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She Loves Me, She Loves Me Not: SaaS and SAP

admin · May 22, 2008 · 4 Comments

From the Department of Irony and Confusion:

  • Businesses Reject SaaS as Core Platform
  • SAP’s Business ByDemand: The Perfection Conundrum
  • ByDesign, the younger person’s ERP
  • SAP Business ByDesign customers quietly confident
  • Decelerating ByDesign

See if you can find a common theme. The only one I could find: She loves me, she loves me not, she loves me, she loves me not,…

I really like the “rejection” of SaaS by customers that are in the middle of SAP implementations or run large SAP implementations.

As Upton Sinclair said: “It is difficult to get a man to understand something when his salary depends on his not understanding it.”

Update: Dan Druker has a great, thoughtful post on challenges faced by traditional ISVs entitled Different is Hard: SAP – (Not Too Much) Business By Design

Franchises are for Pizza and Burgers, Not SaaS and Banks

admin · April 3, 2008 · 3 Comments

I get a feeling that some mediocre MBA read a case study on franchising and the huge profits it has delivered to companies behind the big pizza and burger brands, and decided to apply it to software. Add the failed ASP model to the inappropriate franchise model borrowed from pizza and burger chains – and you pretty much can figure out the product and go to market strategy of the last generation software vendors when it comes to SaaS.

As a public service, I am providing a maturity model for these companies that aspire to be SaaS winners.

Pizza Pie Maturity Model for Franchising: Pizza and Burgers, Banks and SaaS

by avlxyz (CC)

This is a very simple maturity model. I know big companies like maturity models (see here) rather than straightforward examples. The following are the maturity levels I am proposing for those rushing to market with their half-baked SaaS offerings:

Level 1 – Pizza Delivery: Yes, pizza delivery is the first step in this hierarchy. In order for you to deliver a pizza consistently and of good quality, you need a set of tools, some training and then hire low cost teenagers – and you get the cheesy goodness of pizza, delivered to your home by a freckled teen. Most franchising opportunities such as laundromats, burger joints function well when you are delivering a simple product or service that is easy to deliver, has minimal security/quality/reliablity constraints and is easy to replicate. I recommend the INSEAD case study referenced in the MIT Sloan Management Review article.

Level 2 – Banking: As you can guess, delivering banking services is slightly harder. You need to make sure thieves can’t steal your customer’s money, that you provide certain level of services and if you have online banking – you need to ensure that customer’s accounts are not hacked and money stolen. As a customer, you entrust valuable assets (money) to your bank and it is the trust that a bank has earned over years, if not decades that helps you feel safe coupled with certain regulations and assurances from the federal government. Banks do not have franchises – you cannot pay Bank of America $50,000 – get trained and then start operating a bank with their logo, system and processes. The reason is that the trust earned by banks cannot be delegated away nor can the brand be put to risk or diluted.

Level 3 – SaaS: Yes, SaaS is higher on the Pizza Pie Maturity Model for Franchising than banks. As with banks, customers trust valuable assets (data) with the SaaS company. The SaaS provider must earn the trust of the customers one day at a time by providing the right service levels, ensuring security and business continuity. Just as with a bank, the trust embodied in the brand of the SaaS provider is of great value – and this trust cannot be delegated in a simplistic manner. Providing software (and perhaps some training and best practices) to the SaaS Franchisees does not take care of the most critical elements of SaaS:

  • Reliability: How do you ensure that the SaaS Franchisee has architected its end to end systems to provide reliable service?
  • Security: What kind of processes are in place to ensure data is not lost?
  • Performance: How will the brand owner ensure that the SaaS Franchisee provides the right performance?

You may be wondering:
Why is SaaS higher than Banking on the Pizza Pie Maturity Model for Franchising?

