Monday’s Musings: Adoption of SaaS Models May Accelerate with Economic Downturn

All signs lead to an impending slow down in economic spending. Whether this will adversely impact IT budgets is not the issue, but how much will the carnage be is the concern being debated. Regardless, overall funding for new investments appears to be bleak which is why innovative business leaders seeking to fund innovation without significant capital outlays will most likely gravitate to alternative deployment options such as Software as a Service (SaaS) or other OnDemand models because of:

• Subscription billing - why worry about the cumbersome capital expenditure budgeting process when you can sneak this in with operational expenses?
• Rapid deployment - avoid the headaches of complicated deployments, the expense of system integration, and the cost of maintaining a data center.
• Affordable constant innovation - avoid the cost and disruption of upgrades while receiving more frequent delivery of new features and innovation.
• Purpose built functionality - most SaaS offerings are designed for a specific industry, role, or market segment. The result - strong capability in micro-verticals and other purpose built scenarios.

The hallmarks of SaaS are hard to ignore, especially during the advent of an economic slow down. Based on some of the growth rates in the previous quarter, vendors like Amitive, Concur, Intuit, NetSuite, Plexus, SalesForce.com, SuccessFactors, Taleo, and Zoho may have the leg up.

Your POV

Look forward to hearing your comments about how on-premise vendors will fare compared to the SaaS vendors. If you’ve got an idea or suggestion to share, please comment or send a private email to rwang0@gmail.com. Look forward to hearing your thoughts!

Copyright © 2008 R Wang. All rights reserved.

Event Report: Initiate Exchange - Customers Confirm Latest Customer Hub/MDM Trends

Quick thoughts from Scottsdale. Initiate as many you know is one of the leaders in the customer hubs/MDM market. At their annual conference, Initiate Exchange, a few key trends emerged from conversations with customers and partners:

• Rapid deployment still key to securing buy-in a the business level. The registry style approach lends itself to demonstrating quick value. This has led project sponsors to secure more funding for longer term MDM projects. Conversations with Initiate customers confirm that implementation times are quicker because of the types and complexity of the initial deployments.
• Exchanges move beyond the healthcare arena. Commercial customers are learning from the trend of collaborative Healthcare networks. These networks typically share patient and provider data within and across their networks in order to support accurate information across the ecosystem. Retailers and manufacturers are starting to see the value in this area.
• Scarce skill sets abound in kicking off MDM projects. Customers confirm that staffing of technical resources has improved significantly. But both system integrators and customers admit that scarce skill exist for project kick off activities such as setting the stage from change management, building the infrastructure for data governance, and creating and staffing effective program management. This is a trend not just for attendees but across the inudstry.
• Version 8.5 generates a lot of interest. Customers who stopped by the demo kiosk expressed positive comments about the new collaborative data stewardship capabilities, streamlined user experience, and the Initiate Inspector Inbox. Those with Group 1 looked forward to using the geo codes in the new adapters.

The bottom line

Initiate customers remain quite satisfied with their choice and the level of investment in R&D by the management team. A growing list of partners continue to bolster Initiate’s mindshare in industries outside of their core pharma, healthcare, and public sector.

Your POV

Do these trends jive with what you are seeing in MDM and CDI? Looking forward to hearing your thoughts. Post a comment or privately reach out to me at rwang0@gmail.com Check it out on the Forrester Blogs.

Copyright © 2008 R Wang. All rights reserved.

Wednesday’s Whispers

PEOPLE WHISPERS: MOVES, PROMOTIONS, AND MILESTONES

Congratulations to all! If you’ve got a change or know of a promotion, drop me a line!

David Corrigan is now a VP of Product Management at Camilion Solutions. David was the public face for MDM at IBM and the acquired entity DWL.

Ira Hall is now Acting Director of Global Revenue at Silicon Graphics. He joins from PWC where he served as a Director and Advisory Services Partner.

Charlene Li is now a Thought Leader and Founder at Altimeter Group as of July 2008. She joins from Forrester Research where she was a VP and Principal Analyst; and co-author of Groundswell.

Jeff McKee is now a Sr. Director, Microsoft OEM Division Product Management. He previously led various roles within the Microsoft Dynamics AX team including Director, Microsoft Dynamics ERP Industry Product Management.

Robert McNeill is the Founder at ThoughtBright. He joins from Service-now.com where he was the VP of Strategy and Marketing.

Mark Szeleyny is now Director of Product Marketing at ON24. He joins from Jigsaw where he served similar roles in growing that startup.

Eric Verniaut is now at Lawson as the company’s Executive VP of Lawson Professional Services. He joins from T-Systems North America where he serve as the CEO and Chairman - Americas Regions.

CORPORATE WHISPERS

Got a scoop or something to share? Please post or send on to rwang0@gmail.com and we’ll keep your anonymity.

1. Project Based Solutions - The word on the street is that there will be some more acquisitions in the project based solutions space. This market is going through consolidation and the acquisition of OpenAir by NetSuite was just the beginning.
2. Heatlhcare Information Systems are all the buzz. The VC’s I’m talking to hint that a big name like a McKesson, Cerner, Epic, or Medi-tech may make the move or be the target.

