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.

November 15th, 2009

Before you do that BPO, Audit, Consulting or other services deal, check out these costs

Posted by Brian Sommer @ 8:25 pm

Categories: Contracting, ERP, GRC - Governance Risk Compliance, Implementing Technology, Notable Research, Outsourcing, PSA - Professional Services Automation, Professional Services, Selling Professional Services, Service Providers, Sourcing, The Application Software Buyer, expense management, expense reporting

Tags: Rental Car, Hotel, Audit, BPO, Consulting, Business Services, Business Process Outsourcing (BPO), CAD, It Operations, Software

Is your services partner wisely spending its/your money????

I’ve spent a lot of money on travel. Over one 10-year period, I went through $2.5 million just on airline travel alone. I think I understand travel well.

I always look through the annual Business Travel News top 100 travel spending report. Companies are ranked by the amount of air travel spend they incur annually in the U.S.

In reviewing the latest issue, I was pleased to see several systems integrators, software companies, hardware vendors and other technology related firms have instituted some great practices in recent years. I even compared this year’s report with data in a prior year (see graphic).

Where the Money Goes

Now, some firms are spending more on air travel and total T&E (travel and entertainment). Why? Well, last year’s fuel costs drove air fares up demonstrably and that got reflected in higher travel costs. Some firms grew organically and some took on substantial acquisitions (e.g., SAP buying Business Objects, HP buying EDS, etc.). Growth should trigger higher travel costs as more headcount usually translates to more travel cost.

But, buyers of services need to look a bit deeper and question potential service providers as to the measures they are taking to ensure that the money they spend on travel and T&E is worthwhile and cost-effective.

Here are some areas to probe:
- Are training trips booked with 21-day advance purchase fares?
- Do employees use the lesser of the integrator or the client’s negotiated rates with carriers, hotels, rental car companies, etc.?
- Do employees car pool/share rental cars on long-term out of town engagements?
- Do employees stay in apartments or extended stay facilities in lieu of hotels for long-term engagements?
- Do employees use 7-day advance (or longer) fares for internal meetings?
- Are internal meetings scheduled for days when employees would normally be in their home office location (e.g., Friday)?
- Does the integrator/software firm aggregate travel spend globally to maximize its pricing power?
- Do the integrators/software firms utilize closer-in personnel so as to avoid air travel altogether?
- What percentage of trips are booked for travel that will not be chargeable/billable? How can this number be reduced further?
- What class of travel is being booked for short-haul, long-haul and international travel?
- Are service workers allowed to choose the carrier? How can a client be assured that the lowest fares are being selected?
- Does the service firm discipline employees who violate travel policies? Does the client have to pay for these excesses?

Beyond airfare, the size of the T&E numbers is what really gets my attention. Admittedly, I’m surprised when my rental car bill or my hotel bill exceeds my airfare. It happens more frequently these days as rental car rates have shot up in many markets. You’ll really see it when you stay more than a day in a given market (I rarely get that luxury).

I’ve seen service people charge in some whoppers on their time reports. Usually, they get nailed for it. You know what I’m talking about. Staffers taking clients out for mega-expensive dinners and charging it in. Lazy staff who don’t book travel until the last second. Staffers who insist on staying in resort hotels, use valet parking, etc. I have a name for those folks: ex-employees.

I once had a boss who insisted on only staying in the absolute finest hotels and dining in restaurants that only the most well-heeled gourmet could afford. And, of course, he only flew first class.This person was an empirious cad without empathy. This ultimate narcissist was hell to work for and a major expense control problem for his clients.

I spend a lot of time in software and service negotiations outlining the rules of the road, so to speak, on how service providers will operate when engaged with my clients. Trust me, if you don’t have these conversations, you will lose a lot of money.

So, what are the most egregious T&E sins of service providers you’ve seen?

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 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.

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.

