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.

November 18th, 2009

A Tale of Two Software Worlds: Old ERP vs. SaaS

Posted by Brian Sommer @ 11:20 am

Categories: Current Affairs, ERP, Financial Software, Future of Application Software, HR, Implementing Technology, Selling & Marketing Software, Software Development, Software Marketing, Software Vendors, The Application Software Buyer, The Applications Market, Think About IT, software

Tags: Software, Software-as-a-service, Solution, Customer, ERP, Survivors, Software As A Service (SaaS), Managed Hosting, Cloud Computing, Emerging Technologies

Watching the train wreck as SaaS continues its assault on the on-premise software world

Charles Dickens began his famous book “A Tale of Two Cities” with this opening statement:

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going to direct to heaven, we were all going direct the other way, “

This week, I’m in Silicon Valley. Yesterday, a colleague, Dr. Katherine Jones, and I visited with executives from WorkDay, Taleo, Ariba and Financial Force (the Salesforce.com and Unit4/Agresso joint venture). Today, I’m at Salesforce.com’s Dreamforce event. These visits have confirmed for me what CIOs have already indicated to me: SaaS (software as a service) has really moved mainstream. Big ERP (enterprise resource planning) vendors that cannot, will not or are unable to offer these solutions are in trouble. Yet, to hear it from the old school crowd, these firms are:

- still vetting the SaaS space as they aren’t sure it’s for real
- saying that their customers aren’t asking for SaaS
- having trouble retro-fitting their old-premise solution to a SaaS environment
- do not know how to make a solution multi-tenant despite spending hundreds of millions of dollars in research and development
- etc.

LET THEM EAT CAKE

Or in this case “let them pay 25% maintenance that generates 90+% margin for us”. The arrogance, indifference or lack of empathy old school vendors have for their customers is appalling. They behave with the imperious attitude of the royalists of yore. But, like the old royalists, they did not recognize that the world around them was changing. Instead, the royalists found themselves increasingly on the other end of a pitchfork, ax or guillotine. The end of an era is coming and vendors can choose to embrace or fight it. But will the fighters win?

In the executive meetings yesterday, Katherine and I heard, consistently, these sentiments:

- Interest in SaaS products is growing rapidly. Vendors find they are challenged by internal concerns (e.g., how to accommodate their sales professionals’ commission problems as these companies are shifting from on-premise to SaaS sales) not market acceptance. Nonetheless, the smart firms don’t let their internal issues impede what their customers want. These vendors are sorting out the issues and moving forward.

- Marketing SaaS products is not a problem for SaaS vendors but successfully implementing the customers they are winning is. SaaS vendors are almost universally focused on building solid customer references as they know that reputation really matters in a space where a few minutes of service disruption could kill one’s brand.
- Market interest in SaaS products is expanding. Once, where customers would entertain some HR or CRM apps running on the cloud, Finance applications are now being seen as very viable solutions to use.

Katherine and I asked these vendors about the software products they are replacing. No surprise here: they are uninstalling old school products – many of the products being replaced were implemented to alleviate Y2K (year 2000) issues. Those aging products, many of which were implemented in the mid-to-late 1990s, are the ones being booted to the curb. More on this in a subsequent post.

Why are the old products falling away? Vendors told us that their customers and prospects are looking to SaaS as:

- The TCO of existing solutions is out of whack. Ever higher maintenance costs were frequently identified as major customer pain point and a driver of SaaS sales.

- Customers don’t like being stuck on older releases because they can’t justify the commitment of funds, time, third parties, etc. to implement upgrades.

- They have run out of time waiting for their old ERP, HR, or Finance software vendor to get on the SaaS bandwagon or deliver long-promised SaaS products.

One SaaS vendor executive described the ‘transition points’ that trigger the initial contact with their firm. These include, but are not limited to:

- The prior old school vendor requires a re-implementation of the product to utilize a new release.
- The old school vendor requires its customers to re-license an application as it is being re-platformed or re-badged.
- The customer is experiencing declining fortunes yet the old school vendor’s license fees and maintenance amounts will not change to reflect the new economic reality.
- The customer is outgrowing the old solution. The number of customers that are now global is huge and growing yet some solutions do not scale in size, functionality or global reach.
- Etc.

CIOs are adding to the market interest as they are choosing to use SaaS applications whenever some of their servers are due for retirement/replacement. CIOs realize that they would like to avoid new capital expenditures, want to have software that always remains current, use software that doesn’t cost them anything to upgrade, use software that frees up their IT staff to work on more strategic matters, etc.

Vendor after vendor reaffirmed for Katherine and me that customers are realizing 50% TCO savings over older on-premise products. (Salesforce did so this morning, too).

Now look at what’s going on at Salesforce.com’s Dreamforce event. 19,000 people registered for this event. The main auditorium of 10,000 was filled and an overflow room of 3,000 people was filled, too. In this economy, such a large number of people don’t go to a show, miss work and incur travel costs unless they’re serious about the subject.

