Enterprising Insights, – Predictions at the Halfway Point of 2024, Episode 30

Hello everyone. I'm Keith Kirkpatrick, research director with The Future Home Group, and I'd like to welcome you to Enterprising Insights. It's our weekly podcast that explores the latest developments in the enterprise software market and the technologies that underpin these platforms, applications, and tools.

Now for this week's episode, I actually wanna take a step back here. Uh, we are now, as I'm recording this, we're in the beginning of July, and I'd like to take a step back to some market predictions that I made back in December of last year, and I wanted to go back, review them and see how many of them actually came through. So we're gonna take our time this week, go through those, see where I, where I was, right, where I was wrong.

And in some cases I'll bet the jury will still be out. Then as always, I will move to the rent or rave segment where I pick one item in the market and I will either champion it or criticize it. So let's get right into it.

So, as I mentioned back in late December of 23, I made several predictions about cut the market. And, you know, one of the ones that I made obviously was focused on generative ai. And one of the things I said is that in 2024, generative AI will go, basically, we'll see a lot of general availability of various generative AI tools, and really that generative AI was going to become table stakes.

So, back in December I was saying that, well, you know, right now we're seeing a lot of sort of pilot activity, uh, you know, uh, basically, uh, vendors were or, or releasing product in beta saying, Hey, try this out. See if it works for you. And my prediction was that by 2024, we would actually see general availability of generative AI tools.

Well, as we check in here at the beginning of July, I would have to say I was pretty much spot on to no one's surprise. Uh, we have seen a large number of vendors actually go GA with various generative AI tools and functions. Uh, everyone from Salesforce to Microsoft, uh, ServiceNow, OpenText, Adobe, you name it, uh, pretty much, uh, the vendors have released product that is actually out in the wild and is being used in a production environment.

Uh, this is not a terrible surprise. I think the interesting thing is that we are starting to see, uh, in addition to the very, very basic use cases for generative AI that we were talking about about six to eight months ago, things like content summarization or the generation of content, or even the basic generation of images from text prompts. We're actually seeing, we're starting to see more advanced use cases for generative ai, essentially using that technology to query these large systems, uh, to make it easier to interact with them.

Uh, so I think that's been a little bit of, of surprise in that how quickly we moved along. But, uh, on the other hand, um, given the pace of innovation and, and just the, the, the fact that if you look at some of the large language model providers who have come out with the next couple of generations of their large language models, plus the development of small language models, which are more specific or tuned models that are, are really kind of set up to handle very specific use cases or specific industries, uh, I think that's why we're starting to see, um, you know, a great variety of use cases and, and, you know, dare to say it, some more advanced functionality. So yes, I certainly think that, uh, that prediction certainly has come true.

Uh, for the second half the year, I expect more of the same in terms of, you know, rolling out these various, uh, different types of generative tools and, uh, enhancements to products, uh, from these major SaaS vendors. So, uh, let's see here. Second prediction vendors will try to introduce usage or consumption based pricing models.

Okay, so what was I referring to here? Well, if we talk about generative AI at the very, uh, you know, end of last year, the idea was that this is so new that really vendors were really just trying to get some product out in the market for customers to try and get familiar with it and really ascertain whether or not, you know, this actually added value to, um, their organization. And the goal, of course, was to, was to, you know, just spur usage, not necessarily worry about developing a full business model, uh, to actually recoup cost or turn a profit from these, uh, new technologies.

So where are we now in the middle of 2024? Well, we are starting to see vendors, you know, start to take a closer look at these types of pricing models. It doesn't mean they've fully moved to them, um, but certainly we, we have seen a bit of a shift.

I'll give you one example. If you look at one of the major SAS vendors in the marketplace, Salesforce, they actually have, um, really kind of rebranded their generative AI product as the Einstein one platform, uh, which can be leveraged across all of their major clouds, sales, sales cloud, service cloud, commerce cloud, marketing cloud, so on so forth. And obviously that will all link back to Data Cloud, which is sort of their CDP solution to link all of the data sources within the organization and even some outside together and making it so AI can act upon all of that data.

The interesting thing is that they are marketing these clouds, um, products, you know, as having a certain number of generative AI credits included. And what we're seeing here is sort of a freemium model. Essentially, we're gonna give you x number of credits, um, to use generative ai, get familiar with it, and hopefully give you enough for probably 80 or 90% of the market, uh, to feel like they're not bumping up against the limits.

Obviously, you'll have outliers that are using more, and of course they're making, uh, these additional credits available for purchase. But I think the goal was, again, still at this point to try to entice folks to use the technology, see that it has value, see that it actually fits into their workflow, and not necessarily worry about tying that use to the actual cost. So at this point, we're still sort of in that early stage of, of, you know, vendors trying out, you know, usage or consumption based models.

