June2016

EVOLVINGCLOUDSTRATEGIES

AttitudestowardscloudandSoftwareasaService(SaaS)havechangeddramaticallyoverthepastfewyears,particularlywithrespecttosoftwarethatrunsyourbusiness.Asrecentlyasfivetotenyearsago,EnterpriseResourcePlanning(ERP)couldeasilyhavebeencalledthelastbastionofresistancetoSaaS.“Cloud”hadyettobecomepartofthebusinessvernacularand“SaaS”wasstillarelativelynewandpoorlyunderstoodconcept.WhileothercomplementarysolutionssuchasCustomerRelationshipManagement(CRM)wereheadedinthatdirection,entrustingthetransactionalsystemofrecordofyourbusinesstothecloudrequiresahigherleveloftrustthanrequiredforotherapplications,includingthosewhichareoftenreferredtoas“systemsofengagement.”

Butnow-howtimeshavechanged!Todaythemajorityofbusinesseshavesomesortofcloudstrategyandtheshifttothecloudhasdefinitelybegun.ThisassertionissupportedbydatacollectedinthelatestMintJutras2016EnterpriseSolutionStudy.Butbeforewereportonthesemostrecentresults,inordertoavoidconfusion,weneedtoclarifysomeoftheterminologythatgetsthrownaroundtoday.

DEFININGTHEOPTIONS:“SAAS”AND“CLOUD”

Inspiteof,orperhapsbecauseofthehugevolumeofdiscussionaroundSaaSandcloudcomputing,thereremainsmuchconfusionovertheterminology.Manyusetheterms“cloud”and“SaaS”interchangeably,buttherearesomeimportantdifferences.Solet’sdistinguishbetweenthetwoupfront:

• Cloudreferstoaccesstocomputing,softwareandstorageofdataoveranetwork(generallytheInternet.)Youmayhavepurchasedalicenseforthesoftwareandinstalleditonyourowncomputersorthoseownedandmanagedbyanothercompany,butyouraccessisthroughtheInternetandthereforethroughthe“cloud,”whetherprivateorpublic.

• SaaSisexactlywhatisimpliedbytheacronym.Softwareisdeliveredonlyasaservice.ItisnotdeliveredonaCDorothermediatobeloadedonyourown(oranother’s)computer.Itisgenerallypaidforonasubscriptionbasisanddoesnotresideonyourcomputersatall.

AllSaaSiscloudcomputing,butnotallcloudcomputingisSaaS.Traditionalon-premiseorhostedsolutionsmight(ormightnot)beaccessedviathecloud,althoughthisismorelikelytobeaprivatecloud.

Data Source InthisreportMintJutrasreferencesdatacollectedfromits2016(andprior)EnterpriseSolutionStudies,whichareusedtoinvestigatethegoals,challengesandstatusandalsotobenchmarkperformanceofimplementationsofsoftwareusedtorunbusinesses.

The2016studycollectedresponsesfrom~525participantsfromcompaniesofallsizesfromverysmalltoverylarge,representingawiderangeofindustries.

EvolvingCloudStrategiesPage2of7

EachyeartheMintJutrasEnterpriseSolutionStudiesreferencedifferentdeploymentoptions,definedasfollows:

• SoftwareasaService(SaaS):Softwareisdeliveredonlyasaservice.ItisnotdeliveredonaCDorothermediatobeloadedonyourown(oranotherparty’s)computer.

• HostedandmanagedbyyourERPvendor:SoftwareislicensedbyyoubutyoupayyourERPvendortomanageandmaintain(host)hardwareandsoftware.

• Hostedbyanindependent3rdparty:Softwareislicensedbyyoubutyoupayanotherpartytomanageandmaintain(host)hardwareandsoftware.

• Traditionallicensedon-premise:Youlicensethesoftwareandareresponsibleformanagingandmaintainingitonyourownpremises.

• Hybrid:Partsarelicensedandmaintainedonpremiseandparts(e.g.add-onmodules)arecloud(SaaSorhosted).

Togetaclearpictureofhowcloudstrategieshavedevelopedandevolved,weturntosomespecificquestionsinour2016EnterpriseSolutionStudy.

WHAT’SYOURCLOUDSTRATEGY?

Thefirstofthesequestionsspecificallyaskedaboutcloudstrategies.

Figure1:WhatBestDescribesYourCloudStrategy?

