Monday, September 17, 2007

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

Thursday, September 13, 2007

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

Wednesday, September 5, 2007

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

Tuesday, September 4, 2007

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!

Monday, September 3, 2007

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


Thursday, August 30, 2007

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

Monday, August 27, 2007

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

Thursday, August 16, 2007

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

Thursday, August 9, 2007

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!

Sunday, August 5, 2007

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

Monday, July 23, 2007

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

Wednesday, July 11, 2007

Order Hubs: A Perfect Order's Just Really in the Eye of the Beholder

WHAT'S A PERFECT ORDER THEY ASK???

So I've been getting this question about once a week or so for the past 2 years. And basically, everyone starts the conversation from their perspective of what an order is. The supply chain guys think fulfilment, the CRM/eCommerce gals think order capture. and the ERP peeps think billing and payment. In fact, they are all correct! But let me suggest:

Take a process view first
However, you should take a process based view. This is about 4 key 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.
Revisit what an order is really about
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. Not the best definition, but when we drill further into major factors, it becomes apparent that there are about 10 key items to think about. A perfect order delivers:
  1. The right product or service in the
  2. The right quantity with
  3. The right configuration that meets
  4. The right levels of quality from
  5. The right source delivered in
  6. The right condition and packaging with
  7. The right documentation in
  8. The right period of time for
  9. The right cost over
  10. The right frequency
So, as you can imagine, there is such a thing as a perfect order, it's just in the eye of the beholder!

NOTE: Now I know others have had various versions of this and I do want to credit their work and especially Edward Marien at the University of Wisconsin who's talked about this for the past few years from a customer bill of rights perspective

(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

Tuesday, July 3, 2007

News Analysis: SAP Responds to Oracle in TomorrowNow Lawsuit

In this on-going debate about all the details around IP and "theft", we keep avoiding the key question.

"Will SAP or Oracle strive to protect the rights of customers to have access to third party providers, including those for Oracle and SAP applications?"

SAP's Link to Response
Oracle's Link to Complaint

(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, July 2, 2007

IPO Watch: NetSuite Files S-1

NetSuite officially filed its S-1 today. The SaaS suite vendor delivered solid revenues of 67.2M in 2006 and is projected to clear over $100M in 2007. Some key facts about the IPO:

- Going public using the auction method Google used
- Ellison owns 61.1% and his trusts hold 13% from his $100M investment in 1998
- Founder and CTO Evan Goldberg holds 8.1%
- Lower product development and G&A costs show the improving efficiencies of the management and development teams.
- NetSuite's competitors will be WorkDay, SFDC, and SAP A1s
- SuiteFlex will be the key to their ecosystem strategy

Net Suite S-1 Statement
http://www.sec.gov/Archives/edgar/data/1117106/000119312507147833/ds1.htm

Press Release
http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/07-02-2007/0004619143&EDATE=


(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, June 25, 2007

Apps Strategy: Applistructures Key to Custom Development Come Back

While organizations expect their packaged applications to deliver 90% of the functional requirements, most are lucky to achieve 65%. The gap has traditionally been filled by custom development. Customizations often meant expensive upgrade processes, integration challenges, and testing complexity. However, robust and maturing applistructure platforms (i.e. middleware, SaaS, etc.) and a software vendor's inability to cover the functionality requirements of every micro vertical drive many clients to re-consider custom development for last-mile solutions.

The 5 main middleware players, BEA, IBM, Microsoft, Oracle, and SAP each ofter a comprehensive platform. NetSuite and SalesForce.com offer a SaaS platform. As each of these applistructures provide a standards based approach for tools and technology such as application servers, BI tools, process mapping, service repositories, BPEL, master data, and other related technologies, vendors, system integrators, and clients now have robust tools to deliver on their personalized last-mile solutions.

Major SI's such as Accenture, BearingPoint, CapGemini, Deloitte, IBM, Infosys, and Wipro have the capability to build on these platforms as well as clients themselves because extension on an applistructure allows for upgradeability, integration support, and automated testing. As you evaluate the options, the strength of the applistructure becomes the critical design point. Because clients and partners will extend their solutions, packaged application vendors who do not deliver rich and robust applistructure tools will not succeed in the next wave of innovation. Key questions to ask include:
  1. How easy it to build on one applistructure versus another?
  2. Which applistructure has richer tools?
  3. Which applistructure has a more robust ecosystem?
  4. How many applistructures can my organizations realistically support?
  5. How much investment is being made into the applistructure toolset?

