Trends: The Rise and Emergence of Appliances

2008 Trends Heralds A World Beyond SaaS

As the year begins to wrap up, I am already beginning to read the first rounds of predictions for technology trends for next year. Flowing from analysts, reporters, and industry pundits, among the first I caught yesterday listed in the top 10 industry trends for 2008 was increased adoption of functions (in this case security) delivered via the software as a service model. SaaS, as more commonly and easily referred to, has been red hot for a number of years and now is commonly believed to be the delivery model of choice for small and medium sized enterprises. I certainly don’t dispute the value of its ease of use and deployment benefits, nor the lower upfront licensing threshold that makes SaaS an attractive solution. However, SaaS is not the industry’s panacea for medium enterprises software adoption needs, principally because it is not a good solution to address certain functions. A case in point is in the management space. There are numerous management functions you simply cannot do over a WAN. The protocols are just not supported. Coupled with real issues around network latency and security, makes doing general purpose system management through a traditional SaaS model just not a good idea.

For Some Scenarios, Appliances Deliver The Same Benefits as SaaS Without the Long Term Costs

So how do you still get the ease of use and simplicity of deployment that SaaS delivers but for a function like systems management? You pull out a page from our short technology historical past—and I would argue our historical future too: you look to the appliance form factor. In full disclosure, my view is colored; I now work for a company, KACE, which delivers its product via an appliance. That said, I was also on the front lines of delivering early CRM and ERP applications via a SaaS model and have had ample time and experience to compare the two.

There’s a lot of truth in the statement: the biggest skeptic is the biggest convert. Indeed, I have found my religion in the appliance. It offers the ease of use and simplicity of deployment that SaaS does (slap it in the rack and turn it on), but operates within an organization’s network allowing you do everything needed to manage your IT environment securely and at blistering speed. And from the cost angle, more and more reports are being published about the real costs of subscription based pricing which while attractive up front, oftentimes proves more costly in the longer term.

Today's Perimeter Based Appliances Expand Beyond Yesterday's Purpose Built Approaches

My conversion to the appliance has been gradual. Like many in the industry and especially those coming primarily from enterprise software, my recollection of appliances dates back to the late 90’s when big enterprise players like IBM, Oracle, HP, and others were pre-installing their software on Dell or their own hardware and shipping a so called “appliance.” These “appliances” were really just pre-installed and configured servers and that was the limit of their value; it saved a sys admin a day of work getting a new server up and running. But today’s appliances are much, much more. For starters they really shouldn’t be called simply “appliances.” They are “purpose built appliances:” built from the ground up with a specific function and way of operating in mind and optimized for such. They take the black box approach to solving a problem where everything that is needed (database, OS, reporting software, etc) is built into the application, as well as all hardware required, and optimized for its specific function. The result: an all in one approach which in most cases simply needs to be plugged in.

Perimeter-based appliances have seen widespread adoption already. These are appliances that generally sit at the edge of a network and don’t require a lot of administrative interaction. Firewalls are great examples of such. There is, however, a whole new generation of appliances that could be classified as server application appliances. These have become core to the data center and are being used by administrators on a daily basis. Companies like IronPort (now Cisco), KACE, and Cast Iron are all great examples of such and have rapidly carved out a place for themselves within their respective functions of security, systems management, and EAI. This new generation of appliances is also finding a sweet spot among the customers whom they serve. While the companies mentioned above may have started out targeting different customer segments and sizes (and some still do), they have seen strong adoption by medium-sized enterprises. The reasons for this are the same reasons SaaS has succeeded; they offer a model of simplicity that is easy to deploy, comprehensive in nature, and cost effective. For the medium enterprise which is oftentimes resource constrained and lacks the expertise and know how to take on complicated software deployments, the simplicity of the appliance approach is ideal.

The bottom line for users

CUSTOMER TESTIMONY IN SYSTEMS MANAGEMENT APPLIANCES PROVIDES A POSITIVE PROOF POINT

My own conversion to the appliance was made complete when we held our user conference last month and I had the opportunity to speak with numerous customers about how they are using their systems management appliances. It literally blew me away. The customers love the appliance model! Mostly medium-sized companies ranging from schools districts, state and local entities, to financial service providers and manufacturing concerns, I heard the same statements repeated again and again:

• “I love the appliance form factor.”
• “I love the simplicity.”
• “I love the design of the system.”
• “I love the comprehensive nature of your offering.”

With more than 15 years of software industry experience under my belt, I can count on one hand how many times I have heard the word “love” to describe products I’ve worked on. In two days, I heard it, at least, two dozen times. When you hear a chord that resonates, you just know it works. I walked away from the user conference knowing the appliance model is here to stay and more than likely, poised to take off.

If you want to learn more about server application appliances and how they compare to SaaS, check out this white paper. It requires a registration, but is a good one.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by Wynn White / R Wang/ Software Insiders Point of View. All rights reserved

Introducing: Wynn White - The World of IT Appliances

There's a hot market out there in the world of appliances. And because of that, we bring you the latest insights from Wynn White, a Silicon Valley veteran who has served senior roles at Oracle, Oblix, BEA, and now KACE. For those of you who do not know, KACE is a leading provider of systems management appliances where Wynn is now the VP of marketing. We've asked Wynn to take a holistic view on the appliance market, so please welcome him to the list of software insiders!

You can view his bio here.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

News Analysis: Too Early to Call the Death of Third Party Maintenance

Problems at Tomorrow Now unfairly cloud the market
Recent announcements about a management change of control at Tomorrow Now and letters to clients indicating a change in service agreements (we've been told that both sides could have a 60 day window to cancel contracts in the new agreeemnts) could be perceived as a death knoll for 3rd party maintenance. However, the trends for third party maintenance look good because:

• Value for maintenance fees still too low. Despite efforts by the major vendors to improve customer satisfaction, response times, and upgrade benefits, most customers continue to believe that they are not receiving the 2x to 2.5x they are paying in license fees over a 10 year period.
  
• Customers seek options. Third party maintenance, which halves the cost of maintenance, frees up money for new projects and other key IT initiatives. Customers who may have gone to Tomorrow Now look to alternatives. Rimini Street founded by Seth Ravin , a TomorrowNow cofounder, is one vendor who has grown its base to 50 customers and a beneficiary of this trend.
  
• Third party provider market may emerge from China. Chinese IT vendors, not beholden to SAP or Oracle the way the Indian SI's are, have an opportunity to provide this capability and provide some relief to the market. As the Chinese players like Augmentum, Achievo, Neusoft, Worksoft build their outsourcing capabilities, they will be best positioned to provide 3rd party maintenance. For them to succeed, they must do this before they become enticed by Oracle and SAP.

The bottom line for end users
Despite competitive and market pressures from Oracle and SAP, this issue remains a huge pain point for customers. Vendors for too long have milked the maintenance revenue to juice quarterly profits at the expense of customers. Expect new IT players to emerge and take this space and free companies from the shackles of vendor imposed policies while delivering on the true promise of "perpetual" licenses.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

News Analysis: IBM Offers to Pick Up Cognos for $4.9B

IBM announced its 23rd acquisition in its information on demand strategy by offering $58 per share (9% premium), or $4.9B for Cognos, the Ottawa, Canada, based BI stalwart with 4000 employees and 25,000 customers worldwide. The deal is expected to close in the first quarter of next year. A quick assessment of the deal:

• Keeps IBM in the high margin information management services. The most valuable and complicated engagements involve information areas such as BI and performance management. Having Cognos in its arsenal of products and a loyal customer base gives IBM a key tool for future services and software growth. This acquisition is seen as foundational for the Armonk, NY headquartered vendor's information on demand strategy, combining information integration, data management and business consulting services.
• Builds on existing relationships. The close partnership between IBM and Cognos dates back as early as 1992 and at least 8 integrated offerings that support many joint customers. Hence this takeover is seen as friendly and endorsed by the Cognos board. As evidence of this comfortable acquisition, Cognos' CEO will lead the information management software division.

