Monday, April 30, 2007

An Interesting Thing Happened to Me on the Way Back From China ....

Just returned from a trip to China, obstensibly to visit friends and family, but the workaholic side of me couldn't help but arrange for a variety of conversations with businesses large and small doing business in China ... as well as the investors who fund them. I have to admit that came back both awed, as well as a bit disillusioned by what I can only describe in the word, "massive."

First, everyone is filled with the potential of China as THE booming market. You can't help but notice much of it in the lack of rules and constraints, whether in ...
(1) the hyper aggressiveness of startups quickly replicating and expanding on existing ideas ... an example is my conversation with Bill, the founder of KU6, a hot Draper funded "youtube+" that has brought together not only user generated content with shared ad revenue, but also user generated advertising.
(2) the continued drive of innovations in mobile in areas such as pervasive branded experiences ... for example MyClick
(3) whole new business models ... a key observation is that without incumbants defining business boundaries, companies actually have the ability to cross traditional market lines starting from a strong web-presence into things like ... amusement parks, retail, or media. Some would use this to justify some of the large pre-IPO valuations. Very exciting. Then again, a little too much like the height of Silicon Valley craziness, including the extreme sense of developer entitlements that was a hallmark of the bubble.

At the same time, to many around the world as well as a key driver of the economy, China is still about execution: IT Outsourcing, BPO, and cheap labor ... especially for Korea and Japan, for whom India cannot provide the Asian language skills. I had interesting conversations with BearingPoint regarding their evolving strategy ... and how it necessarily includes expanded use of the Global Development Centers. Interestingly, China, as validated by BearingPoint, struggles to support the rapid growth for Services due to (1) education system inadequacies and (2) a booming local economy ... something that India has less issue. A recent McKinsey study does a nice job outlining the looming shortage of manpower for service industries in both China and India. As mentioned above, the local market is expanding incredibly rapidly, whether in Internet, as well as consumer services, retail, entertainment, etc., competing for human capital.

All that in mind, there is something disturbingly hopeful about the rapid rise of the Internet to both entertain and ultimately, connect people in China. In a society where Internet entreprenuers openly speak of the fact that China has become a very lonely place - in many cases driven by government policy of single children households, breakup of the extended family unit, and forced movement to the cities and mass production, mass living, mass education ... resulting in a mass of lonely people looking to connect.

Wednesday, April 25, 2007

Enterprise Software Earnings Watch: Solid License Growth Amidst Increasing Customer Backlash on Maintenance Pricing

Recent positive earnings announcements from SAP, Oracle, Microsoft, Business Objects, Agresso, and Epicor signal that the enterprise software market remains quite healthy. Despite doomsayer analyses that talk about the slowing economy, high single to double digit growth in license revenue demonstrate the success of recent initiatives to capture new industries and market segments (e.g. SME and services industries). Both Agresso and Epicor show significant success in net new license growth in the SME market.

Agresso- 2006 FY License revenues up 16% to €56.8M
Business Objects [BOBJ.O]- Q1 2007 License revenues up 9% YOY to $137M
Epicor [EPIC.O]- Q1 2007 License revenues up 14.1% to $22M
Microsoft [MSFT.O] - Q3 2007 License revenues up 20% (MBS Dynamics break out not disclosed)
Oracle [ORCL.O]- Q3 2007 License revenues up 57% $423M (organic/acquisition mix TBD)
SAP [SAP.N]- Q1 2007 License revenues up 16% YOY (Constant Currency) 563M

However, the real story remains the growth in maintenance revenues which account for 2x to 3x of license revenues. Many vendors report a 25% to 50% increase in maintenance revenues and retention in the 90%+ range. Estimates on profitability for maintenance range from 25% to 90% margin.

As maintenance costs average from 20 to 25% of the license fees, customers continue to express outrage over the value they are receiving. Despite the number of Y2K replacement projects slated for 2008 to 2011, many customers express ERP upgrade fatigue. Consequently, expect upgrade projects to be pushed out to 2009 through 2012 and third party maintenance options to remain attractive.

