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Ad-supported On-Demand ERP? No Way….

Posted on November 21, 2005 ·

(Updated)
Ad-supported content? Yes. Personal Productivity tools? Yes. Enterprise Software? No way. (IMHO)

There’s an interesting, Microsoft-induced debate at ZDNet re. the possibiliy of funding free On-Demand software via advertising:

It all started with Microsof app’s but from there it’s just a step to arrive to Gerge Colony of Forrester: “ I foresee a world in which even enterprise applications like financials, ERP (enterprise resource planning), and supply chain software will be advertising-funded.”

My take: that we have a lot of web-based content supported by ads is already a fact. Consumer software, personal productivity tools? Quite possible.

Enterprise Software is a different animal. Why? It is used by businesses, who have their own business processes and workflow. Clicking on ads would be a distraction from that business process, I can’t possibly see why companies would support it. True, there will be major changes in the delivery/ pricing model for enterprise software. When prices come down from the stratospheric heights set by Oracle, SAP et al and become more reasonable, a’la Salesforce, NetSuite, SugarCRM, 24SevenOffice, SmartCompany ..etc, my bet is companies would rather pay those prices then accept the productivity-loss caused by their employees clicking around the Net for hours a day…

Update (11/29) : SAP’s Jeff Nolan on Ad-supported Business Apps.

Filed Under: Business, Enterprise Software, ERP / CRM, Marketing / PR, SaaS, Software, Startups · Tagged: , , , , , , , , , ,
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Open Source – Socialism? “Döm inte hunden efter håren”

Posted on November 16, 2005 ·

(updated)
No, I don’t speak Swedish … but it’s cute:-) More on it later… The recent controversy around Shai Agassi’s remarks about Open Source prompted Marten Mickos, CEO of MySQL to come forward with his own prospective.

But first things first, what was the controversy? “SAP Slams Open Source” – quoted CIO Today. SAP’s very own Jeff Nolan found himself in a rather invonvenient situation (at least initially) of having to distance himself from Shai’s perceived message: “I wasn’t at the Churchill Club event so I can’t comment on the context of Shai’s comments, but I do not agree with them if they are as represented in this article.”

In his speech at the Churchill Club Shai supposedly strongly came out against Open Source and equated it to “IP Socialism”. Hm…having grown up in a communist country I certainly don’t like the way it sounds… although if we look at what he actually said in the second half of this very statement, it actually makes sense: “IP socialism is worst thing that can happen to any IP-based society…If there is no way to defend IP, then there is no reason to invest in IP. “ Remember, this comes from the guy that invests over $1B in R&D. Jeff later listened to the full podcast of the session and realized the quotes were taken out of context. See more details and a link to Shai’s own blog at ZDNet.

My two cents: the traditional Enterprise Software model (mega $ licence fees, complex and costly implementations, expensive maintainence, questionable ROI) is not sustainable. Enterprise Software companies and their whole ecosystem (Implementation partners, 3–rd party plug-ins, etc) are experiencing Pricing and Innovation pressure not just from Open Source, but the increasingly adopted On-Demand model. One can’t really expect a SAP / Oracle ..etc Executive to be truly, entirely happy about the changes being forced upon them. That said, they can try to be obstructionists, or realize the world is changing with or without them – might as well go for the ride, take the challenge / opportunity to invent new business models and survive/thrive in the New World.

Marten makes the point that SAP is the latter group: “ SAP is the first and most significant ERP vendor to publicly, officially and in actuality embrace open source. SAP was the first enterprise ERP vendor to ship on Linux. SAP has an investment in Zend, the PHP company, and a strategic partnership with MySQL. By its actions, SAP is one of the great supporters of open source.”
On legacy software companies in general: “ At the end of the day, deeds count more than words. If you support open source, you will be supported by the millions in the open source community who are working hard to shape the future of the software industry. “

I fully agree with Marten’s views … but there’s one area where I’d take a step further: “ Perhaps open source can commoditize the infrastructure components and make applications more affordable.” Not just infrastructure, IMHO. Applications are next.
SugarCRM is a pioneer in commoditizing the application (CRM) market … yet they got outwitted themselves by their own ecosystem. The trend is unstoppable, even outside Open Source. A closed-source, on-demand company, 24SevenOffice offers its innnovative, fully integrated Web-based SMB suite for about a third of NetSuite’s prices, in fact they undercut Open-Source SugarCRM themselves, when comparing the On-demand version of their product.

