October 28th, 2009

Cloud-to-Cloud Integration - Another Big ERP Challenge!

Posted by Brian Sommer @ 11:36 am

Categories: Current Affairs, ERP, Future of Application Software, Implementing Technology, Oracle, PSA - Professional Services Automation, Professional Services, SAP, SaaS and Beyond, Software Vendors, The Applications Market, Think About IT, software. applications

Tags: Solution, NetSuite Inc., ERP, Integration, Maintenance Revenue, Brian Sommer

If Your ERP Provider can’t to multi-tenancy, How can they do this????

This week’s been interesting so far. SAP announced earnings this week and the figures aren’t a cause for celebration. In contrast, NetSuite’s OpenAir group has been conducting their annual user conference in Boston with a pretty good-sized crowd of attendees. The company’s leaders have made a couple of big announcements at the show but one of these announcements has some subtleties that should really rattle old school, on-premise ERP vendors.

OpenAir announced their Open Connect capability. Essentially, this permits their SRP (services resource planning) solution to connect, out of the box, with solutions from Salesforce.com, NetSuite, SAP and Oracle. So what, you may ask. Isn’t that what modern platform products (i.e., products built upon services oriented architectures (SOA)) are supposed to do? Yes, but in this case, the delivery models they are connecting to are both on-premise and cloud based. Also, some of these connections will be to products that are multi-tenant (and hence changing/updating/improving daily) while others are not. Open Connect, therefore, must provide not only 1-time integration between two systems at the time of systems implementation but also continuous integration between systems that get continual updates.

Let’s look at this further. Some of the connections NetSuite is now making are cloud solutions (e.g., Salesforce.com, NetSuite or OpenAir products) connecting to on-premise products. That’s a bit more challenging than the old-fashioned integration of two on-premise applications together. Those static ‘interfaces’ were gold to systems integrators. Those ‘interfaces’ consumed a lot of implementation time and, once set and tested, were hoped to last the life of the application. They rarely did as one application or another would get an upgrade that changed the interface needs.

Those interfaces were expensive to do and subjected a company to a lot of risk if they didn’t perform perfectly. These interfaces are probably the number one reason a lot of companies do not apply upgrades, new releases and enhanced functions of older on-premise products. These product enhancements are too costly to implement given the miniscule benefits they’ll throw off. This then causes software users to defer upgrades and get locked into an older version of the product. The on-premise world begets a world of old apps that users can’t justify upgrading.

Cloud-based applications don’t suffer this problem especially if the applications were designed to be multi-tenant. Multi-tenant apps let a vendor (not the customer) apply upgrades and enhancements simultaneously to all customers. Customers don’t have to pay anything to receive the immediate benefit of the enhanced functionality. Cloud-based apps have this – on-premise apps do not. This is a huge deal for CIOs as they are ones who must get the budget to do application software upgrades. Without an upgrade budget, applications do not get upgrades. Without this extra customer expenditure, on-premise solutions get stuck in time. Customers, logically, decide to defer some of these upgrades and instead rely on a stable, proven, low-risk and unchanging application. On-premise vendors then find themselves knee deep in customers who do not want the latest release or version of the product. These customers then wonder why they are paying maintenance for a product they don’t intend to change. This scenario puts on-premise vendors at risk for income declines as more customers opt to go off maintenance.

Maintenance revenue is a top of mind item for the CEOs of on-premise solutions. It isn’t for cloud solutions vendors. One such cloud provider said that to me just today.

Now, look at what Open Connect is doing. It is not only connecting these very dynamic cloud based apps to on-premise apps, it is also doing cloud-to-cloud connectivity. Imagine your accounting application running on one firm’s cloud environment, interacting with another cloud’s CRM solution that’s also interacting with another services automation solution on a third cloud environment. Then, just to make it more mind-blowing, imagine that all three of those cloud applications are changing, simultaneously and continuously. Each system will need the awareness of the other solution’s changes. Interfaces will become fluid and very dynamic. Finally, consider that the user may be unaware that these background changes are even occurring. Now that’s a big jump in integration. That’s a jump the on-premise vendors can’t complete.

When many on-premise vendors cannot even create a multi-tenant version of their product line (most can only offer hosting services), how can they deliver the level of cloud-to-cloud integration that the market will demand?

