deal architect

The Shoemaker's Children

Fortune does an expose of CA - one of biggest software companies without decent accounting or sales commission processes, even as it sells compliance, security and other functionality to global companies.

If you think you can write it off on Charlie and Sanjay - think again.  Software vendors who are paid maintenance to keep improving products which give their CTOs only 5% of revenues to spend on R&D - and little of that on new functionality. Software vendors which take years to roll out products while promising "rapid implementations" to customers.

No, they are not about to get indicted. But there sure is a lot of - do as my salespeople say, not as I do - in the industry. The shoemaker's children often have the tattered shoes.

IBM as an "ERP Company"

James Governor reports from IBM's Software Group event. Steve Mills explains why IBM is comfortable not owing any applications because it can make 5X in "halo" sales?

If I had been at the event, I would have asked - why then does IBM own any software at all - Websphere, Tivoli, DB2 etc? Why not just focus on halo services around those infrastructure areas also?

IBM, Accenture, PwC (now IBM) - have all owned application software in the past. For various reasons they decided to exit. Given how profitable IBM"s software division is (compared to services) and looking at how profitable at least the larger application vendors are, you can bet Steve constantly re-evaluates whether to get back in to application software (or for its services group to cannibalize applications via BPO). IBM today could run an apps software or broadly business process centric units far better than it could a decade or two ago.

Technorati Status Report on Blogging

Dave Sifry provides the State of the Blogging Union update with some interesting tidbits such as Farsi is in the top 10 languages used by bloggers.

Currency Conundrum

Would you invest in a currency when the country has been printing money left and right and with exchange controls to make redemption very difficult? That thought crossed my mind as I got an email from Delta telling me what a great holiday idea it would be to gift miles. For a free domestic ticket it would cost about $ 300. But as I have written before they have made mileage redemption difficult even as they issue so many miles through their affinity partners. If I as a 2 million miler have to fight to get award seats, why would I want to gift someone that currency when I could buy them a ticket on JetBlue or Southwest and not to have them go through heartache?

On the flip side, I was re-reading Tom Friedman's The World is Flat. In that generally flattering book on India, he does call Indians "second buyers" - a polite term for frugal buyers. I have long been baffled why Indian services firms like Infosys and Satyam sit on billions of dollars of  market cap and not use that currency to buy western firms and assets. Especially those with established customer relationships. Infosys, for example, has 1/5th of CSC's revenues but twice the market cap. Many of them have made small acquisitions - but rounding errors compared to the value of their currencies. One missed quarter and that currency would devalue quickly anyways.

But then again, I shouldn't talk because I am a currency novice. Most of my assets are in a currency with too much printing going on, and not enough investment in the right things.

Infoworld Top 25 CIO/CTOs

Some familiar and some new names in this annual listing.

30 Trends for 2007

CIO Insight has a series of slide shows on its projected trends for 2007.  Agree or disagree - the slides are filled with a bunch of interesting survey data.

Strategy

1. Process improvement will be job No. 1

2. IT works on closing the sale

3. Companies make their Web sites more engaging

4. Customer service gets a tune-up

5. Companies put their mounds of data to work

6. Information governance gains momentum

7. CIOs strive to be strategic

Management

8. The division between IT and business will diminish

9. CIO compensation keeps climbing

10. IT organizations will keep growing

11. CIOs struggle to find business-savvy technologists

12. Outsourcing changes IT management

13. Outsourcing growth slows

14. Offshoring shifts from India

15. Companies invest in IT leadership

16. Demonstrating ROI will remain a struggle

Security and Risk

17. No abatement of IT security threats

18. Security concerns turn users away from Windows

19. Security morphs into risk management

20. Compliance achieves what government intended

21. Compliance spurs financial process improvement

Technology

22. The move to a new architecture marches on

23. Enterprise applications start losing their luster

24. Data quality demands attention

25. IT reluctantly embraces Web 2.0

26. IT innovation loses traction

27. Business process management services and software will frustrate users

28. For business intelligence, the best is yet to come

29. IT organizations start going green

30. Dissatisfaction with vendors is on the rise

SaCS - Software as a Customized Service

Forrester says on-premise beats out SaaS economics for organizations with 500 or more users. (or that SaaS is not right for larger companies).