I have two good reasons for this:

  1. Data Loss vs. Money Loss: Data is lost when someone performs a successful read operation without your permission. If I read your mental health records, I don’t have to steal them. With bits and bytes, reading is stealing. With money, not so much. Just because you know my bank balance, I haven’t lost my money. (Yes, there is loss of privacy and trust is eroded but its not the same. You don’t call a cop because someone read your bank statement but if I read your critical health data you would have to call the cops.)
  2. No FDIC: A small bank or cooperative can be insured by FDIC and therefore provide sufficient protection to a customer but with SaaS you are relying on the trust earned by the brand. How comfortable do you feel having your data in a Uncle Billy’s HealthCare On-Demand App that runs on software from NanoSoft?

Reliable Platform, Trusted Brand: What you need is a reliable platform from a trusted brand in Software as a Service. A multi-tenant platform with customers sharing one single system ensures that all customers and ISVs running their applications and trusting their data with the platform are receiving the same high level of security, reliability, availability and that any issues that are discovered are resolved for all tenants.

The approach taken by some vendors to deliver SaaS without true multi-tenancy or even worse, entrust third-parties with running copies of their software takes the Level 1 Pizza Delivery franchisee approach.

What do you think? Want more debate on SaaS styles?

You may want to consider force.com Platform as a Service from salesforce.com for business applications. (Please read full disclosure at the bottom of the blog. No MBA’s were hurt in the writing of this blog.)

Charles Phillips meets with Bloggers and Discusses Fusion, SaaS, SAP and more

admin · November 13, 2007 · Leave a Comment

Today, Oracle took a significant positive step in blogger relations and reached out to Enterprise Irregulars – arranging a sit down with Oracle President Charles Phillips shortly after his keynote where he announced Oracle VM – Oracle’s entry into the multi-billion dollar virtualization market. The blogger meet up was twice as much fun for me since I am proud of my affiliation with both Oracle and Enterprise Irregulars. The meeting lasted 45 minutes as Charles took questions on several topics that included – innovation, Fusion, SaaS, SAP and Cognos.

Irregulars with Charles Phillips

I found the session very interesting – Charles clearly had great command of Oracle’s business strategy, the rationale behind acquisitions and posited interesting perspective on issues facing Oracle customers. For example, he emphasized that Oracle has more than 1.8 million users of its SaaS applications – but also took issue with multi-tenancy being narrowly equated with SaaS which he argued was a vendor strategy for keeping costs down and not a customer requirement.

Charles also talked about how he learned from GE’s success in acquiring companies and retaining and growing top talent. Oracle keeps acquired software businesses as intact teams creating “business units” allowing the acquired management teams to continue to run the business.

In response to another question, Charles mentioned Oracle has now surpassed SAP to become #1 practice for Deloitte in North America. On the topic of Cognos being acquired by Oracle, Charles said “Not surprising, it would have been hard for Cognos to float around by itself. This is good for us – IBM does not have a good record of retaining talent from acquisitions and SAP is also struggling.”

Here are the key posts that resulted from this meeting (which I will update over the next 2-3 days).

Dan Farber (ZDnet Editor-in-Chief and fellow Irregular) posted Oracle’s Charles Phillips: Fusion on track and SaaS for all. Here are some excerpts, I find interesting:

Phillips said he modeled managing different businesses within the Oracle business on GE’s structure. “We give them autonomy and enough authority so they feel like they are running the company,” he said.

…

Oracle has acquired companies large and small over the last several years to fill out is product portfolio. In some sense the strategy is about acquiring innovation, and talented developers, via smaller companies, but it is more directed toward acquiring market share with the larger acquisitions.

…

“We will make sure all of our products are able to run as software-as-a-service,” Phillips said. “We give them choice, and we think we can run it better than customers.” Oracle is looking at providing hosted applications for financial and retail customers with point-of-sale systems.

Jeff Nolan writes Into the Lion’s Den: Oracle OpenWorld. He has an interesting perspective as a former SAP executive and a leading voice in Enterprise 2.0.

Today was a milestone day for me in my professional life. After nearly a decade of SAP, culminating in my stint with the “attack Oracle” team, I ended up at Oracle OpenWorld as their guest sitting across the table from co-president Charles Phillips. BTW, OOW is frickin huge… I thought the Sapphire events were impressive but OOW is much larger and goes for the full week.

