On-demand

  • October 27, 2009
  • With Oracle’s announcement of Fusion applications, you can make a reasonable case that Salesforce.com has won an important ten-year old argument about the future of the software industry.  Notwithstanding SAP, the only significant outlier left, Oracle is the last major software company to adopt on-demand computing as a centerpiece thus awarding legitimacy and critical mass once and for all to the idea.

    Amen.

    But the Oracle announcement says more about business models than technology paradigms and at the model level it is not clear that Salesforce has won.  Salesforce CEO Marc Benioff’s vision of business applications delivered over the internet has won an important victory but the business model — subscription services — that makes this technology the center of the movement and exclusive delivery mechanism has not eliminated all competition.  Not yet, at any rate.

    The reasons are simple enough, market reticence generated by concerns — both real and imaginary — about security or the viability of the technology model still hamper full adoption of the business model.  As a result, companies as diverse as Oracle, Microsoft and Sage have hedged their bets by offering technology that can be implemented in numerous ways including on-demand as well as by conventional deployments.  As a result vendors have effectively thrown the business model decision over the wall to the customer.

    With software capable of, shall we say, polymorphous deployment, the ultimate decision about how to deploy now becomes the exclusive province of the customer as the vendors have now turned into Solomon or, in a modern interpretation, Burger King.  Customers are completely free to have it their way or ways.  They can deploy business applications in a fully SaaS configuration or in hybrid ways that are to a lesser extent owned and operated by the IT department.  As I have noted before, this is typical transition state behavior of vendors straddling two diverse paradigms.

    It is no surprise that adoption of the business model lags adoption of the technology.  It has always been true that conversion from traditional software licensing to SaaS is a big step and one that for many software companies could lead to financial ruin if not handled expertly.  More to the point, there are customers who, for reasons of security, custom and preference believe that SaaS computing is not for them, at least not now.

    So it is no surprise therefore that the most successful SaaS companies are those that, like Salesforce, grew organically from on-demand roots.  Other successful SaaS companies like Oracle bought their way into SaaS computing, a time honored tradition when adopting new models.

    Even before Oracle’s Fusion announcement at Open World this month, the company had been a player in SaaS based CRM with Oracle CRM On-Demand due to its earlier acquisition of Siebel Systems.  But it remains to be seen if any software vendor can fully realize the benefits of SaaS — and now Cloud Computing without full emersion into the technology model.

    One of the most powerful aspects of SaaS computing is not the idea of subscriptions or even Internet delivery but of a single version of the applications supporting all users.  With a single version of the code, all users have the same foundation on which to configure, modify and build new applications.  The single code set — also called multi-tenant architecture — makes it hugely unlikely that any two independent software makers would develop incompatible applications and therein lays the power of the business model.

    This single idea makes it highly likely that applications built to the standards of the foundation — or platform as we like to call it — will be able to inter-operate.  Take this standard away and you have the same Babel of competing standards and proprietary designs that have been the bain of the software industry.  There is a cost associated with this lack of standardization and software customers have been paying it for decades — with rising resentment.

    That cost is not measured strictly monetarily; there is opportunity cost involved too.  When everyone played by the same conventional software rules the opportunity cost problem was equivalent to a farmer experiencing bad weather.  But SaaS computing eliminates the weather variable giving a big advantage to companies under its umbrella.  So it is ironic that the decision about adoption is still left to taste.

    With most of the hybrid products, the same code can be deployed in a conventional multi-tenant way or as a standalone system behind a traditional firewall.  The segregated system becomes a unique instance the moment a developer modifies the platform.  Doing that makes the idea of standards a waste of time.

    But for the time being — and I am still calling it a transition state — we can expect to see a lot of deployments in which the software is SaaS ready but the deployment is decidedly twentieth century.  In the next five to ten years we will see examples of companies trying to back out of their proprietary SaaS-like systems to finally get on board with SaaS or Cloud Computing.  It will all have been avoidable and it will be good business for software consultants.

    As Kurt would say, “So it goes.”

