November 27th, 2009

The Future of Financial Force.com - How Salesforce.com Benefits, too

Posted by Brian Sommer @ 3:25 am

Categories: CEO Interview, Current Affairs, ERP, Financial Software, Future of Application Software, Mergers & Acquisitions, Selling & Marketing Software, Selling & Marketing Software, Software Marketing, Software Vendors, The Applications Market, software, software. applications

Tags: Salesforce.com Inc., Financial, Benefit, Jeremy, Financial Accounting, Finance, Brian Sommer

Or, Why You Should Cut a Joint Venture with Your Cloud Platform Partner

Last week, I spent some time with Jeremy Roche, CEO, of Financial Force.com. This is the new entity created by Saleforce.com and Unit 4/Agresso to market the former Coda2Go financial software product line.

When I first chatted with Jeremy, it was early in the week and before the Dreamforce activities really cranked up. Later, I met with him Thursday just moments before I left the event. My opinion about Financial Force changed materially in that time. Here’s why.

1) In three different sessions, companies that were users of Salesforce.com’s CRM products or users of all new applications they had built using Salesforce.com’s Force.com architecture indicated that they had outgrown their current financial software solutions and would be checking in with Jeremy specifically or Financial Force.com in general for new software.

2) Marc Benioff, CEO of Salesforce.com, even offered, publicly, to introduce two different executives in different plenary sessions to Financial Force/Jeremy to help them with their financial software needs.

3) A panel of four Financial Force.com customers was anything but demure in their praise for the product and the very, very short time it took to implement.

So, what should this mean for Financial Force.com and its owners? I believe it’s a pretty rosy future for now unless they have some sort of service meltdown. Honestly, every customer at that show knew that Financial Force.com is the top-end financial software vendor of record for the Force.com platform. Many of them also know that Financial Force.com is a joint venture that Salesforce.com has a stake in and supports.

So, if Financial Force.com only markets to the Salesforce.com customer base, they’ve got a huge built-in market waiting for them for the next couple of years. That’s a great problem to have. Jeremy’s biggest challenge will be secure more of the mid-to-high end customers within that market segment as that’s the old Coda sweet spot.

Let’s see how they perform.

November 26th, 2009

When the Cloud Meets Agile Development

Posted by Brian Sommer @ 9:52 am

Categories: Future of Application Software, Implementing Technology, PPM - Project Portfolio Management, SaaS and Beyond, Software Development, Software Vendors, software, software. applications

Tags: Platform, Computer Associates International Inc., Force.com, Software As A Service (SaaS), Sales Force Management, Strategy, Emerging Technologies, Sales, Management, Brian Sommer

CA Agile Planner, the Force.com platform and Project Portfolio Management

CA today announced a new offering for IT project developers: CA Agile Planner for the Force.com cloud platform. There are several interesting aspects to this.

First, CA has a multitude of systems management products in its IT solutions portfolio that could support many aspects of a SaaS (software as a service) platform. This agile development technology though has been built on Salesforce.com’s Force.com platform. Force.com is the development and operational platform underneath Salesforce.com’s CRM (customer relationship management) software and scores of other applications built on the Force.com platform.

Why would CA do this?

One look at the Dreamforce conference suggests that hundreds or thousands of firms are building their own solutions on the Force.com toolset and platform. These applications aren’t being built using the old-fashioned methods involving Gantt/Pert charts, 6-18 development phases, etc. These Force.com applications are built in days, reviewed in hours and include new design ideas that are generated and prioritized in minutes. Developers are using a different vernacular now. They speak of sprints not preliminary systems design. It’s a different world that the cloud and platform technologies bring and systems developers must adapt.

This solution fills in a gap in the CA product line. It should be warmly received by firms not in CA’s normal pipeline (i.e., large enterprise IT groups). In fact, this product should resonate well with the smallest to the largest IT shops.

Additionally, we should expect interest in agile methodologies to increase at the same time that more businesses will want to drop their older on-premise application software for newer, platform-based, cloud-based solutions. That should also buoy the CA Agile Planner sales as well. In fact, as Salesforce.com and Force.com prosper, so should CA Agile Planner.

It is rather interesting to see development methodologies adapt to the cloud and the platforms that power the newer applications and business processes running on them. Academics, PMI and others should be paying attention as the world of system development is changing at the technique and environment levels. That CA is releasing a tool to marry a newer development methodology with an even newer phenomena, cloud platforms, is something others will likely want soon.

