deal architect

Call to Steve Jobs: Please reshape the enterprise software market

As I was marveling at the velocity in the iPhone ecosystem a couple of weeks ago I was looking at a client's list of aging software contracts. Most of the vendors want "uplift" fees for the older releases, not lowered ones reflecting software which hardly gets any enhancement and for which the client support calls have been minimal. It was quite a stark contrast.

Then I have a conversation with Dennis Howlett about SAP's Business ByDesign. He is excited about how the mid-market has never before seen such an integrated enterprise piece of software. And I shrug my shoulders and go SAP delivered that integration 25 years ago in R/2. For me, reading BusinessSolutions magazine, the excitement in the mid-market is around RFID, Wi-Fi, scanners,VoIP not another piece of enterprise software.

Then I see Oracle try its "makeup" at E2.0 and ask - why is Oracle just talking about light applications when it has charged its customers billions to deliver the next-gen, Fusion enterprise class applications. Why is there still not much news about that years after they were announced?

Then I see my EI colleagues and others argue about multi-tenancy in SaaS. Ok, important architectural discussion but does the person in the warehouse, field, trading, hospital or plant floor really give two hoots? Where is SaaS functionality for those workers?

Then I see Sam Lawrence's elegant post about the "enterprise octopus" and why the next generation of social, collaborative applications will be better. And I drool over his graphics, but ask the same question as above. How does it make the life of folks in the warehouse, field, trading, hospital or plant floor better?

And the answer, unfortunately is, sensors, and scanners and mobile devices have been helping them a lot more than in recent years than enterprise software has. While enterprise software continues to increase its part of the IT budget faster than other tech categories.

Steve Jobs: know you are busy, but in your remaining waking hours, can you please come in and shake up the enterprise software industry?

Outsourcers and Level 4 support

In a recent conversation with a client with a fragmented and aging software portfolio, the discussion came up: "Wish an outsourcer could take over all the support contracts". In outsourcing lingo, that is often what is referred to as Level 4 - support provided by software and hardware vendors. Besides the administrative convenience of having a single provider, the economics of 90% margin typical in maintenance could be squeezed down - hopefully - to the 30 to 40% more prevalent in outsourcing.  The more we discussed, though we figured the knowledge transfer costs for the outsourcer to learn about each piece of software would be a major gating factor.

But how about around one or two selected packages? I have noticed a few clients sign up with a firm called CedarCrestone to provide PeopleSoft support.   So, I called them up to see if this was a growing business similar to what Rimini and TomorrowNow provide.

Very different positioning. They took pains to explain Oracle (which now owns PeopleSoft) is a "strategic partner" and their preference is customers stay with Oracle support and they provide ancillary support around that.

What that also means is they service customers individually not in the scalable mode of a Rimini which develops regulatory and other updates aimed at their hundreds of customers. 

I think there is a big opportunity for outsourcers to get in to the level 4 business, especially in vertical markets. But they have to redefine who their "partner" is - if they focus on their customer needs, not just their alliances with vendors, there is a world out there waiting for a different support model.

Next: Rollover SaaS usage

3 years ago I wrote about a market for trading unused software licenses. This week, a court in Washington ruled in a case against Autodesk "(an owner) is entitled to sell used copies of Autodesk's software regardless of any licensing agreement that might have bound the software's previous owners."

Now can we apply the concept of AT&T's rollover minutes for unused cellular time to SaaS contracts?

We've got tonight..who needs TomorrowNow?

Apologies to Bob Seger, but catching up with Rimini execs today they feel they have enough momentum from organic growth in third party maintenance revenues around Oracle applications - that they have decided against a possible acquisition bid for the SAP TomorrowNow unit. SAP, embroiled in a lawsuit with Oracle, has announced plans to divest that business unit.

Rimini revenues doubled compared to the same quarter last year and more than 39% quarter-over-quarter compared to the fourth quarter of 2007.

Rimini is capitalizing as more customers are saying the bigger enterprise software vendors are just too high-maintenance.

As I like to say just because you bought a Porsche you do not have to go back to the authorized dealer for all services. Indeed, Consumer Reports in its latest issue says Owners prefer Independents to dealers...

Passionate about PaaS

Google introduces App Engine - "a developer tool that enables you to run your web applications on Google's infrastructure." Phil Wainewright writes about that and other platforms. Last week's debate between SAP's Plattner and salesforce.com's Benioff was also focused on platforms.

With all this focus on developer tools and platforms, are we giving up on pre-cooked, packaged applications? And where are outsourcers in all this? With SaCS offerings they have the opportunity to allow companies to leverage existing on-premise application investments while getting many of the benefits of SaaS. Clearly the zeitgist in the enterprise software industry seems to be about Platform-as-a-service.

But then again, give it 3 months and may be we will be onto something else?

Meanwhile in Enterprise World...

...they would never issue a press release I saw courtesy of Jeff Nolan explaining where Monster Cables explains why its prices are high.

Instead they write scripts for their sales people to use that invoke revenue recognition and other rebuttals in this series -)

He said. She said.

Fellow EI, Mike Krigsman does a nice analysis of an ERP implementation gone awry, and which is the subject of a bankruptcy case. Plenty of blame to go around.

But for the most part in our industry we tend to blame such failures on the customer. After 200,000 plus ERP projects over the last 15 years they are not rocket science. There are 8 to 10 critical project steps - conversion, testing, training, integration,change management - in any such project. There are scripts and tools and accelerators for each step. They have been honed in industry after industry, country after country. There is little reason for spectacular failure. Some overrun or delay, ok - spectacular failure, no way.

Smart as we are as an industry, we are awfully dumb to let attorneys and media and others get close to our projects. The best way to keep them away is to make them routine. As they should be after 200K projects and 15+ years of experience.

On a side note, I have been involved in a few "carve-outs "of companies. I am always surprised  how the spinoffs don't take advantage of their "clean slate". A $ 200 m or $ 1 billion dollar company does not need to adopt the same technology or vendors of its $ 15 billion former parent. They could be leveraging cheaper hosting, SaaS, next gen systems integrators for much cheaper and much better results.

The Demise of Third Party Maintenance is exaggerated

SAP has declared TomorrowNow, the subject of a lawsuit from Oracle, a "discontinued operation".

So third party maintenance is dying, right?

Well, Rimini Street just reported it quadrupled its revenues in 2007.

And SAP is auctioning off TN, so someone will end up with those 300 customers.

As I have written many times before, most markets are bell curves, and a single price, homogeneous product is tough to sustain.  For a segment of the market, third party maintenance is exactly the product they seek but cannot get from their software vendor.

Save XP

Infoworld has started a user petition. As of yesterday, 13,000 people already had signed it.

"Microsoft plans to end most sales of Windows XP on June 30, despite a deep reluctance by many business and individuals about moving to Vista. InfoWorld believes such an expensive, time-consuming shift with problematic benefits should not be forced on Windows users, so we have decided to rally XP users to demand that XP be kept available."

Part of trend which SAP, Oracle and other enterprise vendors are also finding, Users want to be left alone on stable releases, and would prefer maintenance price cuts to new releases which add a few bells and whistles, but cause upgrade chaos and expense.

What a huge PR opportunity for Microsoft. Perfect for this press release

It's all relative

Dennis Howlett points a number of issues NetSuite customers are pointing out. If you are a small to mid-sized customer, the numbers mentioned in the post are clearly significant, but in the massive TCO I see around the bigger ERP players, their systems integrators and outsourcing partners, they are a small rounding error.

Not condoning NetSuite, just hoping customers of all shapes and sizes speak out more, and importantly, negotiate tougher when they are over-sold or under-delivered. Which is pretty often in the enterprise software world.