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

 

 

As many of my readers know, I am a member of the business networking site LinkedIn. In my practice I have had numerous inquiries regarding SaaS agreements and many requests to draft such agreements from my clients. I found and joined a very good group on the LinkedIn networking site entitled Software as a Service (SaaS) Group. The group site itself has a lot of information and discussion groups and news items and I found it to be a good resource when I encountered some unusual issues. So one day I’m sitting in front of my computer when a LinkedIn notice pops into my inbox from Justin Pirie entitled “Your guide to the week’s events in SaaS for the Linkedin SaaS group by Justin Pirie.” He got my attention and so I checked it out and I am glad that I did. His site Paradigm Shift Actionable Insight for a cloudy world has a plethora of information. It is current, it is informative, it is hard hitting, and a must read. I like the sources he cites. It is a bit of a “No holds barred” approach. 

As an ex-SAP employee sometimes it is hard to see the forest through the trees and I tend to tread lightly, especially since a significant part of my current practice involves SAP licensing and drafting of Master Service Agreements for the implementation of SAP software. However I also am aware that it is also important to be forthright and recognize the issues and Justin Pirie does that in his blog. With the current news regarding SAP and the upheaval that has ensued, I think Justin’s approach is the right one. He starts with a cite to Paul Hamerman’s article for Forrester entitled SAP Announces Changes at the Top; Hasso Steps Up. He follows up the hard-hitting truth of Hamerman’s article with more of the same with a quote from Jeff Kaplan of THINKstrategies and his February 8, 2010 article entitled SAP Needs Strong Leadership to Stop Sinking as follows:

 

“The significance of this event was clearly underlined by the role SAP’s Co-Founder and Chairman of the Supervisory Board, Hasso Plattner, played as the primary company spokesperson during a corporate conference call this morning.

During the call, Plattner made an emotional defense of the company’s strategies and tactics in response to rising criticism in the face of SAP’s financial struggles. Plattner used the occasion to dispute claims that SAP isn’t moving fast enough to respond to changes in the market by proclaiming that SAP is well on its way to becoming a “multiple product company”. He gave Apotheker credit for “turning around” BusinessByDesign and said the rollout of the v2.5 of the on-demand solution is “close”.

The reality is that BusinessByDesign has only had isolated success in a handful of deployments in the field, and its scalability from a technological and go-to-market point of view is yet to be proven.

The truth is that BusinessByDesign’s lack of success is a reflection of SAP’s lack of commitment to the solution and an overall SaaS strategy.

The company’s leadership has never fully acknowledged the fundamental changes disrupting the software industry as a result of rapidly changing customer preferences and competitive pressures. For example, various SAP leaders in the past have suggested that BusinessByDesign would primarily serve as an ‘on-ramp’ to its on-premise customers rather than a solid standalone solution. This half-hearted approach not only turned off prospective customers, it didn’t incent its own staff to make a concerted effort to develop and deliver a competitive solution. (Emphasis Ed.)”

 

Justin Pirie follows up this strong dose of truth with yet another quote from Vinnie Mirchandani’s article entitled Enterprise Software is Entirely Bereft of Soul:

 

“But the reality is the customer has been forgotten in enterprise software, not just at SAP. It’s about squeezing as much out of old technology as possible. As I wrote earlier in the week. “I wish the other bigger vendors had the cajones to acknowledge they similarly mostly live off profits from software 15- 20 years old, from consultants which implement that old software and provide services from data centers which were designed during the Cold War.”

Leo was expected to do more of the same in his new role as CEO. So, he did – unbelievably pushing maintenance price hikes in the middle of the deep recession. For all his talk about taking on the partners who have piled 5 to 10X costs on top of SAP’s own expensive solutions, he really could not – they were part of the “field” he created.

SAP needed someone to dismantle that “old field” as the market transitions away from the big, honking upfront license and implementation and operating cost model. It is screaming for soul and innovation. Instead they rewarded Leo. Surely, they did not expect him to choke his own baby?”

 

At this point, I’m not sure if another dose of reality is needed. Enjoy the articles and do stop by Justin Pirie’s blog.

 

• Email This
• Print
• Comments
• Trackbacks

 

A short 11 months ago on March 15, 2009 I posted an article in this Blog entitled Oracle Maintenance Fees Under Attack. At the time we, as a nation, were (and arguably still are) in the worst recession since the Great Depression on the 1930’s. The installed customer base of many of the large ERP vendors, as well as, prospective customers were all searching for a way to cut costs. The larger ERP vendors, in particular Oracle, soon to be followed by SAP, had raised their annual maintenance fees to 22%. One solution highlighted in the March ’09 posting was to take advantage of the services being offered through the third party maintenance provider, Rimini Street. Claims of 70% savings on an overall maintenance bill and 50% savings on the annual maintenance expense were being made by Rimini Street’s CEO, Seth Ravin, see May 8, 2008 posting this Blog entitled SAP Sapphire 2008.

Now here’s where it gets a bit convoluted. Seth Ravin is co-founder of a company called TomorrowNow. TomorrowNow touted its ability as a third party maintenance provider and the savings it could provide to the Oracle installed base. SAP purchased TomorrowNow in January 2005 and Ravin used those profits to start Rimini Street in September of that same year. It is of particular interest and can shed some light on the attitudes and approaches of those involved in this mix if you read Richard Adhikari’s article entitled Rimini Street Adds SAP, Passes on TomorrowNow  cited in my May ’08 Blog posting. In particular pay close attention to the following subsection entitled Who needs TomorrowNow? Here is a brief snip-it:

“While Rimini Street is gearing up to add new support offerings to the mix, one way it's not planning to expand its business is through acquiring TomorrowNow.

Rimini Street had at one time been widely viewed as a likely purchaser of the firm, a provider of third-party support for Oracle applications that had been co-founded by Ravin. He ultimately sold the firm to SAP in 2005.

Rimini Street executives shrugged off their decision.

