SMAC (Social, Mobile, Analytics, and Cloud): The Next Big Thing

SMAC: The Next Big Thing

Tyler Durden on 06/11/2014 21:58 -0400

If you don’t know SMAC, then you don’t know jack. SMAC – Social, Mobile, Analytics, and Cloud – is the ubiquitous term that every startup pre-IPO entrepreneur must use (no matter how awkwardly) in order to garner triple digit P/E valuations. Clearly not as superfluous as Pets.com, Goldman describes the powerful theme in enterprise software, enabling businesses to realign go-to market models with faster and informed decision-making driving an enhanced user experience.

Via Goldman Sachs’ Mohammad Moawalla,

Key factors driving the emergence of SMAC as the fifth wave in information technology are increasing internet and smartphone penetration, exponential growth in data and social media. Our US analysts estimate that 70% of the world’s population will be using smartphones by 2017. By 2020, corporates should be managing more than 50 times the data they do now. SMAC lets enterprises realign their go-to market model and expand their global reach with faster and informed decision making. Given SMAC stack’s high availability and ease of accessibility, companies are using them separately or as a whole to reach out to a greater consumer base and move into new business areas which should drive increased industry and competitive positioning among the peer group.

SOCIAL: With users spending 25% of their online time on social networking sites, these have become an effective medium for companies to engage customers and enhance brand value. Through social media, companies can target customers in a more informed way and gain real-time feedback from them in a costeffective manner. Starbucks’ management indicated an increase in revenues of US$180 mn in the first year of the launch of its “crowdsourcing” initiatives to understand customer preferences, which helped its product innovation capability. In our view, enterprise applications are becoming more “social” with an improved user interface and higher user interactions and the millennial generation is a key influencer in driving their growth.

MOBILE: Mobile devices such as smartphones and tablets have changed the way people access digital content. With the computing power of a laptop in a highly connected and portable smartphone, it is a powerful platform to deploy applications. Consumer use-cases of mobility applications can be seen in a wide range of verticals including retail (mobile commerce) and finance (mobile banking and payments). Enterprises use mobility applications for efficient customer relationship management (CRM), improved sales & marketing strategies , supply chain and product management. In the US, mobile commerce comprised 5.8% of total online retail commerce in 2013 and is expected to increase to 9% by 2018 (eMarketer). As businesses switch to enterprise mobility, mobile devices have increasingly become important to connect to customers and enhance user experience.

ANALYTICS: 90% of the data available today has been generated in the past 3-4 years. While the pace of data generation is only going to increase, organisations are looking to analytics to process this huge pool of data to give customers a personalized experience in a fast and cost-efficient manner. Amazon, for example, leverages its customers for product reviews and uses analytics for real-time recommendations to enhance sales and customer satisfaction. Analytics tools such as SAP’s HANA help businesses make intelligent and faster decisions by analysing large volumes of data to predict and identify change and new opportunities. Improved analytics capabilities are also driving changes in the front-end presentation and visualization layer, resulting in an improved user interface to facilitate better and faster decision-making.

CLOUD: Cloud computing is the delivery of computing services over the internet rather than a local server or a personal computer. Cloud services reduce cost and the complexity of owning and operating computers and networks. Cloud technologies are driving a major change in the IT landscape with disruptive applications enhancing user experience. We believe that increasing penetration of cloud technologies in enterprise software spending should decrease the mix of maintenance related spending to c.50% of the total from c.70% currently, thereby allowing re-allocation to spend in growth related areas.

Each of the components of SMAC has brought about a change in the way the markets and businesses operate, but their integration takes the impact to a whole new level. This drives consumer decisions: as a user searches for something on a mobile device, they are provided the most relevant results using analytics, their selection is then served to them via the cloud and the user would then recommend it on social media. According to a recent industry survey, global 2000, firms will spend c.15% of their IT services and outsourcing budget on SMAC. In the coming two years, the firms are expected to spend around 10% of their total IT budget on big data and analytics, about 9.5% on cloud services (including software as a service, and platform as a service), around 5.3% on mobile apps and devices, and 3.4% on social media.

The integration of SMAC is affecting businesses across industries as they move from material-based value chains to the virtual platform. Robust SMAC strategies must cover both – an optimal integrated online presence and the bricks-and-mortar side of the business. This wave of integration is a threat to conventional businesses unless they evolve and remodel parts of themselves in coherence with SMAC. With increased visibility on social media and ease of access owing to the cloud, the ripple effect is of a much greater magnitude than any other technological shift so far. At the same time, it is a boon for businesses that were either born into this phenomenon or are able to remodel their business platforms to merge with this evolution. Companies in our European coverage that are favourably exposed to the SMAC wave are SAP which operates across the stack , Monitise which is exposed to the mobile money market and Dassault Systemes, especially in the cloud.

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So there u have it… just what all those totally ubiquitous buzzwords mean and why you are paying $18 bn for Uber…

Perhaps the factors should be re-ordered? Social, Cloud, Analytics, & Mobile…

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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