(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

Tuesday’s Tip: Software Licensing and Pricing - Stop paying for shelfware

First of all, some of you may be wondering what shelf-ware is so a quick definition. It’s software you buy and don’t use. So if you bought 1000 licenses of Vendor X’s latest ERP software and use 905 licenses, you now have 95 licenses not being utilized. That’s 95 licenses of shelfware you pay maintenance on whether or not you use the software or not.

To avoid paying for shelfware you have to do a few things:

1. Conduct an internal software audit. Figure out how much software you have and are using.
2. Look at your contract to see if you can reduce shelfware. Vendors are smarter than clients in most cases. You might just find a clause that says any return of software subjects you to repricing of the contract. There are a number of similar clauses like this.
3. Determine future demand. Find out if you will use the software in the next 3 months. If you have a demand, then it doesn’t make sense to return.
4. Consider price protection. Arranging for future discounted prices helps with reducing shelfware and paying maintenance on software not deployed. These clauses are a good way forward

Your POV

I’m in the process of updating the Enterprise Software Licensee Bill of Rights. If you’ve got an idea or suggestion to share, please comment or send a private email to rwang0@gmail.com. If I use it, I’ll send you the updated version. Look forward to hearing your thoughts!

(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

Monday’s Musings: Will Tech Vendors Without Credit Lines Survive The Financial Crisis?

Let’s hope the government finds the most equitable and expeditious solution to the current financial crisis. Without access to credit lines, enterprises lack the financial means to respond to the current economic downturn by transitioning their legacy systems and transforming their business processes. Tech vendors who lack vendor led financing options will be the most vulnerable to this credit crunch. These vendors may find themselves unable to close deals with clients shut out from the credit markets.

Vendor led financing initiatives may prove to be the lubricant that keeps tech spending moving forward. Tech vendors such as Sun, Intel, HP, Microsoft, IBM, and Oracle are best positioned to whether the financial crisis because they have their own financing arms - an important resource which will provide them with such capabilities to extend not only to their customers, but also to their key partners.

Your POV.

Look forward to hearing your views. Where do you think the current crisis will take us?

Related posts: See Infor’s Move with IBM

(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

BLOG UPDATE: Change your links to blog.softwareinsider.org

Hello! Starting in January 2009, A Software Insiders Point of View will be moving to a new home. As we are in beta, look forward to new ways of sharing and reaching out. Look forward to your suggestions!

Here's the new blog link:

http://blog.softwareinsider.org

Cheers!

News Analysis: Oracle SaaS Platform Offering Adds Choice to Emerging PaaS Platform Wars

Emerging SaaS platform wars akin to on-premise middleware wars
With consolidation in the middleware market fairly under way, adoption of SaaS platforms (i.e. PaaS) by solution partners represents the next land grab in the enterprise software space. Current key players include industry leaders and specialists such as Salesforce.com, NetSuite, IBM, Microsoft, Oracle, and Magic Software (UniPaas). Today's announcement by Oracle indicates that:

• R&D investment in the on-premise stack is very applicable to the cloud. As Oracle continues to strengthen it's "Red Stack" initiatives, it's looking at how to effectively win in multiple deployment options from hosted, single tenancy, multi-instance, and multi-tenancy. The platform offering currently includes Oracle database, Oracle Fusion Middleware, Oracle Enterprise Manager, and Oracle VM along with security and other high availability support. The existing partnership with Amazon WebServices show cases this commitment to work with other cloud providers.
  
• Oracle seeks to become the PaaS vendor of choice. Oracle's foray into SaaS platforms and cloud computing gains momentum as 250 ISV's have chosen the Oracle SaaS platform for delivery and development. ISV's include Adaptive Planning, Ariba, Asknet Inc., Blackboard, Callidus Software, CashEdge, Click Commerce, Inc., Docupace Technologies, dthree inc., EnterConnect, eXpresso Corp., frevvo, InfoNow, Intacct Corp., MAXIMUS, Inc., OpSource, Perot Systems, Sabrix, SuccessFactors, Teranode Corp., Where 2 Get It, Wireless Matrix, Workstream Inc., Xactly Corp, Zogix. The list of ISV's is impressive given the size of the vendors, industries, and geographies.

The bottom line...
SaaS platform wars will intensify as Oracle enters a parallell market where BEA, Microsoft VS.NET, and WebSphere traditionally played in the on-premise world. This move can be seen as Oracle's ambition to be the software deployment and development platform of choice for the cloud based computing world. In effect, Oracle now places itself in direct competition with SalesForce.com, NetSuite, and Google for mindshare and technology partnerships. ISV's looking for a PaaS partner now gain another option.

Your turn.
What are your thoughts on Oracle in the Cloud Computing space? Do you see Oracle as an effective provider of solutions for your ISV? Do you believe you can partner with Oracle? Does Oracle provide you with the right tools? Look forward to hearing from you! Feel free to post your comments here or send me a private email at rwang0@gmail.com.

(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

Trip Report: 2008 Oracle Open World Day 1

View from the Moscone North to South Above Ground Crosswalk Looking into Moscone West
(Copyrighted 2008. Photo by R Wang. All rights reserved)

In the world of enterprise software, Oracle's Open World is one of the grand slam must attend events of the year. Day 1 starts with the Oracle Users Forum, a collection of 420 affiliated user group communities participating in special interest group sessions, and the Oracle Partner Network Forum at the Hilton including the Titan Partner awards. Conversations with partners and customers at these user group sessions reveal an emerging and evolving perception of Oracle and its long term strategy that include conversation themes such as:

• What's in the Fusion Apps and when are they coming out? I was stopped a number of times by clients who wanted to know if we had seen the Fusion apps. Sworn to secrecy, I can say I've seen it. We saw real live code at the Oracle Apps Analyst day a few weeks back. The user experience is first rate and I can't comment anymore unless I plan to give up my first born. However, if they deliver, this may be game changing.
  