‘We don't have to buy TomorrowNow because we're getting all their customers already and there's no sense in paying for it,’ Ravin said.”

Then in 2007 Oracle sues SAP, claiming that its new business unit TomorrowNow illegally obtained Oracle copyrighted maintenance materials by using customer log-in ID’s on its password protected web-site.

This all brings us to the latest in this soap-opera which comes to us from Reuters via Internetnews.com’s article entitled Oracle Sues Rimini Street:

 

Oracle has filed a suit against a little known rival that provides low-cost software maintenance services, in a case similar to one that Oracle is fighting against rival SAP AG.

 

The lawsuit, filed in U.S. district court in Nevada on Monday, alleges that privately held Rimini Street stole copyrighted material using the online access codes of Oracle (NASDAQ: ORCL) customers.

 

Rimini Street Chief Executive Seth Ravin denied the allegations, saying in an interview on Thursday that his company had done nothing wrong.

 

"We are going to fight this battle," he said. "The specific allegations we are going to be answering vigorously and aggressively when the time comes in court."

 

Las Vegas-based Rimini Street sells updates and bug-fixes to Oracle's software for about half of what Oracle charges its customers. Ravin said his company booked about $150 million in business last year.

 

The charges are similar to claims that Oracle made in a high-profile lawsuit against SAP's TomorrowNow business unit.

 

That case is due to go to trial in San Francisco federal court in November.

Maintenance service contracts worth billions

 

Maintenance services are one of Oracle's core profit generators. That business generated $11.8 billion in its most recent fiscal year, or about half Oracle's total revenue.

"We are committed to enforcing our intellectual property rights against those who steal or infringe" upon them, Oracle spokeswoman Deborah Hellinger said in a statement.

Copyright 2010 Reuters. Click for restrictions.

 

For additional information and more on this saga see also Paul McDougall’s article in InformationWeek entitled Oracle Sues Rimini Street For 'Massive Theft'

 

 

• Email This
• Print
• Comments
• Trackbacks

 

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.

 

• Email This
• Print
• Comments
• Trackbacks

 

 

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.

 

 

• Email This
• Print
• Comments
• Trackbacks

 

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.

 

 

• Email This
• Print
• Comments
• Trackbacks

 

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.

 

 

• Email This
• Print
• Comments
• Trackbacks

 

This sort of activity is common in mergers and acquisitions. I wish I could say that I had experienced this only once, but the sad truth is I have been on the inside and watched this happen several times. And it always is the same. Something big happens, (e.g. a merger, an acquisition, a new “C”-Level Executive) and people leave. In my last corporate counsel position a new CEO was hired just two months after I had come onboard. The General Counsel who had hired me, an intelligent attorney with a superb management style, abruptly announced his untimely retirement just three months later. His replacement lasted a short 12 months. Within a year and a half the new CEO’s friend and confidant had assumed the General Counsel position and the department I had been a part of was completely eliminated.

So is it any surprise that Sun is experiencing a bit of a brain-drain after the acquisition by Oracle? Andy Patrizio reports for InternetNews in his article Defections Batter Sun Microsystems that some key Java-based developers are reading the writing on the wall and have decided to avoid the tap on the shoulder and request to come to some non-descript conference room. Patrizio reports that so far Java’s creator, James Gosling, has not jumped ship. Josh Farina, analyst with Technology Business Research, states:

"It'd be in their best interests to make offers to get people to stay on board … Oracle is really good at making companies run better, but ultimately it needs the talent to stay because … it's in the line employees who make it happen.”

And the affect is not solely on the software side of the business. To get a preview into this slippage in Sun’s sales see the posts in this Blog Oracle’s Purchase of Sun: A Game Changer and IBM and SAP vs. Oracle and Sun: Let the Speculation Begin. Scott Handy, vice president of marketing, strategy and sales support for IBM Power Systems, reports that customers are calling IBM requesting migration assistance. Sun’s customer base looked at Oracle’s track record and see price increases in the future. Handy states,

“They are all quite concerned. When Oracle bought Siebel and PeopleSoft, they increased the maintenance licenses by 25 percent per year. With BEA, licenses went up 45 percent. So they are looking at OPEX going up just to keep what they had".

IBM is geared up and ready for these migrations. In 2003 IBM acquired a company called Sector 7, a company specializing in migrations. IBM created a program entitled Migration Factory and to date have performed over 1800 migrations. Before the Sun acquisition the ratio was about 40% of the migrations were from Sun but now that percentage is starting to increase. For the first six months of this year IBM has migrated over 170 Sun customers and another 66 Sun storage customers. 

It appears that IBM is doing what it has always done and that is using their hardware to get business in the door and then turn that into sales for long-term services and software.

 

• Email This
• Print
• Comments
• Trackbacks

 

It appears the tide is turning for the ERP giant. Initially Business ByDesign, the SAP SaaS offering, was targeted to the SMB marketplace. John Wookey, SAP’s new chief of on-demand software applications for Large Enterprises (“LE”) and former head of application development for Oracle, announced at the OnDemand Europe Conference in Amsterdam that SAP will allow online integration with core on-premise or hosted ERP platforms. This is a major switch in their strategy. SAP is determined to avoid the problems of data sharing and integration with this type of approach. Mike Simmons reports for ComputerWorld in his article SAP in SaaS U-turn:

“Wookey will initially promote the LE on-demand offering entirely at SAP's established customer base. Until now the company had been reluctant to sell SaaS products to its installed base, for fear of cannibalizing license and maintenance revenues”

Mary Hayes Weier of InformationWeek reports on her interview with John Wookey in her article SAP unveils SaaS Strategy. SAP will provide “function-specific software applications, available by subscription, that plug into customers' on-site SAP Business Suite systems, and that SAP will host for customers using a multitenant architecture”. 

