Sage Summit Atlanta

Sage convened its fall user group meeting in Atlanta this week.  The event was set in the cavernous Georgia World Congress Center, a complex of three starship hangers left over from the Intergalactic Olympics.  The facility is beautiful and very big.

Sage estimated attendance at between 2500 and 3000 people and despite that number of people, the place looked under used.  As you might expect in a recession, Sage officials told me that many companies sent fewer people to the event so that overall attendance was down somewhat year over year though the number of companies sending employees was relatively constant.

It is important to distinguish between the Sage partner event, Insights, held in May and the user group meeting called Summit.  Since Sage sells exclusively through a partner channel, it makes most of its product and policy announcements at Insights each year.  At Summit, the company focuses more on end-user training and adoption and there is less hard news coming out of the event.

Jodi Ueker-Rust, President, Sage Business Solutions Division, gave a keynote on Monday that emphasized three directions for Sage and they were meant to cover both front office CRM and back office ERP products.  Rust said the most important directions for Sage included support for increasingly mobile users, emphasis on social media and business intelligence, but the speech seemed short on detail and the CRM group has been executing on all three for a while, score one for the front office.  I sat down with Joe Bergera, GM, Sage CRM Solutions and Larry Ritter, EVP Sage Business Solutions Division for a discussion about the CRM business; here are some highlights.

My impression of the messages flying around is that there are two different Sages.  One is dedicated to making prudent decisions about moving over to SaaS (let’s call them the front office gang) and the other is digging itself into an untenable position in premise-based solutions, I think of them as back office.

Sage front office folks have long been leading adopters of social media for internal use, with good results.  The company uses communities built into product specific sites for ACT! and SalesLogix and the officials told me that a significant amount of traffic for CRM products now arrives thanks to Twitter and other inbound social media these days.

Even more impressive to me is that some CRM products automatically survey new customers at the 60 and 120 day marks just to better understand customer use and tribulations, if any.  I don’t know if other vendors are taking this step but it strikes me as the kind of aggressive customer outreach a vendor has to have especially if the purchasing process is retail oriented – i.e. without a sales representative and maybe without much implementation help.

Sage is doing a lot with community data and I wish more companies would realize that social media is about the outbound and sexy Twitter and Facebook applications as well as inbound community applications.  Analyzing customer input and data collection is still in its infancy for Sage but Bergera and Ritter tell me they are beginning to see a difference in product uptake that they attribute to social media.

Good for them, I say.  It’s nice to see a vendor drinking some of the Kool-Aid we’ve been mixing up.  But they haven’t stopped with basic social media blocking and tackling.  One of the more interesting things I discovered is that Sage has produced about 16 short product videos that it deploys on YouTube.

I am a big believer in using this kind of video as a way to develop thought leadership and leverage social media.  There’s nothing social per se about a video but once it has a url on YouTube it is likely that it can become viral through social media and this is what Sage executives tell me is going on.

It is also good to see Sage keeping to its 2010 strategy to bring its diverse CRM products into tighter alignment.  So far, the big deliverable has been the ACT! 2010 version introduced in September.  ACT! has made great strides in the last few years moving up market from simple contact management and adding low end SFA functionality and then some.  The addition of e-marketing, for example, has enabled sales people to better generate leads than prior generations of the products.

I am not an ERP expert and a great deal of any Sage conference is focused on accounting and finance.  Having grown by acquisition, the company has highly specialized ERP solutions for construction, real estate and other sectors that I don’t know much about.

Sage is a big organization with 14,500 employees, 27,000 partners and $2.55 billion in revenues generated by 5.8 million customers around the world.  It would be nice to see the company step up more vigorously to embrace SaaS in the front office as a long-range goal even if they don’t plan to make any partners or customers convert over night.  The competition form Microsoft, NetSuite and now Salesforce make it necessary.

The current approach, at least by the back office group, is to stick to their guns, vowing to be an on-premise company leveraging the “software plus services” mantra, which is phony.  It serves no one very well and a more positive message to partners and customers, IMHO, would be to acknowledge that SaaS is an important direction and vow to take customers and partners there when the time comes.  That positive message doesn’t commit anyone to anything immediately but it begins the thinking process for what will be inevitable at some point.

Leveraging Web services is a good place to start but at some point the Web will be leveraging the premise-based applications.

Free WiFi from Virgin Air — So?

