ERP/SCM

FT.com / Technology - SAP aims to dispel its old school image

2010-03-17T05:15:00.000-07:00

FT.com / Technology - SAP aims to dispel its old school image: "SAP aims to dispel its old school image
By Richard Waters in San Francisco"

On-Premises ERP Versus Cloud Computing: Too Late for the Sky?

2009-08-28T02:05:00.000-07:00

On-Premises ERP Versus Cloud Computing: Too Late for the Sky?
Friday, August 28, 2009
Bruce Richardson

Early last week, I spent a morning reviewing SEC filings and Seeking Alpha transcripts for the most recent earnings calls from Epicor, QAD, and NetSuite. I wanted to see how well the two on-premises vendors were doing relative to the ERP-in the-Cloud company. A quick note: Most readers think of vendors like NetSuite as a software-as-a-service (SaaS) or on-demand provider, but I’m going to use the cloud nomenclature, since the term is rapidly replacing the other descriptions in vendor presentations.

While it’s not entirely fair to compare the three firms, since NetSuite doesn’t sell manufacturing applications (but it does have manufacturers as customers), there are some very interesting observations.

Epicor: 125 new customers

For the second quarter ending June 30, 2009, Epicor reported total revenue of $100.4M, down 21.5% over the year-earlier period. License revenue fell 28% to $17.5M. While maintenance slipped 2.8%, it still represented 47% of revenue in the quarter. The company reported non-GAAP net income of $6.7M.

Epicor added 125 new customers to its base of nearly 21,000 companies in manufacturing, distribution, retail, hospitality, and services. Although the company has a cloud product for retail, it hasn’t released a cloud version of Epicor 9 yet.

QAD: Six new cloud customers, with “20 live customers by year end”

For the second quarter ending July 31, 2009, QAD reported total revenue of $61.3M, down 26.2% from 2Q09. License revenue dropped 41.2% to $6.7M. Maintenance and other revenue contributed $32.1M or nearly 53% of total revenue. The company reported a net loss of $1.4M, including stock compensation expense.

Although QAD didn’t provide data on the number of total new customers, it did say it signed six cloud customers in the quarter, including five U.S. companies and an Australian firm that plans to deploy QAD Enterprise in sites in Australia, Brazil, China, the United States, the UK, and Singapore. A QAD executive said the company plans to have “20 live customers by year end.”

QAD is installed at 6,000 sites. It no longer breaks out the customer count.

NetSuite: 270 new customers

It was a different story at NetSuite. For the second quarter ending June 30, 2009, the company reported total revenue of $40.3M, up 10.3% over the year-earlier period. It had a GAAP net loss of nearly $5M for the quarter. Conversely, it had a non-GAAP net income of $687,000.

In the quarter, NetSuite added 270 new customers to its base of 6,000 accounts. This is up from the 240 new accounts added in the first quarter. If you read the company’s 10-Q, which was filed August 10, 2009, you’ll see that new customers accounted for $11.6M in new revenue. This more than offset the $7.9M decrease in revenue from existing customers and other sources. Half of that was because of a $3.9M drop off in professional services. The balance was attributed to customer churn and other factors, such as the reduction of revenue recognized from the company’s Japanese distribution rights agreement. The latter resulted in a net decline of $0.02 in profitability.

In the filing, the company noted “existing customers’ purchases of additional user subscriptions and modules (or ‘upsell’) largely offset the impact of customer churn and decreases in subscription and support revenues (or ‘downsell’) for existing customers.”

Will cloud adoption force public companies into the arms of private equity?

Even though I’ve only presented one quarter’s worth of data, I also looked at the previous quarter and earlier periods too. Since the start of economic downturn last September, on-premises vendors have been harder hit than their cloud brethren. This is especially true for ERP providers.

While the largest enterprises may be the last to replace their financial applications and the bulk of their ERP systems with a cloud offering, it will happen, but only when the largest vendors endorse it, or companies like NetSuite and Workday are viewed as viable replacement products. The economics for buyers are too compelling, which is a theme we’ll explore in future editions of First Thing Monday.

The publicly-traded vendors have more of a challenge, though. Software as a service and cloud represent entirely different business models. Although this is especially true in the shift from large, upfront deals to subscription fees, it also shows up in the company’s business model.

Look at QAD, for example. In its 2009 annual report, the company noted that it had 1,500 employees, including 625 in services and support, with 400 consultants in 23 countries and 15 support centers. It also noted it had 350 developers in R&D centers in the United States, India, China, Ireland, Australia, and Belgium. Some of this comes courtesy of acquisitions, but how many services and support people, trainers, developers, and sites will QAD need if the new business shifts to mostly cloud sales?

Finally, Epicor and QAD are on the top of many private equity firms’ acquisition wish lists, despite the challenges of actually completing a deal.

Wall Street loves cloud companies

In addition to appealing to customers, there are also shareholders to consider. As I write this, NetSuite has the highest market cap of the three at $882.06M. Epicor is valued at $397.54M, while QAD trails at $132.24M. The valuations are based on the closing price on Thursday, August 27.

Since the first trading day of the year, NetSuite’s share price is up 41.4%, Epicor 26.7%, and QAD 4%.

What do you think?

Are the on-premises vendors too late for the sky? If they continue to ignore the trend or move too slowly, will they find themselves running on empty, or pleading to their physicians, “Doctor, my eyes have seen the years and the slow parade of fears”?

As always, I welcome your feedback and ideas—brichardson@amrresearch. Let’s continue the discussion on my blog, The Future of Enterprise Software.

Finally, please take a look at a new research product from AMR Research, Voice of the Customer. We just published the annual outlook on software spending, with some striking findings.

SAP reshapes strategy for online software

2009-06-10T00:29:00.000-07:00

SAP reshapes strategy for online software
By Richard Waters in San Francisco

Published: June 10 2009 00:09 | Last updated: June 10 2009 00:09

A top executive at SAP is set to outline a new strategy on Wednesday for delivering software over the internet, as the German software group struggles to respond to a market that poses a significant long-term threat to its business.

The early pace in the market for on-demand software, also known as “software-as-a-service”, has been set by newcomers such as Salesforce.com, which normally charge a monthly subscription fee for customers to access their software over the internet.

Speaking at a conference in Amsterdam on Wednesday, John Wookey, who is driving SAP’s on-demand software push, will outline a new approach that ties the company’s online services far more tightly to its traditional software.

“Until John got there, there was no strategy,” said Bruce Richardson, an analyst at AMR Research in Boston.

“It’s absolutely essential for SAP – if they don’t make a viable play in the on-demand world, they will be completely overwhelmed by it,” said Josh Greenbaum, an analyst at Enterprise Applications Consulting.

SAP’s first home-grown attempts to respond to the on-demand software revolution have failed to gain much traction. An online service for salespeople to manage customer relationships, rivalling Sales-eforce.com, has gained only “a couple of dozen customers” in its first three years, said Mr Wookey, though he said SAP was pressing ahead with a redesigned service.

Meanwhile, Business By Design, a full suite of online applications aimed at medium-sized companies, which represents one of SAP’s biggest investments in recent years, has faced teething problems that have forced a protracted delay in its launch, and executives admit that their initial plans were over-ambitious.

Acquisitions, including of software maker Business Objects, have since taken SAP’s number of on-demand customers above 1,000 and provided the foundation for it to lay out a broader strategy in the area, Mr Wookey said in an interview.

The German company’s new approach will be to integrate its online services far more closely with its traditional business software, in a hybrid model that tries to take advantage of the big installed base of SAP’s business applications.

Customers will be able to mix online services and traditional software without running into the sort of problems that currently bedevil the software-as-a-service business, such as balkanising a company’s data by holding it in different systems, said Mr Wookey.

“It’s a problem that only we at SAP can solve,” he added.

The simplicity of this hybrid approach is likely to have a big appeal to corporate technology departments, said Mr Richardson.

Mr Wookey also outlined a vision that would eventually see SAP open up its technology to allow other developers to build on-demand services that would tie into its software.

This more open approach represented “a bit of a cultural shift at SAP”, he added.

“It’s a big shift for any company to open up in that way,” said Mr Greenbaum. “They get it, they want to do it, it’s taking a little time to turn the tanker.”

Copyright The Financial Times Limited 2009

SAP BusinessObjects Explorer Is New Star at 20th U.S. SAPPHIRE

2009-05-15T02:19:00.000-07:00

SAP BusinessObjects Explorer Is New Star at 20th U.S. SAPPHIRE
Friday, May 15, 2009
Bruce Richardson

If my calculations are correct, last week’s SAPPHIRE was the 20th that SAP has hosted in the United States. Next year will mark the 20th anniversary of the first one, which I recall as a small event held in New Jersey.

In viewing my reports from many of the recent SAPPHIREs, I noticed that I usually opened with the same complaint: SAP spends a small fortune hosting an event for 10,000+ of its largest customers and prospects, but neglects to try to sell anything during the keynotes.

I’m happy to report that co-CEO Leo Apotheker used most of his hour-long opening slot to sell, sell, sell. The most exciting new product is SAP BusinessObjects Explorer. SAP customers and partners may know it as Polestar.

The new Explorer allows customers to load and manipulate enormous volumes of data in memory, where it can be accessed instantly. At the press conference, one executive from Molson Coors said she loaded 900 million records. Searches across all of the records took less than three seconds. She was so impressed that she compared the velocity to that of the Space Shuttle launch she had witnessed the night before.

She taught her business users how to use the software after only a “five-minute WebEx training.” For her, the primary benefit is the ability to reduce the time needed to make a decision from one day to one hour.

Similar results were reported by an executive at Sara Lee. He said he loaded 290 million to 300 million rows of production data into Explorer. He deployed the software in three days and gave it to business users without providing any training. They took to it immediately.

Both agreed that with traditional tools, you may spend half your life on performance tuning. Given the speed of Explorer, there is no need for tuning.

What can you explore with Explorer?

One of the criticisms I had of Polestar and SAP’s Business Intelligence Accelerator was that they lacked applications or templates. Okay, so I can load a billion records, but what can I do with it?

While neither customer went into too much detail as to how the product is actually used, it’s not too hard to imagine businesspeople deploying the tool to instantly calculate customer profitability by product or region, compare forecasts to actual results, or argue for or against various SKU rationalization proposals based on data, not instinct.

In a meeting with SAP Business Objects’ CEO John Schwarz, I told him that I thought Explorer would make a great platform for third-party applications like Jonova’s business planning software. Imagine having the power and data needed to simulate the impact of moving to direct store delivery or to load point-of-sale (POS) and demand data from thousands of retail points and plan real-time replenishment strategies based on balancing costs and demand. If you can model it, you can make it happen. Of course, this would involve publishing the application programming interfaces. I’m not sure where that fits on the roadmap.

Clouds and SaaS

While none of the SAP executives talked specifically about a cloud version, I found an interesting set of PDF slides and a preview of “Explorer in the cloud” on the SAP Developer Network. The latter is available at https://create.ondemand.com/explorer

Mr. Apotheker’s keynote also featured one slide on SaaS. For large enterprises, SAP currently supports CRM, strategic sourcing, business intelligence, and carbon management. The latter comes from the acquisition of ClearStandards on the eve of SAPPHIRE. In the soon timeframe, SAP promised human capital management and expense management.

As you might imagine, we had a lot of questions. We were hoping to talk to SAP’s John Wookey during SAPPHIRE, but couldn’t get our schedules to mesh. Look for more next Monday.

SAP Business ByDesign: “Go on the offensive big time” in 2010

Jim Shepherd and I went to the exhibit floor to test-drive SAP Business ByDesign, SAP’s first entry into ERP as a service. The company has capped usage to 80 or so companies as it works on guaranteeing sub-second responses to transaction-intensive processes, improving the ease-of-use, adding more functionality, and figuring out how to make money in SaaS.

In my one-on-one meeting with Mr. Apotheker, he told me that if all goes well with the next release, SAP “will go on the offensive big time in 2010.” That should coincide with when he expects the economy to recovery.

He also said that SAP planned to sell Business ByDesign back into the customer base. The challenge has been the customers’ expectation that it will have all of the global functionality needed.

Two new topics for SAPPHIRE ’10?

In keeping with our tradition of offering unsolicited advice, here are two ideas for the next SAPPHIRE: the redesign or replacement of NetWeaver and a new holistic focus on marketing SAP services and support.

The idea that NetWeaver may need a refresh won’t create headlines. As one executive told me, “The time of the fridge is over.” The fridge is a reference to the refrigerator-like look of the NetWeaver product set. Over the next 12 months, SAP will likely embrace more third-party products such as Microsoft SharePoint, IBM WebSphere, and other application servers and integration products.

SAP will also need to get more aggressive on mobility. While I love my BlackBerry, it’s not the only smartphone. The company will also need to add a lot more capability around presence or location-based applications: Where are my people, and what’s the best way to reach them? Should I use IM, e-mail, phone, videoconferencing, or call the pro shop and ask them to find their golf cart?

While no application company seems to do a good job of selling and marketing their services and support offerings, the problem seems especially acute at SAP. One of Mr. Apotheker’s first moves when he assumes the sole CEO role on Tuesday should be to announce the search for a marketing executive responsible for all of SAP’s service and support offerings.

Maybe it’s me, but the service and support offerings seem to consist of pieces: Solution Manager, Value Engineering, Enterprise Support, MaxAttention, Run SAP, SDN, product documentation, consulting, implementation support, and the like. Someone needs to tie all of the offerings together in a clear, consistent package, and get customers to use them. We continue to be astonished by the large number of SAP customers that don’t use Solution Manager, Value Engineering, or SDN.

As if the job wasn’t daunting enough, the new person should also be responsible for making sure that the support tools are easy to use, and not be content that they are good enough.

Selling services and support will become increasing important as more of the lifecycle management burden falls on SAP. Many large customers will likely come to see SAP as their enterprise architect even in heterogeneous environments.

What do you think?

Will we see a battle royale emerge between SAP BusinessObjects Explorer and Oracle Exadata in the database appliance market? How do you rate SAP’s odds for success in SaaS? Is it serious about on demand? Can it displace best of breed? If you were redesigning the NetWeaver fridge, which features would you add or drop?

As always, I welcome your feedback and ideas— brichardson@amrresearch.com. Please visit my blog at http://blogs.amrresearch.com/enterprisesoftware.

--------------------------------------------------------------------------------
© Copyright 2009 by AMR Research, Inc.

SAP sales drop by a third

2009-04-29T02:00:00.000-07:00

SAP sales drop by a third
By Gerrit Wiesmann in Frankfurt

Published: April 29 2009 18:14 | Last updated: April 29 2009 18:14

SAP, the world’s largest maker of business software, said sales fell by a third in the first quarter of 2009, highlighting companies’ reluctance to invest in information technology during a recession.

The slump was bigger than the 12 per cent drop in sales of such programs reported by rival Oracle in March. It led investors to sell SAP stock, although the shares rallied to close only 2 per cent lower at €29.50.

The German company said software sales dropped by a third to €418m ($557m). However, it managed to make up for this by raising revenues from maintaining SAP software installed on customers’ computers.

As a result, software and related services revenues were unchanged at €1.74m, outperforming Oracle, which saw joint revenues sink 2 per cent in its third quarter, which ran until the end of February.

For the full year, SAP said it continued to work on the “assumption” that software and related services revenues would be flat or fall by 1 per cent, allowing it to meet an operating-margin target of between 24.5 per cent and 25.5 per cent.

“While visibility for software revenues remains limited, we continue to take steps to protect our margin in this tough operating environment,” Léo Apotheker, SAP’s co-chief executive, said.

Mr Apotheker added that he was not worried by Oracle’s better performance in selling software at the start of 2009. SAP’s position as market leader was “not substantially changed” by what would prove to be a normal quarterly blip, he said.

Mr Apotheker signalled he did not want to follow Oracle into the hardware business after the US group agreed to buy server maker Sun. However, SAP’s strategy of organic growth would still be flanked by add-on purchases.

Mr Apotheker takes sole responsibility for SAP next month when his current co-chief executive Henning Kagermann retires.

SAP saw double-digit sales growth for much of 2008 – and an annual operating margin of 28.2 per cent – and it said as late as last summer that the crisis could be a boon as clients looked to cut costs with new software.

Yet, in autumn, the company warned that the fall-out from the global recession meant it could not give a sales forecast for 2009. Cost cuts – including a pay freeze and jobs cuts – followed.

SAP is cutting jobs for the first time in its 37-year history, aiming to reduce its workforce by 3,000 – 6 per cent of staff – to 48,500 by late 2009. Some 2,200 of these posts were cut last quarter.

This led to a one-off restructuring charge of €160m in the first three months of 2009, helping to drag operating income down 8 per cent to €332m.

Net income hit €204m, down 16 per cent from the first quarter of 2008.

Copyright The Financial Times Limited 2009

Software sales fall by a third at SAP

2009-04-29T01:59:00.000-07:00

Software sales fall by a third at SAP
By Gerrit Wiesmann in Frankfurt

Published: April 29 2009 07:53 | Last updated: April 29 2009 07:53

SAP, the world’s largest maker of business software, on Wednesday painted a bleak picture of corporate spending on information technology when it said that sales of new software fell by a third in the first quarter of the year.

The Walldorf-based company said software sales – an indicator of follow-on sales from upgrades and maintenance – dropped 33 per cent to €418m, while software and maintenance revenues were flat at €1.74bn.

Last year, SAP regularly reported double-digit growth in both positions and last summer still boasted the economic crisis could raise information-technology spending as its clients looked to cut costs with new software.

But last autumn the company suddenly gave a stark warning about the fall-out of the global recession and said it could not give a sales forecast for 2009. Cost cuts, including a pay freeze and jobs cuts, soon followed.

“While visibility for software revenues remains limited, we continue to take steps to protect our margin in this tough operating environment,” Léo Apotheker, SAP’s co-chief executive said in a statement on Wednesday.

He stuck to his pledge, made at the start of the year, that cost cuts would help SAP to achieve an operating margin of 24.5-25.5 per cent in 2009, albeit down from a profit margin of 28.2 per cent the prior year.

