Further Illumination
I don’t like ambiguity and there was some in yesterday’s post so let’s get to it. Yesterday I wrote:
Microsoft is confidently offering replacement systems that have been the beneficiaries of significant investment over the last several years. These systems also run on cloud infrastructure, though cloud does not necessarily mean multitenant.
Microsoft and others — with the notable exceptions of companies like NetSuite and Salesforce.com — have decided to kick the can down the road with regard to multitenancy. While multitenancy might have advantages, it is not advantageous enough yet to push the issue. As a result, it may have to wait 10 more years — until the next wholesale replacement cycle — until multitenancy becomes more of a standard.
The “can” in this case is a metaphor referring to how vendors address the issue of single tenant vs. multi tenant cloud-based systems, and I thought the second paragraph did an acceptable job of illuminating the metaphor.
Not that long ago cloud and multitenant went together but a revolution in the last couple of years by major software vendors including Oracle, Microsoft and Sage among others, has changed the complexion of the situation. Many vendors have adopted a strategy that leverages a single code base that can be deployed either as single or multitenant. Moreover, the single tenant versions can still be housed in a common, cloud-based datacenter to deliver cloud services that are almost indistinguishable to the user. But no conventional vendors are pushing multitenancy as the wave of the future. They are letting the customer decide.
It’s still true that you need to work with your vendor to establish the right balance of cloud services to go with your cloud infrastructure. For instance, do you want to manage your system from afar or do you want your vendor to provide management services including configuration, backup and upgrades? The choices are numerous. So when I spoke of kicking the can down the road, it was about the choice of deployment—as in letting the customer decide the deployment approach—rather than saying that any vendor did not possess the ability to deploy in multitenant mode.
Clear, right?
CRM Evolution wrap up
There were many encouraging signs of economic recovery at the CRM Evolution conference in New York this week. Attendance was up over last year and even close to the previous highs. Companies and their executives seemed upbeat and one or two announced new funding, a sure sign of resurgence.
The company with new funding that caught my interest is Xactly, the sales performance management company. In conversation with CEO and founder Chris Cabrerra I learned that they had successfully raised a new round of funding worth twelve million dollars including an undisclosed position taken by Salesforce.com. Such an investment is a vote of confidence in the company and its sector and I think it will mean a lot as the company rolls up to a future IPO.
Salesforce was not present for the event and I didn’t even see a company employee among the crowd. That was a mistake, frankly, I don’t know how you get to a leadership position and then fail to show up at a major conference, maybe they do.
At any rate, the other leading vendors were there and many others that are now emerging. Oracle, SAP, Microsoft and Sage all had representatives there though not all had booths. The CEOs or other ranking executives from these companies all attended and it made for interesting panel discussions.
Tuesday morning for example, Paul Greenberg hosted a panel with Anthony Lye from Oracle, Jujar Singh from SAP, Greg Gianforte from Right Now and Brad Wilson from Microsoft. I can’t say this panel was all that enlightening but it was certainly entertaining and you needed to be able to read between the lines to grasp the full effect. A case in point, vendors with extensive investments in on-premise technology and large installed bases were in favor of hybrind — premise and SaaS implementations. Not exactly news but progress from a few years ago when the thought SaaS was a fad.
Likewise, suite vendors thought the best approach to integration is buying an already integrated suite while point solution providers spoke more about the progress they’ve made on the integration front. All of this served as high entertainment though not exactly great information and I am not sure any minds were changed.
Nonetheless, it was good to see them sparring again and it would have been nice to have Salesforce there to lent more weight to the pure multi-tenant SaaS and cloud computing view.
Apropos of nothing, I was out to dinner with people from Oracle and a large contingent of analysts the other night. The restaurant was the Grill at Bryant Park. Next door in the park they were showing a movie under the stars which I had assumed would be some classic like “Roman Holiday” or “The Philadelphia Story”. I was right about the classic idea but the film turned out to be “Rosemary’s Baby” which made quite an impression when the primal scream happened in the middle of dessert. CRM Evolution was anything but a horror show and they even let me give the keynote for which I am grateful.
Last week and the triumph of CRM
Last week was busy in a good way and also in ways that we have not seen in a while and at least some if that busy-ness showed promise for the economy and our industry. In no particular order, Cloud9 Analytics announced it closed its C round financing, SAP held its user meeting in Orlando, Sage held its partner meeting in Denver, and Microsoft sued Salesforce.
You might think that last bit didn’t fit with the rest of the list and aside, from the fact it happened last week, it doesn’t. But it struck me that the two companies are getting into each other’s faces over a market that has significant upside. Regardless of its merits, this suit suggests to me that Microsoft, at least, thinks important issues need to be decided before the market really heats up. The way suits move through courts it’s unlikely we’ll see a result soon but to be fought over like this — it makes you feel like the prettiest girl at the ball doesn’t it?
Perhaps the most interesting item in CRM, for me at least, is that Cloud9 raised eight million dollars. Cloud9 is certainly worthy of investment but the announcement says more about the state of the venture community that had been almost sleeping in the last year. According to the National Venture Capital Association (NVCA), 2009 was the worst year for venture funding since 1997, with less than $18 billion invested and just over $15 billion raised.
Last quarter biotech led software in investment dollars, a trend that has been developing for some time. That high tech is not leading the venture parade should be a concern and the trend bears watching.
I know what you are thinking, you can still do a lot with eighteen billion but it pales in comparison with the hundred billion invested in 2000 or the twenty to thirty billion more typically invested each year in the last decade.