Next ERP solution you evaluate, verify that:

- the solution can do on-premise to on-premise, on-premise to cloud, and, cloud-to-cloud integration
- the solution can, independent of end-user interaction, dynamically update interfaces and system-to-system integration
- the solution can update its functionality without IT or end-user assistance, budget or time
- the solutions will always contain the latest functionality, latest process flows, etc.

I still need to see the proof points behind Open Connect and the market will tell us whether it delivers on all aspects of cloud-to-cloud connectivity. Yet, the potential of this capability should be enough to scare the wits out of the number crunchers in the on-premise firms.

October 12th, 2009

What we may/may not hear @ Oracle Open World this week

Posted by Brian Sommer @ 8:11 am

Categories: CRM, Current Affairs, ERP, Mergers & Acquisitions, Oracle, SaaS and Beyond, Software Vendors, software. applications

Tags: Probability, Oracle Corp., MySQL, Sun Microsystems Inc., Oracle Open World, Software As A Service (SaaS), Databases, Managed Hosting, Open Source, Emerging Technologies

Watch for movement on these matters

Last night, Oracle’s annual mega event, Oracle Open World, opened. This event draws some 37,000 people to San Francisco to hear, see and speak all things Oracle. With the keynotes starting in mere minutes, I thought I’d offer up my thoughts on what may or may not get covered at this year’s shindig. With my choice of discussion topics, I’m also offering up my probabilities for the show’s content.

1) The itty-bitty rebuttal – Last week, Oracle CEO, Larry Ellison, apparently referred to Salesforce.com’s CRM application as an itty-bitty application. That comment is especially interesting as Salesforce.com’s CEO, Marc Benioff, is scheduled to speak at Oracle Open World. My prediction is that Larry stays quiet on the matter (probability 0.5) while Marc will definitely speak up on the subject (probability 0.9).

2) Is SaaS (software as a service) for Real? – Recently, Larry took a couple of shots at the cloud and the SaaS applications on it. That’s interesting as the day after I read that missive, I saw that Oracle was ramping up its cloud offerings for the middle-market.

Probability that Larry back pedals on the cloud issue (0.8).
Probability that this point is clarified at Oracle Open World (0.5).

3) Where will the cuts come next? – Oracle reported that it will continue to incur restructuring costs to the tune of $300 million. The company also intends to pump a record level of investment into product develop of the Sun products it hopes to acquire. That begs the question: If overall costs are to decrease but the Sun product line gets a R&D infusion, then won’t the other applications, databases, tools, etc. feel the investment squeeze?

Probability that Oracle discusses this at Oracle Open World (0.01).

4) mySQL, mySQL – wherefore art thou mySQL? – mySQL is a database management software product offered by Sun. It is an inexpensive product built with open source code. It is also a sticking point with the European Union and is holding up Oracle’s acquisition of Sun.

Probability of Sun being discussed at Oracle Open World (0.8)
Probability of mySQL being discussed at Oracle Open World (0.5)

5) Fusion - We should expect an avalanche of information regarding this major application investment program. Even competitors to Oracle are bracing themselves for this. In fact, Fusion should be the most discussed topic at the show. The real interesting aspect re: Fusion will be the customer and prospect reaction to the announcements.

Probability of Fusion taking the show by storm(0.7)
Probability of Fusion being as big as Oracle hopes it will be (0.3)

Well, let’s see what happens the next couple of days. This could be one interesting Open World.

August 3rd, 2009

Stories that warrant watching: SPSS, HP, Acer, Google, SAP, Oracle, NetSuite

Posted by Brian Sommer @ 9:18 am

Categories: Current Affairs, Future of Application Software, Google, Mergers & Acquisitions, Oracle, SAP, SaaS and Beyond, Software Financial Stats, Software Vendors, The Applications Market, Think About IT, Web/Tech, internet, software

Tags: Google Inc., Software-as-a-service, Hewlett-Packard Co., Oracle Corp., NetSuite Inc., SPSS Inc., SAP AG, Acer Inc., Software As A Service (SaaS), Managed Hosting

Wedding bells for a Chicago software firm

Last week, IBM offered to pay $1.2 billion for SPSS, nee Statistical Package for the Social Sciences. SPSS was one of those niche firms with a lot of brilliant folks on board. They possessed a number of slick apps that few knew of or understand but nonetheless made millions for their users.