The bottom line for vendors
SAS REMAINS THE LAST BI MAN STANDING
The BI space officially is no longer led by Best of Breeds. With Hyperion tied up with Oracle, Business Objects with SAP, and now Cognos with IBM, each of the Big 3 has made its move in the Business Intelligence space. This leaves SAS, headed by Dr. James Goodnight, as the last independent BI vendor. M&A talks seem unlikely, as SAS remains a privately held company, however, Dr. Goodnight has not yet identified a successor.

The bottom line for users
BI SOLUTIONS TO COME FROM THE BIG 4 INSTEAD OF BEST OF BREED
Customers stand to benefit from integrated BI solutions as the Big 4 effectively remove the Best of Breed vendors in BI from the market. This signals the move to incorporate these capabilities into the middleware platforms and create more lock in around the Big 4 offerings. However, customers need to keep in mind the trade off between sole sourcing with one vendor and the risk to innovation.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

Event Report: Oracle Open World

(Copyrighted 2007. Photo by R Wang. All rights reserved)

Despite the stormy night before, Oracle kicked-off Open World to a classic San Francisco weekend, with blue skies, 70 degree weather, and the buzz and excitement one can only expect with 50,000 people packed around Moscone.

Tonight focused on celebrating 30 years of Oracle history and innovation. Attendees were treated to a history of Oracle from the early days of database to tools/middleware, and apps.

Some quick observations about attendees from conversations on the ground:

• Feeling the effect of the Oracle surround strategy. Oracle customers and partners by acquisition was a common theme among attendees. Over the course of the past 4 years, even customers in pharma, oil and gas, and retail find Oracle to be present in their environments via database and edge applications that surround the core SAP instance.
• Seeking information about future roadmap. Most attendees came to have indepth discussions at sessions with key executives and product management staff. Sessions at OAUG were quite lively with in depth discussions among audience members
• Sensing that Fusion Middleware and AIA will play a big role in future solutions. As each Apps Unlimited product consumes more Fusion Middleware, attendees sought to bolster skill sets and general information. The customer base remains open to packaged SOA-based integration and seems willing to pay for this.

The bottom line for users
Customers continue to find value in Open World, despite the size. As Oracle continues to pre package integrations among its acquired products via AIA, expect customers to choose this more cost effective option over expensive integration work conducted by SI's. Customers and partners should bolster Fusion Middleware skill sets as this will be the core requirement to utilize future Oracle acquisitions.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

News Analysis: Dun and Bradstreet Acquires Purisma

On November 5th, Short Hills, NJ-based Dun and Bradstreet revealed its $48M acquisition of Purisma, Inc, a, Redwood City, CA provider of customer hub solutions. Until now, the majority of DandB’s expertise had been applied to the company’s flagship hosted services and data products, not its on-site Integration Manager or customer hub solution. The acquisition and integration of Purisma will bring a solutions focused approach to the on-site customer hub solution and could augment strong B2B capabilities, improve internationalization, deliver hierarchy management, and support data stewardship processes.

MERGER ALIGNS COMPLEMENTARY OFFERINGS INTO A UNIFIED CUSTOMER HUB SOLUTION
DandB’s acquisition of Purisma represents a significant step in the trusted data provider’s transformation into a customer hub and potential master data management (MDM) solution provider. As a premier B2B data and hosted services vendor, DandB can now deliver on a hybrid customer hub offering with on-site data augmented by sophisticated hosted services. DandB also provides B2C capabilities through a recent partnership to OEM Acxiom’s Abilitec solutions. The acquisition of Purisma is strategic because this:

• Provides DandB customers with advanced customer hub tools. DandB’s on-site customer hub solution, Integration Manager, comes with implementation services and automatic monthly refreshes of DandB data made possible through DandB’s DUNSRight Quality Assurance Process. Customer’s light on IT resources benefit by matching their own B2B data against DandB’s gold standard. Today, DandB’s offering suits companies that wanted to compare their data to DandB data rather than create or manage new “best source of truth” information. However, the acquisition and integration of Purisma’s rapid deployment solutions change the game, allowing the ability to add vertical industry versions, support data model extensibility, administer data stewardship, and leverage hierarchies to create new “best source of truth” information.
• Validates Purisma’s innovative technology while removing viability concerns. As a core technology within a $1.4B leading provider of business insight, Purisma now has the visibility and funds to expand on key innovations such as team based data governance, multi-dimensional data hierarchies, what-if analyses, and simplified DandB data integration from Purisma Data Hub Version 3.0 and high availability and enhanced DandB corporate family tree management in Version 3.5. Purisma can also augment previous deficiencies with DandB’s strengths in data cleansing, integration and synchronization, and security and privacy.
• Opens the door to bring other master data solutions into the DandB universe. Innovations from Purisma allows DandB to solve multi-entity data management and enter the software appliance market. Customers and prospects should expect future developments to include expansion into other data entities such as product, suppliers, locations, and financial accounts. Purisma’s head start in software appliances such as myData for DandB appliance builds preconfigured software applications which are purpose specific, configure to order, auto updating, require no installation, and deliver a managed service through subscription based pricing.

The bottom line for users
CONSIDER DandB AS A CDI PROVIDER UPON MERGER INTEGRATION
Customers and prospects stand to benefit from this complementary acquisition once DandB fully integrates the Purisma capabilities.

• Existing DandB customers should consider the Purisma solution. Those with heterogeneous data requirements and hierarchy management needs benefit most from Purisma’s solution focused approach. Customers should discuss with DandB post merger integration plans, product roadmap milestones, and future partnerships. Explore how the solution may evolve into an MDM offering.
  
• Existing Purisma customers should discuss enterprise contracts with DandB. Purisma’s pricing model differs from DandB’s approach. With almost a 70% overlap in customer bases, most Purisma customers have a relationship with DandB and should explore options to continue with Purisma’s user based pricing approach or identify a fair conversion credit to DandB’s pricing models. There may be some bundled opportunties.
  
• Prospects now have a strong alternative for CDI. Customers with DandB data now have the option to sole source a CDI solution. Over time expect DandB to address other data entities such as product, location, employee, or financial accounts. However, those looking for immediate solutions should consider other vendors such as IBM, Initiate, Oracle, and Siperian for now.

The bottom line for vendors
ACQUISITION CREATES A GAME CHANGER FOR THE MDM WORLD
Companies increasingly rank MDM as a high priority technology initiative for 2008. CDI technologies represent a key subset of MDM. As MDM technologies continue to be consolidated into middleware stacks or complimentary solutions, the market can expect:

• Trusted data providers to partner or acquire MDM capabilities. DandB has made a serious commitment here that the other trusted data sources have not made. Anticipate that vendors such as Harte Hanks, InfoUSA, Experian, and other trusted data sources will create partnerships with pure play vendors such as Siperian, Initiate, and VisonWare. Expect a rush to explore those partnership opportunities which may lead to MandA discussions.
• Large vendors to hasten consolidation among “MDM” components. While trusted data source vendors will remain nervous, other well funded players will certainly enter the market. Consolidation is occurring now between the corners of competitors building master hub solutions. These include the trusted data sources, BI/Action Frameworks, Enterprise Apps, and data management players. From an information supply chain perspective, vendors will want to know where to partner, acquire, or build for the end game.
  