Uh, again, it's sort of more of a tiered approach where you get a certain number of credits per tier or per product if you go over that, and then you have to pay more as opposed to a direct consumption model or a, you know, a model like deposit account where you have x number of credits and you pull 'em out and once you hit your limit, that's it. I, I think that is still coming, but I think it's going to take time to roll that out because it is a, uh, it is a major shift. And if we look at the way the market is also changing in terms of using generative AI to replace or, or shift human workers into other roles, I think that's gonna have a major impact on how pricing is developed and rolled out over time.

Okay, so our next, uh, uh, prediction or our next prediction from last year, enterprises will continue to focus on consolidation with their technology stack. So what am I talking about here? Well, if you think of, uh, large organizations that have that basically went out a few years ago and bought, and bought and bought new applications to handle new functionality, obviously part of it was due to the pandemic.

They had to stand up your resources very quickly and didn't necessarily have time to take a long-term approach to planning, uh, application planning and purchasing. So what resulted, of course, was this model where you had a number of different applications, uh, within a particular organization, some of which may have had overlapping functionality, uh, perhaps you'd have applications that were purchased and still had some good features, but they needed something else, and they went out and bought another application to fill the gap. So what we wound up with were, uh, a large number of, you know, applications in use at a particular organization.

And what that resulted in was obviously security risks. You had waste, you had a situation where perhaps maybe not all of the licenses were actually being utilized, uh, which obviously creates, uh, you know, it's a cost issue, a waste issue. Uh, you also have issues with, um, various skill sets and different people using the same app, the same functions from different applications, which is inefficient, uh, leads to some issues in terms of workflow as well.

So my prediction was that enterprises would really start to focus on consolidating their technology stacks in 2024. Now, how did that happen, perhaps a little bit. Uh, I think what we've seen more is that enterprises, uh, they are evaluating all of these applications.

Some are making a move to try to consolidate. Others are saying, well, we have, you know, we may have all of these applications. What we need to do is identify which ones are we using, which ones are we not?

And that's where, uh, platforms like WalkMe, um, uh, cloud Eagle, they're starting to see more utilization from organizations that are trying to get a handle on exactly what is their technology footprint. So they can actually go through and shut off the applications they're not using, uh, let some licenses go, uh, you know, and so forth, and really understand what the technology utilization is, uh, within the organization. In terms of consolidation, I think that's something that's gonna take a little more time, uh, and is very, very much organizationally dependent upon an organization's priorities with respect to digital transformation, uh, the management of data and you know, what their own particular needs are.

Uh, I do think we are gonna start to see that happening more. Uh, as you see large SaaS application vendors do two things. One is incorporate more functionality across their platform to make some other, you know, sort of standalone point solutions, um, you know, redundant in, in some ways.

So I think what we're going to see is certain large platforms, uh, taking the approach of incorporating more functionality within their platforms so they can make certain point solution applications redundant in a sense. So for example, if you are, uh, a platform, a commerce platform, instead of just offering a commerce functionality, uh, like a, a checkout on your website functionality, it would also incorporate things like, uh, you know, the ability to look up tax, uh, you know, for different jurisdictions or to incorporate shipping information so that one platform can handle the functions of many, many minor point solutions. So that's gonna certainly happen.

The other thing is this growing commitment to an open ecosystem to allow more prebuilt integrations and, you know, more smooth integrations via API with other solutions in the marketplace. So the goal here is not necessarily that you're going to be compressing these tech stacks, but you're gonna be making sure that all of the applications can talk to each other and you're, you know, actually receiving value from all of the applications that you're using. Uh, will there be consolidation as the year goes on?

Undoubtedly it is gonna be up to the organization determine to determine at what pace they do that, which applications go, which stay, that sort of thing. Um, wholesale rip and replace. Eh, I don't know that that's going on to a large degree, just given the cost involved.

Uh, if we think about something, even like this migration to the cloud where organizations where vendors in particular are saying, well, hey, we should move to the cloud. Well, that's really expensive. Uh, it can be done, but you have to have the organizational will, you have to have, uh, the, you know, business leaders who are able to actually focus in and go, okay, what assets still need to be on-prem, which can actually move to the cloud?

What is our security situation like? So it, it's very complex. I think it's, it's not something that just sort of, you know, happens overnight.

Um, but, uh, certainly I do think that, uh, to some degree we're just seeing a little bit more focus on, you know, organizational tech stacks and what the utilization is. So I would say for this prediction, I'm, you know, perhaps half right. So, uh, so next trend that I thought would happen in 2024, SAS vendor consolidation will accelerate.

Well, um, this was based on the idea that, that, again, there were a ton of vendors that popped up, uh, during the pandemic even before then, that all really, for the most part, they had very similar levels of functionality and features. And my sense is that when you get to a certain, you know, market, uh, and you have large vendors that control a large percentage, and you have a bunch of smaller ones all trying to do the same thing and competing against the same dollars, you do see consolidation now so far, that has not come to fruition in large, in, in, in a large way at this point. As of July, 2024, we've seen a couple of deals where it's happening.

