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Frost & Sullivan says vertically-focused solutions will be the next big cloud opportunity in Europe

Frost & Sullivan says vertically-focused solutions will be the next big cloud opportunity in Europe

As European enterprises look to shift more of their in-house IT systems over to the cloud, research published this week suggests there is a big disparity between the level of adoption among different sectors, with traditionally conservative industries like energy and manufacturing lagging behind sectors like media and retail. Shuba Ramkumar, a senior ICT research analyst at Frost & Sullivan says it’s a wake-up call for vendors: vertically-focused solutions will be the next big cloud opportunity in Europe.

Based on a series of interviews with industry stakeholders, research recently published by Frost & Sullivan suggests retail is the most advanced sector in terms of adopting cloud-based services, well ahead of healthcare, financial services, manufacturing and the energy sector.

The firm says this is primarily because retail is inherently seasonal, which has nudged retail players –particularly larger retailers – towards more flexible back-end systems like HRM and ERP as well as front-end POSs and mobile inventory tracking applications that are increasingly being delivered on cloud-based platforms.

The sector’s (relatively) early adoption of social and mobile tools to bolster the integration of brick & mortar and eCommerce has encouraged uptake of a much broader set of tools, including analytics that provide deep insights into customer behaviour.

“Market potential is huge due to the willingness of retailers to migrate enterprise applications to the cloud while continuing to operate mission-critical solutions on legacy systems, which is also a common theme observed in most sectors,” Ramkumar said. “As a customer-facing industry, retailers are leveraging mobile and social network applications and data analytics to enhance their understanding of customer behaviour. Running these applications on a cloud platform can provide scalability and promote efficiency,” she added.

Ramkumar told Business Cloud News that while most businesses flock to cloud-based services because of the cost or agility benefits typically associated with them, inhibitors to cloud adoption are much more vertically-specific and ingrained in industry cultures.

“Energy and manufacturing are conservative by nature and with any new technology there is always a lull period because they take a long time to decide to move, whether it’s cloud or not. Conversely, what we’ve found with retail – with the trend towards blending eCommerce and traditional brick & mortar, they are more willing to adopt new technologies when it comes to this pursuit,” Ramkumar said.

“As is the case with most verticals we still see an unwillingness to phase out in-house datacentres and completely shift systems and applications to the cloud, but where we really see the complexity of legacy systems having an impact on uptake of services delivered via the cloud is in manufacturing,” Ramkumar said, adding that manufacturing businesses often depend on large multi-module systems for deeply integrated core business processes – like linking on-premise inventory systems to ERP systems on a global scale. “The global nature of these businesses also means dependence on larger systems than one might find in other sectors, which also slows the pace of change.”

Ramkumar said the traditional barriers to cloud adoption – regulatory compliance and security concerns – are still holding some of the more regulated sectors back, particularly in financial services and healthcare. But she also suggested that the businesses serving these verticals can turn the uniqueness of these challenges into strategic differentiators by catering specifically to them.

Businesses are only just starting to look at how cloud-based ERP and CRM systems could be adopted within vertical sectors, but the lack of vertically-specific cloud solutions means many are delaying the implementation of new IT systems. “The biggest thing these industries told us is that they have specific requirements for the applications they want to run on their platforms, which requires vertically-specific features and an understanding of the business processes there,” she said, echoing statements made earlier this month by Gatwick Airport CIO Michael Ibbitson on the lack of vertically-specific cloud-based solutions.

“There are a few vertically focused vendors that are making the shift to delivering software as a service – in manufacturing for instance, you have companies like BlackLine Systems, which provides ERP and ERP-integration specifically for different industries within manufacturing. But most of what we’ve seen are fairly broad, standard offerings,” she said.

Ramkumar says it’s a wakeup call for the vendor community, particularly those already catering to specific verticals. “We really think the next big wave of cloud adoption won’t come from uptake of broadly-appealing, broadly-applicable cloud-based services,” even if these broader services play a role in delivering more specific software offerings.

“Instead, it will be driven by the niches, the services that appeal specifically to verticals because they have a built-in awareness of the business processes out of the box, and will help facilitate the emergence of new vertically-specific vendors that may seriously challenge incumbent solution providers,” she said.

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