A crowd of 19,000 people is a lot. Maybe only two or three application software vendors could deliver that kind of crowd. And some of those are struggling to do so as the lack of innovation, the lack of timely delivery of product, the high cost of these passé solutions, etc. makes market interest in these products fade.

Will SaaS displace on-premise solutions? Not entirely. But significant market share losses could start showing up in the next 24 months. Latecomers to SaaS will find their existing customers and new prospects to be especially leery of their solutions. Why? It’s taken Salesforce.com a decade to perfect their platform, their reliability, their sandboxes, etc. Untested SaaS environments will be viewed as risky propositions. CFOs, Controllers, CEOs, etc. will prefer to go with solutions from vendors with a solid track record and credentials in SaaS and the cloud. Newbies will have a really tough time.

Dickens opened his book with the best/worst dichotomies not just to get a reader’s attention but to point out that everyone in France at that time, royalists and peasant, had starkly different opinions of the current situation. Some royalists thought good times were still ahead while others correctly saw the sea change coming. Ditto for the peasants.

Survivors are the ones who correctly assess the market situation. Casualties are the ones who live in denial or in some unrealistic but idealized view of the world. Old school, on-premise vendors are in trouble. Of that I have no doubt. What amazes me is the level of denial still present in some of those firms. Pain is coming to those firms soon.

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 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 14th, 2009

Customer Intimacy wins in SAP SI's and Channel Partners

Posted by Brian Sommer @ 10:25 am

Categories: Current Affairs, ERP, Implementing Technology, India & Services, Professional Services, Selling Professional Services, Service Providers, The Application Software Buyer, The Applications Market, sales

Tags: Customer, SAP AG, Firm, Channel Partner, Business Services, Strategy, Supply Chain, Product Development, Management, Business Operations

Yesterday, several bloggers at the SAP TechEd conference in Phoenix had an opportunity to speak with Zia Yusuf, EVP, Global Ecosystem & Partner Group of SAP.

I asked Zia what characteristics typify the best SAP partners. He rattled off five qualities that the best systems integrators and channel partners possess. These qualities and my comments on each include:

1) Have individuals that are deeply involved/connected with SAP’s product direction. We had a great conversation on this point. It’s obvious that implementers who know where the product roadmap is going are better able to serve customers. What too few implementers may do is the extra step to connect themselves to the product development side of a vendor like SAP. Software buyers need to review potential systems integrators on this point. They should see evidence of the implementer’s presence at venues like TechEd, their participation in forums like SDN, etc.

2) Ensure all their SAP implementation professionals are getting the training and product knowledge they need to be successful. Software buyers should insist that their implementers are certified on the products they install. Better still, see what the implementer’s overall level of certification is for their practice. Those firms who don’t invest in their people probably have a low-cost orientation and/or experience high turnover. Either way, firms with lightly trained individuals can’t possibly deliver the same level of value as one who invests in talent. Who do you want installing your software – people who know the product well or people who want to learn about the product on your dime?

3) Can adapt, quickly and easily, to ever-changing markets and market dynamics. When the marketplace demands a systems integrator possess a global delivery model, can the local, New Jersey firm you’re considering deliver a mixed mode solution? If it can’t, it better have some compelling other reason for your firm to use them (e.g., intimate industry knowledge). Markets move and move frequently. Integrators must move resources to different verticals (e.g., is anyone still selling new work in the Automotive sector?) and different labor markets (e.g., shifting more offshore work from India to China). Adaptability to changing markets is a proxy to illustrate how well a vendor can adapt to changing customer needs, too.

4) Are focused on customer service/value delivery – I’m still surprised at how many firms say words like ‘We deliver outstanding value to clients’ but can’t really prove it. Saying and doing are two different things. Smart services buyers get this difference and will ask for proof.

5) Tie their revenues to the delivery of value to customers – Better firms don’t front-load a lot of costs while value delivery is back-ended. Better implementers can craft plans, cost structures, etc. to align these two concepts. Customers will expect and demand this.

A few years ago, Michael Treacy and Fred Wiersema wrote the book The Discipline of Market Leaders. They posited that firms need competency in three key disciplines but they must excel at one of these if they are to be successful. Those disciplines include:

- customer intimacy
- product innovation
- process excellence

In their book, they highlighted companies like Nordstrom as an example of a customer intimate firm. Product innovators would be firms like Intel. Process excellent firms do something better than anyone else in their segment. Those firms could be like Dell and its supply chain or WalMart and its logistics (i.e., cross-dock, low inventory focus) or attention to cost reductions. Quality producers and low cost leaders in a market sector often are process excellence firms.

I pushed Zia to then pick one of these three market disciplines. I wanted to know which one is key for systems integrators/channel partners. Without a moment’s hesitation, he said customer intimacy.

That’s really no surprise as most consultancies sell work and sell follow-on work due to the long-standing relationship they have with their clients. Some firms bend over backwards to place their ex-employees into key clients. If a service provider has ‘customers’ instead of ‘clients’, then they probably aren’t customer service focused.