SAP said this forecast was based on “the assumption” that full-year revenues from software and related services would be “flat” or show “a decline of 1 per cent” – although it said this was not a formal sales target.

The company is cutting jobs for the first time in its 37-year history, aiming to reduce its workforce by 3,000 people, some 6 per cent of total staff, to 48,500 by the end of 2009. Some 2,200 posts were cut last quarter.

This led to a one-off restructuring charge of €160m in the first three months of the year, helping to drag operating income down 8 per cent to €332m. Net income hit €204m, down 16 per cent from quarter one 2008.

Mr Apotheker, who takes sole responsibility of SAP when co-ceo Henning Kagermann retires later this month, said cost cuts were starting to have an effect and pledged SAP would continue with “tight cost controls.”

Copyright The Financial Times Limited 2009

"FT" and "Financial Times" are trademarks of the Financial Times. Privacy policy | Terms
© Copyright The Financial Times Ltd 2009.

Recession takes toll on non-financial sectors

2009-04-29T01:57:00.000-07:00

Recession takes toll on non-financial sectors
By Richard Milne in London

Published: April 29 2009 19:42 | Last updated: April 29 2009 20:21

A string of European companies reported poor earnings on Wednesday as the global recession took a heavier toll on groups from the real economy than on banks.

Companies ranging from France Telecom to car parts maker Continental and pharmaceuticals group Bayer, which are both German, reported weaker earnings in the first quarter.

Meanwhile, Spain’s Santander, the largest bank in the eurozone, said its operating profit had risen.

Other industrial weak spots included steelmaker Arcelor-Mittal plunging to a $1.1bn loss and Siemens, Europe’s largest engineering group, issuing a profits warning in spite of a rise in earnings.

“Financials have done better, while real economy companies – outside consumer cyclicals – have been less impressive,” said Nick Nelson, equity strategist at UBS.

Banks such as Deutsche Bank, Credit Suisse and Santander’s Spanish rival BBVA have reported strong first-quarter profits, while companies from Euro Disney to Philips have reported weaker results.

European managers are generally refusing to say they see the “glimmers of hope” in the economy that several US companies such as General Electric have reported.

The chief executives of Siemens and BASF, the world’s largest chemicals group, even said they had seen further deterioration in recent weeks.

But both Conti and Bayer yesterday said they were seeing the first tentative signs of a bottoming out in the collapse of activity.

Mr Nelson said first-quarter earnings showed that “the rate of deterioration” was slowing in Europe, but that there would be more profit warnings and downgrades in coming months.

The pain in the real economy extended yesterday to diverse companies such as SAP, the German IT group, which said sales of new software had dropped by a third and France Telecom, where profits fell slightly.

German engineering companies – which make up the heart of Europe’s largest economy – reported a 35 per cent fall in orders in March and forecast further woe for this month.

Industrial companies have been hit hard not only by the collapse in demand for exports and cutbacks in investment, but also by the continued relative strength of the euro.

At the same time, some banks have seen improved conditions after a miserable 2008.

But other financial companies are struggling.

Allianz, the German insurer, saw operating profit fall 41 per cent in the first quarter.

Copyright The Financial Times Limited 2009

"FT" and "Financial Times" are trademarks of the Financial Times. Privacy policy | Terms
© Copyright The Financial Times Ltd 2009.

Oracle faces culture shock in Sun’s open-source world

2009-04-23T01:50:00.000-07:00

Oracle faces culture shock in Sun’s open-source world
By Richard Waters and Joseph Menn in San Francisco

Published: April 23 2009 21:42 | Last updated: April 23 2009 21:42

Larry Ellison is a famously activist exponent of competitive strategy. An avowed student of Sun Tzu’s Art of War, the Oracle chief executive has long followed an approach that sets Oracle’s interests against those of its main rivals, with Microsoft, IBM and SAP cast as the enemy.

With the acquisition of Sun Microsystems, however, he is about to walk on to new terrain where some of the methods that defined Oracle’s traditional approach to strategy no longer apply.

Sun’s main software assets – and the jewels for which Mr Ellison said this week that he had agreed to pay $7.4bn for the company – are all closely tied to the open source world: the Java programming language and development tools, which are partly open source, as well as the Solaris operating system and MySQL database.

That makes them unlike the roughly 200 software properties that Mr Ellison has acquired in the past. They are made freely available, and rely partly on the efforts of a wider group of developers to extend and support them. Their future success, in fact, relies on a technology community that stretches well beyond Oracle – and includes companies such as IBM, which also relies on Java as a core technology.

“Obviously Oracle is going to have to be a lot less heavy handed,” says Kenneth Chin, an analyst at Gartner. “They’ve acquired a lot of open-source assets, and they need to keep the communities involved.”

So far, Oracle has had little to say about how it will manage this balancing act. That has left the open source world trying to second guess what Mr Ellison will do next.

The focus has shifted in particular to how he will seek to make money from software properties that Sun itself so glaringly failed to “monetise” in the past, and whether his real intention is even to subvert some of the assets he is acquiring to protect Oracle’s existing business model.

The future of MySQL – an open source database bought by Sun last year, which has come to be seen as a long-term threat to Oracle’s own core database software business – has become the most immediate source of concern.

Marten Mickos, the former chief executive of MySQL, admits that Oracle’s acquisition of an upstart rival has sent a chill through the open-source community, and he likens it to Goliath vanquishing David. However, he also claims that it will still be in Mr Ellison’s own interests to maintain the software: “I think MySQL is cannibalising Oracle anyway,” so Oracle might as well benefit from that process directly, he says.

Most observers do not expect the hard-headed Mr Ellison to see it this way. Gary Reback, a Silicon Valley antitrust expert, says there is a chance that anti-trust authorities will force him to divest MySQL, but adds: “I think he wins any way you cut it. If he keeps it, he kills it: if he spins it off, who wants it without the top developers anymore?”

There are some potential limits. Mitch Kapor, a leading figure in the open-source world, points out that MySQL has a life beyond Oracle’s control: the software has already been “forked”, meaning alternative open-source versions have been created that are outside Oracle’s control.

However, stripped of the sponsorship of a big company willing to supply the core group of developers to push the project forward, MySQL could lose momentum as a significant rival to Oracle.

Mr Ellison’s intentions for Java have also become the centre of considerable speculation. Created by Sun as a way to counter the growing influence of Microsoft, Java’s power comes from its adoption by a wide group of companies, including IBM. If Oracle upsets this ecosystem it would undermine the value of Java – something people close to the company have been at pains to stress.

Yet maintaining Java’s openness, while at the same time directing its future development, will be a delicate balancing act, requiring the exercise of what Bill Whyman, an analyst at ISI, calls “soft power” – not Mr Ellison’s strength.

“We always wanted Java’s evolution to be participatory, but fully open would compromise compatibility,” says Bill Joy, the Sun co-founder and former chief scientist. “I believe Oracle shares these values, so am not concerned.”

More directly, Oracle has made clear that it plans to make money from Java in a way that Sun failed to do – another source of potential conflict with the rest of the technology world. Besides simply raising the licensing fee, Oracle could try to levy a small fee on every application that runs on Java, according to Gartner – a move that would have particular implications for the mobile world, given that Java is shipped on virtually all mobile phones.

Copyright The Financial Times Limited 2009

"FT" and "Financial Times" are trademarks of the Financial Times. Privacy policy | Terms
© Copyright The Financial Times Ltd 2009.

SAP’s New CEO to Inherit Far More Complex Product Set

2009-04-17T04:39:00.000-07:00

Friday, April 17, 2009
Bruce Richardson

On April 29, SAP will host a conference call to discuss its results for the first quarter ending March 31. The company is also expected to announce that Henning Kagermann will be retiring from his role as Co-CEO. Fellow Co-CEO Léo Apotheker will assume the top position.

Knowing Mr. Kagermann, I bet he would have preferred to leave his successor with a strong pipeline and a robust economy as he slips quietly away. During a brief conversation a few weeks ago, I asked him whether he expected to see the economy recover by the end of this year or if we would we have to wait for 2010. Mr. Kagermann said that he thought “we will be lucky if it’s 2010.”

Over the last few weeks, I’ve sat through a lot of product discussions with various SAP executives and dozens of the company’s largest customers. Based on my observations, Mr. Apotheker faces numerous challenges. The top one may be the increasing complexity of the company’s product line and strategy. Here are some observations.

Surprise! Separate Enhancement Packs for ERP and each New Dimension product

When I attended the SAP Business Suite 7.0 launch in February, I left believing that all of the company’s new products would be delivered through an annual Enhancement Pack that covered the whole product spectrum. As it turns out, there will be separate packs for ERP and each of the New Dimension products. (The latter is an old label that refers to SAP’s offerings for CRM, SCM, HCM, and SRM.)

In addition, each release is cumulative, meaning that Enhancement Pack 5 will contain all of the features included in the previous packs. While this is great news for vendors like IntelliCorp and Panaya, which offer tools to help buyers compare the new releases with the current versions, it adds a lot more complexity to large implementations. This is especially true if SAP reverts back to separate release schedules for each of the various New Dimension products.

At the launch, SAP also introduced the concept of value scenarios. If you read my piece, “A Closer Look at the New SAP Business Suite,” you may remember that SAP had created 30+ vertical-specific scenarios based on end-to-end business processes, including inspired shopping experience, integrated product development, and collaborative demand and supply planning.

These scenarios are more like frameworks than composite apps. Still, a scenario such as collaborate demand and supply planning could involve pulling data from CRM and supply chain management in order to create the end-to-end process. This builds in a level of dependence on synchronized product releases. This is a challenge giving that SAP software is developed in 10 or 11 labs around the world.

Three types of apps: transactional, analytical, and collaborative

SAP has quietly built in additional complexity by adding different types of applications. In the R/3 days, its world consisted of transactions, with all of the results stored in a database.

Then, SAP developed and acquired a set of business intelligence/performance management products that pulled data from multiple data sources and content types, both structured and unstructured. The latter creates an issue when you see the world as a set of transactions. For example, what do you do with unstructured data? Where do you store it?

With the acquisition of Business Objects, SAP will be offering far more powerful and complex tools capable of managing enormous volumes of real-time data. This will likely result in a lot more members in the Terabyte Club, a moniker created by AMR Research’s Derek Prior.

Returning to the collaborative demand and supply planning scenario, these new collaborative apps offer a different challenge. In this application, SAP envisions a sort of a heterogeneous trading hub where a manufacturer may be exchanging real-time data with customers, suppliers, third-party logistics firms, contract manufacturers, financial institutions, regulatory agencies, and other interested parties.

The combination of the three types of applications, higher data volumes, and increased transactions is putting more pressure on SAP to open up NetWeaver to support third-party products. Discussions with customers, software vendors, and former employees point to the need for improving or replacing SAP NetWeaver Process Integration (PI). Formerly known as XI, PI is SAP’s enterprise application integration toolset.

Add SaaS and cloud to the soup

While SAP has been relatively quiet about its plans for expanding its on demand and software-as-a-service (SaaS) products beyond CRM and SRM, it’s logical to assume that over the next three to five years, most companies will find themselves support a hybrid architecture consisting of traditional on premise deployments and the rapidly growing on demand software.

Then there is the subject of cloud computing. A few weeks ago we spoke with SAP CTO Vishal Sikka about his plans. He told us that his team has been “working with Amazon for some time.” Logical cloud offerings include backup and archive, support for test and demo systems, and some virtualization support. In terms of offering applications on the cloud, Dr. Sikka pointed to several issues that need to be resolved: lack of analytics, integration challenges, and the difficulty of supporting transaction-intensive functions such as available to promise.

Urgent need for product roadmaps spanning two to five years

So, as you imagine the challenge of mixing and matching transactional, analytical, and collaborative applications in some combination of on premise, on demand, and in the cloud, you can feel the CIO’s pain. Clearly, CIOs have a lot more work ahead on governance, master data management, insourcing/outsourcing, and taming the total cost of ownership.

In meetings with SAP customers, we usually hear the same request unanimously: “Please help get SAP to provide us with product roadmaps.” Most are trying to slot in new, bite-sized projects over a multiyear period. This is much harder when you don’t know the release schedules. To date, SAP has been reluctant to disclose detailed plans. When we push back, the answer usually revolves around revenue recognition concerns. Okay, but that’s not very helpful for customers.

We will plead your case to Mr. Apotheker at SAPPHIRE

The next time we see Mr. Apotheker will be at SAPPHIRE in Orlando (May 11–14). In the past, Jim Shepherd and I have had the opportunities for one-on-one chats with Mr. Kagermann, Mr. Apotheker, and other SAP board members. Assuming that tradition holds, I promise we will relay your requests for detailed roadmaps for user interface plans, applications, NetWeaver, Business Objects, SaaS and clouds, and implementation strategies. Would you like more guidance on pricing, too?

We will also ask him about the economy. I hope he’s a lot more optimistic than his soon-to-be former boss. Look for our analysis next month.

On my blog, we are also looking for your view on your interest in new research on the future of work. Please take a minute to read the posts and add your thoughts.

In the meantime, I welcome your feedback and ideas—brichardson@amrresearch.com

Crossroads: Krönung für das SAP NetWeaver Portal

2009-02-17T07:11:00.000-08:00

Crossroads: Krönung für das SAP NetWeaver Portal

Jan Baan: 'ERP is dood, leve BPM'

2009-02-03T00:37:00.000-08:00

Eindgebruikers passen straks vanuit hun webbrowser zelf bedrijfsprocessen aan
Jan Baan: 'ERP is dood, leve BPM'

"Business process management is de opvolger van enterprise resource planning," zegt Jan Baan. Procesregels zijn nu nog ingebakken in beton, maar over een paar jaar kunnen gebruikers zelf hun zakelijke processen aanpassen, aldus de eigenaar van Cordys.

Een zakelijke gebruiker wil snel reageren op marktontwikkelingen. Volgens Jan Baan, eigenaar van bpm-softwareleverancier Cordys, moet hij echter veel te lang wachten eer zijn automatiseerders de systemen hebben aangepast. De ict-infrastructuur vormt dan ook een rem op de zakelijke strategie.

Een voorbeeld hiervan zijn de toepassingen voor enterprise resource planning (erp). Baan, die met zijn vorige bedrijf Baan Company uit de erp-hoek komt, spreekt liever van Enterprise Resource Problems. "Er is veel bereikt met erp, maar we zijn vastgelopen. Erp-systemen worden alleen maar groter en groter. Het is als een olifant: die kan heel hard lopen, maar veroorzaakt wel een hoop schade." Baan vindt dat it niet sturend moet zijn maar faciliterend. Business process management is zijn ogen de oplossing om zo'n flexibele situatie te realiseren. "Bpm is de opvolger van erp."

Business process management beweegt zich tussen bedrijfsprocessen en ict in. Enerzijds is het een applicatie om processen te modelleren en te beheren. Anderzijds kunnen vooral via de pakketten afkomstig uit de it-wereld verbindingen met de onderliggende infrastructuur worden gemaakt. In het ideale geval zouden de bedrijfsprocessen in de backoffice direct reageren op wat klanten aan de voorkant doen. Jan Baan gaat zelfs nog een stap verder. "Het gaat niet meer om de afzonderlijke klanten maar om het inspelen op veranderingen in de voorraadketen, de supply chain." Hij noemt dit bpm 2.0: "Eindgebruikers en proceseigenaren kunnen straks vanuit hun web-browser zelf de bedrijfsprocessen aanpassen."

Van data- naar procescentrisch
Net als bij de hedendaagse bpm zijn bij bpm 2.0 de bedrijfsprocessen en de onderliggende bronnen te modelleren, waarna ze in een grafische representatie kunnen worden aangepast. Aan de basis liggen de standaardprocessen, die nu ook worden gebruikt bij erp. Binnen randvoorwaarden kunnen proceseigenaren direct aanpassingen doorvoeren. Denk dan bijvoorbeeld aan het overschakelen naar een andere toeleverancier. Nu kost het weken of maanden werk om binnen de keten een nieuwe verbinding op te zetten. Straks gebeurt dat niet meer in de middleware maar direct op procesniveau. Baan spreekt van een overstap van een datacentrische naar een procescentrische aanpak.

Een ander belangrijk onderscheid met de klassieke erp is de integratie met de menselijke kant, stelt Baan. Ongrijpbare interacties met de omgeving en ongestructureerde data die men voorheen in workflow-systemen probeerde te vangen, worden nu integraal onderdeel van de processen. Volgens Baan is op dit moment slechts zes procent van alle processen volledig geautomatiseerd. Door niet alleen de interactie tussen machines (communicatie) maar ook die tussen mensen (collaboratie) mee te nemen, vallen veel meer processen te modelleren."

Om dit alles daadwerkelijk te realiseren, moeten de huidige silo's van monolithische applicaties worden afgebroken tot losse componenten die op flexibele wijze met elkaar worden verbonden. Service-oriented architecture speelt daarbij een cruciale rol.

BPM for dummies
De business logica die straks zo flexibel moet zijn, bevindt zich nu in de middleware-laag tussen frontoffice en internettoepassingen enerzijds en de databases en transactieverwerkers in de backoffice anderzijds. Dat is de laag waar nieuwe applicaties gebaseerd op de bestaande legacy worden gebouwd. Baan wijst bijvoorbeeld op maatwerk op Oracle- of SAP-systemen. Behalve dat die middleware een hoop onderhoud vraagt, maakt het de overstap naar een nieuw platform of zelfs naar een nieuwe versie zeer lastig. Baan: "De procesregels zijn ingebakken in beton. Daardoor kost de overgang naar een nieuw systeem jaren en zijn er te veel specialisten voor nodig."

Als het aan hem ligt, verdwijnt het maatwerk op de afzonderlijke applicaties op den duur. Aanpassingen blijven beperkt tot de overkoepelende bpm-laag, waar alle onderliggende componenten bij elkaar gebracht worden. "Op die manier kun je één seconde voor een transactie nog een aanpassing doen: 'what you model is what you get'. Wat de spreadsheet nu is voor de manager, wordt bpm straks voor de kenniswerker." En je bespaart dus op onderhoud en specialisten."

