June, 2013

  • June 28, 2013
  • You know what they say about the third time doing something.  They say a lot and some of it is bound to be true even if it only means throwing away the high and low scores and dealing with what’s left like they do in Olympic diving competition.  This is the third and final post on the Oracle-Salesforce announcements of this week, which I hope, will provide more light than heat.  I reserve the right to discuss Oracle-Microsoft in similar detail though.

    You know the basic outline at this point.  Oracle and Salesforce have announced that they will work together on certain strategic issues especially integration to provide greater value for customers.  Here are my considered thoughts having now heard from the CEOs of both companies.

    1. Integration is the key.  With this announcement it appears a line has been drawn down the middle of the market.  On one side is front office and on the other is the back, but we knew this already, didn’t we?  The agreement to produce off the shelf integration that will solidify each company’s position in its respective marketplace and enable their front and back office products to instantly inter-operate and that sends specific signals to the market.  Over the next nine years look to Oracle to spend less effort and investment in the front office.  Siebel is getting old as is PeopleSoft and the Fusion approach is a slow burn.  It will not surprise me if each side stays on the side of the fence it is building and produces front to back office solutions based on their integrations.  For Oracle this would be an admission that their front office strategy won’t catch up.  For Salesforce, it simply codifies what Marc Benioff has always said, that he doesn’t want to build ERP.  Over time, look for each party to renew its innovation in its respective space.  As I detail below, as a new paradigm comes into view there will be plenty of innovation on each side required — and that will only happen if they split the effort.
    2. Competition in the middleware and Linux part of the stack is simmering down.  Oracle’s solutions in those areas are standardizing the industry and there isn’t a great deal of profit to chase there any more.  Also, Oracle’s emerging dominance in cloud hardware with Exadata and related products militates for greater stack standardization.
    3. Oracle-Sun may be a big winner here as that unit’s Exadata storage system seems poised to become the de facto standard for public and private cloud data centers.  The idea of public and private clouds no longer seems quite as foreign to Salesforce as CEO Benioff was touting his company’s decision to provide a separate instance of its system for the federal government.  This decision is less about CRM than it is about application development, an area in which Salesforce has become one of the very dominant players.
    4. Security and related issues are becoming ultra important requiring new solutions.  You can’t read the 2013 Verizon Data Breach Report without understanding the tremendous opportunity that the People’s Liberation Army Unit 61398 is providing companies like Oracle, Microsoft, and Salesforce.  If we’re going to the cloud it has to offer better security than what we now have or all bets are off.  Otherwise, the only good news might be your voodoo-like ability to order mooshi pork through your ERP system someday.
    5. Drop your tools, there’s something bigger on the way — get to work on it!  Guys like Larry Ellison, Steve Balmer (of Microsoft) and Marc Benioff don’t come to these kinds of agreements without reason.  The reason is a new paradigm which necessarily commoditizes conventional IT and even conventional cloud computing.  It’s the Internet of Things or as Benioff (a board member of Cisco) said, the Internet of Everything.  This is at once scary and hopeful.  It’s scary to think of everyone and everything being connected to the network and hopeful that we will finally have the sophistication to optimize tiny processes that will, in aggregate make a huge difference as the planet races toward a human population of ten billion.  We will reach a computer population that size long before the human population gets there.

    That’s what I think everyone is suddenly gearing up for.  President Obama gave a well received talk about the environment at Georgetown University this week.  In it he told us that American business has always been able to innovate and engineer and provide the entrepreneurial boost we’ve needed to meet tomorrow’s challenges.  Well, those challenges — especially energy and resource optimization and carbon abatement — are wrapped up in a new paradigm that is itself wrapped in the Internet of Things.

    Paul Krugman’s column today in the New York Times expresses the latter half of it, the front half is where great value will be produced and huge profits stand to be made.  On the back-end Krugman rightly predicts this will be a big economic stimulus that the global economy badly needs.

    It’s rare that you can spot a paradigm emerging in real time.  No one really understood what the steam engine or the industrial revolution it spawned meant when they happened.  It took many decades to see the pattern emerge.  Not this time.  This week the future emerged; it’s been incubating for a long time and the future looks very interesting indeed.

    Published: 10 years ago

    The joint conference call for press and analysts between Larry Ellison and Marc Benioff was both more and less than expected.  It was weird to hear them talking to each other in complementary terms rather than firing shots across each other’s bows but all that history was more show than anything else, I think.  To net it out the two companies will be more cooperative in some of the lower ends of the technology stack that have effectively commoditized anyhow.  Interestingly, Salesforce will begin using Oracle Exadata as well.

