Software strategies and more…

I have been very engaged lately with analysts and vendors about the rapidly evolving cloud ecosystem and am working on a research framework/discussion document that I hope use to test theories and advance some of the factors driving different stakeholders of cloud-enable business processes.

This picture illustrates my initial thinking as to what each of the four major market segment/players are grappling with on a regular basis. These factors influence the development of their strategy, products and ecosystems.

From the 12 o’clock position we deal with a lot of the purveyors of the cloud platform – the platform as a service (PaaS), infrastructure as a services (IaaS) and Software as a Service (SaaS). These players work in conjunction to address the needs for web ‘plumbing’ and include hosting co.s, carriers, and private solutions that invest to provide maximum services to a maximum number of people for little to no margin.

My ‘vendors’ segment represents those folks looking to sell goods and services via a traditional, web and hybrid models. This creates a shift (in many cases) in their business model(s), value propositions and go-to-market methods. This is an incredible complex segment because it contains everyone from 21st century cloud based firms to 19th century media and energy giants. All of these vendors are now faced with not only evolving their services, community and ecosystem – but they (in many cases) are doing them for themselves as well as for their customers.

Partners in my model are under significant duress. Those who’s services are now under the shadow of the cloud must move from a product+margin+services model to an increasingly services based model. Rather then adding value in a tangible (here’s X product) “touch it, see it, use it” manner, partners have to understand how they can help develop solutions and deliver services based on the time to value perceptions of both vendors and customers. They must also rethink what services they are delivering – from custom code to platform (PaaS, IaaS and SaaS) integration and management.

Finally, the customer who sees the shift, understands that their workforce is changing, and is looking to make IT matter less and less and what the business does matter more and more. This segment wants to keep IT costs low (ideally <5% of revenue), manage risk and enable people with solutions and devices tailored to their job. SaaS is of primary interest here to the end user, but from an IT perspective (and from a Financial perspective) these solutions much adhere to governance, privacy and management principles that protect stakeholder value.

The intersection of all of these is what each and every one are doing to create business value. That being the creation and/or evolution of cloud-enabled business process. Talking with Jive Software a month ago I was really impressed with their approach to socializing business process by creating a framework for engaging the right people based on their roles, profiles, etc. This is further enabled by Jive’s partner who are looking to the cloud to facilitate information exchange that is in greater context than email. Greater context in a shorter format that automates information flow across people, devices and applications. By building across business process applications, collaboration suites, and delivering via the web [my understanding of] their argument is that people want information that is easily consumed and in the context of their current activity.

In many ways that last part almost seems to call out the end to multitasking and rather lays a foundation for hypertasking – many short bursts of effort in context of priority and in conjunction with an organization or communities broader goals, both immediate and long-term. (Something to further explore now that I think about it…)

I am working on research to further flush these points out, but I am very interested in where devices come into play across all of these sectors. Its seems that topics like ‘curated’ models (whether these are Salesforce.com AppExchange or Apple or Google’s app stores) are playing a growing role at the edge and where IT and business are working together to push IT to the edge of the organization and off loading systems where they can to third parties or back to the vendors themselves.

Your thoughts?

Just reading how Google’s employees are being switched to Google OS and those that aren’t are choosing between Apple or Linux. The article goes beyond just the trials and tribulations between Google and Microsoft and adds additional food for thought with regards to whether Steveb and team can right the listing Microsoft Titanic.

To see the writing on the wall, one only has to look as far as the turmoil currently happening within the Windows Consumer division, a restart with Windows Mobile that leaves Windows Mobile 6.x users (including nearly every MS employee) out in the cold with a dead product, long-time partners jumping ship for new tablet and tablet-like O/S platforms, and its own inability to launch a competitive product in a space it was once the pioneer, not to mention a music player and store that never was…. What is left Live and XBOX? Both which have had and are being challenged by other services that are often seen as easier and more in tune with the needs of their users. It my opinion that without a tangible connection to what people want to do with computing (consume information about their business, their activities, their customers and their friends) tools that Microsoft continues to decrease its own relevance in the modern computing space.

Of course an argument is that Microsoft is tied tightly into business technology and is it’s platform of choice because they offer everything from the data centre to the desktop, but if we look at changes that are now starting to reshape the enterprise (and by this I mean all businesses that transact with customers large and small) market we see the client/server world coming to a end in the not-to-distant future.

Start by looking at the combined Software as a Service offerings and the Platform as a Service offerings that are enabling both traditional and up-start business to manage their financials, customers, inventory as well as computing and processing power you soon can conclude the tools that Microsoft offers for managing, deploying and developing are quickly becoming yesterday’s news. In fact, I would further argue given IBM, Oracle and SAP’s focus on developing in-memory databases, web-based, mobile and business intelligence solutions that these will have an near term immediate impact on sales of Microsoft’s SQL database as instances of this product will be replaced by solutions that can run complex transaction and data mining queries in-memory and report in real-time rather than via traditional I/O coding. If you combine this with the cloud becoming a repository for web-platform tools like AppExchange for the business and Apple’s Appstore or Google’s Apps for business for consumers and businesses alike and you see how on-premise is quickly becoming a model of the past.

It seems that the market also continues to question the relevance of Microsoft in the future. During the past decade there have only been two periods when the stock showed life, those being the end of the dot.com boom cycle and when Microsoft was expected to buy into the search wars by acquiring Yahoo! but failed. The stock market seems to question Microsoft’s future plans since the company is no longer rewarded with a premium multiple that innovative leaders such as Apple receive.

Yes, I know Microsoft has launched its Cloud strategy and has promising applications from Office 2010, SharePoint, Azure, and CRM – but many of these are still tied to heavy enterprise investments in Microsoft’s traditional tools and platform solutions. So for hybrid environments (Software+Services) this may forestall rapid migration, but it doesn’t mean that Microsoft is truly “all-in” in my opinion.

My final thoughts are these:

1. Microsoft has lost its way at the worst time in the consumer space, its customer and its partners are looking to Microsoft’s competitors for innovation and sellable solutions. Dell and HP are the first off the boat, so how will Microsoft shore up the army of independent and small developers that may soon follow. This space is critical because it connects the data, information and systems to the jobs people are doing in and away from the office. Innovation begins with the consumer these days not with corporate IT, even SAP gets this.

2. Ballmer has bet on a long term strategy over short term gains. I agree that technology investments are not something you should tie to quarterly results, but looking at the quarters and yearly figures above. Seems it’s time to put up or shut up about this.

3. The ‘elephants’ Windows, Information Worker Group, and AppPlat are massive parts of the companies ~$60B in revenues. These massive businesses have the company committed to a course that makes innovation hard and political. While there are forces at work (Azure, Office On-line, CRM) that may effect a change of course – it will take significant management and ethos re-direction to make this work. I am not confident Microsoft has the hutspa  to make the bold and risky choices needed for this to happen. As such Microsoft may loose the enterprise market just as it is loosing the consumer market.

* Full disclosure, I worked at Microsoft and had an amazing experience while there, opinions in this blog are based on my person view of the company given the challenges they face in the market and the publicly available sites I have referenced in this blog. I do not hold shares in Microsoft.

I am not sure.

After hobbling thru the choppy live webcast yesterday and trying to piece together all the PR fluff, blogger commentary and random 140 character posts on Twitter I am still not sure how VMforce will be a monetize-able joint venture between VMware and SFDC.

On the surface it seems to be a great new sandbox for developers to play in to develop future cloud and on-premise applications for their organization and/or for the market at large. Folks that already utilize SFDC’s appexchange and chatterexchange to develop add-ons for SFDC user communities now have access to an even more robust and dynamics infrastructure – but what is VMware’s cut in this?

My gut says VMware is trying to position themselves as a leader in cloud based infrastructure as a service. Potentially even helping companies not only shed business software, but also the hardware needed to support these and other client/server apps. It a bold gambit that vaults them into competing on higher footing with the likes of Amazon’s AWS and both Cisco’s Smart Grid and HP’s Cloud Assure IaaS plans.

Of course the interesting play here is how both of these companies through VMForce are looking to attract the Java developer communities and enable them to create connection across both application and infrastructure software realms. This should further bolster interest in FinancialForce.com, making it easier to build out its core accounting and financial solutions to include industry and role-based users and business processes. Finally this also may allow for BI as a Service to also take off by utilizing virtual machines to power processor hungry analytics, reporting and planning tools.

Personally, I think this makes them a very interesting M&A target for SAP or a merger with SFDC themselves – both to compete more effectively with Oracle. Time will tell as more information and customer adoption of VMforce.com comes to light.

Salesforce.com continues to ramp up its cloud offering and bolster its position as a leading business applications provider for companies of all sizes. All indications show that later this month there is a big announcement coming from SFDC and VMware about their joint product launch that combines SFDC’s could applications with VMware virtualization technologies. You can see the mock up landing page created here .

Now I am going out on a limb here, but I expect a lot to be made of this partnership as SalesForce.com and VMware bring two big trends together to offer scalable applications and infrastructure environments for their customers – perhaps being one of the first to link Software as a Service (SaaS) with Infrastructure as a Service (IaaS). This positions them very well against Microsoft and IBM and in some cases ahead of Oracle in terms of dynamic customer offerings. A successful partnership may also continue the trend away from maintenance agreements that many large software vendors rely on for earning reports and re-invest back into development.

What else may this mean?

Well given the growth of virtualization (take and assessment here)  in corporate data centres and an increase in the usage of  web-based software to meet employee and business needs – these two technologies have a natural fit. By combining the ability to support growing server needs to an ability to dynamically apportion computing, application and processing resources needed for spikes in business demand (say a large payroll run to the opening of a new store and IT needs for adding people, processes and applications based on projected not real commerce) companies may flock in droves to an offering like this with pretty clear ROI and limited risk.

Build on top of this the growing application platform that SFDC brings with AppExchange and ChatterExchange and real-time application deployment, messaging and even management of both physical and web-based resources becomes readily available to businesses big and small.

Granted this is all speculation – but I’ll definitely be updating this blog in few weeks when the cat is out of the bag.

Late in 2009 both SalesForce.com and SAP began beta testing social applications that proposed businesses could use social tools within their walls to address a variety of needs from financial management and sales tracking to impromptu group collaboration. Since then both of these solutions have gone live and are beginning to garner much interest in the Enterprise 2.0 communities.

The applications are Chatter and StreamWork, respectively. I blogged about StreamWork before as it occurred how in the business environment we use word processing tools less and less and depend more and more on our email to communicate ideas across departments, teams and amongst individuals.

I have also touched on the incorporation of business intelligence and search (here) and how these could automate the presentation of information in the context of what an individual, team or department is doing at any given time. I talked in my blog about how I saw the trifecta of business intelligence, search and collaboration tools adding previously untapped insight, thus value, to employees in a highly tailored, yet automated way.

Now I am seeing the productization of this in both Chatter (and Chatterbox by Financial Force.com) and StreamWork. Salesforce’s Chatter, “…which has been described by Salesforce.com CEO Marc Benioff as a way to make the cloud more collaborative and social.”  adds another dimension to the companies AppExchange so much that the company created ChatterExchange a one stop shop for business grade collaborative tools that can plug-in to the many services and products that businesses are subscribing to from Salesforce.com.

SAP has positioned its self as a thought leader here by doing something completely un-SAP like. By first introducing StreamWork (nee 12Sprints) as a tool to aid in cross organization discussions, decision making and delivery toolkit for organization it took the emerging trends in social collaboration being tackled by the likes of Google Wave and Microsoft’s SharePoint 2010 and packaged them in context of a business application with integration into business processes.

While there are differences between the products, SAP stays closer to a collaboration tool that connects to popular email, content management and unified communications solutions while Saleforce.com’s Chatter leverages what it has learned from relationships with social media tools like Facebook and twitter. Both address the needs for robust, business grade solutions for collaboration, messaging and workflows. They both advance the enterprise from treating communications as transactional and promote relationships that unleash a community’s ability to work together in real time on topics of interest to bring business and customer value.

The exciting part is both of these tools are open to others to develop on top of and thus create a social network of their own for improvement in a very dynamic fashion. While is is not necessarily new of Salesforce.com, it certainly is not the business norm for SAP.

The potential value for using these applications may be tremendous for their customers who can now stay on top of internal and external events, opportunities and tipping points so that they can participate in conversations that previously they may have not even known were happening. Further by offering social tools in the context of the business they have potentially set their customers up to take advantage of that next big leap in productivity making them more competitive and more agile than other organizations.

Woke up to read (amongst a weekend worth of posts) the following article from Information Week’s Global CIO: Oracle’s Larry Ellison Declares War On IBM And SAP.

I must admit it hasn’t been a secret that Oracle has been marshaling for this battle, after all any company that spends approximately $25 Billion in acquisitions since 2005 (source) must start making money back at some point. The ‘billion dollar’ question in my opinion is whether the promised fusion of all its applications really works?

Having worked for a company that at one time stated an intent to unify its ERP code across all of its disparate applications only to find that neither customers or partners wanted this – not to mention the engineering pitfalls that become readily apparent – I doubt whether the current plans for fusion can be met in a way that will appease all the stakeholders Oracle needs to oust IBM or SAP as the respective market leaders in high-end servers and business applications.

In the Global CIO article, “Ellison promised that the second half of 2010 will be a momentous one for not only Oracle but also the entire IT industry and its enterprise customers because that’s when Oracle will roll out its completely reengineered Fusion software lineup along with more integrated and optimized Oracle-Sun systems, along the lines of the wildly successful Exadata 2.” Given this promise happened during the Oracle earnings calls, I cannot see how this is much more than a rally cry to sales that he hopes to the Wall Street will echo in an increase of stock price.

By the way Oracle’s stock price, much like Larry’s bid to win the America’s Cup back for many years prior to this one, has been stuck in the doldrums - neither rising or falling much over the past several years – recently it has grown at market average but still trailed SAP, IBM and Microsoft’s growth. A reflection that while Oracle has been busy amalgamating and consolidating many IT players there has not been an overwhelming belief that will pan out for Oracle or its customers.

One important aspect of fusion that Oracle promises, but again trails some of its immediate rivals, is that Oracle promises many of its fusion application can be run either on-premise or via the cloud. SAP realized the need for this hybrid strategy when it attempted in 2007 to launch Business By Design and Microsoft has been working on this since 2005 with its Software+Services strategy. And IBM has been driving its ability to deliver infrastructure as a service and many of its applications as a service for the past several years as well – these have culminated into its Smarter Planet initiative. So Oracle is far from being a thought leader here.

Personally, I think the most telling quote is at the end of the article, Larry says, “So we’ll be delivering those applications both by selling the software directly, kinda the old way of doing it, which is still the most popular, by the way; we’ll be selling the Fusion applications integrated with our hardware—our servers and our storage and our networks; and we’ll be selling it on the cloud.” He later added, “our cloud or somebody else’s”.

This is worth noting if you read the article on Oracle sniffing (original post by Dennis Howlett). Might one conjecture that by acquiring SUN and (especially)  JAVA that Oracle will start charging customers relentlessly for access to any products Oracle deems ‘fused’ thus boosting revenues at the potential expense of customer privacy and satisfaction? Will customers stand for this (thus allowing Oracle to achieve the stated path of dominating IBM and SAP in their respective markets?) or might their customers seek out comparable solutions from IBM, SAP and others for database, BI, ERP, CRM, etc during their next refresh?

Time will tell.

There has been much adieu about Oracle in the news latest and their promise to deliver a stack. Fellow analyst Ray Wang has a good write up here , and there are other notable reports here , here and here  .

Meanwhile SAP reported down but leveling earning for their fiscal Q4; reports here , here  , and here (as well as many others across the web).

Nonetheless, SAP still remains the top dog in the business software space and is revving up its engines to grow into the mid-market via partners, expand its footprint in BI through its investments in the BOBJ toolset and strengthening partnership with Microsoft and of course driving more value for its enterprise consulting and implementation partners.

But given the nature of large ERP implementations and the strong investments that went on from 2004-2008, can we really expect SAP to continue to drive sales as the level that many investors and technology analysts has grown to expect? Moreover, can SAP keep up growth in an environment where two of its largest competitors are preaching one-stop stack solutions?

My feeling is “Yes”.

However to do so, SAP will have to focus on building go-to-market approach that leverages their installed base and offers them the flexibility to expand via a Software as a Service (SaaS) model. Whilst Oracle wrestles with aligning all the packages it has acquired over the past decade into a suite and Microsoft depends of partners to drive innovation and interoperability across both Microsoft and other partner solutions – SAP should rapidly adapt itself to something similar to SalesForce.com’s Force.com model. Thereby making it easier for line of business needs to be met with ‘cloud-based’ software that has strong integration into SAP’s core solutions and middleware.

SAP must also invest in its mid and lower enterprise sales channels. Over the past 5 years, SAP has done a lot to develop this channel and build competencies in selling to the midmarket industry segment. This channel is now both competent and ripe for the picking by its competitors who can offer them the ability to sell solutions from databases to collaborative tools. SAP needs to reassess its commitment to these partners by either strengthening its own partnership with vendors that can provide incremental business to its ecosystem or acquire some of the emerging vendors that can meet this need – potentially allowing their partners to position leap frog technologies.

SAP also needs to continue to grow its channel business if it is serious in gaining midmarket ground. Microsoft Dynamics has over 10,000 partners globally. SAP is no where near that. Given the softness many tier 2 ERP vendors are feeling (read Syspro, Epicor, Sage) SAP needs to selectively go after some of these companies more established partners. If not, then you can bet that a re-energized Oracle will making it even harder for SAP to grow in the midmarket in the long term.