• MDM vendors to enter more scenarios of coopetition. Don't expect any material impact on the market right away, but its reasonable to expect DandB to target the install base for Purisma solutions over time. Yet, despite this, expect partnerships with DandB to continue among the main MDM players IBM, Initiate, Oracle, SAP, Siperian, and VisionWare. Can vendors afford not to partner with DandB and go with a company like Austin Tetra? Probably not.
  

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

News Analysis: Deltek IPO's at $18/share

Kudos to the Deltek team for their recent IPO. This public offering showcases how taking a company private can provide opportunities to regroup, reorganize, and recharge. What this means for Deltek:

• New market growth opportunities. The $10M in proceeds from the IPO give Deltek the cash to build off of its base in the UK for International expansion. In addition, the vendor's strength in government contracting, professional services, and construction lends well to related industries such as IT services, architecture, accounting, and transportation services. Deltek can also take the opportunity to expand its partner network.
  
• Visibility into the growing project based solutions market. Forrester estimates this market to be $6.5B by 2010. As work shifts from product to service orientation, solutions in this Project Based Solutions space gain prominence in the enterprise. Think of a Best Buy who's no longer selling a home theater system but the installation, delivery, and extended warranty. Expect the marketing to crank up from stalwarts such as Epicor, Oracle, Primavera, and SAP.
  
• Debt repayment. As part of the repayment terms, the company will apply $42.9M to repay about a quarter of their debt and another $3.9M to selling shareholders who've exercised options. This should free the firm up for better growth prospects.
  

The bottom line for end users
Keep an eye on this space if your business revolves around projects. Vendor consolidation is sure to occur, but Deltek will be a major player in this space. Deltek's offerings cover both the .NET world and the J2EE world so platforms should not be an issue. Expect both Oracle and SAP to amp up the messaging if the Best of Breeds do really well.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

Buzzword Watch: Tired of Hearing Canonical and Not Knowing What It Means In the World of SOA?

So, it's one of those things that drives you nuts when everyone is talking about a buzzword, and you haven't found the definition. Canonical in the context of SOA keeps popping up in the many briefings and product marketing conversations I've had these past 12 months, so I thought I'd share with you the definition as its being used.

Attempting to find a good definition...
So, I started with a good old Wikipedia try some months back and got this definition:

"Some circles in the field of computer science have borrowed this usage from mathematicians. It has come to mean "the usual or standard state or manner of something"; for example, "the canonical way to organize a file system is as a hierarchy, with extensions to make it a directed graph". XML Signature defines canonicalization as the process of converting XML content to a canonical form, to take into account changes that can invalidate a signature over that data (from JWSDP 1.6).

For an illuminating story about the word's use among computer scientists, see the Jargon File's entry for the word[1].

Some people have been known to use the noun canonicality; others use canonicity. In fields other than computer science, canonicity is this word's canonical form."

...led me to put it in the perspective of SOA
As you can imagine, the definition was utterly useless and left me still clueless. So here's what I'm starting to understand after talking to my Enterprise Architect gurus that "canonical" is often used in the context of SOA to:

• Describe data models. Most of the gurus I talked to mentioned that this would be the superset of all data required to for a specific purpose, yet not reflect all the data. It may not be complete, but it would serve as the single model.
• Explain how applications talk to each other. Often used in discussing messaging for SOA, it's about what metadata objects such as data types, values, and semantics are communicated to both the sending and receiving applications. The end result must be some agreement what is the right data, what does it mean to each party, and how the data will be used and shared.
• Keep BPEL clean. In order to build a clean service repository, there exists an integration layer that transforms/mediates a variety of messages to a common format through common codes or an ESB. This layer sits between the service repository and the integration processes. Typical hub and spoke integration requires messages to be translated to an independent format and then into the required format. This allows you to add new applications by adding a translation layer making this more effective and reusable than point to point integration. It's common in most EAI approaches.

The bottom line
Often found in conversations about SOA, "canonical" refers to a design philosophy and approach that maps between the various data, messaging, and semantic frameworks used by multiple applications and systems. It's about an approach that allow for reuse of items, such as business processes, among different systems.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

News Analysis: Oracle Launches Hostile Bid for BEA

Oracle added fuel to fire in the rapidly consolidating enterprise software market today with a $6.7B unsolicited bid for BEA. Here are a few quick thoughts:

• Oracle seeks to dominate middleware. Middleware platforms provide the nexus for software ecosystems. Each vendor's last mile solutions depend on a strong middleware tool and a community of individuals and solutions providers who build and extend the platform for vendors. Whoever owns the future platform, an applistructure on middleware or a SaaS platform like SalesForce will emerge as winners in the post internet era. Acquisition also marginalizes SAP NetWeaver's role as a standalone middleware solution.
• BEA customer base attractive to Oracle's vertical ambitions. BEA brings high end custom dev clients to the table. With a blue chip base of the best internal IT shops, those in telecom, financial services, and public sector, Oracle or any acquirer could cement its leadership in middleware over IBM, MSFT, and SAP. These custom development shops represent the best and brightest user base and the most lucrative.
• Oracle should expect a fight for BEA. Other vendors like SAP, IBM, and HP need BEA more than Oracle does. SAP's NetWeaver is among the weakest of middleware platforms, despite one of the strongest ecosystems. IBM will be threatened by an Oracle dominance in middleware. HP could use this as an entry point to gain traction in the market. SI's who've built a long term strategy around BEA as an independent platform may seek to assist BEA. Oracle's potential acquisition takes away the last remaining independent major middleware platform provider leaving future competitors without a large install base and a third party supplier.
  
• Will Fusion Apps Still be Built on Fusion Middleware or BEA? Recent rumblings about a delay in Fusion apps delivery and the future of leadership in delivering Fusion apps, add speculation to whether or not Fusion Middleware will still be the basis of Fusion apps. (See the latest from Vinnie Mirchandani). The BEA platform reaches out to more non-Oracle shops and provides a truly open platform for integration with less lock in at the meta data and process levels.
  

The bottom line
Oracle's long term M&A strategy centers on gaining the biggest install base around not only business applications, but also middleware. At the end of the day, its still about selling more database and gaining the largest share of the IT wallet. With so much liquidity in the market, expect continued and accelerated consolidation along key battle grounds of middleware platforms such as MDM, BI, Portals, BPM, and other Information Management tools. Don't expect the competitors or BEA to sit still!

Next up: How will Oracle deal with all the redundant technology?

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

News Analysis: SAP Initiates Friendly Take Over of Business Objects

SAP Faces the Realities of A Consolidating Market and Ecosystem
In a not so surprise move to insiders, Goldman's efforts to tie up SAP and Business Objects proved fruitful as the two companies officially announced a friendly take over offer. (Press Release). In the press release, 2 key things were made clear:

• Organic strategy not enough to meet stated targets to grow the market. Despite great success with organic growth, Oracle's acquisition strategy is making a dent. CEO of SAP, Henning Kagermann's quote from the press release says it all. ""The acquisition of Business Objects is in keeping with SAP’s stated strategy to double our addressable market by 2010 as announced in 2005,” said Kagermann. “SAP will accelerate its growth in the Business User segment, while complementing the company’s successful organic growth strategy."" What kind of acquisitions will SAP make to meet this self imposed target?
  
• SAP evaluated Business Objects for more than just BI. After Oracle's takeover of Hyperion, SAP evaluated the impact to its overall solution centric ecosystem. Business Objects strong partner ecosystem played a key role in choosing Business Objects. It seems likely that Business Objects users may be forced onto NetWeaver in the long run.

