May 20th, 2008
Breaking away from ERP as bookkeeping
Most traditional business software revolves around transactions — the movements recorded in purchase orders, stock movements, bills of materials, invoices, journals and every other document that has evolved to record business operations over the past several centuries. But this is a roundabout way of representing reality that has evolved through historical happenstance. Modern computing can track real objects and the events that happen to them as they move from make to ship, or from order to pay. As fellow Enterprise Irregulars blogger Sigurd Rinde pointed out recently, this vastly simplifies the computing task: “Most important result — one data-object only per real-object, simple as in reality. A reality-model.”
Workday’s new release of its financials application, announced yesterday, illustrates this principle in action. Its Business Resource Management module, for example, tracks assets and inventory as objects rather than as bookkeeping entries. To the uninitiated, that may not sound like much of a difference, but in fact it’s a breakthrough because it allows the organization to track its property in a way that makes sense in business terms rather than merely accounting terms. A simple example is the treatment of a mobile phone. An accountant will usually treat this as an expense rather than a capital asset, but that decision means it never appears on the fixed asset register. If you want to track it, you have to invent some new zero-book-value asset category to store information about it.
In Workday’s object model, the accounting treatment is just a status flag (in software terms, a ‘property’) attached to the object. The bookkeeping happens without impacting how the system stores that information. The identity of the employee assigned the phone is just another property of the same object. If the employee leaves, then it’s a simple computing task to deactivite all the objects assigned to that employee — the mobile phone contract, a WebEx account, a security badge. Workday’s object-centric model means that its resource management module becomes just “a single system to manage all the stuff you’ve got,” as VP of applications strategy Mark Nittler put it in a briefing the other week.
The object-centric model is part of a service-oriented infrastructure that is allowing Workday to roll out incremental functionality as it builds out its underlying application infrastructure. The latest release introduces payroll, expense management and procurement, Read the rest of this entry »
May 19th, 2008
Is BBD hoist by SAP’s on-premise petard?
On-premise vendors never have to run their own software*. This is by far the largest (and least often anticipated) handicap suffered by on-premise vendors when embarking on the on-demand model. [*OK, maybe some of them ‘eat their own dogfood’ by using it in-house. But they never really experience it as their customers experience it.] They are in blissful, utter ignorance of just how difficult it is to install and run their own products. They have always imagined that the problems their customers experienced in doing so were due to special factors in each customer’s own infrastructure. Such problems never come up when testing in the development labs. But as soon as any vendor becomes a software operator, forced to grapple with the realities of running its own software to achieve a business result, suddenly all those lab certainties disappear, overwhelmed by the fuzzy compromises of the real world.
I was forcefully reminded of this when I read about why SAP said it had delayed the release of its SaaS offering, Business ByDesign. Fellow Enterprise Irregulars reported on the account given by SAP executives at the company’s recent SAPPHIRE Orlando conference. It so happens that I’m writing this having arrived today for the European sister show, SAPPHIRE Berlin, where several of us will do some further probing [disclosure: SAP has paid my travel costs to be mere]. Co-CEO Léo Apotheker, who some of us met with this morning, says that any new project starts out with assumptions that turn out to be incorrect. “Fine, you change them.” But I’d argue that shifting to SaaS throws up more issues of much more significance than you’d get in the average new product development project. You’re not simply creating another software product, you’re grappling with all the operational headaches of running business software reliably and at scale, while working out how to deliver it within a completely new business model. Any SaaS stalwart will tell you how steep that learning curve is.
Indeed, many of us in the SaaS world had an ‘I-told-you-so’ moment when we read of the reasons for the slippage in Business ByDesign’s release schedule. “The initial deployments showed Read the rest of this entry »
May 16th, 2008
Web 2.0 and the end of advertising
The idea that software on the Web is going to be largely funded by advertising is just so wrong-headed, I hardly know where to start. It had me spluttering in the latest BriefingsDirect Insights analyst podcast hosted by Dana Gardner — more on that in a moment. Let’s move on from 1.0 notions of the Web as just a publishing medium, with ads on the side. Doc Searls already pronounced what I consider to be advertising’s epitaph way back in March 2006: “Why build an economy around Attention, when Intention is where the money comes from?”
