Transactions and Complex Selling: Strong Catalysts of Cloud Computing Growth

Enterprise software vendors need to challenge themselves to deliver significantly more value if the potential for cloud computing is going to be achieved .

Instead of just going for the low-end, easily customized processes within analytics, CRM, supply chain management, ERP, pricing or service, vendors need to take on the more challenging, complex hard-to-solve problems enterprises have.

As I am completing more research on personas, I’m finding what CIOs really look for in SaaS apps. Flexibility and ease of workflow support, intuitive user interface design without sacrificing functionality, and support for analytics, business intelligence and knowledge management systems integration are all mentioned often.

Nearly all of them also mention that the existing generation SaaS applications on the sell-side, from CRM to order capture and order management aren’t taking on the more challenging areas of their strategies. The result is the CIOs are still relying on legacy, on-premise apps in areas of their companies that are ready for change to SaaS-based applications. Cloud platforms are taking on these more complex, challenging problem areas, yet innovation still lags the needs in the market.

Transactions Are The Fuel of Cloud Infrastructure Growth

CIOs are focusing on how to exceed the expectations of their internal customers at the workflow and interface level while infusing SaaS apps with analytics, business intelligence and knowledge management support. What’s missing is the killer transaction platform layer and transaction-based applications. Gartner’s report, A Workforce Without Humans: Three Ways Technology Will Eliminate Skilled Jobs in the U.S. Through 2020 by Kenneth F. Brant by Johan Jacobs has the following graphic which shows CIO’s estimates of migration to cloud-based IT infrastructure and applications which supports this point.

Source: Maverick Research: A Workforce Without Humans: Three Ways Technology Will Eliminate Skilled Jobs in the U.S. Through 2020 by Kenneth F. Brant by Johan Jacobs

Much of the report is based on the results of Gartner’s 2011 survey of U.S. CIOs. Additional insights from the survey include the following:

• Virtualization and cloud computing are the two top-ranked U.S. CIO technology priorities for 2011.
• 83% of U.S. CIOs estimated that more than half of their transactions would be conducted on a cloud infrastructure by 2020.
• 79% of the respondents predicted that more than half of their transactions would be completed on applications leased using the SaaS platform by 2020.

For cloud infrastructure platforms and SaaS applications to deliver that level of transaction volume and support, there needs to be a major shift in how enterprise vendors develop software. Making better use of analytics, business intelligence and knowledge in the enterprise is key. Designing applications that make information and knowledge sharing intuitive is critical.

The following figure from the same report cited earlier shows the relationship of technologies to potential business value. Many CRM and sell-side vendors tend to focus on being a substitute or just barely delivering increases in human productivity.

Going after the hard work of optimizing pricing strategies, call centers, making multichannel selling strategies profitable and getting the most out of social networks to make the customer experience exceptional will deliver major gains in productivity. It’s been my experience during the persona interviews that for any SaaS vendor to really excel here they need to get beyond human productivity and make it possible for enterprises to deliver exceptional customer experiences daily.

Creating SaaS applications that take on real complexity earns trust too, which no amount of pure efficiency can compete with.

Source: Maverick Research: A Workforce Without Humans: Three Ways Technology Will Eliminate Skilled Jobs in the U.S. Through 2020 by Kenneth F. Brant by Johan Jacobs

An Example: SaaS in Manufacturing

The following table compares the strategies and systems used in a typical manufacturing company. Enterprise apps vendors for the most part are focused on make-to-stock and assemble-to-order automation and efficiency (SAP ByDesign for example).

As the continuums move from left to right, the process, systems and strategy challenges exponentially increase. As a result there are only a few vendors who can manage the more complex engineer-to-order requirements in manufacturing for example. Transactions there are very small in number, yet orders of magnitude more profitable. This is just an example of many areas in enterprises that need major improvement.

Instead of just focusing on the easy processes and strategies on the left, vendors need to go after the more difficult, complex selling and transaction challenges on the right. This is why CIOs want SaaS applications that are easy to customize from a user interface and workflow standpoint, while at the same time supporting analytics, BI and knowledge management. The goal is to slot them into these more challenging areas of their business and transform their company’s intelligence and expertise into profitable growth.

Bottom line: The true catalyst of cloud computing growth isn’t just SaaS economics; it’s how effectively enterprise software vendors address the very difficult transaction, order management and selling challenges their potential customers face all the time. When that happens, the many optimistic forecasts of cloud adoption in the enterprise will take a step closer to being fulfilled.