Software Licensing & Master Service Agreements : Chicago Software Licensing Lawyer & Attorney : Sam Conforti Law Firm : Master Service Agreements, Negotiations, Outsourcing : Cook County, Illinois

Rob Ederle in his article in Datamation.com entitled 2010: The Year and Decade of the Cloud has an interesting theory on the circuitous nature of the computing populace and the nature of the industries that feed into this arena.  Enderle surmises that we have come, or will be coming, full circle in our approach to computing in this second decade of the 21^st century. He notes that we started this journey with huge centralized computing and dumb terminals, and now with the surge in growth of Smartphones and Smartbooks, we may be headed back to that original configuration, but this time in “The Cloud”. Enderle’s advice for companies to survive is to change their approach of how they view the market. Larger vendors ensconced in the large systems approach may have a leg-up on their competitors who were more user-focused; however, these larger vendors must accommodate these user’s demands or risk alienating them. Similarly, the more user-centric vendors must adopt the large centralized systems approach or be left behind. Enderle foresees the most likely way these vendors, large systems vendors and more user-centric vendors, will survive and evolve is through partnerships. He predicts Google as a likely survivor if this decade of cloud computing pans out the way he envisions it.

Ederle gives us a quick definition of what he calls Services-Based Computing, otherwise known as “The Cloud”. He takes a retro look back and states that is what IBM started. I’m not sure if I buy a direct correlation to what was the IBM leasing/services model and what the new cloud computing will become, but I at least understand where he is going with this perspective.

Ederle’s article makes an interesting observation and distinguishes between “Public” cloud computing and “Private” cloud computing. It is easy to guess, and Ederle’s article is quite clear, that the Public brand of cloud computing would be lower cost while the Private brand will be more concerned with security, but at a higher cost.  As a neophyte when it comes to cloud computing (well I guess most of us are neophytes at this point in time), I am not sure I can make the distinction between Private cloud computing and a Managed Hosting arrangement, or is this a distinction without a difference? Further in his article there is a discussion how the enterprise vendor (i.e. the large centralized systems vendor) must meld its strategic efficiencies with the more user-centric vendors who have the knack for responding to the needs of the line managers who have become the new decision makers when it comes to technology spending.

Ederle’s solution, or at least his prediction, is that companies will need to form partnerships with each partner having the right mix of Public and Private components. He concludes his article by stating that the companies that exit the new decade of cloud computing will not resemble anything like they were when they entered this new decade.

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Did somebody famous ever say “We won’t know where we are going until we know where we’ve been”? I did a quick Google search and could not come up with this quote being attributed to any person. If somebody did say this, then I’m borrowing the line for this posting. If not, then feel free to use it (but mention my name please). As my regular readers can imagine, I’ve been gone for about 3 weeks simply due to a very busy fourth quarter/year-end close. While scanning the internet recently for interesting and important information to bring to your attention, I stumbled upon a very interesting and thought provoking article in Internetnews.com by Kenneth Corbin entitled The 10 Most Important Social and Digital Media Developments of 2009. As I have stated in the past, I am a bit of a History Buff (What’s a Buff? See definition 2; enthusiastic, yes; knowledgeable, maybe). So I like to know the background of why things are as they are; and so I think it is nice to know what has happened in the past relating to technology in order to get a better understanding of where we may end up in the technological future. Corbin’s article is a gem. It informed me more fully of things I might have heard but should know more about. It reminded me of things that happened and how society dealt with it. It made me laugh (e.g. someone threatened to kill their cat if Miley Cyrus did not reinstate her Twitter account – really). And it made me wonder about the future. Here is a brief synopsis of Corbin’s Top Ten List peppered with my editorial comments. I hope I can do it justice:

#10.       Amazon.com’s Kindle will change the world: I read somewhere that the Invention that changed the world was the printing press. Well move over Gutenberg, the Kindle has arrived. In 2009 Amazon sold more digital books than printed editions. This e-reader will change the world. For an interesting take and a more in-depth analysis see Don Reisinger article entitled The Most Important Tech Product Is the Kindle, Not the iPhone.

#9.          Craigslist Killer: Some med student solicited an escort off of Craigslist and murdered her. The story was sensationalized due to the use of this new technology. As Corbin correctly points out, this story would have not garnered the attention that it did if the escort was solicited from the many personal ads or from the too numerous to mention yellow page advertisements.

