microsoft Convergence

  • May 18, 2011
  • SAP is holding Sapphire, its annual user meeting in Orlando this week.  Sapphire is one of the premiere events on the IT tradeshow calendar along with Microsoft Convergence, Oracle Open World, Sage Insights and Salesforce.com’s Dreamforce.  These events each draw tens of thousands of people from around the world and each has a distinctly different vibe.

    Sapphire is solidly ERP and enterprise computing (yes, I know they have CRM), Open World is about enterprise computing too but with more emphasis on a rounded picture that includes the front office, SaaS and, even before the addition of Sun, there was a strong hardware element as well.  Microsoft focuses on front and back office but tries to appeal to a broader market of perhaps the Global 2000 with an array of front and back office solutions.  Dreamforce is, among all of them, the most forward looking.

    Salesforce has taken a decidedly different path to the enterprise.  First, ERP is not on its radar.  Though the company has a small subsidiary that specializes in financials, it was an acquisition that demonstrated the power if Force.com, the company’s development platform.  Salesforce’s approach is to not look back at traditional financials but to imagine what the fully articulated front office will be and then to deliver it.  In the process, they have made huge strides in platforms, database, development technologies, social media for business and more.  The approach keeps them ahead of an increasingly crowded field of conventional front and back office computing.

    Over the last few months I have watched as the ERP/CRM companies have all solidified positions relative to new technology.  Each offers a cloud computing strategy that supports multiple flavors of hosting including multi-tenant SaaS but also, and somewhat distressingly for me, solutions that amount to hosting a data center off premises in ways that don’t look much different from historic approaches.  In their uniformity they have basically kicked the can down the road for another decade — roughly the life span of conventional offerings.

    No one wants to tell their enterprise customers that the days of on premise computing are limited and that running a single tenant instance in a datacenter in another zip code is at best a temporary solution.  In 1999 we saw a controlled panic as companies worked to beat a deadline to update their systems to the four-digit date format of the new century.  In ten years we’ll likely see a similar event as some of the same companies realize they have simply exported their conventional data center problems — lacking some standards, upgrades that were delayed and fighting the cost of buying hardware — but that they have not solved them.

    So the ERP companies now all look poised to go through the next ten years with architectures that are a jumble of old and new.  Moreover, they have all embraced similar strategies that support the idea of placing small systems, presumably in a cloud configuration, at their satellite locations while retaining a more conventional ERP system in the center to consolidate regional data.  This is a brilliant, though severely flawed, strategy in my humble opinion.

    There isn’t a major enterprise vendor who doesn’t think that they’ll be able to sell their version of cloud computing and a satellite configuration to their existing customers but I think there’s some danger in that.  It looks like a classic retreat up market for the majors.

    At the grassroots level there are companies like NetSuite, Microsoft and perhaps WorkDay that will not only take on the satellite work but their presence there will ideally situate them to grow up market and displace the legacy vendors.  It makes good sense.  As NetSuite CEO Zach Nelson observed at SuiteWorld last week, there has never been a software company that successfully invaded the lower reaches of the market from the enterprise but the world is full of examples of companies that grew up from the grass roots to take over important market segments.  If you recall, this is precisely what Salesforce did with Siebel.

    NetSuite is already ideally suited for this work with front and back office systems covered as well as ecommerce.  Furthermore, the company introduced its ability to operate multiple divisions in different currencies with reconciliation across borders several years ago.  NetSuite increasingly looks like a grassroots company with greater ambitions and if the keep innovating around the full suite of ERP, I think the world will look very different in ten years.

    The challenge for the legacy vendors is to get out of their comfort zones.  To take on cloud computing not as they wish it would be, complete with the fat margins they and their shareholders have grown to know and love.  Rather they need to better emulate the lean and highly competitive companies they need to sell to and who are nipping at their heels.

    I am writing this before the first keynote of Sapphire, it will be interesting to compare this analysis with the proceedings next week.

    Late addition:  Check out this short article in the Harvard Business Review for a similar take on the subject.

    Published: 13 years ago