As for the incoming tidal wave of Open Source Applications: CRM is just the beginning, the low-hanging fruit… there are literally hundreds of business-grade Open Source applications, ranging from accounting, manufacturing, purchasing, all the way to complete ERP-like solutions, or industry-specific point solutions, like patient management for health care, restaurant management .. etc. One of the reasons why they are not used widely is that they are “trapped in the land of the Nerds” (out-of-context quote by Joe Kraus of JotSpot at the recent SDForum Collaboration SIG event, but I just could not resist using it). Really. Most Open Source apps are difficult to implement, one has to be a real techie to navigate through the maze.

This is where companies like SQLFusion can help small businesses: by providing an easy way to create their web-presence, then offering a pipeline of pre-packaged Open Source applications that can be installed, used, kept up-to-date by a single click of the mouse they bring open source apps within reach of millions who otherwise would not have the expertise to use them. (disclaimer: I am affiliated with SQLFusion)

Update (11/16) Other points of view:

IP Socialism

SAP talks smack about open source

Bigamous contrition and open source faux pas

And now SAP looooves open source?

Big Brother

Update 2 (11/19) I’ve received inquiries about the title – it is explained in Marten’s article I linked to. Btw, it looks like Scandinavian style is in fashion.

Update 3 (11/29) Water into Wine: Monetizing Open Source via On Demand – great article by Rightnow CEO Greg Gianforte, obviously describing his company, but also a perfect fit to SQLFusion’s business model described in the last paragraph about. I love it, thanks, Greg! 🙂

Update 4 (5/10) The Stalwart woke up, blew the dust off of a half-a-year-old speech by Shai Agassi, and starts the Open Source as IP Socialism debate again. (hat tip: Jeff Nolan) Nothing new, why today? Anyway, perfect timing, anyone interested in the subject should come to the Who Pays For Software? New and Old Business Models event tomorrow, where Open Source will definitely be in the focus of a star-panel.

Filed Under: Business, Enterprise Software, ERP / CRM, Open Source, SaaS, Software, Startups · Tagged: , , , , , , , , ,
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The Long Tail Stolen…

Posted on September 11, 2005 ·

Tomorrow Marc Benioff will unveil Salesforce.com’s AppExchange, or “eBay for Enterprise Software”.  A Marketplace where customers can try and buy on-demand applications.  

“The power of that is you can reach this long tail of applications. SAP and Oracle may deliver 10% of the applications you need to run your business, but there’s this large percentage of your business that won’t be managed by Oracle or SAP. This is the long tail of applications.”  says Benioff. 

This is his way of fighting the All-In-One players, including NetSuite, which is more in his league, but also SAP, Oracle.  “It looks great on PowerPoint, but on planet Earth, it won’t fly,” predicts Zach Nelson, CEO of NetSuite.  Who is right remains to be seen, but clearly a key factor is the ease of integration between the additional app’s and salesforce.com, or even between the other app’s themselves.

Salesforce.com may be the first one to bring us the AppExchange, but for all I know, credit for applying the Long Tail theory to Software goes to Joe Kraus of JotSpot (and previously Excite).   And it’s clearly not just theory.  

JotSpot is clearly not just about wikis, the intent is to become a widely used platform upon which the long tail of software applications is served up easily and affordably.   So does that make JotSpot an Application developer?  I seriously doubt it, although they developed sample app’s they can’t be the jack-of-all-trades.  Although  Joe never talked about the business model associated with being “the platform”, I’ve always thought they will one day introduce a Marketplace, where third party developers and the user community find each other.   But first they need critical mass – something Salesforce already has. 

I’m eager to see JotSpot’s next move… 

 

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Filed Under: Business, Collaboration, Enterprise Software, ERP / CRM, Personal Productivity, SaaS, Software ·
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Pre-AJAX AJAX Applications

Posted on September 6, 2005 ·

OK, so this title does not make a lot of sense … I’ll explain:
There’s a lot of hype around AJAX ( Asynchronous JavaScript and XML), which, in laymen’s terms is a set of technologies that allow web applications to have the look’n feel (and speed!) of desktop applications.

Traditional “web behavior” has been one of the main reasons for user reluctance against hosted Enterprise Applications, and innovative companies have come up with AJAX-style solutions for quite a while. Norway-based 24SevenOffice, a provider of hosted, modular All-In-One applications (ERP, CRM, email, calendar ..etc) has had an AJAX-like UI for a year and a half or so. Of course the term AJAX did not exist, so they had to explain at length the benefits of a faster, friendlier, easier-to-use Web Application.