• Should I go with the "Red Stack"? The stack wars represent a consolidated vendor reality. For years, we've used the term "Red Stack" (i.e. Oracle), "Blue Stack" (i.e. IBM), "Rainbow Stack" (i.e. Microsoft), and "Open Stack" (i.e. LAMP) to describe how consolidation is impacting database, middleware, and applications. Increasingly, partner and customers see themselves choosing among stacks. Notably, we see a lot of discussion from the services based businesses about how they are facing a decision that may require a bet on either the "Red Stack" or the"Blue Stack". Others are looking at coexistence with the "Rainbow Stack" in the Oracle enviornments. I spoke with one Federal agency customer who talked about how legacy system replacement was big and how the were looking to see what Oracle could offer in iGovernment. In general, these discussion occur in the large context of an apps strategy and a solutions strategy. Our standard advice, just don't get locked in to a vendor and find yourself with no leverage to switch.
  
• Custom versus packaged apps, does this even matter? With a lot of the tools in Fusion Middleware and other application stacks improving, many customers expressed a viewpoint that packaged apps were just a starting point. One customer from a large multinational hardware provider pointed out how they are extending a lot of their packaged apps using Fusion Middleware to meet new business models. Another customer in the retail sector talked about how deal management and demand planning was back in vogue as the focus shifted to operations from financial engineering. This customer was looking for the capabilities to configure using JDeveloper over some of their other customization efforts.
• Can I trust Oracle as a partner? Oracle is prioritizing efforts to partner with apps and solution providers. For years, Oracle apps partners have often talked about how it was hard to talk about whitespaces in roadmaps, gain commitment from senior executives, and seek joint go-to-market strategies. Conversations from the Partner floor seem to signal a shift in attitude and some optimism in colalborative relationships. More importantly, there was much chatter about new marketing development funds and a renewed focus on partner enablement.
  
• What's Oracle doing about "Green"? There's a surprising amount of interest in Oracle's Green Room Sessions. Being in San Francisco, it's not surprising to find a lot of interest in the Green Marketplace. A few people kept asking me if I knew what was going on with environmental stewardship, sustainability, and green activities. Not being the green analyst I'm making a point to drop by to the Novellus Theatre on Thursday to check out a few of these sessions.
  
• Have you tried Oracle Mix? Hands down this beats the old clunky Oracle Connect! A lot of "early adopter type" attendees have taken advantage of Oracle's new social networking framework at Open World. It's an enterprise version of facebook meets ning! Check it out..(https://mix.oracle.com) or check me out at https://mix.oracle.com/user_profiles/21960-r-ray-wang . drop me a message or add me to your network. Better yet, send me a linked-in request.
  
  
  
  
  
• Are you checking out tonight's keynote? You bet! In the midst of this year's best reality show (i.e. the US Presidential Election), how can you turn down the all time best political power couple and strategists - James Carville (D) and Mary Matalin (R)? See you there!
  

Next stop: Forrester's Business and Technology Leadership Forum (JW Marriott, Orlando)
I'm off to Orlando and then back to San Francisco again for the rest of OOW. But come hear the future as we keynote what life will be like in 2020 across the Business Process and Apps Professional, Information and Knowledge Management Professional, and CIO roles in the Business Applications 2020: A Three Role Perspective event!


(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

Trip Report: Fall Event Tour Summary

For those of you on the road this fall, may be we can find a place to meet up!

September
09/08 to 09/12 SAP's Tech Ed, The Venetian, Las Vegas, NV - Not Attending
09/10 to 09/11 Intuit's Enterprise Solutions Users Conference, Hyatt Regency, Dallas, TX - Not Attending
09/21 to 09/26 Oracle Open World, Moscone Center, San Francisco, CA - Attending
09/23 to 09/24 Forrester's Business Technology Leadership Forum, JW Marriott, Orlando, FL- Attending
09/29 to 10/01 Initiate's Exchange, Westin Kierland Resort, Scottsdale, AZ - Attending

October
10/01 to 10/03 iGate User Event, Ritz Carlton, Orlando, FL - Not Attending
10/05 to 10/08 IFS Customer Summit, Westin Chicago Northwest, Chicago, IL -Not Attending
10/12 to 10/16 Terradata Partners User Group Conference and Expo, Mandalay Bay, Las Vegas, NV - Not Attending
10/14 to 10/14 Microsoft Dynamics AX 2009 Launch, New York, NY - Attending
10/14 to 10/17 Consona Connect User Conference, MGM Grand, Las Vegas, NV - Attending
10/14 to 10/16 Infor's Inforum 2008, The Venetian and Sands Expo, Las Vegas, NV - Attending
10/19 to 10/22 Epicor's Perspectives 2008, Caesar's Palace, Las Vegas, NV - Not Attending
10/26 to 10/31 IBM's Information On Demand, The Mandalay Bay, Las Vegas, NV - Attending

November
11/02 to 11/05 SalesForce.com's DreamForce'08, Moscone Center, San Francisco, CA - Attending
11/10 to 11/11 UK and Ireland SAP User Group, London West Novotel, United Kingdom, - Attending
11/16 to 11/18 HCL Global Meet, The Disney Yacht and Beach Club Resort, Orlando, FL - TBD
11/17 to 11/20 Sage Summit, Mile High Convention Center, Denver, CO - TBD
11/18 to 11/20 Open Text Content World, JW Marriott, Orlando FL - TBD




(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

Food for Thought: Is There a Correlation with Good To Great Companies and the Primary ERP System of Record?