Uh, I'll give you a couple of examples. Uh, Avaya actually acquired Ed ffi, which is A-C-C-A-S-C-S and UCA platform provider that was very strategic in nature to provide Avaya with some very specific capabilities. Uh, so you know that that deal happened, I believe it was in April or May, is when, uh, it was announced.

5 billion to acquire WalkMe. Uh, again, this is also strategic in nature. SAP is doing everything they can to try to, you know, incent its customers to move to the planet.

So what does that mean? Uh, that means that you need to do all of this work of identifying which resources you have, which you're using, which you're not making sure that you're, um, your whole tech stack is accounted for. And WalkMe's, uh, digital adoption platform actually provides a lot of that functionality, and it's certainly an application that adds value to SAP's portfolio, along with a couple of other acquisitions, acquisitions that they've previously made, Signo and, uh, lean ix, which also kind of dealt with this whole idea of making sure that, uh, organizations had the tools and the data and the insights to actually make a informed move to the cloud.

So, uh, I would say here, I've, I kind of missed the Mark A. Little bit on this prediction. Uh, not sure what's going to happen in the second half of the year.

I do think there might be a bit of a, a, a stagnant period here, given that we are coming up at least in the United States into, uh, an election year, and there's always a little instability around that. But, um, certainly, uh, we'll, we'll wait and see, but I, I think at this point I would've to say I kind of missed the mark on this one. Uh, let's see here.

The next one, uh, focus on personalization continues in the B2C market and expands into the B2B market. Okay, this one's really interesting. Uh, this kind of plays into the alt idea that as we start to see AI really kind of permeate throughout organizations, there would be this ability to actually personalize interaction, not just for B2C customers, and essentially you and I going to, you know, our favorite retailer online or in the store and making sure that we're getting served up, uh, you know, products that meet our particular preferences and past histories and needs and all of that kind of stuff.

Um, this, this prediction is really focused on this type of approach expanding to B2B, uh, companies. And I would say that we're starting to see a little more of it on the vendor side in terms of offering those capabilities. Um, they realize that the B2B process when it comes to purchasing is not at all like the B2C, it is much more complex.

There are far greater number of influencers and other stakeholders who need to be intimately involved in that purchasing process and is not all the same. Even, you can't even just say B2B versus B2C. Um, that process is very different in, let's say a pharmaceutical company versus a heavy industry manufacturing company.

Uh, just in terms of the different procurement processes, the levels of approval needed, regulatory issues, all of that kind of stuff. Now, why I thought this would kind of expand now is that we are seeing this greater focus on, you know, ma really activating all the data that is available in, you know, organizations about all of these stakeholders. And now that you have generative ai, it is that much easier to try to interact with that data and, and really activate it and improve these processes, you know, making, you know, automatically serving up, uh, you know, if, if someone is, um, interacting with a company and they're looking at a part, uh, being able to automate the process of making sure that, you know, before that purchase, uh, order is, is sent through, uh, you know, making sure that all stakeholders are signing off, things like that.

Um, is this happening to a great degree? Probably not yet, but I do think that there are certainly steps being put in place at vendors, uh, to enable this type, these types of interactions, uh, this, you know, greater level of automation and the in increasing use of generative ai. So I don't think we're there yet.

Um, I'd be interested to hear from anyone if they can provide any examples real world on this going on. Uh, I have talked to some companies and customers about it. They just said it is interesting to them, but it is a question of, uh, really revisiting not only the technology, but the processes to make sure that the technology fits in to the workflows.

So, uh, kind of jury still out on that one. Okay. And for my final prediction for 2024, I've said that there would be an increase to industry or niche based approach to sales, to SaaS sales and marketing.

So what does that mean, uh, means that, are we gonna see more sort of industry specific versions or enhancements to these large SaaS platforms? Uh, I would say absolutely that's, this is coming true. I've sat on a number of different briefings where sort of large sort of generic platforms are now being reformulated or enhanced or recast to, you know, focus on specific industries and use cases within those industries.

Everything from tax and accounting to manufacturing, to to retail, to service all of the above and more. Uh, why is this? Well, there's a couple of reasons.

Number one, customers are not, they, they're not going to sit around and necessarily wait for, um, you know, a package that is sort of generic to be customized to their every whim, you know, from an third party consultant. That approach is very costly, time consuming. A lot of times it just doesn't ever work as good as it could because there's so many competing stakeholders who are competing for that, that, uh, you know, consultant's time.