De mashup
"Door internet is alles nu met alles verbonden: de mashup", vervolgt hij. "Transacties op het web zijn gebaseerd op xml, soa en ajax. Om daar aan deel te nemen heb ik geen vette client meer nodig; een webbrowser is genoeg. Bpm moet het hart van dat netwerk worden." Het enige dat nog moet gebeuren is het volwassen worden van de servicegeoriënteerde architectuur, de basis onder de bpm 2.0-infrastructuur, benadrukt Baan.

De grote verdiensten zitten volgens hem in de supply chain. "Daar zijn onvoorstelbare voordelen te behalen, vooral in de logistiek. Je communiceert voortaan met de leverancier van je leverancier en met de afnemer van je afnemer. En veranderingen die voorheen acht weken duurden, hebben straks een doorlooptijd van een dag."

Ommezwaai

Sevensheaven

SevensheavenMet zijn oude bedrijf zou Jan Baan volgens eigen zeggen een dergelijke ommezwaai van erp naar bpm nooit voor elkaar hebben gebokst. "De eerste tien jaar kun je innoveren. De tweede tien ben je bezig met het opzetten van een onderneming. Maar daarna kun je geen fundamentele veranderingen meer doorvoeren. Innovatie wordt dan vervangen door fusies en overnames."

Samen met partner Theodoor van Donge heeft Baan de tijd genomenzijn nieuwe onderneming Cordys van de grond te krijgen. "We hebben een paar jaar lekker kunnen hobbyen. Dat heeft meer dan 200 miljoen euro gekost. Pas toen hebben we ons product aan potentiële klanten laten zien en zijn we voorzichtig naar buiten getreden." In 2007 investeerde het Amerikaanse Argonaut Private Equity vijftig miljoen euro in ruil voor een belang van 25 procent.

AMR Research Study Finds Supply Chain Technology Market Will Grow 7% Annually to $9.2B in 2012

2009-02-03T00:32:00.000-08:00

AMR Research Study Finds Supply Chain Technology Market Will Grow 7% Annually to $9.2B in 2012
Thursday, November 20, 2008
Kevin Reilly

AMR Research today released a study that estimates the supply chain management (SCM) applications market will grow 7% annually for the next five years, despite the gloomy economic conditions of 2008. Now a $6.5B market, AMR Research forecasts steady growth will bring the SCM applications market close to $9.2B in 2012.

Based on its analysis, AMR Research predicts there is a high likelihood the economic challenges of the coming years will offer much greater opportunity for supply chain technology adoption.

“The supply chain, and the technologies that support it, will play an important role in helping companies deal and thrive in an economy that is going to be quite unlike anything we’ve seen in the post-war era,” said John Fontanella, vice president of research at AMR Research.

The study named five major forces that will be at work in the economy and society in the foreseeable future, and how the supply chain and the technologies that support it will help companies in the next five years.

- High inflation – Inflation will force supply chain managers to play an important role in protecting product and company margins through cost control and increased efficiencies in their operations.
- Rising commodity prices – Pressure from higher commodity prices will bring supply more in line with demand and reduce inventory levels from raw materials to the finished product.
- Threats to brand security – Counterfeiting, the gray market, and questionable quality standards will make brand protection a top priority. Companies will look to adopt risk mitigation and global trade technologies as well as analytics to monitor distribution channel buy-and-sell patterns.
- Sustainability becomes a component of corporate decision making – Public sentiment will force substantive measures by industry to become more environmentally friendly. This will present opportunities to more directly connect product development efforts with supply chain management to minimize waste and material usage.
- Cash is king – Capital spending will come under great scrutiny as companies preserve cash. Technologies that increase the velocity of cash collection, including B2B e-commerce, will become a critical component of future initiatives.

The report also found that SAP, Oracle, and Manhattan Associates were the three largest SCM vendors by revenue in 2007, with a market share of 13%, 10%, and 5% respectively.

For more information about this report, please visit www.amrresearch.com or call (617) 542-6600.

About AMR Research:

Bold Ideas. Compelling Research. Pragmatic Advice. AMR Research is the No. 1 research firm focused on the intersection of business processes with value chain and enterprise technologies. Founded in 1986, AMR Research provides subscription advisory services and peer networking opportunities to operations and IT executives in the consumer products, life sciences, manufacturing, and retail sectors. To learn more about our research and services, visit www.amrresearch.com.

--------------------------------------------------------------------------------
© Copyright by AMR Research, Inc.
AMR Research® is a registered trademark of AMR Research, Inc.

SAP’s Bill McDermott Reviews SAP’s $15B Year

2009-01-30T00:27:00.000-08:00

SAP’s Bill McDermott Reviews SAP’s $15B Year
Friday, January 30, 2009
Bruce Richardson

On Wednesday, January 28, SAP AG hosted an early morning conference call to discuss results for the fourth quarter and year-ending December 31. Total GAAP revenue for the fourth quarter was Euro 3.488B (or $4.58B based on the 1.314 exchange rate), up 8% from the year earlier period. Full-year GAAP revenue came in Euro 11.567B ($15.199B), up 13% over FY07. Investors appeared relieved by the relatively positive news and bid the stock up nearly 6% in trading that day.

Putting performance aside, nearly all of the news coverage focused on the company’s plans to eliminate 3,000 jobs this year. SAP ended 2008 with 51,536 employees, up 7,675 or 17.5% from the end of 2007. Most of the increase came from the 6,224 employees added in the Business Objects acquisition, which closed last January.

During the earnings call, SAP said that the head-count reduction began last quarter with the elimination of 327 positions. Executives estimate that the 2009 cuts will save the company approximately Euro 300M–350M ($397.5M–$463.7M).

Inside 4Q performance with Bill McDermott

With the broadcast of the earnings call on in the background, our attention was focused on our quarterly call with Bill McDermott, SAP’s president of global field operations. As usual, he was in a very upbeat mood despite a challenging economy that put pressure on deal pricing and nearly eliminated any purchases by first-time buyers.

We opened with a discussion of results by geography. Mr. McDermott said that “Latin America grew very well;” EMEA and Asia-Pacific Japan did “well;” Canada was “great;” and the United States just “OK.” In Europe, “Russia struggled,” while results in Italy and France were “particularly strong.”

BRIC countries: “All have challenges”

The mention of Russia prompted us to ask about the other BRIC (Brazil, Russia, India, and China) countries. He said that “all have challenges.” There are currency and liquidity issues in Brazil. For Russian companies access to capital has become more difficult. Indian sales were slower due to the terrorist attacks in Mumbai. Fortunately, China “remains strong.”

From regions we traversed to verticals. He said SAP’s results were “reasonably balanced” across industries. Retail was “slower” with the exception of software for pricing and margin management. Despite the negative publicity surrounding their industry, banks are still buying software, pointing to good results in Colombia and good penetration of Business Objects into the “mature U.S. banks.” He said that SAP had also been successful selling Business Objects and trade promotion management software to consumer packaged goods (CPG) companies.

Overall, Business Objects has been a “significant contributor,” having replaced more than 600 competitive implementations in SAP accounts. Business Objects is also gaining traction in the area of governance, risk, and compliance (GRC)—“it’s rocking.”

In terms of other products, Mr. McDermott said that the new version of CRM was “doing very well” as buyers use it to get closer to their existing customers.

We delicately brought up the issue of head-count reduction. I told Mr. McDermott that many software companies, including SAP partners, have been telling us that more SAP sales talent had become available due to end of the year job cuts. He said the rumors were unfounded and repeated SAP’s plans to lower head count through attrition.

The conversation shifted to deal flow. Looking at 2008 results versus the year earlier period, Mr. McDermott said that “20% of revenue came from larger transactions, 45% from smaller transactions, and 35% from midsized transactions.” With the downward pressure on prices, SAP “needs to do more volume.”

New SAP product launch on February 4

Mr. McDermott is hoping that the next release of the SAP Business Suite will help to increase the sales volume. The launch is taking place on Wednesday at the company’s offices in Manhattan. When asked for a preview, he described the new software as “the most harmonizing, efficient, feature-rich software” that SAP has developed.

The teaser about the new product marked the end of the call. That was too bad as we still had more questions. We’ll have a chance to ask them at next week’s event. Jim Shepherd and I will be in New York for the launch. Look for our analysis next week.

On the blog: How Do You Think SAP Will Perform in 2009?

As always, we welcome your feedback and ideas at our blog. We pose some questions there about SAP’s 2009, including:

“If I ran SAP, my next major acquisition would be __________. And, here’s why _____________.”

Let us know your answers there

--------------------------------------------------------------------------------
© Copyright by AMR Research, Inc.

SAP to cut 3,000 staff amid gloomy outlook

2009-01-28T01:54:00.000-08:00

SAP to cut 3,000 staff amid gloomy outlook
By Gerrit Wiesmann in Frankfurt

Published: January 28 2009 09:37 | Last updated: January 28 2009 09:37

SAP, the world’s largest maker of software used by businesses, on Wednesday said it would cut 3,000 staff, nearly 6 per cent of its workforce, as it expects revenues to fall this year from software sales, web services and maintenance software.

Léo Apotheker, co-chief executive, said the first job cuts in the German company’s history were a result of the “very exceptional” economic crisis.

SAP said it would incur restructuring costs of €200m-€300m ($265m-$397m) as a result of the cuts, while its sales margin would fall by three points to 24.5-25.5 per cent in 2009 as companies pulled back on software spending.

SAP’s intention to cut personnel costs comes a week after Microsoft announced its first job cuts. It shows how even software companies that found shelter from the dotcom bust are being rocked by the downturn.

The Walldorf-based company did manage to hit the full-year targets for 2008 that it set for itself in October, though these were well below initial goals for a year that Mr Apotheker had until late summer expected to turn in record profits.

SAP saw return on sales rise to 28.2 per cent from 27.3 per cent due to emergency cost cuts of €220m and full-year software and services sales of €8.6bn – a rise of 16 per cent, or 20 per cent when adjusted for currency moves.

“This year we expect to see software and software-related service sales at the 2008 level or slightly below,” Mr Apotheker said.

As a result, this autumn’s programme of cost cuts would go on and expand to include job cuts.

Mr Apotheker said the economic crisis had wrecked SAP’s initial goal of raising revenues from software sales, subscriptions and maintenance by 27 per cent to €9bn.

The year-end shocks saw companies spend less on applications, with SAP’s fourth quarter software sales falling 7 per cent to €1.3bn. Software and service revenues rose 9 per cent to €2.7bn thanks only to maintenance contracts.

Fourth quarter operating income rose 22 per cent to €1.4bn, almost entirely the result of cuts announced in October. This helped boost annual operating income 18 per cent to €3.3bn and net profit by 14 per cent to €2.2bn.

Mr Apotheker and co-chief executive Henning Kagermann expect SAP to emerge in better shape, not least as a result of annual personnel cost savings of up to €350m in and beyond 2010.

Copyright The Financial Times Limited 2009

"FT" and "Financial Times" are trademarks of the Financial Times. Privacy policy | Terms
© Copyright The Financial Times Ltd 2009.

Who Will Oracle Buy in 2009?

2009-01-09T03:09:00.000-08:00

Who Will Oracle Buy in 2009?
by Bruce Richardson

IPOs and M&A activity in 2008 were barely existent in the tech sector, according to a new report from National Venture Capital Association and Thomson Reuters. Oracle was one of the few active companies. January has traditionally been a very busy month for the Oracle acquisition team, but as the economy struggles, what is in store for 2009?

We barely had time to bid 2008 a hearty good riddance before coming across data published by the National Venture Capital Association (NVCA) and Thomson Reuters. The two organizations teamed to provide data on the sorry state of the market for tech sector IPOs and mergers and acquisitions.

All told, there were six IPOs last year, with five in the first quarter and one in Q3.This was the lowest total since 1979, and it represents a dramatic falloff from the 86 IPOs in 2007. While there are 28 companies that have filed to go public, even magician David Blaine wouldn’t be able hold his breath until the IPO gates re-open.

On the M&A side, NVCA and Thomson Reuters tracked 260 deals involving venture-backed firms. The deal count was exactly 100 lower than 2007. The deals were smaller, too. Buyers spent a total of $13.92B in 2008 based on deals in which the price paid was disclosed. Compare that to the $28.41B paid in 2007. See our newly revamped blog for more, and please note the new location: http://blogs.amrresearch.com/enterprisesoftware.

When The New York Times wrote up the study results, the reporter noted that Cisco Systems normally buys 10 to 15 tech companies each year. The company made only five purchases in 2008.

Oracle makes one big buy each year

While Cisco may be reluctant to whip out the checkbook, the same is not true at Oracle. Last year, Oracle purchased 11 companies, the same number as 2007. For the past four years, the company has added 48 companies to its roster (more on our blog on this too).

Over that period, Oracle has announced at least one big purchase per year. If you look at the Oracle website, it appears that the biggest deals are done in the first calendar quarter. Last January, the company made a bid for BEA for $8.5B. In March 2007, Oracle trumpeted its plans to acquire Hyperion ($3B). The website said that the Siebel deal was inked in January 2006, but the press release had the $5.85B offer occurring in September. The same site said that PeopleSoft agreed to be acquired for $10.3B in January 2005. As I recall, the deal was signed in December 2004.

Who will it be in 2009?

The landscape has changed dramatically since the PeopleSoft deal. The most noticeable change is the shortage of midsize software vendors with values in the $2B to $10B range. Here’s a close look at companies in that range based on the closing price of January 8, 2009:

• CA—$9.4B
• Intuit—$8.11B
• BMC Software—$5.02B
• salesforce.com—$4.02B
• Citrix Systems—$4.2B
• Teradata—$2.81B

Based on that list, salesforce.com looks like the most appealing. For companies less than $2B, take a look at the blog, where we give our thoughts.

What do you think?

Will Oracle pull the trigger on a big buy this year? Can Larry Ellison and team find another 11 companies worth acquiring in 2009, or is that streak in danger? Would you bet February’s mortgage payment on an Oracle-salesforce deal?

AMR Research Study Finds Supply Chain Technology Market Will Grow 7% Annually to $9.2B in 2012

2008-11-20T03:13:00.000-08:00

AMR Research Study Finds Supply Chain Technology Market Will Grow 7% Annually to $9.2B in 2012
Thursday, November 20, 2008
Kevin Reilly

AMR Research today released a study that estimates the supply chain management (SCM) applications market will grow 7% annually for the next five years, despite the gloomy economic conditions of 2008. Now a $6.5B market, AMR Research forecasts steady growth will bring the SCM applications market close to $9.2B in 2012.

Based on its analysis, AMR Research predicts there is a high likelihood the economic challenges of the coming years will offer much greater opportunity for supply chain technology adoption.

“The supply chain, and the technologies that support it, will play an important role in helping companies deal and thrive in an economy that is going to be quite unlike anything we’ve seen in the post-war era,” said John Fontanella, vice president of research at AMR Research.

The study named five major forces that will be at work in the economy and society in the foreseeable future, and how the supply chain and the technologies that support it will help companies in the next five years.

- High inflation – Inflation will force supply chain managers to play an important role in protecting product and company margins through cost control and increased efficiencies in their operations.
- Rising commodity prices – Pressure from higher commodity prices will bring supply more in line with demand and reduce inventory levels from raw materials to the finished product.
- Threats to brand security – Counterfeiting, the gray market, and questionable quality standards will make brand protection a top priority. Companies will look to adopt risk mitigation and global trade technologies as well as analytics to monitor distribution channel buy-and-sell patterns.
- Sustainability becomes a component of corporate decision making – Public sentiment will force substantive measures by industry to become more environmentally friendly. This will present opportunities to more directly connect product development efforts with supply chain management to minimize waste and material usage.
- Cash is king – Capital spending will come under great scrutiny as companies preserve cash. Technologies that increase the velocity of cash collection, including B2B e-commerce, will become a critical component of future initiatives.
The report also found that SAP, Oracle, and Manhattan Associates were the three largest SCM vendors by revenue in 2007, with a market share of 13%, 10%, and 5% respectively.

For more information about this report, please visit www.amrresearch.com or call (617) 542-6600.

About AMR Research:

Bold Ideas. Compelling Research. Pragmatic Advice. AMR Research is the No. 1 research firm focused on the intersection of business processes with value chain and enterprise technologies. Founded in 1986, AMR Research provides subscription advisory services and peer networking opportunities to operations and IT executives in the consumer products, life sciences, manufacturing, and retail sectors. To learn more about our research and services, visit www.amrresearch.com.

--------------------------------------------------------------------------------
© Copyright by AMR Research, Inc.

What’s new: SAP sees opportunity (FT.com)

2008-11-19T03:16:00.000-08:00

What’s new: SAP sees opportunity
By Geoff Nairn

Published: November 19 2008 10:50 | Last updated: November 19 2008 10:50

Times are hard and while some vendors see only challenges, SAP sees opportunities. The German giant has designed a new range of software to help cash-strapped businesses shore up their bottom line through greater operational efficiencies and cost savings.

Called Best-Run Now, these offerings cover areas such as energy management, procurement, cash and risk management, workforce management and business planning. Rounding out the range is a business intelligence ”accelerator” and a package for reducing IT operational costs.

Office productivity

Another product for today’s cost-conscious times: IBM is pushing Lotus Symphony, its reborn office productivity suite, as a free and open source alternative to Microsoft Office.

IBM is particularly keen to win over businesses with lots of ”task users”, who perhaps do not need the sprawling functionality of Office. Unlike Lotus SmartSuite, its predecessor, Symphony is free and is based on OpenOffice, so it is compatible with Microsoft Office. IBM also released a beta version of Symphony for the Apple Mac.

Fujitsu foothold

Fujitsu may not be a household name to enterprise customers outside Japan. But that could change with Siemens’ decision to sell Fujitsu its half share in their long-running joint venture, Fujitsu Siemens Computers. Fujitsu hopes the move will gain it a bigger foothold in Europe for its high-end hardware, the latest being the Sparc Enterprise M2000, an entry-level server based on the quad-core Sparc64 VII processor, which Sun also uses. Pricing starts at $15,000 for an M2000 running Sun Solaris 10.

