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Software 2007: Plattner to Turn the SAP Mothership Again

Posted on May 9, 2007 ·

Photo Credit: Dan Farber, ZDNet For half an hour or so I felt I was back at University at Software 2007 – in Professor Hasso Plattner’s class. That’s because his keynote was a compressed version of his recent SAPPHIRE 07 speech, which in turn was an “offsite class” for his Stanford students – literally so, he flew the entire class out to Atlanta. To make his point, he used the blackboard-metaphor, with chalked handwriting (and dressed in matching blacksmile_shades).

I don’t normally enjoy keynotes, but found this one fascinating: it was about a lot more than most in the audience thinks – more on this later…

The “lecture” was about his New Idea for enterprise software – more than an idea, it started as a side-project about 5 years ago, then about 3 years ago they realized they can’t do it with one codebase.. so it became a completely separate system from SAP’s current business suite. They kept the project secret as long as they could, but this year they started to talk about it: it’s code-named A1S, and currently 3000 people are working on it (For comparison, Salesforce.com has less than 200 engineers). It will be On-Demand, and not a point-solution, but a full-featured, integrated business solution, as one would expect from SAP.

Some of my raw notes on the key concepts:

  • On-demand: Google, Salesforce.com showed it works. Time now for the whole enterprise to run in the cloud. Very small footprint at customer.
  • New markets: small business customers.
  • Key difference: user-centric design. Iteration, version 7 of user interface already, it will be 8 or 9 before it launches. Every single functions delivered either by browser or smart client. They look 100% identical. Office (MS) client, Mobile, too.
  • Separation of UI, App, Db – physical sep, multiple UI’s for same App. Front ends very specific to industries. Portal based. Company, departmental portal. User roles. Multiple workplaces. In smaller companies users have multiple workplaces. High degree of personalization.
  • Event driven approach. Model based system. Instead of exposing source code, expose the model. Not just documentation, active models. Change system behavior through models. Very different from SAP’s original table-based customization. Completely open to access by/ to other system. 2500+ service interfaces exposed.
  • The future of software design will be driven by community. SDN 750K members, 4000 posts per day. We’ll have hundreds of thousands of apps from the community. Blogs, Wikis, Youtube.
  • In-memory databases. Test: 5years accounting, 36 million line items. 20G in file 1.1G compressed in memory. Any question asked > 1.1sec. There is no relational database anymore. Database can be split over multiple computers. Finally information will be in the user’s fingertips. Google-speed for all Enterprise information. Analytics first, eventually everything in memory.

For a more organized writeup, I recommend Dan Farber’s excellent summary, and for the full details watch the original SAPPHIRE 07 Keynote (after a bit of salesy intro).

As it became obvious during the post-keynote private press/blogger discussion, most in the room thought Plattner was talking about the mysterious A1S, SAP’s yet-to-be-seen On-Demand SMB offering – although he made it clear he intentionally never used the A1S moniker. I think what we heard was a lot more – but to understand it, one has understand Hasso Plattner himself. No matter how his formal position changed, the last active SAP Founder has always been the Technology Visionary behind the company – the soul of SAP, it there is such a thing.smile_wink He is not a product-pusher, not a marketer: he sets direction for several years ahead.

SAP has an existing (legacy) market to protect, and they clearly don’t want the On-Demand product to cannibalize that market. But Plattner knows On-Demand is coming, and I bet the SMB space will be the test-bed to the new system eventually “growing up” to all of SAP’s market segments. Hasso Plattner gets the On-Demand religion, and when he gets a new religion, SAP typically follows. Plattner oversaw two major paradigm changes: the move from mainframe to client/server, which was entirely his baby, and the move to SOA/Netweaver, where he embraced Shai Agassi’s initiatives. The ‘New Idea” will likely be the last time Plattner turns the Mothership around. Next he will need to find “another Shai” to make sure there is a strong tech DNA in SAP’s leadership, as the Sales/Marketing types take over at the helm.

Filed Under: Bay Area, Business, Enterprise Software, ERP / CRM, SaaS, SMB / SME, Social Networking, Software, Technology · Tagged: , , , , , , , , , , , ,
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SAP’s Zesty A1S(auce)

Posted on January 26, 2007 ·

SAP held major internal announcements and demos of its A1S product, tailored for the mid-market, the future growth sector now that the top end of the ERP market is saturated.