(yes, I know Dreamforce was last week, but I was really under the weather the last few days.)

November 19th, 2009

Dreamforce post#2: Chatter, Events, REA and the Future of Management

Posted by Brian Sommer @ 9:17 am

Categories: Current Affairs, ERP, Future of Application Software, SaaS and Beyond, Software Events, Software Vendors, The Applications Market, Think About IT, software, software. applications

Tags: Salesforce.com Inc., Event, Worker, Dennis Howlett, Sales Force Management, Social Networking, Sales, Online Communications, Marketing, Advertising & Promotion

I got chatted up yesterday - so should you

Salesforce.com announced its Chatter capability today. In essence, they’ve married instant communication services like Twitter, social networks like Facebook and data/events from corporate IT systems like SAP, Oracle and Salesforce.com into one integrated application/platform.

Users of Salesforce’s applications will find Chatter a native capability soon. I’ve got a slew of opinions re: this service and here are the positives:

- It’s great to see an application vendor innovate. The fact that people are enthused, engaged and pondering the possibilities of such a solution is something I wish we saw more of in other vendor’s conferences. Dennis Howlett tells me Epicor has created something similar and SAP may have experimented in this area, too.

- Chatter can bring to a business person’s attention all manner of important business events. The ability of the software to pass along key business events emanating out of application systems and databases is particularly welcome. Proponents of REA (Realtime Event Accounting model) will be especially delighted to see this time of technology become available.

On the concern’s side, I worry about these issues:

- Data Overload and Worker Productivity – I’m just not convinced that every worker needs or would benefit from this fountain of information streaming at them non-stop. Sometimes, my best work comes when I step away from all of the distractions and interruptions and concentrate on the task at hand. I don’t want truck drivers reading Facebook updates while on the road. I’m also not convinced that all posts/feeds are valuable. The challenge for the Salesforce.com team will be to develop sophisticated filtering and prioritization tools to make chatter smarter. If Chatter doesn’t improve worker productivity and create value for the enterprise, it could end up getting blocked on corporate networks like some social networking technologies.

- Synthesis – Speaking for myself, I’ve come to loathe certain bulletin boards, IM users, etc. because they do not write effectively. They incorrectly assume that I can somehow read their mind and determine the context of their messages. Equally frustrating is their self-centered view that I have read everything they’ve ever written and remember it. Their communications assume so much context is already present that their newest missives are incomprehensible. I need context and I need someone or a program to structure and synthesize dozens or hundreds of communications to something short, succinct and relevant.

- Conversation vs. Knowledge – Conversation is a luxury. It’s something I do with close colleagues, friends, family and clients. Knowledge is what I need to do my job well. Chatter certainly fills the conversation component well but businesses may need something that converts, filters and/or structures conversation into knowledge. That’s the real challenge and opportunity this kind of technology could bring in time.

- Quality of content - Not all content that is presented to a user of Chatter will be valuable or will be something that the receiver can assist. Yes, users can choose which people they want to Chatter with but still the quality issue will remain. What we’re willing to read in our own time is not what we should be reading during work hours.

Let’s return to the idea of events for a moment. Events in business systems can be internal or external occurrences or data points that warrant a worker’s/executive’s attention. Here are some examples:

- the Federal Reserve moves up the Fed Funds Rate by a full percentage point. This may mean that a company’s cost of capital is going to go up real soon. If it does, a company would want to re-examine its capital expenditure plans, its inventory levels, etc.

- the price of key commodity (e.g., wheat, copper, etc.) goes up/down by 20% in one day’s trading. Should someone in Purchasing, Procurement, Sales, etc. be notified as the company may want to lock in lower prices now or raise prices of finished goods?

- A key customer or supplier has just announced they are in financial difficulty or getting acquired.

- The engineer in your firm with 116 patents to her name has just notified HR that she’s going to go part-time and then go on early retirement.

Business people make decisions based on a number of internal and external events. When certain (not all) changes occur in one’s business environment, some reactions are necessary. Some events create strategic opportunities for the firm but only when they can be acted upon quickly and decisively. This, I believe, is the real opportunity for Chatter. Chatter can turn a moribund, middle-of-the-road firm into a real competitive juggernaut. When Chatter gets event processing fully incorporated into its solution, businesses and management science are in for a real change. For the first time, we could start to see companies managed in real-time.

