Tuesday, October 14, 2008
Good News for Cloud Computing: Nicholas Carr is getting boring
Ryan Nichols
We’ve always been a big fan of Nicholas Carr’s presentation on the Big Switch … he's delivered it at several Salesforce "Tour De Force" events earlier this year, and gave it tonight before a panel in Palo Alto on whether Cloud Computing is “Ready for the Enterprise.”
There’s a lot that we love in Carr’s pitch:
- We love the stats: In the average IT organization, 80% of server capacity is wasted, 65% of storage capacity is wasted, and 70% of IT labor cost is spent on upkeep of legacy applications. Clearly a ripe opportunity to capture the benefits of centralized cloud computing.
- We love the imagery: the image of a huge water wheel, created as a source of major competitive advantage for a steel company, abandoned to rot in the woods just 2 decades later. His message that on-premise servers are on that same path is right-on.
- We love the scope of his talk, with the emphasis on the broader economic implications of cloud computing. Carr points out that what’s most interesting is not the new infrastructure itself, but what gets built on top. The electricity industry itself quickly became a utility… but the market for electric-powered appliances became highly innovative for decades. As a company that builds on the cloud, we love that message.
We were expecting some fireworks in last night's talk: It was sponsored by the German American Business Association, and was hosted by SAP… not exactly the epicenter of cloud computing. And one of the panelists was Steve Lucas, the former head of On-Demand BI at SAP, who recently left to lead the Force.com business at Salesforce.com. Carr himself is a controversial figure, having gone from the IT industry’s biggest foe for suggesting that “IT Doesn’t Matter” to IT’s biggest friend by backing “The Big Switch” to cloud computing.
But there was remarkably little disagreement among the panel, composed of speakers
from SAP, Salesforce, VMWare, and T-Systems: Salesforce, of course, has built its business around the trends that Carr is talking about. VMWare loves the role that virtualization plays in enabling cloud computing providers. T-Systems positioned itself as an enabler of cloud-based applications. Even SAP acknowledged that “we believe that there will be certain edge processes that will be enabled by the cloud,” which is a bold step forward coming from SAP.
My realization? "Boring" is probably a great phase for cloud computing in today's environment. The elephant in the room was this month’s financial crisis, finally raised by the audience in Q&A. “Boring” technologies do well in the enterprise during tough economic times.
Lucas emphasized that Salesforce has a simple subscription model that is going to get more appealing to companies in a recession. When the economy is bad, the last thing a company wants to do is write a big, difficult-to-justify license check. He quoted the CIO of a financial services firm he met with in New York in the midst of last week's financial crisis-- “We’re looking at Salesforce because we need to better leverage our IT investment. We have 88,000 servers in our organization, and want to reduce that number.”
Is cutting servers boring? Maybe. But good for customers and, ultimately, the cloud computing ecosystem.Labels: Cloud Computing, Force.com, Nicholas Carr, on-demand, SaaS, SAP
Wednesday, October 01, 2008
Cloud Computing - It Ain't Over Til It's Over
Narinder Singh
Recently, a plethora of attempted clarifications (such as those seen in the Wall Street Journal and Information Week), confusion, and even an angry Larry Ellison rant in CNET News have weighted in on the latest hot topic, "what, exactly, is 'cloud computing?'" But the increasing volume level says more about the medium of the argument and the participants, than the it does about the topic's essence. Really, it's just insider talk among "thought leaders" and tech companies, which likely leaves Main St. CIOs scratching their heads.
Let's not focus on the semantic question of "what is cloud computing?" Instead, let's shift to "what your company should do." The wit and wisdom of Yogi Berra seems appropriate as a guide to help explain the causes of the perfect storm around cloud computing.
"The future ain't what it used to be"
Just a few years ago, many predicted the tech industry, and particularly business software, would go the way of the auto industry. A few gigantic players would survive, around which supplier ecosystems would develop. However, innovative providers discovered that if they ran all their customers' systems on a single multi-tenant instance, they could achieve huge advantages - hence the advent of on-demand, Software-as-a-Service (SaaS), and Platform-as-a-Service (PaaS). These providers were able to rapidly develop and innovate for their entire customer bases.
As this market matured, customers discovered that SaaS provided a better functional fit, it was faster to rollout, and it was generally more accepted by end users. Inevitably, if you spend more time on strategy, requirements, business process and adoption, while spending less time on hardware, operating system configuration, software installation and configuration, you end up with projects that better meet business needs.
The future of how businesses used technology was changed forever. Although this is now widely understood, we are still very early in terms of impact on IT and business. This set the stage for the current attention and debate surrounding "cloud computing."
"If you can’t imitate him, don’t copy him"
Cloud computing confusion is sometimes sown intentionally - because of vendor envy for missing the buzz. Large on-premise companies know they have missed the "news cycle" for something that has the powerful combination of hype and reality on its side. So they try to re-spin existing terms in order to re-assert their leadership, leading to interesting tricks like Larry Ellison, Oracle's CEO, cleverly deriding the term "cloud computing" as overused, while simultaneously wrapping the Oracle seal around it.