McKinsey says SaaS adoption in large organizations is about to explode.

Who is right? Neither...

Take Forrester's analysis. At 500+ users, after volume discounts, SaaS pricing for horizontal ERP and CRM functionality could be at $ 60 a user a month. After 6 years, the point where Forrester believes on-premise becomes more competitive, the total SaaS cost is around $ 4,500 per user. I challenge any on-premise vendor combined with an outsourcer to deliver license, maintenance at 17 to 22% a year, hosting, application help desk,  maintenance/tuning, upgrades etc at that price for 6 years.

However, if Forrester appears pessimistic, McKinsey appears overly optimistic. There are just too few vertical applications for which there are robust SaaS offerings. Few large companies are going to use a generalized order entry or billing system. Or have zero customizations. Just as importantly, few of today's SaaS vendors would stand the security and SLA scrutiny of large company due diligence.

I think a far more logical solution for large companies will be a hybrid - what I call SaCS - a customized service. It is an aggressively negotiated software license and maintenance contract, combined with an on-demand outsourcing arrangement. The outsourcing would be a no-capex, utility computing, fractional resource, shared infrastructure, flex capacity with robust data center, connectivity, disaster recovery and security standards. Not completely multi-tenant, but uses multi-tenant concepts in appropriate areas.

The big problem is even after extremely aggressive negotiations per user pricing for such SaCS today would be $ 500 + per user per month (SAP's vertical engine licenses are not by user count - and amortized per user cost in the thousands).  It needs to be closer to $ 150 per user per month - users will pay a premium over today's horizontal SaaS pricing but not much more.

Lots of inefficiencies and premiums in the software and outsourcing markets to be removed to get there. But then watch the market just take off.   By then, both Forrester and McKinsey will have updated research papers out...

Jet Black and Blue

The Tampa Bay Bucs are having a horrible season (they are 3-8)...but the moaning locally is - did they deserve to have a schedule which required them to play 3 games in 11 days, 2 on the road? Look at the bright side - they now have  10 days to rest up before the next game.

I happened to peek at my Southwest Airlines statement, and was shocked. Over last 6 months I have flown them on 46 one ways (not including stopovers or plane changes). I often book multi-city trips so end up with a number of one ways. Delta - another 9 including several international. Then a smattering of international airlines - BA, Ryan, Jet - bring the total to 60 one ways.  So average of 10 a month. No wonder I feel sore.

I am constantly told it cannot be good. But in the 80s I moved - moved - to a different country for PwC just about every year. I left PwC for Gartner thinking my flying would subside, and it increased. I left Gartner to start my own company, thinking I would have more control over my schedule. I guessed wrong. Actually, I guessed right - my clients just happen to like to live in other cities -)

Thanksgiving week brought relief. We had visitors come in to town, instead of us flying. And next week appears to not require any flying either. But let's put things in perspective - compared to Tom Peters or Sadagopan who match my schedule but more on international flights, the hassles of our TSA or our cramped seats are a cakewalk.

But  if December is a slow travel month, I will thank Santa. Even more - it has already been a good year, unlike that of the Yucs, oops Bucs.

Web 2.0 Man Law

When I grow up, I want to be able to rant as eloquently as Bill Thompson does about Web 2.0 which he says "marks the dictatorship of the presentation layer, a triumph of appearance over architecture that any good computer scientist should immediately dismiss as unsustainable.". He also calls it "Ajaxified snakeoil" and "promised metaverse, the land of prims and money."

Honestly, for a while now I have I secretly wished that in my 90s I become the wizened Scribe in the Miller Lite "Men at the Square Table" commercials. 

In that spirit, I table the following Man Law sponsored by Bill:

"Ajax is completely off limits in enterprise technology. If one was to Ajax an application, they might as well put a little umbrella in it and call it a "Web 2.0 colada".

Man Law: "Don't Ajax an Enterprise App"

Do I hear a second for the vote?

More of New Renaissance

Posts on my other innovation blog

Wireless Energy
Pollution as Goodness
Near-Field Communications
On-Line Volunteers
Electronic Waste
The Economist Innovation Awards