June 16th, 2009

Adding agility to Compuware's Changepoint

Posted by Brian Sommer @ 11:27 am

Categories: Current Affairs, Implementing Technology, PPM - Project Portfolio Management, PSA - Professional Services Automation, Software Development, Software Vendors

Tags: Changepoint Corp., Compuware Corp., Project Management, Tools & Techniques, Strategy, It Operations, It service Management, Management, Brian Sommer

Compuware made a number of announcements re: Changepoint yesterday. Changepoint is the company’s project portfolio management solution. Changepoint is primarily targeted to mid-to-large IT organizations. Briefly, the company outlined a number of product directions for the near-term as well as showcased its Accelerator for agile development projects.

The agile development announcement was interesting as the company now has new functionality to support IT projects that are using the fast, repetitive agile development methodology. The software includes needed templates, best practices, reports, etc. to support agile development efforts.

This accelerator is also interesting because it works in concert (not standalone) with the core Changepoint product. In this manner, top IT and business executives can evaluate all projects regardless of the development approach used (i.e., agile or conventional).

Compuware also outlined a product roadmap that is focused on newer technologies and the effect these could have on project/IT management. The new solutions will support technologies such as Silverlight 2.0, W3C (non-IE) browsers and more. The company is

I was pleased to see these announcements as much of the focus from PPM/PSA (project portfolio management/professional services automation) vendors have been on delivery model (e.g., SaaS) or down-market versions of existing products.

May 27th, 2009

Some welcome competition in mid-market ERP

Posted by Brian Sommer @ 4:32 pm

Categories: China, Current Affairs, ERP, Financial Software, Future of Application Software, Implementing Technology, India & Services, Professional Services, Service Providers, Software Vendors, The Applications Market, Vendor Management, software. applications, vendors

Tags: Accounting, Reseller, ERP, Channel Partner, Sage, X3, X3 Product Line, Enterprise Resource Planning (ERP), Tools & Techniques, Enterprise Software

Sage’s X3 - Does it need big systems integrators as part of its market success?

A few days ago, several members of the analyst and press community were given a briefing on Sage’s high-end ERP product, X3. X3 was acquired by Sage three years ago and has its origins as a French company. The software is positioned to compete in the upper end of the midmarket space.

Today, X3 has been sold and implemented in 38 countries. There are 2300 customers comprising some 50,000 plus users. Sage indicated that 160 customers are now present in North America with 20 to 25 of these based out of Canada. The largest customer, by the way, has approximately 1100 users.

The X3 product line contains modules for: inventory, manufacturing, finance, sales, CRM, reporting, workflow, multi-company, multi-site, multi-warehouse, purchasing, multi-currency and multi-legislation. Like many ERP systems, X3 uses Business Objects (now a SAP subsidiary) for its business intelligence functionality.

The software is built on a service oriented architecture (SOA) platform. The platform has the mnemonic name of SAFE: Sage Application Framework for Enterprise.

The software is constructed as a single core of code and is surrounded by country specific extensions. Currently, a Sage executive reported that most users are choosing single country implementations. Approximately 20% of implementations are multi-country.

I noted that X3’s ability to move further up market may be a bit constrained because of the nature of channel partners. Sage’s channel partner ecosystem may be no different from other software vendors where it is really hard to create a channel partner environment for a high-end product (but easier for SMB product lines). What I am wondering is this: more and more small and medium-size businesses are becoming multi-national corporations. They are continuing to source product from lower cost countries and many of these firms are creating subsidiaries, joint ventures or acquiring lower cost operations in countries beyond their own. The channel partner ecosystem of most application software firms is generally country-specific or highly localized in its geographic reach. For example, most US-based channel partners serve clients that are predominately within the continental 48 states. Just the prospect of crossing the border into Canada causes significant issues for many resellers locally. Likewise, Western European resellers may be able to serve clients in their home country as well as those customers in adjacent countries. But can any of these channel partners effectively serve customers with operations in the BRIC (i.e., Brazil, Russia, India and China) countries? Can they serve firms who have operations in the interior of Africa or the former Soviet republics?