Instead of competing to grab attention, the way to sell on the Web is to align your selling proposition with buying intention. The Web makes that easy, because it’s a platform for software automation. So use software to build automation that brings buyers and sellers together on the Web. Not just as a broker that matches deals with no added value, but by putting relevant sellers conveniently at hand at the moment when a buyer is ready to buy, making the discovery and transaction process a smoother, better, cheaper experience for all concerned. I’ll expand below on some examples of how that might happen, but here’s how I summed it up in the podcast (quoting from the transcript):
“… the Web enables people to reach potential consumers and business prospects directly, rather than having to go through this advertising. So, the idea that the software industry is going to get funded by advertising has got it completely the wrong way around. Actually, what is going to happen is that business is increasingly going to use software in order to get closer to its consumers and its prospects. It can actually skip having to spend the money on advertising in order to make that connection.”
I’m not saying advertising will go away completely — I think there’s still room for brand-building and attention-seeking around the fringes of traditional content such as entertainment and information — but software vendors (such as Microsoft, apparently) who stake their financial futures on earning the bulk of their revenues from that form of advertising are making a fatal strategic error. Here are three compelling arguments why I believe advertising is going to get sidelined by intention-focussed selling on the Web: Read the rest of this entry »
May 14th, 2008
Putting Workday on SAP’s radar
Now that SAP’s SaaS project Business ByDesign has gone on the back burner, I’ve been wondering how I’m going to pass the time next week at SAPPHIRE Berlin. One thing I’ll be asking the enterprise software giant is how it feels about losing out to SaaS startup Workday for a 200,000-seat deal at contract manufacturer Flextronics. Oracle was also reportedly a bidder for the deal.
Workday’s win has caused quite a stir after being billed by InformationWeek as the “Software Industry’s Biggest SaaS Deal”. It’s certainly up there with the largest, although privately-held SaaS HRM vendor Authoria claims to serve 340,000 employees at its largest customer, while employee services SaaS vendor Concur already had 180,000 employees online at a single financial institution more than a year ago (see My SaaS deployment is bigger than yours …).
SAP can probably retort that the deal is just for Workday’s human capital management software rather than the complete spectrum of financials-to-manufacturing-to-people functionality that is SAP’s hallmark. Although Workday last year released the first iteration of its financials software, it has just four customers signed up for it, VP of applications strategy Mark Nittler told me in a briefing last Friday, compared to more than forty for the HCM product.
But the size of the deal certainly brings Workday into the same market segment as SAP in terms of company size and should concentrate the minds of SAP management on how to combat the competitive threat from SaaS rivals. There’s plenty to mull over, too, because Read the rest of this entry »
May 13th, 2008
CODA2Go and the economics of PaaS
I had the opportunity to talk money last week with Jeremy Roche, CEO of CODA, the venerable UK-based business software vendor that has become the poster child for Salesforce.com’s platform ambitions after the release at DreamForce Europe of its new on-demand financials application, built and delivered entirely on Force.com. Why does a company with a 30-year history of writing finance applications and 2,400 customers — including well-known brands such as Ikea, Avis, Unilever and HSBC — entrust its on-demand future to a new, untested platform? [Disclosure: Salesforce.com is a recent client].
Time-to-market was the crucial factor, Roche (pictured right) told me. Coda decided in 2007 that the time was right to prepare a SaaS offering. It looked at all the options, including “ASP-ing” an existing product. “But if we wanted to do a proper multitenant application that was scalable, we had no choice but to write it from the ground up,” he explained. The Force.com platform came with all that infrastructure ready-built, along with the functional capabilities and a sufficiently flexible development environment to meet Coda’s needs.
That time saved translates into millions saved on development costs. “We’ve saved at least two years in elapsed time and at least 25 man-years of development time,” he said. “That figure could be as high as 50,” he added, explaining that it’s difficult to quantify the exact figure with no direct experience of what it takes to develop an on-demand infrastructure. Either way, the savings are huge. At an average UK developer salary of £50k ($100k) per year, Coda has saved between $2.5 million and $5 million on the development cost.
