May, 2012

  • May 20, 2012
  • Chancellor Angela Merkel of Germany is in trouble.  So is David Cameron, Prime minister of Great Britain though not as much.  Merkel has an election looming and both have been caught on the wrong side of the most important political-economic issue of the generation, the continuing depression and joblessness plaguing Europe and to a lesser degree the United States.

    Economists disagree about what to do.  We often call them political economists in part because their judgments and advice are sometimes couched more in political terms than in the social science of economics.  Thus we have two schools of thought on how to recover from the economic crash.  One school, holding sway mostly in Europe, demands austerity while the other, a mostly American driven idea, call for stimulus.

    So far the stimulus advocates can claim better results and if you read Paul Krugman’s new book, “End This Depression Now” you get the unmistakable notion that additional stimulus could do a lot to pull the global economy out of its tail spin.  So why don’t we all stimulate?  Krugman owns a Nobel Prize in Economics and knows what he’s talking about.  He considers himself a Keynesian after John Maynard Keynes, the mid twentieth century economist who invented, more or less, the branch of economics we call macroeconomics which is the obverse side of the coin from microeconomics.

    It’s difficult to quantify, but if you’ve had any conversations with regular people, as I have recently, you see the two camps run deep.  The Austerians as Krugman calls them want austerity, smaller budgets, increased savings, less government spending.  The Stimulators think this is exactly the time for government to spend money, deficits be damned.  There will be time later, they say, when the economy is back on its feet, to raise taxes and pay for the spending.

    Who’s right?  Each side thinks it is.  And you know what?  Each side is, though only one can be right in the context of today’s economy.  Economists have been famous for this kind of duality, so much so that Harry Truman once got tired of economists speaking to him in the vernacular of “on one hand and then on the other hand,” that he asked his staff to find him a one armed economist.

    But back to stimulus and austerity or macro vs. micro.  The austerity people have a clear idea of how to pull out of a personal economic crisis.  Stop spending more than you take in, pay down debt, save a little and you will be out of the woods before you know it.

    The macro people say that’s the problem.  We’re not dealing with micro or personal economics but with macro, global economies and they operate differently.  If everyone takes the austerity approach spending will decline and the economy will go into a tailspin.  As Krugman rightly points out, my spending is someone else’s revenue and in a big economy that inevitably drives the spending that results in what I call a paycheck.  That’s why when everyone is not spending either the government picks up on spending for a little while or the economy spins down into a deep hole.

    Typically, governments spend on roads, bridges, teachers and other public infrastructure.  They also spend on unemployment insurance.  Unemployed people are a great investment because you can count on them to spend the money they get and spending is what spins an economy up.  Also, in a recession, with construction at low levels, government can get these things at bargain prices again putting money into the economy.  And if you buy productive assets like infrastructure, you have these things to work with as the economy improves.  Government spending is like training wheels, soon you don’t need them and you ride off on your own.  Think of this as investment.

    Unlike the U.S. the Europeans have a small problem with infrastructure spending or any other kind of spending.  The spending, if it happened, would occur with German money in non-German countries so the Germans are reluctant to try this approach.  That’s the problem of having a unified currency but a non-unified government where each state is sovereign.  There is also more than a touch of righteous moralizing going on by the haves over the have-nots.

    The German conundrum notwithstanding, there is a huge body of evidence from studying the Great Depression of the 1930s onward that shows government spending drives recovery from severe economic crashes.  The body of evidence also shows that failure to spend simply deepens the hole everyone is in.

    Krugman and his colleagues would have liked it if the U.S. stimulus had been bigger or if multiple tranches of stimulus had been applied.  The people who say stimulus doesn’t work are the same ones who denied further spending and fought against the original stimulus plan.  All that is water under the bridge.  A kind of social experiment has nonetheless been performed and the economy that was stimulated, even inadequately, is doing much better than the economy with the brakes on.

    If that’s not enough, what Merkel sees is that the French just elected Francois Hollande, a Socialist who promised to focus on stimulus and job creation in diametric opposition to Nicolas Sarkozy, a Merkel acolyte.  So we were treated to a delicate face saving about face by Merkel this weekend when the leaders of the G8 convened at Camp David with the unofficial goal of convincing Germany that austerity isn’t working and won’t.

    Merkel really likes her policy and is not going to change her mind easily.  But with that election looming, she is at least now saying that austerity and job creation must go hand in hand.  Such is progress in international politics.  One wonders how much faster things would go if Merkel had a chance to see first hand how her policies are affecting millions of people.