The demos were top-secret, attendees had to sign an NDA – and since I am not one of them, I’m left wondering whether they’ve seen the original flavor or the Zesty one Evil Banana

Filed Under: Enterprise Software, ERP / CRM, Humor · Tagged: , , , , , , , ,
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24SevenOffice Acquisition Rumors

Posted on January 19, 2007 ·

24SevenOffice, the European SaaS provider of an integrated, All-In-One system for small businesses may be in acquisition talks with a major US vendor. The news went almost unnoticed, partly because it leaked just before Christmas, partly because the company is largely unknown outside a few European countries – not for long if a deal comes through.

I covered 24SevenOffice, a very promising SaaS provider for the SMB (SME) market several times. Their system is modular but integrated with a breath of functionality I simply haven’t seen elsewhere: Accounting, CRM (Contacts, Lead Mgt, SFA), ERP (Supply Chain, Orders, Products, Inventory), Communication, Group Scheduling, HR, Project Management, Publishing, Intranet. Essentially a NetSuite+Communication and Collaboration.

About the only thing I did not like was the lack of availability for US customers – this might change soon. The news release and blog post mentions three names: Salesforce.com, WebEx and Google, but adds a somewhat cloudy remark: “the companies here are only examples of what the rumors have outlined.” It does not explicitly confirm one of these specific companies as the potential buyer. I should also add that while I had in the past been in touch with Management, at this time I have no information whatsoever from the company, so the ideas below are purely my speculation.

Salesforce.com as suitor: A well-integrated All-In-One product would come handy to Salesforce.com which could dramatically expand their customer base this way. However, they’ve gone a long way in the other direction, trying to become a platform and extending their reach via the ecosystem built around the AppExchange. Acquiring 24SevenOffice would be a huge about-face for Marc Benioff, and essentially would mean admitting that archrival Zach Nelson of NetSuite was right all this time about the superiority of the integrated All-In-One approach.

WebEx: Their original market, the web conferencing space is being commoditized, they clearly are looking for more lucrative markets, as evidenced by the recently launched WebEx Connect (their “AppExchange”). I haven’t heard about much activity since the announcement – certainly owning a product like 24SevenOffice (btw., it really should be called 24SevenBusiness) would allow WebEx a powerful entry into the SMB applications market.

Google: No way, you might say. Google and business process / transaction oriented software are lightyears apart – at least today.

Yet unlikely as it sounds the deal would make perfect sense. Google clearly aspires to be a significant player in the enterprise space, and the SMB market is a good stepping stone, in fact more than that, a lucrative market in itself. Bits and pieces in Google’s growing arsenal: Apps for Your Domain, JotSpot, Docs and Sheets …recently there was some speculation that Google might jump into another acquisition (Thinkfree? Zoho?) to be able to offer a more tightly integrated Office. Well, why stop at “Office”, why not go for a complete business solution, offering both the business/transactional system as well as an online office, complemented by a wiki? Such an offering combined with Google’s robust infrastructure could very well be the killer package for the SMB space catapulting Google to the position of dominant small business system provider. Who’d benefit from such a deal? Google, millions of small businesses, and of course 24SevenOffice.

I admit I would feel somewhat sorry for 24SevenOfice though, as I clearly think they could have a shot of becoming a billion-dollar business on their own – the next NetSuite. Either way, if they make it to the US market this year, they’ll likely see explosive growth. When they are a well -known brand, remember, you discovered them here.thumbs_up

Filed Under: ERP / CRM, SaaS, SMB / SME · Tagged: , , , , , , , , , , , , , , , ,
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Wikis are Not Knowledge Management Tools

Posted on January 18, 2007 ·

No, this is not an anti-wiki pitch, that would be highly unlikely coming from me. But I am continually amazed how we tend to focus on features while missing the people factor. Knowledge Management is a prime example. KM projects typically do not fail due to software issues, but for human reasons: lack of input, or GIGO. Yet here’s an excerpt from a white paper by enterprise wiki vendor MindTouch::

“Wikis provide a flexible alternative to the rigidity of conventional

knowledge management software.