The bottom line for end users
In general, hang tight and if you have the budget, negotiate longer maintenance contracts and buy new modules for significant discounts. In the history of post merger announcements, sales reps typically will be offering sweetheart deals to close out the quarter and status as an independent company. There are many win-win scenarios out there! If you are leaning towards SAP, find your SAP rep and put in the motion for a master agreement prior to merger for completion after the merger.

A quick analysis for end user scenarios:

• SAP users who chose BOBJ. Basically SAP just validated your strategy of going with BOBJ over BW. You'll want to see if you can avoid being tied to NetWeaver in the future as existing SAP users often find NetWeaver connection charges to be the highest cost of ownership.
  
• SAP users who don't have BOBJ. Here's your chance to buy BOBJ once its fully certified on NetWeaver. BOBJ built a great product, and XI on NetWeaver may prove to be quite solid and a significant improvement to BW. There is a reason why so many self-proclaimed "SAP Only" shops run BOBJ.
  

Key questions all users should ask:

• Will Business Objects users be forced on to NetWeaver in the long run?
• Can users ensure that they do not have to use NetWeaver?
• Will key management change and who will replace them?
• What impact will this have on post XI releases?
• Does being a "separate company" in the SAP group work like the way Tomorrow Now works?
• How will SAP continue to support non-SAP users?
• How will SAP and BOBJ address MDM?
  

The bottom line for vendors and BI competitors.
BI remains one of the hottest areas of growth as users struggle to get information out of existing legacy packaged apps. As we move to a full Y2K replacement cycle, smart companies begin the discussion with their BI strategy then with upgrade. Expect the following:

• BI market consolidation in full cycle. Oracle's acquisition of Hyperion signaled the beginning of market consolidation. Though glacial in speed, expect pressure to mount on the dwindling number of independent BI vendors. Cognos is the obvious next target with IBM, HP, and Oracle as potential suitors. Other vendors include IBI, Microstrategy, Actuate, and a very unlikely SAS.
  
• Expect a hostile counter offer. Valuations of $4.6B euros $6.8B may be less than other vendors had anticipated. Hyperion's deal at $3.3B seemed quite high and previous industry murmurings had BO and Cognos valued north of $7B. Deep pocket vendors such as IBM, Oracle, and HP could set a counter for the quite valuable BOBJ install base.
• Organic growth not enough for this market. After years of building a great organic strategy, even mighty SAP realizes that this industry requires strong acquisition skills for survival and growth of partner ecosystems. Acquisition analysis should follow white space mapping and charting of valuable competitor install bases. Each technology era and segment has had dominant acquires. Think of IBM, CA, Microsoft, Oracle, and Google. One may expect other vendors to reconsider their strategies.
  

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

Trip Report: DownUnder

(Copyrighted 2007. Photo by R Wang. All rights reserved)

WHAT'S GOING ON DOWN UNDER FOR ENTERPRISE SOFTWARE?
Well, it's hard to beat the weather, scenery, and market in Australia and especially here in Sydney! Amidst this wonderful backdrop is an economic boom based on Financial Services, Public Sector, and Natural Resources, especially mining. In other economic news, real state pricing has hit a drop but not b/c of the US sub-prime scandal, but more along the retirement savings laws passed by the federal government which has moved a lot of money out of the real estate market. However, rents continue to rise while construction has halted.

(Copyrighted 2007. Photo by R Wang. All rights reserved)

On the technology front, there is a lot of activity supporting the 3 key industries. Enterprise apps remain hot as the country moves into the post-Y2K replacement cycle. In the context of globalization, as expected, China and India remain the talk of the country while the Aussie public sector heats up:

• China's economic influence runs deep for natural resources. China continues to be Australia's largest importer of natural resources such as copper, coal, bauxite, iron ore, and nickel to name a few. The market is such a buzz that there aren't enough truck drivers to haul loads to ports, even with salaries hitting A$ 80,000 a year and miners are clearing A$150,000 or more with bonus. (Side note: The guy that drives the train from Rio Tinto's mine to the port in West Australia makes A$150,000 per year!). From a tech perspective, apps spending is up in the mining and exploration sector to support China's large appetite for natural resources. This means heightened interest in software replacements, upgrades, and new purchases. ERP, supply chain and TMS support, and other mining specific applications are garnering significant interest.

• India's role continues in global delivery models for financial services. The continual labor arbitrage for services and back office functions drives the buzz with India. With most the Financial Services firms looking at these opportunities, the system integrators are playing out the global delivery models and many of the large multi-nationals are focused on business process outsourcing opportunities (BPO). From many conversations its clear that large scale ERP replacements are also on the way for Australian based financial service companies.
  

• Consortia and shared services provide opportunities for the public sector. On the public sector side, IT spending for new projects continue with shared services organizations continuing to lead the way. These public service consortia have been among the early adopters of BPO. Agencies such as water, building departments, land administration among others have done a great job, especially in the rural states like Western Australia.
  

BOTTOM LINE FOR END USERS
End users should begin the process of mapping business initiatives to software spending requirements. Business and IT projects should focus on 4 key drivers: growth, efficiency, regulatory compliance and strategy. One suggestion is to conduct a self-assessment of long term apps strategy readiness and to be focused on building a 5 -year apps strategy that includes organizational change, process optimization, technology readiness, and solutions centric ecosystem maturity.

BOTTOM LINE FOR TECHNOLOGY VENDORS
For system integrators this means a ripe market where implementation services, apps replacement and upgrades, and outsourcing provide significant opportunities as customers look at their technology requirements in the context of business initiatives


(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

News Analysis: PWC's Non-Compete Ends with IBM

PwC EMERGES FROM THE IBM NON-COMPETE
In 2002, PwC sold its consulting arm to IBM for $3.5B. That transaction began a 5 year non-compete which ends on October 1, 2007. The non-compete prevented PwC from participating in IT consulting and systems integration. However, PwC could partake in other areas of business consulting such as management issues and IT advice, but not implementation. PwC now joins its former Big 4 brethren, Deloitte and Ernst and Young in being able to vigorously attack the consulting market however they want. Key points include:

• Continued focus on trusted advisory roles in business. During the non-compete, PwC and others in this space built up significant businesses in post merger integration, valuation and corporate finance, Sarbanes-Oxley and regulatory compliance, performance improvement, etc. With IT decisions moving to the business side, PwC's long-lasting CEO and CFO relationships will transcend well into the new IT environment.
  
• Expanding in IT strategy but not implementation. Expect PwC to play a 3rd party objective role in the board room on a range of issues from business to IT. With the system integration market commoditized by global SI's such as IBM, Accenture, Wipro, Infosys, TCS, etc., this industry observer would expect the operations to remain business focused and not a full range IT services supplier. Projects will focus around vendor selection, IT strategy, and independent validation and verification. This way they can play "auditor" to their former cousins who make their money on systems integration work and delivering vendor services.
  