Under normal conditions I find Virgin Airways to be a pretty sharp group.  They offer an appealing rendition of a commonplace service polished up to make the commodity appealing once again.

Air travel has been beaten down from its once lofty status into something barely recognizable by anyone old enough to recall the golden age that Spielberg and DiCaprio conjured up in “Catch Me If You Can”.  Back then air travel was glamorous, relatively expensive and considered a real luxury.

Richard Branson brought some of that feeling back when he launched domestic service with Virgin America.  To show you how much we’ve lost in the airborne sardine cans operated by United, American, Delta and others, all Virgin had to do was show up with uncrowded departure lounges and room for kneecaps and I for one swooned (I am especially partial to my knee caps).  Food on demand from the little console in front of me is nice but I have this lingering memory of Air France…never mind, I digress.

In any event, this makes it all the more difficult to report on a rare bone-headedness by Virgin.  I got an email today inviting me to fly with them before January 15^th and to receive free WiFi service but the offer left me unimpressed.  I like free WiFi but have only used it once since I just started flying with Branson’s company.  That flight took me from San Francisco to Boston and for the price of $12.95 I was able to post three blogs and pronounced myself both productive and satisfied.  No more though.

According to today’s email, Virgin Air sells WiFi access (the regular price) based on the duration of the flight.  The longer you fly the more it costs.  This is interesting on so many levels.  First off, I can buy a flight from Boston to San Francisco or to many other places for about the same money.  The cost seems more related to the number of times the wheels get pulled into the belly of the plane than anything related to distance.  Why is WiFi priced in tiers?

Ok, I know you’re probably saying you know of a great rate from Boston to Detroit or something so I won’t perseverate.  Distance isn’t my main point anyhow.  Take a look at the Virgin fee schedule direct from their web site:

$5.95 for flights less than 1.5 hours and redeyes

$9.95 for flights between 1.5 hours to 3 hours

$12.95 for flights 3 hours or more

The WiFi charge is based on how long you are in the air – and how likely you are to be awake — not some daily or per flight rate.  What I find most irritating about this is that few of us hop on a plane with a fully charged laptop battery and older batteries are less likely to hold a charge for three hours long.  I know there are wonderful new mini-laptops that have nine-hour battery life but the majority of flying laptops don’t.  The price exceeds the probable utility of the service on long flights so it is as if the whole pricing structure changes while you are using the service.  I might be able to use my computer for between two and three hours – on a three-hour flight that will cost me ten bucks on a longer flight it will cost thirteen.  Say what?

So we have a price curve that looks like it rises rather than falls.  Sure they’re charging less for redeyes based on the assumption we’ll sleep but they’re making up for it on the coast-to-coast flights.  Why?  I know what it costs to buy a router and I’d say all the routers in the Branson fleet have been fully paid for already.

As I write this, I am in a hotel room because I am traveling on business.  The hotel makes money charging me $9.95 for the whole day and some hotels have already discounted to nada just to get my head on a pillow.  Could we possibly agree that $9.95 is a fair price for any flight, any time and that $12.95 is just a little bit piggy?

Larry Ellison at Dreamforce?

This is completely speculation on my part but I was wondering if Larry Ellison has any intention of speaking at Dreamforce the same way that Marc Benioff spoke at Oracle Open World.  Might be fun but keep in mind that this speculation.  If you have any information I would love to hear it.

The Black Swan

I just finished reading “The Black Swan”, a book that has been on my list since it came out in 2007 and I highly recommend it, though it is not easy reading.  There is a great deal of set up before you get to the whole point of the book in the last 50 pages.

“The Black Swan” is about uncertainty in the real world and the subtitle explains it all: “The Impact of the Highly Improbable” and it is something that I can see affecting CRM and its users on many levels.  Highly improbable things happen frequently and they have deep and unpredictable impacts on our world.

Uncertainty is related to risk and randomness, and while we lay people might lump all of them into the same definition, they are different.  My understanding of the three is that risk is something to which you can attach a probability like a coin toss landing heads (50/50 or .5).  Randomness is less constrained than risk if only because it is too complex to compute — if we flip one hundred coins we might reasonably expect half of them to land heads but we can’t say which ones.  Uncertainty is a condition or event that will surprise us, one that is not on the radar.  A blue bird, sometimes called an unknown unknown.

