructure as a service (IaaS), as the benefits of these new consumption models gained rapid acceptance among digital leaders. But as the pace of innovation continues to accelerate and the market matures, platform as a service (PaaS) is playing an increasingly important role in driving digital transformation. Why is that? With the cloud now so established as a core element of enterprise IT infrastructure, we have entered a new era of computing: the age of the intelligent enterprise. Companies are seeking to take advantage of the cloud’s flexibility to identify new sources of differentiation and competitive advantage by embracing intelligent capabilities such as AI and ML in their applications.
For ISVs, this is a huge opportunity to deliver transformative cloud-based products and services that enable the intelligent enterprise. But in a highly competitive market, speed and agility are essential to staying relevant and competing effectively, and a proven cloud platform is crucial in leveraging advanced technologies like AI into easily consumable solutions that developers can incorporate quickly and effectively. IDC’s studies show that the use of a PaaS environment can cut the application development cycle by 30% to 50%.
The ISVs interviewed by IDC are choosing different routes to enabling the intelligent enterprise. Those with on-premises solutions have been extending them to the cloud either by creating new digital applications, modernizing existing applications, or embedding intelligent capabilities in their solutions. Newer ISVs typically move straight to the cloud-based SaaS business model to take full advantage of shorter development cycles, lower deployment costs, and a pay-as-you-go financial model. Whatever their preferred route, all share two key characteristics – a commitment to the future of the cloud and a reliance on a proven cloud platform to build next-generation intelligent applications.
Cloud is the future for ISVs
If you needed any more persuading about the inexorable rise of the cloud, industry commentators are predicting only a modest slowdown in growth rates over the next five years. IDC’s overall cloud revenue growth projection is 18% for 2016 to 2021, with a compound annual growth rate (CAGR) of 17% for SaaS, 31% for PaaS, and 31% for IaaS revenues. Previous barriers to adoption, such as security, are now often seen as strengths, and IDC predicts that by 2021, 70% of new enterprise applications will be developed as cloud-native. The associated spending on intelligent technologies, such as cognitive and artificial intelligence systems, is forecast to reach US$57.6 billion over the same period.
In the next blog, we’ll look at how a cloud platform fits into the bigger intelligent enterprise picture. But one thing is already clear – the cloud is the future. “The drivers for going into the cloud were that the market is going to the cloud,” says Wolfgang Schuller, founder and managing director of Ingentis, in his IDC interview. “Five years ago, everyone in Europe said we’d never put our HR data in the cloud. But this changed… now, I think every conversation is cloudibased or the cloud topic is a topic in every conversation.”
To find out more, download “Partner Success with SAP Cloud Platform: Building for the Intelligent Enterprise,” an IDC e-book sponsored by SAP.