• Advisory and consulting work brings in higher margins than audit work. Audit work still pays the bills and holds the relationships, but margins are much higher on the advisory side. General Big 4 billing rates average in the $250 to $300/ hour rate. Working on a project with 12 to 15 people over 2 months quickly overtakes the annual audit fee at most companies.
• Many alumni seek to come back. Despite the hot hiring market for resources, PwC has an advantage. Many IBM'ers are looking to head back to PwC given their experience with IBM. Along with other Big 4 alumni scattered during the last set of M&A, there's a longing to work at a private company and not at a company that talks a big game about strategy but ends up becoming a slave to the quarter to quarter Wall Street mentality. One classic post from the IBM-PwC Consulting merger days can be found at: http://www.ibmemployee.com/Highlights040724.shtml

The bottom line
Targeting the IT consulting strategy and high-end services market will allow PwC to enter the sweet spot of the market - highest value and highest margin work. Also, it seems that given a saturated system integrator market and high failure rate, PwC would probably not enter the pure systems integration market. However, it may decide to go down the higher end of the systems integration side of the house working on projects such as BI, master data management, business process management. And even if they do, the high end services side, coupled with the relationships should put competitors such as IBM and Accenture on alert as they ramp up in the next 12 to 18 months.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

Event Report: SAP Business by Design (Formerly Code Named A1S)

SAP this morning launched its new hosted offering SAP Business by Design. Some quick observations on the positive side of the spectrum:

• SAP Business by Design runs NetWeaver. UI still runs on services and the product can access all the services in the overall SAP Enterprise Service Repository. Customers and prospects should expect SAP to fill in gaps and last-mile solutions via composites from partners. Though SAP will have to grow this new ecosystem, they've proven they can do that very well.
  
• T-Rex and Max DB reduce dependence on Microsoft and Oracle. Finally, SAP stops funding Microsoft and Oracle with database cash. MaxDB is now the underlying database and T-Rex, the in-memory database (debuted in BIA), is put to use throughout the suite.

However SAP will have many areas of improvement in future releases to come. Here are some areas based on conversations with SMB prospects:

• SAP gets the midmarket but the product still remains complex. The vendor currently leads in the mid-market by revenue ($2.563B in 2006). SAP has spent a considerable amount of research to understand this market and its requirements from a marketing perspective. Yet simplicity and ease of use still remains elusive to the vendor. Key features like easy access to reporting features, quick portal construction, and easy integration to Office could remain significant areas for improvement.
  
• SAP fails to deliver a true SaaS offering. SAP delivers an on Demand solution. Without true SaaS in a multi-tenant design, customers may pay more in the long run but retain some flexibility. SAP had a top secret project (originally code-named A1N) headed by Shai to build multi-tenant and for whatever reason abandoned the project in January of 2007. However, customers may trust the fact that SAP is delivering onDemand and will expect the reliability of a trusted utility.
  
• Focus on usability still falls short of industry efforts from Microsoft and Epicor. The vendor talks about breakthrough user experience. The reality: the current approach in the Business by Design product takes its WebDynpro UI to a new level of configuration and manipulation. Drag and drop features showcase better usability but the net result is still a distinct SAP experience, though it is much better than anything currently offered. In context of the market though, it falls short of the ground breaking work Microsoft Business Solutions has accomplished around roles and usability and the ease of use in process flexibility from Epicor. A move to adopt AJAX would certainly help a ton. (Editor's note: we're all tired of hitting F5)
  
• Early adopters are no different from other early "hosted" SMB adopters. SAP's beta customers share similar requirements of all rapidly growing SMBs. They are growing, need rapid deployment, and impressed by the ability to deploy quickly without being saddled by IT infrastructure costs. Spending operational expense instead of capital expense remains a big driver as well and at $149 per month per user, this is a good deal compared to the full SAP ECC 6.0 offering. Nothing was special about the customer references, in fact, many of them may have received discounts or paid minimal licensing.
  

The bottom line
SAP demonstrates a good understanding of its requirements for the SMB market and a "hosted" offering. SAP should be commended for delivering a significant improvement in comparison to existing SAP products. Company's who trust SAP to deliver core ERP may consider this solution. However, the lack of Web 2.0 features that include user experience, mash-up support, interoperability, and true multi-tenant solution may turn many prospects away. Also, the lack of an easy Microsoft Office integration may keep prospects and existing customers from turning to the numerous SMB competitors who offer .NET based offerings with Office integration. The jury is still out on whether Shai's original strategy would have been better or whether or not Zencke's offering may at least meet SAP's stated growth goals for the mid-market.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

Event Report: SalesForce.com DreamForce 2007

(Image courtesy of SalesForce.com)

At this year's Dreamforce, Salesforce.com made 4 key announcements:

• The Force.com platform - platform as a service for companies to deploy their own apps
  
• Visualforce - a page based model design tool to deliver any User Interface-as-a-Service
• An AppsExchange milestone- the vendor delivered its 700th live application
• Salesforce Ideas- an online innovation community and support group

Of those announcements, The Force.com had the most impact as it now opened up the platform to not only its own partners, but also any customer who was looking for a SaaS platform to build on. Like the original AppsExchange announcement which targeted partners, the opening up of the platform to customers was equally innovative because it put key SaaS development tools in the hands of innovative customers to build their own "last-mile" solutions. The net:net - the reduction of complicated software development platforms.

The bottom line
SalesForce.com remains innovative in bringing a true solutions centric ecosystem to the end user. Customers today face so much frustration in waiting for a vendor to deliver key functionality. Opening up to partners via AppsExchange was innovative. Sharing the code with customers to develop is brilliant and put SalesForce.com one step ahead of any competitor in giving control back to the customer.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

Apps Strategy: SaaS Pricing Models Challenge the Status Quo

A dichotomy of software licensing and pricing philosophies has emerged. On one hand, software titans such as Oracle and SAP continue to shift the pendulum towards usage based metrics for its largest customers. These options represent metrics such as revenue and industry specific models that seek to extract a “fair value” for their contribution to an organization’s success. On the other hand, Microsoft and a host of vendors like Epicor and Sage serving the SMB market continue the push for usage based models including concurrent user which seek to limit ownership costs to the user level. SMB’s find favor with this model because it creates an apparent aura of predictability and “fixed nature” to license costs. As SaaS options gain in popularity and familiarity, I predict the pendulum will shift again (for large enterprises) because:

• Simplicity of SaaS model puts the focus back on user based pricing. Cost per user per month highlights the elegance of simplicity. Business leaders easily understand pricing by users and not by revenue or their business success. Why should you pay a software vendor more for your success?
  
• Inclusion of maintenance, support, and upgrades raises the bar. Unlike traditional models which tack on 15 to 25% in annual maintenance costs and may or may not include the apps and technical foundation upgrade, SaaS pricing eliminates this level of complexity. Users neither worry about the cost of upgrade nor worry about the testing and certification costs.
• Current systems nearing the end of their life-cycle provide enterprises a fresh start. Many ERP systems installed pre-Y2K are now coming up on replacement. Enterprises emerge from harsh lessons, as they have paid for maintenance of unused licenses (i.e., shelfware), suffered undefined maintenance fee increases, and lost functionality credit for future releases. As companies begin their vendor selection processes, they do not want to repeat the same mistakes. SaaS pricing simplicity allows them to limit their risk while gaining the benefits of rapid deployment.

The bottom line

Though the simplicity and elegance of the model may not apply to all scenarios, prospects and customers should consider how to apply SaaS pricing models to traditional licensing and pricing contracts. Armed with this metric, a lot can be gained from limiting the cost of IT to the number of users. And thanks to SaaS, the only thing that matters is cost/user/defined time period.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

Trends: The True Small Business Market

(Image courtesy of NetBooks)

Software trends come and go in cycles. Currently we're in the midst of a focus on partners, ecosystems, and the small business market. Yet, that definition of small business is all over the map. Some vendors look at 1000 employees or less. Others size by revenue and say its $500M or less.

Yet, a great conversation this past Thursday morning with Ridgely Evers, the "Father of QuickBooks", set me straight on a market smaller than SMB! Ridgely's new company NetBooks passionately focuses on what they term a "True Small Business" or TSB.