The Cloud9 investment is a silver lining for the industry but the rainbow is still not shining. Keep in mind that this represents a C round which means the investors are looking to a liquidity event in the relatively near term. That’s completely different from the longer-range expectations held in a typical A round. Nonetheless, it’s good to see money being put to work and the optimism that it implies.
Also on the optimism scale Sage and SAP convened meetings with their users. Sage is continuing to evolve itself and as Doug Meyer, Chief Customer Officer told me and CEO Sue Swenson said in her keynote, the company is going all out to make itself easy and fun to work with. Customer experience is a top priority as is product evolution and Sage showed it is serious about the on-demand market by launching a version of SalesLogix that will be delivered from the cloud. All indications are that the partner community is receiving the offering well and general availability is scheduled for later this year.
Although I didn’t go to Orlando (because I was in Denver) from the emissions at Sapphire it seems like the ERP world has discovered the importance of crowdsourcing and the wisdom of crowds and their eponymous books. The tweet-storm coming from Orlando can be summarized in Co-CEO Bill McDermott’s keynote sound bite: “SAP embraces People, By Design.” Promising greater collaboration with its customers as well as the tools to enable SAP customers to more effectively engage in collaborative business processes with end customers, SAP unveiled new products and new attitudes. Since I was not there it’s best to get the skinny from those who were, including Sameer Patel, Vinnie Mirchandini and Dennis Howlett to name a few.
The collaboration thing has me more than intrigued. I can’t find a soul who cares to object to the idea and that tells me that CRM and our focus on all things social over the last few years is having an impact that goes well beyond front office borders. You might call it the triumph of CRM. It became readily apparent last week and, the economy not withstanding, that may be the biggest news coming out of one of the best weeks in CRM we have had in a while.
Let’s get our terms straight
Sage’s introduction of SalesLogix for cloud computing has caused me to do a lot of thinking. The operative terms we use in the industry for software functionality delivered across the Internet is SaaS or now cloud computing and numerous vendors find themselves twisting themselves and the definition into barely recognizable forms. Enough of this I say, let’s do a re-think.
If SaaS and cloud computing are mysterious to you, let me provide some background.
I started covering the field (it wasn’t a market yet) in 2000 and I devoted my practice at Aberdeen Group to it. In those early years other terms dominated the discussion, notably, hosted, on-demand and ASP. All applications were hosted and available on-demand but the earliest distinction, one that persists today, was between ASP’s and multi-tenant solutions.
Briefly, ASP’s or application service providers offered client server products like Siebel served from a central location across the Internet. It was slow going and each customer had a single instance of the software running out on the Internet. It didn’t work out well and many VC funds took goose eggs on their report cards from the ASP’s.
Multi-tenant was another matter. Salesforce.com was a pioneer but so were Salesnet, RightNow and UpShot. Ironically, only Salesforce understood the power and value of its proposition (RightNow got religion a little later) and most treated the multi-tenant on-demand solution as simply a delivery model and not much more. UpShot was bought by Siebel, Salesnet by RightNow and the debate about superiority abated because Salesforce and RightNow (which hardly competed then) had prevailed.
Then something interesting happened. Vendors like Oracle (which bought Siebel) started dabbling in on-demand services and began delivering application services that hybridized the on-demand and ASP models. They did this by re-architecting away from client-server and supporting applications in browsers. They then began hosting their applications in a have it your way scenario. The re-architected applications had been retrofitted to support the multi-tenant model but multi-tenancy was strictly voluntary. Customers could elect to run their applications as single instances in their IT departments or from a remote data center.
With multi-tenancy everyone shares a single instance of the application and through metadata configures and customizes their instance. All data in a multi-tenant system is stored in one server farm with metadata again serving to segregate it. Some people worry about this virtual segregation but so far it has been resilient to corruption and hacking. Nonetheless, some vendors offered single tenant solutions to assuage jittery nerves.
But wait there’s more.
Terminology evolution continued and SaaS or software as a service and cloud computing have been front and center for several years (in the case of SaaS). In its quest to differentiate multi-tenant from conventional single tenant, the industry keeps adding differentiators. SaaS has usually meant multi-tenant and cloud usually refers to a plethora of computing services available on the Internet. So, raw computing power is also called Infrastructure as a Service (IaaS), there’s still SaaS and cloud seems to refer to platform — the whole computing stack of hardware, operating system, database, middleware, applications and more.
So where does this leave us?
In a word, confused.
The relative dearth of terms has caused us to re-use what we have in ways that have confused the market. I also do not leave out the possibility of savvy marketers hitching a ride on a popular term to bend it to mean whatever they need it to, which lead me to my opening paragraph.
So I propose the following.
ASP is the new term used to describe a single tenant implementation in some remote data center that serves applications across the Internet. A vendor that serves multiple customers with this architecture would be said to be delivering an application service in single tenant mode. Full stop. No need to apologize for it. If that’s what the customer wants then sell it to them. It doesn’t have all the advantages of multi-tenant cloud computing but some people clearly don’t see these things as advantages anyhow.
SaaS refers to multi-tenant application delivery across the Internet.
Cloud computing is an umbrella term encompassing ASP and SaaS as well as IaaS and Platforms. ASP’s and SaaS providers may very well use infrastructure from other cloud providers as Sage is doing with SalesLogix.
My whole point in doing this is simple. I think the industry and the market are mature enough for us to develop some new terms or possibly adapt an old one. Since there are obviously several models for delivering software as a service, why not differentiate enough to give concreteness to them? Calling everything SaaS without qualifiers is not helpful to the market or the customer and the confusion it can cause can only slow down a sales cycle and who needs that?
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?