We've basically come full circle in the cycle from custom apps to packaged apps and now back all in a 20 year period. Here's to living through another technology adoption cycle!


(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

Tuesday, June 19, 2007

Surface Computing

I guess I won't be selling my Microsoft stock this year. I was having some doubts, but then today I stumbled across this article on Microsoft Surface on the Popular Mechanics website.

Finally, a computer that my pre-kindergarten kids can use to print their own digital photos, instead of asking me!

Microsoft Surface computers will be available in limited distribution to specific corporate partners at the end of 2007.

David Pogue of the New York Times points out that there's not that much new about Microsoft's Surface computer. However, what Microsoft is historically good at is marketing, refining ideas and getting market share.

Since the business and home market for Surface computing is practically zero today, its likely to grow.

Maybe in the future this could even be incorporated into game systems and we could PlayAnywhere.

I know I'd buy one for my kids...(or myself!)

Sunday, May 27, 2007

Apps Strategy: Now's the Time to Design a 5-Year Packaged App Strategy

What do ERP fatigue, instance consolidation, upgrades, SaaS, third party-maintenance, and BPO have in common? They are all stop-gap measures in addressing the key issue of having a long-term apps strategy.

Some key areas to consider include:
  • Most packaged apps were bought in the mid to late 1990's
  • Software lifecycle is about 7 to 10 years and we are entering a new upgrade replacement cycle
  • Large demand for small projects skirt the real issue of a need for a packaged application strategy
  • Architectural renewal via SOA and adoption of Web 2.0 functionality driving interest
As we move into one of the biggest upgrade cycles in a decade, enterprises should take the time to design a top-down view of their apps strategy before committing project budgets. A high-level view of the key components of this strategy include:

  • Long term vendor strategy and management
  • Packaged applications internal inventory
  • Maintenance and support schedules
  • Upgrade strategy
  • Instance consolidation strategy
  • Deployment option analysis (SaaS, Hosting, BPO, or On-premise)
  • Change management readiness
  • Business process maturity
  • Custom development requirements
  • Hardware/data center migration plan

(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, May 16, 2007

News Analysis: Oracle Acquires Agile

Based on their Red Pepper IPO, it was only a matter of time that Oracle CEO Chuck Phillips and Agile CEO Jay Fulcher would tie the knot. The $495 M cash deal for Agile adds leading PLM capabilities to Oracle's application arsenal and brings to Oracle over 1,250 top PLM customers and over 10,000 visualization customers globally. In fact, over 60% of Agile's customers chose this best of breed vendor to work with their SAP and Infor ERP systems. With Oracle's efficient pre and post merger integration teams, expect the acquisition to close quickly with minimal disruption by July.

Oracle customers should evaluate Agile in PLM short lists for advanced PLM capabilities. Meanwhile, existing Agile customers should push to make sure that Fusion Middleware does not become a prerequisite for future installations. In addition, customers should quickly lock-in their long-term maintenance agreements to avoid the higher Oracle 22% maintenance fees.

(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, May 9, 2007

IPO Watch: Deltek Files S-1

After much anticipation since New Mountain funds took the company private with a 75% stake in 2002, Herndon based Deltek Systems filed its S-1 on May 8th 2007. As a Project Based Solution (PBS) vendor, nothing could be more fitting than coming out with the NASDAQ symbol "PROJ". While private, Deltek remained active and acquired Wind 2 in 2005 and Welcom in 2006 leading to a doubling of its size and customer base. The results of this acquisition and maintenance strategy speak for themselves -- software license growth up 215.7%, maintenance increases of 89.1%, and overall revenues up 153.33% since 2002 (see Figure 1.) Key to Deltek's future will be the expansion into new vertical areas beyond its strengths in public sector, A/E/C, non-profit, and research. Deltek's key competitors include industry stalwart Primavera, .NET competitor Epicor, and Microsoft with its Project and Solomon offerings.

