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Archives for August 2006

Marc Fleury, Game theory and open-source

admin · August 29, 2006 · 1 Comment

Marc Fleury has written a very interesting post on the future of Red Hat, Linux from Oracle and game theory. He makes the point that a new player has little to gain by entering the Linux market, a self-serving but well thought out argument. He also refers to Red Hat becoming a target of PeopleSoft/Siebel playbook. I think this is going to generate a lot of buzz again over the issue of a new Linux distribution disrupting Red Hat.

I wrote this post on open-source and how to play this game of oepn-source back in July, titled ” Let’s play games! Open source generates lots of value but little revenue“. In my article, I made the point that the prize catch in open source software is not selling open source software but leveraging it to deliver new software and services. Here is the entry in its entirety.

Let’s play games! Open source generates lots of value but little revenue

Yes, it may sound counter-intuitive but many technologies over the last 100 years have successfully added a lot of value without being a profitable business. Airlines add a lot of value to both individuals and businesses allowing us to meet people, establish relationships, ship goods and deliver services. However, since flying is a highly competitive business little value is added by any individual airline. Adam Branderburger and Barry Nalebuff illustrated in their ground-breaking book “Co-opetition” how the revenues and profitability of a business depend on how much value they add in the context of the industry. We will apply these concepts from Game theory to open-source here.

Open-source games

Open source software is created mostly by interested individual contributors that take pride in the software they write. They also gain appreciation and respect from the software development community. Several large vendors such as Red Hat, Novell and start-ups like SpikeSource are attempting to provide open-source solutions that include pre-configured, easy-t0-install distribtutions and support for enterprises. But as Larry Ellison of Oracle recently pointed out they own little to no IP and other players can easily enter the market. Even if companies like IBM and Oracle have not entered the open-source market, the threat from new entrants due to low barriers of entry ruin the game for incumbents forcing them to keep prices low. And this is exactly what game theory predicts- in a market with low barriers to entry it is hard to charge premium prices and make profits over an extended period of time.

Value for consumers and businesses
There is no need to despair for those interested in the open-source phenomenon. The open-source is creating value for companies that are leveraging it including such companies as Yahoo! and Google. In fact, corporate IT departments are using Linux and the LAMP stack (Linux, MySQL, Apache, PHP). And those that are not, are benefiting from the competitive pressures this is exerting on the likes of Microsoft resulting in weakness in pricing. It is interesting to note that traditional math does not apply to the game theory economics and so the value added by open-source to the customers is not equal to the value added by open-source vendors. The reason for this is that even though there are only a few visible open-source players, there are infinitely large numbers that are potential competitors due to low entry barriers. And we all know what happens when you divide billions of dollars by infinity.

How do I play this game?
If you are looking at the open-source trend and looking to benefit from this trend there is a right way and a wrong way to play this game. You are much less likely to succeed by entering the game as a vendor. Your gains are much larger if you can leverage the low cost of open-source software to provide new services to the customer- consumer or businesses. Enterprise software delivered as a service (Enterprise SaaS) companies that provide CRM and other ERP functionalities over the web are some obvious examples. Increasingly services like Intuit’s Quickbase, Salesforce CRM and NetSuite ERP will provide attractive alternatives to customers. As yet unforseen compute-intensive services may be offered in the future that may include anlaytics applications, data warehousing and backup, etc. that have as yet been only delivered by installing software within the enterprise firewall. On the consumer side services like Google’s Web2.0 Office (Spreadsheet, Document writer, etc), Zoho, FlickR are popular and obvious examples of what low-cost hardware, open-source software stack and advertising-driven revenue model can deliver to users at zero cost to them.

In summary, open-source software is changing the way we build, deliver and consume software and services creating untold billions of dollars in increased productivity. However the obvious instinct to profit from this by entering the market as an open-source vendor may be exactly the wrong approach to take. In stead look for opportunities to provide new services to the customer that were earlier economically infeasible due to high cost of hardware and software. Cheaper, faster, better online applications that improve upon Microsoft Office, SAP ERP, Business Object’s BI, etc. is where the action is. Now go play!!!

