Think Bigger
I spent the best part of last week cruising up and down Silicon Valley checking in with customers and would be clients. The consensus from this non-scientific survey is that business is better than OK and most people are expecting this year to be the best in a while. Of course there is a cloud—literal and figuratively—to go with that silver lining. After all, we’re bouncing off a long fall to what’s still a soft bottom.
Business is good enough out there that many companies can’t find enough qualified people. Ted Elliott, CEO of Jobscience, sometimes refers to it as a skills gap with many older workers not having all of the skills that newer companies seek. People with all the requisite skills are rare and valuable and Elliott refers to them as “unicorns” because they’re so hard to find and, yes, he’s got and app for that.
While you might say that such gaps are generational and common it’s still noteworthy that a generation ago the gap was between laid off steel workers and service sector job requirements. Today it’s between laid off tech workers and new tech job openings.
Interestingly, if you have a Ph.D. especially in a science or math, there’s no job shortage especially if you like to work at IBM. A recent story in the New York Times said that IBM hires more math Ph.D.s than anyone else in the world. You could have figured that out from all of the patent applications they file.
What’s been interesting to me in the last couple of weeks has been the intersection of big data, IBM’s quest for brains and a recent report from Forrester Research. The report in question is a project led by Phil Murphy titled: “BT 2020: To Thrive In The Empowered Era, You’ll Need Software, Software Everywhere.” I can’t critique it because I don’t have the $499 necessary to read it but I also happen to think that’s right, but what kind of software?
The report talks about the coming reality that software is and will be even more ubiquitous in the future and interestingly it posits the emergence (according to Forrester) of “cloud cartels”—large corporations dedicated to serving the processing and storage needs of the future. We’re talking more about big data than about running ERP in the cloud. With some 22 billion attached devices by 2020 (also according to the report) spitting out second by second data, a lot of processing and storage will go to machines understanding machines.
I can buy all that but what I find harder to internalize is that the short list of winners quoted in the Times story about the report includes “Amazon, Cisco Systems, Google, I.B.M., Microsoft, Oracle and a few competitors.”
While those are all good names the list fails to mention any of the companies that started it all such as Salesforce.com. The report reveals an assumption that though the data center might be moving to the cloud the fundamental software paradigm isn’t changing. But I disagree. In my little corner of reality I think about things that haven’t been invented yet that are going to need all of that processing horsepower. Many of the companies not making the short list have a foot on the ground in the Valley and they are exciting for the novelty of the solutions they envision.
The Times article, and to a degree the report, support the kind of linear thinking that I have always criticized because the forecast looks more like a scientific experiment that keeps all variables constant save one. But in the real world systems are dynamic (yes, IT is a system) and change cascades through systems leaving no stone unturned—exactly the opposite of straight line forecasting.
If Forrester is right, and I think they are but perhaps for different reasons, then much of the processing power in the cloud will not be taken up by mundane ERP and CRM applications but by applications demanding computational answers to figure out what people want and need and what the connected devices need as well.
I am certain that the actual processing will be as different from that conducted by today’s applications as a fish swimming is different from a bird flying. I’ve lately been reading Isaacson’s “Steve Jobs” with great interest in the emphasis that Jobs put on the customer experience. Interestingly, while the book spends a great deal of time on the customer experience it is almost mute about loyalty and promoting it. Not that it matters—Jobs fixated on the customer and got loyalty and then some. Yes, we need more software in our civilization but it’s time not just to think different but to think bigger, if you ask me.
Getting the Skinny on the Big Four
On an otherwise slow news week there was a story emanating from a Gartner analyst, Dennis Gaughan, at a recent Gartner talk in Australia that I found interesting on Business Insider.
The headline told the story, as good headlines often do. “What Microsoft, Oracle, IBM and SAP Don’t Tell Customers” identifies, in Gaughan’s opinion, the primary strategies or approaches to the market employed by the big four software companies. There’s room to quibble with this but there are also elements of truth. I hope you’ll click the link and read the rather short piece, here are the major takeaways.
- Microsoft mainly wants to protect its Windows and Office franchises
- Oracle products don’t really work well together
- IBM wants to take over your IT strategy
- SAP confuses customers with pricing
Got that? I wonder how many readers came away from the article saying, so?
Didn’t we already know this in our bones? And, more important, aren’t these simply strategies for locking in customers and getting the maximum footprint in customer data centers?
IBM has been running IT strategies at its customers for a very long time. That’s not new nor is Microsoft’s fetish over Windows and Office. Dynamics CRM has an Outlook interface because the company tells me, that’s where people spend their day and they already understand the interface. Fair enough, but do they understand the interface primarily because they’ve been trying unsuccessfully to use Outlook as a CRM system all along? Client-server was a boon for windows and cloud computing is a major threat. Why else is Microsoft trying to sell their idea of an operating system for the cloud?
And can anyone take Oracle’s claim of systems engineered to work together seriously? A few years ago the company said that customers should use their products as they come to minimize breaking systems. And when Oracle bought Sun they immediately extended the blanket to cover hardware. In last week’s column I quoted Dave Yarnold CEO of ServiceMax who wondered in print if the universal devotion to SAP’s ERP (and I must say ERP in general) might be sapping companies’ ability to creatively engage the marketplaces they serve.