Why wikis work for knowledge management

Based on the features described above, wikis are a powerful replacement for conventional

knowledge management software, because they make knowledge easier to

capture, find and consume:

a. Capturing information: The information is there. Somewhere. Maybe on

a PC, maybe in a file attached to an email, maybe in someone’s head

undocumented. With a wiki, all documents are stored in one central

repository, and files are uploaded rather than attached to emails. Therefore

information is more likely to be captured, stored and made available for reuse.

b. Finding information: When a user has to search a network file server,

he or she must know exactly where to look. A wiki lets a user search

contextually. In addition, because the structure is not required to be linear—

as with KM software—cross-linking of pages helps users not only find

information, but find relevant information.

c. Consuming information: In addition to finding information more easily with

a wiki, a user finds that information in context, meaning the information

is in a location that gives the user some background and perspective relative

to the data. That enables the user to more quickly comprehend the meaning,

significance and relevance of that piece of information. “

All of the above is true – yet it misses the Big Picture. The real story is not about a better tool, but being able to work differently. When wikis are truly embraced in the enterprise, they don’t just make KM easier; they put it out of it’s misery. Yes, that’s right, the wiki is the end of Knowledge Management as we know it: the after-the-fact collection, organization and redistribution of knowledge objects.

The wiki becomes the primary platform to conduct work, the fabric of everyday business, where people create, collaborate, and in the process capture information. While not a Knowledge Management tool, the wiki resolves the KM-problem as a by-product.

Update (6/15/08): Now we have pretty good terms to describe the above, instead of my clumsy explanation. See the discussion on In-the-Flow and Above-the-Flow wikis by Michael Idinopulos and Ross Mayfield.

Ross Mayfield talks about similar ideas in Manage Knowledgement (MK):

“Turns out, users resisted and the algorithms didn’t match reality. With MK, through blogs and wikis, the principle activity is sharing, driven by social incentives. Contribution is simple and unstructured, isn’t a side activity and there is permission to participate. Intelligence is provided by participants, both through the act of sharing and simply leaving behind breadcrumbs of attention.”

Update (5/1): What Happened to Knowledge Management? – by Stewart Mader

Filed Under: Collaboration, Enterprise Software · Tagged: , , , , , , , , , , , , ,
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The "Hidden" Business Model in SaaS: Benchmarking

Posted on December 14, 2006 ·

(Updated)

While we saw a lot of exciting products at the Office 2.0 Conference, the biggest “surprise” was not a product announcement, but FreshBooks CEO Mike McDerment letting the cat out of the bag:

“He basically announced the hidden value proposition enabled by SaaS: competitive benchmarking. All previous benchmarking efforts were hampered by the quality of source data, which, with all systems behind firewalls was at least questionable. SaaS providers will have access to the most authentic data ever, aggregation if which leads to the most reliable industry metrics and benchmarking. “

Two months later FreshBooks published the first set of raw data. It includes stats on payment methods, invoicing by email vs. regular mail, browser an operating system usage. It’s a rather limited set, and only covers two months, but it’s a start, certainly to be followed with more business-critical data. CEO Mike McDerment also takes a first cut at analyzing the data, for example:

“Browser Usage

– Internet Explorer 7 – October 5.02%, November 9.68%

– IE 6 – October 37.64%, November 36.77%

– Firefox 2.0 – October 6.61%, November 24.51%

– Firefox 1.5 – October 44.26%, November 22.07%

Analysis

Both IE and Firefox have new versions out. Clearly the Firefox community is quicker to switch to new versions. Remarkably quick in fact.”

I’m not sure I’d agree with the analysis: certainly Mike is right, the Firefox community appears to be quicker in switching to new versions, but aren’t we missing a bigger picture? I’ve dropped the data into Zoho Sheet, the web-base spreadsheet app which generated this chart:

Browser Usage - http://sheet.zoho.com

The “bigger picture” is that IE gained market share vs. Firefox (something that as a FFox user I’m not happy with smile_omg). Clearly, the majority of new IE7 users are not IE6 upgraders, they came from the Firefox camp.

But I’m not here to discuss browser use, nor do I intend to ridicule Mike’s analysis. I picked this example to make a point: the same data set may carry different meaning to you and me. The art isn’t so much in the accumulation of data, but the proper aggregation and analysis allowing customers to benchmark themselves against industry peers – that’s where the real value is, not in raw data. So much so, that I probably wouldn’t entirely give it away; rather market it as a for-fee premium service.

