85% of Software Firms Say They Sell Cloud Software Now

Cloud-based software seems already to have become a significant product for a majority of 100 software executive respondents recently surveyed by Sand Hill Group.

Fully 85 percent of respondents said their company already has a cloud product or service offering in the market.

Some 43 percent of the executives forecasted that their revenues will be dominated (81 - 100 percent) by cloud-based services and products in five years.

Some 61 percent of respondents from companies with revenues less than $250 million are driving towards cloud-dominated (81- 100 percent cloud revenue) business in five years. The larger companies will grow cloud revenues more slowly. About 16 percent of the large company respondents indicated that their revenues will be in the range of 1-20 percent in five years, and 67 percent said it would be between 41-60 percent.



The survey data shows clearly that Platform-as-a-Service is still in its infancy. Enterprise customers already have a rich suite of on-premise development tools and question the value of the platform in the cloud. They also have concerns about vendor lock-in, architectural re-design efforts, and the readiness of PaaS platforms to handle enterprise production applications. Furthermore, CIOs are waiting to see which platform will emerge as the dominant one before committing. In the near term, PaaS will be a favorite for early adopter and progressive companies.

The most popular form of cloud service is "software as a service." SaaS is a dominant delivery model with more than 93 percent of executives indicating that SaaS generates the highest revenues for them, among cloud services. However, PaaS is a strong favorite to dominate in the next three years with 85 percent of executives indicating that PaaS will generate the highest revenues.

Once PaaS reaches mainstream adoption, however, it will be a sweet spot for many product and services vendors. Half of enterprise software comprises of custom software developed on software development platforms. PaaS is where almost half of the tools, custom development, and migration revenues will be generated.

The survey was conducted betwen January and February 2011. See this for more detail.