The blue bird interests me most and is an important factor for CRM.  I have been trying to get my head around some data that I collected earlier this year about sales and forecasting that seems to relate to this.  As you might recall, the data showed that the vast majority of sales forecasts (better than 90% of them) are worthless.  They are so inaccurate that they can make a coin toss look like the model of precision.

My question: Is this the best we can expect or are there things we might do to improve our forecasts by reducing uncertainty?

The data also show that most sales managers engage in a process of downloading forecasts to spreadsheets in which they massage the data with the intention of improving it.  If the dismal forecasting results are the product of an improvement process, it can only suggest that the starting point data is no better (remember GIGO).

All this evidence notwithstanding companies continue to make money more often than not and sales people manage to sell things.  And according to Jim Dickey and Barry Trailer nearly sixty percent of them make quota.  How can this be?  How can we be so profoundly bad at sales forecasting and still manage to sell things?

First, though there is a great deal of uncertainty in sales forecasting, uncertainty is a two-way street.  Deals come in that were not forecasted or perhaps not even known about — so-called blue birds — and some deals that appear to be a lock simply evaporate.  Anyone who has tried to sell — and forecast — knows this.

Customers do rational things for emotional reasons, the saying goes and the irony to me is that at precisely the moment when we need the customer to act emotionally — to buy a product — we expect that customer to act rationally.  If you doubt this then how can you explain attaching a probability to an otherwise emotional decision.  It’s not wise to do that so if you are going to forecast using a probability of close, then you have to assume a set of rational expectations.  In other words, if we have been through a sales process with the customer — understood the business problem demonstrated how our solution solves the problem and asked for the order — we expect the logical conclusion, a purchase order.

But while the situation might look certain or at least logical to us, we have little or no visibility into the similar process being conducted by our competitors and there lies a great source of uncertainty.

What can be done?

As mentioned above with GIGO, we need to acknowledge that the way we are forecasting is not working; in other words, stop digging the hole we have gotten into.  There’s too much uncertainty in a forecast to believe the numbers we generate.

But stopping the excavation will not solve the problem; it will simply prevent the hole from getting deeper.  As sales people we can try to eliminate some of the uncertainty in our deals but by definition, we can’t do that.  We don’t know what we don’t know.  Even if we know everything our competition says and does we have no visibility into whether the stock market will crater the day before we expect the P.O.  There is always something.

Nonetheless, a company’s sales usually fluctuate around a level that is near to the level of the goal — few sales teams in aggregate hit the ball out of the park and few get shut out.  Uncertainty makes sales a numbers game meaning the more irons you have in the fire the more opportunities you have and the better insulated you are against risk.  Notice I said risk and not uncertainty.  More opportunities reduce the importance of a single opportunity because there are many ways to make your number, that’s risk.  But there is nothing that will insulate your forecast from the remote (we hope) possibility of the stock market cratering or flu breaking out in your customer’s headquarters.

If sales really is a numbers game then it makes sense to have systems that can help you manage big numbers of everything — opportunities, deals you know.  More important, it is also essential that we have ways to get as many good opportunities into a pipeline as possible.

For years, we’ve had a discussion about the efficacy of SFA — is it good, is it worth the effort, isn’t it just a management tool?  Ironically, there are still companies out there that believe they are too small for SFA or that it doesn’t work.  In a few years it will be the same stories with social CRM and by then the companies that failed to adopt SFA will be completely out of business.

Truth is, we need both these days.  We need SFA to manage our large data sets and we need social CRM to help us take uncertainty out of deals.  If we never use an outbound social CRM tool such as a blog or micro-blog or networking site we would be fine as long as we had some exposure to tools that help us know what customers think in aggregate.  For me that’s where the power of social CRM is, it’s in helping us reduce uncertainty by that radical idea of asking customers what they think.

Customer experience or service product?

There is a difference between a customer experience and a service product and it is worth noting the distinction.  We seem to obsess about the former and almost ignore the latter and that’s too bad because I think there is money to be made in the difference.

The distinction reminds me of the big discussion that went on a few decades ago over quality.  At the time imports from around the world, but principally Japan and Europe, were cleaning our clocks because they were perceived to be of higher quality than domestic brands.

In typical American fashion we mounted a comeback strategy to bring our quality up to world standards and for a while smart business discussions were all about quality.  It reminds me of the last few years and the relentless emphasis we have placed on the customer experience.  Let me say that emphasizing anything as fundamental as this can’t be bad, in moderation, but there’s more to consider.

