Tuesday / February 18.
HomeWhat's OnPwC Sees Changing Climate for Cloud Companies and Software Industry

PwC Sees Changing Climate for Cloud Companies and Software Industry

As more and more enterprises give up license-based software in favor of faster, more convenient cloud services, the software industry itself is changing dramatically, according to a recent report from the advisory firm PwC (formerly known as PricewaterhouseCoopers). Although legacy software companies that have moved into the cloud are reaping the benefits of the growing “as-a-service” ecosystem, they are also facing some risks.

The “PwC Global 100 Software Leaders” report, released late last month, finds that the revenues for the top 100 cloud companies rose by 10 percent between 2012 and 2014, from $247.5 billion to $272.2 billion. The top five companies providing cloud services globally were, in order, Microsoft, Oracle, IBM, SAP and Symantec.

Since PwC’s last “100 Software Leaders” report was released two years ago, cloud adoption has continued to grow to the point where it is now “affecting the climate of every software company.” Among the top 50 vendors, cloud-based software now accounts for around 10 percent of their total revenues, according to the latest report.

Customer Support a Differentiator

“While the cloud continues to underpin massive change, other trends are building on its capabilities to create opportunities in digital innovation, industrial capabilities and convergence within vertical markets,” the PwC report noted. “The spoils go to anyone whose code represents an improvement.”

That means that startups can quickly emerge as up-and-coming challengers to existing leaders, the report said. PwC pointed to two companies appearing for the first time on this year’s Global 100 list: Workday, which ranked 72, “is challenging existing companies in the human resources space,” and Splunk, a startup big data analytics firm that debuted at number 100.

In addition to having to watch their backs for new competitors, cloud services leaders must also pay increased attention to customer service. That’s because, “as software options proliferate, and switching costs diminish, support becomes more of a competitive differentiation,” the report stated.

Pressures To Connect, Improve Value

Such pressures represent a significant change from the way the software industry used to work, said Amy Konary, program vice president for the SaaS, business models and mobile enterprise apps teams at the analyst firm IDC.

Under the old licensed software business model, vendors tended to think, “I’ll sell you a whole bunch of stuff, and then I’ll go away,” Konary told us. With the cloud’s subscription-based model, software companies must make a greater effort to ensure customers use their offerings, gain value from them and have reasons to renew . . . much in the same way a local gym needs to give members reasons to keep coming back, she said.

“It’s really important to sell the right amount and make sure they’re getting value,” Konary said. “Vendors really have to focus on, ‘How can I improve value over time?'”

As businesses increasingly turn to the cloud for mission-critical services, their expectations are also changing. “Looking at it holistically, I think there’s been an overarching shift in the mindset of customers,” Konary said.

Enterprises looking for cloud services now know they have a wide range of applications and providers to choose from, with specialists in every possible application area. At the same time, many also continue to run their own applications on premises, which is driving a growing demand for hybrid cloud services and providers who can help connect multiple, disparate IT systems. “There are many different ways to do cloud,” Konary said.

Let’s block ads! (Why?)