Uh, and it also be because it is so customized, uh, it doesn't always work the way it should because of the breakdown between, you know, let's say me the user trying to explain exactly what I want from that application and having that consultant, you know, reconfigure the application to work exactly the way I want it, because it may not be the most efficient way to do it. So what we are seeing our vendors really kind of doing that hard work before, you know, basically in productizing that based on their industry knowledge of all of the processes and workflows within a specific industry. Uh, a great example would be if you look at the work that Epicor, which is an ERP company does, um, you know, with its, uh, ERP product, they are very focused on the manufacturing vertical, but not just manufacturing.

They are looking at very, very specific ones like, you know, uh, specific weld drilling equipment, something like that. So they're gonna know all of the ins and outs of that business and are able to, to tailor a solution that will be able to work pretty much out of the box for that industry. Uh, why would they do that?

Well, because they realize that, you know, if you do it for one company, there, you and you do it successfully, obviously you can do it for others in the industry with minor tweaking. Um, that's just a smart play. Uh, it sort of also plays into the whole idea that ultimately, uh, you know, just as consumers are expecting more personalization, businesses are also expecting a more personalized approach to the software that they're buying.

And they're wanting much more sort of out of the bunch out of the box functionality to be incorporated. So they don't have to spend a lot of time customizing that software because really there's no time when you think of the rate of innovation, the pace of innovation today with incorporating things like generative ai, if you have to wait eight, 12, however many months to get the solution to work exactly the way you want it, well, things have already changed. So, um, you know, you can look at my research notes where I've covered a lot of different industry vertical, uh, focused, uh, launches from all of the major software vendors that I covered.

You can sort of see this trend in action. So I think I, I hit the nail on the head on this one. I think this will certainly continue.

I think what we'll also see is a greater number of, um, uh, of these, you know, large SaaS, uh, companies, uh, really kind of diving in, not only on the technology side, but also trying to work with, uh, other experts in the field to really kind of build up and, and cement their, their, you know, sort of, uh, domain expertise. Because that's ultimately where the real value is, is understanding what workflows are, are or commonplace. You know, what are the pitfalls, what are the regulatory issues that are involved so that a solution can be tailored to that specific, uh, industry.

All right, so I think I did pretty well with my predictions. You know, like anything, uh, sometimes, you know, you miss the Mark A. Little bit, but I, I think overall, you know, as we look forward to the end of 2024, I expect all of these to continue to some degree and I will certainly be back at the end of the year, uh, for my predictions for 2025.

So with that, I'd like to move to my rent or rave section, and this week I have a rave. Now this is around, uh, something I normally have a pet peeve about, which is when a vendor, uh, releases new product and they do not release any sort of pricing along with it, they usually say, you know, that depends or you need to call or whatnot. And the challenge with that is, for me as an analyst is trying to ascertain, well, what is the actual likelihood that, you know, a particular, uh, product is competitive in the marketplace with others in terms of pricing?

Now, pricing is not the be all end all. We have to look at value, and that's obviously a, a calculation that is highly dependent on the organization, the use case, uh, the scale at which the solution is being rolled out, so on, so forth. But just getting hard numbers for pricing is certainly a welcome, uh, welcome change from a lot of the analysis that went out.

So what I'm referring to here is Microsoft Dynamics, uh, 365 contact center just went generally available. Um, and, uh, you know, the release that went out and the folks from Microsoft actually put out, you know, plain and simple pricing. They said it's available for $110 per user per month for Dynamics 365 contact center, which includes digital and voice channels, as well as individual channel options for additional purchase.

Uh, they also talked about, uh, another tier of service, the Dynamics 365 customer service premium available now for $195 per user per month. And then, um, what what's really nice about this again, is this is very helpful in terms of framing and understanding, you know, what would the potential outlay be, you know, for a particular contact center of a certain size, it's very easy to kind of get that calculation and then, you know, assess, hey, you know, what is the, the value delivered just on a straight pricing basis. And then, then you can do a, a further analysis in terms of looking at, well, what features are involved, you know, what is the expected shift that will occur within that organization in terms of moving, you know, uh, frontline call center employees to higher value tests, or maybe they'll be more x more productive or what, you know, ultimately though, having that metric there is really great to see, uh, particularly given that a lot of times, you know, all of this stuff is hidden, uh, behind layers and layers of, of, you know, different terms and conditions, uh, which makes it very difficult to kind of compare solutions.

So kudos to Microsoft for being upfront about that pricing. Obviously the details are, the devil is in the details with everything in terms of when we really get into it, but at least there's sort of a baseline there. So certainly a, uh, rave there to Microsoft.

Alright, well, uh, with that, that's all the time I have today. So I wanna thank everyone for joining me here on Enterprising Insights. I will be back again next week with another episode focused on the happenings within the enterprise application market.

So thanks again for tuning in. Be sure to subscribe, rate and review this podcast on your preferred platform. Thanks, and we'll see you next time.