An FSN news item earlier this week reported that Gartner the analyst firm says that BI offerings in the Cloud will account for just 3 per cent of BI revenue by 2013, despite every major BI platform vendor presenting one. The analyst goes on to say that the BI market suffers from cloud-related hype and that the current adoption of "cloud BI" by user organisations lags far behind the expectations of vendors. But what are the impediments to Cloud adoption and is it universally the case that cloud uptake is below expectations? Gary Simon, FSN’s managing editor takes a look at the complexities of assessing this market.
Like all new technologies there is little doubt that Cloud computing has suffered its fair share of hype. That is not always a bad thing, since the hype generates interest and discussion and many innovations would not have got off the ground without it. The early days of Cloud computing tended to present Cloud computing in ‘black and white’ terms, i.e. it was either good or bad for business. But as the market has matured there is a growing realization that there are all shades of grey, so that the cloud-based and ‘on-premise’ world can co-exist and that the suitability of one approach or the other depends on an organization’s needs.
For some businesses the ability to fix IT costs or at least define costs with certainty is compelling. For others it is the lack of upfront investment needed and the ability to cede responsibility for maintenance and upgrades to a knowledgeable third party that is attractive. However some organizations are concerned about integrating mixed platforms of Cloud and non-Cloud-based applications or have well embedded legacy systems that provide a good solution to their needs. Security and confidentiality of corporate information in the Cloud remains a concern for others.
Chris Field, head of business consulting for Infor PM (performance Management) told FSN, “In the PM space there seems to be even more pressure to keep systems “in-house” due to the nature of the data. The only organisations looking for these types of systems are Government and Local Authority where they are looking for a SAAS based system to cut costs and their data is largely public domain in any case”.
As a result of these variables established on-premises vendors are hedging their bets by offering Cloud-based and on-premises solutions – but not necessarily with the same degree of enthusiasm. The Cloud-based licence model with its monthly fee is a poor substitute for the traditional upfront perpetual licence fee and maintenance charges which have been the backbone of the IT software industry for the last three decades. So one hypothesis is that the relatively small amount of Cloud revenues in part reflects an unwillingness to push Cloud-based solutions in order to cling on to the lucrative licence fees of the past.
On the other hand much depends on the application. For example, pure-play cloud-based vendors of financial systems are seeing healthy growth. Tom Brennan of FinancialForce.com told FSN, “We have expanded to around 20,000 end-users of our applications and have been seeing strong growth in the area of Professional Services Automation. The services sector has been growing but is largely under-automated. Organizations with mobile workforces really appreciate the flexibility of the Cloud and embedded social media which offers a superb platform for collaboration in a project environment.”
Yet despite the potential attractions not all organizations are in a position to invest. Gartner says “Organisations that have already invested in on-premises BI infrastructure are hesitating to identify a segment of their BI initiative for which data can be moved into the cloud. However, companies that have subscribed to a specific cloud application, such as customer relationship management, payroll or help desk service, are more inclined to use BI functionality delivered by their cloud provider, as they see it essentially as an extension of the cloud application”.
Edward Smith, Technical Director, Intuitive Business Intelligence, sees uptake of Cloud-based BI partly as a function of the size of organization. “Within the Enterprise market, Gartner’s comments hold true – most enterprises have legacy on-premises BI platforms and are more interested in extending their existing platforms, rather than investing in new off-premises solutions. Also, major enterprises are generally outside of the ‘”sweet spot” for SaaS and other cloud vendors, since they have the scale and budget to warrant building and operating their own systems. So we’d agree that enterprise customers will move towards cloud-based solutions but at a slow pace.”
“But it’s a completely different story for organisations in the mid-tier and SME sector – which Gartner doesn’t appear to address. Smaller organisations have been early adopters of SaaS and Cloud-based solutions because they are more cost-effective in comparison to buying and running their own systems. Additionally, smaller organisations tend to be involved in a “web” of commerce with other similar parties, which makes resource-sharing through the Cloud a more attractive proposition,” he adds.
According to Intuitive Business Intelligence, the real opportunity for Cloud BI is where one organisation builds a BI platform and makes it available to third parties over the internet. Edward Smith says this is an activity that could grow beyond 3% of BI software revenue and cites the example of a customer called Research Now. “It chose Intuitive Dashboards as it enabled them to embed Web-native BI within their own software-as-a-service offering. They needed a product that could be deployed to a global customer base from a central location, and was scalable to large numbers of users.”
So is BI in the Cloud over-hyped? It would seem harsh to conclude that Cloud-based BI is over-hyped. It is a complex market which will take time to fully realize its potential and much depends on the IT maturity, size and needs of the organizations buying the solutions. Given the growth of Cloud-based applications more generally it would be difficult to plead a special case for BI – that it falls outside of the general trend. BI is heading in the same direction as the other Cloud applications – it just may take a little longer to get there.
