Which Business Functions are Using the Most Cloud Applications


Customer-facing business functions are garnering the largest share of the cloud application budget. Marketing, sales and service are capturing at least 40% of that budget in all four regions. The experiences of Dell’s enterprise sector online marketing function shows how one large company is trying to get closer to customers through cloud marketing applications. And a new private cloud at Web media company AOL Inc. explains how a technology-dependent company can make its technology more responsive and cost-effective.


 

  • How the cloud application budget is being divided (by regions of world)
  • How companies plan to allocate their cloud budgets in 2014

With cloud applications representing anywhere from 12% (Europe) to 39% (Latin America) of total applications at the companies we surveyed, it is clear that they have become a fixture in large corporations. But we also wanted to know exactly how companies were allocating their cloud application budget, business function by business function.

So we asked our respondents to estimate how their companies had apportioned their spending on cloud applications across 10 core business functions: customer service, marketing, sales, manufacturing (or the equivalent of “production” or “operations” in service firms), research & development, human resources, distribution, purchasing, finance, and legal.  Furthermore, we asked companies to estimate their budget allocations at present (for 2011) and their projections for 2014.

For 2011, spending on cloud applications is, for the most part, spread well across all 10 functions. Across all four regions of the world, not one business function had commanded more than 19% of the total cloud applications budget. In Latin America, customer service cloud applications were 19% of total cloud applications spending. And in Europe, the marketing function garnered the largest slice of the total cloud applications budget, at 18%.

On the other end of the spectrum, none of the 10 business functions received an average share of less than 4% of total cloud applications spending in any region of the world. Distribution and purchasing received 4% of the total cloud applications budget in Europe, and legal received 4% of the average cloud applications budget in Asia-Pacific companies.

Despite that fragmented spending, in all four regions three functions collectively commanded at least 40% of total cloud applications investments: customer service (15% of total spending across all four regions), marketing (14%) and sales (13%). Of course, these three functions are “customer-facing”: their operations directly touch a company’s customers on a daily basis. In contrast, three functions that don’t touch customers every day – legal, purchasing/procurement and HR – collectively accounted for only 19% of the total cloud applications budget.

There were a few regional exceptions to overall trend. In Asia-Pacific companies, the manufacturing/production function accounted for 14% of total cloud applications spending – twice the percentage of U.S. companies. In Latin America, companies spent more on manufacturing/production cloud apps (12% of total cloud applications spending) than they did on marketing apps.

Why are companies in all four regions putting more of their cloud applications investments in these three customer-facing functions? We believe it’s in part because such cloud applications are more directly able to generate revenue or increase customer loyalty than cloud applications supporting back-room functions. The other part of it is that companies are starting to recognize the value of cloud computing for processing and analyzing enormous volumes of customer data – particularly data generated from customers and prospects on the Web from social media.

In the U.S., 58% of companies had shifted to the cloud on-premises applications that reported and analyzed sales data. Nearly half (45%) had created entirely new applications in the cloud for sales analysis and reporting. And 44% of U.S. companies plan by 2014 to have new cloud applications that collect and analyze social media data, four times the number of companies that had such cloud applications in 2011.

How Companies Plan to Allocate the Cloud Applications Budget in 2014

The companies we surveyed believe that sales, marketing and customer service will continue to snare the largest shares of their cloud applications investments through 2014. Among U.S. companies, marketing (15% of all cloud applications spending), sales (15%) and customer service (14%) will lead the way. In Europe, marketing (16%), sales (19%) and customer service (10%) will account for 45% of all cloud apps spending. Asia-Pacific companies expect to continue investing more heavily in cloud manufacturing apps (15% of the total cloud apps budget), although they project that 35% of total spending will go to marketing, sales and service. And Latin American companies expect marketing, sales and service cloud apps to be 44% of total cloud apps spending.

 


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