Weier provides us with a good definition of Multitenancy and how SAP will provide it:

“Multitenancy -- in which groups of customers share the same instance of a software application, even though their data is kept separate -- helps software companies keep costs down for the hardware, software, and energy they use to host customers' applications. In turn, that allows them to offer competitive subscription prices. Wookey describes Frictionless' technology, which will be the foundation of SAP's on-demand platform, as "Java-based with a true multitenant architecture”

Development groups will bring on-demand applications to the market. SAP’s CRM already in the market, although not a multitenant architecture yet, will be a seamless upgrade soon. The other two on-demand products also in the market, e-sourcing and carbon emissions management are a result of earlier acquisitions. SAP’s acquisition of Sky Data will be able to provide a mobile component to their on-demand offerings.

 

• Email This
• Print
• Comments
• Trackbacks

 

Alex Goldman writing for InternetNews.com in his article Does SAP's Performance Fall Short reports on a survey conducted at SAP’s annual conference for SAP Professionals, SAP Sapphire ’09, held in Orlando, Florida. The study on SAP’s performance was sponsored by Precise Software, a transaction performance management (TPM) provider and was conducted by Dimensional Research. Dimensional Research based its findings from 695 SAP Professionals. The respondents were attendees at SAP’s Sapphire conference and answered questions at the Precise Software booth.   Some of the findings are as follows:

·         62% unhappy with the resolution of performance issues

·         8% reported daily problems

·         68% reported 1 to 5 incidents per month

As to the resolution and/or response times:

·         46% reported resolution in hours

·         22% reported resolution in minutes

·         30% reported resolution in days or weeks

·         2% reported resolution in seconds

Tracking of database transactions through the database and the application servers and into storage can be done for the SAP ERP software. Precise Software is now offering such tracking for SAP’s BI software as well. Zohar Gilad, executive vice president of Precise Software says:

“Traditionally in BI, companies take data from the production ERP system, extract it and scrub it, and load it into their data warehouse.  This can disrupt the production system, companies can fail to move the data in time, and it's tough to access.”

Precise Software is not the only TPM vendor involved in resolving these issues. Attivio and Fiorano are two other TPM vendors using different methods. SAP is also looking for a way to improve its BI and announced it is offering a new search engine to do just that.

SAP had no comment regarding the survey stating that they did not know how the data was gathered nor had they seen the survey.

 

• Email This
• Print
• Comments
• Trackbacks

 

In light of the recent mega-acquisition of Sun Microsystems by IT titan Oracle, the rumor mill has begun to turn. As a follow-on to my posting in this Blog last week dated May 11, 2009 entitled Oracle Purchase of Sun: “A Game Changer”, I have found two article’s that my readers may find of interest. Here is a brief synopsis of each:

An IBM marriage to SAP:

CNNMoney.com posted a Fortune Magazine article from their Tech Daily by senior writer Jon Fortt entitled IBM-SAP combo not in the cards – exec. In it CEO Sam Palmisano’s spokesman lays out why such an acquisition is unlikely. I cannot help my flair for the melodramatic and immediately what comes to mind is that old line from some film noir movie “Your lips say no, but your eyes says yes”. Some of the points for such a purchase are:

• IBM’s Websphere, DB2, and Cognos provide the foundation for SAP’s business apps.
• IBM is one of the few (Google and Microsoft notwithstanding) that could afford the $50 billion  SAP market value plus a premium.
• Such a combination could in essence provide all the software an enterprise could need.
• Others (e.g. Oracle / Sun) have embarked on this portfolio strategy.

IBM’s retort to the above is a recognition to tread softly as not to upset their existing partnership relations. I’m afraid I’m reminded of yet another famous line (with apologies to the Shakespearean aficionados – if I may be allowed a bit of poetic license) Methinks he doth protest too much. { The original line "The lady doth protest too much, methinks” is from Hamlet Act III Scene II. Queen Gertrude, not realizing that Hamlet has staged this play within a play to trap her and her husband whom Hamlet suspects of having murdered his father, speaks these famous words to her son, Prince Hamlet.  See answers at yahoo.com --- but I digress}

Oracle could play the old IBM trick: 

To continue on with the “speculation” theme of this posting, Rob Enderle examines  the aforementioned mega-acquisition and comes up with an interesting strategy in his article in InternetNews.com How Oracle-Sun Could Use Google to Become the New IBM. Apparently, back in the 60’s when IBM was king, IBM locked in its customer base by bundling software with the lease / purchase of its hardware. Enderle posits that Oracle stand this strategy on its head and proposes that Oracle bundle its software and services with the Sun Hardware and this time it is the hardware that is the free commodity (or close to it) and not the software as was the case for IBM in the 60’s. Enderle has an analysis on UNIX and Linux and how Java is “a bone fide platform in its own right”, but I will have to leave it to you to grasp the nuance, since I cannot. The missing element to this strategy is the desktop component. Enderle closes the loop in this strategy with an Oracle – Google alliance (if this is possible) and has Oracle emerge as the new IBM. Such an alliance seems improbable, but worth the mention.

 

 

• Email This
• Print
• Comments
• Trackbacks

 

In late April 2009 Oracle announced its $7.4 Billion purchase of Sun Microsystems. As you can imagine, this deal will have a significant impact on the IT industry, but just how much of an impact remains to be seen. Invariably acquisitions of this size and nature will be examined for any possible anti-trust issues such as anti-competitive influences on the market-place. This process by regulators will be done here and abroad and the end-result may be the necessity to sell-off some assets of the newly combined business. If you are looking for an excellent in-depth analysis of this deal I highly recommend Bruce Guptill’s article in SandHill.com The Impact of Oracle – Sun. In it Guptill sees a totally changed IT Industry with Oracle emerging as a “portfolio” company with the following abilities and offerings:

·         Hardware

·         OS

·         Middleware

·         Applications

·         Development tools

·         Databases

·         Production environments for Hosting

·         SaaS

·         On-premise subscription services; and

·         Consulting solutions (vertical and horizontal).