    Published: 11 years ago


    With the introduction of Fusion applications Oracle has joined the cloud community.  You might want to argue that the company has been involved in the cloud for many years as one of the key technology underpinnings of many of the biggest SaaS companies.  That was one of Larry Ellison’s big points at the Churchill Club.  Cloud computing still needs a ground station to serve it and Oracle has been at the top of that market for a long time.  For example, salesforce.com uses the Oracle database to support its service and many other companies do too.

    Because so many software company founders and executives got their starts at Oracle it was a natural for them to build on what they knew and they knew Oracle.  That may not sound like much if you stop thinking about it at the database but the community of Oracle people present and past gave many a start-up the intangible resources they needed to be successful.  Knowing who a product manager is or what is generally on a product roadmap can be useful information.  I am not saying that any legal lines are ever crossed but having been an insider and understanding the culture as well as the technology can be very helpful.

    At any rate Oracle is, or will be with the full release of Fusion Applications, a member of the Cloud Club.  That leaves stragglers like SAP to still deal with the conversion and I have a notion that the pace will only accelerate from here and I expect that if cloud computing is not the dominant paradigm today it will be in the not too distant future.

    Unlike salesforce.com and other companies that entered the market and developed their products as native SaaS applications, legacy companies had a great deal of work to do to convert to the new paradigm.  Changing a technology paradigm is never easy or cheap — the last time we did this we went form mainframes to client-server or was it client-server to thin clients?  But changing the technology paradigm is only half the battle.  The other, harder and more intense job is changing the business model.

    Companies do not always have to change their business models when they change software paradigms.  As a matter of fact I am not sure if the majority of software companies today ever had to make a business model shift before the advent of cloud computing.  But there’s really no option at this point if a company wants to get to the cloud.

    Oracle’s shift to Fusion, like many other vendors’ shifts to the cloud, buffers the business model change by effectively breaking the shift into two hard but more digestible bites.  Oracle is fortunate in that it has a large number of products and it is acquiring more all the time.  As a financial exercise, when Oracle begins selling fusion applications, at least a part of the revenue will come in the form of subscriptions and I expect that subscription revenue will grow at the expense of traditional licensing over time.

    Because Oracle offers multiple products including hardware (Exadata storage systems — and servers if the Sun merger is approved) the company’s financial results will be insulated from a big hit — something that pure software companies dread when they change models, especially if they are publicly held.

    So, I am not a financial analyst, but my reading of the situation is that Oracle has positioned itself and its business well with Fusion.  When delivered in a service mode, the applications will be competitive with other market leaders.  The applications ought to find a big market in other nations where software might be too expensive for local tastes.  And there at least multi-tenancy should prove to be essential.

    Meanwhile, the conventional license business should continue as a viable option for customers who prefer that mode for as long as those customers want it.  Converting from the license paradigm to a more or less pure cloud paradigm will be a business decision and the required development will consist of rewriting contracts, building web sites and adjusting marketing.

    This isn’t all guaranteed to happen but it looks like a promising and logical evolution.  Of course, I am reading “The Black Swan” right now and I am wondering about something highly improbable affecting this rosy scenario.

    Published: 11 years ago


    Fusion is big, potentially powerful, based on new technology, backward compatible and not available yet.

    Larry Ellison began taking the wraps off Fusion at his Open World keynote on Wednesday.  His appearance on Sunday with Sun CEO Scott McNealy was just for poking some fun at IBM, this was the real deal.  Fusion is a big idea and this post will leave something out – that’s a given – but here are some important impressions.

    There are ten applications and I don’t write fast enough to have copied them all down from Larry’s slide.  For sure there was CRM but also GL, Deal Management, Territory and Talent Management too.

    The applications are based on SOA architecture, the UIs have embedded BI.  There are six thousand database tables, 6,500 objects, 20,000 views, 10,000 task flows and the applications are code complete and being tested by customers.

    Fusion is based on industry standards like JAVA Fusion middleware which Larry said is the first such deployment.

    Fusion applications are scheduled to debut next year and while that is a little disappointing it is entirely in keeping with the purpose of a keynote – forward looking statements right?  Ok.

    I saw some demos but as I said in a previous post, I want to see a birth certificate.

    Fusion applications are modular and they are designed to be deployed as full replacements for other older Oracle products.  Modularity enables them to also work side by side with existing applications so that there is no need for a wholesale replacement.  There are also new applications that have no analogs with the older product suites so it is good that Fusion and legacy applications can work together.

    Like a lot of CRM products coming out these days, the Fusion applications, based on a SOA architecture are intended to operate behind your firewall in a single tenant manner or at some other data center in either single or multi-tenant mode.  This approach neatly straddles the diverse deployment options that some people feel they need today and gives a company like Oracle the flexibility to support all of them with one code set.  This neatly solves the problem of how to convert Oracle’s product set from premise-bound to cloud resident by leaving the decision to the customer.  That’s good, fine even and it does a lot to close the discussion about on-premise vs. on-demand, or does it?

    The trouble with running a private cloud is that as soon as I make a modification to the system I might be making the product unique and unsupportable putting me back into the same version conundrum that many hope to avoid.  I need to know more about this.

    Interestingly, in no demo did anyone talk about Fusion code or coding beyond Larry’s statement about JAVA.  I suspect that is not because you can’t get into coding some arcane part of your application but I hope coding is infrequent and at a level of abstraction sufficiently removed from the guts of the operation to make it possible to have one version of code for the whole planet.

    The Fusion applications, specifically the CRM stuff, are compatible with Oracle’s Social CRM gadgets and widgets and I expect that it will offer fairly robust support for enterprise computing when the applications hit the street.

    The UI looks nice.  I don’t know what the technology is that supports it but it has an Adobe Flex look.  Nice job on that – it will give all those Gen Y people coming into sales and other front office disciplines a feeling that they are using something as modern as the games they play on the home computer.

    That’s about all I feel qualified to say.  We need to see more but for now it is very good to see Oracle redeeming a promise it made a few years ago when it went on a buying spree in the front office market.

    Published: 11 years ago


    This time a little more serious.  Ok?

    I am a software and CRM guy so that’s the focus of this piece.  Much of Oracle Open World (OOW) was table setting.  It was all interesting and valuable but it was also a lot of independent data points.  There was lots of cool CRM introduced for sure but it all lacked a certain coherence until the Fusion announcements.  That’s not a bad thing by the way, just a reflection of the maturity level of so many products.  Some interesting stuff:

    Support for retailers and anyone who wants to support employees who are directly involved with customers.  For example, handheld applications that bring customer information to devices in support of sales clerks.  Not just the customer’s size and account numbers but things like intelligent offers and any loyalty points accumulated so that a pricing negotiation can happen on the spot.  The same technology supports users on their mobile devices to do things like buy train tickets and other self-service purchases.  This was not really new for Oracle but it has been improved and it looks better with each iteration.

    I have several problems with the self-service example though.  The demo was from the Swedish Rail Service and it showed how customers can buy travel packages and trade in frequency travel points —  you get the idea.  But there’s no infrastructure for this in the U.S. of A.  For this application to work we need a high-speed rail infrastructure and that will take about ten years (LOL).  Good thing Oracle is looking at foreign markets.

    I attended the afternoon half of a Chief Sales Officer Executive Summit or some such thing on Wednesday afternoon.  It was very good.  Lots of high-octane sales executives from billion-dollar (or equivalent) companies talking about their success with Oracle-Siebel and Oracle CRM On-Demand and their successes.  They had an economist give a quick analysis of the world economy and for a practitioner of the dismal science, he sounded upbeat.  I regard this as a contra indicator of something, just not sure what.

    No surprises there in the following sense.  CRM and SFA are pretty mature, the biggest gains we are likely to see going forward will likely be in more enlightened use of the products by the high-octane talent.  I am not optimistic in the short term for the following reasons.

    Anthony Lye did a good job presenting the state of the union in SFA mediated selling today.  Most people still use spreadsheets to make forecasts — letting error and unpredictability enter every time a sales manager decides to spiff up the data or apply a fudge factor.  Lye’s slides showed only a tiny fraction of users had forecasts that were worth anything (i.e. accuracy rating of 90% or better) yet we keep messing with the data.