Audit automated

Compliance can be a real headache for IT departments. Sun claims to have the remedy in Sun Identity Compliance Manager, which seeks to automate the time-consuming tasks associated with controlling, reporting and auditing who has access to what data and applications inside an organisation. Pricing starts $75,000 plus an undisclosed small fee for each user.

Configuration automated

More on the compliance front, this time from storage giant EMC. Its Server Configuration Manager product lets IT departments automatically discover and maintain detailed server configuration data, and includes pre-packaged compliance toolkits for regulations such as Sox, Hipaa and others. Companion product, EMC Configuration Analytics Manager, turns this raw data into useful business information on compliance and IT service levels.

Offer of protection

Sprint Nextel is offering US businesses protection from network-borne threats. As well as standard services such as web filtering, antivirus and malware scanning, Sprint’s Secure Web Protection also includes web application control, so allowing business to monitor suspect peer-to-peer or instant messaging traffic. Businesses can sign up for a network-based service or a premises-based option, which uses hardware and software from Blue Coat Systems.

Google SLA extended

It’s not quite five nines reliability, but what do you expect for $50? Google has extended the service level agreement its offers to paying users of its Gmail webmail service to cover its other hosted applications – Google Calendar, Google Docs, Google Sites and Google Talk. The SLA covers businesses and organisations that sign up for Google Apps Premier Edition, which costs $50 a year for each user. If uptime falls below 99.9 per cent, extra days are credited to the account. The free version of Google Apps does not come with an SLA.

Copyright The Financial Times Limited 2008

Epicor(R) Announces Epicor 9 Redefines the Enterprise Application Software Experience

2008-11-04T03:07:00.000-08:00

Epicor(R) Announces Epicor 9 Redefines the Enterprise Application Software Experience

Next-Generation Enterprise Resource Planning Solution Featuring Epicor True SOA(TM), Uniquely Configurable Global Engines, and Far-Reaching Functionality

LAS VEGAS--(BUSINESS WIRE)--

Epicor Software Corporation (NASDAQ: EPIC), a leading provider of enterprise business software for the midmarket and divisions of Global 1000 companies, unveiled today to nearly 2,000 attendees at its annual customer conference, a unique solution for business with the launch of its next-generation enterprise resource planning (ERP) solution Epicor 9. Leveraging more than 20 years of experience designing and implementing ERP solutions, Epicor is introducing a new approach to the way ERP systems are designed, built, and used.

Expected to be generally available before the end of the year, Epicor 9 will virtually put "ERP everywhere," utilizing Web 2.0 concepts to provide users with a truly collaborative and dynamic enterprise business application experience. Epicor 9 raises technology to a level that delivers unprecedented business management and supports continuous performance improvement through real-time, in-context business insight. At the core of Epicor 9 is an adaptable and collaborative business architecture that satisfies the needs of any enterprise regardless of country, industry, or access device, enabling business anywhere -- business without barriers.

"With Epicor 9, Epicor continues its proven history of innovation with Microsoft technology by working to redefine the enterprise application software experience," said Walid Abu-Hadba, CVP, Developer & Platform Evangelism for Microsoft Corp. "We applaud Epicor for its deep utilization of the Microsoft platform to deliver its next-generation service-based business solutions. These applications offer users tremendous choice for interacting with their enterprise information - through the 2007 Microsoft(R) Office system (Office Outlook(R) 2007, Office Word 2007, and Office Excel(R) 2007), Microsoft Office SharePoint(R) Server 2007, Microsoft Office PerformancePoint Server 2007, Windows Mobile and more. We expect that the combination of Epicor and Microsoft software will enable companies to drive greater efficiencies and create new business value as users are empowered to work smarter and faster."

Business Management

With proven success in developing and delivering service-oriented enterprise applications used by thousands of companies around the world today, Epicor has converged the best of its offerings into this next-generation superset release. Encompassing the robust functionality, global footprint and industry expertise of Epicor's existing ERP suites, the release takes business management and control to the next level by extending reach, synergy, and visibility to the organization and its trading partners.

Specifically, Epicor features numerous essential embedded capabilities that manage the flow of processes right across the enterprise. This approach to core functionality, typically provided in other systems through after-the-fact integration or third party add-ons, includes customer relationship management (CRM), supplier relationship management (SRM), advanced planning and scheduling (APS), business process management (BPM), governance, risk and compliance (GRC), product configuration, field service and more. Additionally, integral support for master data management (MDM) and what Epicor terms Global Business Management lets businesses virtualize their enterprise across plants, warehouses, sites, trading partners, companies, countries, and hardware, keeping everything synchronized in real time.

Business Insight

Epicor has responded to the needs of today's businesses, who finding that it is no longer enough to respond retroactively to trends uncovered by complex business intelligence tools all too often removed from the point of decision and managed and used by a select few, are seeking better solutions.

Today's information workers require decision support in real time, and they want it deployed in the tools they already use, day in and day out. Epicor Enterprise Performance Management (EPM) removes the barriers to better business insight through a combination of intuitive enterprise search-based user experiences, user-driven key performance indicators (KPIs), role-based interactive dashboards, and pre-packaged analytics delivered in context that have real meaning to the user and add real value to the business.

Business Architecture

Epicor's breakthrough enterprise business solution has been designed for growing companies in domestic and global markets, and is built on a second-generation service-oriented architecture (SOA) which Epicor announced earlier this year, Epicor Internet Component Environment (ICE) 2.0. The backbone of Epicor's next-generation ERP solutions, Epicor ICE, fuses modern Web 2.0 technologies with Epicor True SOA(TM) to deliver an enabling business architecture that offers new levels of flexibility, usability, and agility in support of application-to-application integration and business-to-business collaboration.

What makes Epicor True SOA(TM) different is the way that all client code, as well as application business logic, is delivered as self-describing business services, offering a tremendous step forward in the creation of productive user experiences. Part of Epicor True SOA(TM) is the Epicor Everywhere(TM) Framework, a unique technology that stores all user interface attributes as XML metadata. This permits Epicor applications to run as smart clients or Web clients or on mobile devices, all from the same source code. Because it all starts from the same metadata, customization and user personalization remains intact, whatever the user interface.

Business Anywhere

The tools that people use to conduct business today have changed. Business is everywhere, business is real-time, and business is always online. Epicor understands that the Internet and ubiquitous mobility play an essential part in the daily lives of the information-hungry global economy. The world has changed and with Epicor 9, ERP has too.

Featuring a unique global engine design approach, Epicor 9 offers a comprehensive configurable ERP platform and global footprint that's ready for deployment anywhere. The initial release is expected to support over 20 languages and countries, with rapid expansion planned to the world's principle markets in more than 40 countries in the Americas, EMEA, and the Asia Pacific Rim.

Enabled by the Epicor Everywhere(TM) Framework and targeted use of modern consumer Web concepts, Epicor next-generation applications can be accessed via a range of mobile devices, such as Windows Mobile(R), Symbian, BlackBerry(R), and the Apple iPhone(TM) for wireless business. Additionally, Epicor Enterprise Performance Management (EPM) can also be deployed direct to mobile devices and includes full search capabilities to rapidly find and drill down to applicable data.

Securing IT Investments - Protect, Extend, Converge

For both existing and prospective customers, this is just the next step in Epicor's "protect, extend, and converge" strategy, enabling them to leverage the latest technology at their own pace. The next generation will expand on the Epicor solutions that customers have trusted to run and grow their businesses for many years. Because Epicor next-generation solutions are based on componentized business architecture, Epicor ICE, customers are able to leverage extended applications like Epicor Information Worker, Epicor Portal, and Epicor Service Connect today with their existing Epicor solution, enabling them to start taking advantage of service-oriented applications before they move up to the next-generation release.

Epicor 9 is the culmination of a well-defined strategy, which at the same time supports current customer investments while keeping the technology moving forward. Bruce Richardson, chief research officer of AMR Research, commented in a recent article that "getting to one brand obviously offers the potential for greater efficiencies in sales, marketing, consulting and services, and product development."(1)

Keeping Pace with Business Requirements

Epicor will empower companies to select the fundamental options that are right for their business--choosing whether to deploy on-premise, single-tenant hosted, or multi-tenant Software as a Service (SaaS), Windows-based or Web-based, centralized or decentralized, end-to-end or individual suites. Customers can also choose how to configure the application suites to best fit and improve business processes. End users can choose several options for interacting with their ERP system: using the standard application forms, through Microsoft(R) Office applications, through Internet and intranet portal pages or composite applications, using a search engine, taking RSS feeds, and from mobile devices.

"Epicor next-generation enterprise applications represent a game-changing opportunity for business," said Thomas Kelly, president and CEO of Epicor. "Epicor 9 is unparalleled because it is designed for the way people work today, is built for business, and is ready for change. Our strategy is to provide both new and existing customers with unprecedented flexibility and choice. It's about delivering business without barriers."

About Epicor Software Corporation

Epicor is a global leader dedicated to providing integrated enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM) and professional services automation (PSA) software solutions to the midmarket and divisions of Global 1000 companies. Founded in 1984, Epicor serves over 20,000 customers in more than 140 countries, providing solutions in over 30 languages. Employing innovative service-oriented architecture (SOA) and Web services technology, Epicor delivers end-to-end, industry-specific solutions for manufacturing, distribution, retail, hospitality and services that enable companies to drive increased efficiency, improve performance and build competitive advantage. Epicor solutions provide the scalability and flexibility to meet today's business challenges, while empowering enterprises for even greater success tomorrow. Epicor offers a comprehensive range of services with its solutions, providing a single point of accountability to promote rapid return on investment and low total cost of ownership. Epicor's worldwide headquarters are located in Irvine, California with offices and affiliates around the world. For more information, visit www.epicor.com.

Epicor is a registered trademark of Epicor Software Corporation. Other trademarks referenced are the property of their respective owners. The product and service offerings depicted in this document are produced by Epicor Software Corporation.

FORWARD LOOKING STATEMENTS: This document includes descriptions of product functionality that is not presently available. This press release contains certain statements which may constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding future product releases, revenues, cash flows, growth prospects, installed base of customers, the launch of Epicor 9 and other statements that are not historical fact. These forward-looking statements are based on currently available competitive, financial and economic data together with management's views and assumptions regarding future events and business performance at the time the statements are made and are subject to risks and uncertainties. Actual results may differ materially from those expressed or implied in the forward-looking statements. Such risks and uncertainties include but are not limited to changes in the demand for Epicor's products; the timely availability and market acceptance of new products and upgrades; the impact of competitive products and pricing; the discovery of undetected software errors; changes in the financial condition of Epicor's customers; and other factors discussed in Epicor's annual report on Form 10-K for the year ended December 31, 2007 and quarterly report on Form 10-Q for the quarter ended June 30, 2008. As a result of these factors the business or prospects expected by Epicor as part of this announcement may not occur. Epicor undertakes no obligation to revise or update publicly any forward-looking statements.

(1) Source: AMR Research, First Thing Monday: "Epicor 9: The Accomplishment that Eluded Microsoft and Oracle" (Sept. 8, 2008)

Source: Epicor Software Corporation

Infor extends its menu

2008-11-03T13:27:00.000-08:00

Infor extends its menu
By Geoff Nairn

Published: November 3 2008 17:13 | Last updated: November 3 2008 17:13

Infor, the US enterprise software company, has launched new software-as-a-service offerings and a novel hybrid pricing model. Infor ERP SyteLine, its ERP suite for discrete manufacturers, can now be hosted remotely by Infor for a monthly subscription of $149 for each user.

In addition, there is a hybrid ”hosted licence” option for businesses that like the traditional licence model but do not have the resources to run SyteLine on site. It costs $65 a month for each user. These new pricing options are also offered on Infor Enterprise Asset Management and Infor Expense Management.

Epicor(R) Announces Support for Microsoft(R) Cloud Services Initiatives

2008-10-31T02:33:00.000-07:00

Epicor ’s Next Generation Business Applications to Take Full Advantage of Microsoft Cloud Computing

ERP Update: Epicor, QAD, and SAP

2008-10-31T02:30:00.000-07:00

It was a busy week for Epicor. The company posted earnings, turned down a takeover bid, and became the first ERP vendor to support Microsoft’s new Azure cloud-computing system. Here’s a look at all that news, plus an update on the Epicor 9 beta program, highlights from our briefing with QAD’s CEO Pam Lopker, and insights on a new set of products from SAP.

The Shrinking Software Middle Class

2008-10-10T00:20:00.000-07:00

When Oracle acquired Primavera, it not only picked up a leading project management software firm with 5,000 customers, but it also eliminated one more application vendor from the “software middle class,” those vendors with annual revenue between $100M and $500M and valuations ranging from $500M to $1.5B. That latter category is arbitrary given the wild gyrations on Wall Street, but is a good place to start examining what’s happened to the software middle class. But first, we have to look at where it was…

Sherman, set the Wayback Machine to 1998

If we go back a decade or so, the ERP market was led by SAP and Oracle, followed by Baan, Great Plains, Intentia, JD Edwards, Lawson, MAPICS, QAD, SSA, and a host of others.

At the same time, there was a brisk best-of-breed market. PeopleSoft rode the human resources market (now renamed human capital management). Siebel capitalized on sales force automation and played a pivotal role in the expanded customer relationship management space. On the supply chain planning front, i2 Technologies and Manugistics competed for the lead, with Red Pepper determined to overtake both, while Manhattan Associates challenged a host of contenders in warehouse and transportation management.

On the product lifecycle management front, Agile Software and MatrixOne were newbies, and Dassault, PTC, and UGS were looking to move to product data management and PLM from their CAD roots. Speaking of Agile, remember when Ariba announced its plans to acquire Agile? At the time, Ariba was battling Commerce One, FreeMarkets, PurchasePro, and a host of others for the top spot in sourcing and procurement.

At the same time, Business Objects, Cognos, Hyperion, SAS, and others battled to create a market broader than their niches. Now, the first three are part of SAP, IBM, and Oracle, respectively, while privately-held SAS remains independent.

Sherman, take us back to 2008…after the elections, please

As we traveled back, were you surprised by the number of companies that have been acquired? I don’t think it’s over yet.

Look at the software middle class. Ariba is the lone large publicly traded company in sourcing, procurement, and spend management. I’ve already written about its attractiveness as a takeover target.

Once JDA completes the i2 deal, the supply chain market will consist of three middle class vendors: Manhattan, JDA, and privately-held Red Prairie. Does Oracle buy one and SAP purchases a second, a la the business intelligence and performance management market?

Who’s next in CRM? salesforce.com may be too large to buy unless Cisco, EMC, or IBM wants to make a bold bet on CRM-in-the-cloud. I don’t see it. Chordiant or RightNow (or both) may be more likely pick ups.

What about HCM? The middle class includes private-equity-owned Kronos and publicly traded SuccessFactors and Taleo as well as others. Again, does Oracle buy one and SAP another? The HCM space may be attractive to Cisco, too, as part of its plans to build out a collaboration suite that started with the WebEx buy.

What about the remaining ERP vendors? Intuit and Infor may be too big to buy, but if you look at the high cost of customer acquisition, do Oracle and SAP buy Deltek, Lawson, QAD, or any of the others for their customer bases and recurring maintenance revenue streams?

Will we move from five tiers to three or two?

If you look at today’s vendors in terms of market valuations, there are five tiers. At the upper crust are Cisco, EMC, Google, HP, IBM, Microsoft, Oracle, SAP, and others. Until the meltdown, all had market valuations north of $50B.

Well below this is a small, upper middle class of application vendors, which are limited to Dassault, Intuit, PTC, salesforce.com, and others with market caps in the $1B to $10B range. One could argue that it could include divisions of larger companies, such as AT&T’s Sterling Commerce and Siemens’ UGS, which could be active acquirers, too. Until the last seven trading days, Ariba could have been considered in this class, too. Are they predators or prey?

Slightly below this are the application vendors with valuations between $100M and $1B. These include many of the best-of-breed vendors and midsize ERP companies we’ve already discussed.

Then there is the fourth tier, consisting of dozens of companies with annual revenue in the $35M to $100M range. With a couple of exceptions, most are private, venture-backed firms, and many are struggling with elongated sales cycles, shrinking license fees, and nervous investors laser-focused on liquidity. They don’t enjoy the same recurring maintenance streams as the large vendors to help sustain product development or sales and market expansion.

At the bottom of the food chain are the smaller vendors. They may find themselves in the perpetual funding chase. You may have seen Sarah Lacy’s references to Jason Calacanis’s “Startup Depression” in her blog and in her Valley Girl column on BusinessWeek’s site. Mr. Calacanis posits that half to three-fifths of venture-backed firms will cease operations or be reduced to a skeletal crew within the next year and a half.

Real question: Where will future innovation come from?

I’m sure you can see where I’m going. My bet is that the rich will eventually buy most of the middle class, mortally wounding the viability of best of breed.

This puts more pressure on vendors in the fourth tier. Can they offer a unique enough product or service that can get them in front of potential buyers? Or, should the smart ones be positioning themselves to be bought, too? I suspect that many are thinking about the latter.

So, if the vendor universe gets sharply reduced, where will innovation come from in the future? Not from the giants that usually have to buy their way in.

The good news is that there are a lot of interesting software companies out there. Whether they can remain independent or viable is another story.

To help introduce you to some of them, we will be starting a new series, “Software Innovators from A to Z.” Look for our analysis of two new startups, Amitive and Zuora, as well as continuing coverage of vendors ranging from Accruent and Aegis to Zyme.

New at the Blog: How low can the stock market go?

We’re following the stock market sink closely at the First Thing Monday blog. Be sure to check back frequently for our updates and speculations on how low the stock slide can go.

What do you think?

Will it come down to two tiers? If so, will this slow or kill innovation? Will VCs abandon the enterprise market once and for all? What does this mean for buyers? Where is the bottom of the stock market slide? I welcome your feedback and ideas, leave a comment on our blog. As always, brichardson@amrresearch.com.

--------------------------------------------------------------------------------
© Copyright by AMR Research, Inc.

