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

Guerilla Marketing @ Dreamforce

Posted by Brian Sommer @ 2:03 pm

Categories: CRM, Current Affairs, ERP, Fun With Tech, Humor, Marketing, PR, SaaS and Beyond, Selling & Marketing Software, Selling & Marketing Software, Software Events, Software Marketing, Software Vendors, The Applications Market, sales

Tags: SugarCRM, Marketing Research, Marketing, Brian Sommer

What a sweet thing SugarCRM did

If you’re into Marketing, you’ve got to watch the user conferences of HOT software vendors. At those events, you’ll find lots of smaller firms deploying low cost but effective marketing methods. They’ll use the draw and concentrated prospect base of a large, popular vendor to get their message out.

The fun is watching how they do it, how they get away with it and how little it can cost. In a perverse way, I like to see how the big dog reacts to it, too.

This week at Salesforce.com’s Dreamforce conference, I looked around at the guerilla marketing materials that were handed to me on the street, slid under my hotel room door, etc. The winner, in my opinion, was SugarCRM.

SugarCRM was handing out books with a size, artwork and cover color scheme that resembled Benioff’s latest book on the cloud. SugarCRM competes with Salesforce.com’s CRM product. SugarCRM had people handing out copies of their ‘book’ at the various intersections leading to the Moscone Center – the site of Dreamforce.

Can You Pick the REAL CRM/Cloud Book?

Look at the covers of these two books. Where Benioff used a blurb from Michael Dell, SugarCRM quotes Kim Jong II. You gotta love it. This takes the phrase “imitation is the sincerest form of flattery” to a whole new level.

As it turns out, their ‘book’ has a few bits of SugarCRM editorial and content in the first few pages with the rest of the book available for one to take notes. Personally, I thought it was a great gimmick.

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

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 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.

October 9th, 2009

SMART Selling in the SaaS world

Posted by Brian Sommer @ 10:58 am

Categories: HR, Implementing Technology, Marketing, SaaS and Beyond, Selling & Marketing Software, Selling & Marketing Software, Software Marketing, Software Vendors, negotiate, negotiations

Tags: Software-as-a-service, Katherine Jones, Software As A Service (SaaS), Managed Hosting, Cloud Computing, Sales Strategy, Emerging Technologies, Sales, Brian Sommer

What we all could learn from Sonar6

Post #3 from the HR Technology show

SaaS (software as a service) is supposed to cost less. At least that’s what all the vendors tell me. It’s also supposed to be easier to use and easier to implement. I’ve often wondered if these lower cost ideals are really true. Why am I such a Doubting Thomas? Because most SaaS vendors are on-premise converts to SaaS. These firms haven’t really changed anything about their business. They still sell the same way. They still implement software the same way. And so on. If it’s all the same, except for the business model, how can it be cheaper?

I saw the answer last week and I got it from a different kind of vendor. Their lessons are important for all SaaS and SaaS wanna-be firms to study and copy.

So, imagine you’re a software vendor, like Sonar6, trying to sell into the North American market. Now suppose that your firm is based in New Zealand. It’s at least 6,000 miles between Auckland and San Diego and over 8,000 miles from Auckland to NYC. Can you imagine Sonar6’s cost of sales if they need to send over pre-sales personnel for even some of their larger prospects?

Cost of sales for many software firms is one of their largest cost items. I’ve seen old school firms fly in 6-8 product experts, sales people, industry experts, change management specialists, project managers and the ever-present ‘regional/ industry client relationship’ executive. That last person flew the most air miles, spent the night in the most expensive hotel room and won’t remember one of the prospect’s names by nightfall. But, he/she will pay for dinner and breakfast for ‘the team’.

Prospects will make these folks come in at least three times to do product demonstrations. They may need to come back two more times to explain the proposed work plan. Next, there could be three more prospect visits by a negotiating team to try to close the deal.

The cost of sales includes a lot of travel costs, time spent in non-billable activity, time spent responding to RFPs and prepping for demonstrations and more. The opportunity cost, that is service time that could have been billed, is huge, too. It’s expensive and customers pay for it indirectly.

Sonar6 looked at several of these components and changed their way of doing business. Here’s their approach:

- they put their software pricing on their web site. Without the haggling, they can avoid a lot of wasteful and expensive negotiation trips

- they make their product available for free for 30 days. If you like it, you can buy it. If you don’t, that’s okay too as Sonar6 hasn’t spent anything with this sales effort.

