The Dollars And Cents Behind Enterprise Cloud Adoption

Cloud technology has already changed the way businesses run their back-end operations, and when it comes to finances, everything from payroll to treasury management processes have migrated.

New research from North Bridge Growth Equity and Venture Partners, in collaboration with Wikibon, aimed to explore exactly how businesses — especially B2B suppliers — are navigating through the cloud adoption journey.

Unsurprisingly, analysts found a massive market for enterprise cloud technologies. Today, more than three-quarters (77.3 percent) of businesses use some type of cloud-based Software-as-a-Service tool — a 9 percent increase from 2014. The industry is worth about $53 billion today, and in 10 years, researchers calculated that the market will hit a whopping $298.4 billion valuation.

[bctt tweet=”The SaaS industry is worth about $53 billion today.”]

“Cloud has been gaining momentum year over year since the Future of Cloud Computing survey was launched five years ago,” stated North Bridge General Partner Jim Moran in the report. “This year, we’re seeing the pervasiveness of cloud disrupt industries across the board as companies look to maximize and implement cloud as a strategic and integral technology.”

A closer look at exactly how these businesses are adopting cloud technology reveals businesses realizing the financial benefits of these tools.

For instance, researchers said, 73.5 percent of payroll and HR operations by the companies surveyed are now based in the cloud. This is a massive shift in corporate behavior from only a few years ago, the report noted, with payroll and HR named the least likely business process to see disruption from cloud technology in 2011.

Analysts also examined the buying habits of businesses surveyed when it comes to procuring cloud technologies. According to the report, three-quarters of companies are using fewer than 10 cloud service providers, demonstrating a trend of vendor consolidation.

When procuring cloud services, the majority of companies are reportedly doing so online and direct with service providers. It’s a trend also expected to continue, the report concluded, with the percentage of businesses headed towards online cloud service procurement forecasted to reach 56 percent in two years.

The cloud service sector is impacting the finances of businesses on both sides of the vendor-buyer transaction.

For buyers, companies are procuring SaaS tools with financial gains in mind. Seventy-eight percent of those surveyed said they expect a positive return on investment within just three months.

And for SaaS players, investment in the space is booming, researchers found. Over the last five years, private financing for the cloud and Software-as-a-Service startup community has grown fourfold. The size of these investments is spiking, too, with the average value of them growing 1.8 percent during those five years.

In the last half-decade, $7.6 billion has been invested in cloud-based startups, researchers calculated, with an average size of $16.2 million provided in each deal.

Cloud-based services are disrupting how corporations run operations, and the technology has pervaded all aspects of business finance — from the way companies manage their money to how they spend it. But with analysts looking at massive growth throughout the next decade, the report also highlights the existing struggles for SaaS adoption.

While interoperability of cloud-based services and the reliability of these technologies have declined as chief concerns for business users, security remains a significant hurdle for adoption, with nearly half (45.2 percent) of those surveyed citing this worry. Regulatory compliance is also a significant hurdle, researchers said.

These challenges are likely to always exist in the Software-as-a-Service sector at some level. But the report also pointed to the data management challenge of today’s cloud adopters.

While North Bridge’s Moran acknowledged that cloud technology has become the sole method of data management for many corporate users, there exists a more immediate issue that SaaS startups and vendors will need to address.

“As the survey showed, because data rarely moves between clouds, companies must first learn how to interconnect disparate data sources into new applications,” Moran said.