A Closer Look at Ariba’s Very Quiet Transformation

2008-10-07T00:38:00.000-07:00

A Closer Look at Ariba’s Very Quiet Transformation
Friday, October 03, 2008
Bruce Richardson

Back in the late 1990s, in the go-go days of Internet commerce, Ariba, Commerce One, and i2 Technologies were three of the most-watched stocks. Their share prices would leap and fall in dramatic fashion, as the trio competed to be the transaction and content hubs of the then red-hot world of industry trading exchanges.

Fast forward a decade. Commerce One filed for Chapter 11 bankruptcy in October 2004 and was later acquired by Perfect Commerce in February 2006. Assuming the deal gets completed, i2 will soon be part of JDA Software. As for Ariba, it has done quite well, despite the repeated attempts by Oracle and SAP to extend their ERP dominance into sourcing and procurement, supplier relationship management, and spend management.

Take your partners, please (FT.com)

2008-09-16T04:32:00.000-07:00

Take your partners, please
By Alan Cane

Published: September 16 2008 16:50 | Last updated: September 16 2008 16:50

Cost reduction has become the watchword in the information technology department and there are certainly bargains to be had as far as hardware, software and services go. However, the cheapest deal is unlikely to prove the best.

This is the view of vendors and customers alike, as the triple whammy of the credit crunch, rising energy costs and the threat of recession distorts world markets and puts the survival of some suppliers in question.

Nonetheless, the overall picture is patchy with certain market sectors enjoying exuberant growth. Alastair Sorbie, chief executive of the enterprise resource planning software vendor IFS, says he has yet to feel pressure for better deals from customers: “Contrary to the general mood of doom and gloom which hangs over the economy at the moment, some markets outside of the consumer and financial areas are doing well.

“Our customers in the oil, gas and defence manufacturing industries are booming and keen for business software which supports their operation.”

Globally, the situation is even more complex. Duncan Tait, managing director for Unisys’ Europe, Middle East and Africa (EMEA) operations, describes a two-speed market, with the MEA part of his title streaking ahead of Europe and the US: “There are three big things going on that fundamentally affect how organisations like ours take advantage of the market place.

“First, in Europe companies have neither cash nor capital to spend and this has a huge impact on the way IT companies have to sell. In the past, hardware companies have resorted to massive discounting but when customers have no upfront cash, things have to change.

“Second, input prices are going up across the economy – inflation in certain sectors is higher than broadcast and this is causing chief executives to pull hard on that big red lever in their offices titled ‘save money’. And third, citizens are worried about their personal and financial security.”

He argues that cash is moving eastwards and finding its way to African states such as Angola, as governments invest ahead of the end of the oil boom: “We are seeing substantial growth in police forces, transportation, ID cards and transborder security. Finance and cost-cutting there is not a problem because they have cash which turns up from the east, quite often from the Chinese. It’s a very different picture from the UK.”

In the west, there is substantial movement in the market with competition increasing and margins tightening: “These are tough times. It is getting difficult. There are some good deals to be had out there but you have to be smart to get them,” says Peter Stroud, managing director of Panacea, the computing services group. He suggests, as an example, that purchasers look for discounts on, say, support for desktop computers, which form a much larger part of the overall cost of a system than the hardware alone.

Scott Petty, global head of services for the IT group Dimension Data, offers another instance of smart rather than aggressive bargain-hunting: “We were looking for new software for our management platform and there were a couple of vendors who could do the job. We decided to create a win-win situation for our preferred vendor. We knew it wanted to close the order in a particular quarter and we knew that asking for a deeper discount was unlikely to work.

“So we decided to build the foundation of the platform we wanted to buy, with 75 per cent of the functionality. As we approached the end of the quarter, rather than asking for discounts, we asked for free software – software that had not been part of the negotiation but which we were keen to have. The vendor was very excited about this. Our request for new software modules was evidence of our long-term commitment to it and it was willing to give away quite a bit of software. The vendor was happy and we saved about 25 per cent on the cost.”

Most industry experts believe that establishing long-term relationships between suppliers and supplied are more important than simply forcing down the price, especially when the business environment is unstable. David Elton of PA Consulting Group says there are more influential factors affecting the price of hardware and software than a particular point in the economic cycle, pointing out that the price of hardware continues to come down and the availability of open source software offers alternatives at a lower initial price: “which doesn’t mean it is not a good time to have a negotiation or a conversation with a supplier about factors which affect the total cost of ownership”, he says.

“I don’t think we’ve been in a faster-moving situation for a decade or more. Given this rate of change, most of the clients I’m working with are exercising extreme caution. What they are looking for is value from the relationship.

“So a conversation around ‘How much can you take off the price?’ will not go very far because the supplier is not interested in it. A conversation around ‘What can we do to benchmark the price in years two and five of the agreement’, say, allows the customer to have some confidence that they are going to get good value right through the agreement and it gives the supplier the opportunity to say ‘I’ve got the potential for a five-year engagement here and that is worth quite a lot to me’ – particularly when you consider the costs of winning some of these deals.”

Customers such as Jos Creese, head of IT for Hampshire county council in the UK, who spends £30m a year on hardware and software with companies including IBM, Microsoft and SAP is concerned that as competition increases and margins tighten, some suppliers will be in trouble – and that could adversely affect their customers: “I think we are going to see quite a lot of shake-out in the market place.

“A number of niche suppliers will struggle. There will be good deals to be had but buyers should be wary because some of those deals could be built on sand. Customers want to work with suppliers in which they have confidence to survive the downturn.”

He said most suppliers are locked into a business model which is rapidly becoming obsolete: “As the industry wakes up to the fact that value in IT does not come from the acquisition of the product, but from its application in the business, so you need a longer term relationship with suppliers that helps you to carry out that exploitation.

“That requires different thinking around the contracts, a different business model from the suppliers and a different approach to risk management because, if you are going to build in that kind of flexibility then the standard, ‘We have a product, it costs this much, we will charge this much and we will make our money over 18 months,’ no longer works because you have to be able to flex and respond to the unexpected – to new competitors, for example, or customers who want to use your product in a different way.”

Mr Creese said he was increasingly looking for relationships with vendors based on a standard catalogue of products and prices but incorporating an ability to respond to unpredictable change to ensure that the organisation remains competitive – in the “top quartile” of IT users.

But according to Mark Nutt of the strategy experts Morse Group, many businesses are wasting money on a grand scale by inept purchasing behaviour. The problem, he explains, is that individual departments frequently buy equipment and services on an ad hoc basis, without looking to see what the rest of the organisation already has.

“To address this challenge,” he says, “businesses need to eradicate the old siloed buying approach and instead implement centralised purchasing through the IT department. By bringing purchasing back under the control of the IT department, businesses can better prepare when approaching vendors to get the best price.”

In the end, however, if cost reduction is the watchword, then value from IT must be the rallying cry and this is difficult to factor into vendor negotiations.

Mr Elton of PA says: “I think there are miles to go before businesses really get the value that they are looking for from IT. It is more about the people and the change you are seeking to achieve in the business that drives the value, rather than the IT itself.”
Copyright The Financial Times Limited 2008

One on One With the CEOs of Business Objects and Epicor | AMR Research

2008-09-10T02:45:00.000-07:00

One on One With the CEOs of Business Objects and Epicor | AMR Research

One on One With the CEOs of Business Objects and Epicor
by Bruce Richardson

I recently spent a few days traversing the Golden State of California. While there, I met with the CEOs of Business Objects, E2open, Epicor, and Intellicorp as well as executives from four other interesting software and technology firms. Because of time and space limitations, our analysis will be distributed over the next few weeks.

During the meeting with Business Objects’ John Schwarz, my first question was: “What’s it like to be part of SAP?” My last question was a request for a sneak preview of his product plans for the next 12 months. You can read his answers and get all of our analysis at the First Thing Monday blog: Life With SAP: My Conversation With Business Object’s John Schwarz.

As for Epicor, this was my first meeting with Tom Kelly. He was named president and CEO of this midsize ERP vendor last February. Our meeting focused primarily on the impending release of Epicor 9. In my view, his company has done what Microsoft and Oracle once dreamed of: melding the best of their multiple offerings into a single, brand-new code base. For a closer look, we have the full story on our blog: Epicor 9: The Accomplishment That Eluded Microsoft and Oracle.

One on One With the CEOs of Business Objects and Epicor | AMR Research

2008-09-10T02:44:00.000-07:00

Infosys to Acquire Axon Global: Combined SAP Practice Will Be in Top Five | AMR Research

2008-08-30T00:19:00.000-07:00

Infosys to Acquire Axon Global: Combined SAP Practice Will Be in Top Five | AMR Research

Infosys got the jump this week on potentially becoming the first Indian tech company to join the ranks of global ERP consultancies. Upon the acquisition of Axon Global, which would close in November, Infosys will become a top 10 ERP service provider and a top 5 SAP consultant and integrator. If the two companies can reach agreement on the right branding, go-to-market strategy, and delivery structure, they will be well positioned to compete with top global ERP players IBM, Accenture, Capgemini, and Deloitte.

Awakening a Sleeping Giant: Inside Microsoft Business Solutions’ ERP Strategy | AMR Research

2008-08-22T00:37:00.000-07:00

Awakening a Sleeping Giant: Inside Microsoft Business Solutions’ ERP Strategy | AMR Research

Awakening a Sleeping Giant: Inside Microsoft Business Solutions’ ERP Strategy
Friday, August 22, 2008
Simon Jacobson, Miles Prescott

Today's brave new world of value chains and multi-enterprise collaboration is impacting how midsize organizations choose and leverage business applications. With IT budgets primed for growth and expansion, a perfect storm is brewing for Microsoft to capitalize on this opportunity with its technologies and Dynamics ERP product family. In this Report, AMR Research reviews the current progress of Microsoft Business Solutions’ products and partners as well as what’s necessary for the company to increase its market share in the ERP segment.

SAP Enterprise Support Contracts: Counting the Real Costs | AMR Research

2008-08-02T00:41:00.000-07:00

SAP Enterprise Support Contracts: Counting the Real Costs | AMR Research

SAP Enterprise Support Contracts: Counting the Real Costs
Saturday, August 02, 2008
Derek Prior, Jim Shepherd

To a chorus of disapproval, SAP unveiled on July 16 that all existing customers will have to pay more for their maintenance and support contracts. But what impact will SAP Enterprise Support really have on loyal SAP customers?

FT.com / Technology / Digital Business - Adding IT to the SME toolkit

2008-07-08T02:47:00.000-07:00

FT.com / Technology / Digital Business - Adding IT to the SME toolkit

Adding IT to the SME toolkit
By Alan Cane

Published: July 8 2008 16:33 | Last updated: July 8 2008 16:33

The past few years have seen a marked change in the marketing of software and services. Vendors such as SAP and Oracle, which had previously confined their attention to the giants of the business world, have begun to court small and medium-sized enterprises (SMEs) with a cornucopia of new products.

“So many companies that have traditionally focused on large enterprises are now going into the SME market. It is amazing. Everything is about SMEs,” says Joslyn Faust, principal analyst specialising in the SME market for Gartner, the consultancy.

But, she warns, it is not necessarily to everyone’s benefit. “Many of these vendors do not understand that it is a totally different business model. Service, support and pricing are all very different. The products need to be very simple and they all need to work together. SMEs are worried that the IT they are offered will prove to be too complicated, too costly or that the vendor will consider them too small for proper support,” she says.

Buying consumer-grade technology is one answer for very small firms.

Eilert Hanoa, chief executive of Mamut, a European provider of integrated software and internet services for SMEs, shares Ms Faust’s concerns: “There is a misconception within the SME sector that technology is expensive and that it is a luxury a small business cannot afford. Most SMEs have few people to turn to for technology advice and this has led to an abundance of fear, uncertainty and doubt when buying IT.

“This sorry state of affairs has been compounded, and in some cases encouraged, by an IT sector that has done the SME sector a disservice by downsizing enterprise applications for the SME market without addressing their need for less complexity.”

SAP, however, one of the world’s largest software groups, has seen a significant change in its mix of customers over the past 10 to 20 years. At one time it was a provider of enterprise resource planning (ERP) software only to large corporates, it now estimates that 70 per cent of its customers – about 35,000 globally – are SMEs.

Simon Etherington, head of the SME division for SAP in the UK, says the sector is covered by a three-product family: Business One, an out-of-the-box business management system for companies with less than £30m-£40m in turnover; Business by Design for larger groups; and Business-all-in-One for vertical industries. These products are generally marketed to customers via channel partners who can offer technical help and business advice.

Are there any companies too small for an SAP offering? “If there are, we haven’t found them yet,” says Mr Etherington.

But he warns that IT is no magic bullet. The customer, he says, must have a clear vision of what it wants to do, where it wants to go and how it thinks IT can support its objectives.

He says that SMEs may have an advantage because they see their business processes – essentially what the business does – more clearly than bigger enterprises. And any IT investment must be treated as a business project rather than an IT initiative, he counsels.

Dawn Baker, head of marketing for the small business division of Sage, the UK accounting software group, concurs: “Small businesses have to make monthly decisions based on cash flow. So an owner may be faced with the dilemma of whether to take £100 ($197) extra as a bonus or use it to buy a piece of software.

“Another option, especially for businesses at the upper end of the SME sector is to look into hosted versus on-premises software solutions, as this might provide a higher degree of flexibility with less up-front investment. Either way, any investment in IT should be linked to a business plan.”

Big-ticket technologies such as ERP are not alone in being reconfigured to fit a smaller customer. Virtualisation – running a number of operating systems and application packages on the same server – is becoming increasingly attractive to small companies, not simply because of savings on the cost of servers but because of disaster recovery and business continuity.

Martin Niemer of VMware, a leading vendor of virtualisation software, says that companies with only four or five servers and fewer than a dozen staff are virtualising their servers as a protection against downtime, “which could cost them a huge amount of money”.

Typically, VMware consolidates applications from 10 machines on to a single server. The latest servers can run as many as 30 virtual machines.

So how do we define an SME or SMB (small and medium-sized business)? Definitions vary geographically. In Europe, a small company might have 10-49 employees and a medium-sized one, 50-250. In some regions, 5,000 people might still constitute a medium-sized company.

Smaller concerns are generally seen as more flexible and agile than their larger competitors. Simon Devonshire, head of SME marketing for O2, the mobile operator, says small businesses are typically quicker to adopt new technologies than large corporates.

“This is largely the consequence of a difference in the attitude towards technology in small versus larger businesses. In large corporations, new technologies such as the latest handheld mobile device and laptops are often viewed as a privilege, restricted to senior management.

“Small businesses are more likely to recognise the business benefit that a new technology will bring as opposed to seeing it as a status symbol.”

Again, the technology cannot be deployed unthinkingly.

Michel Robert, managing director of the European hosting group Claranet warns that SMEs must be sure their investments will move the business on. “Most SMEs don’t care if the technology is the newest or the fanciest or the quickest. They care about reliability and about whether it will take them in the right direction. SMEs cannot afford to experiment and get it wrong.”

He points to the dangers of growing complexity, which SMEs may be ill-prepared to deal with. He recommends outsourcing the bread-and-butter operations: “This will allow you to focus the technical resources you have on the future and on innovation and on aligning IT with the business.”

The impact of the internet on SMEs has been particularly strong. While a couple of decades ago, an SME might be considering what accounting package to buy, today it is chiefly concerned with connectivity.

Chris Stening of Easynet, part of the BSkyB group, says the company has seen an exponential demand for broadband from SMEs driven by e-mail, web traffic and online applications.

“The internet has changed the way small businesses think about themselves,” he says.

A company can use a cleverly designed website to make it seem larger than it really is: equally, a failed internet connection can quickly cost a small company more than it can afford.

A survey carried out among UK SMEs by Quocirca, the consultancy, for Easynet Connect, the company’s SME network, says connection has become vital for many: “While a quarter of companies could work for days with no internet connection, most companies require failures to be fixed inside a day. For one in four, time to fix is even tighter at less than an hour and for some no break is acceptable.

“In such critical situations, a second redundant connection has to be worth considering,” Quocirca recommends. The survey shows that from a simple web presence and e-mail, SMEs are selling online, using internet protocol telephony and networked video. Almost half use the network for remote back-up and disaster recovery.

Are there simple guidelines that SMEs should follow in their adoption of IT? Joslyn Faust of Gartner suggests that potential buyers should not focus on price too strongly. “Free or almost free does not mean stress-free,” she says, adding that new additions must work with existing equipment if the company is not to have problems as it grows.

She also says it is important to make sure that the vendor understands the customer’s business. “Too many do not understand these vertical markets, which leads to frustration for their customers as they get up to speed.”

There are heartening signs, she says, that vendors are working towards the idea of “one-stop shopping” for SMEs. “That is what SMEs have always wanted but what they have not been able to have because of the state of the market. It takes a few years for vendors to get it right.”
Copyright The Financial Times Limited 2008

FT.com / Technology / Digital Business - How should organisations react to social networking tools? Embrace them, ban them, or …?

2008-06-24T04:07:00.000-07:00

FT.com / Technology / Digital Business - How should organisations react to social networking tools? Embrace them, ban them, or …?

How should organisations react to social networking tools? Embrace them, ban them, or …?
By Dick Eve, Change Portfolio Director, for Atkins Group

Published: June 23 2008 14:02 | Last updated: June 23 2008 14:02

A truck driver approaches a bridge that has a weight limit of 5,000kg. He and his truck weigh 4,950kg so he would be able to cross it were it not for his 100kg cargo; a flock of pigeons loose in the back of the truck. He has the bright idea of banging on the side of the truck to scare all the birds into taking flight and then he quickly drives across the bridge. Does it work?

After long debate in the New Scientist one reader said: “The practical engineer’s answer is yes, of course the driver could cross! The surplus weight of 50kg translates to a 1 per cent excess over the bridge’s specified load maximum. An additional impulse force due to the truck bumping over a small stone in the road would be much greater than this 1 per cent, and any civil engineer who designs a structure of any sort with a safety margin anywhere near as small as 1 per cent deserves all the professional liability lawsuits he or she gets.”

Why do I raise this? Because it describes nicely two things about engineers: they are practical and they are (or have to be) risk averse. We are the UK’s largest engineering consultancy, and are involved in some of the world’s most high profile building, infrastructure and transport projects. The culture engendered by this – by taking on board every possible eventuality to ensure the products of our endeavours stand the test of time – inevitably puts safety and risk aversion at the heart of what we do.