It took a brand like Google, and the gliding-sliding oh-so-beautiful and fast Google Maps for AJAX to become a “household” name and one of the hot IT trends this year. Now longer do we need the long explanation, AJAX is chic du jour, all new web apps have it, and the major hosted Enterprise App’s also go the AJAX way: see NetSuite’s announcement. They claim to be first major business application with broad support of AJAX, but as stated above, they are a little late to the party… Late or not, it’s nice to see mainstream adoption and friendlier Web-apps finally.

For more technical info, as well as a good compilation of reference material, check out Rasmus’ 30 second tutorial. (via Jeff Nolan).

Filed Under: Business, Enterprise Software, ERP / CRM, SaaS, SMB / SME, Software, Startups · Tagged: , , , , , , , ,
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Not-So-Open-Source Applications

Posted on August 30, 2005 ·

(Updates at bottom)

“Enterprise software vendors who leverage open source, subscriptions and grid computing to meet customer needs will emerge as next-generation industry leaders. “ – says John Loiacono, EVP, Sun Microsystems.

Jeff Nolan recommends caution: “… open source and subscription licensing, two completely separate trends that often get lumped together, are not silver bullets for emerging companies.” His post is well worth reading, and I agree with most of his logic, which refers to the traditional Open Source “business model”, if there is such a thing (we’ll come back to this later):

  • Open Code
  • Broad Support Community
  • Paid Sales & Marketing staff
  • Paid core Engineering
  • Product Available free
  • Revenue from support / training / consulting… i.e. services

He then rightly concludes that this model is basically a service business, so investors should beware, when we peel the hype layer away, they don’t find the hypergrowth software business there.

Yes … but … this may just have been the “beta version” of an Open Source business model – if we can even say that. In fact we really shouldn’t: Open Source is not a business model, it’s a software production model (and philosophy), says Marten Mickos, CEO of MySQL (via Jeff Clavier). Absolutely.

The two examples Jeff uses, SugarCRM and Compiere could not be further away from each other – not only in terms of their product offering, but mostly their business model.

Compiere, for all I know is closer to that “beta model” of “trying-to-make-a-buck” on Open Source, or, if I may say, the idealistic, altruistic (?) Open Source company that makes ALL it’s products ( full ERP & CRM for the SMB sector) available for free, source code included. They even let Consulting/ Implementation Partners rebrand the product under their own name. They are the “nice guys” barely making a buck on support. (Sorry, Jorg, if I am mistaken.)

SugarCRM, on the other hand is not even a purely Open Source company, it’s a hybrid. (Hey, hybrids are popular nowadays ). “ It didn’t take me long to realize that there is a HUGE part missing in the open source version “ says Simon Romanski, director of information systems at Fulfillment America, quoted by ZDNet. The title says a lot: Commercial open source, a misnomer? Well, not a misnomer, but definitely commercial software: SugarCRM sells the Pro and Enterprise versions of their product, and also charges for the On-Demand version. Even the Open Source version can be “upgraded” by paying for extensions, e.g. the $39.99/user Outlook Plugin. Hm, I would not put my Sales Organization, no matter how small, on a CRM system without Contact synchronization. By the time we configure the basic needs of a small Sales Team, chances are pricing is on par with a truly commercial software company, e.g. 24SevenOffice .
So is SugarCRM using Open Source as a marketing gimmick, riding the fashion wave? I don’t think so. Nor do I think there is anything wrong with the business model… perhaps a little heavy on the hype, like the other guy selling software using the “No Software” slogan. SugarCRM is a successful hybrid that’s partly Open Source (development, support community, viral marketing) yet generates it’s revenue from selling software like any other company.

Only to prove Marten right.

Update (9/01): ZDNet’s SaaS blog has a good follow-on article on SugarCRM: “Outwitted by its own ecosystem”

Update 2 (9/01) The “Commercial Open Source” story reverberates; ZDNet’s Dan Farber follows on quoting Marc Fleury, CEO of JBOSS.