From time to time, this question comes up as to what ERP systems are used in the 12 companies listed in Jim Collins, "Good to Great" book. Here's the "official" system of record as gleaned from public sources including press releases, SEC filings, and media quotes. If you work for any of these companies, please let me know if I've got any of these wrong as things may have changed...

* Abbott Laboratories - SAP - Primary. BPCS (Infor) and JD Edwards (Oracle) run at the plant level
* Circuit City - PeopleSoft (Oracle) - Primary. Retek (Oracle) at the retail level.
* Fannie Mae - Custom ERP systems
* Gillette – Oracle (At the time of the book), P&G acquired Gillette and runs SAP
* Kimberly-Clark - SAP - Primary
* Kroger - Custom ERP systems. Retek (Oracle) at the retail level.
* Nucor - Custom ERP systems. IFS and Microsoft Great Plains at some plants
* Philip Morris - SAP - Primary
* Pitney Bowes - Oracle - Primary
* Walgreens - Custom ERP systems
* Wells Fargo - PeopleSoft (Oracle) - Primary

The bottom line.
The final score here is 4 for Custom ERP systems, 4 for SAP, 2 for Oracle, and 2 for PeopleSoft. With such a small sample size and Oracle buying up PeopleSoft, it looks like a 3-way tie for SAP, Oracle, and a custom ERP system. If there's any lesson learned here, technology serves a role as an accelerator and not a change agent. One might want to place bigger bets on people, especially Level 5 leaders, strong management, and self-discipline.

Your turn.
As far as one can tell, there rarely is a correlation with the ERP system and how well a company does, but I'll let you be the judge. Do you think the ERP System of record makes a difference in how a company runs? Share your thoughts here or send me a private email at rwang0@gmail.com.

(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

Trends: What Customers Want From Maintenance And Support

One of the hottest topics this year has been maintenance and support. With many vendors contemplating another price hike, customers increasingly ask where's all that money going. The dirty secret - many vendors typically take up to 85% of the fees as profit, leaving a paltry 15% for reinvestment in support, maintenance, and upgrades. What's worse, some vendors have not only under invested in the core technology, but they have also failed to deliver basic enhancement requests that a majority of customers have asked for. Below's a top 10 wish list that customers are asking for from their vendors (in classic Letterman style):

10. Web based self service driven user support communities
9. Knowledgeable and culturally appropriate support professionals
8. Fixed pricing with no CPI or other inflationary price increases
7. Transparency into functionality and enhancement and prioritization
6. Time and materials billing for products outside of vendor stated support policies
5. 24/7 follow the sun support
4. Service level agreements for response times and quality of resolution
3. Transparency in how much of the maintenance and support dollar is reinvested versus how much is going to profit
2. Choice in support options and packages (i.e. tiered maintenance options)
1. Option for third party maintenance

Bottom line
Some major ERP vendors, especially those in the more competitive midmarket, have seen the light and are beginning to take steps towards delivering on the above wish list. It goes to prove that competition keeps everyone honest. However, those customers who are "locked in" to a vendor, need to organize and band together to create the right leverage with vendors who are hell bent on milking their customers for all their worth in the maintenance dollars. Start the movement with your user groups or other industry trade groups. If you fail to organize, well, you'll know it when you find yourself locked in.

Your turn.
Are you finding that your long term costs to keep the lights on continue to grow? Would you rather spend 80% of your budget on innovation and new projects instead of commoditized back office processes? Would you like to organize with other customers to affect change. Look forward to hearing from you! Feel free to post your comments here or send me a private email at rwang0@gmail.com.

(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

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
  
• SalesForce.com - 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 rwang0@gmail.com .

(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

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, SalesForce.com, 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.

Food For Thought: Can You Have It All - Faster, Better, Cheaper?

Return of the FBC Mantra
With pending economic uncertainty in sight, almost every conversation in the past 2 months has referred back to the mantra of Faster, Better, and Cheaper (FBC). Maybe it's part of living here in the heart of high tech companies where product life cycles are as a short as the next haute couture dress on a Paris runway model. But we're hearing it more and more across all industries. Is this a new client based reality or just another step towards the price-based commoditization whirlpool? Let's take a look at the components:

• Faster. Can you get this to market faster? Can you reduce the time it takes to sell the product? Will you be able to collect money more quickly? Can you respond to a safety issue more quickly?
  
• Better. In the eyes of a customer, is this a significant improvement? Are the trade offs we make worth the effort. Will this compel someone to select our offering?
  
• Cheaper. Can we do this for less? Can we do this with less people? Are there regulatory or compliance issues that prevent us from reducing cost? Do we have to hire so many people? Do we have to hire so many good people?
  

