Predictions 2013: Enterprise Software & Application Services

We see 2013 as being a pivotal period for enterprise software and application services suppliers as they grapple with the disruptive implications arising from cloud, mobile, social media, and big data/analytics. The scale of change is already forcing suppliers to think differently about what they deliver, how, and how they charge for it. A new factor is the need to predict the rate of change across these interlocking spaces.

Supplier maturity varies - from enthusiastic adopters and transitioning traditionalists, to reluctant followers and slow starters - but they are all faced with turning disruptive innovation into profit-generating revenue streams. That means taking them mainstream and innovating to reduce the cost of delivery.  As a result, 2013 will be a make or break year for suppliers while developments that further blur the boundary between the two groups will bring additional make or break considerations. Some providers will fail to make the changes or get the timing wrong, meanwhile there is a throng of emerging providers ready exploit any mistakes made by today’s lead pack.

Investment-to-revenue lag start to hurt

Upfront investments in new business and technology areas (cloud, mobile, social media, big data) will start to hurt during 2013 due to the combined effects of the slowing market and the early market stage of these new technologies. Although adoption will ramp up during the year, it will be from a low base so actual revenue will be a small proportion of software and services suppliers’ overall revenue. Suppliers who can reduce the cost of delivery through shared development/shared risk, standardisation and asset reuse, and one-to-many delivery and support models; and adjust business models around outcome-based fees will be best placed to manage the investment-to-revenue lag.

Technology without a cause?

It will be incumbent on suppliers to demonstrate the business value of new technologies/solutions in specific use cases. The scope for social, mobile and big data analytics use is vast and many enterprises will not have the bandwidth or resources to explore potential use and value. Unless there is a clear outcome-based business case, enterprises will continue to explore via pilots or deploy tactical solutions rather than invest in the revenue-generating deployments suppliers need. This will drive the development of process-specific and vertical solutions earlier in the lifecycle than usual. Suppliers with deep domain knowledge will have an advantage – those who just skim the surface risk being exposed. 

Back to the starting blocks

Leadership in ‘traditional’ technology and solution areas is no guarantee of a top position in the new areas. With so many of the fundamentals changing - business models, delivery mechanisms, development timetables, technologies, skill requirements, asset and IP mixes, partner models - everyone is starting from the same place. Early movers will gain an advantage but even here established suppliers will face intense competition from emerging players.

Established suppliers at risk of being outmanoeuvred

Existing software suppliers risk being outmanoeuvred by cloud-centric competitors acquiring and/or partnering to bring portfolio cloud solutions to market. Traditional vendors are slicing off more of their core systems and putting them in the cloud; at the same time cloud providers are edging further towards the core. Running alongside this will be other budding partnerships involving cloud providers that could cross service lines (e.g. between cloud and network providers, cloud and telco providers), and expand the range of complementary functions and services. Traditional software providers will be hard pressed to adjust their go-to-market approaches. Software and services suppliers will have to be prepared for sales negotiations (and revenue splits) to become more complex and involve an extended group of participants.

SaaS, ERP and profitability

Cloud providers will not have it all their own way. SaaS offerings have yet to make a substantial impact in mission critical transactional ERP and providers are still dogged by profitability problems (when assessed from a GAAP perspective), which will be intensified by pressure to prove the case for SaaS ERP. Those factors, combined with traditional providers’ stepping up their own SaaS activities, could see some SaaS pure-plays break down during 2013, while others break through into new areas. 

The Windows 8 effect

The fate of Microsoft is tied to the performance of Windows 8, so 2013 will be a make or break year in the consumer, enterprise and mobile spheres. But the effects will ripple out through the huge ecosystem too, so whether positive or negative the impact in the SITS space will be widespread.

Posted by: Angela Eager at 08:59

Tags: software   predictions   applications  

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