Housekeeping- My blog’s comment feature was blocking some readers. You can easily leave comments now, so do express your opinions.

(Disclaimer: The views expressed on this blog are personal and do not represent opinions or views of my employer.)

Open Source Red Hat Oracle Larry Ellison JBoss wisezen

Zoho Projects makes Google look like a dinosaur

admin · August 26, 2006 · Leave a Comment


Yes, I am saying Google is a dinosaur when it comes to Office 2.0 applications. Zoho Sheet is better than Google Spreadsheet as I wrote in a previous entry. And now Zoho is launching Zoho Projects- a complete project management app for the 2.0 fanatics.



Some features I like:
– Integration with Calendar
– Easy to add tasks and to-do’s
– Reports including Gantt Charts
– Ability to attach project documents to the project

My feedback to Zoho team is to have a more carefully thought out demo scenario. To the new user, the demo and the product are indistinguishable- pick an interesting project (say “Launch Motorola RazR”), carefully think through the project and have a demo scenario everyone can relate to.

This is a good example of Enterprise 2.0 and as you will notice this app is just a Web2.0 app that happens to be targeted to the office user. In my previous post I argued that the whole Enterprise2.0 debate is a little misleading as it is mostly packaged app vendors looking for a veneer of Web2.0- a true Enterprise2.0 app is just another Web2.0 app. Do you agree?

Tags:
Office2.0 Web2.0 Zoho Enterprise2.0 wisezen

Enterprise 2.0 is same as Web 2.0

admin · August 23, 2006 · 5 Comments

I think some of us are over thinking the Enterprise 2.0 and Enterprise Mashups. The key is to learn from history and apply the knowledge to the present. Jeff Nolan has nicely summarized some of the discussion around Enterprise 2.0. Rod Boothby has raised the question of mashups in the context of Enterprise 2.0 I find Vinnie Mrichandani’s post to be the best description of issues we need to consider and resolve.

However, the idea of Enterprise 2.0 seems inside-out to me. People from the enterprise world used to large ERP-style applications and deployments thinking in traditional terms with a willingness to tweak the model to incorporate 2.0 from Web 2.0. This will not suffice. The square (pun intended) peg of Enterprise software will not fit into the round hole (no pun intended) of Web 2.0

A lesson in history

The IT departments and software vendors that had significant investments in client-server tried to simply adapt client-server to the web rather than moving to true N-tier architecture. Slapping a portal on top of client-server software helped SI’s and vendors make some money but they were no competition for applications designed from the ground up for the web. A lot of companies are now trying to do the same by trying to ‘service-orient’ their existing applications. I find the tone of discussion on Enterprise 2.0 suffering from the same problem.

Principles of Enterprise 2.0

The real Enterprise 2.0 applications are the SaaS applications (On-demand) from the likes of Salesforce.com, NetSuite, Siebel On-Demand etc. Some key characteristics of Enterprise 2.0 applications will be SaaS (Software-as-a-Service) delivery model, SOA architecture, simple web services based integration, extensiblity and open-ness.

SaaS & Long-tail: I would argue that all Web 2.0 applications are hosting-capable if not entirely hosted. The benefits of the long tail come into effect only when you have large number of users and but for a few very large companies it is hard to see how this effect will play out if the application is not hosted.

SOA, Web Services & Mashups: The Web 2.0 mashups were enabled by open standards-based APIs with many of them using either web services or other standards such as ATOM. In the enterprise, you need similar capabilities to do end-user integration. And SOA & web services help you expose your internal applications for integration. Rod Boothby poses an interesting question on what will Enterprise 2.0 mashups look like. I strongly believe (that’s what blogs are meant for, right?) that Enterprise 2.0 mashups will look just like Web2.0 mashups. Just as your internal web apps for email and procurement now look just like Yahoo! and Amazon, in time your internal Enterprise 2.0 apps will look like the Web2.0 apps. Here is an example- you are browsing a catalog in your procurement application. As you mouse over the price, a bubble pops up (AJAX style) to tell you whether this is within your purchasing authority. This is a mashup of procurement and financials.