…

Phillips echoed sentiments I heard at SAP that customers don’t want end-to-end multi-tenant hosted solutions. In fact, he argued that because Oracle offers a private database option that they are uniquely able to capture government and other accounts that are prohibited from allowing their data to be on hosted datacenters. Quite honestly, I found this hard to believe but was unwilling to argue the point absent of factual data to support my own position.

One comment that he made about subscription pricing caught my attention, he said (to paraphrase) “if you look at the numbers you will find that saas subscription models are more lucrative after 2 1/2 years than perpetual licenses”. I would like to see that data, but tend to agree with him even absent of the data.

…

Karen (Senior Director, Corporate Communications) is definitely not what I expected from someone with Oracle Marcom… no taser strapped to her hip, no brass knuckles at the ready… just a competent hard working professional.


I am looking forward to see what other blogger attendees Michael Krigsman, Brian Sommer, Josh Greenbaum, Sadagopan and Vinnie have to say about this update.

Summary

This was overall an exciting step forward for Oracle in working with the blogger community. Even though the opinions on this meeting will be diverse, there was near unanimity amongst the attendee bloggers that we need more of this – interaction with vendors that our readers (and software customers and users) care about.

Kudos: Special thanks to Irregulars Jeff Nolan and Vinnie Mirchandani that worked with Karen Tillman, Jake and others at Oracle to make this a reality.

(Disclaimer: Please read full disclaimer below. All opinions expressed here are my own personal views.)

SaaS lovers want it both ways – a short rant

admin · September 1, 2007 · 7 Comments

A lot of SaaS proponents take great pride in distinguishing the new Software as a Service era from the hosted applications or ASP model – and insist that there is only one right way of doing SaaS. This is in direct contrast to what I am seeing a lot of ISVs do in real life – which is, adopt a range of delivery model options to fit the customers need and economics of their particular business. But, every time an established software company talks about its success in SaaS by pointing to the wide range of options in the SaaS business, the SaaS purists go up in arms. This would be perfectly fine if their definition of SaaS was consistent when it came to only including shared everything multi-tenant services with its much hyped poster child Salesforce.

The problem is that when they tout the growth and size of SaaS and its wide adoption, they refer to billions of dollars in revenue which includes all variations of SaaS.

So here is my point – either go with a “purist” SaaS definition and accept SaaS as a relatively small niche market today with limited adoption or expand your definition to include different SaaS models. Don’t mix and match.

Related posts:

  • Stuart Launchlan on Oracle & SaaS
  • Phil Wainewright on Oracle & SaaS (SaaS momentum)
  • Vinnie Mirchandani on Charles Phillips and SAP
  • Dennis Howlett on SaaS momentum

Update:

Mukund makes an excellent point in the comments that multi-tenant model of SaaS delivery is a preferred architecture – and I agree that it is, for many applications. I don’t argue in my rant that multi-tenancy is unimportant or irrelevant- in fact, quite the contrary, I am of the opinion that it is the most suitable model for many ISVs and has several architectural and business beneefits. My argument is with the attempt to restrict the definition of SaaS to only one model and yet continue to conveniently include other models when it helps SaaS puritanism proponents make their point.

Update 2:

The post has elicited a series of responses. Phil Wainewright asks “So who exactly is trying to have it both ways?” in his post on ZDNet and argues against my viewpoint – even though I think that he and I agree on a lot of things as I mention in my comment on his blog including the importance of multi-tenancy. Bob Warfield doesn’t take sides but points to what he considers the more important issue of economics (than architecture) . Sinclair Schuller follows up with his post asking Are there REALLY multiple strategies for SaaS ISVs?

This is turning out to be pretty interesting conversation. What do you think about the so called purist vs. realist SaaS debate? Do you think that there is only one true blue SaaS architecture that qualifes as SaaS?

