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

In my research of items concerning the latest in the software industry, I came across three short articles of interest. I’ll give you a brief synopsis of each and a link to the article if you wish to explore further.  I’ve added a bonus “Quote of the Week” at the end. Sorry but I just couldn’t resist.

1.       Gartner Reports on the Surge in SaaS

Larry Barrett’s article on Gartner’s SaaS Market Report entitled SaaS Market Growing by Leaps and Bounds: Gartner states the latest report from Gartner shows no indication on any slowing in the demand for on-demand software applications. Gartner defines “SaaS as software that is owned, delivered and managed remotely by one or more providers”. Gartner expects 2010 SaaS sales to top $8.5 billion, an increase of over 14% of 2009 sales.

Advantages to SaaS:

·         Lower start-up costs compared to on premises deployments

·         Lower maintenance costs compared to on premises deployments

·         Ease in sharing applications and documents through the cloud

Gartner analyst Sharon Mertz stated, "As tighter capital budgets demand leaner alternatives, familiarity with the model increases, and interest in platform as a service and cloud computing grows.”  Further Mertz noted, "Greater market competition and increased focus by the mega-vendors reinforces the legitimacy of on-demand, mitigating initial objections about security and availability for many, as acceptance of SaaS as a viable model for enterprise computing services grows."

2.       Microsoft Claims Top Spot in Cloud Computing

Stuart J. Johnston’s article on Microsoft’s claim to be #1 in Cloud Computing entitled Microsoft: We’re No. 1 in the Cloud reports that Kevin Turner, Microsoft COO, proclaimed at their annual meeting for financial analysts in Redmond, Washington that Microsoft is “number one” in cloud computing. The company claims 40 million cloud computing users globally and Turner reported that "Seventy percent of the wins in the cloud that we had in [the fourth quarter of fiscal 2010]… were new Microsoft customers." He touted three of their new customers:

·         Dow Chemical Co.

·         Hyatt Hotels & Resorts

·         University of Georgia

Additionally, Turner made sure that his audience was aware of the company’s record year due in large part to a total of over 175 million licenses sold for their new Windows 7 operating system in the short nine months since its release.

3.       Public Cloud Storage Services the New Choice for Enterprises

David Needle has a new article on Public Cloud Storage entitled New Public Cloud Storage Services Target IT. In it he discusses the latest report from research firm Ovum regarding public cloud storage services. Ovum senior analyst Timothy Stammers stated:

"Not only do they relieve the burden of storing data on customers' premises, but they also have the multiplying effect of transferring to the cloud provider the responsibility of backing up that data"

Initially companies poured vast sums of cash into online storage services to no avail. Economies of scale could not be reached due to the fact that the vendors were using the same storage systems of the enterprises they wished to sell. Huge network bandwidth costs along with their customer’s refusal to accept to the unknown contributed to the collapse of this new emerging venture.

The solution and/or opportunity was as follows:

·         Slowing economy put CIO’s on the hunt for cost cutting measures

·         Cost of network bandwidth plunges

·         The unknown becomes known due to success of certain vendors, most notably Amazon and Salesforce

·         New object-oriented storage technology, i.e. much more bang for the buck

New start-ups offering these services include Nirvanix, Nasumi, and Ctera. Stammers revealed that these vendors often leverage the storage clouds from such mega-providers as Amazon, Microsoft, and RackSpace. He stated,

“To the customer it still looks like ordinary storage and there's caching to alleviate latency issues. Typically these systems also provide their own backup, but companies may also choose to do that on their own for an extra level of protection.”

4.       Quote of the Week

And finally, I just couldn’t resist this one. To paraphrase a line from a well-known cable news network, I’ll Report, You Decide. Here is my pick from David Needle’s article entitled Say What? The Week’s Top Five IT Quotes:

"First of all, moving to the cloud is not the right way to think about anything. There will be new things in the cloud -- redoing something doesn't make a lot of sense. If you want to argue we've been somewhat slow in expanding to the cloud -- fair enough -- but customers have a lot of interest in seeing that our applications maintain their core value, the data integrity and consistency. Taking that to the cloud takes a lot of work."

Kaj Van de Loo, an executive in the office of the CTO at SAP, defending his company's cloud computing strategy.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In May of this year Microsoft sued Salesforce for infringement of nine Microsoft patents. Last week Salesforce counter-sued Microsoft claiming Microsoft has infringed on five of its patents. Salesforce has asked for treble damages (i.e. three ‘3’ times the amount of harm caused), an injunction of Microsoft’s use of the patents in question, and attorneys’ fees and court costs. Hanging in the balance is the future of cloud computing for enterprises and consumers alike. For more on this matter see Stuart J. Johnston’s article in eCRM Guide.com entitled Salesforce Suit Clouds Microsoft’s Patent Attack.