I’d assumed that the quid pro quo for those savings would be a higher monthly subscription cost — after all, Salesforce.com presumably can charge a hefty premium for all that added value. But Roche surprised me. Read the rest of this entry »
May 9th, 2008
VCs put big sums into SaaS
Several SaaS vendors have announced some big funding rounds the past couple of weeks, which suggests that SaaS is still able to command strong VC support where vendors can show good traction for their offerings. The three rounds that caught my eye were:
- Rearden Commerce, $100 million. Announced Tuesday, this substantial investment (PDF release)
appears to have been led byfeatures an important new backer: credit card powerhouse Chase, part of the JP Morgan Chase empire (the guys who bought Bear Stearns). Rearden [a past client, see disclosure] automates booking of a wide range of travel and entertainment in a way that integrates with employee workflow at the same time as complying with corporate purchasing policies. It already snagged a £22.5 million investment from American Express eighteen months ago, and Amex has put money into this round too, along with Rearden’s previous VC backers. However it seems likely that the bulk of the money comes from Chase (PDF release), and if the Amex precedent is any guide, it’s a prelude to Chase rolling out the Rearden service to its corporate cardholders (and perhaps ultimately consumers too). Rearden has built a broad customer base of more than 1,700 — mostly since it signed the Amex deal — and according to Techcrunch it has close to $1 billion worth of transactions going through its system. - Xactly, $30 million. Last week, sales compensation management and analytics vendor Xactly announced a new round of $30 million in revolving credit and equity to finance further global expansion and product development. Earlier in the week, Xactly had announced an analytics product that builds on the data collected in the course of enabling its core sales compensation functionality, and it has ambitious plans for further product announcements based on this core information store. Meanwhile, customer growth continues strongly, with the average customer having around 250 subscribers.
- Intacct, $15 million (on top of $14 million secured last June). Recovering strongly from a period a couple of years ago when it lacked direction, venerable on-demand midmarket ERP vendor Intacct has seen something of a resurgence since Mike Braun took over as CEO. This is the second injection of finance negotiated by Braun and provides the fuel for some long-overdue expansion. Intacct is developing some interesting channel strategies, which I hope to discuss in a separate posting in the near future.
Of course, there is a school of thought that says that once a trend reaches the point where mainstream media (let alone bloggers) start to cite it, then you can probably bet that it’s over. So I’m interested in feedback from readers here. Is it still possible to secure VC funding for SaaS ventures or has the funding climate tightened significantly in the past few months? Please post your views to Talkback.
May 8th, 2008
SaaSplaza opens European SaaS marketplace
Europe’s first pureplay SaaS hosting venture opened its doors last month with a roster of 50 vendors and integration partners on board and an estimated 1 million end user subscribers. Based in the Netherlands but with a Europe-wide reach, SaaSplaza projects its platform will generate more than €100 million (around $150 million) in SaaS revenues for its partners this year.
Although freshly launched, the venture has a pedigree going back more than ten years, being the brainchild of Siennax, a SaaS specialist that industry veterans will recall as a leading European light of the ASP era. The SaaSplaza venture has grown out of Siennax’ own SaaS hosting experience along with its early participation in Microsoft’s SaaS incubation program. As such, it has inherited Siennax’ existing SaaS hosting customers including those acquired through the Microsoft program. Customers can host on Microsoft or open source platforms, along with a range of service delivery management infrastructure assembled through Siennax’ long experience. SaaSplaza will support a range of architectures, ranging from ASP-style application hosting and virtualized single-tenant infrastructures to true multi-tenancy.
SaaSplaza sees its role as coaxing European ISVs and their channel partners into the SaaS model. Herb Prooy, who goes by the somewhat unorthodox job title of ‘Market Maker’ for SaaSplaza and is also CEO of Siennax, told me last week that the European market for SaaS is not as well developed in the US at present.
“The mentality here is lagging behind the US, but best-of-breed software suppliers are looking into the SaaS market — otherwise they [risk being] passed by other vendors,” he said. “We position SaaSplaza as a platform a software vendor can put their software on and offer to their channels. We really want to facilitate the value chain of software vendors and partners.”
For channel partners, one of the big selling points of SaaSplaza will be the ability to combine multiple SaaS offerings into Read the rest of this entry »
May 7th, 2008
Marc Benioff heralds Web 3.0 at DreamForce Europe
Salesforce.com has come to London today for its first DreamForce Europe event. There have been European customer and partner events in previous years, but this is the first event at true DreamForce scale — 2,500 attendees at the Barbican conference center in the heart of the City, London’s financial district. And it has one of Marc Benioff’s hallmark two-and-a-half-hour marathon keynotes, familiar to DreamForce regulars [disclosure: Salesforce.com is a recent client].