If IBM’s smart about this deal, they’ll keep the talent and push this technology, the modeling and advanced analytics, etc. into every vertical they can. IBM should also push the envelope on their technology and make this stuff as technically relevant as possible. Click for more from The Standard on this.

Acer, HP, Google Android and Google Chrome

The Standard reported that Acer was dropping the development of an Atom based netbook running Google’s Android. Acer and HP may develop netbooks based on Google’s Chrome. Google could become a real nuisance to Microsoft if it fields a market relevant desktop OS. This is a story to watch especially if application developers can be recruited to code for this platform.

SAP & Oracle Earnings (& Pricing)

SAP earnings were announced this week. The company’s revenues could be better but the firm is apparently ably managed and its operating margins even went up. Comparisons to same quarter revenues last year may be a bit unfair as that was one heck of a quarter and the last quarter whose results weren’t totally clocked due to the recession.

Oracle a few weeks ago boasted record 41% operating margins. FierceCIO reported recent price hikes by Oracle even in the face of a recession. I enjoyed the first paragraph of their article:

These are tough times and managers are trying to keep expenses down, but apparently no one told that to Oracle.

Oracle took an amazingly risky step, by raising the cost of some of its management options for its flagship database by 40 percent, according to a pricing list available on July 1, InfoWorld reports.

Now let’s compare those financial results to a SaaS vendor…

NetSuite Earnings

I listened in to the NetSuite earnings call late last week. The story at this application software vendor was decidedly more upbeat overall and it was really better by new revenue standards as compared to traditional on-premise providers.

NetSuite is also generating free cash flow from operations now. The company also indicated that is working a big services customer deal in Europe which has the potential for a 9000 seat customer.

As one of the better known and larger SaaS (software as a service) vendors, NetSuite benefits by the continuing rising tide that SaaS brings. Having large systems integrators and outsourcers legitimizing SaaS also helps the space. CIOs are now more comfortable and more knowledgeable about SaaS and I’d expect more CIOs to ask vendors like NetSuite this question: “Can you deliver for me big company SaaS expertise and mature solutions while maintaining the SaaS cloud cost structure of someone like Amazon or Google?” Yes, I think smarter CIOs are going to demand that vendors provide not just a SaaS solution but an inexpensive one, too! Maybe I’ll get to ask that question at their next earnings call….

February 10th, 2009

Spin, Baby, Spin – Oracle’s case for spending in a tough economy

Posted by Brian Sommer @ 10:49 am

Categories: Current Affairs, ERP, Future of Application Software, Oracle, Selling & Marketing Software, Software Marketing, Software Vendors, The Application Software Buyer, The Applications Market

Tags: Oracle Corp., Recession, Information Technology, Business Leader, Brian Sommer

How recessions should alter vendor behavior

Oracle had a recent show here in Chicago. Attendees were given a very nice breakfast, a keynote from an Oracle executive and an opportunity to kick the tires on scads of Oracle products.

The keynote address was a quick primer on how to justify new IT spending via a business case. Part of the talk was instructive – but – I found a chunk of it tougher to swallow. Let’s dissect the speaker’s argument:

- First, the speaker showed how cutting 10% from a company’s IT budget has a small effect on total business profitability while the same percentage cut from other non-SG&A areas (like manufacturing costs) has a far more pronounced impact on both total profit and operating expenses. This is true as the cost of IT in many corporations today is less than 4% of total revenues and cutting 10% of that is only 0.4% of total revenue. In better run firms, the cost of IT is less than 1% percent of total revenue and a 10% reduction here is quite small. But this math game misses a couple of critical points. In many firms, executives are being asked to cut 10% or more from every department, cost center, etc. and not just IT. Can IT keep its budget when other groups are expected to pare back? That will take some real convincing and political savvy. I have my doubts that IT can avoid many cuts because as a firm faces declining revenues (as most firms will during a recession), it must also cut all costs (including IT) in a corresponding fashion. It’s the rare firm that can justify continued pre-recession spending levels in the midst of a bad recession.

- Second, the speaker identified a number of firms that have maintained their investment spending during recessionary periods. These companies were then able to emerge from the recession armed with the tools to devastate their competitors. Again, this is factually correct but this recession may well be longer and deeper than many in recent memory. Prudent business leaders are conserving cash for three very important reasons: a) they don’t have any to spare; b) their credit lines are constrained thanks to that Wall Street meltdown; or, c) they expect this recession (and corresponding cash restrictions) will be in place a long time. It will be hard for IT personnel to get budget for many IT initiatives beyond the basics.