My interest in the customer experience was provoked by a long series of calls between my wife and our mortgage company, a typical big bank.  The problem was that the bank had failed to pay our property taxes though it was clearly their responsibility because they collect the money each month and hold it in escrow.  The problem got worse as we waded into it.  Not only did the bank not pay our tax bill but also they had inadvertently paid someone else’s with our money.

My wife had a series of calls with bank representatives who work in the call center.  Each bank agent promised to fix the problem, each tried to reassure us and each was pleasant and professional told my wife to have a nice day at the end of the call.  My wife ended each call thinking that the agents were “nice” and that the problem had been solved.  Unfortunately, there was no follow up and here I will let you imagine the rest.  After four “nice” conversations the problem is still there.

Now if this was a manufacturing problem I would say that the product is broken and that the bank has a quality problem.  The typical response when quality became an important value in manufacturing was to improve final inspections and it worked.  Certainly a lot of inferior product was kept from the customer but the manufacturer also ended up with a lot of products that needed fixing.  Clearly something else had to be done and that led to the idea of designing quality in rather than inspecting for it.

I think our focus on customer experience is a lot like focusing on quality.  Just as you can’t separate quality from the whole manufacturing process you can’t separate the customer experience from offering a high quality service product.  My wife is more tolerant than I am and left each encounter (so far) encouraged that the situation would be rectified.

Intense focus on the customer experience has left us with a hollowed out service product, at least in this case but I will extrapolate here.  It appears to me that the bank might be incenting people to be nice but also to pass the ball and not care too much if the ball falls on the ground and dribbles away.

This experience vividly shows me and I hope others that there are two parts to customer service — the customer experience for sure, but also delivering a quality service that goes well beyond being nice or professional or any other qualifier that to attribute to the people involved except one.  You still have to get the job done, and CRM needs to ensure that aspect as much as it addresses the experience.

Comparing NetSuite and Salesforce

I was at a user meeting with NetSuite in Boston earlier this week.  The company has bought two companies since going public — OpenAir and QuickArrow — both of which support the professional services market.  Companies sell things as well as services and CRM has been applied most successfully to the former.  Companies that sell services have been left to their own devices to figure out how to automate and manage sales and delivery and their situation resembles that of the thing-sellers pre-SFA.

NetSuite’s idea is an integrated solution combining ERP and services oriented planning and sales modules going by the name of SRP — services resource planning — and the idea has legs.

As you can imagine there are some significant differences between selling things and selling projects.  Most importantly, services companies have bigger issues with fixed overhead because you have to have smart people on staff if you expect to sell their time.  Economists might say that supply is inelastic or certainly less elastic for the services guys than for the companies that can throttle up or down the manufacturing process.

All this got me thinking not about the two different types of selling but about the two different styles of building a company exhibited by Salesforce.com and NetSuite.  Both companies have purchased other companies when it made sense as a way to build out their offerings.  But each company also has a multi-tenant architecture and a cloud platform, which makes it easy for third parties to build or modify applications.  Nonetheless, if I had to describe each company’s strategy I would say that NetSuite is more likely to buy than make compared to Salesforce — if you include the partners.

Salesforce appears to have decided on an approach that encourages a partner community to build native applications while NetSuite seems to encourage partners to deploy and modify its core solutions though not necessarily build wholly new ones.

Now, this is a rough approximation and it looks more black and white than it is — there is a lot of grey area in all this.  But it drives an interesting question that I believe can’t be answered, at least not now.  Which approach is better?  Should the primary vendor be the only one involved in new product development or should the platform vendor simply let a thousand flowers bloom?  Certainly the existence of the platform makes the second option possible.

Part of the answer can be found in how each vendor views itself.  Salesforce is obviously looking for a big new market to penetrate that’s bigger than CRM and it has selected application development tools for the enterprise and smaller organizations.  NetSuite might have a serviceable platform but for the time being it appears to be more interested in the market for integrated front and back office applications, which is more crowded.

I don’t have any good answers here or prognostications, just these observations.  Salesforce has always been in the business of inventing the future and while they’ve been successful they have had their stumbles along the way too.  Other companies have been content to stick to their knitting, but the future rarely keeps to a script.  There are many markets just opening up, at least in part because there is reliable and low cost software available to support them and that says good things for both companies’ chances.