SaaS providers may become the benchmark specialists themselves, but think about it: businesses will likely end up using a few systems from different providers, and if your purchasing, sales, invoicing, service ..etc data are all in different systems (and consequently aggregated by the different providers), wouldn’t you have a better competitive picture benchmarking yourself based on all those aspects? Does this mean we’ll have independent benchmarking consultants in the SaaS world? If so, will there be a secondary market for raw aggregate data?

But wait … whose data is it anyway? Trust in your data being secure, not lost, published, traded with is the cornerstone of the SaaS model’s viability. But we’re not talking about original customer data, rather its derivative – does that change the picture? There’s a potentially huge market opportunity here, yet SaaS veterans like Salesforce.com, NetSuite, RightNow …etc haven’t explored it yet. Why? I suspect for this very trust/ownership issue, which can be a potential mine-field. In the early days of SaaS it simply would not have been appropriate to address it, but now with mainstream SaaS acceptance (MicKinsey predicts 61% of $1B+ corporations will adopt one or more SaaS applications over the next year) it’s high time the industry starts addressing these issues.

Kudos to FreshBooks for being a pioneer in building the service as well as bringing a major industry dilemma to the forefront.

Update (01/04): Jeremiah is thinking along the same lines, discussing how storage companies will (?) eventually pay for your data. Yes, he talks about storage while I talk about applications, he talks about advertising while I talk about benchmarking, but in the end it’s the same: user data being processed to deliever business services.

Update (9/28/2008): Here’s another showcase of benchmarking turned into action messages on CloudAve.

Filed Under: Business, Enterprise Software, ERP / CRM, SaaS, SMB / SME, Software, Technology · Tagged: , , , , , , , , , , , , , , , , , ,
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Losers of the Google / JotSpot Deal

Posted on November 2, 2006 ·

(Updated)
In my longer analysis of the JotSpot sale to Google I listed a group of JotSpot customers who may feel disadvantaged by the deal: those who’d rather pay to have their data at a company whose pure business model is charging for services than enjoy free service by Google whose primary business model requires dissecting/analyzing their data left and right.

I also pointed out that several competitors are offering deals to migrate these customers to their platform free or at a discount. Socialtext and Atlassian were the first to come forward with their offers, but since the previous post I heard about Central Desktop, (update: see correction in this comment by Central Desktop’s CEO), ProjectForum and I’m sure there are others. (Clearly, the wiki market is growing and sadly, I don’t know all the players). Jerry Bowles and Tom Raftery wrote more on the subject.

We all seem to have missed a point here: there is a group of customers for whom migration is not optional but a necessity: participants in the JotSpot Wiki Server beta program. Like I’ve said before, as much as I am a SaaS believer, it is not a religion, apparently the feedback from most customers is that they want their wiki behind the firewall – JotSpot’s response was the Wiki Server edition. These customers now have a rude awakening: JotSpot notified them that they would discontinue the beta program. Current customers have the right to continue using the product for the remainder of the 90-day beta period (what’s the point? smile_omg) but there is no support, no migration plan – game over, bad luck. smile_angry Of course JotSpot had the right to do this, these were not paying customers (yet), and a beta is a beta, after all. But a beta program is a mutual effort, and especially early on requires a lot of time and effort from the customers, so it’s clear that these customers may feel let down. While most competitive migration offers are hosted solutions, it’s this specific “betrayed” group that Atlassian goes after: they offer migration help and discounted rates on Confluence, their behind-the-firewall enterprise wiki. So let down or not, these customers may eventually be better off on a more mature, robust enterprise platform.

As a sidenote, this is the second time that JotSpot drops a product benefiting a competitor: when they discontinued JotBox, Socialtext reaped the benefits by moving those customers to their Appliance. Update: Please read the comment exchange below for correction by JotSpot.

Update (11/29): two post on how the deal affected JotSpot partners and customers:
JotSpot Got the Goldmine. Its Partners and Customers Got the Shaft.
The JotSpot Google Merger

Update (11/30) the above post, The JotSpot Google Merger is now deleted, supposedly under pressure by … (?) Read the story on TechCrunch.