The best integrators really try to understand their clients. They know what the value drivers will be for a given initiative and will construct an implementation plan that aligns with it. Integrators who take a one-size-fits-all approach to projects lose some deals and don’t delight some of the customers they have.

Customer intimate integrators know the client’s industry, know the personal/career/political/economic agenda and needs of each client executive. These integrators win because of their client knowledge.

Customer intimacy alone will not carry the day. If an integrator is customer intimate but not winning 60+% of their proposals, then they probably aren’t doing enough in the other two disciplines. For example, knowing a client’s needs well won’t be enough if your cost structure is way too high. It also doesn’t help if your firm has nothing new, original or proprietary to add to the standard SAP solution sets. Better integrators bring their own intellectual property into a deal. These added extras are the competitive differentiators implementers must possess.

My view is that implementers need to be something like 40% focused on customer intimacy, 30% focused on product innovation and 30% focused on process excellence. If an integrator is overly skewed in just one discipline, they may be unable to win the work they need to be a sustaining or growing service provider.

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?

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.

September 7th, 2009

HP to Cut Loose its BPO operations?

Posted by Brian Sommer @ 2:25 pm

Categories: Current Affairs, ERP, Financial Software, HR, Outsourcing, Professional Services, SaaS and Beyond, Service Providers, The Applications Market

Tags: Innovation, Hewlett-Packard Co., BPO, Business Process Outsourcing (BPO), Outsourcing, It Services, It Operations, Business Operations, Outsourcing & Subcontracting, Brian Sommer

Why sell what you just bought?

A recent Channel Insider article raised the concern that HP might sell off or shutter some of its outsourcing business. Specifically, the article speculated on the BPO operations that EDS brought into the firm as part of HP’s acquisition of EDS. BPO, business process outsourcing, describes the outsourcing of entire business processes, like accounts payable, to a third party with the objective of reducing costs and/or improving the performance/outcomes of those processes.

HP bought EDS back in May this year. Selling off assets, like the BPO practice, would seem like something that would have been done earlier than now. But, HP may not be happy with the lower returns that BPO offers. That was certainly one scenario that Channel Insider offered up.

(Fellow blogger Dennis Howlett offered up an assessment of the HP EDS merger here).

Why do companies decide to get out of recently acquired businesses? They do so because:

- the businesses do not ‘fit’ their strategic game plan
- the businesses are not healthy
- the businesses cannot return the margins that the company’s shareholders demand
- the economics of that business are really messed up by competitors’ pricing
- they do not understand that space or how to operate it well
- etc.

BPO is about scale and process delivery. The more scale, theoretically, the lower the operating costs. The better designed the processes, theoretically, the lower the operating costs and improved service levels for customers. However, BPO in practice doesn’t work the same as in theory. BPO deals often include a lot of one-off processing. Few ‘best practices’ or ‘best processes’ work well across industries or work well for every company. Too often, BPO solutions are not standardized and hence more expensive to operate than in theory. I suspect that most BPO solutions look more (and are sold more) like hosted applications than the standardized, multi-tenant applications offered by SaaS (software as a service) vendors.

Another issue with BPO deals concerns the ability of the outsourcer to dramatically improve existing processes and performance levels. Some deals essentially involve the transfer of systems to another firm. No step change in improvement occurs. Other deals promise a transition to new level of performance via new systems and process designs. These deals are expensive to implement as the change management, user training, and other costs drive up the BPO cutover costs for the user firm and the outsourcer. Finally, BPO providers who promise ‘continuous’ process improvements may find that getting a customer to one step change is expensive enough. Future improvements may be too costly to justify.

BPO providers also build their business on the use of third party ERP software. Guess what, those same BPO providers better have terrific pricing with those firms as license, maintenance and support costs for these products have been growing faster than inflation, consumer price index or reason.

But the use of ERP software may not be such a great thing for these BPO firms. If every BPO provider uses the same limited set of solutions with their limited (1980s) functionality, these solutions are not innovative or delivering unique value. This is especially true for back office (i.e., accounting and HR) applications. ERP and innovation are not words often found in the same sentence. Without innovation, value is hard to deliver.

BPO doesn’t have to be a low margin business, though. If outsourcers want to get higher margins, they need to offer something more than a commodity offering. Specifically, they need to offer innovation and value. The value must be more than low cost/pricing. Innovation must be more than process designs. BPO without innovation is a commodity. Without innovation, BPO is like any other business service: janitorial, vending, delivery services, etc.

If HP can spin off this business without taking a bath, they should use the funds to re-invent BPO. BPO today should be a service offered via a SaaS solution running with a PaaS (platform as a service) in a full multi-tenant world. BPO needs to fully embrace the cloud.

BPO-based processes need a huge infusion of innovation and it won’t be coming from the usual ERP suspects. Most of these firms have become large technology portfolio managers more interested in 43% operating margins on their maintenance base than in delivering something really new or different. These ERP firms are too vested in maintaining the status quo and not in delivering something really amazing. Their inattention to innovation is hurting BPO. Maybe, this is why HP is possibly running away
from BPO….