The coming sea change in CTRM technology
We’ve been seeing it for some time now – the increasing momentum toward adoption of web-delivered and cloud-based CTRM. We’ve written about it extensively (almost to the point of exhaustion), but it is clearly a trend that will ultimately transform CTRM technology and something like that can’t be ignored. No doubt about it, web-delivered software adoption is accelerating…Aspect is a perfect example of this. The company is booking record license sales and revenues for their cloud/SaaS product, AspectCTRM, and they’ve essentially been the bellwether of the coming change.
Other companies, like OATI, have been selling hosted solutions, delivered via the web or private network, for a decade or more – in effect selling the same software running on the same type of server, with the differentiation being “do you want the server in your building or ours?”.
The significant technology change that we are seeing now is the use of the public cloud…a different proposition from just having the application running on a server in a different location. A number of vendors are now starting to re-engineer their software to take full advantage of the public clouds, like Azure or Amazon – proven environments with state of the art security, and high scale-ability that takes full advantage of the processing power inherent in those environments.
Of course, despite the advantages offered by the cloud, many prospective customers have been reluctant to have their books sitting outside their firewalls. While experience has shown data security of public clouds is no more or less a risk than is private servers, the perception of increased security risks has nonetheless been the major roadblock to increased adoption of cloud CTRM. Now, as I wrote about last week, with the prospect that we will see at least a few major commodity trading companies starting to move their CTRM systems into the public cloud in 2017, security concerns are starting, and will continue to fade as a roadblock to adoption. It’s easy to imagine the thought process of a CIO of a mid-sized trading firm when contemplating buying a new cloud-based system….”If highly-respected Mega-Cos. X, Y and Z are going cloud, there is little chance that I’m going to get fired if I do the same.”
Its that thinking that will change the dynamic for the entire market.
That mid-sized company CIO knows that “Mega Cos. X, Y & Z” will not just give the cloud a try to see what happens – they will deploy the resources necessary to ensure their systems are available, secure and working as they need and expect. They will have examined all conceivable issues and concerns long before throwing their most critical and sensitive systems into the cloud. Performance, cost, user access, integration, workflows, latency and every other potential concern will have been examined, tested, retested and checked-off long before they move their production environments into the cloud.
Once these “Mega Cos.” are there, the dam will burst – software in the public or private clouds, or at a minimum, hosted in shared environment, will become the norm in CTRM. Lets be clear though…we’re not talking necessarily about multi-tenanted models here. Sure, there will be some increased adoption of the “every customer using the same code” model, but the greatest near-term growth will be in the “hosted in the cloud” model. While that differentiation is important for some vendors and/or customers, we’ll save that discussion for another day. The critical takeaway right now is that 2017 appears to be the year that cracks in the dam will start to widen, the the beginnings of a flood of cloud and web-delivered software will swamp the channels that have been dug by vendors like Aspect.
Of course, that’s not to say that all existing customers of vendor software will immediately switch to the web and/or cloud…that will take time as they amortize their initial investments and continue to limit expenditures in a difficult market. Still, over the next 5 to 10 years, it will increasingly difficult to find a company that has a CTRM application server sitting in a heavily air-conditioned room in their own building.
As analysts, we have to deal with some unknowns – like how will the shift impact the size of the market and how do we model the shift? We also need to understand if, and to extent, buyers will care about the differentiation among private cloud, public cloud, and hosted options. While we have some early thoughts on these things, we will obviously be considering and researching them on an ongoing basis.
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