Filed Under: Business, Collaboration, Customer Service, Enterprise Software, SaaS, Software, Startups, Technology · Tagged: , , , , , , , , ,
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JotSpot Google Deal – Who Wins, Why it’s Big:First Thoughts

Posted on October 31, 2006 ·

A few weeks ago the “wikirati” was having dinner with the Enterprise Irregulars in San Francisco, on occasion of the Office 2.0 Conference. Our gracious sponsor was Atlassian’s Mike Cannon-Brookes, and JotSpot’s Joe Kraus showed up, too. Missing from the photo is Socialtext’s Ross Mayfield, who was there for the first part, a briefing for Forrester‘s Charlene Li, but left before dinner. (Hm, did Joe eat Ross’s dinner?smile_tongue )

(photo credit: Dan Farber)

I heard a rumor that one of us in the group had likely gotten a few million dollars richer – and it wasn’t me smile_sad… but Joe Kraus, having sold Jot$pot to Google. The source was credible but of course we had already heard about a Yahoo acquisition, then eBay .. so who knows, after all.

I found the timing ironic, just having come back from a Google briefing where they announced Google Docs & Spreadsheets, which left me largely unimpressed. This is what they were missing, I thought.

Today we know it’s a fact: JotSpot is part of Google. After the quick post, here are my first thoughts around who wins, and what it may mean from a user prospective.

Who Wins:

  • Joe, Graham and team for obviou$ rea$ons.
  • Google, for now they have all the pieces for a small business collaboration suite, if they are smart enough to get rid of the junk and integrate the good pieces together – something they have not done before. I’ll talk about this more a few paragraphs below.
  • Some paying JotSpot customers: Jot has had a funny pricing model, where you can start free, but if you exceed a page limit (10?) you have to upgrade. Most users probably don’t realize that because in Jot everything is a page (i.e. add an event to the Calendar, it’s a new page), 10 pages are essentially nothing, if you wanted to do anything but testing, you’d have to upgrade – until now, that is. From now on paying customers will enjoy their current level of service for free.
  • Competitors: JotSpot’s market direction has never been entirely clear; they focused on consumers and small businesses, but were present on the enterprise market, too. I think it’s fair to assume that they are out of the enterprise market at least for a while, leaving only Atlassian and Socialtext as the two serious players.

Who Loses:

  • Some JotSpot customers who’d rather pay but have their data at a company whose business model is charging for services than enjoy free service by Google whose primary business model is to know everything about you. Clearly there will be some migration from JotSpot to other wiki platforms. Update: the competition isn’t sleeping, see migration offers by Socialtext and Atlassian.
  • Me, for having half-written a post about the merits of pure wikis, Office suites and hybrids, which I can scrap now.

Who Needs to Move:

  • Some of the Office 2.0 Suites, including my friends at Zoho. This may be a surprising conclusion, but bear with me for a while, it will all be clear.

So far the balance is good, we have more winners than loserssmile_regular – now let’s look at what Google should do with JotSpot.

They have (almost) all the right pieces/features fragmented in different products, some of them overlapping though. They should kill off the weak ones and integrate the best – a gargantuan task for Google that so far hasn’t pulled off anything similar. Here’s just some of what I mean:

Google Docs & Spreadsheets:
One of the reasons I found the announcement underwhelming was that there really wasn’t a lot of innovation: two apps (Writely and Google Spreadsheets) put together in a uniform look and a file management system. It’s this very file management system that I found weak: how on earth can I work online and manage a jungle of thousands of documents in a flat, alphabetical list? JotSpot may just be the right solution.

Google Groups:
It’s rare for a mature product to go back to beta, but when Google recently did it, it was for good reason: the Groups which so far has been just a group email mechanism, became a mini community/collaborative platform, offering functionality found in collaborative editors like Writely, Zoho Writers, page cross-linking a’la wikis, file management..etc, combining all this with group email and the ability to share with a predefined group. I seriously considered it a major step forward, likely attracting previously “email-only” users to the native web-interface – and we all know why Google loves that.

JotSpot, the “hybrid” wiki:
This will be the somewhat controversial part. First of all, JotSpot is an attractive, easy-to-use wiki, and I believe that’s the value Google should keep.