Charles Phillips discusses Oracle SaaS Leadership

admin · August 24, 2007 · Leave a Comment

Charles Phillips recently emphasized Oracle’s SaaS leadership in an interview to Datamonitor:

Always on the look out for growth, Oracle believes the SaaS movement will provide it with two revenue opportunities, one from additional database sales and the other from direct income from services.

As far as databases are concerned, president Charles Phillips believes the very nature of SaaS will drive demand for on-premise databases. “SaaS is very database intensive. Normally people do not want all their data resident on an on-demand product. So if Salesforce.com is hosting data for a large company, they are forcing them to create a replicated database behind the firewall, which means that companies are creating more and more databases,” he said.


Charles also discusses the fact that Oracle was early in adopting the On-Demand model and has been doing it successfully for over 9 years. In another interview with AccountingWeb, Charles Phillips brings out Oracle’s successes in SaaS and in competing with SAP.

Dennis Howlett of AccmanPro called the claims outrageous leading to a debate on Enterprise Irregulars – and Josh Greenbaum who writes a ZDNet blog, in a rare feat, wrote the following response arguing for the facts in favor of Oracle and I quote him (with permission):

Rising to the defense of Charles in a disagreement with Dennis almost sounds crazy, but here goes:


The only really outrageous statement comes in the first graf:
We’re not trying to preserve something from the 1970s like SAP is. As a company, we were in infrastructure first, then we moved into applications.

Correction: SAP is not preserving anything from the 70s (except some of its founders, who ARE relatively well-preserved. And Oracle was NOT an infrastructure company first: they started in database, moved to applications (in 89) and then went into infrastructure.

But the rest of it is actually not too outrageous.

Statement: We could not be reporting those numbers without competing among SAP customers. A significant proportion of our new customers are also SAP customers who we can now add value to.
Fact check. They are competing among SAP customers: The overlap has always been huge, (DBMS), and now it’s bigger with PSFT, SEBL and Hyperion on board. If he didn’t have SAP customers to sell (DBMS and middleware and appliactions) to he’d be out of business.

Statement: I know for a fact that there are far more SAP customers calling me now than there were three or four years ago.
Fact check: see above. He’s just bought into more overlap.

Statement: We have entire sales territories that are now just based on SAP accounts, our salespeople can make a living out of just selling to SAP accounts.
Fact check: Yup on that one too. Guess what, SAP has territories that are all ORCL too.

Statement: SAP doesn’t want that co-existence so they haven’t made it easy for their customers.
Fact check: I was only one of several analysts who discussed this issue with Henning earlier in the year. Field sales hasn’t been open to ceding CRM to SEBL and completing the rest of the sale with SAP, so they’ve been losing accounts that want SEBL and care less about the rest of the system.

Statement: SaaS is very database intensive,” acknowledges Phillips. “Normally people don’t want all their data resident on an on-demand product. So if Salesforce.com is hosting data for a large company, they are forcing them to create a replicated database behind the firewall, which means that companies are creating more and more databases.”
Fact check: The first part of this doesn’t wash with me, though I would love to hear Phil’s comments when he gets back. The idea that SaaS generates net greater DBMS sales seems bogus. But the very last statement is true regardless: companies are creating more and more databases.

Statement: Oralce is going to be the on-demand leader, seemingly using the terms on-demand and SaaS interchangeably.
Fact check: until very recently, ORCL and SFDC were the only two companies that stuck with the on-demand market, and, while the numbers were small, ORCL was a leader in number of customers doing OD. If you define leadership by number of users, no way. If you define leadership by vision, ORCL was definitely a leader in OD. As for mixing OD and SaaS, at the risk of annoying the purists, they are interchangeable, except by lexicographers and semanticists intent on splitting hairs.

Statement: We continue to make progress (on fusion).
Fact check: True. Can’t say more, or the NDA police will draw and quarter me.


Oracle is not only a leading SaaS provider but is also the database and middleware platform of choice for well known leading SaaS ISVs and several others that are not so well known.

(Note: Cross posted on http://blogs.oracle.com/zen also.)

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