Dive Brief:
- Industry cloud adoption will have a slow start in the coming year, analyst firm Forrester said. The market for industry-specific cloud solutions will grow at a modest rate of 10%, four percentage points below vendor expectations, according to Forrester research.
- While there are now hundreds of industry verticals across finance, healthcare, manufacturing, retail and other large sectors, elusive ROI and persistent budget scrutiny will hinder adoption in the short term, the report said.
- Instead of investing in industry cloud, enterprises will prioritize operational cost-cutters like workflow automation, tactical AI, user-experience technologies and low-code capabilities that boost efficiency and improve customer experience, according to Forrester.
Dive Insight:
Cloud is the engine driving enterprise modernization across industries and the ultimate destination for many companies. Even as budget scrutiny and IT optimization intensified this year, end-user cloud spend rose nearly 18%, topping $560 billion, according to Gartner.
Industry cloud promised to ease adoption. But for many companies, tailored verticals have complicated the decision-making process, Forrester Senior Analyst Akshara Naik Lopez told CIO Dive.
“Industry-specific solutions are more complex to set up, more expensive and they require a very specialized skill set to implement,” Naik Lopez said. “You really have to be able to justify the ROI versus going with a comparable generic solution and then adding extensions or customizations.”
Cloud comes in all sizes. Elasticity and flexibility are two of its selling points. Industry verticals will need to compete more effectively with basic cloud offerings to have a larger market impact.
“Industry clouds are really a mixture of platform and software that hits different layers in the tech stack where there are already generic solutions available,” Naik Lopez said.
Convenience doesn’t trump composability, at least not for now. Even when there is an industry vertical available, the flexibility of a multivendor cloud-based ecosystem is often preferable to paying a premium for a relatively new and untested packaged solution.
“As a client executive, you want to be open to the fact that whatever I’m doing today is composable,” Naik Lopez said. “I should be able to bring in new software or other solutions and marry that into what I’m building out for my company.”
Oracle, IBM, Snowflake and Salesforce are several large service providers that are banking on verticals to grow their business. The big three hyperscalers are also heavily invested in industry clouds.
As the technology matures, analyst firm Gartner expects tailored platforms to gain a foothold in more than half of enterprises by 2027.
Forrester isn’t counting out that possibility. It’s just taking more of a wait-and-see approach.
“In these economic conditions, a lot of companies are delaying their decision on industry cloud and focusing on other areas before they decide whether industry cloud is really the way to go,” said Naik Lopez. “It’s really still in the early stages. Perhaps in a few years the discussion may be a little bit different.”