Second, they’ve been playing around with the concept of being an application platform, which just never took off. The “applications” available in JotSpot are all in-house developed, despite their expectations the world has not come to develop apps on their platform. (Will this change in Google’s hands?). In JotSpot 2.0 they integrated some of the previously existing applications into user-friendly page types: Calendar, Spreadsheet, Photo ..etc, along with regular (text) wiki pages. This is what I considered Jot’s weak part. Just because a page looks like an application, it does not mean it really is:

  • Try to import an Excel spreadsheet into a Jot Spreadsheet page, you’ll get a warning that it does not import formulas. Well, I’m sorry, but what else is there in a spreadsheet but formulas? The previous name, Tracker was fair: it’s a table where you track lists, but not a spreadsheet.
  • Look at a Calendar page: it does not have any functionality. You cannot do group schedules, can’t even differentiate between personal and group events. It’s just a table that looks like a Calendar – reminding me the “electronic” calendars of corporate executives in the 90’s: the Word template that your secretary maintained for you and printed daily…

I guess it’s clear that I am unhappy with Jot’s “application” functionality, but I like it as a wiki. In this respect I tend to agree with Socialtext’s Ross Mayfield, who believes in best-of-breed (whether that’s Socialtext is another question…). Best-of-breed of everything, be it a wiki or other productivity tools. I’ve also stated that my ‘dream setup’ for corporate collaboration: is a wiki with an integrated Office 2.0 Suite. Why?
Other than its collaborative features, a wiki is a map of our logical thinking process: the cross-linked pages provide structure and narrative to our documents, one could think of it as a textual / visual extension of a directory system, resolving the problem of the flat listing of online files that represent fragments of our knowledge. Of course I am not implying that a wiki is just a fancy directory system… au contraire, the wiki is the primary work and collaboration platform, from which users occasionally invoke point applications for number crunching, presentation..etc.

Now Google has it all: they should kill the crap, and combine the JotSpot wiki, their own Office apps ( a good opportunity to dump the lousy Docs & Spreadsheets name), Calendar, Gmail, the Group email from Google Groups and have the Rolls -Royce of small business collaboration.
(Update: Dan Farber over at ZDNet is pondering the same: Is JotSpot the new foundation for Google Office?)

By now it’s probably obvious what I meant by Zoho having to make their move soon: they either need to come up with their own wiki, or team up with a wiki company. Best-of-breed is a great concept and enterprise customers can pick and match their tools on their own. For the SMB market it makes sense to be able to offer a hosted,integrated Wiki/Office solution though. So far Zoho is ahead of Google in Office 2.0, if they want to maintain that leadership, they will need a wiki one way or another.

Of course I could be way off in my speculation and Google may just have bought the team.. either way, congratulations to Joe, Graham and the JotSpot team. thumbs_up

Related posts:

Filed Under: Blogging, Business, Collaboration, Personal Productivity, SaaS, Social Networking, Software, Startups, Technology · Tagged: , , , , , , , , , , , , , , , ,
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Open Source Hotel Rooms

Posted on May 19, 2006 ·

I’ve just checked out of my hotel at SAPPHIRE 06 and am shocked looking at the bill:

You can click to view the original Zoho Sheet.

Since I am still in a “software state of mind” (and btw, will return to SAPPHIRE posts soon), I can’t help but draw the analogy to the software industry:  Support and Maintenance charges in the Enterprise Software business are in the 20-25% range.  There is an ongoing debate about the viability of Open Source as a business model but several companies are experimenting with giving away the product and focus on additional revenue sources, i.e. support, maintenance, training ..etc.

Since the hotel industry is up to 18% in surcharges, why not make a dramatic move, “opensource” the rooms and make their numbers on all these other (bogus) fees?    (OK, before I get ripped apart, yes, I do realize running hotel rooms has actual material costs vs. downloading software, and that the Open Source model is a bit more complex … in other word, my analogy is far from perfect, but hey, it’s Friday afternoon, I am waiting for my plane and can have a little fun, can’t I?)