Benioff has chosen London to unveil a new definition of Web 3.0 (a favorite theme of my own) that ties it to Salesforce.com’s platform-as-a-service message.
Where Web 1.0 was about consumer applications that gave people access and Web 2.0 enabled people to publish their own user generated content, Web 3.0 is about empowering people to innovate using Web-hosted infrastructure, he explains.
“We think Web 3.0 is now upon us. It’s the era of platforms,” declares Benioff, citing his own company’s Force.com, along with Google App Engine, Amazon Web Services and Facebook as examples. “New platforms are coming right out of the cloud. It’s time to make a choice. You can continue to build your applications in the software model or you can move your applications to the new model of cloud computing. There is a new way to build your applications.”
One of the most striking aspects of Benioff’s new message is that it’s no longer about trying to get everyone using Salesforce.com’s platform. Showing a slide with logos from 21 different PaaS providers, he acknowledges the emerging diversity of the PaaS landscape: Read the rest of this entry »
May 6th, 2008
The four horsemen of SaaS
Taleo’s acquisition of Vurv, announced today, is a clear play by the SaaS vendor for breakout leadership of the people management sector — one of the hottest segments of the enterprise SaaS landscape, populated by fast-growing startups such as recent Nasdaq entrant SuccessFactors along with privately held Authoria, Cornerstone OnDemand, UK-based StepStone and others.
Once the deal closes in June or thereabouts, Taleo will become one of four vendors whose revenues and reach puts them head-and-shoulders above other publicly quoted pureplay SaaS vendors serving the enterprise software market. These four horsemen of SaaS are:
- Salesforce.com — the giant of the pack and runaway SaaS leader in CRM. Expects $1 billion revenues this financial year.
- Omniture — secured its leadership in enterprise web analytics after closing its acquisition of Visual Sciences (formerly WebSideStory) in January this year. Expects $295 to $300 millon revenues this year.
- Concur — consolidated its leadership in travel and expense management with its acquisition of smaller rival Gelco last year. Expects revenues of $211 million for the current financial year.
- Taleo — acquiring Vurv will confirm its position as the leading talent management SaaS pureplay. Adding Vurv’s annual revenues of around $40 million to Taleo’s existing guidance brings its expected revenues for the current year to just under $200 million.
Taleo’s move on Vurv (previously known as Recruitmax) is an out-and-out expansion play: “It’s really about scale and positioning Taleo for the next stage of growth,” chief marketing officer Al Campa told me earlier today. Vurv brings no new products to Taleo’s portfolio, he admitted, and over the next eighteen months the Vurv product set Read the rest of this entry »
May 2nd, 2008
SAP’s SaaS pull-out will help rivals in Europe
The news that SAP has pushed back the roll-out of Business ByDesign by twelve to eighteen months should be music to the ears of its SaaS competitors, especially on SAP’s home turf in Europe. By announcing its own SaaS product for the midmarket late last year, SAP put its stamp of approval on the on-demand model. Now that it has said customers will have to wait another year or more before they can buy it (due to scaling problems, no less), the company has created the worst of all worlds: it has validated a market and then vacated it, giving competitors a free run. Even SAP can’t spin FUD (fear, uncertainty and doubt) for as long as 18 months — especially not in the on-demand market, where customers can be up-and-running within weeks of placing an order.
Whereas prospective customers and partners might have taken a wait-and-see approach if Business ByDesign were due later this year, delaying it until late 2009 or into 2010 will drive both camps into the arms of competitors (perhaps we should rename the product ‘Business ByTwoTen’). I suspect this will especially help smaller local players whose marketing and partnering efforts in the European market would previously have been overshadowed by SAP’s looming presence.
It’s certainly welcome news for UK-based CODA, which next week at Dreamforce Europe releases phase I of its on-demand CODA2go application, built on Salesforce’s Force.com platform. “Of course we’re not looking to deliver as broad a portfolio as SAP, but we have designed a truly international, sophisticated accounting system that will support not just small and mid-sized companies but also enterprises. That space is going to be a lot clearer without SAP in the market yet,” commented group marketing director David Turner by email yesterday.
Andre Kwakernaat, CEO of Netherlands-based Twinfield, probably Europe’s most established on-demand financials vendor, was more cautious, but saw SAP’s move as Read the rest of this entry »
Phil Wainewright is a commentator and strategist on emerging software industry trends. See his full profile and disclosure of his industry affiliations.
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