(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

Thursday, April 19, 2007

MDM and the Information Supply Chain: Applying Supply Chain Principles to MDM

Like demand signals in the supply chain for the auto industry, the flow of information via data drives our ability to evaluate, decide, and act in our information worker economy. Delivering relevant data to the right person, time, and place, in the appropriate context remains a key challenge MDM professionals encounter. Taking a page out of Japanese-born lean principles in supply chain, we can apply the following:

  • Push information quality processes towards perfection. Lean companies are not driven to beat competitors, they strive for perfection by proactively engineering the removal of process mistakes (pokayoke) through the reduction of production time, errors, and inventories. Data governance and MDM efforts should focus on streamlining how data is acquired, cleansed and optimized for usage among stakeholders. This level of quality will deliver the real-time decision making that will improve an enterprise's operations.
  • Flow data through the system pulled by the stakeholder. Lean manufacturers do not wait to push inventory into the plant; they let demand signals from customer orders pull each unit through every step in the value chain. One car company streamlines the flow of test drive requests from the website to be delivered instantaneously to the closest sales person. Customer experience a 60 minute or less response. Any process step that hinders a smooth flow is eliminated as waste (muda).
  • Eliminate redundant data via continuous improvement. Like overproduction and excess inventory, routine data quality efforts such as cleansing is similar to eliminating waste (muda). Instead of waiting for problems before making major changes (kaikaku), leading companies have call center agents who casually verify customer information at every interaction and supplier portals that validate shipping and billing information throughout each transaction. These small improvements everyday area the heart of kaizen.
(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

Wednesday, April 11, 2007

Industry View: SaaS Applistructures Deliver on the Promise of Tying Web 2.0 to Enterprise 2.0

Walking out of the Event on Tuesday the 10th had me thinking about the promise of Web 2.0 for the enterprise via middleware, SaaS platforms, and this notion of Applistructure. The thing that really struck home was not the utility computing model that Marc rants and raves about, nor the great drag and drop content management capability of Koral that was being demo'd. What struck home more than anything was how applistructure was taking shape via SaaS and how quickly SaaS could deliver Web2.0 capabilities to the Enterprise.

Okay, let me take a step back, what's applistructure? Well, applistructure refers to the boundary blurring between business applications and infrastructure software. Originally coined by Ken Vollmer of Forrester (Giga) in 2003, the term is shaping up, especially with the rise of middleware platforms (e.g. IBM WebSphere "Blue Stack", Oracle Fusion Middleware "Red Stack", Microsoft VS.Net "Rainbow Stack", and SAP NetWeaver "Blue and White Stack") that are doing everything from being the appserver, delivering BPEL, modeling business processes, addressing content management, providing business intelligence, coordinating master data, solving identity management, etc. SaaS itself is an applicstructure and as these applistructures take hold in the enterprise world via middleware, the SaaS vendors including SFDC, NetSuite, and WorkDay, have the best opportunity to deliver on most of the collaborative aspects of Web2.0.

Unfortunately for most enterprises, not much of the Web 2.0 impact we feel here in the Valley has made it into the mainstream middleware platforms. In fact recent announcements of Lotus Quickr, SAP's end-user widgets, Microsoft Office 2007, and Oracle Web Center show slow to moderate progress in this arena. Hot for Web2.0 for years has been tagging, mash-ups, social network, participation architectures, and the spirit of the individual and wisdom of the tribe. Though we're starting to see wiki's, blogging, and RSS become the new collaboration standards for enterprises its really been the SaaS movement that's driving Web2.0 adoption into the Enterprise.

Similar to the shift in attitude on utility computing and the simplification of licensing and pricing to cost/user/month, I think we can count on SaaS to be the game changer again. I eagerly await to see what other Web2.0 innovations like the Koral acquisition by SFDC will make its way to the likes of SAP, Oracle, Microsoft, and IBM in this emerging solutions centric software world 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

Monday, April 9, 2007

Why I can't recommend Open Source CRM....yet

I have recently been receiving pressure from certain vendors and CRM SIs to give more visibility to Open Source CRM products. Open source may be in fashion, but that's hardly a reason to recommend it.

Open source is not better. Yet. And I won't recommend it for enterprise size companies. Yet. And here's why.

Last week I had an inquiry from an SSPA member about how to handle customer emails regarding open support incidents. It turns out that the company is using an open source CRM package, and when an agent emails a customer about an open support incident, and the customer replies, the customer reply only posts into the open ticket if the email is from the contact who opened the ticket. If that person sends it to their system administrator for input, they go on vacation and someone else inherits the problem, or perhaps they escalate to their boss who then emails, the emails are opened as new support incidents.