The big question to ponder is whether there is enough demand for in-house development to support Salesforce’s vision.  It groups are notoriously backlogged and it is unclear to me if the backlog is a result of too much demand or inefficient tools.  For decades we have argued that it is the tools and we’ve seen generation after generation of tools that promised to fix the problem.

Tools are important but if you read “The Black Swan,” which I recommend, you might get the notion that backlogs are inherent in what we do, in part because we do such a poor job of understanding and planning for future requirements.  If so, one of the next logical acquisitions for either Salesforce or NetSuite should be a company that focuses on improving forecasting and planning methods.  Does such an animal even exist?

Rock bottom?

We are all junkies for leading economic indicators.  Whether it’s the first spring swallow or an uptick in orders for semi-conductor fabrication gear, we love to call the start of a new movement, if only because it signals the end of something more prosaic.

So it is now at what appears to be the end of a bad recession and the beginning of a new economic cycle.  The aforementioned semi-conductor sector has done its thing along with house prices and general real estate activity is picking up.

But what about the trailing indicators — those things that take their time going down when the economy hits the skids?  A notorious lagging indicator is always employment.  Companies cut jobs as a last resort in the early stages of a downturn and cautiously re-hire after the first indicators of recovery are in full bloom.

Newspapers and TV talking heads meanwhile wring their hands about a “jobless recovery” as if the economy is spring loaded and able to bounce back with the seeming alacrity and speed of a toy.  They are always surprised at employment latency and the headlines hardly vary from recovery to recovery.

I have my own economic indicator that I watch with guarded optimism at this time of a recovery and fright when the economy seems to be going south.  It is marketing spending and a corollary is the number of people I know in marketing who are out of work and having difficulty finding it.

In late 2007 I began hearing whispers of a housing bubble getting ready to burst and through early 2008 the whispers turned to shouts but marketing spending seemed to be on pace.  Later analysis showed that the recession actually began around the same time as the whispers but marketing spending was resilient.  I recall having lunch with an already out of work CMO in May 2008 and we were musing about the arc of the economy that year.

“Do you think things will pick up in the second half (of 2008)?” he asked.

“I don’t know,” I said not wanting to deflate him.  “I think we’ll see when we know about marketing spending after July first.”

My idea, which I explained to him, was that the marketing money being spent at that point was loaded into budgets that had a more or less calendar year cycle.  The real test, coming after July first, would be whether companies with June 30 year ends would be as bullish or with six months more perspective, they might pull in their horns.  The distinction is important for our industry because so many companies in the technology sector have June 30 year-ends, thus their marketing spending renews on July first.

At the time, my reading of the tea leaves advised caution because I had not seen the typical run up to a new spending year in the second quarter of 2008.  In other words, fewer companies were asking for quotations, planning programs and the like.  I was right.  The second half of 2008 was slower than the first half and a lack-luster summer gave way to a wild autumn ride on Wall Street that erased doubts about the economy’s direction as well as untold fortunes and more than a few marketing jobs in the technology sector.

The first indicators of renewal have, indeed, been spotted both economy-wide and in the tech sector.  I know of at least one out of work mid-level marketing person who got a job offer last week and several senior people now consulting so there’s that (highly unscientific, I know).  But I still have not seen a general if cautious uptick in marketing spending plans.  This would be the quarter for that to happen if companies are intent on starting the new year with any momentum.

Marketing costs money even in today’s highly automated and socialized marketing world.  There is still time to make plans for early next year even if they get delayed and the first harbingers of revival lead me to think that we are about to see the first tentative steps.  Those chip makers and house builders can’t all be wrong.

On the road (again)

Colorado Springs is an interesting place.  Despite the name there are no “springs” it’s an arid place in a valley surrounded by the southern Rocky Mountains and Pikes Peak National Park (for sticklers Pikes really should be Pike’s but the official U.S. naming convention eliminates the apostrophe).  The springs were an invention of the railroads seeking to establish a destination for vacationers.  Good idea, it’s a nice place.

You can ride horseback through the mountains and see abandoned mines and homesteads as well as some rugged natural beauty.  Last time I was there we rode on some trails that were barely wide enough to accommodate our horses.  On one side there was forest and on the other a steep drop off.  RightNow convenes its annual user group meeting at the Broadmoor Hotel in Colorado Springs next week.  By most accounts it’s been a good year for software, especially SaaS vendors so the meeting should be upbeat.

