The coming year will be a transformative one for cloud computing in the enterprise. An early indicator was Oracle’s acquisition of cloud applications provider NetSuite for more than $9 billion, its biggest purchase in more than a decade. The world’s largest companies are starting to move core business processes to the cloud, and Oracle saw the need to position itself for this transition. Enterprises now see that the cost-savings and flexibility offered by the cloud outweigh concerns that held them back in the past.
The cloud is also evolving in exciting new ways. Amazon Web Services and Salesforce each launched new platforms this year that allow businesses to explore machine learning and other forms of AI. It’s early days, but the cloud will provide customers with the tools and computing power to analyse massive amounts of data in new ways, providing valuable insights. The rapid growth of Microsoft’s cloud business is another indicator of enterprise adoption, and Google has said its cloud revenue could surpass that of its advertising business in five years.
But some of the most important changes in 2017 will be more subtle. As more applications move to the cloud, customers have greater visibility into how much value they derive from the software they’re paying for. This shifts the power dynamic between buyer and seller, and vendors will be held more accountable next year for the value they provide.
I’m excited about the changes we can expect in the year ahead. Here are four predictions for how the cloud and enterprise software will evolve in 2017.
The year of the cloud challenger
Two companies solidified an early lead in cloud computing -- Amazon for cloud infrastructure and Google for cloud productivity apps. In 2017, both companies will see their leads diminished. In IaaS, growth at Amazon Web Services has already started to slow, while Azure and Google are hitting their stride. Google simply has better technology for the fast-emerging workloads that companies are planning for today. To give one example, Google’s BigQuery can scan terabytes of data in seconds to enable real-time analysis of vast amounts of data. AWS will still be the biggest cloud provider for some time, but Google is about to put a serious dent in its impressive growth rate.
It won’t all be plain sailing for the search and ad giant, however. In cloud productivity apps, Google will have its own comeuppance at the hands of Office 365. Microsoft’s cloud suite already holds sway in the largest enterprises, and the company should continue to protect that turf as large enterprises transition to the cloud. Why? Microsoft dominates the identity piece of the equation, which Google never managed to wrestle away even as it built a lead in cloud productivity. In addition, large companies need enterprise level support, an area in which Microsoft and its channel have built a formidable position.
The year of the paid app
In the business world, if you’re not paying for something, you can’t expect much from it. Enterprise security and support? Management and compliance? Forget about it. That uncertainty doesn’t work in an enterprise setting, so in 2017 companies will take a hard look at the cloud collaboration apps they’re using and ask, which of these are worth paying for? Which can conform to my policies around governance and control? Apps like Slack, Trello and Asana have proliferated precisely because free versions are available -- but some customers need more. They now have greater choice, with apps available that more closely match their security and usability requirements. 2017 will be a time of reckoning, when businesses take a hard look at the tools they’re using and commit to those that are worth buying.
The value of software will be defined by engagement
How much should you pay for that application? Depends how many seats, right? Not so fast. What if most employees use it only one day a week -- if ever? What if they don’t even like it? In 2017, the amount companies are willing to pay for software will be determined by levels of engagement rather than number of users. Cloud and mobile apps provide unprecedented visibility into these usage patterns, allowing companies to see more clearly how much value they get for their software. Smart companies are waking up to the reality that they should only pay for what provides demonstrable value. Slack has been on the cutting edge of this trend, and in 2017 other application providers will follow suit. If they don’t, they’ll be having some uncomfortable conversations with CIOs.
Enterprises wake up to the opportunities for transformation within
The shift of enterprise applications to the cloud, and connectivity via mobile devices, has fundamentally changed how we consume, store, and share information. Despite that, for many of the Fortune 500 (and beyond), cloud and mobile have had far less impact on their internal processes and operations than on external, customer-related apps.
Ask a CEO or CIO to fund the purchase of a familiar, cloud-based CRM app (like Salesforce) that enhances the relationship with customers, and you’ll likely get a quick “yes”. Ask them to migrate well-understood “old world” systems like email, helpdesk ticketing and ERP to the cloud, and that’s also an easy choice. “Old world” systems benefit greatly from being in the cloud, but are often simply close analogues to their on-premise predecessors.
Less familiar, though stacked with potential value, are next-gen productivity, process, and collaboration apps that are not simply cloud versions of familiar apps. They are fundamentally new and exist only because of the cloud. Their ability to transform internal processes and operations is enormous, but requires an understanding of the “new possible” in a cloud-based world. Rapid and often viral adoption of these apps by end users clearly demonstrates that this “new possible” is being embraced by front-line information workers as they search for effective ways to manage the ever-increasing volume and velocity of today’s collaborative work.
However, C-suite executives who were willing to migrate “old world” apps have hesitated to embrace the “new possible.” Why? Because new concepts are hard. Really hard. Are they willing to sign off on an application that would allow an information worker to define and initiate a collaborative process, enroll colleagues in that process, and automate that process without the need to build a “system” from the ground up? For forward-thinking types, the answer is increasingly yes. They see that the cloud and mobile can transform their businesses from the inside out, they’re watching their users “vote with their wallet” and realise they can no longer stand still. Perception has reached a tipping point, and in 2017 the laggards among the Fortune 500 will start to catch up and build an intentional strategy that meets both user needs and corporate requirements.
Mark Mader, CEO, Smartsheet
Image source: Shutterstock/Omelchenko