    It was clear that this was a conversation between equals.  The two men might be separated in time by two decades and one might have mentored the other earlier in his career, but clearly they have a single vision and the desire to make it real.

    It is now clear that the two companies will continue along their independent paths but that critical parts of their technologies will of necessity overlap and the companies will jointly support the integrations.  So for instance, the companies’ greatest overlap will be in developing plug and play integration between Salesforce CRM and Oracle applications, presumably HCM and ERP.  As Ellison said, “Oracle will continue to sell Oracle apps, Salesforce will continue to sell Salesforce apps but we will both sell the productized integration.”  Ellison’s vision is that a customer can go to either vendor’s application sales venue and “press a button” to download the integration and it will begin working right away.

    Regardless of anything else happening, expect Oracle to continue selling its wares.  So for the moment it appears that Oracle Fusion CRM apps have a future as does HCM, which Salesforce does not offer a competing product for though it complicates the Salesforce AppExchange ecosystem to a degree because HR applications like Jobscience are available there and some overlap is inevitable.

    On the hardware side, Salesforce will use Oracle Exadata a database server that delivers huge performance improvements over conventional storage and a solution ideally made to support big data in big clouds.

    Some things we did not find out — Will Marc be invited back to OpenWorld?  There was no mention of it though Marc graciously invited Larry to Dreamforce in November and Larry accepted.  Watch this space.

    For now, the vision is the thing for both parties.  As Benioff said, “We’re in a new world, the third wave of computing with billions of computers and everything is on the network.”  He was right too and one way to read the developments of the last week is to conclude that the first wave of cloud computing or Cloud I is over and that the next wave, which will include the Internet of things, i.e. billions of devices connected to the network capturing enormous amounts of data, is potentially so big that the major companies decided to clear the decks to get ready for it.

    A world with billions of devices is like nothing we’ve prepared for.  It involves devices mediating all kinds of processes.  For example, Benioff noted that he was wearing two small devices and had been investigating ingestible computing as recently as last week.  And Ellison discussed using small cheap computers to optimize drip irrigation to enable us to manage water and other precious resources.  I think they’re on to something with that.

    There is wonderful symmetry in all of this.  You can draw a line through this year’s title, “Race Against the Machine” by Brynjolfsson and McAfee through Ellison’s resource statement and Benioff’s vision of the opportunities ahead plus Oracle’s announcements this week with Microsoft and Salesforce and you will have a tantalizing vision of the future.

    The next wave of human endeavor and the next economic K-wave is very likely to involve optimizing this small planet to accommodate all the people who want to live here.  There will be huge opportunities to deliver value, which Benioff described more than once as “epic”.  The next wave will be built on the shoulders of those that came before and none more so than IT.  Ellison and Benioff understand that; perhaps they don’t have all the particulars but they uniquely have the vision and the resources to fill in the details.

    Published: 10 years ago

    The stunning announcements that Microsoft and Salesforce.com would become more engaged with Oracle by using its middleware, hardware and associated other products has left many people agape and agog and for good reasons.  We are all more accustomed to covering the initiation of trends and their evolution than their resolutions.

    Initiations have terms associated with them and one of the best to have, if you are looking to capture a market, is disruption.  It rhymes with eruption and carries a similar but not identical definition.  Disruptions change the existing order and eruptions burst forth seemingly from nowhere and you can make the case that really significant events in the technology world do both.

    The iPhone and iPad erupted, coming out of nowhere, and disrupted the communications and computing markets respectively.  The recent announcements by Oracle, Microsoft, and Salesforce.com also erupted and may be disruptive but I think the market is still trying to figure out their meaning.  Let me take a stab at it.

    Yesterday I was musing about the idea of Oracle acquiring Salesforce and uniting it with NetSuite to produce a new enterprise cloud company and while I think that could still happen, I think I may have been thinking too small about the situation.  I now believe the import of these announcements is to signal an end of competitive markets in middleware and Linux and the beginning of some others.

    We can argue about it, but we’ve played out the string long enough in middleware and Linux and in the process Oracle’s products have gotten enough market penetration to become standards.  This doesn’t mean that other products will go away but it does mean that everything is fairly homogenized and standardized to the point that it doesn’t matter any more.

    Exadata is different.  It’s not new any longer but it is still very much a disruption.  That’s the storage system from Sun that runs lots of spindles and piles on memory so that database operations happen closer to memory speeds than to disk speeds.  It’s roughly the difference between milliseconds and nanoseconds — as much as a million times faster.  Exadata or something like it is becoming necessary today for cloud data centers running big data and big database systems.  But I expect that Exadata has always suffered from being an Oracle product meaning that customers may have been leery of getting too much Oracle in their datacenters for their own good.  If you become a one-vendor shop do you lose some leverage with your supplier?

    But when Salesforce announced it would use Exadata in its datacenter, it changed the complexion of the discussion.  As a cloud platform and application provider, the problem or opportunity of dealing with Oracle becomes Salesforce’s and so provides a level of insulation between the end customer and primary supplier.  Will it matter?  Quite possibly yes.  As one of Oracle’s largest customers, and growing, Salesforce can exert a modicum of influence with Oracle that even a large corporation or government might not.

    Exadata may also be becoming a necessity in many enterprises as a possible security tool.  Unless you have not been reading the papers or this space, you know that industrial espionage through hacking data is a big problem globally with China the leading culprit.  Conventional barrier methods of securing data are hardly up to the task of keeping intellectual property secure these days and all signs point to a need to encrypt all, or at least most, sensitive data to make it much less profitable for bad guys to steal secrets and IP.

    But there is significant overhead attending to encryption especially if it is applied to all enterprise data.  Exadata or some generalized version could be effective at enabling enterprises with very large data sets to use more encryption without necessarily imposing a great burden on the gear or the corporate coffers.  Salesforce’s embrace of Exadata brings it dramatically to the cloud and offers at least the possibility of making the cloud more secure than older terrestrial datacenters.

    We’re witnessing the eruption of a new enterprise IT model.  It has been birthing for over a decade first with cloud technologies and their predecessors and more recently with the ubiquitous computing models coming into view thanks to all the mobile devices now crowding the market and the social revolution that rides on them.

    So the recent announcements should not be seen as a pure consolidation or the end of competition.  But they are moving the arena of competition from the lower ends of the stack to applications and customers.  The competition will likely be much more retail oriented in the future and I expect that will suit the new customers, the millennials, just fine.


    Published: 10 years ago

    I attended a Siemens analyst event last week in which they announced a new product called Project Ansible.  In a quirky embargo between us I am able to say that much and a bit more but I must point out that their full details will be available after July 16.  Generally speaking Ansible concentrates on unified communications but I will defer till July any further descriptions or discussion of roll out and roadmap.

    That notwithstanding, Siemens has caused me to do some deep thinking about product category rollouts and their lifecycles and that has made me go back to Arnulf Grübler’s classic, “The Rise and Fall of Infrastructures: Dynamics of Evolution and Technological Change in Transport”.  Grübler was associated with the International Institute for Applied Systems Analysis in 1990 when he published this and while the book might be getting old, it still offers some great insights.

    Grübler traces transportation from the days of canals through the beginning of air transport after World War Two and yes, there is an important CRM component to this.  If you look at the figure supplied here, you notice that each type of infrastructure has its rise and fall, as the title implies and as the S-curves amply demonstrate.  If it looks like the curves were traced over by a fourth grader, it’s because the idealized shape is imposed on actual data.  See how well they overlap?

    The 55 year span between peaks of each curve is also significant as it represents a “long wave” interval first recognized by Kondratiev and others.  It is the duration of an economic wave or paradigm and there is a great deal of writing available on this subject.  Quick question: Where are we on the IT long wave?  If we assume it started in about 1960, this paradigm where we all earn a living is getting old.  But I digress.

    Here’s what’s most interesting to me.  Canals were developed to move heavy raw materials like coal and iron ore (and later some finished goods) from the mines to the factories.  But they were replaced by railroads that, in addition to moving freight, began doing business transporting people.  In each case, the transportation mode supported a kind of communication.

    Canals moving raw materials had little need to be more explicit communicators.  Directions, bills of lading and the like were hand delivered on paper with the order.  Rails, on the other hand, began to move people associated with raw materials as well as finished goods.  People came along to sell the goods and train others about them.  People also came along to provide pure services.  Ball teams, politicians (arguably), business people, and circuses all traveled by rail and their principle interest was either communicating ideas or delivering a personal service to patrons.  Life became richer because of transportation.