"Our similarities are different"
While on-premise laggards attempts at catch up fuel their interest in the cloud, successful SaaS companies have an equally compelling, but very different rationale for promoting "cloud computing." They know they have a winning value proposition, but, relatively speaking, a small part of the market dialogue. They fear a repeat of the past - where SAP, Oracle, IBM and Microsoft hijack leadership around an important market trend (see the browser, java, B2B/SOA, open source) that they've been living and breathing for years.
Happily, this spin has the added benefit of being true (which is always a plus!). The consumer Internet has conclusively shown the power of collaboration. Now businesses want to be unshackled from the constraints of legacy software that was designed to be physically and emotionally closed.
"You can observe a lot by watching"
With both the laggards and innovators supporting buzz creation around "cloud computing" the race is on. Will clarity or confusion rule the day? Businesses are looking at cloud computing (which for today we'll assume to be a superset of all SaaS, PaaS, and on-demand solutions) as a way of doing things that had never been done beyond their four (virtual) walls. Unfortunately, too many vendors are simply trying to tie the movement back to their past strengths so that any change is incremental.
1. Use the cloud computing hype to discuss broader related changes in your organization. The business press is saying that "business must think differently about IT." This is a real chance to focus broader discussions around cloud computing into the very real, concrete benefits of SaaS/PaaS/etc.. Appirio launched Business Model Prototyping to jump on this opportunity. We think companies can use SaaS/PaaS and other learning from the consumer Internet to dramatically reshape their businesses.
2. Start with the concrete. The "cloud computing" discussion makes for good blogging, but it's not directly helping your business or feeding your kids. Real impact comes from translating the trend into action. Do this with projects that prove quick value or clear measurable milestones in a slightly longer journey, and highlight a sharp contrast with the old way of doing things.
3. Force vendors to be specific and timely. We'll be seeing lots of vendors starting to parade their products and services under the banner of cloud computing. We'll see more arguments over what cloud computing is, and how to understand it. Customers cut through the hype by forcing vendors to be specific in how they will help, where they will help, and on what timeline. Force discussions around initiatives that have a quick time to benefit and very clear milestones. Protect your company from being a victim of hype with low hopes for success. As Yogi Berra supposedly once said, "If you don’t know where you’re going, chances are you will end up somewhere else."
Labels: Cloud Computing, on-demand, PaaS, SaaS
Thursday, August 28, 2008
Lawson CEO: "Traditional software is like cocaine — you're hooked"
In a mind-numbing interview with ZDnet, Harry Debes, CEO of ERP vendor Lawson Software, demonstrates why the traditional enterprise software market is overdue for disruption. Debes' remarks show how little care and understanding legacy on-premise vendors have for their customers, and how poorly suited they are to help businesses address today's challenges. Is this really how traditional software executives view their customers? Ordinarily, we'd ignore the musings of an executive whose company has destroyed massive shareholder value over the last 7 years - Lawson shares have lost nearly half their value since its IPO. But Debes' lack of awareness of the trends surrounding his market and the reality of what customers experience rivals that of telegraph executives trying to understand the implications of phones. Actually, Debes' cluelessness more brings to mind the infamous image of those cigarette CEOs telling the U.S. Congress that their products don't harm customers.
So here they are - Exhibits A, B, C, D, E, and F for why we founded Appirio, straight from the mouth of Lawson CEO Harry Debes:
"It isn't about locking people in. People lock themselves in. Traditional software is like cocaine — you're hooked. It's too difficult and expensive to switch providers once you've invested in one. If it were easier to jump ship, a lot of people would've hit the eject button on SAP a long time ago." In a moment of candor, the best comparison to on-premise software the Lawson CEO can think of is cocaine. Enough said. We'd laugh, until we'd remember what a painful drain this is on the productivity of real customers. The notion of lock-in was a central theme of why Appirio's first blog entry back in 2006 argued that every company must have an on-demand strategy.
"Getting signed up as a SaaS customer is fast, but getting out is just as fast." Switching costs are lower for SaaS applications. This key feature has fueled the massive customer interest in SaaS. But the biggest application switching costs have more to do with business change than what you're paying the vendor. Companies adapt their business processes based on what their software can do. The idea that SaaS vendors will see their customers switch month-to-month, chasing lower prices, is ridiculous. Vendors keep customers by demonstrating value. This may be a foreign concept to Debes, but the cornerstone of stable relationships in any field, business or personal, is mutual benefit to both parties - not addiction.
The reality is that Salesforce.com has much higher than average customer retention: 94% of its customers say they'd refer the company to a colleague, 74% of its customers say they have already done so. These figures are twice what most on-premise software vendors are seeing. SaaS solutions tend to be good because they have to be, to keep customers. On premise software can afford to treat customers as addicts - at least for the short-term, until the customers kick the habit for good.
"The success of Salesforce.com, in my opinion, has to do with their product being good, not because it's SaaS."
Salesforce.com is good BECAUSE it's SaaS. You can't separate the two! Consider the plight of a beleaguered Lawson product manager, trying to figure out how to improve the product. Invite a few customers into a lab and watch them work? Spend a day at a customer's office asking questions? Maybe they can peruse error reports "phoned home" by software to headquarters. The product manager then struggles to translate this anecodotal feedback into requirements, and plan the next release - which likely isn't for a year or two, since massive upgrade costs mean customers can't handle more frequent updates.
This process is a key bottleneck to the rate of innovation for on-premise software. It's nearly impossible to know if certain changes will make the product better or worse. The result - bloatware, as product managers add features based on what's going to look good on a feature sheet, without really knowing what customers will actually use.
Now look at the happy life of a SaaS product manager. After launching a new feature, they get immediate, direct feedback on real-life usage patterns. They see what works and what doesn't. They can even launch two versions of a feature to see which works better. Their development teams can fix problems instantly, without having to issue patches or service packs. In reality, early users of Salesforce.com would have had a hard time calling it a "good" CRM package when it was first released. But today, it is great. The rapid rate of improvement is a direct result of the SaaS model.
"SaaS is just a financing option for the customer... This is something I've lived through three times: first it was called 'service bureaux', then 'application service providers', now 'SaaS'. But it's pretty much the same thing." Sorry, Mr. Debes, but you're wrong. SaaS is far more than a "financing option," and it's fundamentally different from the models that preceded it.
- Economies of scale: The TCO benefits of SaaS go beyond the initial pricing model. There are real cost profile differences between a customer versus a vendor owning IT infrastructure. The benefits scale as SaaS grows. Google offers an online productivity suite for free, because the incremental cost to Google is near zero. Microsoft couldn't change this equation even if it gave Exchange and Sharepoint away for free, because a customer would still have to invest in the infrastructure required to run these on-premise applications.
- Multi-tenancy: The ASP "hosting" model was based on single tenancy - a separate copy of the server for each customer. By contrast, putting all customers onto the same code base gives the vendor economies of scale and allows them to deliver rapid innovation because they build on a single platform. Traditional software vendors wrestle with the nightmare of managing, enhancing, and testing multiple versions of their software, then porting everything to various hardware and OS stacks. Multi-tenancy virtually eliminates the single biggest cost to the customer in all of enterprise software - the dreaded upgrade. Salesforce.com and Google have released dozens of major releases without ever forcing their customer to re-implement, re-test or re-set their business processes.
"People will realise the hype about SaaS companies has been overblown within the next two years....then, the rest of the SaaS industry will collapse. The hype is based on one company in the software industry having modest success... People are stupid."
McKinsey reports that three-quarters of software buyers say they are "favorably disposed to adopting SaaS platforms" for software development and deployment, and that they will dedicate 19% of their total software budget to applications delivered as services this year. Are they stupid?
How about Silicon Valley venture capitalists? When's the last time you've seen them fund an on-premise software company? Are they all stupid?
Let's reflect for a moment on who is actually "stupid." Over the past five years, Salesforce.com shareholders have tripled their money, while Lawson shareholders have watched their shares under-perform the market. After reading Mr. Debes' interview, many may come to their senses and bring in a CEO who doesn't see himself as a cocaine dealer. After Debes remarks, the most interesting open question is who will file the first lawsuit, his shareholders or his customers...
Labels: investors, Lawson, on-demand, on-premise, SaaS
Wednesday, July 09, 2008
Microsoft to Partners: We Still Don't Get SaaS
Chris Barbin
The on-premise titans trying to transition to on-demand face considerable challenges, well-documented in this blog and elsewhere. One of the most significant mistakes companies make trying to transition is pursuing a "hybrid" strategy. We've watched SAP and Oracle stumble into all sorts of problems trying to seek the middle ground, and now it seems Microsoft wants to join the party. Recently we were invited to listen to Microsoft's new CRM pitch , designed to recruit existing Salesforce.com partners. The pitch centers on a benign-sounding notion, the "power of choice" (see screenshot at left). Microsoft's lack of a choice (on-premise vs. SaaS) is the core issue. Choice when used in the context of technology architecture typically points to a vendor with a conflicted or transitional strategy. They're not quite ready to make the full commitment, so they spread their attention, development, marketing, and operations resources across fundamentally different paradigms.
What is deemed a choice actually represents a company trying to provide two conflicted models. Would you expect the company who sold you a backyard well to be able to offer a water utility? Would you expect the company who sold you a diesel generator to be able to offer you the benefits of a utility company? Nick Carr did a good job exploding the general myth of "choice" as an alternative to "progress" in The Big Switch, where he extends the electricity analogy to the current age of IT technologies.
We recently blogged, and were quoted in eWeek, saying that companies like Microsoft build "physically and emotionally closed solutions." This makes them unable to meet the challenges of tomorrow's enterprises.
A sign of this and that a company doesn't get SaaS is when it positions on-demand as a transition path to on-premise. This usually means:
- They are trying to not completely freak out their sales and management teams with the notion that their SaaS offering will cannibalize their traditional software.
- Their SaaS feature set is way behind their current on-premise product.
- They don't want a customer to think they made the wrong choice in selecting their on-premise product last year.
- They still don't get what SaaS means for their products, sales, operations and culture.
Microsoft was so brazen as to promote a financial incentive for partners who help customers move from on-demand to on-premise. Microsoft evidently considers this customer ripoff to be an "Opportunity for Success" for its partners (see second screenshot).
Again, the analogy to other utilities is useful: if a company tried to sell you the benefits of their electric or water grid as a "transition" to a bigger and better backyard well and generator, you'd have reason to question their commitment and ability to deliver the promised utility.
What could be more illustrative of this than Microsoft's attempts to put thin web front ends on on-premise solutions? Look at the screenshot below. This solution is really nothing more than diesel generator hooked up to a electric grid and pretending to be a utility (although this solution is apparently good enough for some other companies 'committed' to on-demand). At best this type of solutions is a stop gap measure; more likely, it demonstrates a lack of understanding for what is required to deliver SaaS to tomorrow's enterprise.
Labels: Google Apps, Microsoft Exchange, on-demand, oracle, SaaS, SAP
Thursday, May 29, 2008
Connecting the Cloud, One Contact at a Time
Ryan Nichols
Most businesses ultimately depend on personal connections. Business people would be lost if they couldn’t connect everyday with the contacts in their address book. And businesses wouldn’t function without the rich web of connections among their employees, partners, suppliers, and customers. But your company’s contact database is almost certainly incomplete. Despite periodic reminders from management to “scan those business cards” and “import those contacts,” most people can't find the time to maintain this information unless they are forced to, regardless of the benefits to the company. Your personal address book is also incomplete. Sure, you may have a rich virtual rolodex of names, mobile phones, and email addresses, but you can't see how this person is related to your business right now.
- Imagine you’re writing a casual email to reconnect with a former colleague—who happens to be in the midst of making a big purchase with another department in your company. What if you had this sort of business context at your fingertips whenever you communicated?
- Now imagine that your company’s sales reps knew about this connection as they were putting together their proposal. You would have been happy to make an introduction—if they’d only known to ask.
As with our other offerings, we’re starting with simple synchronization—you choose which of your contacts you want to share, and how you want them synchronized between your Google and Salesforce address books. This is a valuable start. Today, your Google email account automatically stores the email address of everyone you’ve ever written to, but knows nothing about their companis or roles. Your Salesforce.com contacts are detailed, but you’re missing hundreds of critical business connections. Synchronizing the two solves a real pain point that we hear from our customers today.
Contacts in Context
Sync is just the beginning. Appirio's vision is to bring the business context from all of a company’s on-demand enterprise applications into the productivity tools and social networks that individuals use as they work. We want "Solutions for Business" + "Solutions for People" to finally create "Solutions for Business People."
Contacts is the center of that vision, and sync between Google Apps and Salesforce is a great place to start. Enjoy the offering!
Labels: AppExchange, appirio, Google, Google Apps, on-demand, SaaS, SaaS integration, Salesforce for Google Apps, salesforce.com
Friday, May 02, 2008
Business by Delay - On-premise and on-demand are like oil and water for SAP
Narinder Singh
This week's announcement that SAP has delayed the rollout of its hosted midmarket “Business ByDesign” offering, and reduced expectations for the product, shed further light on the difficulties that on-premise software companies will have in delivering software as a service.
It's not that SAP leadership doesn’t “get” the opportunity, or isn’t “smart” enough to capture it. I spent three years in the Office of the CEO and know better. But it takes more than smarts to overcome fundamental conflicts between the traditional enterprise software business model and the on-demand business model. Many lessons only come with experience in the market, and SAP's approach to try to build it all at once (as explained by SAP founder Hasso Plattner in his debate with Marc Benioff) is completely off the mark.
For example:
- SAP locked 1,000 German engineers in an offsite location for five years to develop Business ByDesign. This follows the traditional model for building complex enterprise software. Software-as-a-Service (SaaS), on the other hand, allows, and flourishes with, continual refinement based on customer usage. This affects every aspect of the development lifecycle.
- SAP built a system that was service oriented by design, but service delivery was an afterthought. SAP has never been in the service delivery business - this is an entirely new core competency, which happens to be at the core of how Salesforce and Google create value.
- To avoid cannibalization of its core products, SAP has tightly restricted the target market for ByDesign to a narrow set of geographies and industries. Successful SaaS solutions, on the other hand, are adopted by the marketplace in a bottom-up fashion and spread virally, leading to surprising adoption patterns that result in new opportunities, such as Salesforce being used for Service and Support.
This week's announcement is bad news for SAP—they’ve spent the last 2 years validating the potential of the SaaS market and now have to admit that it is far more difficult that then they anticipated to capture this opportunity.
Maybe SAP should take Benioff up on the challenge that he issued to Hasso at the Churchill Club, and build their next business application on Salesforce.com's Force.com platform. After all, SAP’s core expertise is business processes, not in the technology or infrastructure required to deliver software as a service.
Labels: business by design, on-demand, SaaS, SAP
Thursday, March 20, 2008
What Do Open Source and On-Demand Have in Common?
Chris Barbin
What Do Open Source and On-Demand Have in Common?
They both keep Steve Ballmer awake at night? Nope, too easy. They both changed the game in enterprise software? True. But the most interesting answer is "community" - they are both driven, and advanced by, the power of the community that surrounds them.
This power was one of the topics raised at this year's Dow Jones Web Ventures conference held earlier this week, where Appirio joined Vauhini Vara of the Wall Street Journal and Salesforce.com president Steve Cakebread onstage.
(Interesting side note: Steve Cakebread is not only president and Chief Strategy Officer at Salesforce.com, but also a Salesforce.com user, and the system administrator at his family's well known wine business - Cakebread Cellars. It's a testament to the simplicity of Salesforce.com that the same platform can serve both a 60,000 person company like Japan Post, as well as a 50-person SMB shop like Cakebread Cellars.)
We joined Steve and Vauhini onstage to discuss how we're using the Force.com platform to create custom SaaS applications for enterprises like Dolby Laboratories and CRC Healthcare. The questions during Q&A focused mostly on core topics - about a potential recession, whether hybrid vendors like Oracle and Microsoft will succeed in on-demand, why Salesforce is betting on the platform play versus offering more applications, etc.
One of the most interesting questions - the one prompting this blog - came from an audience member who asked, "How does Salesforce take user feedback into consideration when developing their platform?"
Steve said that Salesforce.com is giving the community - users, partners, customers, prospects, developers - a public forum where they can share their ideas and suggestions and implementing a process to take action. Salesforce has created an on-demand product called Ideas to create this forum that turns ideas into action. It ranks the most requested suggestions, which they then incorporate into their own product development. They also use it to encourages their partner community, including vendors like Appirio, to address the other ideas that don't make it into their own development cycle. Salesforce Ideas is now being implemented at other companies, like Dell and Starbucks.
This illustrates a fundamental shift in how product development, IT and enterprise software organizations operate now. Taking a page from the open source model, smart companies like Salesforce.com, Amazon and Dell are tapping into the community to drive innovation internally. The Internet has given them the means of collaboration. Each of these companies focuses on transparency, openness and getting rid of the "not invented here" syndrome.
We like to say here at Appirio that you have two ears and one mouth for a reason - you have to listen to your customers if you're going to win and keep them. It's nice to see that we're in agreement with the leaders in our industry.
Labels: IDeaS, on-demand, open source, SaaS, salesforce.com, Software as a Service, VC
Thursday, March 06, 2008
Can Google Bring Enterprises Together?
Mike O'Brien
Last week marked the official launch of Google Sites, a web-based collaboration service that has been lovingly dubbed by some as the "Sharepoint killer." It lets you pull together information from across Google Apps to create customized company intranets, team sites and more. It's the reincarnation of JotSpot, which Google acquired over a year ago, with a few new twists.
Appirio has been using JotSpot for over a year as our employee intranet and knowledge base, using it as a way to disseminate information and best practices, document processes and methodologies, ramp up new hires and archive content. It has become an enormous corporate asset for a company like Appirio that has employees and consultants distributed across the U.S.
We're excited about the progress of Google Sites, but rather than review the new features or the pros and cons of the service, we'd rather highlight what this type of collaboration service means for enterprises and why on-demand collaboration is so compelling.
It's clear that approaches to collaboration inside enterprises have not had anything close to the same level of success as social networking sites for consumers. Why is that? People like to interact with other people. They like to do less work to be more productive. Yet despite these core truths, enterprise-based collaboration tools lag far behind the maturity and growth of sites like Facebook, mySpace, Digg and others.
We believe that if enterprise collaboration services shared some of the same characteristics of these successful social networking sites, we'd see a lot more progress.
- Keep it simple, stupid - On the whole consumers migrate to things that are intuitive. We want products that give you the features you need, without going overboard or making things overly complicated. No site represents this better than google.com. By making this so simple and intuitive, even the slightest change can draw substantial attention or mindshare from the user.This is where Google shines and it's very different from the way most enterprise collaboration tools have been built in the past. In the enterprise software world more attention is often given to the number of boxes you can check on an RFP response than to the actual user experience.
- Make users WANT to be there - The beauty of social networking sites is people actually want to be there. How many people can say that about Sharepoint? By making it easy to embed photos, slideshows and videos using services like Picassa and YouTube, employees are more apt to come to and stay on the site. Also, make it easy to update and navigate. Team collaboration may not always be FUN, but it should never be painful.
- Leverage the "wisdom of crowds" - The 2004 book by James Surowiecki describes how and when the collective intelligence of the "crowd" is far superior to that of any individual. The Internet is the ultimate enabler of that. eBay, Digg and other sites actively harness that capability every day. As a result, its critical to be able to embed services from across the Internet. That is one way Google Sites (embed any web gadget), Facebook (embed any application) and others become so powerful so quickly.
- Apply the network effect - The success of social networking sites correlates to size of the user community (wisdom of crowds) and the volume of interactions (e.g. Twitter). The same could be said for intranets or team sites. The more information and interactions happening on these sites, the more valuable they become. Google gets that, which is why their sites can be easily networked and searched, why users are encouraged to create their own sites, and why Google's marketing is often aimed more at the users themselves than IT departments.
The Cloud Inside the Silver Lining
Google Sites is making a lot of progress in the areas above. However, there are several things that CIOs and IT departments need to be conscious of before they deploy Sites or other collaboration tools like it in the enterprise. First is that these tools are going to get used whether you sanction them or not. Google Docs, Spreadsheets, Presentations and now Sites will emerge from the ground up. Understanding this can help plan and integrate natural momentum from a business user's consumer side influences.
Also, the easier it is to create sites the more employees will want to create their own. Google Sites encourages this, which may be a conscious decision to employ the network effect. However, it can create "pockets of knowledge" and reduce the impact of having a single, comprehensive site. The Internet tends to empower the end user not the IT administrator. The only way to get ahead of this in the enterprise is to do what good Internet sites do - become the most relevant site for the user. Creating relevant content, integration and awareness of a core set of capabilities makes it less likely that end users will stray into unsupported territory.
The Internet is the future of collaboration - whether it occurs inside or outside the enterprise. The innovative business that wants to drive productivity through collaboration must embrace this change to create a passion for working together.
Labels: Google Sites, JotSpot, on-demand, SaaS, social networking
Monday, March 03, 2008
Insights and Observations from the Pacific Crest On-Demand Conference
Narinder Singh
Last Thursday we had the pleasure of participating in the 3rd Annual Pacific Crest On-Demand Conference, the kickoff to Pacific Crest's Emerging Technology Summit. Salesforce.com CEO Marc Benioff invited us on stage during his keynote to illustrate how partners can harness the power of the Force.com platform, Visualforce and the AppExchange.
The participating companies covered the spectrum from large on-premise software companies such as EMC and SAP, who were describing their expansion into the newest "hot" market, to companies such as NetSuite, Salesforce.com and SuccessFactors that have built their business from the ground up with Software as a Service.
Interestingly, a number of companies there are in the process of trying to radically shift their business model from on-premise to on-demand, and they talked about the challenges. Most of these companies were small and nimble, which enabled them to make the transition cold-turkey. All were very clear that it wasn't an easy switch to make.
Can Companies Have Their SaaS Cake and Eat It Too?
Can companies successfully split their focus between traditional software and on-demand services?
This is a question we've been raising, skeptically, for quite some time in our blog. Our original Services 2.0 position paper in April 2007 described how the disruptive effects of SaaS will impact the economic models of on-premise software vendors. After a year of additional information and insight, it's even more apparent that treating SaaS as just another channel or product feature is a recipe for failure.
Spending a day with companies that have, or are attempting to make the switch from on-premise to SaaS reinforced the major challenges. IDeaS CEO Ed Booth gave a great presentation highlighting the challenges and upside of moving to an on-demand model. Concur Technologies has often been referenced as the best example of a company that successfully made the transition. Some issues raised by them and others included:
- One-time revenue hit: How do you manage through the decline in revenue growth when you move from an up-front license model to a monthly subscription model? With Wall Street and shareholders as panicky as they are today, this is a very difficult proposition for large public companies. Upfront licensing, even with longer term contracts, can drop by as much as 75%. As the Patricia Seybold Group has noted, As a company moves from perpetual licensing - where customers pay a relatively large, one-time licensing fee - to SaaS - where customers pay a relatively small, monthly license fee - financial performance slips in the short-term."
- Internal channel conflict: How do you manage the channel conflict that happens with your own partners, and even your own sales force, when offering both traditional license and on-demand software? Companies like EMC, with established business units focused on driving demand for SaaS or cloud computing, will have a serious challenge with this. The most reliable solution is to completely separate the businesses - which eliminates any synergy of having both models in the same company.
- Shifting to a "month by month" culture: How do you change the way you sell to and support customers when you have to earn their business every month instead instead of every few years when the next big version comes along? This is a huge cultural change for sales and support teams to make. SaaS companies require the culture of the web - where sites like eBay, Amazon, Google and others constantly monitor, serve and improve their customer's experience.
- Speeding up R&D: How do you adapt your product development processes to deliver an on-demand service? Successful on-demand vendors get the benefit of releasing new features quarterly, not every two or three years. When features are released, they are expected to work with other systems indefinitely. Salesforce.com still supports each of its 12 versions of its API. How many on-premise vendors can claim anything even close?
EMC, SAP, Microsoft and Oracle make it clear to customers and stockholders that their foray into SaaS or cloud computing is not a departure from their software strategies, but an expansion of it. They say things like "SaaS is just another delivery model," or "we're giving customers a choice." Yet they keep increasing the on-premise maintenance fees. SAP just increased its maintenance rate from 17% to 22% per year - an increase of 30%! This leads to one of two possible conclusions:
- The cost of supporting a growing legacy of capabilities keeps increasing, which eliminates the benefits of on-premise scale. Compare this to any internet company, where increased scale lowers cost and results in expanded services for customers.
- They are taking advantage of customers' inability to easily switch off of their on-premise software.
Traditional software companies - especially large ones - will certainly have to straddle the fence for a while. Yet the doubletalk and denial will not help in the transition. First, they must acknowledge the need to make a transition. Second, in many cases, dramatic actions, like separating SaaS products into completely independent business units or taking companies private to allow for transition, will be needed to make the change. It's likely that legacy companies will not switch until customers stop tolerating increasing TCO and diminishing innovation from their on-premise systems.
Labels: AppExchange, Concur Technologies, EMC, Force.com, IDeaS, on-demand, Pacific Crest, SaaS, salesforce.com, SAP, software-as-a-service
Monday, February 25, 2008
Adobe and Salesforce - A Fine Blend of Art and Science
Chris Barbin
Application development is a unique combination of art and science. Today’s announcement from Salesforce.com and Adobe introducing the free Adobe Developer Toolkit for Force.com is a good example - combining Adobe’s deep understanding of design with Salesforce's powerful platform-as-as-service model so developers can build innovative and visually appealing on-demand applications.
The Adobe Developer Toolkit is a new set of tools and services that streamline the process of creating customized rich user interfaces for delivery via the web. It allows developers to create on-demand applications that work without an Internet connection. The toolkit connects Adobe’s Flex and AIR (Adobe Integrated Runtime), two of the leading rich internet application (RIA) environments, with Salesforce's Force.com platform. This gives Flex developers access to the Force.com web services APIs, so they can make data in a Force.com database available offline.
CIOs and development organizations need to deliver users a wider set of on-demand applications that require very rich client interfaces and/or offline functionality. These have traditionally been two of the biggest challenges for developers of on-demand applications.
Appirio has been an early adopter of various front end on-demand development paradigms, including Adobe Flex and Visual Force. We use these technologies in a number of ways, for example:
- To create user interfaces for call centers - where a high volume of calls means that saving a few clicks can add up to thousands of hours a year
- To develop interfaces for the iPhone - where the user expects a very specific interaction style that works the same as other applications
- To design custom applications for a very specific purpose - like the cinema management application we have written about previously
- Even to create applications for our own internal use (yes, we eat our own dog food here) such as our Professional Services Automation (PSA) application
The Appirio Professional Services Automation (PSA) application enables professional services organizations to track, manage and reconcile a large collection of projects. Appirio originally developed the PSA application to visualize and manage our various projects, resources, timelines, skills and assignments, and at the time there was not a native Force.com application available on AppExchange that offered these capabilities. While you could use Force.com to manage the respective data, workflows and reports, Flex was what enabled us to create a single visual interface that could both increase individual user productivity and provide clear visibility into the status of projects.
This Flex-based scheduling tool brings our PSA, which is built entirely on the Force.com platform, close to functional par with pure-play on-demand PSA vendors at a fraction of the price. This neat little component (shown below) lets managers drag-and-drop projects, lay out an entire consulting team's assignments on a single color-coded grid, and double-click to drill down for more details. This makes consulting managers more productive - and smarter. If the result is just an increase of a few percentage points in utilization, the financial payback will be dramatic.
Here are a few screenshots of the Appirio PSA application and our Salesforce interface on the iPhone. For those interested in participating in the current beta program for our PSA application, please contact us at beta@appirio.com.
Screenshot #1: This is a high-level view of our PSA application, which lays out the entire consulting team's assignments on a single color-coded grid.
Screenshot #2: This view of the PSA application shows how individuals and managers can double-click to drill down for more detail.
Screenshot #3: Example of a Visual Force application on the iPhone showing the apartment floor plan for a real estate agent.
Labels: Adobe Flex, appirio, Force.com, iPhone, on-demand, Professional Services Automation, SaaS, salesforce.com
Tuesday, December 19, 2006
Understanding the Difference between On-Premise and On-Demand Software
It’s difficult to touch, feel or smell enterprise software. It in a package, but definitely not one that has a bar code and a price on it. When we ask "what does it do," we’re asked in return "what do we need it to do?" Sometimes, the same question applies when one asks "how much does it cost." This sales approach, combined with zero marginal cost for the provider, results in the software industry being fraught with idiosyncrasies. In such an industry, one of the tools all of us use to understand the ethereal notion of enterprise software is the analogy. While analogies can never prove a point, they help frame our view and make software more concrete in our minds.
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Below we have taken a look at some of our favorite (hopefully humorous) analogies for On-Demand and On-Premise software. Yet there is a more serious point - your approach to solving business problems with technology is often about how you frame the question.
The past several years on-demand software has empowered line of business owners to sucessfully deploy siloed applications. Yet for CIOs, today the question is not how you wrestle back control, but how to embrace on-demand, allow lines of business to pursue their efforts, and manage the overall adoption of the technology in the business.
With that, we hope you enjoy some of our favorite entertaining analogies that frame the difference between on-demand and on-premise. In addition, we welcome you to add to our list.