Market based reality shows it's tough to achieve all three: One could argue that it's been next to impossible to support all three for all industries. For example, in the March 2000, NASA FBC Spear Report, a former NASA engineer stated that "the faster, better, cheaper" approach that pushed agency engineers and scientists to crank out more frequent, low-cost, and stripped down missions was a failure. In learning from the aftermath - we are seeing that top technology trends in the enterprise software industry do not normally support all three either. Two out of three seems to dominate current trends. For example:

• SaaS. Faster - rapid deployment, real-time upgrades, 99.99% uptime and reliability. Better - more dynamic UI, newer functionality, configured not customized. Cheaper - this remains to be seen. Today ROI studies over a 10 year period show that SaaS is cheaper for companies with less than 1000 employees. Once over 1000 employees, we see SaaS costs comparable to on-premise. This becomes more of a life style thing.
  
• Third party maintenance providers. Faster - this is debatable in terms of responding to regulatory updates, vendor changes, etc. Better - users often find that vendors like Rimini Street optimize the instance when they bring over the product. Cheaper - up to 1/2 the cost of maintenance price can be reduced which frees up money to invest in all the other projects that have been neglected for some time.
  

Your turn.
You've heard my view. Got an example where all 3 work? Or do you think this is all a fallacy? Maybe it's true that, "You can only have 2 - Faster, Better, Cheaper" in enterprise software? 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.

News Analysis: SAP Moves All Customers Onto More Expensive Enterprise Support

Margin Pressures Drive Maintenance Fee Increases
Announced at the 2008 Field Kick Off Meeting (FKOM), the elimination of the Standard and Premium support offerings was originally developed just for new customers. However, today's announcement that existing customers will be "transitioned" to Enterprise Support as of January 1, 2009 will come as an unpleasant surprise to SAP's 17,000 customers on basic support. This move may stem from a variety of factors including:

• Increasing complexity of the SAP user landscape. SAP often cites the movement towards SOA environments and the growing complexity of IT landscapes as the main drivers for a more comprehensive, differentiated, and streamlined support offering. In fact, SAP customers would concur that their environments have become more complex to manage and own. Many of SAP's largest customers have decided to skip the upgrade to ERP 6.0 and wait for SAP's next major release.
  
• Failure of Business ByDesign launch. Inability to scale BBD in a cost effective manner and delays in moving BBD onto the new NetWeaver 7.1 platform have led to a major loss in potential revenue growth. Most notably, SAP will not reach the 1000 customer target by 2008 as promised in its Q4 2007 earnings call.
  
• Margin pressure exerted by Oracle. During the 2007 Q4 earnings call, Oracle’s CEO, Larry Ellison, stated an overall goal of reaching 50 percent margin and 20 percent earnings annual growth. The effect - SAP has had to react with an equivalent profit margin growth strategy. Combined with the recent $83M payout to i2 and the pending TomorrowNow legal issues, SAP has been left little choice but to respond with a maintenance fee increase to achieve double digit earnings growth.
  

Compared to the Rest of the Software Industry, Enterprise Support Does Deliver Relatively More Value...
Despite the price hike, SAP should be given credit for holding maintenance fees at 17% for over a decade. Unlike the policies and practices of other vendors, SAP's increase does comes with additional benefits:

• Free trial period and graduated increase. Customers will be moved to Enterprise Support as of July and not begin payments until January 1st 2009. Expect increases of about 8% a year until the 22% maintenance fee is reached. For most customers this will occur around the 2011 - 2012 period.
  
• Upgrade commitment. SAP provides a technical upgrade commitment that every installed base customer can be upgraded to the next release. In addition, SAP commits to deliver all the tools required to manage a technical upgrade. However, customers must migrate to ERP 6.0 to take advantage of Enhancement Packages (EHPs).
• End to end operations support. Enterprise Support comes with a central test plan for core business processes, a quality manager that will validate test execution and completeness, and a central transport mechanism and change control system. SAP also commits to 7 X 24 support advisory, 7 X 24 root cause analysis, and continuous quality checks via remote access and supportability.
  

... However, Most Customers Barely Use What They Have.
In conversations with over 100 SAP customers, most express minimal utilization of the existing Basic Support offerings. Basic Support typically includes problem resolution, quality management, SAP Solution Manager, SAP standards for solution operations, knowledge transfer, continuous improvement, and access to the SAP Service Marketplace. The average customer claims to connect with SAP less than 5 times a year. This is the software equivalent of getting an expensive but comprehensive insurance policy and never utilizing it.

The bottom line.
Maintenance fees continue to erode the value of a perpetual license. At 22% of net price, customers pay the equivalent of 2X their original license cost over a typical 10 year ownership lifecycle. Maintenance continues to be the most expensive cost component of enterprise software. Customers should take action by:

• Considering third party maintenance options. Rimini Street's recent announcement to provide third party maintenance in 2009 is worth a look. JD Edwards and PeopleSoft customers who have considered this option already save up to half of their Oracle maintenance fees.
• Galvanizing the SAP User Groups to take action. Now is the time that customers should leverage their independent users groups to organize a campaign against this maintenance fee increase. Groups such as ASUG, DSAG, SAP Users Group UK & Ireland need to step up to the plate and find a solution to this increase. This will be the real test of these users groups effectiveness. It will become painfully obvious which individuals in leadership positions have been under the influence of SAP and which individuals will be willing to back the end users.
• Determining long term SAP containment strategy. Most SAP customers adopted a single vendor strategy. The initial benefits were driven by a fear for complicated integrations, desire for process standardization, and need to expedite deployments pre Y2K. This strategy has led to vendor lock-in and vulnerability. Long term apps strategy should consider how to contain future risk in a single sourced ERP scenario.