Other commitments will keep me from attending the RightNow Summit but I look forward to hearing about their announcements.  In general there is an unmistakable move in most areas of CRM, contact centers included, to move more operations to an on-demand footing.  Whether it’s called SaaS, managed or hosted, the call center is moving to simpler surroundings — at least for the client organization, and for good reasons.

Owning and operating a call center is a big and expensive undertaking for a company.  With all phases of the operation in-house, a company has to be able to support multiple subject matter experts from hardware to applications.  The company also has the task of managing an impressive (some would say bewildering) array of gear both telephonic and computer.  The same company also has all of the headaches of recruiting, training and managing a sophisticated workforce.

So, when a vendor comes along offering to take even a portion of that big job over for a fixed price per seat, it draws a lot of attention.  In the not too distant past, the number of vendors willing to make such an offer was limited and RightNow was at the top of the heap.  The market is changing making it easier for vendors to get into the business and the fact that we are even talking about the difference between on-demand, managed and SaaS solutions is evidence of that change.

But it’s not just changing technology that is driving the market.  The core customers, you and me, are smarter and more experienced and we are beginning to draw less from our vendors’ call centers.  Since we’ve all experienced earlier generations of products we are more likely to solve simpler problems with new products ourselves.  Moreover, our recently acquired sophistication with social media makes us more adventurous when it comes to seeking out service and advice from our peers.

It was no surprise to me that RightNow acquired social networking company HiveLive to bolster its efforts in social service offerings.  I look forward to hearing what RightNow CEO Greg Gianforte has to say about his company’s direction in socialized service and support.  Should be an interesting conference.

Also on the docket, the following week Sage Software hosts its user meeting in Atlanta followed by Microsoft holding an analyst briefing in Redmond.  I wish I could make all of these events but they are simply too close together.

Sage is always surprising in part because the company’s business model — selling exclusively through the indirect channel — puts different demands on its products and services.  That has frequently meant that the company has held back on major innovations until its partners were ready to get on board.  But last year, the company announced a 2010 strategy to bring its multiple CRM products under an umbrella that will enable it to achieve greater economies of scale and better integration capabilities with its back office solutions.

Also, Sage recently announced a foray into another on-demand style solution to be delivered early next year.  Their original SageCRM.com notwithstanding, this will be something new for SalesLogix, their high end product.  This is CEO Sue Swenson’s second year at the helm and it was clear at the partner meeting in May that she’s putting her imprint on the company.  She’s tasked senior executives with ambitious plans to update key products and improve partner-facing programs.  It will be interesting to see what end user facing changes are in the offing.

Finally, Microsoft is a very important player in the front and back office applications markets today.  Their analyst meeting in the same week as the Sage user meeting should generate a few headlines and I am eager to hear more about their direction though I will not be able to be there.

All this activity makes me optimistic about next year, and if all this isn’t enough, Intel, AMD and IBM have all reported better than expected financial results for the recently finished quarter.  The semiconductor market has always been a reliable indicator of an upturn in the tech sector and I am hopeful that these results are the first signs of a general economic rebound.  But recovery means more than simply reporting better financial results especially if the increase is from a depressed level caused by recession.  It’s clearly a half full glass but that’s fine with me.

Adobe on a roll (hold the fries)

For the second day in a row Adobe made an important partnering announcement.  Yesterday the company said it had teamed with Salesforce.com to produce Adobe Flash Builder for Force.com, which will speed development of Flash-based user interfaces for Salesforce customers.  Today Adobe announced that it has concluded acquisition of Omniture, a web analytics vendor based in Orem, Utah for a whopping $1.8 billion.

It seems an obvious strategy to leverage some of Abobe’s ingredient technologies, like Flash, to make a bigger presence for itself in Cloud Computing.  The addition of web analytics is very interesting.

At this point in the evolution of CRM, if you are not already a big player the chances of starting from scratch and getting big are nugatory so the strategy has to be to buy.  But Adobe’s choice of partnering with a leading CRM company for user interface design and following up with buying analytics is intriguing.  With these two ingredient technologies, Adobe appears to be 1) betting on the future importance of understanding customer moves and motivations and 2) clearly understanding that robust simplicity must rule all software interfaces regardless of platform.

If you ask me, these are two good bets.  While there are clearly many good analytics products on the market either freestanding or embedded in business applications, my research tells me that regular users are still too confused about analytics to fully leverage them.  Ask ten people in our industry the difference between reporting and analytics and you will see what I mean.