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 22nd, 2009

Sustainability: Hard for business, harder for ERP vendors

Posted by Brian Sommer @ 11:08 am

Categories: Current Affairs, ERP, Future of Application Software, Think About IT, software, software. applications

Tags: Sustainability, ERP Vendor, ERP, Enterprise Resource Planning (ERP), Enterprise Software, Software, Brian Sommer

“Everyone, we’’re currently meeting with customers to see what sort of requirements they might have in the sustainability space. With this input, we hope to someday craft a reporting solution to help customers understand what their carbon consumption really is.”

HOLD IT RIGHT THERE

ERP vendors don’t get sustainability. They think it’s about collecting all of a user’s electric and gas bills to determine their carbon footprint. They think it’s a reporting exercise. If they can develop a spreadsheet with more rows and columns than the next ERP vendor, then they have achieved some sort of market leading, product excellence crown of achievement.

NO

Putting sustainability into ERP solutions will be very intrusive, very disruptive and expensive, if it is done correctly. Why? Well, sustainability requires new ways of looking at:

- which products to make
- what the true costs of a product are including costs for carbon offsets
- which production facilities should/should not be used to achieve optimal business, financial and ecologic outcomes
- how product scheduling should be optimized to take advantage of lower emission, lower carbon generating, etc. plants and machinery
- etc.

Let’s examine this further. In an ERP solution today, does a cost accounting module account for carbon offset costs as part of a product’s actual or standard cost? No. Some solutions might allow for a user to add a new cost item for this but can the system automatically drop in the correct cost based on:

- the specific machinery used (some machines use more energy than others)
- the time of day the product was made (i.e., some products may be made at night with hydroelectric power instead of daytime production using natural gas powered electricity)
- the location where the product was made (i.e., some facilities have naturally lower energy consumption or take advantage of solar/wind energy)
- whether recycled or virgin packaging was used
- etc.

Pre-sustainability cost accounting is passé in the new world. Cost accounting needs to be re-worked.

Now look at production scheduling algorithms. These optimization formulas were created to simultaneously solve several variables to produce optimal production schedules. These algorithms try to reduce the amount of machine down time, increase the likelihood of customers receiving promised products on time and meeting the target cost requirements of the products to be made. But these algorithms were not designed to assess the carbon footprint of each product that could be produced. These algorithms will need to be re-worked.

Look at the product quotation module. This functionality lets a product or design engineer build out a product specification, cost it out and price it. It helps companies, especially make-to-order manufacturers, decide what to make and how much to charge for it. As designed, these systems do not explicitly support additional cost concerns that sustainability might introduce. How would a package help a product designer/engineer determine where a product should be built, what machinery should be used, etc. to achieve needed profit levels while also incurring low carbon offset costs, low impact on the environment, etc.? This functionality needs to be re-worked, too.

In all, I believe ERP vendors will need to re-work their fixed assets, order entry, job costing, production scheduling, logistics, transportation management and many more applications if their solutions are to really support sustainability. It might be easier to determine which modules won’t be impacted by sustainability than to identify the ones that are.

When I heard a major ERP representative give a comment like the one at the top of the post, I was apoplectic. This firm was approaching sustainability in manner consistent with adding some minor, bolt-on functionality to the core product. They didn’t realize that these changes will be significant and when new legislation for sustainability (e.g., Cap and Trade) kicks in, their customers will need it (all) immediately. Customers will not have the luxury of time to wait for this ERP vendor to:

- spend a year or two collecting requirements from a few ‘strategic’ customers
- spend another year ‘studying’ these requirements and getting approvals for development work to proceed
- spend two-three more years developing the needed functionality for the initial release
- spend another year hand-holding the alpha/beta version of the product with a limited release group of customers
- then, finally, after seven years or so finally start rolling out a functionally light or insignificant version of the product to the general market.

No, sustainability is not like analytics. It won’t be something you can bolt to the exterior of the ERP suite and add a little something to it every few months. Sustainability functionality will be big, disruptive and important. When it is needed, all of the functionality will be needed at once.

Sustainability is a great example of what’s wrong with innovation in ERP today. Vendors have forgotten how to innovate. The fact that this ERP representative is asking customers and bloggers for ideas and items to put on their development list is appalling. The vendor should already know, by their own assessment, what needs to change in their product line to support sustainability. If they have to ask me, they are doomed.