What has that got to do with social networking? Well, the adoption (or not) of any software technology is more about the culture of the business than the technology itself. You cannot introduce new technology alone and expect it to be successfully adopted in any business, especially one that is resistant to change and risks.

As an example, Microsoft’s Communicator can be installed on everyone’s computer but without education and a business change programme this generates many mixed views, ranging from “I don’t know anything about it” through, “I already get too much e-mail – I am not using that too!” to users like myself who really embrace it. So I use this for communication with a small community of like-minded individuals but not the whole network. This is strengthening strong ties within my network. The next question is how far should that network extend, should I be allowed to communicate with customers or partners or should communication be restricted to internal users only?

So why would a business restrict this powerful tool to being an internal capability when more and more business is done with one or many partners?

It is probably the uncertainty of the outcome. Could it have a negative effect on the business either through someone spending all day chatting with their personal partner rather than their business partner? Maybe the risk of litigation when someone commits something to their business partner they shouldn’t. Written documents are much more formal: they are reviewed, rewritten and are clear records of events; conversations are transient and normally decisions are confirmed in writing. Social networking today sits in between. There is no real audit. What about records management? Decisions could be made with no record.

Of course, Communicator is just the tip of the iceberg. If we consider a wider range of social networking software (SNS) such as Facebook or MySpace, where I can publish a wide variety of information about my background, interests, skills and activities, there is an opportunity for even more abuse. Innocent or otherwise, the lack of regulation regarding such content could have legal ramifications. So maybe the risk outweighs the benefits.

But there seems to be evidence that weak ties and bridges between networks are increasingly important for innovation and knowledge sharing. A social networking approach can really help to develop these weak ties which will bridge the strong networks and spawn new innovations and approaches.

Our business works largely on the strong networks built over years. If you need advice or a resource you can call on a contact you worked with several years ago and be confident they will share their experience to your advantage. But are we missing a trick here? We will always get the same answers – can we use the weak ties and maybe get some new ideas and innovations, maybe SNS is a quick way to involve the new upcoming stars and help them shape the business.

And last but not least, doesn’t the next generation expect to use these tools in work as well as at home? There will come a day when new stars will not join dinosaurs who don’t offer these techniques.

So, when the business is ready and the culture is right, businesses will have to embrace social networking. Yes, of course we need to be prudent and put in the checks and balances for protection. Social Networking Solutions are now available that have been hybridised for business use which should take some of the pain away but when we do embrace it, let’s not get paranoid; too much restriction will stifle the advantages it can deliver.
Copyright The Financial Times Limited 2008

Can NetSuite Surge While SAP Decelerates?

2008-06-13T13:19:00.000-07:00

NetSuite executives stopped by our offices a few days ago to brief us on the new NetSuite for Manufacturers product. This release adds new functionality for product assembly, inventory management, bill of materials, and work orders. While not going deep into manufacturing operations or planning, it is a logical extension to the platform offered for wholesalers and distributors that also do some final assembly or kitting.

During our briefing, NetSuite executives made it clear that they were going to be more aggressive in the positioning against SAP Business ByDesign, a competing software-as-a-service (SaaS) product that also features applications for manufacturing, finance, and customer management. Earlier this year, SAP said it would "reduce its accelerated investments around SAP Business ByDesign in 2008." While SAP is still selling the product, it has tempered its plans to sell to 10,000 new customers annually. This won't happen until 2010 or so.

If you looked at the NetSuite press release, there was little subtlety: The headline read: "NetSuite Enters SAP's Core Market," a reference to the fact that most of SAP's 47,800 ERP customers are manufacturers. In the first paragraph, there were references to NetSuite's plans "to exploit the prolonged delay" of the competitor's products. The theme also carried over to the company's website: "NetSuite Takes on SAP with Manufacturing Solutions."

Smart to provoke Goliath?

While I was surprised by the boldness of the headline, press release, and website, I think this is a smart bit of positioning if NetSuite's marketing people can get the press to bite. Essentially, NetSuite wants to turn the broader SaaS application space into a two-horse race. If it is successful, any article on SAP Business ByDesign should also include an update on or quote from NetSuite. Marc Benioff did this brilliantly when he turned any CRM coverage into a Siebel versus salesforce.com debate.

Iâ€™ll bet at least one of my colleagues and several of our competitors will dismiss NetSuite's move as a gimmick. That argument is too simplistic.

Look at some of the company's recent moves. In early June, NetSuite made its first acquisition with the purchase of OpenAir for $26M in cash. OpenAir develops SaaS software for professional services automation and project portfolio management for project and time-based firms such as professional services, consulting, legal, accounting, and government contracting. OpenAir's 300 customers bring NetSuite's professional services base over the 1,000 customer mark.

OpenAir adds another entry point to new customers

This acquisition gives NetSuite a broader footprint as well as a new entry point. Like the SAP Business ByDesign team, NetSuite customers always start with a single pain point: financials, CRM, or e-commerce. Using the classic land-and-expand strategy, NetSuite will add more seats and modules in the next 12 months as customers come to see the benefits from having a single integrated system and set of dashboards as opposed to operating a spider's web of piece parts.

In April, the company launched NetSuite OneWorld, which allows customers to consolidate all global financial and customer data on a single platform. This includes support for all things multi, such as multicurrency financial consolidation, quotas, and forecasts; multilanguage; multicountry; and multibrand websites.

Ecosystem expands to 60 third-party applications and 21 industries/micro-verticals

In February, NetSuite introduced NS-BOS (NetSuite-Business Operating System), its unique entry into the platform-as-a-service market. In just four months, more than 1,000 software companies have inquired about building software on top of the NetSuite platform or creating their own micro-vertical systems based on NetSuite. To date, there are 60 third-party applications, including 4 unveiled as part of the NetSuite for Manufacturers launch.

More impressive has been the company's success in attracting third parties interested in using NetSuite's whole product line to create their own industry-specific systems. So far, developers have begun offering software across 15 sectors, including agriculture equipment dealerships, commercial floor cleaning, deep seaport marinas, government contractors, insurance, and pharmaceutical distribution.

For its part, NetSuite is targeting six core verticals that it plans to tackle on its own. These include software firms, wholesalers and distributors, services companies, IT value-added resellers (VARs), media and publishing entities, and e-commerce providers. This is a different approach from SAP which has vowed to stick with a vanilla solution - no customization, no vertical versions - at least for the near term.

Next target: HCM? SAP integration?

On the competitive front, Plexus Systems has successfully sold SaaS into hardcore discrete manufacturing sites for awhile, particularly in automotive, A&D, and other industrial firms. Lately, its success in these environments has pulled it into adjacent manufacturing environments such as food and beverage and medical device. While other vendors are fine-tuning their SaaS models, Plexus Systems has truly capitalized on SaaS ERP, leading with manufacturing execution and quality management modules and then extending that footprint into more traditional ERP functionality, including financials and HR. For its part, I'm not sure NetSuite will go much deeper than light manufacturing.

As for SAP, if you look at the SAP Business ByDesign product map, there are eight wedges in the diagram: financials, compliance, supplier relationship management, project management, supply chain management, executive management, CRM, and human capital management (HCM). Looking at the SAP wheel, NetSuite's moves would eliminate the need for most, if not all, of supply chain management and supplier management. That leaves HCM as the one major obvious gap between NetSuite and SAP. Thatâ€™s the next likely acquisition or partner area.

While SAP has made it clear that it does not intend to sell SAP Business ByDesign back into its high-end base, that might make an interesting market for NetSuite. Can it position its products as a replacement for some of the aging MRP II, ERP, and/or CRM applications at smaller plants, distribution sites, or sales offices? While it would likely result in expensive and often futile sales cycles, it is intriguing nonetheless. Companies like Cast Iron Systems already provide integration appliances that link SaaS vendors like salesforce.com to SAP backbones.

Will NetSuite get to 10,000 SaaS customers before SAP?

Right now, NetSuite has about 6,000 customers, compared to just over 150 for SAP Business ByDesign. On the other hand, it is far smaller than its rival. The company expects 2008 revenue to be in the range of $156M to $159M. This compares to analyst estimates of $18.81B for SAP (source: my.yahoo).

NetSuite should get to 10,000 SaaS customers first. Given that it added 430 new customers in 4Q07 and another 400 in 1Q08, it could take two or more years to get there. SAP has opened a window, but it's unclear how long NetSuite will benefit from the breeze.

What do you think? Are manufacturers ready for SaaS, or should NetSuite focus exclusively on service industries? Is the comparison to SAP a smart marketing tactic or just a gimmick? Will NetSuite make it to 10,000 customers, or will Oracle acquire it before Zach Nelson gets his company there?

As always, I welcome your feedback and ideas. You can comment on my blogâ€”firsthingmonday.netâ€”or contact me at brichardson@amrresearch.com.

FT.com / Lex / Technology, media & telecoms - Slowdown at SAP

2008-05-01T03:28:00.000-07:00

FT.com / Lex / Technology, media & telecoms - Slowdown at SAP

Slowdown at SAP
Published: April 30 2008 09:38 | Last updated: April 30 2008 19:22

The prospect of implementing an SAP program for the first time tends to bring managers out in a sweat. Investors anticipating the software company’s results have learnt to feel the same way. On Wednesday SAP shares dropped 3 per cent after its first-quarter numbers missed expectations.

Sales of new licences, which contribute about half of sales, were weak. Because these should generate follow-up maintenance contracts, they are a good signal about future growth. The Americas were particularly weak: excluding the impact of recently acquired Business Objects, licence sales fell almost 10 per cent year on year. An exceptional first-quarter performance in 2007 does offer some mitigation but a tougher market fits the darkening picture painted by US competitor Oracle at the end of March. It is taking longer for software customers to sign contracts and deal sizes are down.

SAP has stuck confidently to full-year guidance for overall sales growth (excluding Business Objects) of 12 per cent to 14 per cent. With the first quarter at the bottom of the range, that looks optimistic. SAP sells software with claimed strategic benefits for businesses, which provides some protection from the cycle. But, if the economic outlook worsens, SAP will feel the impact of sweeping cuts to capital expenditure budgets.

The group has another problem in that it still largely relies on selling software to big companies. SAP is targeting smaller businesses with its first foray into an online, on-demand service called Business ByDesign. But the move is proving harder than expected. SAP had hoped to have 10,000 mid-market customers by 2010 but it is, by its own admission, 12 to 18 months behind target. The roll-out has been reduced to just six countries this year. It makes sense to proceed slowly in order to get the product right but continued difficulties in this competitive segment will raise concerns over SAP’s long-term growth prospects.

Post and read comments on this Lex
Copyright The Financial Times Limited 2008

FT.com / Companies / IT - SAP delays software rollout

2008-05-01T02:30:00.000-07:00

FT.com / Companies / IT - SAP delays software rollout

SAP delays software rollout
By Maija Palmer

Published: April 30 2008 10:08 | Last updated: April 30 2008 18:22

SAP on Wednesday delayed the roll-out of its new online software for medium-sized businesses – a crucial part of its growth plans – and reported a steep fall in first-quarter profits.

The German group had hoped to generate €1bn from supplying its internet-based Business ByDesign software to 10,000 small to medium-sized customers by 2010. However, it said that it would take 12-18 months longer than expected to reach this target.

Business ByDesign is the company’s first foray into web-hosted software for the mid-market. Companies such as SAP and IBM are trying to cater for smaller customers as orders from big enterprises slow. The small business IT market is estimated to be worth about $400bn, but potential suppliers face stiff competition from entrenched competitors such as Microsoft.

Henning Kagermann, chief executive, said SAP was slowing down the roll-out as it looked for ways to reduce the cost of running the internet services. “We need to automate the running of the services, otherwise the cost base will be too high and the profit will not be good enough,” he said.

Mr Kagermann has promised that margins from the internet business will be the same as those of SAP’s other businesses. “I want to prove to the market that this way of selling software will not lead to a margin decline.”

While the company looks for ways to cut running costs, it will limit roll-out of Business ByDesign to just six countries and fewer than 1,000 customers.

SAP missed analysts’ estimates for its results for the three months to the end of March, reporting a 15 per cent increase in software and services revenues to €1.74bn, against expectations of around €1.8bn.

The weak results echo a disappointing performance by US rival Oracle last month, and compound fears that the software market may be slowing in the uncertain economic climate.

Mr Kagermann said the US remained a tough market, with customers spending less on software deals. He saw no signs of a slowdown spreading to Europe.

US sales, which account for a quarter of revenues, fell by 1 per cent, while European sales, which account for half of SAP’s business, rose 22 per cent.

Total revenues were €2.46bn ($3.8bn), up 14 per cent from a year ago. But net income fell 22 per cent to €242m, as SAP was hit by €130m in charges related to its acquisition of Business Objects last year, and a €40m investment in the Business ByDesign service.

Earnings per share fell 19 per cent to €0.21.

SAP reiterated forecasts that software and services revenues would grow 24 to 27 per cent at constant currencies this year, and said operating margins, excluding costs related to Business Objects, would be higher than expected because it was cutting back investment in Business ByDesign.
Copyright The Financial Times Limited 2008

SAP Sets Virtualization Coalition - Data Center Central

2008-04-18T13:59:00.000-07:00

SAP Sets Virtualization Coalition - Data Center Central

Major software and hardware vendors are starting to work together, hoping to overcome some of the disconnects that arise between the two worlds during times of rapid technological change.

SAP has begun taking steps to forge a coalition to smooth out some of the rough edges of virtualization. The company has gathered the likes of AMD, Intel, HP, Sun, EMC, Cisco, Citrix, VMware and NetApp, as well as Linux providers Novel and Red Hat, to enhance process-driven virtualization platforms for business users.

The group is part of the Enterprise Services Community, a worldwide organization designed to help vendors and users overcome issues surrounding the development and deployment of business productivity software.

One key goal of the group is to help business-process professionals design their own processes to run in virtualized environments using standard modeling techniques regardless of their knowledge of virtualized environments.

FT.com / Companies / IT - US fears weigh on Sage shares

2008-04-15T03:21:00.000-07:00

FT.com / Companies / IT - US fears weigh on Sage shares

US fears weigh on Sage shares
By Tim Bradshaw

Published: April 15 2008 03:00 | Last updated: April 15 2008 03:00

Sage shares fell yesterday despite the software group stating that first-half results would be in line with market expectations.

Analysts' average expectations estimate sales for the six months to March 31 will be £617m, with earnings before interest, tax and amortisation of £145m.

Sage shares fell 6.1p to 192.4p, partly because of concerns about the prospects for a recovery in its US healthcare business and fears that a slowing US economy will hold back IT spending.

But analysts at Merrill Lynch said the "in-line" statement was encouraging given weaker results from Intuit, Sage's US rival, in February. About 70 per cent of Sage's revenues are classified as recurring, which analysts said should provide some insulation from broader economic fluctuations. Tim Bradshaw
Copyright The Financial Times Limited 2008

New Leadership for SAP Reinforces Strategy Shift

2008-04-04T00:59:00.000-07:00

New Leadership for SAP Reinforces Strategy Shift

The appointment of Leo Apotheker to co-CEO marks the leadership transition of the world's largest application vendor. This, plus other board changes, will accelerate SAP's shift to a parallel, multiproduct strategy.

FT.com / Companies / IT - Oracle says customers delaying spending

2008-03-27T06:27:00.000-07:00

FT.com / Companies / IT - Oracle says customers delaying spending

Oracle says customers delaying spending
By Richard Waters in San Francisco

Published: March 26 2008 22:42 | Last updated: March 26 2008 22:42

Oracle on Wednesday said some corporate customers had delayed their spending on new software in recent weeks, triggering a 7 per cent fall in its shares in after-market trading as Wall Street suffered another bout of nerves about a wider slowdown in technology demand.

However, company executives also said the pipeline of potential new business entering the all-important fourth quarter of the company’s fiscal year was much stronger than usual at this stage.

Also, stronger profit margins enabled the database software maker to hit earnings forecasts in its latest quarter, with net income rising 30 per cent to $1.3bn, or 26 cents a share.

Most big technology companies do not report earnings for another month, making Oracle’s figures a closely watched barometer of broader IT demand.

The spending delays that took hold in February, at the end of Oracle’s third fiscal quarter, left the company’s revenue growth for the quarter at 15 per cent after stripping out the effects of the falling US dollar, slower than the 17 per cent growth Wall Street had been expecting on this basis. Including currency changes, Oracle reported revenues of $5.3bn, up 21 per cent from a year before, helped partly by acquisitions.

”Customers got a little more cautious in the light of what’s happening in the financial markets,” said Safra Catz, Oracle’s co-president. “We just saw a few things get delayed a little bit.” Some customers added “a second level of approval” before signing off on purchases, slowing buying decisions, she added.

The shortfall was particularly marked in Oracle’s application software business, where it has mounted a series of acquisitions to compete more aggressively against German rival SAP. Sales of new application software licences grew only 2 per cent in constant currency terms, to $415m, or some $100m short of Wall Street forecasts.

Ms Catz said Oracle had seen “a massive increase in the pipeline” of potential new business for the fourth quarter, which represents a disproportionate share of its total annual sales. On the basis of the greater caution shown recently by customers, Charles Phillips, co-president, said Oracle was assuming that the proportion of these potential deals that are completed in the current quarter would be five percentage points lower than normal.

Despite that more conservative expectation, Oracle said it expected revenues to grow between 10-20 per cent in the current quarter, with pro forma earnings per share up 14-18 per cent. “The could be some upside – quite a lot of upside – to the guidance, but we want to be cautious,” said Ms Catz.
Copyright The Financial Times Limited 2008

Of Terabytes, March Madness, and Network Performance

2008-03-21T04:34:00.000-07:00

Terabytes, March Madness, and Network Performance
Friday, March 21, 2008
Bruce Richardson

If you haven’t had a chance yet, read Derek Prior’s recently published piece on “The ERP Terabyte Club.” The only requirement for membership is to have an ERP production database with at least a trillion bytes.