 

Although Sun is primarily a hardware vendor, Guptill sees this as a play for Sun’s software capability. He quotes Oracle’s CEO, Larry Ellison, “Sun's Java programming language and Solaris operating system were the main attractions for Oracle”; and specifically as regards Java, “the single most important software asset we have ever acquired.”  Guptill believes this asset alone places Oracle at the epicenter of the industry. Sun has also played a key role in open source by opening Java and Solaris to developers and this should give Oracle the ability to influence such software development especially in the following specific vertical markets: financial services, government, academia, and high-performance computing. Lest we forget the hardware business, Sun’s server and storage revenue have been estimated at an annual amount of $7 billion and $9 billion respectively. All of the Sun components, from software to hardware, should provide Oracle the foundation to build its SaaS and Cloud Computing services.

Can Oracle successfully integrate the services and hardware businesses that come with the purchase of Sun? Guptill tells us to be on the lookout for Oracle Management to sell of some of these hardware lines, or alternatively as mentioned above, regulators may force Oracle to divest itself of some of these assets.

Guptill concludes his article with a brief description of the impact such a purchase has on several stakeholders and competitors. For example:

For Sun: This probably means the demise of Sun CEO Jonathan Schwartz who had pushed for the IBM acquisition of Sun rather than Oracle. Sun Chairman, Scott McNealy, although a friend of Larry Ellison, will probably go as well since a ship needs only one captain.

For MySQL: It should fit nicely into the Oracle family as a web server database engine.

For IBM: This was a lost opportunity at more profits and the ability to rein in Oracle competition. Also Sun’s capabilities would have enhanced IBM’s Cloud Computing efforts, but now this advantage goes to Oracle.

For SAP: Guptill sees the advantage going to SAP in the interim while Oracle’s sales teams learn how to integrate Sun products into the Oracle family. I am not so sure I agree. In light of SAP’s recent sales history any advantage may be illusory. See SandHill.com Software News Summary article SAP Struggles. The title tells it all.

For Hardware Vendors: For those that have partnered with Oracle in the past the loss could be significant.

For Users: Future investments in Sun hardware may be put on hold as the install base waits for reassurances on the direction of the server and storage lines of business.

Never a dull moment.

 

• Email This
• Print
• Comments
• Trackbacks (1)

Well, you just don’t mess with maintenance fees, or so we thought. In my career it has been my experience that a software developer, in particular, the large ERP Vendors, would be willing to grant some pretty large discounts on the licensing of their software. There would be a standard discount and this could be followed by a non-standard discount which could then be followed by a special one-time discount and so on. As long as we could think of inventive names for the next round of discounting and the business approvals kept coming, a savvy customer could get what appeared to be an incredible buy. So you might wonder how a large ERP vendor could discount the initial one-time license fee of their product 50% to 65% to 80% and above. The secret my friends (well it’s not really a secret) is that an annual maintenance fee was exacted as a percentage of the “net” license fee after the first initial standard discount. I remember when this maintenance rate was 15% and then it was raised to 17% and recently it has been raised to 22% by the big ERP vendors. It really doesn’t take a rocket scientist to figure out that after approximately 4 ½ years the customer has paid for the software again. As long as the ERP vendor can receive their annual cash inflow from these maintenance fees on their customer installed base, these vendors will be willing to discount their license fees.

So what does a customer get for this annual maintenance fee? Since we are talking about software, any Director of IT will tell you that maintenance gives you access to the 24/7 help desk. But there’s so much more than the help desk. A customer will need access to the latest patches and fixes that are inevitable when dealing with software. Maintenance also allows the customer to receive the next version and/or release of the software. With the new higher maintenance rates of 22%, the vendors are providing more and more enhanced support in order to justify the higher fees.

However, it seems that the current economic downturn has made the untouchable somewhat vulnerable to attack. For a more in-depth report on this phenomenon read Barbara Darrow’s article in IT Channel entitled Oracle fees for maintenance and support under fire. In it she describes the sea-change in the attitude towards maintenance fees coming from the customer base. There are some reports that customers are switching their application servers just to avoid Oracle altogether. Another approach customers have been taking, but one fraught with pitfalls, is to forego maintenance completely.

“There's definitely been a significant spike in the percentage of clients pushing back on Oracle support rates or who have let support lapse," said Eliot Colon, president of Miro Consulting, a firm that specializes in license negotiations.”

As Darrow reports, one option customers are exploring is to limit their maintenance fees to only what is deployed (e.g. users, modules, functionality). But it looks as though Oracle will not capitulate and only offer an all or nothing alternative. When customers choose “nothing” they run the risk of losing out on new upgrades. Once they decide to reinstate maintenance, they’ll be hit with all back maintenance fees during the period they declined maintenance and also a reinstatement fee.

And still another option for customers is to use third party support. David Rowe, senior vice president of marketing for Rimini Street states:

“Take your existing bill for maintenance, cut it in half, and then cut it further, because we let you drop maintenance for modules you're not using, whereas vendors have some very tough policies on that.”

For further discussion on this topic see also:

• IT shops renegotiate contracts to get savings out of vendors
• Rework vendor contracts to save money in tough times
• IT Shops renegotiate contracts to wring savings out of vendors

 

• Email This
• Print
• Comments
• Trackbacks

Alex Goldman reports for InternetNews.com on two interesting collaborations announced recently by SAP in his article SAP Taps IBM, Intel to Cut Datacenter, SMB Costs. Here’s a brief synopsis:

Ability to create an in-house cloud:

The two giants have been collaborating since 1999 on this particular project. Although the product is not yet generally available, SAP and IBM demonstrated it at the CeBIT trade show. The idea is simply to spread SAP’s utilization across the servers in an enterprise which lessens underutilization of servers while also allowing for spikes in usage. This should be attractive to companies trying to get the most out of their current infrastructure. The technology demonstrated is based on the RESERVOIR cloud computing project. The goal is to make it easier for datacenters to be able to adjust their services to meet demand at different times. 

