July 29th, 2009

SAP: cautious optimism going forward

Posted by Dennis Howlett @ 7:25 am

Categories: Enterprise applications

Tags: SPSS Inc., SAP AG, Leo, Sales Strategy, Operational Accounting, Sales Force Management, Mergers & Acquisitions, Sales, Finance, Investment

Following on from this morning’s earning announcement, it was a calm, cautious but emphatic SAP board fielding a set of disappointingly soft questions on today’s earnings call. First some selected quotes:

Leo Apotheker, CEO: “Things are still tough…closure rates are more volatile then in the past…I am cautiously optimistic that the worst might be behind us. Buying behavior has not changed. We have been focusing on margin growth…we owe that to the strength of our business model…which include 55% recurring revenues. It will be tough to maintain the cost and run rate in the second half of 2009 [given the cost reduction measures the company took in 2008.] Our win rate is 80%…I don’t expect the acquisition of SPSS by IBM to impact our relationship. It might simplify our overall offering.”

Bill McDermott, executive board member: “Customers are cautious about their strategic investments…the pipeline in each of the regions is improving…The pipeline is becoming more robust…Volume selling is clearly the answer [where SAP packages smaller deal but requires higher sales productivity.]  We invest in our customer relationships. We’re collaborating with our top 390 customers. Taken more than 400 customers through our Value Academy [where they are shown how to extract value from SAP investments.]..The majority are on enterprise support…MaxAttention is providing attention on critical processes for about 10% of this number.”

The problem with any analysis of an isolated call is you can only interpret on the basis of what you hear. I was gobsmacked that the whole problem of maintenance and support was almost completely ignored by the financial analysts. Perhaps they’re mollified by Leo’s 55% remark. However, it doesn’t provide any real insight into progress being made on issues such as Mittelstand or KPIs. Clues may be drawn though from Bill’s discussion about the Value Academy.

As far as I can tell, sales people have been focused on explaining the value of enterprise support rather than chasing big deal shadows. This is now being bolstered through the Value Academy. I’ll guess that what SAP hopes to do is demonstrate to the other 88,600 customers that if the top 400 customers benefit then they can too. Such a theory assumes that customers are lemmings, persuaded by their peers. That might have been true in the good ol’ days of the SAP ‘clubs’ in industries like oil and gas. Recent consultations and discussions with colleagues suggest this is far from true today. Yes, customers keep signing those least risk maintenance checks but there is far more questioning about value delivered.

This should be questioned more closely because a continuation in the extreme weakness in top line software revenue sales will eat into downstream revenues over time. Not any time soon, but without a return to healthier deal flow, it will happen.

Leo’s remark about SPSS makes sense. IBM is a competitor, customer and partner. SPSS has been a long term partner - in fact it is one that John Schwarz specifically mentioned during our discussion last week. SAP is arguably in better position to leverage the new dynamic, provided SPSS doesn’t become yet another IBM maintenance revenue stream.

However, I am still far from clear what SAP’s acquisition strategy is going to look like in the months and years ahead. What seems obvious to outsiders seems to escape SAP and to have seen both IDS Scheer and SPSS disappear from under its nose - albeit to partners - must be a matter of investment strategy concern.  At least to SAP’s advisors.

The good news is that SAP seems to have a much firmer grip on its cost base and seems confident it can leverage what it sees as a leaner and more agile operation going forward. For as long as it continues to drive the bottom line and keeps plenty of free cash flow, the speculative wolves can be kept from the door. Including IBM.

July 29th, 2009

SAP revenues slump, in line with analyst expectations, bottom line up

Posted by Dennis Howlett @ 12:55 am

Categories: Enterprise applications

Tags: Revenue, SAP AG, Operational Accounting, Finance, Dennis Howlett

SAP has revealed its Q2 2009 numbers and as widely predicted, top line software revenues are off 40%, down from €898 million in 2008 to €543 million this time around. Software services, support and maintenance was also off, 5% from €2,061 million to €1,953 million. That left total revenues down 10% from €2,858 million to €2,576 million.