- they created their applications to be so logical, so intuitive and so compelling that they sell themselves. Seriously, if you’re going to sell an application that runs on the Internet, it ought to be so obvious and straightforward to use that it doesn’t require a phalanx of trainers and change agents to help explain its myriad eccentricities.

When you do these things, your cost of sales plummets. You don’t need to hand-hold prospects. You don’t need to play time-consuming negotiating games. You don’t need to create expensive work programs. You get the point.

The second big area of change to win in SaaS applications is to achieve true multi-tenancy. Katherine Jones is covering that point in a companion post. Suffice to say, if a vendor can apply upgrades to hundreds of customers simultaneously, then the cost of their operation plummets. An old-school application that is hosted is not multi-tenant and it can’t be operated as cheaply as a SaaS product. SaaS applications need to be cheaper than packages and bespoke software. When they are, SaaS vendors can win. Cost of operations, like cost of sales must be reduced.

Cost of SaaS operations also go down when the vendor is smart about where they run their operations and what they use for hardware. Some of the vendors we met at the HR Technology show use low cost cloud service vendors like Google and Amazon. When it’s all done, I’ll bet these providers may be far less costly than the data centers many SaaS operate themselves.

So, when you’re evaluating a SaaS vendor, see what they’ve done to reduce their cost structure, especially in the cost of sales and cost of service delivery. Yes, look at their SAS 70 compliance efforts but also look inwardly to see if they truly understand how to get their costs, and yours by inference, down to record lows. That’s the smart way to evaluate SaaS vendors. And that’s how your costs will come down, too.

October 5th, 2009

The troubling thoughts re: outsourcing

Posted by Brian Sommer @ 4:35 pm

Categories: Contracting, Current Affairs, India & Services, Mergers & Acquisitions, Notable Research, Outsourcing, Professional Services, SaaS and Beyond, Selling Professional Services, Service Providers, Think About IT, deal

Tags: Solution, BPO, Outsourcing Company, Customer, BPO Deal, Business Process Outsourcing (BPO), Outsourcing, It Services, Managed Hosting, It Operations

Watch this space for future problems!

There’s a lot going on in the outsourcing world lately. Things like:

- Perot Data Systems being acquired by Dell

- ACS getting bought by Xerox

Add to these deals, consider that:

- Accenture is providing guidance suggesting zero growth

- Accenture cutting back its executive ranks

- A colleague telling me that outsourcing, traditional & BPO outsourcing, is on the way out

Let’s look at that last supposition. BPO, business process outsourcing, is built on the idea that an outsourcer can assemble a great collection of technologies, design & enable them with a specific set of business processes and deliver a step-change improvement in a customer’s business operations. Generally, BPO providers can take a customer experiencing 3rd or 4th quartile performance levels to 1st or 2nd levels and at a lower cost than the customer was able to deliver on their own.

BPO deals are tough, though. Customers fight the urge to adapt standardized processes and often end up with processes that have some best processes and some of their old bad habits (and cost structures) embedded within them.

BPO solutions have traditionally been built around older ERP solutions. They’ve been constructed with the stuff your firm was using before it went to BPO. Many use older client server software and not newer SaaS (software as a service) products. These solutions may or may not have a SOA (service oriented architecture). They may be built from the parts of several ERP and specialty software firms. Sure, the vendors are selling an outsourced process and not a technically elegant solution. But, what happens when BPO buyers are looking under the hood and see a solution that’s long in the tooth technically? Just last week, I spoke with a vendor whose firm is still selling a COBOL-based, HR Payroll product with a runtime compiler in it. Oh, did I mention it was a green-screen solution that an outsourcer is using.

There’s another issue with the traditional BPO solutions. They may not be economical for the solution providers and their customers anymore. True SaaS products can be great deals for the provider and the customer as they have multi-tenancy properties. Multi-tenant solutions permit the provider to operate one-version of the code for all customers while logically (not physically) separating each customer’s data. In contrast, many BPO solutions are not multi-tenant. Actually, they are far from it. Each customer has their own configuration and version of the code. Their data is logically and physically separated. BPO solutions in this fashion are more expensive to update and operate. Every time an old-school BPO provider needs to update their software (e.g., scheduled maintenance, new functionality, security patches, etc.), they have to do it one customer at a time. It’s expensive and, ironically, it’s inefficient.

Buyers are going to look at other solutions. Solutions that come with best practices built in and are capable of instant updating. They can be updated simultaneously for all customers. New processes can be enabled immediately. Buyers will want solutions built for cloud platforms and offered by vendors who can really get their cloud costs down. They’ll want a solution provider who uses Linux and not some proprietary operating system. They’ll want a provider who builds their own servers using commodity parts. Likewise, they’ll want a provider who offers disk storage at prices closer to the sub-$100/terabyte prices you and I pay at mass retailers and not prices form factors higher from brand name hardware vendors.