Why? Unlike just about every customer support application on earth, instead of using XML embedded in the header record to route the email correctly, the open source product routes the email and posts it using the customer's email address. So if a different contact at the customer account replies, the email isn't recognized as related to the open case. And a duplicate case is opened. I have no idea what happens when a customer has 2 tickets open at the same time.

This irritates me because I worked for one of the very first customer support vendors 12 years ago, and even then, our product was smart enough to use a batch load process for inbound emails, validated by the incident ID in the email header. This basic logic is now in every packaged CRM suite.

I completely admit that there has been little or no advancement in case tracking/trouble ticketing in many years. This piece of CRM is totally a commodity. But, and this is the important part, it is a commodity that is the bedrock of every customer support organization in the world. While commodity software is perfect to recreate in open source, there should be a baseline of functionality that is assumed.

I have lobbied for years to get rid of RFPs listing hundreds, if not thousands, of functional line items. Companies spend months writing them. Vendors spend weeks responding to them. But functional laundry lists don't help you determine if a vendor's products will help you solve your business problems.

If moving to open source means having to make sure the software behaves according to normally accepted industry paradigms, RFPs will only get worse. Companies will have to be even more specific about how they expect applications to behave, or else receive some ugly surprises after implementation.

Call me a luddite. But there are too many avenues for excellent customer support software, many costing very little (check out FrontRange and Numara, for starters). And here's the best part: no surprises. And when it comes to enterprise software, no surprises should be a requirement.

Monday, April 2, 2007

News Analysis: Workbrain brings key workforce management capabilities to Infor customers

Acquisition of Workbrain marks 20th for privately held Infor Global Solutions, GmbH
Infor's acquisition this morning of Workbrain for $227M marks its 20th. Assimilation of the Toronto based workforce management vendor fills a significant void in the # 3 ERP vendor's product portfolio. Workbrain delivers key work force planning, time and attendance tracking, scheduling, absence management and related solutions that help companies contain costs and develop optimized human capital management strategies. Marquee customers include British Airways, Target, and General Mills Inc. Infor and Workbrain have similar customer profiles that should lead to many joint sales opportunities.

By adding key workforce management functionality, Workbrain complements Infor's greater strategy of growing revenue among its 70,000 customer base via sales of extended solutions. Infor's business model primarily focuses on customer retention and maintenance revenue optimization. While Infor continues to maintain a strong track record in retaining acquired customers, future prospects should continue to validate the level of support and quality of enhancements delivered among current products with existing customers. On the next gen architecture front, Infor's future SOA strategy remains visionary in its approach. When delivered, one would expect it to lower overall TCO by design and extend flexibility to existing customers seeking the flexibility and integration requirements of SOA.

(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

Sunday, April 1, 2007

Industry View: What's Up with Adobe Apollo?

Last month I found myself at a Adobe user's group presentation on Adobe Apollo. I went because I was looking for a Flash developer to help out with some work on a web project. The presentation I saw was from a group called Effective UI. They were demoing a proof-of-concept front-end for eBay built in Apollo.

There were some things I found really interesting about the meeting.
  1. Effective UI is moving out of some very nice offices, because they have grown so quickly in the last year. I guess demand for UI work in Flash and Flex is soaring. There must be some market momentum around these tools. I had thought of Flash as a space for one-off contract developers, but now there are teams of people working on fairly complex applications.
  2. From about 20 people, the group was divided into about a third from Effective UI, a third from another local company called photobucket, and a third miscellaneous Flash / Flex / ColdFusion developers. (Everyone was very nice to me, even after they found out I work primarily in C#). As a group, they seemed youthful, energetic, and smart. It reminded me a little of the groups attending Microsoft presentations about 10 years ago. They understood things about graphics and presentation layer issues that few of today's business developers binding row after row of data into grids understand.
  3. Apollo is going to set Adobe head-to-head on a collision with Microsoft in the developer tool space. Its cross-platform, runs rich-client applications, and has a decent IDE leveraging Eclipse. If I had to build a rich-client application to run on Windows and Mac, I would probably have to at least think about Apollo.
  4. No one at the meeting knew (or would discuss) what the Apollo run-time distribution vehicle would be, but I'd like to venture a guess. If I was a program manager at Adobe, I'd want it bundled with the Flash Player. All the browsers distribute it anyway, and even Microsoft might have trouble distributing a browser which doesn't support Flash.

I was looking for a Flash or Flex developer, so I announced that twice at the meeting. I only got one card back for a salesperson at Effective UI. I guess everyone at the meeting was already pretty busy and not looking for extra work...