- Third, the speaker suggested that business growth should really take off at the conclusion of the recession. A 36% growth figure was suggested as possible and businesses are cautioned to use the current timeframe to get their infrastructure (this includes IT) in order and ready to efficiently and effectively grow. In theory, I’m with the speaker but top executives aren’t ready to commit to this. I’ve had this identical conversation with two CEOs lately. Both agree that it is logically correct but they are more terrified of the recession to come right now. They are not convinced that we’ve seen the bottom of this one and for now they’ll conserve cash. They are looking after the long-term viability of their business today – growth strategies are less important when survival is the paramount business concern.

What I was really hoping for was that Oracle would have announced a different strategy for coping with a (big) recession: lower cost solutions from Oracle. Oracle has achieved some of the highest operating margins in the software industry. They’ve done so by making a number of acquisitions, achieving significant economies of scale and by meticulously monitoring their expenses. I cannot fault Oracle one bit on the accomplishments they’ve made here. They’ve done this quite well. Their post-merger integration processes should be the envy of thousands of other firms. But, these new economic gains they’ve made aren’t getting down to the customers. These savings are accruing to the shareholders. Should shareholders get the benefits of great management? Absolutely. But, customers and ORCL could both benefit today from lower cost solutions from Oracle. Oracle would gain in the long-term from gaining market share and from squeezing less efficient vendors out of the marketplace.

I believe it’s time for the operationally excellent Oracle to mirror another operationally excellent firm: Wal-Mart (full disclosure: I own 100 shares of Wal-Mart). Wal-Mart uses its efficiencies to relentlessly drive down its costs and prices and in return captures ever greater market share. This last Fall, I did an application software purchase negotiation and the Oracle database license was more costly than the application software suite under consideration. I didn’t think that was right then, and in a recession, I still don’t.

Software and service firms can sell in a recession when they possess:

- products with great ROI
- business-usable innovation
- real innovation (not copying an idea that a competitor introduced five years ago)
- add-on capabilities, especially strong vertical solutions
- solutions that can be implemented really fast (think SaaS)
- solutions will immediate value delivery
- solutions that do not require a blank check for an implementer to complete

What won’t sell well in a recession?

- re-packaged suites
- new platforms under old applications
- generic, horizontal applications
- re-automation initiatives

Vendors: Use this recession to re-discover the value you could deliver to customers. Re-discover what a difference your firm could make to end-users. Re-discover and re-invent processes - don’t just re-package the past. Buyers never remain static. They change and evolve. A recession actually accelerates these buyer changes as it forces them to re-evaluate their spending, their true IT needs, their scarce capital and other resources. Get in tune with the new business customer and their value proposition needs. Ignore them at your peril.

January 30th, 2009

SAP confirms layoffs - 3,000 to go

Posted by Brian Sommer @ 1:09 pm

Categories: Current Affairs, ERP, Oracle, SAP, Software Financial Stats, The Applications Market, Vendor Management, software

Tags: Layoff, SAP AG, Workforce Management, Human Resources, Brian Sommer

SAP to go on Slim-Fast? Can they make the apps as lean as the company?

On Jan. 13, 2009, I ran a post about rumored layoffs at SAP and Oracle. I made a few calls to sources in those firms to verify/deny these rumors.

In SAP’s case, I specifically spoke with one of their blogger relations people. This individual told me that the company had cut loose a few people in North America and that these cuts were due to overlaps resulting from the Business Objects acquisition.

Apparently, the rumor mill was much closer to reality.
Forbes reported this week that:

“SAP is making the right steps to address the current environment,” said Gerardus Vos, an analyst with Citigroup, who recommended investing in the software company. SAP said it would slash 3,000 jobs in the hope of saving 300-350 million euros ($397.5 million-$463.7 million) a year, adding to measures announced in October, following in the footsteps of American archrival Oracle (nasdaq: ORCL - news - people ). Oracle reportedly cut hundreds of jobs earlier this month.

Possibly, this SAP representative was unaware of the cuts to come or I was too early in asking for a verification. Other possibilities also crossed my mind.

No matter, 3000 people will be joining the ranks of the unemployed.