#8.          Social Networking Sites Made Money: Facebook and Twitter, both a free service to their customer base of MILLIONS (yes I’m shouting MILLIONS) managed to figure out a way to make money. Facebook does it through advertising and the sale of virtual products; and Twitter did it by licensing the ability to add real-time content to Search Engines Google, Microsoft, and Yahoo.

#7.          Social Media in the Government: Is this a good thing? I don’t know. The Obama Administration seems to think so. They’ve done weekly addresses to the nation on YouTube and hosted online town hall meetings. There are numerous government websites and blogs.

#6.          The slow death of the Newspaper: Is this really happening? Are we really getting more (or most) of our news from the internet? What will the new business model turn out to be? Dare I say, do we need yet another industry bailed out?

#5.          Miley Cyrus deletes Twitter account: I honestly do not understand this phenomenon. Apparently there are millions of fans of all sorts of celebrities and Star Athletes that are interested in knowing and these Celebs/Sport Stars are interested in tweeting what they may be doing most hours of the day. Is this the downfall of our society? Well, it is at least another reason for it. Oh how I long for much calmer days and “Home Tweet Home”.

#4.          Social Web becomes target for hackers: Why do they do it? I don’t know. Some do it for the thrill of the “hack” and some are out to steal our identity. We put too much personal stuff on these social sites. Regulators and privacy advocates have fertile ground for their causes and activities.

#3.          The Twitter revolution in Iran: In June of the last year as Iranian authorities were cracking down on protestors, these same protestors began to twitter their cause, and when the foreign correspondents were thrown out, became the only source of hard data on what was really happening in the country. Corbin reports that the US State Department convinced the people at Twitter to postpone a planned power outage for scheduled maintenance just so they would keep the twitter lines of communication open.

#2.          The growing sense of urgency about information:  It seems that everything is about immediacy. We’ve got to have it real-time. 

And the #1 important issue that materialized last year relating to Social and Digital Media was VIDEO: The web is free and on-demand. How does one derive a business model out of that? TV Everywhere offers paying subscribers the option to watch content on the web. Hulu pulls content from sites, and its owner News Corp is thinking about making it a paid site. So is free TV over the air waves supported by its advertising (i.e. commercials) a thing of the past?

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In November of this year the staff at CIO Update conducted its annual fourth quarter survey of IT executives in an attempt to get some sense of the coming year’s economic activity. This year the survey included executives in 139 companies in the US and Canada. From the results it appears that the doldrums of 2009 may be replaced with cautious optimism for 2010 (VERY cautious optimism). The survey asked questions such as whether the surveyed companies had made any changes to their in IT Budgets during the last quarter, increases, decreases, or no change. Another question put a slightly different spin to the IT budget inquiry and asked were there any anticipated changes in the coming years IT Budgets. The article posted December 17, 2009 by the CIO Update staff entitled The IT Spending Recession is Over presents the answers to these survey questions in print and in pie chart form as well so the reader can try to put the responses into perspective. While 19% had increased their IT Budget spend for the last quarter as compared to only 11% last year, 29% answered that they continued to reduce their expenditures as compared to 35% from last year’s survey.

Two interesting observations by the CIO Update staff center around their section entitled “Signs of Hope” and also the breadth of the recovery. The CIO Update research has 20 years of data to lean upon, particularly in the response to “Expectations for Change in the IT Operational Budget” category. The results shows 52% of the IT executives expect an increase in their 2010 budgets. Historically, the CIO Update data indicates a recession when that expectation number drops below 50%. So it appears that the trend may indicate that we’ve turned the corner. However, the anticipated amount of those budget increases is not large and hovers around 2%.

A rosy economic picture for the 2010, I think not. However, it is not bleak either. From an amateur economist at best, your humble blogger’s opinion is that the capitalist business model is cyclical and that an economic recovery is inevitable. I think some intangibles would be the uncertainty of the current administration’s spending plans and the affect they will have on any recovery. And there always is the looming Federal Reserve and whether their policies will allow for further growth as the inflationary effects of their 2008 – 2009 monetary policy have as yet to be manifested. The issues not discussed in this CIO Update posting may be addressed in its complete version Outlook for IT Spending and Staffing in 2010. This full version of the report “provides 2010 forecasts for IT operational spending, IT capital spending, and IT hiring, both for the composite sample and by organization size”.