Your turn.
You've heard my view, but I'm looking to see how you feel about this latest increase by SAP as well as the Oracle price increases.

For more details on how SAP has raised maintenance fees see the Forrester Report from March 3, 2008 "SAP Raises Maintenance Fees for New Customers"

For some other interesting posts on this topic check out the news time line:

• July 11, 2008, Enterprise System Spectator's Frank Scavo, "SAP Botching UP Support Transition"
• July 16, 2008, Irregular Enterprise's Dennis Howlett "SAP pulls the trigger on higher support costs" and SAP 'Mittelstand Customers Upset at SAP Maintenance Increases Computerworld Germany Link (for those of you who sprechen Deutch and Babelfish)
• July 17, 2008, The Register's Joe Fay "Comment on SAP forces customers onto premium support package"
• July 18, 2008, UK and Ireland SAP User's Group's Statement on SAP Support
• July 18, 2008, Cio WebLog's Scott Wilson, "SAP Jacks Support Costs"
• July 21, 2008, E-piphanies' Michael Hickins, "Tomorrow Now Comes Early"
• July 28, 2008, Irregular Enterprise's Dennis Howlett, "More dissent on SAP Maintenance Price Hike"
• NEW! - July 28, 2008, The Register's Chris Williams, "SAP Defends Forced Price Hike"
• NEW! - July 28, 2008 MyCustomer.com - Stuart Lauchlan "UPDATED: SAP customers furious at 29% hike in support costs
• NEW! - July 29, 2008, Enteprise AntiMatter's Joshua Greenbaum, "Friendly Fire: SAP Flubs the Maintenance Business"
• NEW! - July 30, 2008, Enterprise System Spectator's Frank Scavo, "Mad As Hell: Backlash Brewing Against SAP Maintenance Fee Hike"
  
• NEW! - July 31, 2008, Computing's Tom Young and Janie Davies, "Fury as SAP raises support costs"
  

(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.

Reality Check: Sales reps matter more than product

I haven't posted for so long, butI felt like I had to give Mr. Analyst of the Year a break and actually write something.

Over the last year I have become increasingly aware of something and wanted to share it with a larger audience. When I have conversations with companies about a pending software purchase (usually CRM or eService), they tell me the core business problems they are trying to solve, then give me the list of vendors they are considering. And almost every time, I hear a little jingle from Sesame Street in my head:

One of these things is not like the other
One of these things just doesn't belong
Can you guess which thing is not like the other
By the time I finish this song?

Why? Because the obvious vendor(s) who are specialists in their problem are not on the list, and they are selecting from a group of vendors who all do something else. So I ask, "Um, why isn't Vendor X on the list?" And here is the universal reply. "Oh, we started with them, but their sales rep was an asshole."

I don't think developers and marketers at high tech companies have any idea how many deals they are losing based on the personality of the sales rep. What is really shocking is how many times the obvious 'best fit' vendor is dismissed from a deal because:

• The sales rep was arrogant (I've heard this a dozen times about 1 vendor in particular)
• The sales rep was late to multiple meetings and conference calls and the company felt the vendor didn't want the business
• The sales rep didn't know bumpkis about the product functionality and tried to BS their way through--always a big turnoff

Maybe I'm a troublemaker (OK, I admit it, I am) but sometimes I contact the vendor who lost a particular deal and asked them about it. So far, not a single time has the 'win/loss' report had anything about the sales rep or the sales process. Usually it is a useless excuse like, "they weren't ready to make a decision," when that obviously wasn't the case. Or, "we couldn't meet their price," when I knew the discussions never even got that far.

This is all very frustrating for me, because I want to see companies buy the right product to fix the right problem, and when there is a mis-match from day 1, it isn't good for any of us. The customer ultimately doesn't receive the ROI they expect. The vendor never has a referenceable customer. And I have far fewer success stories to write about than I should.

There is so much pressure in my industry (service and support) on after call satisfaction surveys, I wonder why companies aren't doing a better job of understanding the impression their sales staff is making on customers? Why doesn't the VP of sales follow up with prospects after the initial sales visit and ask how it went? Why doesn't someone other than sales create the win/loss reports so at least companies know how much business they are losing because of sales rep hubris?

So all you Software Insiders who read this blog, ask yourself, "when was the last time I did a 'ride along' on a sales call?" Regardless of what your role is (engineering, support, marketing, etc.), maybe you should start making your presence known in more customer facing sales situations. From what I'm hearing, you may be shocked at what you see.

Thanks for reading!

John Ragsdale

Ragsdale's Eye On Service

News Analysis: Infor Teams Up with IBM Global Financing

Vendor Financing Options Provide a Key Weapon in Battle for Tech Spending
On June 28th, 2008, Infor and IBM Global Financing (IGF) announced a worldwide customer financing program for Infor customers. With the worsening global crunch on credit, this program provides Infor's customers with:

• Access to a line of credit for key tech investments. Similar to other IGF deals, the program includes more than just Infor's entire line of business software. Other eligible items include software, services, hardware, and maintenance.
• Flexible payment options. Customers can spread traditional up-front payments over time. Flexible payment plans for loans or lease extend up to 60 months. Interest rates are country specific.
  