    Rails also moved people not associated with goods too, people on private business and those bringing information from place to place.  It is also no coincidence that the telegraph spread at the same rate as rails, at least initially.  When pure information was the only thing to be transported, telegraphy was better, faster, and cheaper than sending a body.

    Roads accelerated the trend started with rails of enabling movement of goods, people, and it should be said, ideas.  Newspapers, for instance, extended their reach with trucking and eventually the telephone working on the same or very similar infrastructure replaced the telegraph for most voice communication.

    The revolution in air travel has gone differently.  While airfreight has gained an important and lucrative part of the transport market — sending an over night package is no longer cheap — air travel has not replaced roads and rail to the extent you might have expected.  We travel long distanced by air but the flying car never took off due to energy concerns and because humanity’s dreadful driving record is no endorsement for making everyone a pilot.  But the communication theme remains in place.  People fly to communicate ideas in business and to communicate on a more personal level when flying for pleasure.  But lurking in the background is the new fangled Internet, which nicely takes on the functions of the earlier telephone and telegraph and which is competing with conventional transportation infrastructure.

    We increasingly trade in information and not in goods and we have the ability to separate physical delivery of goods from virtual delivery of ideas.  So, at least in some forms and for some needs, communication is in the process of replacing transportation.

    The potential for disruption that this presents will be huge.  For example, during 2009 (the latest year I have insight to, though there is more information on line) the U.S. Business Travel Association estimates that American business spent $234 billion in business travel costs.  If business can find a way to communicate more through electronic means than by transporting people, that number will surely go down.  It will hurt a part of the economy in the same way that the interstate highway system and trucking drove a few nails into railroads’ coffin.  But it will also raise up a new industry and a new technology platform which might likely exceed the revenues of what is being lost.  That’s the creative destruction that the economist Joseph Schumpeter wrote about in the 1930’s.

    Unified communications — bringing together Internet, telephone, conferencing, software, video, and social media — has the capacity to be the disrupter of transport and the plain old next disruption.  It might be the next thing on the horizon and the next platform we need to think about beyond ERP and CRM.  Already Microsoft, Shoretel, ATT, Siemens, and many other vendors, have product sets that they are working to build out in this space.  There is more work to do to bring so many disparate technologies together but that work is ongoing.  There is also a great deal of work to be done explaining unified communication to a skeptical market.  Naturally, there are early adopters to be found too.  But I also think unified communication will inform how we think about CRM in the years ahead.

    Published: 10 years ago

    LarryEllison_2255331bI am a little shaken up and I spent a lot of time trying to get my head around the Salesforce-Oracle announcement from earlier today.  I didn’t want to make some rash pronouncement because this could be rather important going forward.

    So far, I know that Oracle and Salesforce will merge their clouds in a process that will take nine (not ten) years.  We know that Salesforce will standardize on Oracle Linux and middleware and that the company will use Oracle HCM.  Meanwhile, Oracle gets a new customer for its Exadata product, a bigger than big storage system with speed to burn.  Salesforce could always use more speed in the data department — who couldn’t?

    But long term, what’s it mean?  To me it looks like Oracle is buying SFDC but to skirt the SEC and DOJ, and to avoid sticker shock, they’ll do a slow motion merger and present the market with a fait accompli in 9 years.  Larry gets a lifeboat strategy for a company whose applications were (mainly) architected a long time ago and whose developer tools have not been a resounding success.  Marc gets entre into new customers, though arguably he didn’t need the help.  And Salesforce and its ecosystem will be the face of Oracle apps as older products like PeopleSoft and Siebel wind down.  Also, newer acquisitions made by Oracle, such as RightNow, are already integrated with Salesforce so there will be no slowdown.

    Larry is no spring chick so there is a succession issue to consider at Oracle and Marc would be a good fit because nine years from now Larry will be about 77 (his birthday is in August).  Marc is almost exactly twenty years younger than Larry.

    The other shoe is that Larry already owns NetSuite, a respected cloud ERP vendor headed up by another Oracle alumnus, Zach Nelson.  I look for a similar announcement from Oracle-NetSuite in a few years too.  So, Oracle will have reinvented itself at the end of this with best in class cloud computing that it could not have developed on its own due to internal friction.  Oracle brings Exadata to the party, which is quite good, and completes the setting for a completely re-architected, product offering that includes hardware, software, and social that should be good for the rest of my working life.

    You could see this coming and it makes a certain amount of sense but the audacity and sheer size and scope always made it unlikely in my mind.

    Published: 10 years ago