Pricing will fall for the hardware, software and services in the mostly back office enabled BPO world as these are all commodities now. SaaS will just exacerbate the drops.

Traditional outsourcing, that space where clients transfer entire data centers to a third party, may be on the way out, too. Non-core applications will go to the cloud as more and more of the hardware in a data center is scheduled for retirement. It’s a predictable route given the need to free up capital and labor. Customers will continue to move troubled, non-strategic apps to outsourcers or SaaS solutions. They will do so just as many of us trade-in our messed up old cars for newer ones. Problem is, too many traditional outsourcing solutions aren’t too different from the old cars…

Traditional outsoucing made sense when labor arbitrage was a key value driver. It isn’t anymore.

Today –
Today, outsourcers are taking calls from acquirers, private equity firms and others. They know tough times are ahead and are looking for an exit strategy for their investors. Who wins? Well, the investors in the outsourcer might see a bump in their stock price but it won’t be long lasting. Structural changes introduce turmoil in markets and we should see some here.

Gartner recently published an analysis of this space and predicts 25% of outsourcers are going to disappear.

That’s a lot of change and it will disrupt a number of firms. Just make sure yours isn’t one of them.

I’m concerned that some of the buyers of outsourcing firms may have rose-tinted glasses on and their employees (and clients of these firms) could get hurt. Let’s hope not.

September 15th, 2009

Interesting things I've been briefed on lately...

Posted by Brian Sommer @ 12:47 pm

Categories: Current Affairs, ERP, Mergers & Acquisitions, PPM - Project Portfolio Management, PSA - Professional Services Automation, Professional Services, SaaS and Beyond, Software Vendors, Sourcing, The Applications Market, software, software. applications

Tags: Food, Open Source, Information Technology, NetSuite Inc., Computer Associates International Inc., iTrade Network, Meridian Project Systems, UC4, Food & Beverage, Manufacturing

NetSuite, CA, iTrade Network, Meridian Project Systems, UC4, Project Open,….

NetSuite has some new financial consolidation/planning functionality in their SaaS solution. It permits global firms to handle currency conversion. Adaptive Planning’s software is at the core of this solution. This technology does not currently use an in-core memory resident database. The more of this sort of advanced financial capability that NetSuite builds into its products, the more upmarket they’ll become.

iTrade Network is the result of three related firms coming together to solve an important problem in the food industry. iTrade is providing the traceability needed in this sector to protect us, food manufacturers and distributors and others from problems in our food supply. Their solution can expedite recalls and hopefully drive a more complete and accurate removal of contaminated products from the selves. The company has already attracted a lot of big name customers. Last year, I did a white paper for SYSPRO on the food sector. Product recalls were one of the most contentious issues that I discussed in that piece.

ARRA (American Reinvestment and Recovery Act of 2009)– You’ve likely seen this acronym on a road project near you. In fact, my daughter and I recently drove from Colorado to Chicago and we passed a lot of construction sites benefiting from these rehabilitation monies. Meridian Project Systems briefed me many months ago about this and now CA is out there with their Grants Management functionality. CA’s solution is an offshoot of their PPM solution (nee Clarity). Meridian has scheduled a more detailed briefing with me later this week.

UC4 has put the 2.0 moniker on something called Automation 2.0 for the IT data center. Their software puts all kinds of scheduled tasks under a single, integrated toolset. Why is this technology needed? Just look at how many different applications and activities IT groups support now versus a 10-15 years ago? Email archiving, CRM applications, web applications, data resident on SaaS systems, etc. are all relatively new IT responsibilities. Each of these requires backups, report runs and other processes and they all must be scheduled. IT shops don’t need to buy a different scheduler for every database, application, reporting tool, etc. IT data center personnel should experience greater productivity and should be available to work on more strategic initiatives. UC4 claims a 6-12 month ROI.

UC4 also acquired an event-driven technology, SENACTIVE, to complement its offerings.

Project Open is an open source project portfolio management solution based out of Europe. The software has attracted a fair following there and is used by a number of professional services firms (e.g., Cambridge Technology Partners). The software is frequently used in an on-premise mode although hosted versions are available from the firm or selected partners. I only had time for a cursory examination but the functionality appears fairly robust for service groups of 20+ people. It’s a PSA/PPM option for those looking at open source solutions.