Here are some key characteristics:

• less than 50 employees (typically 2 to 25)
• management by a founder or owner
• lack of "professional" management or capital investments
• profitable and growing organically
• focused on ease of use versus power
  

Ridgely proceeds to size this market at a conservative 5.1M TSBs in the US.

Based on the conversation, the NetBooks solution targets a very specialized but dynamic TSB niche looking for:

• Easy to use solutions
• High-touch support and deep relationships
• Hosted solutions
• Valued price points

With a full suite that covers production, inventory, compliance, shipping, book keeping, marketing, sales, and CRM, TSB prospects should keep an eye on NetBooks. Vendors competing head to head may want to evaluate whether a hosted model could best shrinkwrap.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

How Web 2.0 is Transforming Customer Service

I thought I would write a post about the biggest trend happening in my industry in case it is emerging as a hot topic for others. When I started writing about online discussion forums as a new support channel almost 3 years ago, the examples were mostly high volume consumer companies (Tivo, Palm). Today, there are both B2C and B2B companies finding great success using discussion forums to respond to customer questions, often deflecting large numbers of agent interactions--producing a huge ROI for an online community project.

Today I'm saying this has gone from 'bleeding edge' to 'leading edge' to 'best practice,' and technology companies without a mature online community are soon to be in the minority. Though only a year ago SSPA members were curious, yet not totally convinced, Web 2.0 and online communities have now become one of, if not the, hottest topics I hear about in member inquiries. What has changed so quickly that is forcing companies to act, incorporating Web 2.0 elements into customer service operations? I call attention to these three drivers:

• There's no more fat to cut. After 7 years of cost cutting, service management has 'done more with less' and 'worked smarter not harder' until there's nothing left to cut, streamline or optimize. Still under pressure to cut costs, a new possibility for deflecting costly live agent interactions peaks the interest of most support managers.
• Gen Y is aging into the target demographic for more companies. The MySpace generation is now nearing 30, putting them squarely in the cross-hairs as a target demographic for more companies. And this generation prefers peer-to-peer support over corporate support; hence discussion forums emerge as a preferred support channel, and existing forums find wider user adoptions.
• Engagement leads to loyalty. At Forrester I used a pyramid diagram to illustrate how satisfied customers become loyal customers, and this involves personalization, bonding, and empowerment. This perfectly maps to the reputation models used in communities, and surveys show that as customers move up the reputation levels from 'novice' to 'intermediate' to 'expert,' their loyalty increases with them.

Analysts love a new bandwagon, and I'm sure this is one that experts across many areas of enterprise software can ride. From my perspective, I wanted to share the roadblocks to adoption that I most commonly encounter. If Web 2.0 has yet to impact your coverage area, here are problems I'm seeing in service and support that may give you an inkling about what the roadblocks in your area may be in the future:

• Poor integration. As with other new support channels (web self-service, email, chat), companies tend to launch discussion forums in a vacuum, not integrated to the customer hub. Customers post questions on a forum that are already answered in the self-service knowledgebase, and customers create support tickets for problems not addressed in the knowledgebase that are resolved in the forum. If you don't integrate search across both KB and forum content, you end up with duplicate (and likely conflicting) information and frustrated customers.
• Lack of resources. Will we never learn? Companies gear up for new projects, staffing as needed, then pull off resources after go live. If customers post a question to a forum and never receive an answer, you have just guaranteed they will never use your forum again. Sure, customers should ultimately provide the mediation in a mature forum, but until that happens, plan on staffing moderators for at least 6 months.
• Hubris. The single biggest roadblock I've seen to including Web 2.0 in support's vision? Support management refusing to acknowledge that there are experts with expertise on their products outside their firewall. I call this the "If we don't know it, it ain't worth knowing" mentality, and companies stricken with the malady are unlikely to launch or adequately fund a forum project.

Hope this is useful for all of you. I've published quite a few reports on this topic, including some real-world examples from SSPA members. Add a comment or drop me an email if interested! Thanks for reading!

Trends: What's all the fuss about True SaaS, OnDemand, Hosting?

•As many of you know, there's mass confusion out there about what's really SaaS, so time to clear the air on this topic. I'm going to give this some common definitions and hopefully this will help us figure out what's what and where the trade-offs are in all these deployment options.

1. Single Instance - (a.k.a. "On Demand"). Think traditional apps deployed one cusotmer per app or per server. Many vendors provide hosting capabilities. Customers don't worry about the IT infrastructure and retain the flexibility to modify, customize, and in most cases choose when they want to change the code. All customers can use different versions of the software
   
2. Multi Instance - (a.k.a. "Server Virtualization"). Think "VMware" like. Apps deployed into a shared-web hosting environment. A copy of the app is configured and deployed into a web directory for each customer. Vendor benefit from easier to manage environments. Customers don't worry about the IT infrastructure and retain the flexibility to modify, customize, and in most cases choose when they want to change the code. All customers can use different versions of the software.
   
3. Multi-tenant - (a.k.a. "True SaaS"). Apps in a multi-tenant deployments provide a single operating environment shared by multiple customers. Config files are created and deployed each time a customer request services. Customers don't worry about the IT infrastructure and retain the flexibility to modify, configure but NOT customize the code. Customers usually receive upgrades at the same time. Everyone shares the same code.

From least expensive to most expensive to run for a vendor:

1. True SaaS
2. Server Virtualization
3. On Demand

Why is this important? Let's see, you choose an OnDemand solution and the vendor's costs to run the app goes up with each new customer as it has to manage the different environments. No matter how hard the vendor will try to "fit" everyone to standard configurations and deployments, that's not always possible. Flexibility has a cost. In a "True Saas" solution, the cost to add an additional customer is minimal and each customer reduces the overall cost for everyone. Ultimately, a True SaaS deployment will have the lowest cost/user/month fee. What will you do 5 years into an OnDemand scenario when you are locked in?

From most customizable to least customizable for a customer:

1. On Demand
   
2. Server Virtualization
3. True SaaS
   

Why is this important? Your may have specific needs in an area where the SaaS vendor has not provided the deepest level of configurations. You can't just go in and modify the code unless everyone else wants it or the vendor's has it on the roadmap. The cost of comformity is the lack of flexibility. What will you do 5 years into a True SaaS scenario when you are locked in and the vendor won't add the feature or functionality you need?

The bottom line:
Keep in mind there are cases where one deployment option is more favorable than another. Just because you are multi-tenant SaaS doesn't mean you are better. On the other hand, when vendors tout OnDemand as a SaaS offering, then the SaaS bigotry begins. Be on the look out as more vendor provide mix-mode offerings to support disconnected modes, SaaS and On-premise, as well as other improvements in integration with stronger client side ESB's.

....

Editorial Note: (September 5th, 2007) Just noticed a great posting that really showcases the point here. This applies to all the vendors who did not architect for SaaS and are now playing catch up.

Phil Wainewright's Posting on Oracle's Misconceived SaaS Strategy


(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

Thoughts On Oracle's Next Acqusition

(Image courtesy of SAP)

So, first of all, let me qualify this. It's not inside information, it's not a potential target we've heard to date, but an idea I've had for some time.

There's an acquisition target that Oracle could make the best use of in Germany. In fact, it's even based in Waldorf, but its not SAP. I know many of you haven't been out to SAP's headquarters, but if you ever go out there, you'll find the massive and elegant SAP complex. They've also built out some beautiful new star buildings which house the growing number of people in Waldorf.