Xeon-based systems for SMB’s:

Another SAP announced partnership is with Intel. SAP’s Business One customers (i.e. SMB’s) are to be the beneficiaries this time. SAP plans to develop applications for use on Intel's 64-bit Xeon architecture. The end result is a faster deployment for SMB’s using Intel Xeon based systems.

The Green Effect:

The current “Green” craze is not lost in the two announcements above. The parties involved are proud to state that both moves reinforce the output of lower carbon emissions in customers' datacenters.

 

• Email This
• Print
• Comments
• Trackbacks

 

Yes, the rumors are true.  I have left the world of “cool” and entered the world of “White Papers”.  It really isn’t that bad.  In fact in my research I have found a very interesting White Paper by Cindy Jutras, Vice President and Service Director, Manufacturing Research, for the Aberdeen Group, Inc.  Jutras’ paper is entitled Best Practices in Extending ERP: A Buyer’s Guide to ERP versus Best Of Breed Decisions.  Admittedly her report was published in November 2006, but it is a factual view of where the ERP industry was at that point in time and a prescient summary of where it was about to go.  It is a must read for those involved in the ERP industry and I highly recommend it to my readers.

 

The gist of the report is the emerging approach of today’s Enterprise’s desire to derive more for their dollar from their ERP implementation and deciding whether to stay with the core functionality of the ERP solution or augment this functionality with “pure play” or “Best of Breed” software vendors.  This decision is becoming more complicated due to the acquisitions of these smaller Best of Breed vendors by the larger ERP giants.  This 2006 report foresaw the consolidation in the market and what affects it would have on the companies caught in the middle.  See also What’s Next for ERP in 2008; and, The 7 Trends for ERP in 2008; and, What Customers Want from their Software Vendors; and also, SAP’s Business Objects Partnership with Oco.

 

Jutras identifies the three “Key Business Value Findings” for the enterprise deciding whether to go solely ERP or Best of Breed.  These three factors are:

 

• Functionality
• Integration
• Ease of upgrading to new releases

 

Her report includes very descriptive and easy to understand tables and figures such as:

 

• Levels of integration
• ERP module adoption rates
• Adoption rates of ERP extensions

 

At the top of each of her four chapters is a “Key Takeaway” section in bullet points.  This is extremely helpful to the reader.  It helps direct your attention to the salient points and provides a fast and easy way to return to a chapter and refresh one’s recollection.

 

For all those involved in the industry this is a report you should keep handy.  It definitely helps bring the whole recent picture into clear view.

 

 

 

• Email This
• Print
• Comments
• Trackbacks

 

Richard Adhikari reports in InternetNews.com that SAP plans to move aggressively forward with its SaaS offering, Business ByDesign, and is targeting the SMB customer in his article SAP to Innovate Heavily in SMB On-Demand Suite - updated - Business intelligence to pervade enterprise software giant's forthcoming products.  It appears from some of the comments quoted from the SAP executive suite that the word “aggressive” is only the tip of the iceberg:

Henning Kagermann, co-CEO stated:

“When you come to challenging times, you have to take risks. Business ByDesign is not just about product, we also want to focus on profitability, and in the volume business you have to do a lot of innovation to make the business profitable”

Jim Snabe, head of SAP's business solutions and technology, stated further:

“You can look at it from two angles. One is how to convert money into ideas; the other is how to convert ideas into money”

In addition to the predicted new innovation of this SaaS offering which includes CRM, SAP will integrate its Business Intelligence (“BI”) technology into the business suite as a direct result of its purchase of Business Objects last year.  This will bring the analytics portion into the new offering.  Customers will be able to analyze their historical projections as well as future projections.

So when should we expect this new business suite to be rolled out.  SAP says to look for it by next year.  Just exactly when next year isn’t quite clear.

In related SAP news:  In a move to emphasize its focus on profitability and a bid to match the pricing of Oracle, its chief competitor, SAP customers are none-too-happy with the recent price increase for its enhanced maintenance “Enterprise Support”.  For the full story see SAP CEO Defends Price Hikes as Customers Gripe - In its drive to become more profitable, has the enterprise software vendor stirred up a hornet's nest?  Kagermann defended his company’s actions by stating:

"We're offering a new service which is much larger than before, has a certain value and a certain price. The cost for us is higher, and so we believe it's a fair price."

• Email This
• Print
• Comments
• Trackbacks

Business Objects, an SAP Company, continues its strategy of partnering with innovative companies offering Business Intelligence (“BI”) in a SaaS approach with the blessing of its parent, SAP. Its latest association is with Oco. Although both companies are players in the SMB space and both offer BI in the SaaS mode, Oco is a much smaller company. Oco’s competitive advantage comes from its development of templates for various vertical niche markets such as analytical tools and reports in the retail, industrial manufacturing, and consumer packaged goods industries. This collaboration suits both companies. SAP furthers its desire to make its products work with other vendors’ products and Oco gains an entrée to the larger SMB customer that was not previously available to them.

The BI marketplace has become extremely competitive. The main distinguishing factor for vendors in this market is to provide the products that give the enterprise the ability to make decisions faster. Business Objects’ SaaS offering, Business OnDemand, provides a fast and accurate solution. Now with the added advantage of Oco’s data discovery and mapping tool, the solutions for the SMB will come faster and at a lower cost. These partners recognize that the much larger enterprises who want their intelligence customized might not be so receptive to the Oco data model. Richard Adhikari explains in his article Business Objects Teams Up With Oco the customer first accepts Oco’s data model and this data model then finds all the data in the enterprise and produces the BI in a low cost manner.

Adhikari cites Business Objects Vice President Mani Gill, who explains the enhanced OnDemand offering this way:

Oco will let us deliver hosted multi-source data warehouses in multiple industries and functional areas.

We use our enterprise information management tools to pull data from customers, host it ourselves and provide business intelligence on top.