On the cost side, SAP benefited from the deep cuts it made last year such that operating income rose from €593 million to €647 million. It now says that planned one time restructuring charges will come in at €200 million rather than in the range €200-300 million and that in the first half of 2009, it has reduced headcount by 2,800. It also said that it expects to maintain operating margin in the range 25.5%-27%. Net income was up slightly from €408 million to €423 million. Operating cash flow was €1.83 billion, up 34% on 2008 (€1.35 billion)

In prepared remarks, Leo Apotheker, SAP’s CEO is quoted: “While the operating environment remains difficult, we are beginning to have improved visibility into the second half of the year.” This is in line with what senior executives were saying at last week’s Fortune Brainstorm event.

In the run up to the results, I fielded a number of calls from financial analysts asking whether there were indications that the 40% drop was likely to be exceeded or bettered. From soundings among the customer base and elsewhere, it was clear that SAP has been battling on a number of fronts to maintain momentum but there were no rumors of worse than expected results.

What these figures suggest is that while top line sales are hard to come by with BusinessObjects leading the way, there is also some pressure in the services revenue line. Surprisingly, that is not impacting support revenue as much as I thought it might, with the numbers showing an uplift from €1,099 million to €1,337 million in the quarter on a year over year basis. More detailed analysis will tell how this was achieved.

Consulting and training revenues both took hits as you might expect from seeing falling top line sales revenue. Professional services took a hammering, falling from €768 million to €610 million in the quarter on a year over year basis.

In the background, I have been arguing strongly that SAP needs to overhaul its training and certification strategy and program. These are key elements in its ability to deliver higher quality, better manage its partner ecosystem and help prevent it from getting continued black eyes over failed software projects. Given the relatively small amounts this line item generates, it seems to me that now is a very good time for biting that particular bullet.

According to one report, SAP believes the worst is behind it. These results will calm down jittery investors who were expecting something of a blood bath and in early morning trading, the shares popped around 0.5%.

Strong positive cash flow provides SAP with plenty of opportunity to engage in M&A activities although the recent IDS Scheer acquisition by Software AG and yesterday’s acquisition of SPSS by IBM place question marks over some of SAP’s partnering arrangements.

SAP will host an investor call at 3pm CET. Hopefully, we’ll hear more about the detailed impact market conditions are having on SAP going forward.

July 28th, 2009

Salesforce.com: rethinking the database

Posted by Dennis Howlett @ 9:56 am

Categories: CRM, pricing

Tags: Salesforce.com Inc., Zoho, Database, Sales Force Management, Sales, Dennis Howlett

While attending Fortune’s Brainstorm event, several of us took the opportunity to sit down with Parker Harris, Salesforce.com co-founder and EVP technology. To say it was our first outing as Irregulars with the company, Parker was remarkably open and congenial, often straying into territory that would otherwise drive hyper controlling PR’s nuts. We seem to have that effect on some people.

Much of the conversation centered around cost management and the general direction Salesforce.com would like to take. Top of Parker’s mind is the vexed question of how you bake grown up analytics into an on-demand solution. Vinnie Mirchandani notes that:

So, last week in our conversation with Parker Harris of salesforce, the question came up – why would customers pay its storage costs compared to rates amazon and now Microsoft with Azure are bringing to market? Will it need to rethink its EMC infrastructure? From there the conversation moved to whether it needed the Oracle DBMS – whether it could afford to keep passing along those costs when vendors like Zoho and RightNow aggressively use open source components.

This was the opportunity for Salesforce.com to put its cost cards on the table. Parker talked about enterprise needs for high grade security, using that as the reason for justifying continuance of EMC’s premium services. He has a point but one that must come under increasing scrutiny  when, as Vinnie observes, companies like Zoho seem perfectly happy to compete and win with lower cost components. You can of course argue that Zoho is not exactly tackling business critical transactions and therefore doesn’t need to observe the requirements of a robust infrastructure demanded by Fortune 500 CIOs. That would however be a distraction from the direction companies like Zoho are traveling.