    I have an idea.  Rather than futzing with the data in spreadsheets, let the forecasts stand as they are and make accuracy a criterion for sales compensation.  Then stand back and watch things improve.  Short-term pain for long-term gain.

    Ok, Oracle showed plenty of good technology (including Fusion apps as part of some demos) like that described above, for B2C segments and even more for B2B but the thing you come away with is that Oracle is really focused on the enterprise.  Oracle has a lot for the mid-market user – it’s more about what you don’t buy in that case – but they really groove on the sophisticated and complex selling that goes on in billion dollar companies.  They have apps that solve problems that mid-market companies might not even encounter.

    For example, the Oracle deal management application takes a lot of data about what a customer has bought already, their price tolerance, the value of a deal, what other companies might be paying for similar deals and derives a statistically relevant price for the deal.  This happens automagically after the sales representative has fed a few data items into the system.  Management, meanwhile, had set a few parameters in the system and out pops a price that the boss will, if not love, then certainly tolerate.

    Smaller companies don’t do this kind of thing much.  They’re focused on closing as much business as they can at the end of the quarter.  Too bad, because Lye’s slide deck included one chart that showed the 30% of companies knew they were leaving money on the table – but they were not sure how much they were leaving.  Maybe there is broad applicability for deal management.  Ya think?

    My impression of the related sales applications is that they were best for companies that sell to managed accounts.  You know what I mean, two companies have long term relationships and sell parts, components, raw food and the like to a large group of repeat customers.  That’s not the only kind of business they do but it’s significant and the Oracle apps work well in that large environment.

    Oracle also has some apps that I find more interesting for things like territory planning and while they got some attention in the executive summit I could have used to see more.  My favorite is something that helps find the “white space” in a territory.  I wasn’t familiar with the term white space until this week but now I can use it almost as much as the Governator says technology.

    What white space refers to is the knowledge that a territory acts like a buffer.  It can absorb only so much before it gets saturated (think of a kitchen sponge here).  Once the buffer is saturated it won’t absorb more so it’s smart to know at the start of a year how full your territory is – especially if you plan to assign quotas that your people have a realistic shot at making.  Ok, the white space application helps the manager figure this out by taking account of things like the target density in the territory, what’s already been sold, the average sales cycle, price points and other relevant information.  That’s cool and my only critique of this and other cool stuff is that Oracle didn’t show it off enough for my taste.

    These are some of the applications that separate Oracle from other SFA vendors and they represent some true differentiation.  I hope they do more with these apps.

    I was going to write about Fusion now but this post is getting long so the next post will be about Fusion.

    Published: 11 years ago


    Well, that was interesting.  Salesforce.com CEO Marc Benioff just completed a speech at Oracle Open World, perhaps the ultimate example of co-opetition.  It was apparent to me early on that Marc’s purpose for being there was to refute Larry Ellison’s rant at the Churchill Club in which he compared Cloud Computing to vapor.

    I got a hint earlier today when someone said that the event had been put together quickly, which to me confirmed the need to refute Larry who spoke a couple of weeks ago at Churchill.  Benioff started out by graciously telling the audience that he had worked at Oracle and attended Open World many times in his 13-year career, even presenting on the same stage he was now on.  He went further pointing out that the Oracle database is one of the key components of the Salesforce service and thanked Oracle executives for the graciousness.

    But there was little doubt in my mind that Benioff felt he needed to refute Ellison’s off the cuff assertions at the Churchill Club.  He did that with ease and just when you might have thought he’d reached the end of his talk, he brought up the CIO of EMC Corporation Sanjay Mirchandani to discuss that company’s hybrid CRM approach that includes Salesforce and Oracle for on-premise CRM.  It was almost as if he wanted to say that Salesforce can play the hybrid game as well as Oracle.

    I guess the Open World setting proved too much of a temptation for Benioff.  It’s in the same city as Benioff’s office.  The venue was easy to get, Michael Dell another big Salesforce customer spoke at Open World this morning and was available to be on stage with Benioff for part of the afternoon.

    There’s little doubt that Benioff was able to refute Ellison but the bigger question for me was why he felt he needed to.  We haven’t seen this kind of action for many years and it makes for lively times in these challenging days.

    Published: 11 years ago