deal architect

HP Services Innovations

This Businessweek story is focused on Ann Livermore, who heads HP's Technology Solutions Group. But I was pleased to see investment HP is putting into automation - the next generation data center. "Customers are complaining all their money goes into labor and operating costs. We can be the company to help them automate and manage this..."

Good to hear someone in charge of services try to cannibalize them as I wrote in Frederick Taylor and Technology Services.

Of course, only a percentage of labor will be automated. There is an even bigger opportunity to deliver geographic, functional, capacity and other optimization around other technology service delivery as I wrote in that note.

If HP Services can continue to innovate in those areas, it will recapture the spirit that made HP a respected brand in the first place.

Author's Note: For a more cynical view on HP's next generation data center architecture see this post by Jonathan at Illuminata.

Revenue, Margins and Pricing

At the AMR conference last week, Shai Agassi of SAP jokingly referred to himself as the "Israeli assassin". So, what do I do? I engage him in an email exchange in which he goes "Vinnie, since it is your job to try and reduce my revenues...". Boy, am I in trouble!

I have no interest in lowering SAP's revenues or margins.  I am very interested in reducing the TCO for my CIO clients. Those 2 statements are not contradictory.  As any good supply side economist will tell you reducing taxes increases overall collections. Wal-Mart has shown you can become the world's largest company with decent pricing. Another myth in the market is lower pricing equates lower margins. Not if your costs decline faster than your revenues. The margins of well-run offshore vendors are 10 to 20% better than those of Western service providers - and they charge a third of the rates. As I have written before the TCO of packaged software today is stubbornly high - lowered pricing in many areas will actually re-balance the buy/build equilibrium and help grow revenues and potentially margins. Taking a hatchet to the high selling and marketing costs in the software industry would also help.

Actually, the rest of Shai's email was pretty genial. He eats shoots and leaves rather than eats, shoots and leaves. Now, if I worked for Oracle, it might be a different story...

What does Dave Duffield have left to prove?

nice post here by Jason Wood on Dave.

It was good to see Dave at the AMR conference last week. He looks young as ever. He continues to be modest - gives Aneel Bhusri, his long time pupil a lot of credit.  It is funny to see him continue to be nervous around analysts. Has not changed since I first met him over 10 years ago.

He says he needs to work so his 6 adopted kids have a working role model. Whatever his motivation it is good to have DAD back - bring a little class back to the software market.

Technology Innovation, Human and Animal bodies

New Scientist has two articles in its Christmas issue worth reading (yes, last year - I  wish I had some of the superpowers below)

One is about things we would change in the human body - readers submitted entries on what they would "innovate" - all-day bladders, joints with lubrication points, pouches for newborns

and another on animal superpowers us humans would love to emulate - follow scents, decode ultrasound, resist radiation, re-generate  body parts,  slow down reproduction, dive to extreme depths, not sleep for months, see in the dark.

Hey, come to think of it Jack Bauer can do most of these...that hot dog!

I wanna be a groupie

As young PwC staff we were proud of the fact that "we" tallied the Academy Awards. All of us young pups fantasized about being invited to that glitzy evening. Or getting within a few miles of the event.

Now that I am older and wiser, I would like to be in Davos, Switzerland this week for the annual World Economic Forum and gawk at the who's who of global technology and other business executives as this attendee list shows.

But I have an even more important event to attend to.  I am taking my daughter to the Susan Polgar Girls National Chess Championship in Corpus Christi, TX. Ms. Polgar is a true rock star in that world - she is doing more to excite young girls to play chess than any other soul. She has "groupies" we can all be proud of.

BusinessWeek on Future of Outsourcing

Generally positive set of stories by BusinessWeek on outsourcing. May be too positive .

I did not like the buzzword "transformational outsourcing" when the Financial Times used it last June. Now, I am even more convinced the outsourcing industry needs its own radical transformation before it promises to perform surgery on its clients.