But smack in the middle of the campus, is a car dealer. If memory serves me right, it's a Peugot or Citroen dealer. For those of you curious, you can see the white 2-story building amidst the apartments in the bottom left hand corner and just across from the main executive building. (just click on the pix to blow up)

Now, what could be better than Larry going over there and buying out the dealer. Imagine having SAP fly you out there for a key meeting with execs and and then walking across the street to see a demo at the Oracle Customer Briefing and Visitor Center? It'd be like walking by the local auto mile/parkway and doing some comparative shopping.

With such a very accretive and visible acquisition target, let's see if Charles and Safra pull the trigger on this one!

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

Event Report: Sterling Commerce Connection, Denver, CO

(Image courtesy of Sterling Commerce)

Sterling Commerce Pushes Closer to the Perfect Order
Sterling treated customers and prospects to a packed agenda of product announcements, customer case studies, and educational sessions at this year's customer conference. Here are a few quick observations from the event:

• Transformation from infrastructure supplier to solution provider near complete. Prior to the acquisition of Yantra in 2004, Sterling Commerce was known for its integration, data sync, and EDI capabilities for the supply chain. Through the successful integrations of additional specialist vendors such as Nistevo (2006) and Comergent (2007), Sterling Commerce continues to show progress in not only integrating but also extending its application capabilities in selling and fulfillment.
• New products focus on addressing the perfect order. Attendees continued to express their interest and desire to achieve the perfect order. Multi-channel capabilities and advanced order process functionality topped many conversations. Sterling's unveiled and showcased its new capabilities in inventory replenishment and new merchandising and marketing capabilities.
  
• Post merger integration with Comergent remains on track. Despite the departure of CTO, Bill York, key former Comergent executives such as Jean Kovacs and Andy Nicholas remain with significant management roles. Conversations with product team members and customers suggest that overall delivery on the integrated multi-channel selling and fulfillment appears to be ahead of schedule.
  
• Customers continue to displace existing systems. Conversations with over 23 customers indicate that many continue to choose a Sterling solution over their existing ERP or CRM provider. Of the 23 customers, 7 had Oracle, 11 had SAP, 2 had i2, and 2 had Click Commerce.

The bottom line:
As customers make the shift from functional centric to business process centric software, processes that support the perfect order (i.e. opportunity to order capture, order capture to order fulfillment, order fulfillment to order completion, and order completion to order settlement) will elevate in importance. Solutions that support the end to end order process across multiple channels will truly bring differentiation and strategic advantage to an enterprise. Sterling's focus in this area and continued execution along the late Sam Starr's strategy will bring this vendor closer to delivering the perfect order.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

Trip Report: Reflections on ERP Software in Shanghai

(Copyrighted 2007. Photo by R Wang. All rights reserved)

WILL CHINA BECOME THE NEXT INDIA FOR ENTERPRISE APPS?
Miss the energy and excitement during the dot com boom? Well it's alive and well in Shanghai! While consumer and internet software remains hot and starting to mature, enterprise software in particular emerges as virgin territory in a rapidly growing market. (I and am still in awe of what I heard, saw, and felt.) Rapid fire growth in key industries such as manufacturing, financial services, telecommunications, utilities, government and of course high tech drive the charge towards the adoption of packaged applications. China demonstrates significant potential for the following reasons:

• Strong infrastructure. The Chinese government provides significant software infrastructure. Specifically, power, internet connectivity, and telecom networks exhibit stronger reliability in uptime than India and some parts of North America and EMEA.
  
• Rich talent pool. With considerably more universities and training facilities, the pool for Chinese software talent runs deep and wide. Like India, the expat community remains vibrant with 1000's returning from abroad on a monthly basis.
• Labor advantage. When the US was pushing offshore development just 10 years ago, Indian vendors now turn to China for advantages in labor arbitrage. Rising costs in India make China attractive though rates are rising.
  

HOMEGROWN VENDORS FOCUS ON THE CHINA SMB MARKET
During my time in Shanghai (July 27th to August 3rd), I had opportunities to speak with many customers, partners, and executives at the Big 4 major Chinese ERP vendors: Yongyou (Ufida), Kingdee, Digital China, and Newgrand. What makes this market unique is that the local vendors build their own ERP systems for the SMB market and then many of them resell software for the western vendors such as SAP, Oracle, Infor, Micrsoft, Lawson, QAD, Epicor, and IFS in enterprise install bases.

Homegrown vendors demonstrate a tendency to:

1. Provide mostly SMB tailored offerings
2. Focused first on accounting and "multi-book" accounting capabilities
   
3. Deliver truly localized and customized extensions on their own offering or on a competitors
4. Exhibit a strong determination to build out their capabilities into the "m" part of SMB
5. Demonstrate true co-opetition as they partner, resell, and compete with competitors to deliver solutions
6. Compete with local system integrators that believe they are also software providers as they deploy localized versions of Western applications
   
7. Lack strong marketing capabilities for the Western multi-national
   

VENDOR COMPETITION AMONG GLOBAL ERP VENDORS SEGMENTED BY VERTICALS
This market remains extremely hot for enterprise applications. Market share numbers are quite murky, but the competition among Western vendors runs fierce by industry verticals. For example customers will see the following vendors by industry:

• Public sector: SAP, Oracle, and Microsoft
• Fashion: Lawson, Microsoft
• High tech: Oracle, Microsoft, SAP
• Utilities: Oracle, SAP, IFS
• Manufacturing: Oracle, SAP, Infor, Micrsoft, Lawson, QAD, Epicor, CDC - Ross, and IFS
• Telecommunications: Oracle, SAP
• Gaming: Infor, Epicor
  

BOTTOM LINE FOR USERS
Enterprises face the challenge of selecting software that must meet rapidly changing requirements of a growing marketplace.

• Local prospects and customers must think long term. Rapidly growing Chinese prospects and customers must move beyond the short term selection criteria of low cost, localization, and language support. As these SMB's become the next large enterprise, support for SOA standards, industry functionality, interoperability, and long term application platforms must play a significant part of the vendor selection process. Homegrown vendors may achieve the size and scale to compete with Tier 1 vendors. However, in this rapidly consolidating market, a Tier 1 will more than likely acquire a homegrown vendor in order to gain market share, acquire additional local know-how, and cement a presence in this growing market.
• Multi-nationals will require local system integrators for delivery. Most multi-nations conducting business in China will look to their existing Tier 1 vendors to provide significant localization as well as alternative deployment options such as SaaS and hosting. Buying a solution in this market requires careful consideration of both the vendor and the related partner system integrator capability. For example, stakeholder centric applications that impact employees, partners, customers, and suppliers will require the expertise of local SI's who will be able to provide the needed customizations and extensions.
  

BOTTOM LINE FOR SOFTWARE VENDORS

• Challengers must act quickly. New vendors must quickly add significant business or risk being shut out by established western and homegrown vendors. Vendors such as Oracle, Infor, QAD, and Lawson will be positioned to succeed because of the strong networks and relationships that have been built over time. Challengers must quickly win the hearts and minds of home grown partners and vendors as this market will most likely begin consolidation over the next 12 to 36 months.
  

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

Companies get smarter...what's the future role of analysts?

Ray Wang and I have talked about this a few times, and I think it is an interesting trend for analysts and vendors to think about, so thought I'd write a short entry here.

I've noticed a new trend over the last year as I work with SSPA members on technology acquisition issues: some of these companies are hella smart! One company asked for input selecting a Web self-service platform. I went to the meeting, and attending were internal experts on support technology. Specifically around natural language searching, one of the most innovative areas of self-service, they had a guy who had tested every system out there, and with his engineering background, he had an in-depth understanding of how each worked and what their strengths/weaknesses were. And the key here: he wasn't from IT. He was part of the support organization.