For his research, Derek surveyed 67 SAP customers in conjunction with the American SAP User Group (ASUG). Their average databases were 3.7TB and growing by 10 to 100 gigabytes per month. The largest ERP production database uncovered was 18TB.

Many of the survey respondents are running large, single global instances of SAP and supporting up to 11,120 logged-on ERP users. The dependence on the global instance puts increasing pressure on IT to reduce the planned downtime windows needed for emergency fixes, problem resolution, upgrades, and enhancements.

Reading his research gave me a great sense of déjà vu. In the early days of ERP, clients would often call us for help on sizing up the computing power and storage needed to run their brand new applications. Sadly, this usually happened after they had already purchased the hardware. This issue went away as vendors and integrators gained more experience with the new software.

The issue surfaced again when SAP introduced SAP BW, its business information warehouse, in 1998. Early adopters called again, asking for assistance in sizing the processing power and database needed to effectively run BW.

Databases growing like kudzu

Until I read Derek’s piece, I had assumed there were no additional issues. Not true. It turns out Lora Cecere has been talking about this with our consumer goods clients over the past few years. She had been warning them that they needed to rethink their database strategies as they began pulling global order line-item data into their SAP systems.

Her concern was verified by a quick discussion with IBM executives that described a current customer project where the company is testing SAP NetWeaver and SAP BW sitting on top of a very large DB2 implementation. We will provide the details as soon as IBM obtains its customer’s permission.

The IBM team also warned that database sizing concerns are not limited to consumer goods companies, with consumer electronics and telecommunications companies facing similar issues. If you look at several of the large cell phone companies offering games, music, ring tones, television programs, movies, sports, and other content and services, these transactions are also being stored in SAP. It doesn’t take long before the production database exceeds 30TB to 35TB.

Affecting the network too?

When talking to one CIO about Derek’s research, he asked if other companies were having network problems too. He was concerned about running out of capacity. Ironically, his question came on the same day that The Boston Globe ran the story “Analysts Predict Internet Congestion.” One professor said that digital traffic is growing 50% a year, which is no doubt aided by YouTube and other multimedia applications. As a result, firms are predicting that demand will exceed network capacity by 2011.

But we may not have to wait three years. According to SiliconValley.com, the annual March Madness college basketball tournament may drive network performance down to dial-up levels as employees watch video clips or entire games on their PCs. While I don’t plan to watch any streaming video (my alma mater didn’t even make the NIT), I did find it curious that CBSSports.com automatically linked my picks to my Facebook account.

Join us April 2nd for our first SAP Terabyte Club webcast

I have asked Derek Prior to join me in Boston on Wednesday, April 2, at 11:00 a.m. EDT, for our first webcast focused exclusively on managing large production ERP databases. During the call, Derek will share findings from the study, provide insights on what it means for CIOs and SAP Basis administrators, and explain how SAP Solution Manager might help address part of your concerns. You can register here.

In the meantime, do you share my concerns? Is your database spreading like kudzu? Are you seeing a causal relationship between growing databases and network performance? Will more widespread adoption of business intelligence and performance management software have any affect on the size of your database or your attempts to manage it? Finally, who do you have winning the NCAA tournament?

As always, I welcome your ideas and comments—brichardson@amrresearch.com.

--------------------------------------------------------------------------------
© Copyright by AMR Research, Inc.

What’s new: SAP woos mid-sized enterprises

2008-03-19T01:27:00.000-07:00

What’s new: SAP woos mid-sized enterprises
By Geoff Nairn

Published: March 19 2008 00:28 | Last updated: March 19 2008 00:28

SAP hopes to woo mid-sized businesses with a range of pre-configured solutions that combine Intel-based hardware with a range of software.

The software includes Novell’s Suse Linux Enterprise operating system, SAP’s MaxDB database and its Business All-in-One enterprise suite.

The aim is to drive down the total cost of ownership of SAP software, which has traditionally had a pricey reputation among SMEs.

SAP's Enhanced GRC Offerings Expand Integration Options

2008-03-18T03:00:00.000-07:00

SAP's Enhanced GRC Offerings Expand Integration Options

SAP's governance, risk and compliance offerings align to financial, supply chain, and environmental safety and health functions. New releases of these offerings enhance integration but an overarching GRC platform awaits.

Convergence 2008: Microsoft Is Serious About Business Applications | AMR Research

2008-03-15T05:25:00.000-07:00

Convergence 2008: Microsoft Is Serious About Business Applications | AMR Research

Productivity, adaptability, and innovation took center stage at Microsoft Business Solutions’ (MBS) annual Convergence conference this year. The keynotes from executives as well as the common usability and extensibility showcased across the products signaled Microsoft’s commitments to the business applications market and moving forward with all four ERP products, as well as a long-term commitment to software plus services. It also showed a company with a vision: supporting a diverse set of customer shapes and sizes with a blend of hosted services and on-premise software.

SAP Insights: The View From the Castle | AMR Research

2008-03-14T05:17:00.000-07:00

SAP Insights: The View From the Castle | AMR Research

We caught up with SAP’s Holger Fritzinger at the Dromoland Castle in County Clare, Ireland, where he had just finished hosting a two-day meeting with high-tech executives. This was the spring meeting of the company’s twice-yearly high-tech advisory council, one of the first vertical customer groups established by SAP.

The 12-year SAP veteran was recently named vice president of the company’s lucrative high-tech business unit. His domain includes thousands of customers across the whole ecosystem, from original equipment manufacturers to semiconductor firms, contract manufacturers, original design manufacturers, and software companies. While not part of his official business unit, the ecosystem also extends out to media (many consumer electronics companies now market or sell music, games, television programs, movies, and other content) and professional services firms (most of the large integrators run SAP) as well as retail since consumer electronics firms have added their own stores.

While SAP no longer breaks out revenue by specific verticals, high tech has long been one of the top performing sectors. This has been true since the very early days of R/3. In the past 15 years, SAP has generated billions of dollars in software and services from tech customers.

But so did many other smaller vendors. i2 Technologies amassed a very impressive base in supply chain management (SCM). PeopleSoft did the same in human resource management. Siebel had a very strong tech presence in CRM, as did Agile Software in product collaboration and product lifecycle management (PLM). Ironically, three of those four are now part of the Oracle product portfolio, purchased in part because of their presence in SAP accounts. As these applications mature, however, large customers are looking to bring the functionality back within the SAP Business Suite.

Microsoft + Yahoo! or Microsoft + SAP? | AMR Research

2008-02-29T03:43:00.000-08:00

Microsoft + Yahoo! or Microsoft + SAP? | AMR Research

Randall Stross penned an interesting column for the February 24 New York Times, suggesting that Microsoft abandon its plans to acquire Yahoo! for $44.6B. Instead, the office automation giant should pony up and buy SAP for a premium north of the ERP leader’s current $59B market cap.

His argument was that SAP strengthens Microsoft’s presence in the corporate software market whereas adding Yahoo! to Microsoft’s online business means combining two weaklings who, together, can’t stop Google. In the piece, MIT professor Michael Cusumano described Yahoo! as an “old-style Internet asset, in decline, and at a premium.”

I don’t like either idea

The Yahoo! purchase is a dumb move. I don’t see the value or the long-term opportunity. There seems to be an inverse correlation to Microsoft’s move and Google’s market cap, though it’s not Yahoo! fever that has been causing Google’s shares to drop. Google’s market valuation has dropped 38% from the high of $747.24 reached last November. That’s a loss of $83B in market cap. Google has lost more value the past few months than SAP is currently worth. The market is reacting negatively to reports that the paid-click business is slowing.

SAP is a well-run company with a great customer base. The bulk of its revenue, however, is generated from an expensive direct sales and service force. This is counter to Steve Ballmer’s strategy of selling business applications through a channel.

While the combination would be formidable, especially against Oracle, I’m not sure that the investment would yield good ROI. Sure, SAP should continue to grow in low double digits for the foreseeable future, but I don’t see any new cross-sell or upsell opportunities for Microsoft at the upper end of SAP’s base. Companies already have a huge investment in Office and Outlook—how many more seats do they need? Can you see CIOs replacing their DB2 or Oracle installations (and skilled database administrators) with SQL Server?

Is ERP old-style, too?

While Professor Cusumano referred to Yahoo! as “old-style,” I wonder whether we will come to see ERP in the same way. Pursuing SAP would be a logical move, but may not be a leap ahead. Consider three scenarios.

Scenario No. 1—ERP as a service

SAP Business ByDesign is a well-designed product suite built using leading-edge technology. That said, it’s not worth buying all of SAP to get this product, even if its represents the embodiment of the original Project Green.

The software has been going through a slow, controlled rollout. While SAP hopes to have 1,000 implementations by the end of the year, I’m not sure it can sell sophisticated software over the web. While there had been early talk about building a new channel, no one at SAP has been able to convince me that there is enough money in it for resellers. Ultimately, though, Business ByDesign will become the successor to SAP Business Suite. The question is when?

Scenario No. 2—SOA as the new backbone

As I wrote last week, IBM’s Bob LeBlanc recently compared industry-standard PC buses to service-oriented architectures (SOAs). If SAP supported an industry-standard enterprise service bus, would customers use it to build a plug-and-play enterprise backbone using best-of-breed software? Is there a disruptive SOA play for Microsoft that would allow it to sell its business applications into other ERP vendors’ bases?

Scenario No. 3—The network as ERP

About a decade ago, we began writing about the concept of trading exchanges, in which customers and suppliers would move their ERP-based business processes to a shared network. A lot has happened since then. Companies like E2open and One Network Enterprises are moving more and more collaborative processes onto a shared network.

One Network’s Greg Brady recently shared some of the work he’s been doing linking grocers and suppliers. He believes that one day his network could become a lower cost ERP system shared by all of the nodes. In his view, why would companies need to have their own, on-premises ERP systems if the core transactions, as well as the planning and analytics, have moved to the network? While that might not happen in our lifetime, it still qualifies as a bold idea ... even 10 years after we first wrote about it.

What do you think: Yahoo, SAP, or other?

Am I missing the secret sauce for a Microsoft-Yahoo stew? Do you agree with the Times and MIT perspectives that SAP would be a better bet, albeit it maybe at twice the price? Do any of my three scenarios make more sense for Steve Ballmer as he looks ahead for Microsoft? Where else might he look? As always, I welcome your feedback and ideas—brichardson@amrresearch.com.

FT.com / Companies / IT - SAP confident of software sales

2008-01-31T23:57:00.000-08:00

FT.com / Companies / IT - SAP confident of software sales

SAP confident of software sales
By Gerrit Wiesmann in Frankfurt

Published: January 31 2008 02:13 | Last updated: January 31 2008 02:13

SAP, the German business software manufacturer, expects that it, and many rivals, will avoid any serious fallout from the economic slowdown rippling in the wake of months of global financial turmoil.

Investors have grown increasingly worried that economic woes will lead companies to cut spending on software and computers, much as they did in 2002 when technology stocks went into tailspin.

However, Henning Kagermann, SAP chief executive, said his company had canvassed clients and concluded that demand for software that manages inventories and client data would remain strong.

“Software like ours is always in demand – in a boom because companies want to sell more, and in difficult phases because they’re looking to improve productivity,” he told the Financial Times.

It would be “absurd” to compare the current situation with that of 2002, when companies were forced to cut “exaggerated IT spending”, fed by the technology boom, at a speed that hurt software houses.

“The companies learned their lessons and became more careful with [information technology] spending,” said Mr Kagermann. “So I don’t think they’ll be forced to hit the brakes a second time.”

SAP said its operating margin would edge higher to 27.5-28 per cent this year, from 27.3 per cent in 2007, after being adjusted for writedowns and charges that accrued in the course of a big acquisition.

The company also said sales of its software and related services would grow by 12-14 per cent this year, when adjusted for currency moves, the same target set last year – which it beat by three points.

The projected slowing of growth comes as SAP integrates Business Objects, a software house it bought for €4.8bn ($7.1bn) last year, and introduces a new web-based product for small companies to market.

The projects are meant to reduce SAP’s dependency on selling software to the world’s largest corporations.

Mr Kagermann said that he would make a decision in spring or summer about whether he would extend his contract beyond early 2009.
Copyright The Financial Times Limited 2008

Oracle Buys BEA to Strengthen Position in Middleware Market

2008-01-18T01:53:00.000-08:00

Oracle Buys BEA to Strengthen Position in Middleware Market

BEA Systems has agreed to be purchased by Oracle. If the deal gets the right shareholder and government approvals, Oracle will emerge as a peer to IBM and Microsoft, the current middleware market leaders.

FT.com / Companies / IT - Oracle acquires BEA for $8.5bn

2008-01-17T06:08:00.000-08:00

FT.com / Companies / IT - Oracle acquires BEA for $8.5bn

Oracle acquires BEA for $8.5bn
By Richard Waters in San Francisco

Published: January 17 2008 02:27 | Last updated: January 17 2008 02:27

Oracle led a fresh round of consolidation in the software industry on Wednesday as it pulled off the $8.5bn purchase of BEA Systems, a middleware company it has stalked since last summer.

Meanwhile, Sun Microsystems picked up one of Europe’s most closely watched young tech companies – open source database company MySQL – for $1bn, and SAP announced it had sealed enough support to close its €4.8bn ($7bn) purchase of Business Objects.

Oracle won over BEA’s board as it raised its offer for the company by 14 per cent to $19.375 a share. The move echoed a pattern also seen with its purchase of PeopleSoft, the landmark deal that triggered wider software consolidation, when Oracle eventually paid considerably more than it originally offered, in spite of threats to reduce the value of its offer.

While lower than the $21 a share that BEA’s board had said it wanted, the final price still represents a partial victory for Alfred Chuang, BEA chief executive.

Oracle’s decision to go public with its interest in BEA, a company it had pursued off and on for years, came after shareholder activist Carl Icahn had taken a stake in BEA and called for a sale of the business.

Since signing a confidentiality agreement with BEA that gave him access to internal company data, however, Mr Icahn has been largely silent, giving the company time to regroup and present a stronger case to Wall Street about its efforts to turn its business around.

The acquisition will put Oracle almost neck-and-neck with IBM in terms of its middleware, a layer of software in complex corporate IT systems that has become increasingly important amid the rise of the internet, said Ian Finlay, an analyst at AMR.

Also, with a presence in application software that IBM does not have, and a stronger middleware business than SAP, Oracle is now the only company other than Microsoft able to sell a full “stack” of software to corporate customers, he added. Meanwhile, Sun’s acquisition of MySQL marks the latest attempt to kick-start a software business that has frequently failed to live up to the company’s hopes. Jonathan Schwartz, Sun CEO, said his company would be able to sell other software and services around MySQL’s products.

Started by two Swedes and a Finn, MySQL has been the most successful of a number of open source database companies that have tried to challenge a market dominated by Oracle, IBM and Microsoft.

Marten Mickos, its CEO, is fond of saying that by distributing its software free of charge and selling service and support, his aim has been to reduce the size of the global database market by a third, and take a third of what was left.

Mr Schwartz said that MySQL had revenues last year of $70m, an increase of 50 per cent from the year before, and that he planned to continue its disruptive business model.

Additional reporting by Maija Palmer in London
Copyright The Financial Times Limited 2008

FT.com / Companies / IT - Strong holiday sales lift SAP shares

2008-01-15T14:06:00.000-08:00

FT.com / Companies / IT - Strong holiday sales lift SAP shares

Strong holiday sales lift SAP shares
By Gerrit Wiesmann in Frankfurt

Published: January 15 2008 01:19 | Last updated: January 15 2008 01:19

German business-software company SAP said preliminary results showed strong sales in the Christmas quarter, lifting full-year growth of a key performance indicator above a previous forecast.

The announcement cheered investors, who have worried the credit squeeze could damp economic growth and corporate spending on software that runs inventories or client data.

The Walldorf-based company said sales of software and related services rose 13 per cent to €2.48bn ($3.69bn) in the fourth quarter and would have risen 17 per cent had exchange rates stayed stable.

Full-year sales of software and services rose at the same rate to €7.44bn, beating a forecast by SAP executives that sales would grow 12-14 per cent, expressed in constant currencies.

The world’s largest business software manufacturer last year introduced web-based programmes to lure small companies as sales of conventional software to global corporations slowed.

In consequence, SAP has shifted to calibrating its performance through revenues from software and services, rather than software alone – although even this older measure was strong.

Software sales, long seen as an indicator of follow-on maintenance revenues, rose 14 per cent – or 18 per cent at constant currencies – to €1.4bn in October, November and December.

This figure, slightly above analysts’ forecasts, helped push SAP shares on Monday to €33.70, 2.7 per cent higher than Friday’s close – although still below a high of €41.76 seen in September.

The company in October took investors by surprise when it announced the takeover of Business Objects, a business analytics company, for €4.8bn, SAP’s first big acquisition.

The move rattled investors just as they were starting to regain confidence in the company after a January announcement that its web-based service for small companies would reduce profitability in 2007.

SAP said on Monday its operating margin would, as forecast a year ago, fall to 26.5 per cent from 27.3 in 2006, with the dollar’s slide against the euro lobbing 0.3 points off profitability.

The company plans to release detailed results and give a forecast for this year on 30 January.

This week, it will give more details about the integration of Business Objects.
Copyright The Financial Times Limited 2008

i2: Think Services Play, not Software Vendor

2008-01-07T14:28:00.000-08:00

i2: Think Services Play, not Software Vendor

About a year ago, I wrote about my meeting with Azim Premji, Wipro’s chairman. One of the first topics we covered was the relatively modest number of new customers added each quarter by the fast-growing Indian services firms.

Mr. Premji responded by saying that his number reflects “net new customers,” or new business minus the closed accounts. At the time, Wipro had added 37 new accounts for the quarter ending December 31, 2006. Then he said something surprising: “I’d like to get that number to zero.” He said that chasing new business was very expensive and time consuming, and that there is no guarantee of a long-term relationship. He said that Wipro’s strategy is to focus on “must-have accounts.” Other Indian services firms have expressed similar opinions.

i2 becoming more like Wipro?

