Oracle to Buy ATG
Analysis
The news is that Oracle is buying independent ecommerce software provider, ATG (Art Technology Group) of Cambridge, MA for $1 billion. I think it’s a good move for both companies.
ATG is known as a premium provider of ecommerce solutions at a relatively affordable price with more pre-built solutions that its larger competitors who have delivered ecommerce more or less as a toolkit. However, I also think that the company lacked the size to compete on its own with companies like IBM whose reputation still has a great deal of weight in the board room where decisions about which technology to spend millions of dollars on come from.
The only other company in a similar position is NetSuite the leading provider of SaaS based ERP which also has a good ecommerce product. Interestingly, NetSuite’s (NYSE: N) majority owner is Larry Ellison, CEO of Oracle.
With Oracle behind it and a ready customer base of Oracle CRM and ERP customers—including Oracle CRM On-Demand—it looks like Oracle will recoup its investment quickly. ATG, meanwhile, will gain a larger audience and Oracle’s backing. There’s a lot to like in this.
Market fit
Oracle may be looking down the road at a world that will be more dependent on ecommerce. As transportation prices increase due to high-energy costs, there is evidence that consumers may travel less and ecommerce solutions will undoubtedly be called on the fill some of the gap for retailers who will begin to see fewer people in their mall stores.
Regardless of whether the transportation scenario plays out, it is a reasonable conclusion that if a vendor like Oracle can get behind a company like ATG, which offers lower cost ecommerce solutions, market demand for these solutions will expand because the lower price point brings out new demand.
NetSuite, Zuora tie the knot
NetSuite and Zuora announced a partnership today that should be good for all parties, including customers. The companies agreed to a partnership that provides Zuora’s billing and payment system integrated with NetSuite’s billing system.
At least initially, the combined offering will be made to NetSuite customers that provide subscription services, such as software companies working in the SaaS market.
Zuora is already a Salesforce.com partner and this latest alliance builds momentum for Zuora as it claims primacy for its metering, billing and payments solution in what it is calling the “subscription economy”. NetSuite offers a SaaS-based financials and ERP package augmented by CRM and eCommerce.
There are many good reasons for client companies to adopt this combination especially given the flexibility it offers them not only for billing but for innovation. Companies that can manage their billing costs through products like Zuora will have a competitive edge when they innovate new products with low monthly fees. Costly billing processes — especially with costly mistakes — can easily eat up slim margins and for this reason alone, subscription companies are turning to Zuora.
Sage SalesLogix for the cloud: The return of ASP
Perhaps the most interesting CRM development to come out of Denver this week was Sage’s unveiling of its SaaS or cloud offering. But now that the initial hoopla has died down (mine included) it’s time to take a more measured look at what is being delivered.
As I mentioned in an earlier post on my blog the announcement means that Sage is offering a hosted version of SalesLogix but not one that has been re-architected to take advantage of multi-tenancy. The company still legitimately claims a better total cost of ownership profile for SalesLogix because the arrangement off-loads from the partner the need to support a physical installation and from the customer, the cost of most infrastructure. The usual configuration and modification cycle remains the same however.
So is this good or not? I say both.
First, let’s ‘fess up, this is not SaaS or cloud computing, except in the broadest possible definition you can imagine. Amazon’s EC2 compute services, which delivers infrastructure as a service (IaaS), provides the cloud aspect. It’s really ASP or application service provider, a model that waned away in the last decade for competitive reasons. ASP is back because the applications are no longer client-server and thus have lower server overhead; that single change should make the model much more competitive.
Sage is betting that this change is enough to help its partners battle against NetSuite, Salesforce and RightNow (and others) by enabling them to check off the SaaS box in any bake-off and that’s a good point. In fact, in briefings with SVP Larry Ritter and EVP and GM Joe Bergera that scenario came up. Sage partners can continue the discussion about CRM and business issues with prospects once they’re past the SaaS beauty pageant and for them it’s a good thing.
Sage’s secret sauce has always been its partners. The channel may be hard to administer at times but one thing you have to admit is that partners get right into the shoes of their customers in ways that software sales people simply cannot. No wonder then that most SaaS companies are trying to breathe life into a channel solution. Microsoft has sold through a channel for a long time, NetSuite is building one and even Salesforce has its version with its AppExchange developers who sell seats as a matter of course.
Sage’s strategy from here is to enable a hybridized approach to its solutions by offering the choice to customers over core CRM functions but increasingly to also offer complementary SaaS solutions that leverage customer data wherever it happens to reside. That may represent an optimum for this business model, at least for now.
On the other hand, though, Sage seems to be taking its time bringing out complementary solutions and appears to regard that as its domain. It would be better if the company opened up this space to more competition and contribution from partners and ISVs. A more open approach would enable Sage to stock its catalog faster and make the promise a reality sooner. The company’s statement so far is that it’s going for quality over quantity but I have a mild disagreement here. I think it’s better to look for quality by letting a thousand flowers bloom and picking the best, rather than by over controlling the process.
SalesLogix in the cloud takes the company a long way to delivering lower cost solutions but Sage still has work to do. Its customers represent a market very much oriented toward operational efficiency as opposed to, say, customer intimacy. It needs to deliver low cost, easy to implement and deliver solutions, a quest that never ends. Now that infrastructure has been dealt with Sage can focus more attention on business processes and vertical deployments, which is always on its roadmap.
So to net it out, Sage was the odd man out in the hosted services derby but that changed this week because Sage is now in the hosted services game. It’s a solution that might seem odd to a SaaS purist, but it fits the special circumstances of a channel operation. I think we need a new name to distinguish multi-tenant SaaS and cloud computing from solutions that simply use IaaS, something that is assertive rather than pejorative. ASP anyone?