Another company is evaluating vendors for a cross-enterprise Web collaboration platform. They had a team dedicated to this topic, and had incredible knowledge about the vendors and their technology. And had contacted references listed on the vendor websites for information!

As an aside--I survey members to find out what technology they use and how satisfied they are with it. Many members have asked that I publish this in the member directory so they can easily contact other members to ask about their experiences with a software program. Damn, with the incredibly low satisfaction scores on most of the surveys, can you imagine how those reference calls will go?

In both cases (and there are many other examples), these internal employees know more than about 90% of the analysts covering this space. There is far too much "rah rah" coverage on cool features and the latest press releases, and not enough coverage on what actually works and how to get the most value from your purchase. (And yes, from that last line, it is clear I was a Giga analyst!)

Our SSPA Benchmark data clearly documents the rise of technical complexity, and I think larger companies are now identifying which technologies are the most critical to their success, and business units--not IT--are recruiting experts on those topics.

My take away from this:
Research firms need to stop focusing on 10 year projections and creating trends in marketing-speak and focus instead on value. If not, you won't be relevant much longer.

For vendors, I think you need to realize that future prospects may be much better informed about your technology than many of your sales people. Marketing needs to focus less on mushy things like "improving the customer experience," and more on hard-core ROI statistics (which even wildly successful companies still struggle to give me).

And bottom line, any vendor or analyst firm with obvious contempt, or at least condescension, toward customers will soon find that the customer has gone away.

And that's my view from the front lines of the front office!

Event Report: Oracle Open World APAC - Shanghai, China

(Copyrighted 2007. Photo by R Wang. All rights reserved)

ORACLE OPEN WORLD SHANGHAI DEMONSTRATES THE POWER OF THE ORACLE BRAND
As some of you know, I recently came back from Oracle's Open World Shanghai (July 30th to August 2nd). With 8,000 people at Oracle Open World, and about 1000 there for apps, you could really see the momentum taking off. Of the 60 partners, it was great to have been able to talk to about 25 partners in my broken Chinese.

Here are a few quick observations from the event:

• Oracle's presence in China for 18 years gives them a significant advantage. Initially based on the database successes, Oracle builds on solid networks and relationships required for sales success in China. During that time, Oracle has grown to more than 1500 employees, across 13 branch offices, and 16 representative offices throughout China. Customer counts number over 7,000 and the Oracle Technology Network (OTN) in China exceeds 245,000 members. In addition, Oracle works closely with over 800 partners.
  
• Attendees very interested in Fusion Middleware and applications. Conversations with attendees revealed significant interest among partners to gain certification for apps implementation. Customers expressed bullishness on Oracle's future as well as its acquisition strategy.
• Guo Wei, President of Digital China gave the most inspiring presentation. Despite the fact it was delivered in Mandarin and this poor analyst forgot to get the translator headset, Mr. Wei proved to be a visionary. His descriptions of the very fragmented Chinese customer and market showed a deep knowledge of where the future Chinese enterprise apps market. More importantly, he went into detail on the role of the software industry in promoting and reinforcing sustainable development and supporting China's future growth path.
  
• The Oracle brand remains larger than life. Throughout Asia, the media blesses the tech gods and assign a rock star status to the companies that symbolize progress and technological prowess. Respect for Oracle's brand remains high in China, allowing Oracle to attract top university graduates, key partners, and receive significant media coverage.
  

CONVERSATIONS WITH KEY EXECUTIVES SHOW EXTENSIVE COMMITMENT TO PARTNERS IN APAC
Necessity drives innovation in APAC. Oracle's partnership strategies provide the right balance of synergies in product development, go-to-market strategies, and ecosystem support needed to win. Conversations with Mark Gibbs, SVP for APAC app sales; and Bronwyn Hastings, APAC VP Channels and Alliance highlighted the following:

• Clear solution strategies forge tighter partnerships. Oracle's extensive whitespace maps for solutions and industries across geographies tremendously help partners identify opportunities for investment. They also provide insight as to what areas Oracle is willing to cooperate on versus acquire and build.
• Partners demonstrate significant partnership maturity. Partners compete directly and work cooperatively in delivering customer solutions. Many of Oracle's largest partners build their own packaged application software for the SMB market but resell Oracle and competitor software for the enterprise market. Partners like NeuSoft, Digital China, and Hand devote significant resources to Oracle. In fact, one Certified Advantage Partner, Hand focuses 700 people on 300 customers for Oracle EBS implementations.
  
• Technology focused partners provide future base of apps partners . Due to Oracle's heritage, most partners deliver on database and tools capabilities. However, this base will work to Oracle's advantage as the same skill sets for DB and Middleware translate well to enterprise applications. By harnessing this network, Oracle retains a significant advantage among competitors.
  

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved

Apps Strategy: Responding to Tectonic Shifts In the Software Industry

As the software industry matures and transforms itself, four key forces converge to shape a new future for the software industry. Despite these tectonic shifts impacting clients, enterprise software strategies should focus on the business users and the processes they support.

The 4 tectonic shifts impacting clients include:

1. The post Y2K upgrade cycle harkens the technology move to SOA - The shift to SOA harkens to the shift to web based computing a decade ago. We know its coming. We have some idea what to expect but no one knows for sure. As enterprises upgrade from existing legacy systems to software "architected for SOA", we enter a new technology spending cycle.
   
   The result: CIO's, Vendor Sourcing Professionals, Business Users, and IT professionals have one shot to get this right or wait it out another 7 to 10 years for the next major upgrade cycle. The applistructure you choose will be one you live with, especially as vendors create lock-in onto their platforms at the same time they push "open standards". Users should negotiate their software contracts with care taking into account the impact of SOA and middleware.
   
   
2. SaaS moves buying decisions from IT to the business user - By changing the rules of the game, now a VP or GM can go out and buy 100 licenses without going to the board for capital budgets or talking to IT about support and dependencies. Imagine that... operational expense and not capital expense and potentially no IT integration. (We'd still caution that you talk about integration with the IT guys).
   
   The result: Business users gain control of software buying decisions for edge applications like CRM, performance management, talent management, recruiting, incentive comp, corporate email and other productivity tools. IT leaders may be stuck with integrating a plethora of SaaS applications back to the on-premise hub. Architects should consider an overall ESB and meta data management strategy!
   
   
3. Web 2.0 apps transform Enterprise 2.0 apps - As the innovations in Web 2.0 such as rich internet applications, AJAX, and mash-ups make their way into enterprise software, how we collaborate, integrate, and view business processes will be transformed in the enterprise.
   
   The result: What's we use at home and what we use at work will collide. Users should be careful as to how they blend work and their private lives. However, all users will benefit from the innovations of mash-ups and other Web 2.0 innovations as they become pervasive in the corporate environment. CIO's will have to establish extra vigilant but security policies to address new flexibility and interoperability requirements from users. Just like IM 5 to 7 years ago, we now have more external integrations that increase security risks.
   
   
4. The future rests with solutions centric ecosystems- A maturing software industry increases specialization in core areas and becomes more reliant on dominant applistructure platforms as ecosystem hubs for applications, business processes, and related web services.
   
   The result: Users have an opportunity to band together in industry consortiums to dictate how IP is created and shared in enterprise software. System integrators and vendors will try to "own" the IP in last mile solutions but will not be able to address all scenaris. Users will take advantage of the improved middleware tools to create a new renaissance of custom applications built on standardized tools. Custom dev will come back with a roar!
   
   

As you can see, these shifts create significant impacts and should be factored as long term apps strategies are being developed.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved