Posts Tagged ‘Oracle’

I read Chaucer’s Canterbury Tales in college (yes, in Middle English and no, it wasn’t that long ago) and now every April brings me back to the opening verses about spring time and renewal.  This April was especially memorable in our industry and as the month has just passed I wanted to take a moment to discuss some of the things I witnessed.

Mostly, for me, there was an unmistakable sense of renewal in CRM and in the tech sector more generally.  Facebook continued to primp for its assumed to be historic IPO and bought Instagram, a company with an application for mobile devices and not much more than a website otherwise.  Facebook paid a billion bucks for Instagram, no doubt a sign of the future.  Marketo heading for its own IPO at some point bought Crowd Factory combining marketing solutions into a suite that will offer modern and ultra modern marketing.

Thankfully, there was more innovation than just the M&A variety.  I went to a couple of analyst briefing sessions that were interesting for different reasons and I will have to assume that the events I couldn’t fit in were much the same.  Oracle held a deep briefing to show off progress on all fronts.  The event made me a believer that they have a plan or plans that merge into a powerful vision of engineered systems and software that meets some of the challenges of the social/mobile/analytic/big data world we’re moving into at light speed.

SugarCRM raised the bar and showed the world that it is growing rapidly and that its open source approach to business is very much in the mainstream along with operating system, server and database open source projects that support, in one way or another, the innovations in the rest of the industry.  It looks to me like Sugar is becoming the go to CRM that everyone has to include on the shopping list.  Open source might not be for everybody, but then again Sugar’s growth numbers and recent capital round indicate they just might be.

Salesforce announced its Government Cloud in an effort to capture some of the new business likely to come out of local, state and federal initiatives to cut IT costs and improve constituent service.  When government becomes an adopter of a new technology like cloud computing it’s safe to say that it’s not a radical departure anymore.

But that doesn’t mean we stop innovating.  As the Salesforce announcement made clear, the big issue for government will be security and, I would add, up time.  So I look for a new era of innovation around both security and fault tolerance as cloud computing works to measure up to a nine nines reliability standard found in other utilities.

Finally, sneaking in just under the wire, on April 30, Paul Greenberg announced the second season of CRM Idol, the competition that seeks to discover hot emerging companies with great technology ideas in our space.  Full disclosure, I am Paul’s friend, but that category includes about half the world.  Last year, Idol’s first, was a great learning experiment.  As one of the founding primary judges (others in the U.S. are Brent Leary, Esteban Kolsky, Jesus Hoyos) I was present for all of it and I can say we learned a lot.

We got a stellar crop of finalists last year (both in the U.S. and Europe) including Crowd Factory, Stone Cobra, Assistly and Get Satisfaction, which won the contest.  Two of the four were bought — Assistly mid-way through the competition and Crowd Factory last month.

We are expecting big things from this year’s group of contestants too.  The announcement by Greenberg on Monday is the opening of the season and companies interested in participating should visit the Idol website for details.  There are a few rules that make this a real competition among emerging companies — you can’t be too old or too rich for example — so check it out.

Being a software entrepreneur is not easy.  While you might think that venture funding has eased many of the burdens, raising capital is not easy though it can be insightful.  VC’s look not just for new companies or new solutions but new categories.  And what looked hot last year may no longer be attractive.  They’re always looking for something that has never been seen before that nonetheless sparks interest and fills a need.  CRM Idol is like that.  The companies that do best are those that don’t conform to a pattern but instead break new ground.

If you pay attention to Idol you might get an idea of the future of CRM and possibly other things.  Just looking at the Instagram deal tells me potentially that the hottest new companies might be those writing for the smartphone market.  That, of course, would be a significant finding — the kind of thing that will make future Aprils so interesting.

At Oracle Spring Analyst day last week, Mark Hurd spoke about simplification and about how the industry needs to reduce complexity, a good message.  But he equates simplicity with reducing the number of vendors that a corporation works with — at least in IT.  However,  history shows this is not the path to simplicity.  It’s just a route to profits once a vendor becomes the only incumbent.

Complexity is often the signal that an old paradigm is reaching its asymptote.  Simplicity, its opposite, often ensues but at the cost of exploding the old order.  Mainframes didn’t get simpler, mini-computers became common and the number of vendors didn’t decline, it rose thanks to the standards that new vendors brought.  Standards made it possible for lots of competitors to play and the competition made better products and services.

This paradigm busting continued when PCs and networks replaced both minis and mainframes and it continues as cloud computing replaces the data center and its ossifying stack.  Standards for cloud computing, social interaction and communication, mobility and analytics all contribute to the new paradigm, which Hurd seemed to see as a glass half empty.

Standards make it possible for many vendors to compete without increasing complexity.  In fact, without the standards brought by a new paradigm, the old paradigm simply collapses due to its increasing internal complexity.  So, Hurd was right to offer simplicity as a goal but I think he was off point in suggesting that the current paradigm could or should be simplified.

Oracle is initiating a new paradigm that simplifies the old order albeit with its own standards which I hope will remain non-proprietary.  I think in its messaging the company would be better served if it acknowledged that the road ahead is a new, and for a time, simplified paradigm.  Then the massive influx of social and services providers makes sense and ceases to threaten the IT hierarchy.

Simplicity is a good idea.  It often means a new paradigm is forming and those who initiate the change are usually the winners.  Oracle is both instigator and guardian of the status quo.  It must engage in its own creative destruction.  So far the company has walked a fine line of defender of the faith and iconoclast.  The challenge ahead is for the company to stay on course and not to believe all of its marketing messaging.

Salesforce held its winter Cloudforce meeting in San Francisco last week.  For many the meeting seemed like a reiteration of Dreamforce and to be fair there was some overlap but each time they tell the story, the company adds new wrinkles that cause people like me to pay attention.

What caught the attention of many analysts was the emphasis on enterprise computing, the continuing roll out of the social enterprise strategy and two new products Salesforce and Salesforce Rypple.  One at a time.

Social Enterprise

We really should talk about the social enterprise first because it drives the broader enterprise discussion.  It appears from the rich videos presented at Cloudforce that the social enterprise envisioned by CEO Marc Benioff is alive and flourishing.  We heard from Burberry’s, NBC Universal, Kimberly-Clark, HP and Toyota about how adopting social business techniques has changed their businesses by giving them greater interface with customers and the chance at greater profits.

Though the language and the videos were mostly from Dreamforce, each customer company was represented this time by its CIO who testified that the effort and company direction were real.  The difference was that at Dreamforce we heard from CEOs about their social enterprise strategies.

What’s interesting is that Salesforce is not trotting out examples of companies that are much smaller than it is.  Just the opposite.  In every case, the customer company is equal in size to Salesforce or much bigger which only bolsters its case.  Salesforce has identified a need and is delivering a different, and by the testimony of the CEOs and CIOs a better, approach to doing business.  This approach appears to be becoming the social enterprise standard for the early part of this century.

Enterprise Computing

At a press and analyst Q&A after his keynote, several of us asked about the pronounced emphasis Benioff’s keynote had on enterprise computing.  In his on stage discussions with CIOs, Benioff had observed that these customers also use SAP or other enterprise solutions and he’d asked the CIOs about their experiences bringing SAP back office systems together with Salesforce.  Those experiences were generally positive, though at least one CIO stressed that simplification was still his goal.

Benioff observed that no company of any size at all buys from a single source.  “These companies like what we have in the social enterprise,” he observed.  At the same time they are committed to their back office investments.  “They’re telling all of us that they want us to work well together and that’s been our strategy.”

So now it appears that a new round of rapid adoption of the social enterprise has begun in some of the largest companies on the planet.  If this is a typical ramp up we should expect to see a stampede in the next year, which will only make Benioff’s self-appointed job of becoming a ten billion dollar company easier to reach.

Bring on Sustainability

Back in the Clinton administration, the president, at the urging of his vice president Al Gore, invited an assortment of politicians to the White house for a conference on the environment.  The Kyoto treaty was up in the air at that point (the U.S. never signed it).  But there was an urgency in many quarters to attempt to get something done for the environment by reducing CO2 emissions.  It shouldn’t have been controversial because the approach was along the same model as phasing out chloro- fluoro- carbons, which had caused the famous ozone hole over the Antarctic.  That effort had been led by the first president Bush.

Regardless, the meeting blew up.  Rather than accept the administration’s leadership, conservatives took to the opposition as if it was any other issue that they needed to oppose and the environment has been a contentious issue ever since.  This has plenty to do with what comes next.

I am not a global warming denier refusnick (the double negative is intentional).  I believe the preponderance of the evidence and just to keep this moving, if you are on the opposite side of the discussion, please indulge me.

It struck me during Cloudforce that regardless of the political stances, businesses are hardnosed and they do what’s best for them financially.  With fuel prices again rising, the marketplace is demanding less expensive and therefore less carbon-intensive approaches to executing their business processes and vendors are beginning to respond.  That translate to travel avoidance through the use of surrogate technologies like embedded video and bi-directional communication and that’s what the Salesforce demos offered.

At the Q&A, Benioff reiterated the importance of being able to address customers through a multi-channel approach, to meet them where they are.  There was no crusading involved, just the solid business logic of satisfying customer demand and leveraging all technological possibilities to do it affordably.  That’s when it became clear for me that this is how the free market handles challenges like the environment.  Regardless of what the pols on either side think or do, sustainability is now crossing the chasm and becoming a business imperative.  It’s subtle but it’s happening.

New Introductions

The new news form Cloudforce was not highlighted that much but it is important in its own right.  The company announced availability of Salesforce and Salesforce Rypple.  I’ve written about Salesforce Rypple, the socialized employee management tool elsewhere.

Salesforce is also interesting.  The next iteration of its Sites solution, this product is a cloud-based content management system (CMS) that is part of the platform and capable of helping organizations to quickly develop social websites.

As a user of an earlier generation of CMS I can attest to how powerful it can be to define a page and let the software figure out how to fill it with content at run time.  Moreover with the social platform as an integral component I expect that the websites that generates will enable a more engaging level of interaction with customers.  It’s also possible that with Heroku as another part of the family that what defines a website is about to be expanded significantly.

Finally, Cloudforce also filled a necessary spot in the ongoing marketing conversation.  Microsoft Convergence is happening this week and other vendors including SAP and Oracle will be having events in this quarter so it was important for Salesforce to raise its profile.  OF all the things you can say about Salesforce, you should always be mindful that this is a very good marketing organization.

News out in the virtual world is that some analysts have trimmed their sails regarding Oracle’s financial picture.  The company missed its revenue forecast last time and today the financial guys are concerned about competition in the database business and lack of strong market support for the company’s hardware.

Competition from companies like SAP with its in-memory database solution offers potential to disrupt part of Oracle’s database business.  Oracle also has a memory based strategy and there are other factors to consider.  For instance, how do SAP customers feel about buying their database services from their application provider vs. from their database company?

The same kind of question can be asked about hardware from Oracle, traditionally a software company.  Oracle’s purchase of Sun a couple of years ago changed that equation and you can argue that Oracle is more of a hardware company than SAP is a database company but I think this all misses the point.

Whether we’re talking about in-memory databases, very large computers, data storage and analytic appliances, we are seeing fundamental disruption in multiple markets.  What’s interesting about these disruptions is that the incumbent leaders in these markets are leading the creative destruction themselves.

In a more conventional market disruption we could expect a crop of small companies flying under the radar to create products and nip at the heels of the big guys for a few years until — Oh my gosh the sky is falling! — the moment when the little guys tripped up the big guys.  That’s not happening here.  The big guys, especially Oracle, are doing their own disrupting.

Perhaps it’s because hardware is no longer a place where Steve Wozniak can put a few chips together on a breadboard and invent the new, new thing.  It takes big bucks and lots of R&D to build what Marc Benioff derisively calls a new mainframe or the data storage and analytics appliances the Oracle has brought to market in the last two years.

Oracle has done its job, it has brought out some impressive next generation technologies and it has seeded its biggest customers, the early adopters, with the gear.  It has also received good reviews albeit with some first generation glitches.

Wall Street is doing its job too, though you might want to question the rationale.  The Street has a ninety-day time horizon; we know this.  But disruptions have their own internal clocks and they don’t kowtow to the analysts.  So we have a situation in which Oracle is having some lackluster results regarding market uptake of its newest and priciest products.  Not to worry, I say.

The alternative to really big iron is widely distributed iron and it will be interesting to see how this plays out.  A widely distributed scenario can use smaller and older technologies, but you lose economies of scale, even in a cloud computing situation.

So although Oracle is experiencing slower demand for its new products, I think the situation is temporary.  The new gear strikes me as the disruptive innovation that the market needs and we are going through a normal process of market uptake.  The only difference between this and a more conventional disruption is that as a big public company, Oracle is going through this in full view of all the critics.

Last week Oracle bought the HR SaaS company, Teleo for $1.9 billion, which to me means it’s time to do you-know-what to the fire and call in the dogs.  This hunt is officially over and out.

The hunt in question is for legitimacy and primacy of the SaaS and cloud computing model.  Many people would argue that legitimacy happened when Salesforce had its first billion dollar year—heck its first $100 million would do just as well.  But primacy has always been a wee bit dodgy.