For a fuller explanation see Adhikari’s article. He points out that the combination of these two vendors additionally benefits both by allowing Oco to become a reseller of Business Objects products and permitting Business Objects yet another opportunity to differentiate itself and gain a foothold in this market space.

• Email This
• Print
• Comments
• Trackbacks (1)

 

First I would like to define what we mean by Unified Communications (“UC”).  Unified Communications encompasses email, instant messaging, texting, phones, and other networking and mobility applications.  In short Unified Communications “ … lets users access people and resources, no matter the location or communication channel, spurring productivity and boosting business processes at an economical cost.”  For an in-depth discussion on this topic see UC Will Prove Challenging to Buyers And Sellers by Judy Mottl.

Initially SMB’s have found it a daunting task to try and pull all these various applications together into one cohesive platform.  The lack of funds and the lack of familiarity with these tools have hindered their move to UC.  The familiarity issue is evaporating as more people are using these communication tools in their non-work life and begin to demand these tools in the workplace.  For further discussion on the capabilities and uses of the newest wireless devices and the coming of the Mobile Web see the following posts in this blog:

• Blackberry Bold RIMs Next 3G High Speed Wireless Handset

• 4G and The Mobile Web: WiMAX v LTE

SaaS may be the way that SMB’s can overcome the budgetary constraints as well as the integration problems that have acted as a barrier for these enterprises.  SaaS provides a faster deployment and the right provider can pull all the telephony tools and applications together into one unified and interconnected unit.  Judy Mottl has written an excellent article that details in the ins and outs for those SMB’s considering this next step into UC.  In her article SaaS Best Path for SMB Unified Communications: Service strategy lets small companies enjoy technology benefits without the headaches she interviews Simon Edwards, UC project director, British Telecom (“BT”), who cautions not to get locked into one particular platform:

"SMBs have to make sure they stick to an agnostic platform," said Edwards, adding that the best approach is an open standards platform that allows emerging technologies from different tool makers

Mottl concludes her article with a quote from Mat Taylor, a senior software architect with BT:

"The ability to get things done faster, get workers more engaged in business scenario, provide better customer service, are all big productivity wins that benefit the bottom line"

For more on the coming of age of handheld devices for the UC revolution see the following posts in this blog:

• Future of Wireless Devices

• SAP Sapphire 2008

• Email This
• Print
• Comments
• Trackbacks (1)

 

There is a revolution of sorts going on in the computing world. I do not want to over-dramatize this fact; however I am reminded of author and pamphleteer Thomas Pain who wrote:

• “Lead, follow, or get out of the way”
• “These are the times that try men’s souls”
• “The harder the conflict, the more glorious the triumph” (yes, this is drama)

Why all the drama? Well, I recommend you read Tien Tzuo’s article entitled The Global Transformation to On-Demand. Tzuo’s subtitle may aid in understanding my reference to the drama (i.e. “Why the world is moving to subscriptions and what it means for businesses”). This article should be read in conjunction with Daniel Druker’s article Different is hard: SAP - (Not Too Much) Business by Design.

Let’s start with Tzuo’s rather succinct history of the change in the paradigm from on-premises computing to subscription buying via the internet. Tzuo was on the cusp of the wave that brought in the SaaS business model. The guiding ideology for Tzuo and his contemporaries regarding SaaS is that

“ … software belonged on the Internet, not on a CD, and in that process it is transformed from a product that you buy to a service that you subscribe to.”

Tzuo’s analysis of why the trend towards subscriptions (i.e. On Demand or SaaS) rather than the traditional purchase or licensing model covers a broader spectrum than just the software industry. He explains that the internet has transformed the way people buy. The purchaser now has more options from more packages and as their needs change so can their subscription. Buyer’s remorse is eliminated.

“no large up front investment, no ongoing maintenance costs or hassles, no insurance costs – just pay for how much you use.”

Tzuo points out that there are significant differences between the processes for managing a subscription business versus the traditional product for sale business. These differences are:

• The ability to offer your product in parts, as well as full packages
• Invoicing and payment terms must be able to track the flexibility in the product offerings
• There are constant changes in the subscription and the revenue collection process becomes convoluted
• The metrics for this type of business differ from the usual billing metrics and so the ability to measure success and redirect efforts must adapt

The difficulties in managing a subscription business can be demonstrated by reference to the current situation at SAP and its announced delays and reduction in investment in its hoped for SaaS offering, Business by Design. Daniel Druker presents an in-depth analysis to the possible problems facing SAP. He lays out the trials and tribulations that a mega-corporation must face when trying to adapt to the changes in the industry. Instead of the purported technical issues facing this new service such as the “Mega-tenancy” model that a company the size of SAP is trying to implement, Druker sees the problem as the age-old issue of resistance to change. He labels this the “innovators dilemma”. The best and the brightest personnel shun the new innovation, especially if the promise of returns is far removed from the fundamental business model. It almost seems as though the company sets up its own barriers. A matrix organization, such as SAP, organized by country or region, is more inclined to focus on hitting their sales goals for the quarter or month and less likely to assist in the latest project.

In addition to the innovators dilemma, Druker also includes a discussion much like Tzuo’s differences between a subscription run business and that of the traditional product driven business model. Simply put, the business processes needed to run a subscription business do not yet exist, and when these new business processes do come on line, they will be incompatible with the existing business processes for a large enterprise software company.

Druker concludes by stating that, “SAP is an amazing, well run company”. It remains to be seen how well they will manage this latest innovation in the computing world.

• Email This
• Print
• Comments
• Trackbacks (1)

As many of you may know already May 4th to 7th was Sapphire 2008. This year it was held in Orlando, Florida. What is Sapphire? Well, it is SAP’s annual international customer conference. It is the place where the enterprise’s decision makers come to see the latest business solutions that SAP has to offer. There are a plethora of announcements and it is difficult to keep all the facts and details straight in one’s mind. I have listed below what I found to be a few of the more noteworthy announcements with a brief summary and if any of these are of interest follow the links for more details.