Enterprises choosing on-premise software are like teenagers getting married. It’s not what you thought it was going to be, there are all sorts of unexpected costs and divorce (think "upgrades" or "migrations") are both painful and inevitable. That’s why teenagers should focus on dating (on-demand)?
People try to compare on-Premise and on-demand to buying vs. leasing a car - as if either preference were equally valid. This analogy would be true if, when buying a car, you needed to take a special class that cost twice the price of the car, and every 3-4 years the car's engine would require rebuilding while in motion; while when leasing a car, gas and insurance were included.
But isn’t it true that at some scale, its just more cost effective to buy software and manage it yourself? Sure, I think that was right under the headline of Wal-mart buying old nuclear reactors to provide power to their stores.
Long term contracts, uncertain performance and costly upgrades? Hmmmm, you're talking about either on-premise software, or the New York Knicks.
Security, quality control, our large size, the need to customize things for our unique needs and the cost of buying things each month… those are the top reasons for using on-premise software... or deciding to buy seeds and grow all our own food.
Labels: on-demand, SaaS, salesforce.com, Software
Wednesday, December 13, 2006
IT Management & Governance In an On-Demand Model
The IT landscape for Salesforce.com customers is quickly growing complex. With over 400 applications on the AppExchange today – with projections of 1,000 by late 2007 – and the upcoming Winter '07 release and the Apex programming language, sound IT management and governance practices are essential. In the past, a single application such as SFA or Service & Support was manageable for a line-of-business leader or an aspiring IT professional. They could gather requirements, build a business case, sell internally and then implement. With the increasingly complex platform now offered by Salesforce.com, where customers have access to applications, extensions, API’s, partners and the platform itself, determining the tradeoffs among building, buying, and partnering requires a thoughtful and collaborative approach among the business, IT, and the Salesforce.com community.
Some Appirio customers have recently completed extensive application and server rationalization exercises as part of the launch of an on-demand strategy. Inventory analysis is a great first step towards on-demand portfolio management, and uncovers a number of obvious opportunities to migrate on-premise applications to the on-demand model. Many traditional project and portfolio management principles apply, but in the on-demand world there are four key strategies for CIO’s to apply:
- Centralize the Approval Process. All new IT project requests should flow through a single, cross-functional, company-wide approval process with common selection criteria. In the past, on-demand software vendors have thrived by working around traditional IT, which creates redundant projects, additional costs, and inefficient use of resources. Under this decentralized model, many departments (often including IT) are finding, promoting, and implementing siloed on-demand applications that solve a specific problem for that particular department, but perpetuate vendor bloat, cost creep and integration headaches. Further, many existing Salesforce.com customers and their IT departments may not be aware of the capabilities and benefits of the AppExchange platform. To take advantage of the benefits of a true on-demand platform, CIOs must have the business, IT, Salesforce.com teams in sync. The CIO should be aware of all projects currently in queue, and knowledgeable of the end-to-end platform capabilities. This linkage is essential to driving adoption, integrating the user experience, ensuring corporate buy-in, and keeping costs down.
- Apply Early Adopter Factors. Let’s face it, we are in “early adopter” territory: standardizing an on-demand platform for a company with thousands of users, hundreds of legacy applications, complex business models and an “on-premise” mentality.. Along with the benefits of the on-demand model, there are inherent risks, with few end-to-end enterprise class success stories today. The development methodologies and assets are far from mature, and for every ten integration challenges, there are twenty solutions presented. Based on the evolving nature of on-demand platforms and applications, CIOs are well advised to estimate timelines somewhat longer than rollouts of a single application, and to anticipate increased costs associated with training, development, integration and data cleansing and migration.
- Keep Up with the Upgrade Roadmap and Partner Ecosystem. Remember that when you use on-demand vendors, your software is automatically upgraded with each new release. New partners and applications appear on the AppExchange every day. In short order, enterprise customers can expect features that they were planning on building to show up in new releases, and will notice applications that they were expecting to buy to show up on the AppExchange or other marketplaces. CIOs making the platform decision should demand early visibility not only into traditional product roadmaps, but also ISV and SI applications. Specifically, power users and CIOs should find out which applications are actually being used - particularly in large deployments of more than 1,000 seats - and how they are scaling in terms of volume, security, integration, and usability. This information, and the ability to talk directly with other companies making similar investments, will have a direct impact on a CIO’s make, buy, or partner decisions.
- Salesforce.com is Not Just for Sales. Education, awareness, and sponsorship are critical. While it seems obvious to those of us who ”get” on-demand vendors like Salesforce.com, most executives, functional leaders, and even salespeople, do not understand the future direction and capabilities of the AppExchange platform. The notion of building an application development platform using an on-demand model is new for most people, and it takes awhile to fully appreciate the profoundness of this change for typical IT operations. To really drive platform adoption across the enterprise, the executive team needs to consistently educate and drive awareness thru sponsorship and active, visible pilots that demonstrate value to end users and the business.
Labels: AppExchange, appirio, cio, on-demand, SaaS, salesforce, salesforce.com