SAP will be a thinner, leaner firm but will these reductions result in any changes that benefit users of the software? That’s quite doubtful. The code will be unchanged, service may get a bit disrupted in the short-term and yet SAP’s margins will improve in the short-term. SAP will appease Wall Street and try to match Oracle’s margin numbers but do these changes foretell great things for SAP users? Not necessarily.

When I attend a SAP press/analyst event next week, I will seek more details on these layoffs. I wonder what I’ll hear then….

January 13th, 2009

Layoffs at large software firms - Fact or Fiction?

Posted by Brian Sommer @ 2:23 pm

Categories: Current Affairs, ERP, Mergers & Acquisitions, Oracle, SAP, The Applications Market, Vendor Management, blogging, software

Tags: Software, Layoff, Oracle Corp., Workforce Management, Mergers & Acquisitions, Corporate Law, Human Resources, Investment, Finance, Business Operations

Did SAP & Oracle cut loose staff?

There have been a number of web sites reporting planned or executed layoffs at various software firms. Some of the rumored layoffs are supposed to occur at venerable firms like SAP, Oracle, Infor and others.

Seeking Alpha discussed a number of these cuts including others planned or executed at leading IT analyst firms.

The Enterprise System Spectator reports layoffs of around 8000 at Oracle, 300 at SAP, etc.

I put in calls to a number of different sources to validate these figures. From a senior SAP source, I was told that the company made a small number of cuts in the U.S. and Canada. The figure, this source said, was in the neighborhood of 100-120 personnel and that these cuts reflect further elimination of post-merger synergies resulting from the Business Objects acquisition. For an employer with over 50,000 personnel globally, a cut of 100 or so personnel is not significant to the bottom line (although it is very significant to the people involved).

As to Oracle, I’ve reached out to a couple of sources including their PR firm. I’ve received no confirmations on any cuts there. The web traffic on Oracle cuts has been heavy but no official count.

With Oracle, we should look at this company carefully. Oracle has made an extraordinary number of acquisitions the last few years. In each of the acquired firms, there are back office and other personnel that are going to be redundant with those already in place at Oracle. Many of these personnel are cut loose right after the deal is consummated. Other cuts will occur over time as some functions, skills, etc. take time to transition. I would expect Oracle to shed a number of positions from every acquisition and this molting process could take up to 24 months after deal closure to occur. That said, any RIFs going on today could be due to additional culling from prior acquisitions.

The economy, obviously, is going to be a factor in layoffs. Oracle’s Safra Catz recently said “When you combine our product strength with our financial strength already delivering the highest margins among our peers and nearly twice as high as SAP, we believe we are well positioned relative to all of our competitors.” (source: Oracle 11/2008 earnings call). It’s really hard to maintain those kinds of margins unless Oracle:

- keeps headcount very lean
- has extraordinary internal processes that operate at world class levels (e.g., first quartile efficiency and effectiveness)
- eliminates all redundant spend
- centralizes wherever possible
- enforces great discipline in pricing and sales
- etc.

A down economy is going to put more pressure on Oracle executives to maintain fat, healthy margins when the economy causes clients to defer signings, cancel purchases and reduce deal sizes. Oracle can expect cost of sales to increase, average deal size to decrease and deal margin to decrease. Oracle must reduce its costs to maintain margins or Oracle must sell additional value-added components (e.g., services, acquired products, etc.) to get total deal size back up. The economy will likely hurt margins as Oracle will need to respond the customer issues above and the pricing strategies of economically challenged competitors. This may accellerate additional layoffs.

Managing headcount is one method Oracle can control costs and maintain margins but it’s not the only one either. When you listen to Oracle’s earnings calls, it’s clear the firm is looking at every aspect of their organization to protect margins. They are using a disciplined approach to earnings that makes Wall Street happy but doesn’t win any warm and fuzzies from tech employees at Oracle who find themselves on the wrong end of a consolidation or cost containment decision.

After reading the postings and comments about Oracle cuts, I am fairly convinced that Oracle is cutting loose some people. I am not convinced as to the size of the cuts. If a 10% cut (8000 out of 84,000 employees) does/did happen, that’s a big, material number and one Oracle must own up to.

I’m still waiting for a confirmation.