Innovation is not (and please understand this point) about order-taking but you’d swear that’s how ERP vendors see it. Innovation involves imagination, empathy and the anticipation of future market needs/demands/wants. That’s the part ERP vendors don’t get.

October 22nd, 2009

CEO Interview: Meridian Systems' John Bodrozic on the construction front

Posted by Brian Sommer @ 10:15 am

Categories: CEO Interview, Current Affairs, PPM - Project Portfolio Management, SaaS and Beyond, Software Vendors, software. applications

Tags: Asset, Construction, Meridian, AECOM, Asset Management, Transportation, Software As A Service (SaaS), Operational Planning, Business Operations, Emerging Technologies

I recently had a chance to speak with John Bodrozic, President and co-founder of Meridian Systems. Meridian sells a number of solutions in the project portfolio management and infrastructure lifecycle management space (e.g., Prolog, Proliance, Prolog Converge) . Their products help property owners, property managers, construction firms, architects, engineers, etc.

I asked John specifically about the economy and how it has impacted the construction space. John indicated that some sectors are in dire straits, especially new housing construction. However, there are definite bright spots out there. John talked about all of the ARRA (American Recovery and Reinvestment Act of 2009) spending in the United States and the significant amount of public works construction it has spawned. Meridian has made sales of its solutions to organizations like City of Seattle Dept. of Transportation, Miami Dade Water & Sewer Department and the General Services Administrations’ Public Building Services group.

John also indicated that not all parts of the world are being impacted the same way. The World Bank is apparently helping out with infrastructure projects in selected locales.

Meridian is seeing lots of government interest in infrastructure initiatives particularly in areas like transportation, energy and water.

Given that Meridian had a strong private sector customer base (approximately 5000 customers/100,000 users), I asked John if these new governmental customers are any different than private sector customers. The biggest difference that John identified was that governmental customers preferred more on-premise solutions while private sector customers were more interested in their SaaS (software as a service) offerings. However, both groups are interested in looking at assets (e.g., buildings, dams, roads, power plants, etc.) as long-lived assets that need meticulous records maintained on them over the life of the asset and not just during the initial construction phase. John then told me of their shorthand name for this: plan – build – operate.

Meridian has recently added functionality to track project expenditures by fund. This functionality is especially needed for those entities administering or seeking reimbursement from targeted government stimulus funds. John also discussed how firms seeking these stimulus monies must also meet OMB compliance and reporting requirements if they hope to win this work and get compensated for it.

Finally, I asked John about whether they are seeing the overseas market being a big contributor to the company’s growth. He indicated that the Middle East is going strong for them. He singled out one success story: their customer/partner AECOM. AECOM is involved in numerous initiatives in the Middle East and Meridian’s solutions are being used in many of these efforts. AECOM is a program management company that is often hired by a building or property owner to design and engineer the structure, hire contractors to do the work and manage the lifecycle of the asset thereafter.

October 20th, 2009

Demand this from software vendors

Posted by Brian Sommer @ 4:49 pm

Categories: Analytics - Performance Management, ERP, Financial Software, Future of Application Software, Notable Research, SaaS and Beyond, Selling & Marketing Software, Software Vendors, The Applications Market, software. applications

Tags: Vendor, Customer, Sales Strategy, Tools & Techniques, Software As A Service (SaaS), Sales Force Management, Enterprise Software, Sales, Management, Emerging Technologies

I was getting a briefing last week from a software executive. We got to a point in the conversation where the discussion was focusing on existing products. I moved the conversation to a different space, though. If you’re getting a pitch from a vendor, you should move the conversation, too!

Still Market Relevant - When the vendor dialogue is all about existing customers buying more of the old product line, it’s not all that intriguing. Yes, it tells me that the vendor is still relevant to its customer base but these sales are mostly in-fill sales. You remember these sales, don’t you? They’re like those customers who had previously bought most of the ERP suite but now need the CRM (customer relationship management) modules.

Gaining Market Share - When a vendor is getting all-new customers for its existing products, then that’s a bit more newsworthy. This means that the products are appealing to new buyers and these just aren’t the existing customers. That means the products are still fresh and delivering competitive advantage. Alternatively, this market momentum could also signal that the software vendor has a great sales and marketing organization or is buying its way into ever greater market share. Wall Street likes this quadrant but a vendor can’t stay here forever as its products will age and lose their market appeal or luster.