Parker then drifted into talking about what might happen with the database, clearly a significant direct cost to the company which is basically hefting a gargantuan Oracle DB. Parker said the company is looking at a range of possibilities in the future, including the use of columnar databases for analytics. I’m sure that Vishal Sikka, SAP’s CTO will be nodding vigorously at this idea. Perhaps, as Vinnie suggests, they should share a latte?

In a recent Enterprise Geeks video, Dan McWeeney postulated about using such types of DB for transaction systems. The theory runs that columnar will provide significant performance and scaling enhancements. That has yet to be proven in this scale of application but Parker is not prepared to rule anything out. Can you for instance imagine Salesforce.com taking the really radical step and moving to say: LucidDB? In after hours follow up, Salesforce.com declined to add more color - understandable though frustrating to both sides.

Despite its 10 year heritage, Salesforce.com is still ‘young’ enough to take radical and game shifting steps that would shake the market while allowing it cost leverage to either improve its bottom line and/or share its largesse with customers. Listening to Parker, I got the sense he favors helping customers - something you don’t often hear from senior enterprise executives. Of course he could have been gently setting the scene for the next round of price negotiations with Larry Ellison. If the latter is true then who better than Vinnie to take the call?

July 27th, 2009

Intuit creates open source community

Posted by Dennis Howlett @ 9:50 am

Categories: Uncategorized

Tags: Intuit Inc., Open-source Community, VerticalResponse, Web Services, Scripting Languages, Open Source, Enterprise Software, Software, Software/Web Development, Web Development

Earlier today, I had a conversation with Alex Chriss and Alex Barnett of Intuit as they discussed the creation of code.intuit.com Intuit’s open source community. This is a smart move and one that I’d suggested would be a welcome addition to IPP when we last spoke.

In essence, the community will serve as an extension to Intuit’s R&D, providing Intuit with visibility into the types of extended application that are most likely to prove popular over time. I like that idea because it allows Intuit and its partners to both experiment and spread the risk associated with new product development. It also means that developers could have a potential exit should Intuit choose to acquire code.

This is not to be confused with a ‘free’ resource. Intuit is being proactive in how the community develops and so far has some 200 members. Projects will be mentored into the program in a manner similar to the way it works in the Apache Foundation. That means not all projects will make the cut though Intuit stressed they are trying to be as inclusive as possible. Internally, Intuit developers are said to be excited about the prospect.

Today, the community has some framework elements necessary to help onboarding. From the company’s blog:

The initial Intuit-sponsored projects under Common Public License include:

IPP Developer Toolkits: Language-binding libraries and sample code for the Intuit Partner Platform. The toolkits under development include Java, J2ME, Ruby, .Net, iPhone™ and others.

IPP Federated Authentication: Working and sample code for Federated authentication for the Intuit Partner Platform using SAML.

Princeussie for Flex: Adobe^® Flex^® components which extend the existing Intuit Partner Platform Kingussie frameworks.

IPP Deployer: Maven and Ant tools for deploying Intuit Workplace applications. This project is in incubation.

Third-party developers are currently contributing code to the community. VerticalResponse has provided a sample Ruby SAML gateway that enables authentication between IPP and their application, VerticalResponse for Intuit Workplace.

Intuit says that it is leaving the development of UI in the hands of project committers. I’m not so sure this will work because UI is one of those areas that demands strong leadership. The company recognizes the risks but hopes that developers will see the rationale in maintaining a consistent UI approach.

This is an important development and one that has the potential to change the competitive landscape. Sage for instance has no comparable community. It also means that Intuit can encourage internationalization of its product, something it says is very much part of this strategy. Again, this is something I view as both useful and potentially disruptive. As always with new initiatives, we’ll have to wait see ho w this one develops but if my read of the developer community is anywhere near accurate, both they and Intuit have much to gain.

July 27th, 2009

SAP unplugged: Vishal Sikka and John Schwarz on deck

Posted by Dennis Howlett @ 9:22 am

Categories: Enterprise applications

Tags: SAP AG, Leadership, Financial Planning, Management, Finance, Dennis Howlett

Jeff Nolan and Vinnie Mirchandani have done a sterling job in reporting our meeting Vishal Sikka, SAP’s CTO and John Schwarz, executive board member in charge of BusinessObjects. To my eternal shame, I was asleep for most of the meeting with Vishal having completely miscalculated the effects of jetlag, turning up for the last 20 minutes before getting him on video to discuss some of the issues under discussion.

Despite Vinnie’s coyness on ‘unpleasant topics’ such as ByDesign, Vishal endeavored to provide an explanation for the apparent black hole in understanding the economics of getting ByDesign out into the marketplace. He insisted that what SAP is attempting to do goes well beyond competitive offerings, noting that analytics are baked into the application. As he correctly points out, the computational requirements for analytics are an order of magnitude more demanding than transactional systems. Even so, it remains unclear whether SAP is wrestling with a provisioning issue or something more fundamental. It will be another year before we find out. He was however firm that cannibalization is not the issue. At least not now.

John Schwarz was in relaxed mood, talking to the different dimensions across which SAP’s vision of business analytics is traversing. I was curious to know how the company hoped to wean the Excel junkies off their addiction to Pivot Tables. I was a little disappointed to hear John tread familiar territory, arguing that it is better to live with spreadsheets than try fight them. There was instead some hints that SAP may be looking at the equivalent of a kind of ‘Facebook for Enterprise.’ I’m not so sure that will work. The notion that design thinking should follow the consumer style of application is fine but as Facebook has demonstrated, you can easily end up with what I describe as digital vomit - a mess of ’stuff’ on the screen that lacks coherence or reasoning. I can’t see SAP falling into that trap but we’ll have to wait and see how that plays out with its Jive implementation.

Much more tantalizing was the suggestion that SAP is becoming willing to adopt open source approaches to development. The ‘Not Invented Here’ syndrome that has at once been both a strength and a weakness for the company may - and I stress may - be on the way out. That will excite developers and got me to place a call with the SAP Mentor community leader to see if John can be persuaded to address that group at the upcoming TechEd.

John didn’t go so far as to nod at the idea of MySQL as a future database of choice but it would not be beyond the realms of possibility to envisage that happening in the years ahead. Imagine the hole that would burn in Oracle revenues. A billion dollars perhaps on an annualized basis? He did however note that the new emphasis is on persuading the business user rather than IT. That way marks the line of least resistance inside the SAP customer base and a strategy I see as succeeding rather than trying to deprogram the Oracle zealots.

Overall I came away with the impression that we are starting to see the emergence of a new SAP under Leo Apotheker’s leadership. One that is getting back to being hungry rather than assuming incumbent status. How far that goes in a company I have felt has become conflicted between speed at the edges of innovation and ponderous at the core remains to be seen. However, if these two leaders are representative of that new face then we can look forward to a reinvigorated company that remembers its past but has its sights set firmly on the future.

Now back to managing my return jetlag.

Disclosure: SAP covered my travel and expenses.

July 20th, 2009

Business ByDesign: to scale or not to scale?

Posted by Dennis Howlett @ 1:06 pm

Categories: Enterprise applications

Tags: Blade, SAP AG, ByD, Zinow, Blade Servers, Utility Computing, Corporate Governance, Servers, Web Services, Middleware

As the soap opera that is SAP Business ByDesign rumbles on, I can’t help but think of the opening lines in Hamlet, Act 3, Scene 1:

To be, or not to be: that is the question:
Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,
And by opposing end them? To die: to sleep;
No more; and by a sleep to say we end
The heart-ache and the thousand natural shocks
That flesh is heir to, ’tis a consummation
Devoutly to be wish’d. To die, to sleep;
To sleep: perchance to dream: ay, there’s the rub;

Recent reports suggest that ByDesign is languishing. Rosalie Marshall of v3 quotes:

Stefan Reid, an analyst at Forrester Research who used to head up the product management division for SAP’s Netweaver infrastructure, said that Business ByDesign is unlikely ever to be scalable because it is not based on a multi-tenant architecture.

“SAP said that the architecture of Business ByDesign is multi-tenant, but it can’t be because SAP has also said that it is powered by Netweaver, which I know is not multi-tenant,” he said.

“And if SAP wants to sell a software-as-a-service [SaaS] solution at a competitive price point, it has to be scalable.”

That’s not quite true. I’ve sat through many ByD presentations and talked to plenty of customers. I can’t ever recall SAP saying ‘multi-tenant’ instead preferring its own moniker ‘mega-tenant’ where multiple customers reside inside the same rack but on different server blades. This still leaves the vexed question of why BYD economics are so out of whack with where SAP needs them to be. But I was equally concerned with the customer numbers. Back to V3:

The 40 current customers of Business ByDesign in the six countries where it is available are being used by SAP as good practice case studies, or what it calls “referencing accounts”, for when the firm is ready to encourage more businesses to sign up, according to Rainer Zinow, Business ByDesign innovation vice president.

That didn’t jibe with the 150 customers we were hearing about in 2008. It now seems I didn’t understand what they were saying. I followed up on the points with Rainer Zinow. These were his emailed replies and my interpretation:

Qu: In 2008 we were told there were around 150 in the early program, now it seems that number has shrunk to 80 - or is it 40 - or some other number? Please see: http://www.v3.co.uk/v3/news/2246312/sap-business-bydesign-really?page=1 If some have dropped off the scheme then what happened?

Re. 1: We are currently have 40+ customers live with broad solution scope deployed and another 40+ customers in implementation projects.  In addition we are working with more prospects who are evaluating ByD, but have not yet signed.  This is consistent with the number of customer engagements we shared previously – so the number of customer engagement stays about the same as what we had discussed in Orlando.

Read: ByD sales is something of a revolving door. As operational cost comes down, SAP should be onboarding more customers while stuffing its pipeline. Zinow’s answer suggests potential customers have yet to be convinced

Qu: Back to the user numbers per blade. Originally 50, then 100, where are we now?

Re 2: Regarding the number of users per blade: We can run up to 100 users on the latest Blade technology. As always it depends on the number of cores, front side bus speed and on board memory.

Read: Nothing much has changed. That’s worrying. We’re almost a year on from when SAP put on the marketing brakes while at the same time acknowledging operational issues.

Qu: Is the issue one of memory utilization within the NW environment that’s preventing SAP from getting this to scale?

Re 3: Scalability is not an issue, as ByD behaves like any other NetWeaver based application. With growing CPU and memory resources on board of blades, we should be able to grow the number of users even further.

Read: Watch this space. ByD is clearly memory intensive and SAP is hoping that Moores’ Law will work in its favor.

Qu: Has the pricing changed? You’re quoted as saying that customers need to take the whole thing but that presumably is based on $149/user/month as previously announced or has that changed?

Re4: Pricing has not changed. Still 149 USD per user for all business functions with a minimum user count of 25.

Read: SAP has been adding functionality and is keeping its prices steady. At least for now. That’s got to be good news.

Later this week I’m hoping to meet Vishal Sikka, SAP’s CTO. I’m expecting to see some clarity on the technical issues.

July 17th, 2009

Oracle cranks up some prices 40%

Posted by Dennis Howlett @ 4:05 am

Categories: Uncategorized

Tags: Oracle Corp., Configuration Management, Storage, Databases, Hardware, Enterprise Software, Software, Data Management, Dennis Howlett

I have this imaginary letter in my head from Oracle to customers that goes something like this:

Dear Customer

You don’t need me to tell you we’re in the teeth of the worst recession in living memory but as you know, we at Oracle are committed to providing you with the best value possible. Recently we rolled out Fusion Middleware and as I’m sure you all know, this will be the centerpiece around which the long awaited Fusion Apps will integrate. We believe that when taken together, these will provide you with an application landscape that delivers outstanding value and potential return on investment.

While putting this strategy together, we’ve discovered that some components were not appropriately priced and it is for that reason we are introducing new prices for the diagnostic and tuning packs, as well as the database configuration management pack.

Some might be surprised at the extent of the price rises but at Oracle, we believe in sharing in what I’m sure you’ll see as your long term good fortune.

Yours sincerely

Larry

The more serious side to this is that TechWorld is reporting that some components have been price hiked by 40%:

Processor licences for the company’s diagnostic and tuning packs, as well as a database configuration management pack, are now US$5,000(£3,040), up from $3,500(£2,130) listed on a 2008 price list.

The first two products are meant to help database administrators target and resolve performance problems. The latter tool is used for a range of tasks, such as tracking database configuration changes and ensuring policy compliance.

Meanwhile, a processor licence for the enterprise edition of Oracle’s database remains priced at $47,500, following a roughly 20 percent increase last year.

These may be small potatoes in the scheme of things but provide an excellent example of the kind of nickel and diming that customers regularly grumble over. However, as the Techworld article says, these are price negotiation starting points with nothing to stop Oracle offering extra discounts at no penalty and so making buyers look good. That would not be difficult in the current economy. I am hearing reports that customers are demanding and getting up to 90% discount in some deals.

Even so, price is a bit of a distraction. In the current economy, the name of the game must surely be about eeking as much as you can from existing, eliminating shelfware and optimizing apps usage without triggering yet more charges from your supplier.

All the same, I give Oracle credit for producing a price list that we can pick over. Others don’t.

July 14th, 2009

Sex, geeks and Blackbox Republic

Posted by Dennis Howlett @ 11:52 pm

Categories: Enterprise applications, Social computing

Tags: Community, Oliver, Collaboration, Groupware, Investment, Enterprise Software, Software, Finance, Dennis Howlett

The first time you meet Sam Lawrence, ex-CMO of Jive Software you just know he’s a specially talented marketing person. He’s a creative which for geeks should be an immediate affinity thing. Today, he, along with co-founder April Donato came out of stealth mode with Blackbox Republic, what he believes is the next iteration of social networking.

The first offering focuses on the sex positive community, something with which I was not familiar and which at first had me thinking that Sam had joined the Crazy Deranged Fools out in West Texas headed by cartoonist extraordinaire Hugh MacLeod. But no. Far from it.

Earlier in the week, Sam and April briefed me and I was aware that Oliver Marks had also been briefed. We compared notes. We both agree that despite its in your face attention grabbing first community, Blackbox Republic is onto something. Oliver’s take is particularly inspiring because he correctly argues that:

Any form of collaboration is intensely personal  - it means letting go and trusting that the information you share, and by definition the power you have, will ultimately return value to you.

This is as true socially in your personal life as it is in a work situation. We’ve all been there - the noisy bar full  of obnoxious people and the sinking feeling of wasting a night out, the participation in an online work space dominated by snarky colleagues destroying any sense of cameraderie or creativity.  This typically results in the bar being ‘last months hip place’ and empty collaboration spaces online.

How often do you here that in a community building sales pitch?

So-called enterprise and community pundits have been trying to crack the community building code for what seems like years but when you stand back for a moment, what have they really been trying to do: get each of us to transact something as the price of our entrance into this brave new collaborative world. It should be no wonder that many of these efforts fail. I sense that with Blackbox Republic, a number of those same pundits are going to be eating large gobs of humble pie. Why? As I said elsewhere:

…anyone can join provided they’re willing to pay the $25 a month (I like that he has a pay model from the get go. That sorts out the weridos and hangers on from day one) but you can’t really connect with anyone unless they want to connect with you. That means you HAVE to add value and be seen as someone who gives so that you can get attention. That should create the kind of dynamic that breaks Nielsen’s 90-9-1 law of participation inequality. If it achieves that then Blackbox Republic has done something with which many of us in community building land have struggled.

Or as Oliver implies, Blackbox Republic starts by putting the trust issue right up front and making THAT the admission price for acceptance. Why should this have enterprise implications beyond those that Oliver discusses?

Read the rest of this entry »

July 14th, 2009

SoftwareAG: 'We're not up for sale'

Posted by Dennis Howlett @ 11:40 am

Categories: Enterprise applications

Tags: SAP AG, SoftwareAG, Mergers & Acquisitions, Corporate Law, Construction, Investment, Finance, Business Operations, Dennis Howlett

SoftwareAG acquiring IDS Scheer: deal details

• All cash offer €477 million (net of IDS Scheer cash is €387 million)
• Debt to be repaid in 2-3 years
• Contracted shares today 48%
• Tender process for remainder expected to start August and close Q3 2009
• Expected to be operating EPS accretive in 2010

The questions hanging in the air throughout this afternoon’s quickfire analyst call were:

How this will impact the relationship with SAP, SoftwareAG’s number one partner and customer?

Peter Kurpick, chief product officer said: “WebMethods is the most tangled product with SAP since 2000 and that isn’t changing. We always claim we have a level of neutrality with SAP being our most important customer and partner. We’ve had a conversation with Leo Apotheker (SAP CEO) an Jim Hageman Snabe (SAP executive board member responsible for technology) and they are fully supportive of what we are doing.  But the same will go for Oracle, IBM and TIBCO.

SAP knows that it is hard for them to extend process innovation beyond SAP in certain markets where SAP is not ‘wall to wall’ for example banking. They know they need other partners.”

Is the company up for sale?

“We have repeatedly said that SoftwareAG is not up for sale and with some 30 percent of the company’s stock in one of the founder’s hands, it is very difficult, if not impossible to engineer an acquisition without the agreement of that stock. That means we are not an attractive acquisition target.”

Analysis and question marks

Colleagues in Europe who work with SAP software day and day out were stunned by the news, considering that SAP has missed an opportunity to acquire IDS Scheer as a lever for perhaps acquiring SoftwareAG further down the track. As it stands, the enlarged SoftwareAG is looking like an attractive and important tool as part of SAP’s composition environment for orchestrating processes among different components. It therefore should be no surprise that SAP’s board is expressing support for this vendor neutral company.

In product sessions I have attended, the perception is that SAP is still relatively early in the BPM space and that if it had made a pre-emptive strike then that would solve many problems for SAP as it rolls out its new products. It also helps the company make good on its promise to extend processes outside customers’ firewalls. As we stand today, the momentum has shifted towards SoftwareAG and even though there is significant mutuality between the two companies, it is SoftwareAG that is looking the more powerful partner.

Another question that colleagues raised was why SAP didn’t jump in first or over the SoftwareAG offering. With 48% of IDS Scheer’s shares in the bag, SAP could not realstically mount a challenge without risking any transaction becoming dilutive - the last thing it wants right now. My own theory is that SAP was slow to recognize the value of the opportunity and was concerned not to overpay given that analysts have been critical of the BusinessObjects acquisition for exactly that reason.

As the deal comes to completion, the questions will continue to be asked and it is certainly an area I plan to explore with Vishal Sikka, SAP’s CTO when we meet later this month, along with questions about what this means for future development around the Galaxy process tool.

UPDATE: Forrester provides a solid and detailed analysis of the deal’s impact on the landscape, noting that:

The acquisition of IDS leaves SAP with no viable options to shore up the NetWeaver stack other than to look at Informatica or Software AG, though it’s been rumored for some time that SOA Software was on their target list.  Rumors have also been rampant about a potential SAP acquisition of Software AG.  In addition to regaining control of the IDS Scheer modeling capability, there are additional factors that could make such a move beneficial for SAP.  For example, replacing NetWeaver XI/PI with webMethods would solve a persistent problem of interfacing SAP applications with the outside world.  It would also provide native EDI capability that SAP customers must currently obtain via SAP partnerships with CrossGate and Seeburger.

July 14th, 2009

Sir Bonar Neville-Kingdom on the 'Three Pillars of Digital Britain'

Posted by Dennis Howlett @ 10:46 am

Categories: Enterprise applications

Tags: Attention, Government, Vertical Industries, Dennis Howlett

Sir Bonar Neville-Kingdom from Dennis Howlett on Vimeo.

From time to time, It is useful to bring to US readers’ attention the way ICT receives attention from other countries’ governments. On this occasion, Sir Bonar Neville-Kingdom provided insights into the UK government’s Three Pillars of Digital Britain.

The video was first recorded at an Open Rights Group OpenTech 09 meeting on 10th July. ORG gave permission for me to upload to my Vimeo channel.