Is the worst behind us? That remains to be seen.

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As some of my readers may recall I posted an article to this Blog on October 12, 2009 entitled Microsoft Buys Core Technology to Boost Its ERP Offering. The article mainly commented on Microsoft’s most recent purchasing strategy to boost its Dynamic ERP product offerings. After reading my article, Houston Neal, Website Content Manager for Software Advice for Manufacturing contacted me and asked me to read and comment on his article entitled Microsoft Dynamics for Manufacturing – Understanding the Difference Between GP, NAV, SL and AX. Neal’s take on the current situation is that although Microsoft has tried to establish itself as a player in the ERP market space, enterprises may still be confused as to what product(s) would be suitable to which industry.

I have read Neal’s article and was quite impressed. I’m a person that likes to understand the history behind the product and/or company. Neal does a nice job of detailing the 8 year evolution of Microsoft’s foray into the ERP industry. He starts off with a sort of Gantt Chart that breaks down the different target markets for each of the Microsoft Dynamic products.  From the enterprise size, based on number of employees, it looks as though Microsoft has taken a comprehensive approach to the SME market space and taken aim on competing directly with SAP and Oracle in this space.

I particularly liked the section where Neal describes Microsoft’s initial purchases and the making of the Dynamics portfolio of products. First there was the Great Plains acquisition in 2001 which netted the Great Plains accounting application and the Solomon business management applications. Then there was the Navision purchase in 2002 which garnered not only the human resources and CRM applications, but also the Axapta product line from a recent acquisition by Navision.

So what is Microsoft to do with four different enterprise products (Great Plains, Solomon, Navision, Axapta) each written in a different language, running in different development environments, and using different databases? Neal takes us on a tour of the daunting task that Microsoft laid out for itself to convert all four products to a single code base, Project Green.

Neal includes an evolutionary chart of which Dynamic products have become the product of choice for which industry. He reminds us that over 9000 ISV’s are out there providing customization services and support for these products. He concludes his article by stating that growth in the Dynamic Product line appears evident.

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Well, by now you probably have seen the commercials. The first commercial began with a children’s lullaby playing in the background as a series of “i don’t” phrases appeared on a whiteboard. This was just enough to catch one’s curiosity when the final “i don’t” phrase dissolves into an eerie Sci-Fi fuzzy screen and a voice is heard announcing the coming of Droid. As a fighter pilot wannabe, the second commercial was much more to my liking. A squadron of what look to be 2^nd or 3^rd generation stealth fighter-bombers is flying in formation when the order is given to release the pods. A shower of what appears to be meteors fills the skies. Upon impact the locals gather around each crater and the pods begin to open when the background voice announces the arrival of Droid.

Last Friday Verizon’s iPhone killer went on sale. Motorola’s Droid has a mobile open source platform on the Verizon network. Michelle Megna reports for Internetnews.com on the impending battle between Apple, the maker of the iPhone, and the PC community in her article entitled “Droid First Step in iPhone Fade Away?”. Megna quotes Tim McLaughlin, CEO of Siteworx, a mobile app and Web development company,

"History shows that unlike Apple, PCs gathered the ecosystem of profitable companies, such as Dell and IBM, thanks to its open technology. Apple, however, only develops systems that benefit itself. It all comes down to economics, and the only company interested in making the iPhone ubiquitous is Apple. On the other hand, you have Google, Verizon, Motorola, all these big companies together, the cumulative market value is huge. You put all of those resources together, and even though it's less effective because it's not centralized like Apple, it will still have a huge impact"

Brad Reed and Matt Hamblen have done their due diligence research on the product and have come up with a nifty review in their article for Computerworld entitled “Four reasons to buy (and one reason to avoid) the Droid”. I’ll try to provide a brief summary of their five points:

1.       Droid is the strongest device on the Verizon Network with the following three characteristics:

a.       Mobile browsing capability

b.      A very good voice recognition functionality

c.       The largest 3G data coverage network of Verizon

2.       The Google connection: The open platform will stimulate development of new apps and allow users to switch to new carriers while maintaining the same device.

3.       Ability to run two applications simultaneously: iPhone can’t do it. Once Droid develops the appropriate security features, then Blackberry will need to pay attention as Droid could become the device of choice for the enterprise user.

4.       Connection to the internet through Wi-Fi: Also use of the same processor as the iPhone will allow a fast and smooth browsing experience.