I see a lot more potential surcharges (on top of  the free rooms), like: clean hotel fee, airconditioning surcharge, towel fees at the pool, hot water fee in the bathroom, warm water fee at the pool,  low-noise airconditioning surcharge, no-cigarette-smell fee in the nonsmoking rooms, Broadband fee (yes, I know they already have it, but this would be extra for connection that actually works vs. trickles), private room fee (that is when you don’t get the keys to a room already occupied like it happened to me), fast or medium service surcharges at the restaurant..etc.  Of course when you can’t sleep at night because the damn airconditioning is so noisy, or when your nonsmoking room smells.. .etc, you don’t have to pay.  This could become the feedback / QA mechanism for the hotel industry, a’la the Open Source community support / QA in software.

The opportunities are tremendous, and we should not stop at the hotel industry.  Open Source the World!

Filed Under: Business, Humor, Open Source · Tagged: , , , , , , , ,
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Software 2006: Questioning the McKinsey Study

Posted on April 7, 2006 ·

(Updated)
McKinsey and Company in collaboration with the Sand Hill Group, organizer of the Software 2006 Conference released their Industry Study (pdf) that I have to take issue with. (yes, I know, who am I to disagree with McKinsey?)

“Business Model Discontinuity: Software as a Service (SaaS) and Open Source. Two major business models are vying for an growing share of software spend: Software as a Service and Open Source. …SaaS has already gained traction in number of application areas – such as payroll, human capital management, CRM, conferencing, procurement, logistics, information services, and e-commerce) – and should make gains across a much broader cross-section of applications over the next 3 years. Out of 34 application areas we have examined, only nine are unlikely to see some SaaS adoption over through 2008”

Apparently McKinsey tells us that Financial Applications are the back-office function most unlikely to see SaaS adoption for years to come. Hm … I know the trendy app now is CRM, but there were widely-used web-based packages long before CRM. Intuit, NetSuite (originally NetLedger), Intacct, 24SevenOffice, WinWeb ..just to name a few.

Perhaps these companies can jump in here, and tell us what they think of McKinsey’s prediction that SaaS will not take off for financial apps?

Update (4/7): Dennis Howlett has a really good point bringing up Document Management, the other “unlikely” area per McKinsey. As to confidentiality concerns: the numbers in the financial apps are the result of real business activity that may very well have been in other hosted systems, e.g. CRM, Procurement..etc. Document Management? Oh, well, our external interaction is often on hosted platforms (email), sales contracts are largely in hosted systems (CRM)… I could go on.
Interestingly enough businesses lost more confidential data stored “safely” inside the firewall due to disgruntled ex-employees than due to “exposure” to SaaS providers.

But the point I made about Accounting systems, that this isn’t subject to predictions, it’s already happening, or has happened largely: accounting was available On-Demand before CRM was “born”.

Update (5/31): New McKinsey paper bullish about SaaS model. (hat tip: Nick Carr. Free registration required to read).

Update (8/17): Dennis points us at Gartner’s Hype Cycle for Software as a Service.

“On-Demand Financial Management Applications and On-Demand Sales Force Automation are said to be at the peak.”

Interesting. McKinsey says it’s not coming for years, Gartner says it’s already at the peak. Go figure …

Related posts:


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Web 2.0 & Enterprise, Round 3: Enterprise Software for Small Businesses

Posted on February 22, 2006 ·

(Updated)

This post is a continuation of Web 2.0 in the Enterprise – Round 2 in which I reflected on some thoughts brought up by Stephen Bryant in Five Reasons Web 2.0 and Enterprises Don’t Mix.

The Web 2.0 in the Enterprise TIE event I previously referred to was hectic, trying to cover way too many subjects in 90 minutes, with one common underlying assumption: Enterprise means large corporations. The theme of the night was how these Web 2.0 technologies and business/communication approaches will “seep in” to the large enterprise from the bottom up.
What is then Enterprise Software? Typically SAP, Oracle et al come to mind, and I can hear the roar “Enterprise Software is Dead” – well, is it?
If we define Enterprise Software as the traditional heavyweight, expensive, pay-huge-license-fees-upfront, then try-to-implement-forever model it is certainly challenged from two ends, by Open Source and the SaaS model. But there is another definition that is largely being overlooked:
Software that allows a company to conduct it’s everyday business, supporting most of the core, fairly standard business processes any company performs repeatedly.