Source: Mint Jutras 2015 and 2016 Enterprise Solution Studiesd

Lastyear(2015)wasthefirstyearweaskedthisquestionandwefoundtheresultswerealittlesurprising–butonlyalittle.Thefirstsurprisewasthatthemajority(84%)hadacloudstrategy,evenifthatstrategywastonotgothere(8%).Thosenumbersbarelymovedthisyear,withbothonlychangingasingle

Todaythemajority(85%)ofcompaniessurveyedhasacloudstrategy,evenifthatstrategyistonotgothere(9%).

EvolvingCloudStrategiesPage3of7

percentagepoint.Thatleftonly16%lastyearand15%thisyearwithnocloudstrategy.Inawaythisisnotparticularlysurprisinggivenallthehypeovercloudthesedays.Butnoticehowwequalifiedthisoption:“Wedon’thaveacloudstrategy.Cloudisjustoneofmanyfactorsweconsider.”

WephraseditthatwaybecauseforyearswehavebeencapturingprioritiesforselectioncriteriaforERP.Overtheyearswehavealwaysincludedsomesortofreferencetodeploymentoptionandithasconsistentlybeenrankedclosetothebottomofthelistofcriteria,ranking8outof10inprioritythisyearamongstothercriterialikefitandfunction,completenessofsolutionanduserexperience(thetopthreeprioritiesthisyear).Sincedeploymentoptionwasnottheoverridingfactorinselectingthesesolutions,youmightalsoconcludethatcloudwasnotdrivingstrategy.Andyetonly15%thisyeardon’thaveacloudstrategy,andanother9%havenoplanstomoveanyapplicationstothecloud.Thatmeansthemajority(76%)aremovingtothecloud.

Aresurveyparticipantssendingusmixedsignalsordotheyjustviewcloudoptionsasa“given”today?Althoughcloudoptionsmaynotrankhighinpriorityintermsofselectioncriteria,thisisthestrategicdirectioninwhichmostaremoving.It’snotaquestionof“if”,butrather“when?”

SLOWANDSTEADYWINSTHERACE

BasedonthestrategiesshowninFigure1,wemightconcludethatclouddeploymentswillnotdominateimmediately.WeactuallyconfirmedthisconclusionbycapturingthepercentageofallbusinesssoftwarethatiscurrentlydeployedasSaaS,alongwithprojectionsoverthenexttwo,fiveandtenyearsandbeyond(Figure2).

Figure2:PercentageofBusinessSoftwareDeployedasSaaS

Source: Mint Jutras 2016 Enterprise Solution Study

Thissteadyprogressionistobeexpectedlargelybecauseofthenumberofexistingon-premise(non-cloud)solutionsthatarecurrentlyinstalled.Thesewillnotberippedoutandreplacedovernight,particularlywhenitcomestoERP.Implementingasolutionthatrunsyourbusinessisnotasmall

Althoughcloudoptionsmaynotrankhighinpriorityintermsofselectioncriteria,thisisthestrategicdirectioninwhichmostaremoving.It’snotaquestionof“if”,butrather“when?”

But,no,itwon'thappenovernight,simplybecauseofthenumberofon-premisesolutionsinstalledtoday.

EvolvingCloudStrategiesPage4of7

undertakingandmostwillnotabandontheircurrentsolutionswithoutaverygoodreasonandanexpectedreturnoninvestment.Sointhatrespect,itisnotsurprisingthatthemostlikelystrategyistoleaveexistingsystemsinplacebutsurroundthemwithcloud-basedsolutions(27%).Yetthepercentagetakingspecificactiontoactivelymovefromon-premisetotheclouddidjumpthisyearfrom8%to11%whilethepercentagetakingtheirtimeshrankfrom20%to14%.

Lookingatthesameunderlyingdataabitdifferentlythough,weexpecttheadoptionofcloudandSaaSsolutionstoacceleratequitequicklyoverthenexttwotofiveyears,drivenbyreplacementsandnewpurchases.Today47%ofsurveyrespondentshavelessthan25%oftheircurrentsolutionsdeployedasSaaS,andthatincludesthoserunningnoSaaSsolutionsatall.Thatpercentageisexpectedtoshrinkby36%inthenexttwoyearsandby53%withinfiveyears(Figure3).IfyouhaveyettojumpontheSaaSbandwagon,nowisthetimeunlessyouwanttobeleftbehind.