Re-enlistments – These are the customers who are re-affirming their commitment to the vendor. They are choosing to upgrade their applications to the all-new application suite, new platform, etc. These firms are making a major financial commitment and their decision to do so is not trivial. Re-enlistment scenarios often occur with major technology platform changes (e.g., going from client-server architecture to Web 2.0 applications).

Hot Space - The top right quadrant is the really high-interest zone. This is where all-new products are attracting all-new customers. This stuff is red-hot! It’s the kind of software that makes the customers of other software vendors abandon their old products and switch to the new stuff. When you think of this quadrant, don’t just think of replacement technologies. Think about the products you bought for the first time. Think about your first cell phone, spreadsheet program, MP3 player, etc.

I want to hear more Hot Space stories. They are undoubtedly more interesting than the other stories and they are really rare. If a vendor has been around a while and has 1000 customers, probably 900 are in the Still Market Relevant quadrant. The rest are scattered across the three remaining quadrants with fewer than a dozen or two in the Hot Space quadrant.

Over the last few years, the numbers of customers and stories in the Hot Space has been in decline and, worse, as a percentage of total customers, experiencing a very real decline.

Innovation in ERP, for example, has been so bogged down in technical infrastructure changes (e.g., middleware/SOA platform changes) and business model changes (e.g., from on-premise to SaaS (software as a service)) that real value-adding, business-relevant improvements to products are far and few between. Look at the ‘amazing’ value that business analytics hasn’t brought in to date. Analytic applications are still crunching internal transaction data. The lack of imagination and innovation here is an embarrassment to the technology sector.

When a software vendor comes knocking on your firm’s door, ask them to segment their customer base along the lines of the four-quadrant picture above. Then, only ask them to describe the value derived and experience of these all-new customers buying all-new solutions. If they struggle with this exercise, this vendor is selling you yesterday’s technology. Your users will love this old-time solution the vendor is pitching as much as they’d want to buy a newspaper from last week. Even if the vendor has some stories in this quadrant, these may actually reference old technology. Watch out for this. If it doesn’t have sizzle, differentiation and freshness, then it’s old news. Don’t reward vendors for re-packaging an old product in new wrapping. Make them innovate or make them get out of the way.

** UPDATE **
I read the comments many of you post to these blogs. Thanks.
A reader of this post raised a couple of points I’d like to clarify. Were a vendor to approach your firm about an existing product, one that has been on the market for a while, am I suggesting you not consider it? No, I’m not but I would caution you that the product you could be considering may be a bit long in the tooth. I wouldn’t pay too much for old-tech. But also remember that the vendor that has nothing in the top right quadrant is also a vendor with a limited future. This is an area where the vendor’s future sales momentum will occur. Without something to entice new customers into the fold, this firm will be lucky to make in-fill sales to existing customers. So, if you need something now, any product in any quadrant will do. But, if you want a product with a future, find a vendor who is building for the future.

October 16th, 2009

Two Views of the Software Market

Posted by Brian Sommer @ 11:07 am

Categories: Current Affairs, ERP, Future of Application Software, Notable Research, Software Vendors, The Applications Market, software. applications

Tags: ERP, Vishal Sikka, S-curve, Enterprise Resource Planning (ERP), Enterprise Software, Software, Brian Sommer

A Bridge Too Far?

In a blogger briefing this week at SAP’s TechEd, SAP CTO, Vishal Sikka, drew a chart of the application software market and what new areas of technology are of interest to the firm. I’ve tried to reproduce his freehand drawing into the following PowerPoint rendering. I believe I have captured the essence of his points but apologize in advance if I omitted some of the subtleties of his sketch.

Vishal discussed how new technologies, like social networks, are forcing ERP vendors to process new kinds of information (i.e., unstructured data that may exist in great volumes with little organization), understand the explicit and tacit insights within this data and connect it to the decision making processes of modern companies.

I agree that new kinds of information are presenting themselves to businesses. Sadly, most ERP vendors have often ignored new kinds of information and, instead, focused single-mindedly on those transactions that eventually end up in a general ledger.

Now, let’s look at the broader picture. ERP vendors are behind the eight-ball on several data fronts. Here’s my abbreviated list on this subject:

- event data – Businesses make all kinds of decisions based on external (and many internal) events that are never found in an ERP. For example, sourcing personnel make a number of decisions as to how much to buy, what to pay, etc. based on current commodity price movements. If a key commodity your firm needs suddenly jumped up in price, would your ERP system notify a buyer? I doubt it. Other events are triggered by legislators, competitors, regulators, the press, bloggers, employees, etc. Does your ERP monitor and assess the changing market share and business fortunes of your competitors or is it still trying to perfect last year’s financial statements?

- the context behind data – Can your ERP system scan non-structured data, like blog posts, and determine whether your firm (or a competitor) has suddenly got a product reliability or customer service issue? I doubt it. Most ERP’s are still stymied with problems like how to reconcile the company’s headcount in the HR module with the headcount used in the Budgeting module or the headcount figures in the company’s EEO reports. If an ERP can’t understand structured, accounting data, how can it deal (credibly) with data from less structured sources or data from external sources?

- data for non-traditional users – Your ERP probably makes a bunch of accountants, clerks, data entry people, outsourcers and systems integrators happy. But what does it really do for the significant number of other data-hungry people who are constituents of your firm? Does your ERP have dedicated applications for your board of directors? Your suppliers? Your customers? Different regulatory agencies? Your external auditors? The activist shareholders who are watching your management team? ERP products were designed to satisfy an internal, mostly accounting/Finance user group. While lots of vendors tout ‘analytics’, ‘business intelligence’ or ‘data warehouses’ to address some of these new constituencies, these are mostly bolt-on reporting tools that simply re-work existing, internal transaction data. I really doubt any ERP was designed as ‘business operating system’. Recently, I saw a picture of a horse-drawn cart where the owner had so overloaded the cart that it tipped backward and lifted the horse off the ground. That’s ERP today – an overloaded horse cart. We need vendors who will take a fresh perspective at the totality of a business and its information needs. The incremental approaches of late may work for a while but if left unchecked, create a poor long-term solution.

I got the impression that SAP’s leaders are looking at many of the right kinds of data and business questions but their self-imposed need to do so within the context of keeping everything in the original ERP wrapper may be limiting their vision and potential.

Their desire to push everything into the same technology, same business construct, etc. may not be correct. It feels like they are pushing, a la Montgomery’s Operation Market Garden, for a bridge too far. I’m unconvinced that a solution designed for manufacturers and designed to report, process and store internal transaction data is necessarily the best platform for the businesses of today and tomorrow.

Don’t believe me? I give you a couple of things to ponder. When most ERP systems were designed, technology was heavily constrained. Memory, throughput, processor speed, disk storage, etc. were all in short supply and expensive. ERP designers created systems that worked within these constraints. They intentionally constrained their products to have less than a whole, world view of business. Their products cherry-picked a few key computationally intensive or labor intensive internal tasks and automated them. Over time, as computing became less constrained, more function points and process components were automated. But, at its core, these solutions are still constrained as they were designed as internal systems, using internal transaction data that creates backward looking reporting data.

ERP vendors could create better, more relevant solutions now if they’d just envision a technology world without constraints. When you create systems assuming you have unlimited storage, terabytes of in-core memory, etc., you realize that business information doesn’t have to be internally generated data only. You realize that work is not just comprised of internal work processes (just watch how a sourcing professional does their job – they spend much of their time checking prices of suppliers, analyzing the financial statements of suppliers, etc. – they spend just minutes a week actually keying in a purchase order) but a mix of internal and externally facing tasks. When you realize that the old systems’ views of processes were artificially constrained and limited to an internal view of the world, then you understand that the old data model for ERP is just obsolete, irrelevant and desperately in need of a new perspective.

Data isn’t the only sticking point. ERP systems were designed for internal users. They weren’t created to serve other constituents like board members, activist shareholders, customers, regulators, suppliers, external auditors, etc. Many corporate constituents were never part of the original data model of these products and bolt-on efforts to mollify/pacify these non-traditional users are ‘limited’ by design.

Bolting data from social networks, group-think collaborations, web crawling activities, etc. into ERP solutions may tax the ERP data model to the breaking point. Even if these solutions have the technical elasticity to support these new data types, the basic limitations with the inwardly focused old ideas of business, business information, etc. will remain within old ERP solutions. The old ERP design is ready to be replaced with one more relevant for today’s firms.

We need visionary ERP vendors who will take the fresh piece of paper and envision what a new generation of software product should look like. The technology maturity curve for ERP solutions has run its course. The S-curve has hit its apex and has flattened. It’s time for a new kind of product. It’s time for some real innovation and not more of this innovation at the margins.

Vishal’s vision looks good and SAP has the R&D resources to make big things happen. But will we see a vendor brave enough to re-imagine what ERP should really be? Or will we see more stuff bolted to the exterior of the old ERP and business thinking of yesteryear? I’ll keep hoping for the former.

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.

September 25th, 2009

Shouldn’t services firms have their own ERP?

Posted by Brian Sommer @ 9:41 am

Categories: CEO Interview, Future of Application Software, HR, PPM - Project Portfolio Management, PSA - Professional Services Automation, Professional Services, Selling Professional Services, The Applications Market, software. applications

Tags: Staffing, ERP, Services Firm, Service Firm, Enterprise Resource Planning (ERP), Sales Strategy, Enterprise Software, Software, Sales, Brian Sommer

I caught up this week with Morris Panner, CEO of OpenAir (now part of NetSuite). One aspect of our wide-ranging conversation concerned the continuing evolution of businesses, the economy, etc. towards a greater services orientation. Drawing on that, we discussed how services firms need their own version of ERP.

Here are just some of the ways I believe a Services ERP would differ from a traditional ERP:

1) Services firms need visibility in their ‘resources’ so that the best/optimal staffing decisions can be made. If the best resource (as measured by value delivered) is available in one country but the work is sold in another and eventually delivered in a third, can these resources be optimally scheduled? ERP/MRP solutions optimize capital resources (e.g., stamping machines, extruders, CNC machines, etc.), customer orders, inventory and other assets. But, in services firms, the optimization software is still in its infancy or non-existent. Sadly, this staffing is often controlled (not optimized) by individuals whose allegiance is to a local sales or operations person and not to the service firm or its shareholders.

2) The CRM component of ERP is also structured to serve Industrial Age firms. Service firms need information about people, availability, real-time pricing data about people, etc. and this is different from products. For example, if your service firm knows it will soon offload a very large number of SAP implementers from a big project, would you want to offer some discounted pricing to prospects to soak up all of that upcoming bench time? And, would you want to be selective in offering these discounts for only some personnel while actually boosting the rates of others who have distinguished themselves as real experts in this subject matter? ERP solutions don’t do that.

3) Sales commission calculations are/should be different in services firms. Some sales people would prefer to sell only domestic work as they are paid a percent of total revenues. Selling a mixed mode project (i.e., where some work is performed offshore and some on shore) results in a lower total fee estimate and lower sales commissions for the sales person. Shouldn’t the sales commissions be driven on which projects drive the greatest margin for the employer or greatest value to the client (and not greatest income to the sales person)? Do ERP systems address this? Do ERP systems show a local sales person the staff availability of personnel in another country? Do ERP systems recommend the best value people for a project regardless of location?

4) ERP systems (still) don’t integrate non-accounting data into their software well. Service firms need to capture, reuse, modify and expand prior work plans, intellectual property, ideas, etc. into their projects, deliverables, work plans, etc. They need a flood of information about people so they know who to staff and where. That sort of information changes daily and is rarely found in the standard HR system. This is why resource managers exist in service firms and knowledge management components are essential in service firms’ IT solutions. ERP providers have tried to bolt on project tracking and some PPM capabilities to their ERP offerings but it doesn’t work well. ERP was designed first for accounting transaction data and then updated for Industrial Age firms. Overlaying ERP on service firms is an unnatural act and not optimal for these firms.

PSA (professional services automation) firms did some great things to get services firms more productive and efficient. We all owe them a big thank you just for making time entry a one-time event and eliminating all the reconciliation work (between the project tracking module, payroll and budget/estimating systems). PSA vendors also made billing, collaboration and other project work easier, too.

The initial focus of PSA has been to stitch together a number of service functional needs into a smaller collection of better integrated solutions. Service firms now have better, larger, more robust and more efficient systems. They still have islands of service automation software and data that include: PSA, spreadsheets, accounting software, HR/Payroll software and BI/Analytics. It’s time for that to come together as a more unified solution set.

These larger solutions will likely form the nucleus of a SRP (services resource planning) offering but won’t initially deliver the full capability of SRP until someone adds the unique business functionality that only service firms have and need. Functionality like support for global service delivery models, billing and currency reconciliation for global projects with globally sourced team members, resource staffing optimization models, etc. That may be a few years off but it’s what will eventually come. The question is which vendors will deliver it?

I’m pleased NetSuite kept Morris after they acquired OpenAir. It speaks volumes to their support for the service industry. The question now is will NetSuite create a full, robust SRP for the services space?