With this definition, Enterprise Software has a whole new, largely unpenetrated market to enter: that of small businesses, referred to as the SMB or SME segment. Such enterprise functionality has traditionally been beyond reach for a typical small business, for two major reasons:

  • Cost (license, hardware, implementation, maintenance ..etc)
  • Lack of IT resources (integrating applications, designing processes, dealing with multiple vendors ..etc)

SaaS is the right answer for both, since it allows the SMB user to start using the functionality without an upfront investment, does not require implementation, upgrades, maintenance, worrying about backups and security ..etc.

Of course several Open Source packages are available completely free, which is a perfect solution for the cost problem, but I think most of these packages are by geeks for geeks; i.e. you really have to be quite IT-savy to implement, integrate, upgrade them, and as we stated most small businesses simply do not have that type of resource. Yes, that means the Silicon Valley tech-startups are not a true representation of the SMB world
Likewise, I don’t believe SOA, best-of-breed packages working together are an option for the SMB market, for the same reason. They will play an increasingly critical role in larger enterprises with a professional IT organization, but for a few more years SMB’s are far better off with integrated, All-In-One type On-Demand solutions.

Of the Web 2.0 companies Stephen mentions in Five Reasons Web 2.0 and Enterprises Don’t Mix two are offering Integrated On-Demand solutions:

  • NetSuite
    Stephen lists NetSuite along with Salesforce.com, and while they are in the same club, the significant difference is that Salesforce.com is only CRM, while NetSuite offers an integrated CRM+ERP package. They both are trying to become a “platform” via NetFlex and AppExchange, respectively. Both companies are definitely pushing upstream, going after the Enterprise market as in the first definition, i.e. large (or midsize) corporate customers.
  • 24SevenOffice
    Coming from Europe this company is lesser known. They focus on the SMB market and offer a modular but integrated system with a breath of functionality I simply haven’t seen elsewhere: Accounting, CRM (Contacts, Lead Mgt, SFA), ERP (Supply Chain, Orders, Products), Communication, Group Scheduling, HR, Project Management, Publishing, Intranet. Essentially a NetSuite+Communication, Collaboration. I’ve taken their test-drive (currently IE only) and liked it. I would debate how they structure their menu-system, as functions like Product, Inventory, SCM are all hidden under Financials.

Back to the economics: if SMB’s could not in the past afford Enterprise Software, the same held true for the Software Industry: they could not afford SMB’s, since there was just no way to make the numbers work. The cost of customer acquisition vs. the very low license fees made it an uneconomical model, whether via direct or channel sales.
Once again, technology comes to the rescue: the Internet, and largely Search Engine Marketing changes everything. Joe Kraus, Founder of JotSpot and previously Excite sums it up:
“ Ten years ago to reach the market, we had to do expensive distribution deals. We advertised on television and radio and print. We spent a crap-load of money. There’s an old adage in television advertising “I know half my money is wasted. Trouble is, I don’t know what half”. That was us. It’s an obvious statement to say that search engine marketing changes everything. But the real revolution is the ability to affordably reach small markets. You can know what works and what doesn’t. And, search not only allows niche marketing, it’s global popularity allows mass marketing as well (if you can buy enough keywords). “

Another benefit of SEM is that while traditional advertising can pick the right demographic groups, it cannot pick the right time, only a fraction of the target audience is in “change mode”, looking for a solution. That’s the beauty of Search Engine Marketing: obviously if you are searching, you have a problem and are looking for a solution, which is half a win from the vendor’s point of view.
Small Business Trends recently published a survey on “Selling to Small Businesses”, which supports the increasing importance of SEM: “A full 73% of vendors attract small business customers through search engine results”

Finally a quote from Ziff Davis again: “Products for the long tail and SMB market, where 72 million businesses spend $5k or less each year, are a much easier play” Wow, I don’t know where those numbers come from, but if I were a SMB-focused software vendor, I’d certainly like them … there’s a goldmine out there.

Update (2/22): Perfect timing for this report to come out just now: U.S. SMBs to Spend $2.2 Billion on Software in 2006, Says AMI-Partners

Update (4/17): Interprise Suite (recently debuted at Demo 2006) claims to be “The FIRST Accounting / ERP / CRM Solution to Bring the Power of the Internet to Small and Mid-sized Business“. While I take issue withe the claim to be “first”, considering the breadth of functionality it’s definitely an option to consider for SMB’s .

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