Enterprise Software Market, 2018 — What’s happening in A.I. , Cloud, and more…
There seems to be nothing more enterprising than the enterprise software market. From centralized computing to decentralized ones, from rule based programs to self-learning algorithms, from chips on electronic devices to chips on mechanical ones, from cycles to cars, from toys to space ships, from human health to machine health, from farms to homes, our lives are not the same as it was some years back. Thanks to advances in computing power, cloud & open source technology, enterprises are creating software solutions that have become an integral part of our world.
The market and the new world order:
Lo and behold, the enterprise software market will stand at almost $500 B market potential by 2022, approximately 12% of the $4.2 T worldwide IT spending by 2022. This figure is based on conservative estimates from two reports by Orbis Research and Gartner.
In another report, Gartner projects that the major chunk of the market would be captured by public cloud service — standing at almost $302 B by 2021. This includes, SaaS, PaaS, IaaS, BPaaS, and cloud management and security services, with SaaS, BPaaS, and IaaS slated to become the top grossers. Further, cloud adoption will get a booster shot as more companies drive towards augmenting their business processes with intelligence through IoT, Machine Learning, Analytics followed by Augmented Reality, Blockchain etc., (hereinafter referred to as ‘new tech’).
Keeping this view in mind, cloud solutions embedded with intelligence through new tech will become an inevitability for Enterprises. In fact, there is a transition happening from an on-premise world to the cloud world even today, albeit rather slowly owing to the complexity in current system landscape, short supply of new tech skills, and not to forget ‘we are doing just fine’ approach of some companies. As a result, it is possible that there will not be a complete switch from cloud to on-premise. Forbes talks about a new world order where hybrid deployments (cloud & on-prem) are likely to persist in the future.
Enterprise software makers are buzzing with activity:
So, while the enterprises switch to hybrid modes from on-prem to a mix of on-prem and cloud, all is not quiet on the western front. The biggest and fastest growing software makers are preparing for the battle of dominance in the cloud and new tech space to become the selected partners for enterprises transitioning to the new world order. The preparation is happening on two battlefronts:
1) Organic front: The focus is on building new generation business processes using IoT, ML, Analytics at its core, and also integrating and extending existing business processes with intelligence from new tech.
2) Inorganic front: The focus is on acquiring niche talent and technologies through M&As or partnerships which further reinforces and consolidates the organic front.
Moving on, this article will focus on some of the notable acquisitions by some enterprise software makers in 2018 in a specific focus areas — either a business process or a new technology or a strategic investment. (For a list of acquisition in 2017, you can read this article by cbinsights). I intend to append this list as more notable acquisition happen in 2018. For now, let’s set the ball rolling.
- Focus Area: Artificial Intelligence, Conversational AI
i) Microsoft’s acquisition of Semantic Machines for Conversational AI.
My take on conversational AI is that we need to set goals for building Conversational AI that go beyond making it more natural, human like? I am still to come across a bot that does not make me go — “Gosh! Can somebody tell me the quickest way to get to a human”? It makes me wonder — even if my productivity gets X% boost, would I be more motivated with human less conversations? Will it negatively impact my productivity in the longer run? Would I ever tell my colleague- “Man I had such a nice conversation with Alex from Amex, what a great bot he is, let me find him on LinkedIn!?” These are some areas to think about.
But for now, Microsoft seem to have done a lot in the areas of NLP and Conversational Intelligence with the recent ‘full duplex’ breakthrough in natural conversation. With Semantic Machines, Microsoft aims to further strengthen and make conversational AI more natural and less artificial. The team at Semantic Machines is particularly interesting. It has a unique experience, building core AI technology for Siri and Google Now as well as leading award-winning academic research.
ii) Microsoft’s acquisition of Bonsai
A part of Microsoft’s M12 portfolio, Bonsai claims to be the world’s first deep reinforcement learning platform for the enterprises, offering dev tools that will not only democratize the use of AI but also provide actionable intelligence and not merely fun science experiments. Bonsai operates in Energy, HVAC, Manufacturing, Automotive, Supply Chain Industries and lines of businesses.