Figure3:PercentageofCompanieswithLessthan25%SaaS

Source: Mint Jutras 2016 Enterprise Solution Study

Thosewithadefinedstrategyofmovingtothecloudclearlyseethepotentialbenefits.Thesebenefitsincludecostsavings,moreinnovation,bettersupportofremoteworkforcesanddistributedenvironments,aswellastheenablementofgrowth.ThisaccelerationofmovementtoSaaSaddsacertainlevelofurgency.Adoptinga“waitandsee”attitudemaybecostlyintermsofachievingormaintainingacompetitiveadvantage.

BUTREMEMBER,NOTALLCLOUDISSAAS

However,ifyourecallourpreviousdefinitions,whileallSaaSiscloud,notallcloudisSaaS.Soweaskedspecifically“Whichismostimportanttoyouintermsofplacinganysolutioninthecloud?”While13%admittonotreallyunderstanding(Don’tKnow),thedominantpreferenceisforSaaS(Figure4).However,aslongasthesolutionisweb-enabled,evenahostedoron-premisesolutionmightbeabletobeaccessedanytime,fromanywhere.ButMintJutraswouldcontendthatwithoutaSaaSsolution,youwouldleavesomeofthepotentialbenefitsonthetable.

BenefitsofSaaSincludecostsavings,moreinnovation,bettersupportofremoteworkforcesanddistributedenvironments,aswellastheenablementofgrowth.ThisaccelerationofmovementtoSaaSaddsacertainlevelofurgency.Adoptinga“waitandsee”attitudemaybecostlyintermsofachievingormaintainingacompetitiveadvantage.

EvolvingCloudStrategiesPage5of7

Figure4:Whichismostimportanttoyouintermsofcloud?

Source: Mint Jutras 2016 Enterprise Solution Study

Andasyoucansee,thereisstillasignificantpercentagethatprefersaprivatecloud.Thismightbebecauseaprivatecloudisconsideredmoresecure(itmayormaynotbe),orbecauseofcurrentoranticipatedcustomization.However,whilecustomizinglegacysolutionstraditionallymeantinvasivecodechanges,todaymuchoftherequirementsperceivedtobe“customizations”todayarehandledthroughnon-invasiveconfiguration,tailoringandtheapplicationofexternallydefinedbusinessrules.Ifyoutrulyrequireheavycustomization,thenitmaybetimetoreevaluatewhetheryouhavetherightsolutionforthejobathand.

Iftheoverridingdesireistosimplymovetothecloud,itmightbeeasiertoliftandshiftexistingsolutionstoaprivatecloud.Yetindoingsoyousacrificesomeofthebenefitsofamulti-tenantSaaSsolution(seesidebar).Withmulti-tenantSaaSsolutions,vendorsmaintainasinglelineofcode.Asaresult,theycandelivermoreinnovation,atafasterpace.Withsingle-tenantsolutionsrunninginprivateclouds,vendorsandtheirclientsstillfacethecomplexityanddisruptionoftraditionalupgrades.

SHOPPINGFORANEWSOLUTION?

Inordertotakefulladvantageofnextgenerationsolutions,enabledbyadvancedtechnologies,youmaychoosetoreplaceyourcurrentsolutions.Thequestionwehavebeenaskingforyearsnowisthis:“Ifyouweretoselectasolutiontoday,whichdeploymentoptionswouldyouconsider?”

Intheearlydaysofthisquestion,thosethatwouldconsiderSaaSweredefinitelyintheminorityandalmosteveryonewould,ofcourse,consideron-premisesolutions.Thatlandscapehasshifteddramatically.Figure5showsthemostrecentfewyears.InterestinSaaShasgrownslowlyandsteadilyoverthepastsixyears.Lastyearitbecametheoptionmostlikelytobeconsidered(participantsareallowedtoselectasmanyoptionsastheywant).

Multi-tenant versus Single-tenant SaaS

Multi-tenantSaaS:Multiplecompaniesusethesameinstanceofhostedsoftware;configurationsettings,companyandrole-basedaccesspersonalizebusinessprocessesandprotectdatasecurity.

Single-tenant(orMulti-instance)SaaS:Eachcompanyisgivenitsowninstanceofthe(hosted)software,butmaysharecommonservices,suchasanintegrationplatform,andsecurity.