****************************************
UPDATE

The Industry Standard today published their take on the layoff rumors. They took the reporting to an additional level of depth by looking at the sums that Oracle has reserved for severance for workers in acquired companies (e.g., BEA & Hyperion). They compared those amounts to the monies that Oracle has already expended. One likely conclusion from their homework is that Oracle cuts may come in several smaller waves and not one big cut.

****************************************

January 12th, 2009

SAP & Oracle - Settling or Nettling?

Posted by Brian Sommer @ 8:15 am

Categories: Current Affairs, Litigation, Oracle, SAP, Selling & Marketing Software, TomorrowNow, damages

Tags: Oracle Corp., SAP AG, Pricing, Marketing Research, Marketing, Brian Sommer

Psst - Hey, what kind of margin is that software getting?

The long-running dispute between SAP and Oracle over the TomorrowNow case is moving to a settlement stage but not without some fireworks along the way. InfoWorld recently reported that SAP wants Oracle to provide profit margin information for two of its product lines: JD Edwards and PeopleSoft.

I’ll give SAP’s lawyers credit: they know how to tweak the opposition.

If the court agrees with SAP’s request, then Oracle’s pricing data may become part of public record. Future licensees of these products could use this information to negotiate a better deal for themselves. Obviously, Oracle will fight this request or demand this data be placed under seal.

So, SAP, if you get this data, send me the link for my own future reference.

December 18th, 2008

ACN vs. ORCL - Who's spending on advertising?

Posted by Brian Sommer @ 10:40 am

Categories: Current Affairs, Marketing, Notable Research, Oracle, Outsourcing, Professional Services, Selling & Marketing Software, Selling Professional Services, Service Providers, Software Marketing, sales

Tags: ORCL, Advertisement, Accenture Ltd., Firm, Brian Sommer

The cost of selling services and software

BtoB magazine recently posted their Top 100 business-to-business advertiser list. On this list were a couple of firms with distinctly different approaches to advertising.

Oracle Corporation came in at #95 on the list, down from #74 the prior year. In 2007, they spent $18,687,700 on advertising. Their spending was down 32.2% from the prior year. Their top spend categories were:

- business publications - $7,109,000 (38%)
- internet - $3,717,800 (20%)
- outdoor - $3,295,900 (18%)
- national newspapers - $3,171,400 (17%)

Accenture went the other direction in a couple of ways. They ranked #29, up from #59 last year. They spent $58,403,300 in advertising for 2007. How they spent it differed, too. Their top spend categories were:
- consumer magazines - $25,776,800 (44%)
- outdoor - $9,762,700 (17%)
- national newspapers – $7,981,000 (14%)
- business publications - $5,813,800 (10%)

Clearly Accenture likes consumer magazines and Tiger Woods figures prominently in those ads. But they also do a lot to promote the “high performance” message in their ads, white papers, collateral, website, etc. While I like the high performance angle, the Tiger Woods angle may be getting a bit long in the tooth. Tiger and Accenture are starting to feel like a Coca-Cola jingle/slogan that’s been used for too many years. When I was a partner at Accenture (and as part of full disclosure, I own a few shares in the firm) around 1999, the firm signed up Tiger. At about nine years now, this relationship may need to be retired, re-worked or refreshed.

I was surprised at the different directions each firm has gone re: advertising spend although both have experienced growing revenues. I’m not sure either approach is right or wrong. In a down market, one could argue that spending should be maintained just to keep the brand fresh in the minds of ever more cautious buyers. Others would suggest that these costs should be pared along with everything else. What each firm spends in 2009 will be even more telling.

The more interesting issue is what are these two firms trying to achieve in their spending. Both firms spend mostly on the overall brand and to reinforce it. Oracle has so many organic and inorganically acquired products that it would be difficult, if not very expensive to market them all. But Oracle does spread its advertising around several product families, though.

source: http://www.oracle.com/ad/index.html

Accenture, like many service firms, has lots of offerings that go the gamut from strategy consulting, custom development, outsourcing and much more. Advertising for all of these would be expensive, too. Accenture seems to keep its discussion of offerings limited to broad themes like Technology and Outsourcing.

The high performance angle is laudable as it describes what ACN is doing for clients. There’s a big difference is telling prospects ‘what you do’ versus ‘what you do for them’. With that in mind, saying you’re #1 in database sales doesn’t mean as much as saying you can save firms a pile of money.