Key facts about the deal:

• Geographies: All
• Products: All products, No IBM hardware or software required
• Length of program: Up to 5 years, typically 24 to 36 months
• Interest rates: Country specific
• Partner eligibility: Open to all partners
• Program inclusion: software, services, hardware, and maintenance.

The bottom line.
Vendor-led financing options and payment alternatives provide users with opportunities to avoid up front payments and efficiently deploy capital. While financing options do not address the issues of recurring costs for support, upgrade, and hardware infrastructure, the bundling of professional services, hardware, and other related software offerings provide a compelling business case to choose one preferred IT vendor while deferring capital outlays. Financing will continue to prove to be the game changer in this consolidating and competitive software market.

For more details on how other vendors have accomplished financing options see the Forrester Report from August 29, 2006,"Assessing New Software Vendor Financing Options" .

Your turn.
You've heard my view, but I'm looking to see how you've used vendor financing and if you see this as a game changer or not. Looking forward to your reply.


(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.

News Analysis: Multiple Factors Lead to Shifts in Oracle List Prices

Dollar Based Pricing Drives the Bulk of Recent US Based "Price Increase"

On June 16, 2008, Oracle updated its localized price lists and software investment guide. Applications previously priced at $3995 per user rose 13.1% to $4595 per user in US dollar terms. Database pricing increased 18.75% from $40,000 per CPU to $47,500 per CPU. Other price increases approximate 15% on average. Despite Oracle’s role in vendor consolidation, increases during an impending economic downturn appear illogical. Recouping for dollar devaluation is the main rationale behind the recent price shifts for the following reasons:

• Oracle offers one single global price list. Unlike many vendors who account for global currency fluctuations with country, region, and industry specific uplifts, Oracle maintains consistent pricing in dollars. The dramatic devaluation of the dollar has led to a de facto discount in the 30 to 35% range for multi-nationals who purchase in Pounds Sterling, Euros, and to a lesser extent, Yen. As a result price increases mainly impact the US while other Euro zone countries will not see a major increase in real dollar terms. A closer look at country specific pricing for Germany shows that the Euro price has not changed in constant Euro terms.
• Management aims for 50 percent profit margins. During the 2007 Q4 earnings call, Oracle’s CEO, Larry Ellison, stated an overall goal of reaching 50 percent margin and 20 percent earnings annual growth. Given Oracle's global presence and geographical distribution, a large proportion of Oracle's sales and sales expenses are incurred outside of the US and the currency issue has hampered this margin objective and created pricing arbitrage. In the past, key recommendations to end users include purchasing in non-dollar currencies and take advantage of the currency arbitrage. Oracle’s pricing moves aim at mitigating this end user pricing strategy.
  

Other Price Shifts Reflect the Level of Market Competitiveness
Oracle typically provides pricing changes on a 9 to 12 month basis to account for iterative changes and acquisition activity. Despite dollar based pricing being the main rationale for this recent price shift, some changes reflects the level of competition Oracle faces in the market. For example:

• Business intelligence (BI) minimum pricing cuts reflect a competitive market. Head to head competition with IBM, Information Builders, Microsoft, SAP and SAS leads to a change in pricing strategy. Financial BI analytics moved from $400,000 per customer to $5800 per application user with a 25 named user minimum purchase.. This change at list pricing reflects a minimum user drop from 79 users, effectively targeting the SMB market but raising the price for companies with more than 79 users.
• App sever increases may reflect Oracle’s dominant market position. Acquisition of BEA puts Oracle in the dominant market position. The price for BEA WebLogic server is now $25,000 per CPU, a 47.1% increase from $17,000 per CPU. Currency fluctuations can not explain this level of price increase. One possibility could be an overall change in packaging that may include additional components.

The bottom line for end users
Contracts Must Take Into Account The Software Ownership Lifecycle

Software ownership spans across five phases of ownership: selection, implementation, utilization, maintenance, and retirement. List prices represent one part of the cost equation. Maintenance fees, upgrades, and staffing have longer term implication and should be factored in contract negotiations and vendor selection criteria. Though Oracle’s specific price changes impact US based or dollar based markets the most, Oracle clients should:

• Never pay list price. Most initial offers for enterprise software carry a discount. While discounting percentages may vary due to revenue recognition rules, list prices rarely impact the final cost. Expect the software market to remain competitive in the US and license discounts will remain in the same ranges.
• Focus on total contract value, not the discount percentage. Because of the dollar based price increase, discount targets should factor in the price changes. A 30.4% discount for 2008 would be required to achieve the same 20% discount in 2007 due to the list price increase.
• Minimize maintenance fees. Maintenance represents the largest chunk of long term apps costs. Rates at 20 to 25% a year represent the equivalent of buying new software every 5 years and spending two times the original license cost over a period of 10 years. Euro zone customers who purchased software prior to 2006 should renegotiate rates to reflect the recent dollar devaluation.

The bottom line for vendors.
Like Big Oil and Petrodollars, Dollar Devaluation Creates a Silicon Dollar Effect.
Dollar devaluation not only impacts the price of oil, but now enterprise software. Expect other US based software vendors with a global presence and single global price list to make changes to the “Silicon Dollar’ equation and raise prices accordingly.