Nope, sorry, nothing really new here. As they might say in court if you’re an IT executive, you knew or should have known all about this. But what is new is that this kind of news or information is surfacing and it is surfacing at a time when people are thinking differently about their futures and companies are trying to keep up.
The legacy systems of the twentieth century that mediated the manufacturing economy have proven inadequate to the task of keeping up with the increasingly mobile and socialized customer. Moreover the customer is increasingly turning to the cloud and to subscriptions for all manner of things that were once considered products but are now delivered as services.
The news in the article I quoted is not that the big four have tried for a long time to—legally—control their customers. The news is that Gartner said it and the speaker acknowledged that the information was culled from Gartner’s experience with its own customers. To the best of my knowledge Gaughan has not been reprimanded for speaking bluntly and Gartner has received no law suits for the honesty, but it’s early.
No matter, what this indicates to me combined with other things I’ve been reporting on are two things. First, IT customers are getting restless and starting to speak out. This may be the beginning of a cascade. Second, the vocalized dissatisfaction rising in the market may indicate a turning point in the paradigm.
Paradigms are remarkably stable. They may crumble for a long time accumulating pressure for change but never reaching a tipping point. But then, seemingly without warning a catastrophic event causes a shift. There is nothing foreordained to the effect that today’s big four will be tomorrow’s. They have big installed bases and tremendous market presence and that might delude some people into thinking that they are too big to displace.
Alternatively, though, major market shifts don’t happen because the leading vendors fail. They happen when the leaders become irrelevant to the problems they provide solutions for. We haven’t been a primarily manufacturing economy for a long time yet our enterprise software is built to support it. Hand in hand with the irrelevancy of the old regime, the free market boasts a huge number of vendors with robust solutions that are more relevant to the moment.
Multiple economic drivers are in place and that should make the new year very interesting indeed.
Oracle and ATG Redux
One of the more interesting developments of the last week has been the announced acquisition of ATG (Art Technology Group) by Oracle Corporation. ATG is one of the leading suppliers of ecommerce solutions and Oracle liked their stuff well enough to plunk down a cool billion bucks for the logo.
I thought it was a good idea at the time but I am also interested in hedging my bets. Questioning or being skeptical of Oracle’s acquisitions has not always been a good career move. I was one of many voices who questioned the sanity of the binge that Oracle went on when it bought up much of the front office industry in the middle of the last decade.
Several years later the product set that once looked like Marshal Tito’s Yugoslavia still hangs together and Oracle says it is about to release for general availability the new technology stack that will “fuse” it all together.
Only a company like Oracle or Microsoft or a few others, with deep pockets, could pull off something like this. In addition to the billions it took to buy the companies, billions more had to go into not only Fusion’s development but also the care and feeding of so many disparate brands during the interval. I assume the acquired companies have been throwing off enough cash to make the deals palatable but I have no first hand knowledge of this.
So when I look at the ATG acquisition part of me says, not to worry, Oracle has it all figured out; besides, it’s only a billion bucks. (In truth, that last bit about the billion bucks makes me blanch.) The other part of me says this is a lot of money, especially now in this part of the recovery and this part of the front office software life cycle.
Now, to be sure, ecommerce is really important for a variety of reasons and I can envision scenarios where it continues to gain in popularity. For example, buying on-line will likely increase in popularity if we see another gas price spike that makes people go to the mall less often. But I also know that as demand for ecommerce software increases the trend toward commoditization will likely increase. Ironically, one of the commoditizers in this case is none other than NetSuite, affectionately known as Larry’s Other Company.
NetSuite’s (NYSE: N) got game—they’re global (just opened a development center in the Czech Republic), they’re all SaaS and their ecommerce functionality is already tightly incorporated with their ERP and CRM. There’s a lot to like with NetSuite (and they are not a client). But N isn’t even the only alternate player in the universe. There are many players in the space starting with IBM and moving through the alphabet to 3dCart, Volusion, and Venda just to pick some names out of a hat. In addition there is a growing list of open source software to contend with.
Now, certainly, these vendors don’t all compete for the same business. A company like Oracle has to have a credible system that it can offer to its Global 2000 customer base, especially when competing with the likes of IBM and many of the smaller vendors chase business in the SMB world. I’ve recently has some experience with the open source content management system, Joomla! (Yes the “!” is part of the name.) It’s a good product and they’ve got a robust community of developers and a secondary market of people who implement and sell the product as a download or as a hosted offering. And it has ecommerce functionality. Free.
My point is that the cost of good software has dropped to a very low level. Companies are making more of their money in services rather than product, at least in ecommerce as far as I can see. So the idea of paying a billion dollars for an ecommerce software company, even one as accomplished as ATG, seems a little out there to me.
But maybe Oracle sees something; maybe they see a future in which they sell more services and an ecommerce product makes sense to them as something that fills a need for solutions that sell services. That might sound crazy but in the last year Oracle became a hardware company with the acquisition of Sun Microsystems. You might not have been able to see that coming five years ago but there it is.
So, Oracle and ATG—good idea? I really don’t know. If past is prologue then deep pockets might again make a funky strategy into a winner.
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.
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.