There’s been a see-saw battle between the on premise and cloud communities for many years which culminated with all the major software companies finally adopting and promoting some version of their own cloud computing architecture in the last two years.  Microsoft famously thinks the Web needs an operating system, Oracle announced its cloud, driven by its ultra husky next generation servers last fall at OpenWorld and SAP has been trying its hand at multiple iterations of cloud computing.

More importantly a raft of small entrepreneurial companies are offering hosting facilities much like when this business got started with ASPs or application service providers.  It’s tough to make a living selling commodity infrastructure but the advances made by companies like—such as the application in a browser rather than client-server—make selling infrastructure possible.

The Taleo announcement was so important that I had people emailing me to offer their thoughts.  For instance, Tien Tzuo, one of the early employees at Salesforce and now the CEO of Zuora and billing and payments solution provider for subscription businesses, had this to say:

“This is the tipping point for the cloud.  RightNow [bought by Oracle], SuccessFactors [bought by SAP] and now Taleo.  The big old school enterprise players have just validated the cloud as the future and signaled the end of their reign.”  I agree and it is reminiscent of Clay Christensen’s Innovator’s Dilemma, but Tzuo takes this theme even further.

“We’ve seen this before,” he says.  “Siebel acquired Upshot trying to look more SaaS-like and apparently to box into a corner.  Instead it backfired.  That one deal validated the SaaS model to CRM buyers.  And almost overnight Salesforce went from up-and-comer to leader.”

Yup, I was there too.  But I think what’s happening now is the incumbents are accelerating their efforts to catch up.  With each vendor articulating a cloud strategy we’re seeing mostly closed strategies, which means things might not change very much for their customers.  Some vendors are trying to have it both ways, clouds plus customer lock-in.

Closed strategies limit choices and options and at least in some situations we’ll continue to see higher than necessary costs for things like management and development or maintenance.  What many of the clouds offer is a trimming of the cost of infrastructure, period.  I think that’s what Marc Benioff means when he says beware of the false cloud.

To put a final point on it Tzuo says, “All these cloud acquisitions won’t help ERP one bit.  Acquiring cloud companies doesn’t make you a cloud company….It’s an attempt to distract customers and hope they will forget about the boat anchor they’re stuck with.”

Tzuo is not the only skeptic.  Echoing Tzuo, Ted Elliott, CEO at Jobscience, an HR solutions company based on the platform and so a Teleo competitor said, “This really represents a capitulation by Oracle regarding the cloud.  Unfortunately this would have been great in 2004, but in 2012 we are transforming towards social; a server company that builds databases is transaction oriented and social is about relationships, people not numbers”

Elliott’s got a point and so does Tzuo and perhaps the Teleo acquisition says a lot about a conventional software company trying to make the cloud conventional.  But at this point the cloud is conventional, it’s just not conventional in that way.  So a paradigm has been shifted.

Perhaps most importantly, all this hoopla about clouds and rather conventional application areas means that many big vendors are not giving the attention they ought to be giving (in my opinion) to social media companies.  They are proving to be a generation behind.  Well beyond darlings like Facebook and Twitter, there are fascinating companies like Get Satisfaction, Studentforce and Crowd Factory—just to pick a few of names out of a hat—that are rocking their worlds and causing the next disruptions.

That’s where Salesforce has focused its energies.  They still talk a lot about the cloud and its centrality but they’re also onto a new vision—the social enterprise.  The cloud is increasingly about plumbing, the social enterprise is about putting the plumbing to work.

I culled two stories from today’s (Thursday) New York Times that illustrate some important points about energy, substitution and resilience.  I think the word resilience will be prominent next year as the economy tries to recover further.  Tired of waiting for full recovery we may very well see more people taking matters into their own hands—legally and non-violently—to make the difference.  This will amount to substituting one form of activity for another in an effort to reduce costs and keep the wheels turning.  That is essentially what resilience is all about.

Example one, “Signs Point to Economy’s Rise, but Experts See a False Dawn” .  Ok, this may not be the most upbeat headline but it makes some good points.  Economic activity in the fourth quarter may be trending up to four times what savvy analysts had predicted at an annual pace of 3.7 percent.  That’s good.  What’s not so good is that the boost may be temporary and a result of rebuilding inventories that have run down over several quarters.  But that’s what recoveries are all about so I’m playing the optimist on this one.

The article falls short of making the connection between energy prices and economic growth but it is plain to see.  The first half of 2011 had reasonably good economic numbers, which caused increase demand for energy.  In May while on a trip to Chicago I saw gas prices pushing five bucks and the same was true in San Francisco.

