Research & Advisory

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Cloud Convergence: A Primer to Understand Retail’s Cloud Transformation

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Product Overview

Date of PublicationAugust 25, 2016
FormatAdobe PDF
LicenseEnterprise-Wide Internal - Subject to Fair Use License
GeographyWorldwide or by Region

In this research, we summarize the overall market drivers, key players, decision points, and financial implications of SaaS and how they are impacting the retail software landscape. This document is written from the perspective of addressing the broad spectrum of stakeholders within the retail technology ecosystem from buyer to provider. While by no means is this meant to be an exhaustive overview, we hope that we are able to bring to bear some new factors for consideration, ecosystem impacts, retention and cost statistics to help support your decision making process.

We would like to thank NetSuite, a division of Oracle, for their sponsorship of this research.

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Key Observations:

  • Worldwide retail and hospitality SaaS revenue is projected to grow 389% from $3.5 Billion today to over $16.9B in 2020.
  • All clouds are not the same. There are significant differences between single and multi-tenant architecture that should be understood upfront.
  • Inability to customize software is often cited as a major concern when considering a SaaS solution, but this is no longer true in many cases. Among the largest cloud solution providers, Demandware (Salesforce), Magento and NetSuite are out in front in offering cloud code customization, each taking a different architectural approach.
  • From IHL Group’s research, retailers have expressed they are experiencing total life cycle cost savings by transitioning to SaaS ranging from 25-50%.
  • From our Sophia Data Service of installs from 1,500 e-commerce installations in North America and Europe, we currently can see retailers keep SaaS solutions an average of 17% longer because of ongoing enhancements made to the platform compared to traditional client/server models for which they have to patch and update themselves.
  • Perhaps the group facing the greatest management challenge with this ongoing shift to SaaS are System Integrators (SIs). We estimate that spending with SIs has a worldwide yearly compounded growth rate of only 2.8% up to 2020. This means that SIs must transition their practice expertise along with considering new revenue streams. We believe this is one of the underlying drivers as to why a few SIs are beginning to develop and sell their own software or acquire software companies. As we believe this trend will continue, the implications will be greater overlap and potential conflict between SIs and their ISV’s partners.

Below are some examples of some screen shots.

We welcome you to contact us if you have further questions around market sizing and vendor market share.

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Is this product really free?
Yes. While NetSuite did sponsor the research, we are agnostic in our analysis. The research that you will read is our perspective on the subject, absent of any bias associated with the sponsorship.

You mention that NetSuite is a division or Oracle, yet the paper does not reference the Oracle acquisition. Why is this?
The paper was originally published in late August 2016, prior to finalization of the Oracle acquisition. At the time of publication, all acquisitions had been correctly reflected.

For more information, please feel free to contact us.

This product is free. We would ask that you adhere to our license agreement with regards to quoting sections of the research. Our full license agreement may be found below.

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