(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

Order Management Hubs: 20 Steps to a Perfect Order

A Perfect Order still means many things to many people
Recent studies show that enterprises who deliver perfect orders have a direct correlation to positive customer satisfaction scores. Despite the stakes, success in consistently delivering a perfect order continues to elude many enterprises because existing systems lack the flexibility to move orders across the order management cycle.

Process views should trump functional fiefdoms
One source of confusion stems from the lack of clarity in what the components of a perfect order should entail. Confusion often stems from a functional perspective which may be predisposted from an ERP, CRM, eCommerce, or Supply chain heritage. Tossing out the three letter acronyms, order management hubs are about 4 key business processes:

1. Opportunity to order capture - all the stuff to capture information for the order and send it on to the next step
   
2. Order capture to order fulfillment - the guts and logistics of fulfilling an order from pick,pack, ship to TMS, WMS.
   
3. Order fulfillment to order completion - the processes that may occur before an order is satisified such as returns, after market service, installation scheduling, and warranty claims.
   
4. Order completion to order settlement - invoicing, AP/AR, financial stuff.

Moving from 10 steps to 20 steps towards a Perfect Order
The basic notion is a stakeholder gets an order and they have their expectations to have this filled every time, without question and with minimal effort. In previous discussions on Perfect Orders, 10 steps were identified. The definition has now been expanded to cover 20 key steps which include the delivery of an order:

1.		Through any channel at any time
2	.	Multiple types of stakeholders can
3	.	Engage in a consistent brand experience by
4	.	Selecting the right product or service with
5	.	The correct quantity and configuration that
6	.	Meets the acceptable levels of quality for
7	.	The stakeholder's entitled pricing policy
8	.	Supplied from the agreed upon sources
9	.	Delivered to or installed with the right customer within
10	.	An agreed upon period of time to
11	.	The correct locations in
12	.	The most appropriate packaging that
13	.	Includes the right documentation over
14	.	The right frequency with
15	.	An accurate invoice that can be
16	.	Collected and efficiently settled and/or
17	.	Returned via any channel for
18	.	Warranty claims against defects and/or
19	.	Scheduled for repair based on
20	.	Agreed upon service contracts

The bottom line for end users
Achieving a perfect order requires enterprises to revisit how existing order processes support multiple selling channels, multiple fulfillment scenarios, across functional areas. Ultimately, these business processes must be measured against metrics and key performance indicators (KPIs) such as:

1. Availability to promise visibility
   
2. Order status across all stages
   
3. Picking error rate
   
4. On-time delivery percentage
   
5. Cases shipped vs. ordered ratios
   
6. Type and percentage of unsellables
   
7. Days of supply
8. Order cycle time
   
9. Shelf level service ratios
   
10. Warehouse to store fill rate
11. Order accuracy percentages
    
12. Accurate and timely invoices percentages
    
13. Percentage of data synchronization
14. Stakeholder satisfaction
15. Lifetime monetary value of stakeholder.
    

(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 "Ray" Wang. All rights reserved

News Analysis: NetSuite's Acquisition of OpenAir Signals Importance of Services and Project Based Businesses

Like the consolidation in the on-premise world, NetSuite's acquisition of Open Air marks the beginning of the a wave in consolidation for SaaS. NetSuite's decision to acquire OpenAir for $26M is significant for a few reasons:

• NetSuite gains a toehold in the Services and Project Based world. The Project Based Solutions market is hot and OpenAir is one of the poster children for SaaS in PBS. In addition, NetSuite has needed critical capabilities in project management, scheduling, and related PBS skill sets. NetSuite adds a base of 40,000 active users and 300 new service customers.
• OpenAir customers add end-to-end SaaS business suite functionality. Integration between the 2 products is planned for later in 2008. End users should expect Web services integration frameworks to allow OpenAir customers to complete end to end processes for Order to Cash, Schedule to payment, and Project Design to Completion. Services and project based companies now have a complete offering delivered on a true multi-tenant SaaS platform.

The bottom line for end users
Decision making should still be led by business drivers that may span across growth, regulatory, compliance, and strategic. Key advantages when considering a SaaS solution still include:

• Faster deployment of critical business functionality. SaaS solutions often provide much needed "last-mile" solutions that meet pent up business user demand. More often than not, upgrades to solutions occur with more frequency than on premise offerings. Keep in mind, enterprises should coordinate with IT on long term integration requirements, canonical data model design, and deploy the appropriate ESB's or integration technologies.
  
• CapEx reductions that free up much needed capital. Use operating expense instead of upfront capital and avoid the long buying cycle of board approval and IT infrastructure dependencies. Take the freed up capital and apply it towards more functionality.
• Growing capabilities to extend solutions via partner networks and tool kits. Vendors continue to expand their Platform as a Service (PaaS) offerings to partners and customers who are looking to ultimately extend processes and apply metadata configurations to "customize" solutions. The toolkit and strength of partner ecosystems should be one of many factors in vendor selection.
  

The bottom line for vendors
The growing threat (see Workday Flextronics Win) of SaaS as a business and deployment model means that consolidation will accelerate as SaaS vendors aim to bulk up for scale in sales and marketing as well as partner mindshare. Should NetSuite successfully acquire and integrate OpenAir , customers will not only gain key capabilities, but SuiteFlex partners will also gain a new avenue to extend their offerings and last mile solutions on top of one of the industry's top Project Based Solutions, Open Air.


(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