My quibble with analytics and analytics vendors generally is that few acknowledge the effort required to capture good data.  Too often the MO is to capture large samples and get some averages, a good but not great approach that, in another setting, once left a bemused Benjamin Disraeli to list three categories of lies, “Lies, damn lies and statistics”.  There’s no substitute for understanding demographics, biases, attitudes and the like to better predict behavior.  Here’s hoping that Adobe gets it and uses Omniture to go the more rigorous route.

Fusion applications decide an argument, sort of

With Oracle’s announcement of Fusion applications, you can make a reasonable case that Salesforce.com has won an important ten-year old argument about the future of the software industry.  Notwithstanding SAP, the only significant outlier left, Oracle is the last major software company to adopt on-demand computing as a centerpiece thus awarding legitimacy and critical mass once and for all to the idea.

Amen.

But the Oracle announcement says more about business models than technology paradigms and at the model level it is not clear that Salesforce has won.  Salesforce CEO Marc Benioff’s vision of business applications delivered over the internet has won an important victory but the business model — subscription services — that makes this technology the center of the movement and exclusive delivery mechanism has not eliminated all competition.  Not yet, at any rate.

The reasons are simple enough, market reticence generated by concerns — both real and imaginary — about security or the viability of the technology model still hamper full adoption of the business model.  As a result, companies as diverse as Oracle, Microsoft and Sage have hedged their bets by offering technology that can be implemented in numerous ways including on-demand as well as by conventional deployments.  As a result vendors have effectively thrown the business model decision over the wall to the customer.

With software capable of, shall we say, polymorphous deployment, the ultimate decision about how to deploy now becomes the exclusive province of the customer as the vendors have now turned into Solomon or, in a modern interpretation, Burger King.  Customers are completely free to have it their way or ways.  They can deploy business applications in a fully SaaS configuration or in hybrid ways that are to a lesser extent owned and operated by the IT department.  As I have noted before, this is typical transition state behavior of vendors straddling two diverse paradigms.

It is no surprise that adoption of the business model lags adoption of the technology.  It has always been true that conversion from traditional software licensing to SaaS is a big step and one that for many software companies could lead to financial ruin if not handled expertly.  More to the point, there are customers who, for reasons of security, custom and preference believe that SaaS computing is not for them, at least not now.

So it is no surprise therefore that the most successful SaaS companies are those that, like Salesforce, grew organically from on-demand roots.  Other successful SaaS companies like Oracle bought their way into SaaS computing, a time honored tradition when adopting new models.

Even before Oracle’s Fusion announcement at Open World this month, the company had been a player in SaaS based CRM with Oracle CRM On-Demand due to its earlier acquisition of Siebel Systems.  But it remains to be seen if any software vendor can fully realize the benefits of SaaS — and now Cloud Computing without full emersion into the technology model.

One of the most powerful aspects of SaaS computing is not the idea of subscriptions or even Internet delivery but of a single version of the applications supporting all users.  With a single version of the code, all users have the same foundation on which to configure, modify and build new applications.  The single code set — also called multi-tenant architecture — makes it hugely unlikely that any two independent software makers would develop incompatible applications and therein lays the power of the business model.

This single idea makes it highly likely that applications built to the standards of the foundation — or platform as we like to call it — will be able to inter-operate.  Take this standard away and you have the same Babel of competing standards and proprietary designs that have been the bain of the software industry.  There is a cost associated with this lack of standardization and software customers have been paying it for decades — with rising resentment.

That cost is not measured strictly monetarily; there is opportunity cost involved too.  When everyone played by the same conventional software rules the opportunity cost problem was equivalent to a farmer experiencing bad weather.  But SaaS computing eliminates the weather variable giving a big advantage to companies under its umbrella.  So it is ironic that the decision about adoption is still left to taste.

With most of the hybrid products, the same code can be deployed in a conventional multi-tenant way or as a standalone system behind a traditional firewall.  The segregated system becomes a unique instance the moment a developer modifies the platform.  Doing that makes the idea of standards a waste of time.

But for the time being — and I am still calling it a transition state — we can expect to see a lot of deployments in which the software is SaaS ready but the deployment is decidedly twentieth century.  In the next five to ten years we will see examples of companies trying to back out of their proprietary SaaS-like systems to finally get on board with SaaS or Cloud Computing.  It will all have been avoidable and it will be good business for software consultants.

As Kurt would say, “So it goes.”