The Microsoft products affected by the Salesforce claim of patent infringement are as follows:

·         SharePoint Server and related products

·         Windows Server AppFabric

·         Windows 7 error reporting system

·         Windows Server 2008 R2

·         Microsoft’s .NET development platform

·         Windows Live delegated authentication system

The outcome of this law suit could have a tremendous consequence on Microsoft’s cloud computing initiatives.

So what are the chances that young upstart Salesforce can defeat the mighty Goliath Microsoft in any legal action? Well I would not count my chickens before they are hatched. Salesforce has hired David Boies as legal counsel for this litigation. For those of you not familiar with Mr. Boies or any of his notable cases you can find a brief synopsis of his career here. Just to whet your appetite here is a list of some of his more notable cases:

Notable cases

• At Cravath, Boies assisted top litigator Thomas D. Barr in defending IBM in the 13-year antitrust cases brought by the Justice Department and many private competitors.
• Also at Cravath, he represented the Justice Department in the United States v. Microsoft case. Boies won at trial and the verdict was upheld on appeal. The appellate court overturned the relief ordered (breakup of the company) back to the trial court for further proceedings. Thereafter, the George W. Bush administration settled the case. Bill Gates said Boies was "out to destroy Microsoft."
• Boies represented New York Yankees owner George Steinbrenner in a suit against Major League Baseball. This involved an action against all the teams. The Atlanta Braves were owned by Time Warner, a longtime Cravath client, who objected to his representation of the Yankees.
• He defended CBS in the action brought by General William Westmoreland. The general abandoned his case during the trial.
• Following the 2000 U.S. presidential election, he represented Vice President Al Gore in Bush v. Gore.
• Boies defended Napster when the company was sued by the RIAA for facilitating copyright infringement.
• In November 2003, he represented Andrew Fastow, deposed Chief Financial Officer of Enron.
• Boies has been retained by the SCO Group in their pursuit of alleged infringement of their rights to the Unix intellectual properties.
• He negotiated on behalf of American Express two of the highest civil antitrust settlements ever for an individual company: $2.25 billion from Visa, and $1.8 billion from MasterCard.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The SaaS story remains the same, but now the approach must shift.  SaaS is cheaper to implement and the enterprise can avoid the upfront capital expenditures for hardware.  Since it is a service, the pricing is based on per seat use and so there is no initial cash outlay for the software suite.  You pay for what you use.  In this current economic crisis enterprises are ripe for a way to lower costs and so the approach the SaaS vendor should take needs to adjust to the times and the SaaS vendor must highlight the advantages in their marketing approach.  Demian Entrekin, founder and Chief Technology Officer of Innotas, has written an Op Ed piece for SandHill entitled 10 Predictions for Software as a Service.  In it he cites a Gartner study that predicts the $6.4 billion in SaaS sales for 2008 will grow to over $14.8 billion by 2012.  In his article Entrekin discusses the 10 key trends that the SaaS vendor should consider in order to expand their market share by encouraging acceptance of their application.  I will provide a brief synopsis of these trends below, but I strongly suggest his article to my readers for the full story.

10 Key Trends to Growth and Acceptance:

1.     Sell the product features:  Abandon the traditional approach of selling the whole product and emphasis the individual product features that address the individual business processes desired.

2.     The application is seamless:  SaaS is not restricted to the enterprise and more directed toward user networks.  This should lead to easier adoption.

3.     Have an Elevator Speech:  Just when marketing yourself for a job, one needs to be able to sell oneself in the first few moments of the interview, Entrekin suggests the SaaS Vendor be able to demonstrate added value in the first minutes of meeting the prospect.

4.     A Deming Approach:  W. Edwards Deming would emphasis “the ability to support a reliable, scale-able service at a low cost.”

5.     Emphasis Tier 1 Support:  Stress the capability of your Tier 1 Support and suggest the enterprise eschew the need for high priced consultants to answer what become high priced questions.

6.     Product Alliances are key to growth:  Make alliances with other SaaS vendors as a means to growing market share.

7.     Video rules the day:  Use video for training and support.  It is cheaper and much more interesting than the traditional text tools.

8.     Consider a full service Hosting Provider:  This is the point of most interest to me.  Entrekin points out that the SaaS Vendor obtains the same leverage from an outsourcer that they provide to their own customers.  This has the added benefit of leading to aggregation of applications and partnerships.

9.     Grid Computing:  SaaS vendors should build their applications so they are “cloud compatible”.  It remains to be seen if grid computing becomes cost efficient, but the SaaS vendor should be ready to take advantage if such is the case.

10.  Your approach can shift from the technology hurdles to a marketing strategy: Entrekin believes the hurdles getting the application to market are slowly but surely being overcome and now is the time to shift to a viable marketing strategy.

• Email This
• Print
• Comments
• Trackbacks
• Share Link