EvolvingCloudStrategiesPage6of7

Figure5:DeploymentOptionsthatwouldbeConsideredToday

Source: Mint Jutras Enterprise Solution Studies

* Option added in 2015

Inprioryears“SaaS”and“hostedandmanagedbyyoursolutionvendor”haverunneckandneck.Inthepast,oneofthereasonswasbecausethedifferencebetweenthesetwooptionswasoftenblurryandsurveyrespondentsdidn’tnecessarilyunderstandhowtodistinguishbetweenthetwo.ThiswassubstantiatedbyobservingthatasignificantpercentageofparticipantsthatwererunningsolutionsthatareSaaS-only(e.g.solutionslikethePlexManufacturingCloud,NetSuite,Intacct,etc.)chosethishostedoptioninsteadof,ratherthaninadditiontoSaaS.

Butwe’renowstartingtoseeevidenceofabetterunderstandingofthedifferencebetweentheseoptions.NotonlyaremoreparticipantsactuallyrunningSaaSsolutions,butalsothepreferenceforSaaSisstartingtopullawayfromhostedsolutions.

Butitwasbetween2011and2013wherewesawasharpdeclineinthewillingnesstoevenconsideratraditionalon-premisesolution.However,rememberthewordingofthequestion.Wecreatedahypotheticalsituation.Thisdoesnotmeaneveryonewilljustdumptheiron-premisesolutionsovernight,hencetheslowandsteadyprogressioninFigures2and3.Yet,attheriskofbeatingadeadhorse,wehavetoagainpointoutthatthedirectionisclear.

Wealsoaddedanoptionforhybridsolutionslastyearandweseesomegrowinginterest.Thisoptionmaybesimplyashort-termsolutionforthosethatintendtoleaveexistingsystemsinplacebutsurroundthemwithprimarilycloud-basedsolutions.ThisdeliverssomeofthebenefitsofSaaS,butwillleadcompaniesdownamorecircuitousrouteintheircloudjourneys.Inthesecases,hybridsolutionsmightsimplybeviewedastemporaryoptionsandnotnecessarilythedesiredfinaldestination.Itwillbeinterestingtoseeifinterestinthesehybridsolutionscontinuestogrowordeclineovertime.Alotwilldependonwhetherthehybridsolutionsdeliverthedesired(end)resultsorservetowhettheappetiteformoreSaaS.

SaaSiscurrentlytheoptionmostlikelytobeconsideredandtheinterestintraditionalon-premisesolutionshaswanedsignificantly.

We’renowstartingtoseeevidenceofabetterunderstandingofthedifferencebetweenSaaSandhostedoptions.NotonlyaremoreparticipantsactuallyrunningSaaSsolutions,butalsothepreferenceforSaaSisstartingtopullawayfromhostedsolutions.

EvolvingCloudStrategiesPage7of7

CONCLUSION

Perceptionsandpreferencesforcloud-basedsolutionshavechangeddramaticallyoverthepastseveralyears.Earlypioneershaveledthewayandarelivingtestimonytothebenefits.Theshifttothecloudhasbeguninearnest.Mostcompaniesnowhavedefinedacloudstrategy.Ifyouhavenot,eitherbecauseoflackofunderstandingorlackofattention,takeastepbackanddevelopone.EducateyourselfoncloudandSaaS,alongwiththepotentialbenefits;researchanylingeringconcernsyoumighthaveandinvestigateyouroptions.

Noteveryonewilltakethesameapproach.Somewillracetothecloudfinishline,whileotherswilleaseintoitovertime.Ifyouarecurrentlyrunningyourbusinessonlegacysolutionsthatlimityourconnectivityandinteroperability,addingsomeperipheralandcomplementarycloudsolutionsmightselectivelyhelpyouconnecttotradingpartnersandcustomers,butultimatelyyouwillneedtoreplacethatoldsoftwareorruntheriskofplacingyourselfatasignificantcompetitivedisadvantage.Replacingitwithacloud-basedERP,deployedinasecureSaaSmodelmightjustbethegiantstepyouneedtomoveintotoday’stechnology-enabledworldandaccelerateyourowncompetitiveadvantage.

Abouttheauthor:CindyJutrasisawidelyrecognizedexpertinanalyzingtheimpactofenterpriseapplicationsonbusinessperformance.Utilizingover40yearsofcorporateexperienceandspecificexpertiseinmanufacturing,supplychain,customerserviceandbusinessperformancemanagement,Cindyhasspentthepast10+yearsbenchmarkingtheperformanceofsoftwaresolutionsinthecontextofthebusinessbenefitsoftechnology.In2011CindyfoundedMintJutrasLLC(www.mintjutras.com),specializinginanalyzingandcommunicatingthebusinessvalueenterpriseapplicationsbringtotheenterprise.