Use Cases:
For industrial manufacturers, they are focused machine calibration, quality control, process optimization, system reliability. Read more here.
For supply chain, inventory management, container packing, safety stock, real time routing are the points of focus. Read more here.
2. Focus Area: Open Source Developer Community
i) Microsoft’s acquisition of GitHub was a whopping $7.5 B acquisition.
Whether Microsoft is likely to gain any bump in the stock price later in the future is a topic for another article, but to those who have been frequent visitors on GitHub and have had access to the amazing repository of open source projects contributed by philanthropic developers, MS has taken a stab at strengthening its relationships with developers. Yes, you heard that right, strengthening the developer relationships looks like the rationale behind this acquisition. Microsoft has latched on the fact that every enterprise in the world is slowly but surely is becoming a software company, so wouldn’t it help if Microsoft owns a giant software developer open source community? We will find out.
3. Focus Area: Connected apps across on-premise, cloud world.
i) Salesforce acquires Mulesoft
As per CrunchBase, the biggest round of acquisitions for Salesforce was in 2016 when it acquired about 12 companies. The focus of acquisitions ranged from data analytics to content and messaging. But the story of 2018 so far has been different and big. This year, Salesforce acquired 3 companies with Mulesoft being the biggest acquisition till date.
Mulesoft places Salesforce on a firm footing in the race to gain share of revenue lodged in supporting the hybrid existence of the enterprises in the future i.e. on premise and cloud. It provides the capability “for building application networks that connect enterprise apps, data and devices across any cloud and on-premise — whether they connect with Salesforce or not”. In the words of Marc Benioff — “Now with Mulesoft, Salesforce will enable customers to connect all of the information throughout their enterprise across all public and private clouds and data sources — radically enhancing innovation. I am thrilled to welcome MuleSoft to the Salesforce Ohana.”
4. Focus: Material Repair and Operations (MRO), optimization algorithms.
Material Repair and Operations (MRO) is a critical cost savings area as the spending here ranges from .5% to 4.5% of the revenue (Source). Furthermore, improved MRO inventory optimization has direct correlation with downtime reduction for manufacturing enterprises. What Oniqua brings to the table for IBM, is a team of professionals with key skills in MRO inventory optimization, data engineering, data science, and predictive and prescriptive analytics. According to Joe Berti, CEO of Oniqua, the combination of IBM’s asset optimization offerings with Oniqua is unique and not offered by any other software company in the market. They intend to offer the next generation ‘solutions as-a-service’ that let businesses easily connect with the data they need so they can forecast equipment failures, optimize spare parts, reduce unplanned downtime and optimize asset maintenance.
5. Focus Area: Customer Experience
i) SAP Acquires Callidus Cloud
According to Orbis Research, the Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP) are the leading application segments of the enterprise software market. The dominance of SAP in the ERP and back office space needs no proof or introduction. However, with the current focus of companies in reinventing sales, service, marketing, and commerce, SAP is determined to take a strong position in the ~$40 B CRM market with its SAP C/4HANA customer experience solutions. The acquisition of Callidus cloud would be integral to the C/4HANA suite. Callidus Cloud is cloud-based sales, marketing, learning, and customer experience solutions.
6. Focus: Financial planning
i) Workday acquires Adaptive Insights
In a move to consolidate and extend its portfolio, Workday announced its acquisition of Adaptive Insights, a SaaS firm specializing in financial planning. According to a Gartner report, Adaptive Insights was recognized a Leader and positioned highest in ability to execute in the Gartner 2017 Cloud Magic Quadrant Strategic Corporate Performance Management Solutions report based on its ability to execute and completeness of vision.
These are some of the acquisitions. As we move ahead in 2018, I plan to update this with more notable acquisitions. Watch out for this space and add your observations and takeaways from these acquisitions.