5.       AND the one reason to avoid this device is the keyboard: Droid has the touchscreen capability, but in order to get that feel of hitting the keys, they have also developed a slide-out keyboard. This feature allows enough room for a larger display screen. Reed and Hamblen report that users do not get the same feel with this shallow keyboard.

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I recently came across a White Paper from Saugatuck Technology, Inc. entitled “SaaS Realities: Business Benefits for Small and Mid-sized Enterprises”. In the spirit of full disclosure, this research paper was sponsored by SAP so there is a one page blurb from SAP at the end of this White Paper which reemphasizes the benefits of SaaS for SME’s and then touts its own SaaS offering Business ByDesign. I chose to post this review of the White Paper since the research is very current, describes the benefits succinctly yet thoroughly, and is also presented in an unbiased format.

The paper is written with the SME in mind, as one can discern from the title, however it begins with a very brief background to the pre-SaaS days. As a bit of a history buff myself, I always appreciate it when an adequate foundation is laid so we can see how things have progressed over time. The paper points out the initial two choices available to us:

·         Purchase of software suite from an ERP Vendor: The enterprise’s IT department is then saddled with all the tasks from selection, installation, maintenance, all hardware, and networking; or

·         Engage a VAR or Systems Integrator (“SI”) to install new software and integrate it with its existing legacy systems: Here selection and installation are handed over to the VAR or SI, leaving maintenance to the Enterprise’s IT department or perhaps outsourcing it.

The authors address the question of when is the optimal time to contemplate a switch in technology from the old approaches mentioned above to the latest alternative, SaaS:

·         Establishing a new location

·         Serving new markets

·         Sudden sustainable growth

·         Preparing for a recession

·         A new sales channel

·         A new supply channel

·         New governance or reporting standards

·         New performance goals

·         Aggressive competition

·         Increased customer expectations

The authors then go into a deeper discussion of SaaS. They begin, as most SaaS discussions begin, with the pricing model, per user / per month, and variations of this model. This is followed by a discussion of what an enterprise is really purchasing with SaaS (i.e. a business service). This business service includes:

“… the entire range of data center infrastructure services: networks, storage, operating systems, databases, application servers, Web servers, and of course, disaster recovery and backup services. Moreover, a full range of data center operational services – authentication, availability, identity management, production monitoring, patch management, activity monitoring, software upgrades and customization …”

The research paper then gets into the heart of the issue, mainly the Advantages of SaaS. There is a very well-written discussion including:

·         Financial Value

·         Time to Value:  Quicker installation, quicker integration, quicker pay-back period.

·         Affordability:  No large up-front costs

·         New technology

·         Continuous innovation:  Multi-tenancy allows for a continuous stream of enhancements

·         Improved Operations

·         Customization: Easily adaptable for SME’s

·         Integration: Service Oriented Architectures (“SOA”) are standard for SaaS providers. Also, three additional means of achieving seamless integration with other enterprise applications on premise include: Web-based SaaS integrators, SaaS integration appliances, and SaaS system integrators.

·         Fewer technical resources needed: Less strain on your IT department and small firms can take advantage of the latest technologies

·         Focus: Allows firm to focus on its core competencies

The research paper concludes by recognizing that SaaS may not be the answer for your particular firm. For example:

·         The application differentiates your firm from the rest of the market (i.e. the application is tied to your core competency); or

·         An existing large investment in your existing IT; or

·         Regulations may require that you keep and manage your data behind a firewall and your SaaS provider cannot accommodate this requirement.

Saugatuck Technology, the author of this White Paper, is a strategic advisor to senior executives, information technology vendors and investors, providing strategy consulting, subscription research and thought-leadership programs focused on emerging technologies, key business / IT challenges, and effective management strategies.

For further readings on this topic, see the following posts in this Blog:

SaaS Customer: A Checklist of What You Need to Know Before Selecting the Vendor

SaaS Contracting: Tips Leading to the Decision and What to Include in the Agreement

Also on the left hand sidebar insert “SaaS” into Keyword search and hit “go”. You will find numerous articles relating to SaaS.

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First I would like to apologize to my readers for the delay in posting this article. My goal is to post something of interest every 1 to 2 weeks, more often if events warrant it. Unfortunately, my schedule went a little haywire during the closing of the 3^rd quarter and so it has been difficult to meet my self-imposed deadlines. I think I’ve turned the corner.