First on the list was the pre-conference announcement. My guess is that this was sort of a primer for things to come. The “mobile workforce”, many of whom are users of the ever popular hand-held device from Research in Motion (“RIM”) known as the Blackberry, may be interested to know that they will have access SAP’s CRM functionality in the coming months. The plans are to eventually integrate the rest of SAP’s functionality into the handheld device. As a Blackberry user myself, I think the implications of this could be enormous. Just the mere fact of being able to send and receive my emails wherever I happen to be is a huge advantage to me. SAP and RIM are talking about a mobile workforce now with access to all parts of the enterprise including order applications and inventory management. A more detailed description can be found in the Internews.com article SAP Is Wooing the BlackBerry CRM Crowd.

The next announcement I found to be of interest was that Rimini Street, the low-cost third-party provider of support, will be providing support for the SAP R/3 ERP suite. The concerns about SAP pulling support for its older versions was alleviated a bit when Rimini Street pledged to continue supporting the older versions without any upgrades until the year 2020. The cost savings for the R/3 user base could be significant. SAP had recently announced that it would raise its maintenance fees from 17% to 22% to keep up with the industry standard, particularly Oracle. Now with the availability of support from Rimini Street, CEO Seth Ravin, boosts, “Most of our customers are saving on average 70 percent against overall maintenance costs and at least 50 percent on their annual maintenance bill. We cut customers' costs in half and still make a very hefty profit." Ravin’s approach is that R/3 users don’t want to move to the next platform since “they spent years and a ton of money to get it working right and,…there's nothing that justifies the cost of upgrade, disruption and opportunity cost…” To read more see Rimini Street Adds SAP, Passes on TomorrowNow.

Following the Rimini support announcement, SAP made another announcement concerning its own Enterprise Support. This new approach to support from SAP will be more of a holistic approach and not the usual patches sent to fix bugs in the software. SAP will be supporting SAP solutions as well as non-SAP solutions and focus its attention on SOA. To learn more about the components of this Enterprise Support offering from SAP read SAP Beef’s Up Enterprise Support. This article also contains Oracle’s perspective on SAP’s offering and how it competes with SAP.

The last announcement coming out of Sapphire 2008 that I will discuss are the two add-ons that will assist in the design and execution of new business processes without the need for new code development, SAP NetWeaver Business Process Management (BPM) and SAP NetWeaver Business Rules Management. With close to 39,000 NetWeaver deployments, these new add-ons continue to emphasize SAP’s push into SOA. SAP's NetWeaver BPM will provide the ability to implement and manage complex business processes. In essence it simplifies the implementation of an SOA environment. As stated in SAP Add-Ons Aim to Simplify BPM for NewWeaver, “NetWeaver BPM's unified modeling capabilities mean that a single version of a business process will be available throughout an enterprise, and its users will be able to edit it and make changes without losing details in translation.”

The above discussion is only a sample of the announcements that came out of Sapphire 2008.

• Email This
• Print
• Comments
• Trackbacks (1)

SAP took the opportunity at CeBIT 2008, the world leading technology fair, to announce its latest partnership which builds upon SAP’s Business All-in-One solution. SAP has teamed with Intel and will be offering a landmark product on Intel Xeon-based systems via original equipment manufacturers (OEM) and hardware system providers based on SUSE Linux Enterprise from Novell and the database SAP MaxDB. Hardware offerings pre-installed with SAP software is landmark to say the least. The intended benefit for the SME market is a reduction in the Total Cost of Ownership of their IT systems. SAP stated in its announcement:

“The offering targets midsize companies in the manufacturing, service and trade industries and directly addresses the demands in these market segments for quick and easy implementation, and tailored yet scalable solutions at predictable costs."

Ray Boggs, VP of small and medium business research IDC, noted that having the alignment of hardware and software will give customers what they have been looking to do, “reconcile the somewhat contradictory goals of a solution designed to meet their individual needs but in an almost pre-configured fashion to minimize time and cost." SAP plans to continue with this strategy of partnering with hardware vendors to directly address the needs for TCO for its SME customers. For a more comprehensive description of this announcement see SAP and Intel Collaborate to Offer Pre-Installed Business Solutions for Midsize Companies Optimized for Quad Core Intel(R) Xeon(R) Processors.

Of course on the surface this hardware with pre-installed SAP software approach seems to be a winner. Even below the surface it is hard to find fault with this methodology. But I am a simple man. When I see the words “Xeon Processor”, “SUSE Linux”, and “database” in the same sentence my eyes begin to glaze over. I might have a talent for spotting an ambiguous phrase or two in a software license or consulting agreement and perhaps the ability to offer a revision to it to bring the language to a more equitable point of view. However, I wonder if it is reasonable to ponder this new approach from SAP from a slightly different perspective. I almost get the feeling as the Portuguese explorers must have had during their successive voyages down the coast of Africa in search of the riches that lay ahead in the Far East. These aren’t entirely unchartered waters, but one cannot be quite sure what lies ahead. Others, such as Microsoft, have gone down this course before. I have to wonder what obstacles may present themselves in the future. The usual suspects are ubiquitous, (confidentiality, ownership, infringement, anti-trust). I am sure that the right people at SAP and Intel have considered these issues and more and are fully prepared. The cost of doing business is a fascinating journey.

• Email This
• Print
• Comments
• Trackbacks

Soon users of Lotus Notes will have the same access to SAP’s business applications as Microsoft Outlook and Exchange users have today. The jointly developed cross-platform application, announced at IBM’s Lotusphere in Orlando, is in answer to customer’s demands. With over 135 million users of Lotus Notes and a majority of its top customers using SAP, what seemed inevitable will finally come to fruition. Both companies will offer this application in the 4^th quarter. 

SAP's CTO, Vishal Sikka, stated in a press release:

Lotus has been an innovator in collaboration for 20 years. This agreement is a great example of how SAP enables our customers to empower their users by providing easy access to SAP business processes and data through productivity tools and user interfaces of their choice.