    Published: 12 years ago


    This spring has seen a raft of software company events and announcements and they’ve been good meetings full of real news and important new developments.  It is as if these companies bided their time during the worst of the recession building new product, thinking about the future and how customers will use their technologies.  It was time well spent.

    This week SAP, NetSuite and others have held meetings and more good news seems to be emanating from their conferences.  I attended the NetSuite SuiteWorld event in San Francisco and that’s what I want to write about here.

    For at least two years most ERP vendors have been championing the idea of a two tier ERP strategy.  I’ve heard messaging from Microsoft, Oracle, SAP and NetSuite and, plus or minus a few wrinkles, the idea is that conventional ERP built for the late twentieth century is tired.  But rather than scrapping the huge investment in blood sweat, toil, tears and a not inconsiderable number of dollars, most companies deploying new ERP will be doing so in ways that surround the original deployments rather than replacing them.

    That was the story up to last year and it was a good and logical one.  Vendors loved it.  Two tiers made the old system with its high maintenance charges a fixture for at least another decade while giving everyone a chance at new business.  For customers, few thought ERP was broke and even fewer had an appetite for fixing it.  But many did have serious needs to fill in what old ERP lacked — the social, mobile, cloud, big data issues that won’t go away.  To this you should add commerce, which will bring us current.

    One of the hidden themes running throughout the software industry today — a theme that no one other than me, I sometimes think, ruminates on — is the high cost of energy required for doing business.  Escalating transportation costs factor into the social, mobile, cloud etc. alluded to above as well as what I’m going into next.

    So back to the present, San Francisco and SuiteWorld.  In his keynote today CEO Zach Nelson unveiled a comprehensive approach to ecommerce running off NetSuite’s financials called SuiteCommerce.  Now, NetSuite has been offering ecommerce solutions for many years and they already have successful customers running commerce sites (about 2,800) off their financials and integrating other important modules like their warehouse system.

    The difference today is in emphasis, partners and application development tools from NetSuite that brings everything together in a solution set that aims the company at being a significant player in a new generation of integrated and flexible back to front office systems.  Parenthetically, this is how disruptive innovations take root which should provide no comfort to the major ERP players basking in their apparent good luck.

    In announcing SuiteCommerce, NetSuite has added a third tier to the conventional ERP wisdom.  The major difference between two and three tiers is the emphasis on reaching customers through the commerce solution and the recognition that NetSuite, at least, owns two out of three levels.

    This has big implications for all businesses.  As Nelson correctly pointed out, the demand for some of this new commerce approach will not come from you and me but from the devices we use to run our lives.  The fridge is out of beer so it signals the store or at least my personal device to remind me to pick some up.  The car needs service — already a cliché but nonetheless an important reality — so it negotiates a service appointment.  On and on it goes.

    The Internet of things will be much bigger than the Internet of people and the Internet of things will be a major acquisition portal for business and consumers as well as a major user of automated commerce technologies.  Commerce solutions that make it easier for people to buy and receive products through efficient channels is a great first step.

    Back to transportation costs.  The Internet of things will be instrumental at consolidating demand and ensuring that supply arrives in the most efficient way, easing the transport issue all the way up the supply chain.  Of course, the Internet of things will also enable actions that have no commerce involvement and it’s important to recognize but not to delve into here.

    What makes SuiteCommerce appealing is the “something for everyone” approach.  NetSuite’s financials can act as a data hub funneling necessary product and pricing data to user interfaces including their own as well as third parties.  The financials, shipping and invoicing technologies provide the critical single source of the truth that has become a NetSuite mantra.  And powerful tools make it possible for developers and business users to make or modify commerce systems at, well, the speed of business.

    So there’s a lot to like coming from NetSuite today.  Earlier, the company announced revenues of nearly $70 million for the last quarter and the CEO repeated his guidance that the company would generate $300 million in the coming fiscal year.  While he was at it, Nelson also announced new partnerships with Grant Thornton, and Deloitte’s sprawling digital business group.  So there will be plenty of help on the implementation side, which is most important in the two or three tier approach in dealing with the very large companies that are beginning to flock to NetSuite.

    I can’t say that three or even two tier solutions were on my radar when I first contemplated SaaS for ERP.  Honestly, I thought ERP for the cloud was an exercise in squaring a circle.  But it seems like the industry has a plan at last and innovation continues at the margin where NetSuite is carving out quite a position for itself.

    Published: 12 years ago


    A door closed this quarter and another opened.  We’re now oriented on a new computing paradigm that will serve us for the rest of the decade.  There is now broad agreement on the big IT issues of our time and they can be summarized in the Four Big Buzzwords mobile, social, big data (and analytics) and real time.

    We’ve been bantering these words around individually and in groups but in Q2 2012 most vendors came to a tacit agreement that these would be the issues around which marketing campaigns would orbit for the intermediate future.  Since Oracle’s CEO Larry Ellison is the original proponent of decadal cadence I will use his company as the measure of the short timeline that brought us to this moment.

    April 2009.  Oracle buys Sun Microsystems.  The purchase of a failing Sun was seen as a retrograde effort.  The conventional software company buys a conventional hardware company and many of us expected them to fade into the sunset together.  It didn’t go that way.

    September 2009.  In an interview at the Churchill Club Ellison said that cloud computing was a bunch of hot air.  Less sincere words have rarely left his mouth as subsequent events would prove.  No matter that by then, Ellison disciple Marc Benioff had already built a billion dollar business offering nothing but cloud computing as a delivery mechanism.  The prior decade bred an entire industry devoted to cloud computing and multi-tenancy but no matter.  Ellison had the database that drove these cloud companies and not much else.  He also had a huge installed base dedicated to conventional on-premise computing, so he was a late arriver intent on making up ground.  The first step might have been this bit of indirection.

    OpenWorld 2009.  Oracle announced a new strategy and line of hardware starting with Exadata a huge database server with monster truck-like capabilities for serving data and crunching it into submission ten times faster than conventional technologies.  Exadata was followed by Exalogic, a compute server and Exalytics an analytics appliance.  There were other things too.  Before long little boys playing in sandboxes had traded their toy trucks, backhoes and other construction paraphernalia for Exatoys and Oracle had announced its engineered systems strategy.  Ok, I made that up just to see if you are still with me.

    2011 Anthony Lye plus Oracle’s checkbook proved to be a potent combination as Lye developed a vision of Fusion driven applications and business processes of tomorrow.  Lye bought five companies proving that while you might not be able to buy love you can certainly buy R&D.  By the end of 2011 Lye had purchased ATG (ecommerce), RightNow (customer experience, service and support) Endeca (ecommerce and business intelligence), FatWire (web content and web experience management) and Inquira (service knowledge management software).  The combination, when knitted together positions Oracle as a contender in the Four Big Buzzword Categories.

    But it wasn’t just Oracle that was making moves.  As early as late 2010 Microsoft and then others began preaching a gospel of multi-tier ERP, a strategy that would keep existing ERP systems and their pricy maintenance contracts in place while providing much of the new functionality required by the Four Big Buzzwords through a second tier of ERP from up and coming players like NetSuite and Zuora.

    The approach ended a potentially disruptive moment for ERP vendors and their customers who were beginning to contemplate rip and replace on a scale not seen since four digit date formats were all the rage.  But beware ERP vendors, you are being surrounded and at some point you will be made irrelevant by the increasing functionality of the second tier and at some point there will be a bloodless coup d’état.

    So what happened this quarter is that one ERP vendor after another admitted defeat of a sort.  No one any longer pooh-poohs cloud computing (even Ellison) or questions the validity of social technologies in business.  It’s all SOP today in what some are calling the post-digital era.  Post-digital doesn’t mean we’re beyond it, simply that it’s established fact and beyond debate just like evolution, global warming and a round earth are in most precincts today.  Yes, there are laggards who haven’t bought into the message yet but increasingly they are to be pitied, not argued with.

    So, as they say in the reality shows, Who’s safe? And Who’s going home right now?

    Well, as it happens very few need to go home provided they’re cloud oriented all ready and that they’re at least making noises about the other three Big Buzzwords.  Companies entering the market with anything that enhances the two-tier strategy will be welcome and some, like NetSuite, which has announced a defacto three-tier strategy should do fine.

    In the years ahead look for the following ideas to gain primacy in business and enterprise computing as the post-digital era gains momentum.

    Increasing use of the Four Big Buzzwords.  This will show up most obviously in mobility technologies but they will be supported by increasing use of centralized analytics crunching big data derived from social media.

    Social will continue to be a big draw, not so much for what we know of social right now but for advances such as gamification that will become key drivers.

    Multiple-tier solutions will continue to blur the distinction between on-premise, cloud and single vs. multi-tenant.