For resellers to effectively sell and service multinational accounts, they must have feet on the street in other locations. In a telling back and forth conversation with multiple executives at this briefing, I pressed on this very point that a customer wants a single choke point regarding their implementation of a new ERP solution. They don’t want one implementer to install the product in the United States and a completely different implementer to install and configure the software in another country like China. What would result would be two completely different instances of the software and the highly likely prospect that data will be difficult to consolidate from a reporting or operating perspective. The customer would want consistency in accounting procedures, accounting calendars, chart of accounts, production schedules, shipping data, sign-offs, etc. They would also want all of their business processes to be consistent across the corporation. But most of all, they will want to ensure that all product movement transactions that cross between country borders would result in the efficient movement of product and/or services trans-nationally. I have no doubt that Sage has qualified internal or reseller professionals who could implement X3 in many countries. But I believe that Sage will need more high-end implementers who can really deliver the multi-national implementation that many more X3 customers will demand. Generally, this means Sage will need systems integrators who possess:

- feet on the street in many countries
- intellectual property regarding the business requirements, regulatory requirements, customs, etc. of each country in which they provide services
- global program management skills
- global change management capabilities
- ability to craft multi-lingual documentation and training
- personnel with fluency in more than 1-2 languages
- ability to sell and deliver work in cost effective ways regardless of where the data center or work must be performed
- cultural sensitivity to the work forces found in global project teams

Does any of this mean that there are shortcomings in the X3 product? No. The product may be quite sound and its executive team clearly seems to understand the space. The challenge may be that Sage will need to develop its own multinational implementation capability or attract a number of higher caliber, global systems integrators into the channel ecosystem that supports X3.

I like to see more competition, not less, in the ERP space. And given the rash of consolidation that has occurred these last few years in the midmarket, it is good to see a product line like X3 coming into North America. Let’s hope Sage can create the energy, enthusiasm and appropriate ecosystem components that will fuel growth of this product.

May 8th, 2009

Where Platform-as-a-Service (PaaS) must go next

Posted by Brian Sommer @ 8:35 am

Categories: ERP, Future of Application Software, Implementing Technology, Selling & Marketing Software, Software Development, The Applications Market, Web/Tech, software. applications

Tags: Software Company, PaaS, Cloud, Cloud Computing, Brian Sommer

More Robust Apps Needed NOW!

Platform-as-a-Service is hot these days. Vendors like NetSuite and salesforce.com have their clouds as to players like Amazon and Google. Cloud providers like to promote their capabilities to application developers and, in doing so, create an ecosystem full of low-cost applications for users to choose from.

That’s a great concept for end-user, personal applications but the best clouds, long-term, may well be those that cultivate and convince larger application software vendors to move their offerings to their clouds. Coda and salesforce.com did such a deal last year and we should be hearing more on this before long as Coda, I believe, was going to put more applications on this environment (this product line is marketed as Coda 2Go). The Coda/Salesforce teaming is really good as it pairs a well-established CRM product line with a very solid financial accounting system.

When you want to win over the hearts and minds of back office buyers, vendors (including cloud providers) must address the concerns of people like CFOs, Controllers and Finance Directors. None of these individuals ever want to be on the cover of the Wall Street Journal explaining why their firm’s books won’t balance or close. To sell cloud capabilities up-market to mid-and large enterprises, the applications need:
- Solid provenance - does the developer/vendor really understand this functional space?
- Proof - Show prospects that this solution absolutely, positively works. Just because someone can click on an icon to enable a SaaS app, doesn’t mean it actually works.
- Relevancy - Are the applications relevant for this size of business and its complexities? A financial system today needs work in hundreds of countries globally not just the one where the developer lives.

For PaaS to really take off in the enterprise, cloud providers must cultivate relationships with major software vendors. We need to see vendors like Infor, Sage and others being wooed into the arms of a major cloud provider. When those apps start showing up in the cloud, we’ll start seeing some real cloud and platform adoption then.

Several large software vendors though will not respond to these entreaties though. They’ve spent millions cobbling together their own marketechtures or proprietary platforms. Unfortunately, their platforms are best designed for those firms who still want on-premise solutions. Having a development platform is not the same as a cloud based platform. This distinction is critical as the cloud based platforms take all the lower stack items (e.g., hardware and middleware) off the table. If you use the platforms of old-school vendors, you’re on the hook for a lot of hardware and software. How expensive can that be? A recent deal I negotiated had the DBMS costing more than the application software.

PaaS vendors: move up-market now. Ally with larger application software vendors and provide mid-market and enterprise software buyers better application software choices and better system economics.

