Zero One: The Mushrooming Cloud

The gold rush to the cloud shows no signs of slowing, even as cloud apps appear to be maturing.

Here’s what’s happening: Independent software vendors (ISVs) are looking to go vertical. Systems integrators (SIs) have begun jumping into the fray. And the marketing tech juggernaut continues to push compelling cloud offerings.

First up, ISVs.

In the tech industry, vertical apps indicate a maturing market where main objectives have been met by industrial strength solutions, consolidation starts to occur, ecosystems form around platforms, and now the next stage of value for ISVs is in specialized software tuned to a certain industry.

“In 2017, we saw that cloud vendors started formulating industry-specific solutions in the healthcare, financial services and retail sectors,” says Neeracha Taychakhoonavudh, senior vice president of partner and industry innovation at Salesforce. “Many of these vertical markets still remain largely underserved and untapped, offering a significant opportunity for channel partners to capitalize on and specialize in those markets.”

Related: Zero One: What’s the Scoop on Enterprise Software?

There’s a lot of money changing hands in the verticalization stage. Some argue that vertical solutions offer the most value, in terms of serving customers and getting a leg up on the competition.

For instance, Salesforce’s largest net gain in industries will be in financial services and manufacturing, creating $164 billion and $159 billion, respectively, in new business revenue by 2022, according to IDC.

SIs want to get into the cloud game, too.

Taychakhoonavudh has seen a convergence of SIs and ISVs, driven by the opportunity to create battle-tested, repeatable cloud solutions. Channel partners offering repeatable solutions can make some real money. By 2022, the Salesforce partner ecosystem will gain $5.18 for every dollar Salesforce earns, according to a joint IDC-Salesforce study.

By bringing cloud apps into their portfolio, SIs are investing in their own intellectual property, she says. “This type of app development poses a massive business opportunity for partners, as cloud ecosystems continue to grow and provide opportunity for partners to invest in app innovation through new ways they couldn’t before.”

Related: New Research Shows Big Opportunity for MSPs in Digital Marketing

The channel might also want to look at the marketing tech space.

This year, the CMO’s tech budget surpassed the CIO’s, Gartner says. Chiefmartec reports that the number of marketing tech vendors is now more than 5,000. And Forrester predicts a B2B marketing renaissance in 2018 (although Gartner believes spending will be more disciplined).

Either way, marketing tech is still one of the most popular enterprise software categories in the cloud, according to G2 Crowd, a crowdsourcing enterprise software review site.

“It’s still one of our highest traffic areas, and one of the places we end up answering questions a lot,” says Michael Fauscette, chief researcher officer at G2 Crowd.  “But it’s perhaps a little different than it used to be… consolidation of vendors or consolidation of features, which may actually be more accurate. A lot of the tools have gotten good enough to do a set of things. You don’t need to buy the best of every little piece.”

In addition to marketing tech, here are G2 Crowd’s most popular software and services categories (in alphabetical order): analytics, artificial intelligence, CAD and PLM, CRM, collaboration, content management, development, digital advertising platforms, e-commerce, ERP, hosting service providers, IT infrastructure, IT management, IT security, office, software, supply chain and logistics, and vertical industry.

Of course, many of these applications are a perfect fit for the public cloud.

“Public cloud tends to deliver the best experience, in general, when we look at the review data, and certainly a lot more applications are using the public cloud now,” Fauscette says. “The cloud platform wars are going to continue to expand. We’re seeing the ecosystems coalesce. That’s probably where you’ll see a lot of growth next year, the ecosystem to support those cloud platforms.”

Tom Kaneshige writes the Zero One blog covering digital transformation, AI, marketing tech and the Internet of Things for line-of-business executives. He is based in Silicon Valley. You can reach him at [email protected].