Technology Innovation and Airport Security

Over the last year, Orlando airport (MCO) has run a Registered Traveler Program using technology from Verified Identity Pass, Inc. (along with Lockheed Martin). Using biometric cards, the participants in the pilot program average 4 seconds (up to reaching the X-ray machine) compared to over 4 minutes for the average passenger in the TSA line. In San Francisco (SFO) they recently tested the "Checkpoint of the future" using GE scanner technology - where you can leave keys in your pocket, laptops in their cases on etc.

TSA plans to roll it out the Registered Traveler program to many more airports starting this summer. Unisys and EDS are running pilots at other airports.

Enrollment is expected to cost around $ 100 a passenger - but if it catches on could drive new forms of biometric security around credit cards, laptops and other applications. Of course, it is also raising a number of privacy questions.

As the Airport Technology site shows in addition to the aging x-ray machines, there are a new generation of detection and scanning, surveillance and monitoring, intrusion detection and other technology increasingly in use at airports.

In the near future, we should be able to  print boarding passes at home, park, check any baggage at a self-service kiosk and walk to the plane without being asked to show our id's multiple times, remove our shoes, get to the airport hours in advance. Darn, just when I finally had that routine down pat!

The politics of software

Jeff Nolan of SAP in his comment below compares the Oracle/SAP campaign against each other to a political campaign - negative, but necessary. I understand his point - SAP has reason to be wary. The market is littered with Oracle roadkill - Ingres, Informix, PeopleSoft, Siebel. Oracle is wizened old political campaigner - knows how to win "elections"

But there are more political comparisons. In the sandhill podcast we did a couple of weeks ago, Erik Keller called utility IT spend "entitlements" - boy, SAP and Oracle surely get their share of that. Both have benefited richly from SOX compliance spend. Both are selling quite a bit in the government sector and protesting awards to the other. Bill McDermott of SAP and Charles Phillips of Oracle are both said to be eyeing political futures.

It will be nice to see Bill and Charles someday in Washington. We need more tech savvy folks there. But short term, they need to focus on customers. Because in software, customers have shown every decade they bring new "parties" to power. Being an incumbent is in many ways a curse in technology.

Ein Esel schimpft den anderen Langohr

In my last post I said I would use the German version (courtesy of Google) of  The Pot and the Kettle if the SAP/Oracle games flare up again.

Sarah Lacy of BusinessWeek writes a nasty one about SAP based on her interview with Shai Agassi at the AMR conference this week I wrote about here and about SAP distributing "suggested questions" for journalists to ask of Oracle. Jeff Nolan of SAP responds here. I do like Jeff's spunk. But SAP risks making Oracle its benchmark for way too many areas.

I asked Shai as he was walking out of the AMR conference about SAP's high maintenance fees and he said "we are cheap compared to Oracle". The average SAP customer is not impressed with that answer.

SEC and that little company in Texas

Not Enron, i2.

My lawyer friend, Henry W. ("memphishank") Jones, III, who scours through this stuff points out this SEC press release on how it plans to distribute the $ 10 million penalty it imposed on i2, If you are an interested party, feel free to comment to the SEC. My personal preference would be to better fund the SEC.  It needs to keep being a better watchdog not push the onus to corporate management under SOX as I have written before.

The SEC still has its outstanding complaint against past executives of i2 for revenue recognition issues.

Talking about revenue recognition (and this is not my commentary on the specifics of the i2 case), I do think we need to revisit the principles:

a) the rules were written when license sales were the dominant portion of software vendor revenues. Today services are and as we move to SaaS models they will become even more so - we let the software license tail wag the recognition dog.

b) it is interesting that the SEC does not apply the same rigor to capitalization of software costs by buyers. I doubt it has filed any high profile cases compared to a whole bunch against vendors for issues in revenue recognition. Capitalization policies are not consistent across buyers.

c) In software negotiations, recognition issues cloud the fact that software pricing is way above where the market suggests it should be. I have seen several vendors hold the line on their maintenance percentage - "our accountants will not allow us" - but then turn around and give higher license discounts, and maintenance is tied to the lowered license fees and discounted that way. When those discounts approach 90% of list, talk about rigorous revenue recognition is well - as they say in Texas, cheap.