Sunday, August 31, 2008

The Big Picture: Dichotomy In Revenue Growth for Q2 CY Quarterly Revenues

As many main app vendors continue to lower guidance on earnings, this calendar year Q2 public company quarterly earnings analysis shows that larger vendors and specialty vendors such as SAP, Oracle, Lawson, and Deltek gain ground in license revenue growth while growth for the mid-market players now comes from maintenance and services. SaaS vendors all appear to be growing subscription revenue at breakneck paces with Concur (76%), SFDC (50%), SAP (45%), and NetSuite (43%), leading the charge in year over year quarterly revenue growth.

As mentioned in past conversations, the leading indicator for long term growth is new software license sales which drive recurring revenue for vendors with perpetual license models. The trailing number is maintenance revenues which track retention. In the SaaS world this would be subscription revenue. Renewals represent retention.

Here's the break down of year over year quarterly new license sales numbers/recurring revenues:

Enterprise Software Vendors with Perpetual License Revenues (YoY)
  • CDC Software - License down 20% to $14.8M / Maintenance up 26% to $26.8M / Services up 12% to $27M
  • Deltek - License up 18% to $22.1M / Maintenance up 11.3% to $28.3M / Services up 12.9% to $22.3M
  • Epicor Software - License down 3% to$24.3M /Maintenance up 23% to $48.7M / Services up 21% to $41M
  • IFS - License down 27% to SKr 111M ($17.2M) /Maintenance flat at SKr 165M ($25.7M) / Services revenue up 9.5% to SKr 324M ($94.2M)
  • Lawson Software - License up 3% to $41.7M/ Maintenance up 14.4% to $88.9M / Services up 8% to $102.4M
  • Oracle (Apps) - License up 36% to $989M / Maintenance up 17.7% to $1.044B / Services up 16.8% to $957M
  • QAD - License down 23 % to $11.4M / Maintenance up 8% to $34.5M / Services up 34% to $23.6M
  • SAP - License up 25% to 898€ / Maintenance up 22% to $1.151B / Services up 21% to 2.06B€
Enterprise Software Vendors with Subscription Revenues (YoY)
  • Concur - Subscriptions up 76% to $53M
  • NetSuite - Up 43% to $36.6M
  • Oracle (On Demand) - Subscriptions up 28.5% to $194M
  • Right Now - Subscriptions up 25% to $24.5M
  • SAP - Subscriptions up 45% to $64M
  • - Subscriptions up 50% to $240M
The bottom line
Growth for most vendors continues to be driven by maintenance and services revenues. The impact on customers will be a continued squeeze to increase maintenance fees and an increase in the number of service offerings delivered by the vendor. Users should begin their long term account planning and right set expectations. One place to start is to align your business drivers with a long term apps strategy.

Your turn.
Are you seeing a push by your vendor's sales person to up the size of the maintenance contract? Are you seeing more value added offerings in services? Is it getting more difficult to reduce the overall cost of operating your apps? Look forward to hearing from you! Feel free to post your comments here or send me an email at .

(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 2008 by R Wang. All rights reserved

Thursday, August 7, 2008

Food for Thought: In a World Of Partner Solutions Does the ISV or SI Partner Designation Matter?

Old World Definition Of Software Partners Still Prevalent
From a vendor's point of view, partners can play a critical role in expediting time to market, improving sales reach, or delivering a complimentary solution to a customer. There traditionally have been 5 defined categories:
  • ISV - Independent Software Vendors specialize in delivery software. They typically partner to complement a solution offering or create an integrated solution offering for a target market.
  • SI - System Integrators focus on bringing various technology components including software to ensure a complete solution. They bring a solution offering to life and may also provide additional business transformation services.
  • VAR - Value added resellers build on top of existing solutions and to resell the "value add" on top of an existing product. VARs partner by expanding a solution offering for a geography, market segment, industry, or role.
  • OEM -Original Equipment Manufacturers develop components for use by another company in their product. In this context, the vendor provides their solution as an OEM to be embedded by a partner.
  • Technology Partner - Technology partners supply solutions in other areas such as hardware, networking, tools, and related components.
Next Generation Partner Solutions Blur the Lines
Recent discussions with over 150 customers and partners of software vendors and their partners at Microsoft, IBM, Oracle, SAP, Lawson,, and NetSuite highlight two trends:
  • ISV's continue to provide system integration via new services. The hunt for quarter to quarter growth has many of the ISV's bulking up their pro services offerings. While many of these vendors continue to build additional partnerships to expand their reach, there remains considerable investment in internal professional services teams and other value added consulting offerings. Some examples include additional "value added" support services or business value services offerings.
  • System integrators break ISV dependencies by delivering solutions via SaaS or PaaS. Previously, the large consulting firms have invested in solution platforms for custom delivery to clients such as a specific utility billing platform, tax collection system, or telecom call center solution. By moving to a one to many multi-tenant deployment option, system integrators break their dependency on a vendor and can now mitigate the cost of supporting clients should they choose a multi-tenant approach. This means they can deliver one to many support and get into the solutions game without worrying about excessive costs to support various client templates and deployment intricacies
The bottom line.
In the world of partners and partner solutions, customers remain confused at all these designations. At the end of the day, they just want to know the solution is offered in a consistent fashion, certified, supported, and part of a socialized ecosystem.

Your turn.
You've heard my view. As I write this, I'm in the midst of my next report on solution centric ecosystems. Do you agree or disagree that these designation no longer have the same meaning? Is there value in having a uniform way of evaluating these new partner solutions sans the old world monikers? Would a maturity model help? Looking forward to your comments!

(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. All NDA's have been honored.)
Copyrighted 2008 by R Wang. All rights reserved.