The new application is entitled “Atlantic”. Larry Barrett reports in his article IBM Teams Up With SAP on ‘Atlantic’:

While Atlantic will first provide support for SAP workflows, reporting and analytics, the two companies plan to include other tools in future releases to extend and adapt these collaboration capabilities and leverage additional offline features found in the Notes and Domino product lines.

In August, IBM began shipping Lotus Notes and Domino 8, the company's latest refresh of its flagship communications suite. Along with a snazzier user interface, Lotus Notes and Domino 8 included custom applications and Web 2.0 features such as mash-ups in the hopes of providing a more interactive user experience.

The integration of SAP’s business suite coupled with the new function-packed Lotus Notes 8, which allows independent software vendors the ability to develop new applications from their Notes dashboard, will further IBM’s quest to overtake Microsoft’s competitive advantage in unified communications and collaboration.

• Email This
• Print
• Comments
• Trackbacks

SAP unveiled nine new software packages that allow the monitoring and response to business information from any format or application. Three of the nine new offerings are targeted to the SMB market space. This all stems from SAP’s purchase of Business Objects (see post 12/21/07 in this Blog SAP Merges with Business Objects). SAP’s CEO, Henning Kagermann, stated:

Our key competitive differentiator is that we're building a portfolio on the most open platform. We are the only one that can offer business performance optimization in a closed loop.  At the end of the day, you have to take immediate action. Our business suite and business intelligence close the loop. You have faster and better insights and you can transform it immediately into actions.

Is this rollout all in response to the current activity now taking place in the industry? As I alluded to in my post of 1/9/08 What’s Next for ERP in 2008, Larry Ellison has not and will not sit on the sidelines as these mergers and new products are rolled out to the customer base. Just this week Reuter’s reports that Oracle has finally succeeded in its bid for BEA.

Kagermann addressed the issue of growth and competition in the industry stating:

You never in life should exclude an opportunity in business. The question is where is your priority.  Growing through organic growth is No. 1 for SAP.  If there's a unique opportunity to expand our opportunities, we will do it.  These are things you can't plan ahead and sometimes you have the opportunity and must take advantage of it.

SAP plans to integrate functionality from Business Objects into its Saas offering, Business ByDesign. SAP’s 2007 operating margins were down by .8% due mainly to its approximate half a billion dollar investment in getting Business ByDesign to market.

To read the full article click here

• Email This
• Print
• Comments
• Trackbacks

As customers demand more from Web 2.0 applications and software vendors scramble to meet these demands, we should expect to see more mergers.  The assembling of such technologies as “instant messaging, Web conferencing, email, desk phone, mobile phone, blogs, and RSS feeds” has proven to be an overwhelming task.  A way to provide such technologies without losing some of the functionality which makes these technologies so appealing is to merge or purchase smaller niche companies that have the new emerging technologies already in hand.  Larry Barrett in his article in InternetNews.com reports on the most likely scenarios to come in 2008.  The companies to watch will be those with established expertise in data management, business intelligence and analytics and security.  The candidates include Informatica and i2 Technologies.  Regarding this anticipated consolidation, Barrett cites HP’s CEO Mark Hurd:

“I think you'll see continued industry consolidation and see more and more vertical integration.  It could accelerate in the next year or two if the right alignment of players were to occur ... I think potential M&A opportunities will rise to the top.”

And what about the big players in the ERP arena?  Is a purchase of SAP a possibility?  SAP’s co-founder and chief of its supervisory board left the door open a bit when he responded to such an occurrence by the likes of IBM, Microsoft, or Google stating, “If shareholders think that a combination, and not independence, is better, then it will happen.”  Barrett points out some of the key factors involved in any proposed merger with the world’s largest business applications vendor: 

• SAP’s market cap is $63 billion.  Microsoft would be an expected suitor.  It has the money.  The antitrust issues would require Herculean efforts and thus make such a combination unlikely.

• Google could afford it, but the corporate cultures are so divergent that this is a limiting factor.

• IBM seems to be the one.

Barrett cites Peter Goldmacher, an analyst with Cowen & Co.

“As big as SAP is, they're becoming a niche vendor and I think Oracle is hurting them and hurting IBM.  Both of these guys need each other.  And there's not a better fit. You'd have the No. 1 applications company and No. 2 database company competing against Oracle, which is No. 2 in applications and No. 1 in database.”

Does anyone really think that Oracle’s Larry Ellison will just sit idle and watch this all happen?  To read an interesting article and get a sneak peek at what other types of companies have caught the eye of Venture Capitalists as well as the large enterprise software companies check out Larry Barrett’s article in InternetNews.com.

• Email This
• Print
• Comments
• Trackbacks (1)

SAP acquired business intelligence (“BI”) software developer, Business Objects, for $6.7 billion.  This is the latest of acquisitions in the BI space.  First there was Oracle’s purchase of Hyperion for $3.3 billion.  This was countered by Business Objects own $300 million purchase of Cartesis S.A.  Business Objects’ software provides the means for companies to analyze their competitors decisions as well as their own.

SAP’s CEO, Henning Kagermann, emphasized during a press conference that the value added to its customers will come through its real-time BI which will strengthen the decision process.

Ovum Research's David Bradshaw and Helena Schwenk commented:

"Another factor is the business growth that SAP can get from the combination. Large suppliers are attracting an ever-larger share of customer spend, as customers try to reduce the number of suppliers to bring some order to their IT buying. In some accounts, the purchase might turn SAP from being an 'also ran' into a strategic supplier."

In addition, they noted, the acquisition "will bring both data extraction capabilities and market-leading front-end query and reporting tools, complementing parts of the NetWeaver BI stack," referring to SAP's cornerstone platform that it recently opened up to developers.

To read the full details of the merger read Larry Barrett's article in Internetnews.com.

• Email This
• Print
• Comments
• Trackbacks (1)