May 5th, 2009

Book Review: Why New Systems Fail

Posted by Brian Sommer @ 9:20 am

Categories: Books, Implementing Technology, PPM - Project Portfolio Management, Software Development, group dynamic

Tags: Project, Phil Simon, Capability Maturity Model (CMM), Leadership, Blogging, Professional Development, Software Development, Software/Web Development, Management, Internet

Phil Simon has a new book out called “why new systems fail – theory and practice collide”.

I read through it quickly this weekend. Here’s my review:

I’ve pored over systems failures much of professional IT career. In fact, I was often brought in to fix/put back on track/repair many such initiatives. Recently, I even penned some of those experiences for a colleague, David Dobrin, and his blog.

If one could imagine a reason for a project to go wrong, I’ve probably seen it. So, it was interesting to see what Phil produced.

His book is actually quite complete. He methodically looked at a very complete range of causation factors. He looked at the choice of consultants used, setup issues, post implementation maintenance issues, role of vendors, etc. It was actually a lot more thorough than I thought it would be.

I’ve seen the work of others in this space. Usually, they pen a tome about one type of project and one major causal factor (e.g., bad choice of implementer). Or, they take a real high level approach and then dive into a single solution (e.g., CMM) that should be a cure-all for most any project quality or failure scenario. Personally, I’ve never found the one-size fits all approach to project success or failure to be correct.

The issue with projects is that they are emotional, political, economic, time-based, financial and technical endeavors just to name a few of their attributes. Even the simplest projects are complex and multi-faceted. Sometimes, a project needs a leader who resembles Machiavelli. Other times, a project needs someone like Gandhi to help show the masses a more enlightened way. Other projects need a Jack Kennedy or an Attila the Hun. It just depends on the circumstances of the project. And, since no two projects are the same, your approach to project success must continually adapt to the new circumstances, project team, culture, locale, etc.

When you read Phil’s book, you need to remember that your next project could get clobbered by any of things he writes about. Your job, as a project leader, is to watch out for all of these and do your best to minimize the impact of them. You might want to re-read the book quickly every time you start a new project just to make sure you’re not about to step in a real mine field of unexpected issues.

If you really like to read about system failures, be sure to check out fellow ZDNet blogger, Michael Krigsman.

April 19th, 2009

The immediacy of value – Where SaaS must go next

Posted by Brian Sommer @ 3:53 pm

Categories: Current Affairs, Future of Application Software, Implementing Technology, Selling & Marketing Software, Selling & Marketing Software, Software Marketing, Software Vendors, The Application Software Buyer, The Applications Market, sales, software, software. applications

Tags: Software-as-a-service, High-velocity SaaS, Software As A Service (SaaS), Managed Hosting, Cloud Computing, Emerging Technologies, Brian Sommer

The issue isn’t just SaaS vs. On-Premise - It’s also about the speed that value is delivered

Recently, I had a good conversation with Jan Arendtsz of Celigo. His firm makes connectors for NetSuite and Salesforce.com.

The really interesting part of our conversation though centered on this sentiment I’m hearing from many software buyers. In essence, they are saying that they need:

- solutions that have a low initial capital appetite. So, that means SaaS (software as a service) trumps the on-premise products.

But

- They also need these SaaS products to be implemented within the quarter or the project doesn’t get green-lighted. This is an advantage for SaaS vendors with great consultants, fast conversion tools and pre-supplied integration tools/connectors (Celigo has these).

But

- These projects still do not get the go-ahead unless they also start to deliver value within the first quarter. Now this is a high hurdle. But, it also points out that SaaS alone is not enough in this economy. High-velocity SaaS is what’s needed.

What would high velocity SaaS contain? Minimally, it would have:

- capabilities to connect to other enterprise applications whether they are SaaS-based or not
- fast integration tools that take a lot of research, guess work and coding out of the implementation process
- data conversion utilities
- product consultants

But more than anything, high velocity SaaS apps must provide clear proof of value, a way of capturing the value delivered and a mechanism for repeating this value capability in customer after customer. It’s the value delivery speed that will create great market uptake for SaaS vendors particularly in this economy.