If your firm is re-visiting its ad spend for 2009, think about that last point. Are you bragging about your products/services or are you getting prospects excited about what your firm can do for them? If you can’t do the latter, don’t waste your ad budget. These are leaner economic times and businesses need to believe you’ll add value (not costs) for them. Today, businesses want to see the value - not buy nice to have solutions.

November 19th, 2008

Giddyap - Oracle Mid-market apps team with Wells Fargo

Posted by Brian Sommer @ 5:23 am

Categories: Current Affairs, Oracle, Selling & Marketing Software, bank software

Tags: Team, Oracle Corp., Wells Fargo & Co., Adapter, Brian Sommer

A Treasury Solution to Save Money (not cost more of it)

I got a briefing from Oracle’s Tony Kender and Wells Fargo’s Brad Stewart concerning their new joint plug-in adapter product for Oracle’s E-Business Suite. Basically, this adapter allows users of Oracle’s mid-market applications to directly connect with Wells Fargo systems and automatically transfer bank reconcilation, payment and receipt information without re-keying, errors or time delay. Moreover, this solution should be easily implemented by Oracle users with a minimal outlay of capital and time delay.

Once installed, this solution permits finance or treasury users to download an immediate and data-rich flow of information from a business’ bank accounts at a Wells Fargo institution. Lockbox receipts, cleared checks, electronic funds transfers, account balances and other information are available in real time.

Wells Fargo has built the adapter and will license it to Oracle’s and Wells Fargo’s mutual customers. Like a licensed software product, the adapter software also requires an annual maintenance fee be paid so that customers can continue to receive product updates, upgrades, etc. Pricing information was not made available to me.

The real story here is that this is a mid-market solution that has a short time to value and makes the treasury function in mid-market firms easier to perform, less expensive and error-free. In light of other software firms that are raising maintenance rates and ignoring the current economy, this briefing was an interesting one to hear. Wells Fargo listened to its mid-market customers and discovered that many were bothered with a time-consuming and inefficient process. The adapter they built takes (according to Wells Fargo) about a week to implement (not 2-3 months).

A subsequent release of the adapter will support P-cards.

For more on this announcement, see this Oracle announcment.

November 3rd, 2008

NetSuite vs. SAP – really a question of back office economics

Posted by Brian Sommer @ 8:09 pm

Categories: Current Affairs, Marketing, Oracle, SAP, Selling & Marketing Software, Software Marketing, The Application Software Buyer, The Applications Market

Tags: Revenue, NetSuite Inc., SAP R/3, SAP AG, Back-office, Enterprise Resource Planning (ERP), Operational Accounting, Enterprise Software, Software, Finance

Show me the money

NetSuite is announcing later this week a program that offers some SAP R/3 users (or potential users) a chance to use NetSuite’s applications at a price point equal to 50% of the maintenance fees SAP would have charged them.

Moreover, NetSuite has already got a customer moving onto to its suite.

The real issue here is more than an aggressive sales promotion, though. NetSuite is making a lot of hay out of SAP’s forced upgrade of its customer base to a higher maintenance service level (and with it a potentially higher maintenance cost). In light of the current economy, SAP’s timing on this cost increase was unfortunate at best and a strategic blunder at worst. Raising customer costs in a down economy is a gutsy thing to do unless you are absolutely sure of your customers and their willingness/ability to pay more.

Another aspect of this announcement is found in a customer’s comment re: their move to NetSuite. The quote states: “We were spending 3% of our revenue on SAP. By switching to NetSuite, we reduced that cost to 0.1% of revenue”. If your firm is spending 3% of its hard earned revenue on an application software suite for its back office needs, I think you’re spending too much. In studies completed over the last decade or so by groups like Hackett, CIC and others, most large firms (the kind that use software like R/3) are often spending around 1.5% of revenues on their back office processing. That figure includes software and labor. Granted that’s an average but top quartile firms often report costs in the 1% level while best in class can be at the 0.4% level. If that customer was truly spending 3% of revenue, they probably had the wrong software or configured it poorly to drive up their costs so much. This customer probably needed to move off of R/3.

Should the average R/3 user cutover to NetSuite apps? I’m pretty doubtful this is a good idea. The best candidates for this campaign would be divisions, plants or other business units that don’t need all the functionality that their parent company is getting out of R/3.

Will additional campaigns to attract Infor, Oracle or other users?