IBM, Cast Iron tie the knot
IBM bought Cast Iron Systems for what looks like an undisclosed amount of cash today. That’s big news if you are an AppExchange product vendor specializing in integrating with legacy systems like ERP and some CRM. Cast Iron has been the g-to company for effecting these integrations and grew prosperous doing them.
That IBM saw a need to have Cast Iron in its stable of software companies says a lot about the growing popularity of and necessity for SaaS based business software. We all know that integration with legacy systems can be a bear and for IBM — a company with significant services exposure to make this acquisition speaks directly to the popularity of new-style SaaS over legacy computing.
I didn’t see any discussion of how the deal was financed — whether by stock, cash or some combination. Nonetheless, it would appear, at least at this point, that Cast Iron will still be expected to do a good deal of business with companies implementing the likes of Salesforce.com and RightNow. Hence my instinct that the purchase says a lot about these SaaS companies as well as Oracle CRM On-Demand, NetSuite and almost any other SaaS company that needs to integrate with legacy systems.
VMForce Q&A
I got this long comment on yesterday’s VMForce post and I disagree with some, but not all of it, and rather than just posting it and letting it run, thought I would comment using it as the Q part of a Q&A. Here it is.
“Great analysis on vmforce announcement.”
Ok, you didn’t expect me to disagree with everything did you?
“At the outset vmforce will benefit vmware by providing their Java developers instant access to cloud services. Also vmforce will benefit salesforce.com by increasing adoption of Force.com platform among Java community. From developers perspective I believe today’s announcement is a ground breaking one that is a win-win for both salesforce.com and vmware.
This is true though as I told John Pallatto at eWeek, I think the early adoption will be among Java developers employed at companies already using Force.com and possibly ISVs and SIs who have catalogues of Java code they’re just itching to deploy in the cloud. There are six million Java developers and even one percent of them represents a lot of code.
“However today’s announcement is short on details around business deployment scenarios and pricing models. I hope today’s announcement is just an incremental step towards a much larger strategy on open cloud infrastructure that addresses some concerns around cloud computing like security and scalability for enterprises.
Salesforce has a well-documented and time tested approach to its announcements. Like a good baseball team, that looks fresh and crisp on the field, it’s because they execute well on the fundamentals. For Salesforce, this means the old rule of three — tell them what you are going to do, do it and then tell them what you did. The company has gone through a year many times hitting on this formula for every major advance and VMForce is no different. This was round one.
Not sure where we get the security and scalability for enterprises issue that the writer is talking about. These were issues in the middle of the last decade that haven’t been raised recently because they literally went away. I noticed at the NetSuite partner meeting a couple of weeks ago that CEO Zach Nelson was dealing with these issues in ERP but they’re about as valid in ERP as they were in CRM. Salesforce has many enterprise customers with thousands or tens of thousands of users, what do they need to do to put the scalability issue to rest? And when was the last time your credit card information was stolen from a Salesforce application? I’ve got a lifetime subscription to the credit rating agencies from all of the enterprises with conventional IT who lost my credit card information. And there are dozens of companies in Silicon Valley that have lost valuable IP to state sponsored IT pirates from China. They had conventional security too. Sorry, but I just can’t buy the argument that SaaS is not scalable or secure.
“Currently salesforce.com lacks support for private clouds for enterprises and only supports public clouds through its hosting services. Majority of enterprise customers will be reluctant to migrate to public clouds until concerns around security are addressed. Industry market trends point to migration towards “private/managed” clouds by enterprise customers in the next 3-5 years time-frame. I hope salesforce.com will announce products or partner with companies like vmware to fill this gap.
Show me your 3-5 year data please. I see 1.4 million users and 70,000+ companies using Salesforce. Let’s call them the early adopters if we must. I am sure some enterprises will not migrate to the cloud no matter what. My prediction is that they will all eventually be headquartered in some inland Rocky Mountain state, dig bomb shelters and join the NRA.
But I digress. The definition of public and private clouds is something invented by the part of the industry that thinks a cloud is infrastructure as a service or IaaS. I don’t agree. IaaS is a data center in the sky, but it’s not cloud computing. To be a legitimate cloud you really need platform or PaaS and software or SaaS.
Then there’s that security bogie again. A data center in the sky will still lose my credit card just as well as one on land unless enterprises devote many more resources to the job — something they won’t spend sufficient money on. SaaS and Cloud providers spend on this as a matter of course. The private/managed clouds idea took a big hit yesterday when VMWare and Salesforce showed how to bring a Java application to the security of a scalable VMForce virtual server.
Finally, Force.com has always offered private server capability, that’s what you get when you run your enterprise on an instance of Force.com. What the writer is alluding to when he says “private” is more about single tenant, dedicated hardware in the data center in the sky. Of course this approach destroys much of the rational and cost savings of cloud computing so why go there?
“In addition current public cloud deployments models have some limitations on scalability and performance front. While multi-tenancy is good from h/w utilization perspective, due to the inherent sharing model it is not ideal for compute intensive and complex data processing applications. Until this limitation is addressed few enterprises will be willing to migrate to public clouds.
Now its scalability and performance. Ok, you’ve got me, the cloud is probably not the place to do molecular modeling or tornado tracking — though the human genome made great and creative use of spare PC cycles unraveling DNA. So, all of you molecular modelers and complex calculation buffs are excused from class. The rest of us will be just fine running our business applications in the cloud, I suspect.
“I hope trailblazers like salesforce.com and vmware will address these limitations around public clouds soon. On a final note we seem to have a new “— as a service” acronym pop up every other day. Unless each and every one of these services is tied to “customer value proposition” we will just end up with technical jargon that only confuses the end customer.
I think we did all that yesterday, at least at the announcement I attended.
