Microsoft’s PowerApps Aim To Disrupt Enterprise Mobile App Development Market

Microsoft (NASDAQ:MSFT) launched a new enterprise service called PowerApps that empowers users (employees of businesses) to create mobile apps (they need), connect to existing business systems in a secure way and easily share newly developed apps with coworkers. ^[1] This is significant considering the fact that over 2.1 billion mobile units will be sold by 2019 ^[2] and that enterprise mobile apps market is expected to grow with more companies and users relying on enterprise apps for productivity. In this note, we explore how this service will disrupt the enterprise mobile app development industry and add to Microsoft’s revenues.

See our complete analysis of Microsoft here

Trends In The Enterprise Mobile Development Market

Currently, over 2.6 billion people use smartphones. This number is expected to increase to over 6.1 billion by 2020, according to the Ericsson mobility report. ^[3] With the increase in subscribers, the uptick in user data is also expected, stemming from the increased use of apps. The Ericsson mobility report states that 80% of mobile data traffic will be from smartphones by the end of 2020. However, very few of these users currently use mobile apps for office work. According to TechCrunch, more than 3 billion people work in some capacity. ^[4] But only 20% of these have access to technology that makes them more productive for their work. The rest, which is about 2.4 billion, are underserved. This is a huge opportunity for future mobile app development as smartphone gains traction in the coming years. According to Strategy Analytics, the estimated total size of mobile app market is expected to be $63 billion by 2020. ^[5]

Given the scale and need for mobile app development, Gartner says that market demand for mobile app development services will grow at least five times faster than internal IT organizations’ capacity to deliver them by 2017. ^[6] Gartner also states that the average number of devices that an employee uses is expected to increase from three to five or six devices as technologies such as wearable devices and the Internet of Things (IoT) eventually become mainstream. Since many of these employees are given the autonomy to choose the devices, apps and the processes with which to complete a task, it puts increasing pressure on IT to develop a larger variety of mobile apps for employees. Recent research from Accenture revealed that almost 82% of the 2000 decision makers for technology agreed that apps are integral to the success of their respective organization. As a result, organizations need to decide which applications need to be developed and which tools, vendors, architectures or platforms will be used in development. Microsoft has identified three key causes to the business app “innovation gap” ^[7] :

• Lack of skilled mobile developers: As stated, Gartner predicts market demand for mobile app development services will grow at least five times faster than internal IT organization capacity to deliver them. Therefore, there aren’t enough skilled mobile app developers to keep up with demand for business app development.
• Business data proliferation across multiple devices: Business data has proliferated spanning on-premises systems and SaaS clouds. Furthermore, this data is spread across many systems, and it is difficult to connect to and consume related data from within an app.
• Sharing and deploying enterprise (sometimes with proprietary data) app is difficult: Mobile app distribution typically happens through app stores, or through mobile device management, governed by IT. This creates inherent friction in getting apps onto employee phones.

What Is PowerApps?

Microsoft has been chasing its dream to develop a suite of application tools, such as Project Siena, that lets non-programmers develop professional level apps. In March 2015, Microsoft introduced Azure App Service, which supports .NET, Node.js, Java, PHP or Python, based on Azure Web Apps. In its latest effort, Microsoft is combining the existing Azure App Service with a new tool that supposedly enables anyone to create an application with a few clicks through drag and drop features. PowerApps boasts of a new visual development tool for building clients for App Service applications. The PowerApp is backward compatible with a wide range of application programming interfaces (APIs), including: 1) those built on App Service; 2) those from Dynamics CRM, Salesforce or SharePoint; 3) those associated with docs on OneDrive or Google Drive; 4) those used in Azure-hosted SQL Server databases; and, 5) those enabling both on-premise and cloud versions of Office 365.

Currently, Microsoft has three different plans for PowerApps (Free, Standard and Enterprise) with scaled pricing from freeware through standard to premium. The free service is limited to two connections to SaaS data sources per user. During the preview, the Standard tier is also free. Microsoft hopes that PowerApps will dramatically expedite business apps development and reduce time to solution from weeks or months to minutes by empowering a new category of app creators i.e. tech-savvy employees.

At this moment, it will be difficult to ascertain the impact of PowerApp on Microsoft’s revenues since Microsoft’s earlier efforts in this space, including Project Siena, have not taken off. However, we continue to monitor growth in this new service as it unfolds.

At present, we have $47.13 price estimate for Microsoft, which is 15% below the current market price.

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1. Microsoft announces solutions to help businesses modernize in the digital world, November 30^th 2015 [↩]
2. The Enterprise App Explosion: Scaling One to 100 Mobile Apps, May 7 2015 [↩]
3. Ericsson mobility report, November 2015 [↩]
4. The Next Billion-Dollar Market Opportunity Is Mobile Enterprise, www.techcrunch.com, March 30 2015 [↩]
5. Strategy Analytics: Enterprise mobile app market to hit $63bn by 2020, 11 November 2015 [↩]
6. Gartner Says Demand for Enterprise Mobile Apps Will Outstrip Available Development Capacity Five to One, June 16 2015 [↩]
7. Introducing Microsoft PowerApps, 30^th November 2015 [↩]