Why is this so hard?
If Enterprise 2.0 looks, feels and behaves like Web2.0 then why is it so hard. It is not hard, its hard for the existing enterprise applications that will in five years be legacy just as client-server applications became legacy and mainframe apps before that.

Are we done?
No, we are not done with building out Enterprise 2.0. The CRM space has made a good beginning and there are several others in various stages of development. With a new class of Enterprise 2.0, there will be new problems. Rather than looking for how to morph Enterprise 1.0 (did we ever finish 1.0, btw) into Enterprise 2.0, the key is to look at the Enterprise 2.0 and fill gaps. Some of these gaps are in the areas that have been brought up by Jeff Nolan and others. These include:
– Integration 2.0: How will Enterprise 2.0 applications integrate with each other? Will it be a hosted integration model?
– Identity 2.0: How do you enable single sign-on in Enterprise 2.0? Again rather than thinking about simply connecting your existing LDAP to Enterprise 2.0, look to online identity service providers.
– Customization 2.0: (I am as annoyed with having to say 2.0 after every term that applies to this new class of apps but couldn’t resist it.) The question is how do I customize the new applications for specific verticals? Again look for the emergence of experts from verticals and regions. A Chinese company that customizes your vanilla Financials system to deal with national regulations. And then yet another company customizing that offering for clothing manufacturers to account for specialized business processes to deal with QR (Quantitative Restrictions) on clothing imports. And so on and so forth. Essentially, you end up with a network of service providers rather than customization by internal IT.

There are other issues of service-level monitoring and guarantees, analytics, bulk upload, security etc. Rather than trying to solve all these problems a priori before we build Enterprise 2.0, these concerns will get sorted out as we build out the services for the 2.0 world. Those of us who fall into the not good enough trap need to go back and re-read Innovator’s Dilemma. The barely good enough for some will, in time, with iterative innovation become good enough for most.

I think this is an interesting discussion and I look forward to more exchanges and posts on this topic.

Update: FASTForward Blog’s Joe McKendrick has picked up and extensively commented on this post at Fitting the Enterprise 2.0 Square Peg into the Web 2.0 Round Hole

Update: ZDNet’s recent post entitled Facebook for Enterprise = Enterprise appears to agree with my viewpoint.

Tags: SAP Web2.0 SOA Enterprise2.0 wisezen

Business games, India and Web2.0: My top 5 blog posts

admin · August 13, 2006 · Leave a Comment

I wanted to welcome my new readers. Please do participate by leaving a comment below. Here is the list of my top 5 articles-

  1. Let’s play games! Open source generates lots of value but little revenue
  2. India at a threshold- a first hand account
  3. TiE Event: The great Virsa story for Enterprise Software
  4. Disruptive Innovation, Co-option and JBoss
  5. New Business Models and Web 2.0: Share and Prosper

Securing the Enterprise

admin · August 1, 2006 · Leave a Comment

I recently wrote an article for the Line56 magazine, and it is now published on their site at Line 56 site. Here is the introduction:

When CIOs leave their homes this summer for a vacation, they will not just lock the front door but will attempt to secure every door and window. Unfortunately, the same cannot be said of the physical assets and IT systems they manage for enterprises. Businesses have been looking to lock down access to every critical IT system and physical location one at a time, be it consumer-facing Websites or sensitive manufacturing facilities and data centers. Increasingly, businesses are realizing this approach to securing enterprise in silos does not scale well, costs too much and does not provide adequate security. Therefore, a blended approach to security that takes a holistic view of the problem and proposes solutions that lower the security risk for the enterprise as a whole are gaining favor.

You can read the entire article here. Please send me your comments on content and style.

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