Old pal, Chris Kanaracus (who covers enterprise software and general technology breaking news for The IDG News Service) has a story in InfoWorld yesterday which is very interesting in that it describes the current dynamics of the enterprise software business.
Just to convolute things, the article is about a recent report from Forrester Research, which describes the lackluster adoption of Oracle Fusion Applications. I get the impression that Forrester is telling a cautionary tale and getting ready to, um, “put out the fire and call in the dogs” where Fusion is concerned. But, really, what were they or anyone else expecting? Take a look at the opening paragraphs:
“Oracle spent years developing its next-generation Fusion Applications and finally put them into general availability nearly a year-and-a-half ago, but some new evidence suggests that it’s been less than successful at enticing customers to move up.
Two-thirds of 139 Oracle applications customers surveyed by Forrester Research said they had no plans to implement Fusion Applications, while another 24 percent said they didn’t know whether they would, according to a new report out this week.
The article goes to great lengths to document how customers are more or less standing pat on their existing systems and waiting for someone else to make the next move.
Well, what did we expect?
The thesis of the report (which I have not seen) seems to be that customers are not flocking to the new, new thing and that therefore Oracle messed up — must be marketing’s fault (Louie, round up the usual suspects.). Much the same critique could be levied on SAP but I am not going there right now because most of what I have to say applies there too.
Rather than being some aberration, this is exactly what you’d expect in a mature market. Think of it from the customer’s side. The old saw that companies spend money for only two reasons — to make more of it or to save it — applies here. Existing customers have the older model of the non-Fusion Oracle applications and they are installed, running and paid for.
In the recession that we’re still dealing with there are many ways to save money, notably by not hiring or laying off workers, that don’t involve spending new bucks to replace what’s already working. There are also precious few ways to make new money and the record corporate earnings gushed over in the financial press stem largely from penny-pinching — layoffs, reduced head count and not investing in the future, which is exactly what Oracle is facing in its customer base. But this is typical mature market behavior even in the best of times. In order to get someone to buy the new thing, your new offering has to be much, much better than what’s already in the barn or nothing happens. So, no matter what Oracle does to promote Fusion, it’s facing an uphill climb.
We don’t have to dwell on the mature market though and the Forrester Report unintentionally shines a bright light on why it’s so important to innovate not just within a product cycle but way beyond it. Our pathological obsession with quarterly results makes it very hard to get out of the box and go beyond the product cycle but that’s what the idea of Blue Ocean Strategy is all about. Dell is a great proof point for this given its recent effort to go private.
Another great example, if you’re not tired of hearing about it, is Salesforce.com. They’re not in the replacement business except for replacing Oracle and SAP legacy systems with their cloud offerings. More to the point, Salesforce has an elongating history of Blue Ocean thinking, of not simply trying to replace old functionality with new stuff that does the same thing but a bit cheaper.
Salesforce still has issues with market adoption of its newer offerings. But notably, customers are trying to figure out how to best apply them, which is very different from whether or not the new items can pay for themselves with cost savings. When companies discuss Salesforce’s Blue Ocean products they’re having very different discussions about what the future holds and how they will encounter it.
So while I don’t think the Oracle Fusion news is very remarkable, I do think it’s time for them and just about every other enterprise software company to do the same — to think about the future and build a bold vision. Their last bold visions are now aging products, today’s legacy systems. Time to saddle up.
I spent the best part of last week cruising up and down Silicon Valley checking in with customers and would be clients. The consensus from this non-scientific survey is that business is better than OK and most people are expecting this year to be the best in a while. Of course there is a cloud—literal and figuratively—to go with that silver lining. After all, we’re bouncing off a long fall to what’s still a soft bottom.
Business is good enough out there that many companies can’t find enough qualified people. Ted Elliott, CEO of Jobscience, sometimes refers to it as a skills gap with many older workers not having all of the skills that newer companies seek. People with all the requisite skills are rare and valuable and Elliott refers to them as “unicorns” because they’re so hard to find and, yes, he’s got and app for that.
While you might say that such gaps are generational and common it’s still noteworthy that a generation ago the gap was between laid off steel workers and service sector job requirements. Today it’s between laid off tech workers and new tech job openings.
Interestingly, if you have a Ph.D. especially in a science or math, there’s no job shortage especially if you like to work at IBM. A recent story in the New York Times said that IBM hires more math Ph.D.s than anyone else in the world. You could have figured that out from all of the patent applications they file.
What’s been interesting to me in the last couple of weeks has been the intersection of big data, IBM’s quest for brains and a recent report from Forrester Research. The report in question is a project led by Phil Murphy titled: “BT 2020: To Thrive In The Empowered Era, You’ll Need Software, Software Everywhere.” I can’t critique it because I don’t have the $499 necessary to read it but I also happen to think that’s right, but what kind of software?
The report talks about the coming reality that software is and will be even more ubiquitous in the future and interestingly it posits the emergence (according to Forrester) of “cloud cartels”—large corporations dedicated to serving the processing and storage needs of the future. We’re talking more about big data than about running ERP in the cloud. With some 22 billion attached devices by 2020 (also according to the report) spitting out second by second data, a lot of processing and storage will go to machines understanding machines.
I can buy all that but what I find harder to internalize is that the short list of winners quoted in the Times story about the report includes “Amazon, Cisco Systems, Google, I.B.M., Microsoft, Oracle and a few competitors.”
While those are all good names the list fails to mention any of the companies that started it all such as Salesforce.com. The report reveals an assumption that though the data center might be moving to the cloud the fundamental software paradigm isn’t changing. But I disagree. In my little corner of reality I think about things that haven’t been invented yet that are going to need all of that processing horsepower. Many of the companies not making the short list have a foot on the ground in the Valley and they are exciting for the novelty of the solutions they envision.
The Times article, and to a degree the report, support the kind of linear thinking that I have always criticized because the forecast looks more like a scientific experiment that keeps all variables constant save one. But in the real world systems are dynamic (yes, IT is a system) and change cascades through systems leaving no stone unturned—exactly the opposite of straight line forecasting.
If Forrester is right, and I think they are but perhaps for different reasons, then much of the processing power in the cloud will not be taken up by mundane ERP and CRM applications but by applications demanding computational answers to figure out what people want and need and what the connected devices need as well.
I am certain that the actual processing will be as different from that conducted by today’s applications as a fish swimming is different from a bird flying. I’ve lately been reading Isaacson’s “Steve Jobs” with great interest in the emphasis that Jobs put on the customer experience. Interestingly, while the book spends a great deal of time on the customer experience it is almost mute about loyalty and promoting it. Not that it matters—Jobs fixated on the customer and got loyalty and then some. Yes, we need more software in our civilization but it’s time not just to think different but to think bigger, if you ask me.