Figure 1. Deltek Consolidated Financials as Filed in S-1


2002

2003

2004

2005

2006


(in thousands, except per share data)

Statement of Operations Data:





















REVENUES:





















Software license fees


$ 23,742

$ 36,636

$ 34,934

$ 45,923

$ 74,958

Consulting services



18,063


22,842


28,585


41,212


66,573

Maintenance and support services



43,987


47,778


54,178


63,709


83,172

Other revenues



4,512


2,091


3,516


2,112


3,565





















Total revenues



90,304


109,347


121,213


152,956


228,268

As the Project Based Solutions (PBS) space heats up, expect rapid consolidation in the next 3 years among vendors such as Agresso, Artemis Software, Augeo Software, BST Global, CA (Computer Associates)Niku, Computer Methods International Corp. (CMiC), Deltek, Dexter & Cheney, Epicor Software, IFS, Lawson, Maconomy, Maxwell Systems, Mercury Software, Meridian Systems, Microsoft Dynamics, Oracle, OpenAir, Pacific Edge, Planisware, PlanView, Primavera Systems, ProSight, Sage Software, SAP, Softrax, Tenrox, and Viewpoint Software (formerly BidTek). According to Forrester Research, the PBS market is expected to grow to $6.5B by 2010.

(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

Friday, May 4, 2007

Event Report: i2 Planet 2007, Orlando, FL

Given the recent consolidation in the industry and increasing dominance of both Oracle and SAP, I couldn't help but wonder if supply chain had gone the way of CRM or if it was a specialized field that would continue to stand out like business intelligence. In fact, I normally don't specialize in supply chain but was at this year's i2 Planet mostly to get caught up to speed on i2's order management cycle capabilities and Agile Business Process Platform (ABPP). Here are a few quick observations from the event:
  • Lots of interest and enthusiasm for the new generation supply chain. Customers expect demand-supply synchronization and related real-time demand management integration to provide faster time to results and greater flexibility. More importantly, customers expect demand shaping to drive visibility across the value chain. You could see the eyes light up and the energy levels go up especially in the TMS (Freight Matrix), POS Demand Sensing, and demand shaping sessions.
  • Supply chain continues to be a proactive discipline. More than ensuring that the right product reaches the right customer at the right time, users expect to drill into the root-cause and rapidly apply corrective actions. New generation supply chains deliver on the convergence of visibility, planning, collaboration, control, and analysis. Customers continued to express the need to be vigilant.
  • i2 has developed significant expertise in the front end sub processes. By besting SAP at Lenovo, i2 proved not only the strength of its order fulfillment to order completion, but also its ability to move into opportunity to order capture via not only its configurator but also its multi-channel capabilities. Believe it or not, the complete order management cycle on the Lenovo site runs on i2.
  • ABPP provides the technology foundation for i2's future. After some extensive discussions with both Sanjiv and Pallab it became clear that i2 has a clear understanding of its role in the future of solution centric software ecosystems. I believe i2 intends to emerge in the next 3 to 5 years as a complete supply chain solutions provider with a platform that will support a wide range of deployment options, solution options, partner extensions, and professional services. This will not be an easy task to deliver, but the intention is to provide customers and partners with flexibility via the toolkit (e.g. MDM and business content library).
  • Many SAP customers continue to choose i2 while Oracle customers remain hesitant. From talking to customers and system integrators, i2 continues to hold its ground and gain some momentum in the SAP install base. Key factors include user reluctance to upgrade to NetWeaver and i2's continued lead over SAP in advanced capabilities. Penetration and growth in SAP accounts parallels the experience of BI vendors Cognos and BO who have entrenched themselves with business users in "SAP only" environments. However, i2 needs to figure out how to win over Oracle customers. To date, I see Oracle customers more likely to explore hot acquisitions such as G-Log and Retek while holding on to their latest release of JD Edwards or Oracle EBS.
  • i2 remains a thought leader in the industry. I often joke if i2 stopped building software it would be the supply chain consultant of choice like an Ann Grackin at ChainLink or AMR Research. The conversations I had with all levels within the company showcase their bench strength and passion. Discussions in the breakout sessions and throughout the event showed that a good majority of the best of the best were i2 customers.
Despite the current industry consolidation and shift to the next generation of software, I believe i2 can pursue a strategy similar to Amdocs and succeed in not only a horizontal capability but several industries with end to end solutions and services. The push to solutions selling and services revenue on a flexible platform is the first step. The real story is how much investment in R&D and innovation capabilities will i2's board allow in a post- Mike McGrath era.

(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