High energy prices cooled the economy.  As a result demand for energy fell back.  Prices in a photo accompanying this article show regular gas at $3.16 per gallon.  A few years ago that would have been nose bleed territory but today three bucks seems like a tropical vacation.  We’ll take it!

Example two, “Video Chat Reshapes Domestic Rituals” describes how families are using video chat to stay close, even when they are across the country and can’t travel.  Video chat is not just like being there, yet, but it fills a void.  The article briefly mentions one person’s inability to hop on a plane for face time; clearly video chat is substituting.

Not only is video chat substituting for being there but also it is helping to create new ways of connecting and reasons for connecting which is all wonderful.  It is also a great example of resilience.  It shows that conservation through substitution need not be onerous; it need not feel like a sacrifice to use Skype rather than travel, especially when you can’t afford to travel anyhow.

I’d say that adoption of video chat is right where social media was about five years ago.  It’s in the grass roots stage; it is personal for the most part though advanced corporations are discovering its value.  And it is dependent on hardware technology rollout meaning PC’s with microphones and cameras.  Generation Two of all this will mean a PC directly connected to your giant plasma TV with a built in mic and camera.  I have a Mac Mini connected to my TV and it is fantastic.  In addition to Skyping, I can watch silly cat videos any time I want on the big screen.

So here is my point.  Energy supplies are tight and will remain so indefinitely.  If you like the ups and downs of the economy that match the rise and fall of energy prices, stay tuned, as supply continues to tighten there will be more and the ups and downs will be more violent.

On the other hand, if you like the idea of less turbulence in the economy, you know what you can do.  You can find substitutes for energy in your lives both personal and working.  This kind of substitution on a macro scale makes a difference.  It makes each of us a little more resilient to energy price fluxes and it makes the society as a whole a lot more so.

Peak Software?

Posted: December 21, 2011 in CRM, Economics
Tags: ,

It is an iron law of physics.  A component of a closed system is limited in size to the size of the closed system.  For instance everything on this planet is bounded by the size of the planet and nothing on this planet can grow forever.  This gets us right into economics because the economy is a subset of the ecosystem.

Trace any economic good to its source and you will find an ecosystem natural resource whether it’s sand for making silicon wafers, energy for baking them or the brains of people who build and program them.  More than this, there are also economic rules, like the Jevons Paradox, that correlate energy use to increasing economic activity.

In the last five or so years there has been increasing talk about limiting factors in economic growth, peak oil being the most obvious.  There is only so much oil in the ground or, another way to state it, the earth is finite and so is the supply of crude.  Without a limitless supply of cheap energy to fuel economic growth the economy would cease to grow, as it almost has.

This is the context for reviewing Oracle’s quarterly report, which was delivered yesterday.  Although the company managed to make some money it badly underperformed compared with analyst projections.  You can get the details here my point is not to review them but to analyze their meaning directionally.

I believe this miss combined with the lackluster performance of many traditional software companies in recent years represents a plateau forming for conventional software.  The economy is barely growing and absent growth many corporations have much reduced need for software or inclination to buy products that have notoriously long lives that demand expensive maintenance and labor to support them.  The software industry is a subset of the economy and if the economy is not growing software can’t grow for long.

To be blunt: the conventional software industry has peaked.  It will not go away but it will go sideways for a while.  The sideways motion will last as long as it takes customers to move the bulk of their processing to the cloud.  Since most conventional software companies have already introduced software for the cloud, you can expect a big fight for cloud dominance among them that will last for several years.  It will be a zero sum game as each company tries to retain its customer base and poach from the competition.  But during that time it will appear that the industry is thriving.

At the end there will be a robust industry that has nevertheless shrunk in real dollar terms because a subscription model will generate less cash on a recurring basis than the old license model.  Companies that will fare well in this situation are those that have already made a substantial investment in delivering cloud services and those that have aggressively sought out new niches, especially in front office business processes increasingly mediated by one form of socialized engagement or another.

None of this should be surprising.  A quick look at the growth of GDP over the last sixty years reveals an upward trajectory

US GDP Growth

that resembles a classic bubble.  This was made possible by cheap and readily available fossil fuel.  Although growth appears to have resumed it is likely that a plateau is forming and that an asymptote is in sight.

To my mind the clear implication of all this is that the economic paradigm we have all lived in for virtually our entire lives is changing.  The question of the moment is how do we adapt?