    We will need to turn our attention to the internet of things later in the decade as machines increasingly talk to machines a la buy more milk, eggs and bread.

    The key battleground will become platform and development tools.  Increasingly, the goal in business is to project agility through the capacity to change with customer demand.  Tools will be important but platform will be key.  Platform increasingly is the place where security, social, mobile and all the other Big Buzzwords have to be built in.  You can’t add any of them on after the fact.

    Platform therefore is key and positions companies like Oracle (Fusion) and Salesforce (Force.com, Heroku, Sites.com, Database.com), NetSuite and others in the catbird seat.  Vendors with older platforms rejiggered for the cloud may not fare as well.

    So there it is.  They’ve figured out what to do about cloud, as inelegant as it might seem, they’ve embraced the big Four Buzzwords and for the next several years, provided the economy holds up, we’ll see renewed competition as different vendors compete on slightly different permutations of a similar story.  We can already see Salesforce focusing on the social enterprise, Oracle the customer experience, NetSuite commerce, Microsoft catering to its large installed base with cloud versions of the things it used to sell in boxes.

    SAP will do something but it’s still hard for me to figure out what.  They’re working with NetSuite according to Zach Nelson, CEO of NetSuite and Business by Design appears to be catching fire.  Never a strong marketing presence they need to get an elevator pitch for a small building.

    Later in this cycle we’ll begin talking about video and voice embedded in the front office suite.  They’re about where social technologies were in 2006 and moving toward the center.

    Published: 12 years ago


    We recently published a video research note on SugarCRM’s mobile technologies.  Please take a look.

    Published: 12 years ago


    In Cambridge, Massachusetts, my home turf, there is a good-natured intramural rivalry between Harvard and MIT.  Each may be a bastion of higher learning but they are very different places with different cultures.  The rival taunts go something like this: Harvard people are good with letters but not so much with numbers.  The engineers down the road only use letters but, then, only in equations.

    I thought about this the other day when I learned that Harvard wizkid Eduardo Saverin, a Brazilian native, had cashed in his U.S. citizenship in an attempt to out wit the taxman.  You might recall that Saverin was the kid who co-founded Facebook, according to his successful lawsuit against his former friend Mark Zuckerberg.

    The wonders never cease.  Severin was naturalized when he moved to this country as a kid because his wealthy parents were afraid that he could have been kidnapped and held for ransom in his native Brazil.

    In context for this story, Severin has an estimated four percent of the company and what’s really mind numbing is that he’s moving his mailbox to Singapore just to avoid paying tax on the stock when he sells it.  One must wonder if international kidnapping has been quelled over the years making it safe for the ultra rich to consider such strategies.

    Many people have already commented on the shallowness of stiffing his adopted homeland and about the absurd luck this kid had in landing as a room mate one Mark Zuckerberg.  But no one, to my recollection, has mentioned the fact that life gets a tiny bit harder than that once you leave Cambridge.

    No one has remarked on the stupidity of this logic either.  Life is a game of base hits.  Very often you strike out, rarely you hit a home run but to win games you manufacture runs, one at a time with base hits, stealing a base and getting walked.  I feel bad for someone who thinks his life’s ambition was met in college.  There is something inversely Gatsbyesque about this story.  Severin’s move should have been to take some money off the table, pay some taxes and move on to the next big idea, assuming he had one.

    This failure to appreciate the logic of the base hit and the impetuousness of cashing in his citizenship, are what reminds me of the Harvard-MIT rivalry.  I can’t imagine an MIT person doing this.  Maybe I am naïve but my reading of the culture at MIT is that they truly like making things and finding solutions and most of the people I have met from MIT would do what they do regardless of the pay simply for the thrill of it.  Money matters but beyond a certain point, meh?

    So let’s recap the Facebook founding mythology.  Facebook was founded in a dorm room at Harvard by some of the most privileged kids on the planet.  Zuckerberg turned out to be not exactly a boy scout, then the Winklevoss twins asserted their rights to Facebook, in court, repeatedly, and now Severin can’t stick around to do the honorable thing.

    If the engineers at MIT like making things, I wonder what motivates the kids at Harvard other than whining.  Is it just the art of the deal, going in for the kill?  Is it addictive?  Does it take more and more to keep you sane?

    These are things I will likely never know.  But  in the age of the 99 percent, I have a new sense of where the .01 percent come from.

    Published: 12 years ago