Update 3 (9/28): The Next Little Thing Isn’t Free by Sam Ramji

Update 4 (11/16) But is it really free? CIO Magazine

Hybrid Open Source Business Models by Zack Urlocker

Filed Under: Business, Enterprise Software, ERP / CRM, Open Source, SaaS, Software, Startups · Tagged: , , , , , , , , , , ,
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On-Demand Software is Not Just a Lease (Where’s My Upgraded Lexus…)

Posted on August 30, 2005 ·

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Recently several analysts downgraded salesforce.com’s stock, citing high valuation:   Salesforce a A Harder Sell ,  Salesforce.com Shares Seen As Pricy  .  Chris Selland had voiced his doubts regarding the hosted CRM model before (“ won’t cure cancer anytime soon “) , and sees the downgrades as signs that  “the media honeymoon appears to be mostly over”.
I beg to differ … a stock’s valuation is often not indicative of the business’s success, further growth potential, and certainly not of the underlying business model (hosted CRM) in general.  The stock can become an underdog, simply because it had previously ran ahead, was overvalued, while the SalesForce.com (and On-Demand software) continues to grow.

AMR research reported 105% growth in on-demand CRM in 2004. Nevertheless, the debate continues as to how suitable the On-Demand model is, especially for larger Enterprises:  “Is it less expensive to lease or buy a car? If you don’t have a down payment, a lease looks pretty attractive,” says Bob Thompson, founder of CRMguru.com. But if the total overall cost is the main concern, the best strategy is to buy a car and “drive it into the dirt,”  (via The Deal.com)
I think the car analogy is seriously flawed: this is not a simple lease / buy decision.  In the On-Demand model  bug-fixes, even major upgrades are managed centrally in a painless manner, often not even transparent to the Customer.  The car analogy would only be fair if it referred to a lease where any time the car manufacturer had an upgrade (we’re not talking about the new models every 4 years or so, with today’s cars software upgrades, amongst others are almost continuous) my friendly dealer  drove up to my house, leave a new car with identical trim level, color, options (“customization”) at my doorstep and drove the old car away. Now, that’s a lease model not even Lexus came up with … but if anyone knows such a deal, sign me up! 🙂

Of course the on-demand vs. on-premise decision is not simply a matter of TCO (Total Cost of Ownership) analyses.  Phil Wainewright discusses a few other criteria specific to large enterprises. 

Debate or not, I think both camps agree at least in these points:

  • On-Demand software is now a proven business, here to stay
  • It is no longer “only for small businesses”
  • For small businesses though, it is likely to be the best choice
  • There is no “best choice” for a large enterprise, they all have to perform their own analyses and pick the best option.

After more than a decade in the Enterprise Software business with the “biggies” like SAP, IBM, Deloitte  my attention is now focused on the SMB sector, their Enterprise Software and Infrastructure needs.  It’s a very refreshing change, and I’ve come to learn a whole new world. (Having switched from Service Provider to Customer  in a smaller business was a tremendously helpful eye-opener.)   In the next several posts I will look at  On-Demand, Open-Source and other new trends from an SMB point of view.  

 

Filed Under: Business, Enterprise Software, ERP / CRM, SaaS, SMB / SME, Software ·
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The Story of the Bitch Dog and the Palestinian Bomber

Posted on August 27, 2005 ·

What does a “Bitch Dog” and a “Palestinian Bomber” have in common?

My guess: disgruntled customer service employees messing up their employer’s CRM data.

  • LaChania Govan complained about her cable box/PVR (these things die every two months or so), so her next Comcast bill arrived addressed to “Bitch Dog”    “If this is not that customer’s name, it shouldn’t be on that bill,” said Patricia Andrews-Keenan, vice president of communications for the company. “   IF???  Wow!  That’s from a Comcast VP!

      

  • Sami Habbas, Palestinian-born US Citizen, US Army Veteran who lived here for 51 years received a credit-card-offer  which began: “Dear Palestinian Bomber.”  When he called Chase, he was actually greeted with: “Yes, Mr. Bomber, what can we do for you?”  

    (via Chris Selland and Brad Feld)

 

Update: (8/28)  Oops, there’s more.. has being rude and brainless become a hiring criteria nationwide?

  • Peoples Energy addresses letters to customer as “Scrotum Bag”
  • Waitress at a NJ restarurant writes “Jew Couple” on check – this later shows up on Credit Card statement.

What’s next?

Update (3/18/07):  Next is Hertz calling Phil Wainewright “English John”.  Phil, compared to the above, that’s not too bad 🙂

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Filed Under: Customer Service, ERP / CRM, Misc ·
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