Barbara Darrow, Senior News Editor for SearchITChannel.com, reports in her article entitled “Microsoft rolls partner technology into Dynamics AX ERP” that Microsoft has embarked on a purchasing strategy to build up its core technology of its Dynamic ERP offerings. The series of purchases (provisos not disclosed) included the following:

·         Fullscope Inc. – process manufacturing technology

·         Computer Generated Solutions Inc. – professional services solution

·         LS retail EHF – retail technology

·         To-Increase Denmark A/S – retail technology

Axapta, now called Dynamics AX, is one of the Dynamics ERP lines from Microsoft that competes directly with SAP’s SME offerings.   This mid market space, what Darrow identifies as the “white space”, is more often than not where VARs and ISVs do a lot of customization. This current round of technology purchases is seen as Microsoft’s attempt to add functionality while at the same time reducing the need for customization. It is probably safe to assume that SAP might not welcome this intrusion into the mid market, but the jury is still out on other VARs that perform application work in the space as to whether the additional functionality will be viewed as a help or a hindrance. Dan Fine, President of Fine Solutions, a Dynamics AX partner, stated:

"They've bought some key functionality for professional services and are putting it into the plumbing. That will let us extend our products more easily into various verticals"

He also remarked that time sheets and billing will be part of the offering.

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Paul McDougall reports for Informationweek in their Global CIO Blog that the National Association of Software and Services Companies (“NASSCOM”) predicts the $58.8 billion in India’s outsourcing revenue for the fiscal year ending 2009 will grow to over $225 billion in the next decade. McDougall quote’s Som Mittal, the president of NASSCOM, an association that promotes Indian offshoring, in his article entitled Indian Outsourcing To Increase Fivefold:

“ … the potential for this industry is tremendous and the industry will not be demand constrained”

In order to achieve savings and to stay competitive in the global marketplace, more and more companies are outsourcing their business and technical functions. McDougall confirms in his article that the Obama campaign rhetoric of keeping the existing jobs in the US and preventing jobs from going overseas has not materialized. For further discussion on the Obama campaign rhetoric and the actual affects on outsourcing, see also the following postings in this Blog:

·         No Slowdown in Offshoring for the Foreseeable Future; posted April 20, 2009

·         Obama’s Tax On Outsourcing; posted June 1, 2009

The current trend has tech, financial services, and manufacturing as the core industries making up the bulk of the $58.8 billion in outsourcing revenue. However Mittal suggests that WIPRO, Infosys, and Tata, India’s outsourcing behemoths, foresee healthcare and transportation as the engines for further revenue growth.

With the coming growth an emphasis on infrastructure moves to the forefront. The traditional centers of Hyderabad and Delhi will need to be supplemented by the so-called second-tier centers like Kolkata in West Bengal in order to accommodate the growth.

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SAP takes majority position in SAF

Alex Goldman reports for Internetnews.com that ERP giant SAP has increased its stakeholding in SAF to a majority position. This retail software provider’s products have been embedded in SAP’s retail solution since 2002. SAF’s 2008 sales were slightly over $19 million.

Seibel Systems Founder Attacked By Charging Elephant

Internetnews.com’s Andy Patrizio reports that billionaire founder of Seibel Systems, while on safari in Tanzania, was a victim of an elephant attack. He and his guide were 200 yards away from an elephant herd when suddenly one broke from the herd and charged. Seibel suffered broken ribs and a gorged left leg and a crushed right leg. He spent 18 days in four separate hospitals in Nairobi before returning home. Wheelchair bound, reconstructive surgery and physical therapy are the next steps in his recovery.

BPM: Europe Exceeds US in its Adoption

Back in 1996 Michael Hammer wrote ‘Reengineering the Corporation’. Joerg Heistermann, IDS Scheer CEO of the Americas, stated, “Once BPM became the buzz in the boardrooms around the world, because of the Hammer book, the business changed and in the 1990s SAP began to roll. Many of our implementations complemented SAP.” The chemical companies, financial institutions, and auto makers of Germany were first adopters. "Culture might have an impact. In the U.S., the focus is on sales and marketing.  In Europe, we are more technicians. We optimize the organization for what's coming." IDS Scheer’s “flagship software” is ARIS. See Alex Goldman’s article IDS Scheer: US Lags in BPM Implementations for more.

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