A few weeks ago, I met with a group of i2 Technologies executives, including Dr. Pallab Chatterjee, the interim CEO. During our briefing, I mentioned Mr. Premji’s comments to the i2 team. Dr. Chatterjee said that he was following a very similar strategy and is shifting i2 to a more intensive focus on serving the existing customer base with an expanded set of software and services. He then described some hosting projects as well as planning and fulfillment outsourcing.

We talked about how i2’s business had changed in the nearly 20 years that I have been following the firm. In the past, i2 often embarked on multiyear transformational projects. The customer would spend a year deciding on a vendor, then use another year or longer to complete the software implementation, and then use a third year (or more) to begin to achieve results.

Customers are no longer willing to wait three years for results. In my meetings with i2 executives, they are confident that they can compress the results cycle to a much shorter time period by focusing on a well-defined set of critical success processes, including “making plans happen,” “lean replenishment,” “supply continuity,” “deliver-to-order,” “matching consumer demand,” and “product profitability.” Each process is modeled after the total quality management (TQM) methodology and has a well-known customer as sponsor.

i2 has about 500 active customers (defined as paying maintenance). To serve the largest customers, i2 has formed 100 customer business units. The list includes companies that have worked with i2 for more than 10 years. The shift to more of a focus on services has been happening since the start of this decade, and can be seen in the company’s financial results. When i2 reported its 3Q07 results November 1, revenue from services and maintenance accounted for 50.2% and 34.0%, respectively, of the $66.5M reported in total revenue.

Will the new strategy makes i2 attractive to services vendors?

Dr. Chatterjee and team don’t have a lot of time to make the new strategy work; investors have been pressuring them to find a buyer for the company. They have to show that they can grow revenue and their market valuation. As I write this, i2’s market cap hovers around $266M. This is about the same as the revenue that the company expects to report for the fiscal year ending December 31, 2007.

The logical list of potential buyers or partners could include any of the major services vendors. Accenture was a key services partner during i2’s rapid growth phase. A deal with i2 could help build its nascent supply chain outsourcing process. IBM has been a customer and a partner. IBM executives will tell you that i2’s demand planning implementation at IBM’s PC division was the most successful supply chain project ever completed at the company. Tata Consultancy Services (TCS), also a long time i2 partner, has been the most aggressive of the Indian services firms in building a supply chain practice. Other firms, like Infosys, Satyam, and Wipro, may be interested in challenging TCS here.

What do you think?

Can software vendors make the transition to a more services-based business? Does i2 have time to make the transition, or will it be forced to sell or wage a messy battle with investors? Are the services vendors the logical suitors, or should JDA Software, Oracle, or SAP step in as partner or suitor?

As always, I welcome your feedback and ideas—brichardson@amrresearch.com.

The AMR Research Supply Chain Top 25 Blows Away Market with 17.89% Return | AMR Research

2008-01-04T14:43:00.000-08:00

The AMR Research Supply Chain Top 25 Blows Away Market with 17.89% Return | AMR Research

For the third year in a row, the Supply Chain Top 25 portfolio of companies outperformed the market, this time by a wide margin. The average total return of the Top 25 portfolio for 2007 is 17.89%, compared with returns of 6.43% for the Dow Jones Industrial Average (DJIA) and 3.53% for the S&P 500. Clearly, this is a group of companies that excels, strongly weathering the ups and downs we’ve seen in the market this year.

The Year in Review and a Look Ahead: M&A, IPOs, and Breaking a Million

2007-12-14T14:03:00.000-08:00

The Year in Review and a Look Ahead: M&A, IPOs, and Breaking a Million
Friday, December 14, 2007
Bruce Richardson

Welcome to the last edition of First Thing Monday for 2007. It’s hard to believe that another year has raced past. Looking back, 2007 has been a great year for Red Sox fans (and South Africa rugby fans, our Roddy Martin reminds me), and should prove to have been a very strong year for the software industry. When we published our 2007 forecast for enterprise applications, we were looking for this market to grow to $61.1B, an 8% increase from last year. That forecast looks pretty safe.

Next year should be strong, too. Our preliminary 2008 estimates show that total enterprise application revenue should reach $65.4B, up more than 7% from the current year.

Business intelligence deals yield another strong year for software M&A

According to Mergerstat, there were 1,206 software mergers and acquisitions in the first nine months of this year. This is down 7% from the 1,293 deals reported for the first three quarters of 2006. If you’re an investment banker, you made more money this year as the value of the deals for the same period this year tallied $62.8B, up 11% from the $56.4B total for the first three quarters of 2006.

The big software M&A news was the purchase of the Big Three business intelligence (BI) vendors. In March, Oracle acquired Hyperion for $3.3B; in October, SAP bid $6.8B for Business Objects; last month, IBM made a successful offer of $5B for Cognos.

The next question is likely to be “Which company or sector is next?” I’ll decline your offer to name companies, but I will say that I see further consolidation in infrastructure and human capital management (HCM). We could still see an Oracle/BEA deal, or even a Hewlett-Packard/BEA combo. In addition, some of the vendors hovering around the service-oriented architecture (SOA) space are starting to get more attractive as SOA begins to creep into large ERP accounts. There’s not a lot of blockbuster potential, though.

As for HCM, Oracle and SAP are trailing some of the new-wave HCM providers in functionality and sex appeal. This sector appears to be one of the last safe harbors for best-of-breed vendors, at least for now. SuccessFactors and Taleo have each built a customer base of 1,400 companies with performance management and talent management functionality.

As I write this, SuccessFactors’ market cap is close to $735M, while Taleo’s is just above $712M. Taleo is closer to the $100M annual revenue mark, with $77M in revenue for the first three quarters versus $44.1M for SuccessFactors. Both offer their products as software as a service (SaaS). We could see one or both acquired over the next 12 to 24 months. As we were writing this, SAP (through the NetWeaver Fund) was investing in Montreal-based Nakisa, a user interface company specializing in organizational and talent management information visualization (see Christa Degnan Manning’s note below in Market Roundup for more on this).

Longer term, I’m waiting for the first batch of consolidation among the IT services and business process outsourcing (BPO) vendors. Given the high cost of new customer acquisition and the ongoing battle for scarce talent, consolidation appears inevitable. This will take longer to play out, though, thanks to high market valuations, especially for the leading firms in India. As I write this, Infosys is valued at $25B, followed by Wipro ($22.8B), and Satyam ($9B). I couldn’t find a market valuation for Tata Consultancy Services (TCS). TCS is the largest of all of the Indian services firms. This compares to $21B for Accenture, $11.13B for EDS, and $9.9B for Cognizant.

Door to IPO market slightly ajar in 2007

The IPO market opened up again for a handful of select software companies. The must-have new tech stock for 2007 was VMware. When the company made its debut on the New York Stock Exchange in August, the opening share price was $29. The stock closed the first day of trading at $51, giving VMware a market cap of $19.1B. Since then, shares have traded as high as $125.25. Currently, the shares are hovering just below $100, giving the company a valuation of $37.9B. Very nice.

DemandTec also went public in August, opening on a day when the Dow had experienced the “the second-heaviest one-day plunge since 2003,” falling 387 points. Shares of DMAN opened at $10.05, but fell to $9.34 by the end of the first day. Since then, shares have traded between $8.95 and $20.50. The shares are currently trading just under $15.

If DemandTec shareholders also bought Deltek shares when they debuted on November 1, they must have experienced déjà vu. On Deltek’s first day of trading the NASDAQ finished down 64.29 points, the Dow dropped 362.14, and the New York Stock Exchange fell 289.53. Deltek opened trading at $18.00 and closed at $17.95. In the past six weeks, shares of PROJ (Deltek specializes in project-based ERP software) have traded in a relatively narrow band—$15.01 to $18.63, with the current price at $17.20.

SuccessFactors went public last month just before Thanksgiving. Shares of SFSF opened at $10 and rose to $13.25 to end the day. Since then, shares have reached a high of $15.27. It’s trading at $14.75 now.

NetSuite should be the fifth and final enterprise software IPO for this year. On December 10 the company announced an offering of 6.2 million shares of stock at a suggested price range of $13 to $16 per share. Bidders will determine the actual price through an online auction or “Dutch auction” process. Pricing is expected to close December 19.

The fact that I’m excited about five IPOs doesn’t make me forget the craziness of the first Internet bubble. I saw a stat the other day that reminded me that more than 1,100 technology companies had their IPOs during the 1995 to 2000 mania. Now, that was the time to be a banker.

“Million” is the new black

The “new black” analogy is thoroughly overused. I am noticing, however, how many software companies have hit the coveted one million mark. Salesforce.com recently reached one million subscribers. One week later, SAP touted that its Community Network membership had topped one million. SuccessFactors and Taleo brag that their software is used by two million employees and one million employees, respectively, at their corporate customer accounts.

Next year’s theme: convergence of enterprise apps and social networks

Like you, every day I get multiple invitations to join friends on Facebook, LinkedIn, and Plaxo. In the past two weeks, I have also been asked to join Hi5 Networks and Spock.com. Smart companies are looking at social networks and seeing new prospecting and hiring opportunities. They are also looking to use these tools to build tighter links to a wide range of communities, from shareholders to suppliers.

A few months ago, I wrote that salesforce.com is looking to become the “Facebook of the business world.” Last month I wrote about Faceforce, a new tool that links information from your Facebook profile and network to salesforce.com’s software. This could be a little creepy if abused or overused, but I have the power to limit access to my Facebook profile.

A few weeks ago salesforce.com announced Salesforce to Salesforce, the world’s first “multi-tenant business network.” Some of the initial customers are using this technology to connect directly to their reseller networks to share and track leads in real-time, plan and update marketing campaigns, track orders, and share other functions and processes. The intent is to reduce the latency from suspect-to-prospect-to-customer and eliminate any and all manual processes. Rob Bois goes into detail about this below in Market Roundup. The next step should be to layer salesforce.com’s IdeaExchange on top to allow the channel master to solicit ideas for new features and functions or improvements to the indirect channel program.

In the not-too-distant future, I suspect that we will see a Facebook-like application from salesforce.com that will be used to replace static employee intranet sites, extend out to key customers (like a social network site for your major accounts), or provide pages for the sales and service members of key suppliers.

Why? Facebook envy. Even though salesforce.com has reached the one million mark, I suspect that CEO Marc Benioff won’t be happy until he approaches LinkedIn’s 17 million connections or Facebook’s 60 million friends.

Back to goofy company names

Remember the last bubble when it seemed that the name of nearly every startup either began with a small “e” or started with a letter from the end of the alphabet, like V, X, Y, or Z? Ever find yourself confused as to whether Meebo is a new prescription drug or an instant messaging tool? Are you current on all of the new Web 2.0 players? If not, and you have a couple of minutes, here’s a quiz for you.

Coming up: What lies ahead for i2 Technologies?

It’s been over a year since I last met with Sanjiv Sidhu, i2’s founder and chairman, and Mike McGrath, former CEO. We recently flew to Dallas to catch up with Mr. Sidhu and Dr. Pallab Chatterjee, interim CEO. Look for our analysis after the holidays on January 7.

In the meantime, all of us at AMR Research want to offer our best wishes for a safe and happy holiday season. Here’s to a healthy and prosperous 2008! While we won’t be publishing for a couple of weeks, we will still be looking for your feedback and ideas—brichardson@amrreseach.com.

--------------------------------------------------------------------------------
© Copyright by AMR Research, Inc.

Oracle Strengthens Its Application Management Capabilities

2007-12-11T01:56:00.000-08:00

Oracle Strengthens Its Application Management Capabilities

The acquisition of Moniforce will widen Oracle's Enterprise Manager portfolio by adding end-user monitoring capabilities. Expect Oracle to become a competitor within the application management market.

SAP Unveils Web 2.0 Look for Its CRM Tool

2007-12-10T05:30:00.000-08:00

SAP Unveils Web 2.0 Look for Its CRM Tool

December 10, 2007 (Computerworld) --
BOSTON -- SAP AG, looking to reduce the complexity of its customer relationship management software, last week unveiled an upgrade that adds support for Web2.0-style user interfaces.

24 Hours With SAP

2007-12-07T14:47:00.000-08:00

SAP brought close to 200 employees to Boston for the company’s Fifth Annual SAP Influencer Summit. The audience consisted of 340 analysts, journalists, bloggers, academics, customers, and software and services partners. Given how closely we follow SAP and how much we write about the company, I can’t say there were a lot of surprises for the AMR Research analysts. Nonetheless, there is still plenty to write about for this week.

My primary interest in attending was to hear the morning keynotes, followed with one-on-one meetings with the top SAP executives, including CEO Henning Kagermann, Dr. Peter Zencke, and the members of SAP’s executive council. Mission accomplished. I was able to squeeze all of the keynotes and the meetings into a single day.

While past summits have been held in Phoenix and Las Vegas, this year’s event was held in Boston at the Westin Hotel, a 15-minute walk from our offices. In exchange for not having to fly to the event, how did we return the favor? Our city greeted the mostly German and Bay Area visitors with a snowstorm upon arrival, followed by subfreezing temperatures for the rest of the week. I wouldn’t be surprised if next year’s event is held in Orlando or returns to Las Vegas.

Rather than risking reader fatigue, I’m going to focus on three core ideas gained from the summit:

- Business ByDesign is the foundation for SAP’s next-generation application platform. It will ultimately replace the SAP Business Suite, albeit gradually and maybe transparently over a 5- to 10-year horizon (or more).
- In the interim, SAP will retain customer loyalty through Enhancement Packs and continued NetWeaver investments that move SAP Business Suite closer to Business ByDesign.
- The business user, critical to SAP’s future revenue stream, may be placing it in a potential showdown with Microsoft.
“I’ve seen the future of SAP software, and its name is Business ByDesign”

In 1974, Jon Landau wrote a memorable line in Rolling Stone that music fans still remember more than 30 years later: “I’ve seen the future of rock and roll, and its name is Bruce Springsteen.”

As you watch Business ByDesign develop, you see the future of SAP software. That’s not only my view, but also the perspective of SAP customers who attended the event. At lunch, I sat with executives from various SAP user groups based in Australia, Mexico, the Netherlands, and the United States. One of the first questions we asked each other was “What did you think of the Business ByDesign presentation?” Within minutes, we had achieved near unanimous consensus that SAP will use Business ByDesign’s model-based development framework to develop the next wave of applications.

Dr. Zencke’s keynote did not focus much on SAP’s future plans for Business ByDesign. He did say that he planned to deliver new model-based applications in 2009, though he did not say whether it would be a new human capital management (HCM) suite or one more closely linked to a specific process (such as trade promotion management and fulfillment). He also said that some of the initial announcements could come as early as next spring during the two SAPPHIRE events (May 4–8 in Orlando; May 19–21 in Berlin).

Business ByDesign continues to evolve. The newest feature to be unveiled was the software’s ability to record, in real time, all the steps and documents in a business process (order to cash or procure to pay, for example). This can be used for visualization, monitoring, analysis, and auditing. For example, how long did it take to fill the last 10 open sales positions, from initial interview to start date? And how long did it take until they closed their first substantive deals? You can model that or use the search capability. That assumes, of course, that all the data is in SAP and not in a third-party application or tied to a manual process.

Of course, maintaining that data increases the overhead. As customers add more users and functionality, we could be looking at significant data volumes and larger data transfers. What will this mean for performance over a hosted, on-demand network? Users may be willing to tolerate relatively slow performance when updating a sales prospect’s record, but they won’t accept it for more mission-critical applications. SAP is well aware of the need for sustained high performance. One executive told me that it was exploring 64-bit caching appliances to better match on-premise performance.

Enhancement Packs: “100,000 man-days” in every bite

SAP has a delicate balancing act between old and new. More than 99% of its 44,000 customers run on one of its three core systems. The company continues to invest a large part of its $2B annual R&D budget into delivering new functionality for the core SAP Business Suite base through Enhancement Packs (EhP) and continued investment in the NetWeaver platform.

The initial idea behind EhP was to deliver continuous innovation to customers without forcing them to undertake costly and time-consuming upgrades. When the concept was first unveiled, SAP pledged that there would be no new ERP release until 2010.

The EhPs are delivered through a “switch framework” that’s analogous to the lights in your office. Customers have the option of turning the new features on or keeping them off. While this might suggest somewhat “lite” functionality, Dr. Kagermann surprised most of the audience by stating that the average EhP required more than “100,000 man-days.” That’s a lot of coding and testing.

A galaxy of side-by-side innovation

On the NetWeaver front, the most exciting news was the new business process management (BPM) suite. Code-named Galaxy, the BPM products are part of the NetWeaver Composition Environment. The tools include a process composer, process server, web editor, rule builder, rule management, rule analytics, and a rule engine. Galaxy will be part of the core NetWeaver platform and will be used for SAP Business Suite, SAP All-in-One, and SAP Business ByDesign.

The continued investment in NetWeaver across all three platforms is part of Mr. Kagermann’s vision of “side-by-side innovation,” where SAP continues to invest in existing and new areas, with the intent of cross-fertilizing the best of both. This will extend to the user interface (UI) strategy. SAP said it hopes to have one primary UI for SAP Business Suite and Business ByDemand within 18 months. This is long overdue. I lost track, but I would estimate that we saw more than 20 different UIs between the demos and the canned screen shots.

How will SAP customers get to the new architecture?

Life was much simpler when SAP launched R/3 at SAPPHIRE in 1991. While R/3 replaced R/2, that was not the original positioning. The new client/server was slotted as software for smaller companies or for remote divisions of larger enterprises that needed a new ERP system. Over time, nearly all R/2 users replaced their mainframes with R/3. Of course, there were at least five years and three major releases before R/3 was close to functional parity with R/2.

Likewise, in the mid to late 1990s, SAP launched the New Dimension products to fill unmet needs around the pillars of customer management, supply chain management (SCM), and the like. Later, these were added seamlessly to the Business Suite. The new upgrades are delivered through the EhPs.

Is Business ByDesign the replacement for SAP Business Suite? It’s not that easy. Today’s SAP Business Suite is designed for dozen of verticals as well as for companies in more than 120 countries. Business ByDemand has minimal vertical capabilities and is only available in a few countries and languages. Yet, the convergence is starting.

Today, the SAP Business Suite and Business ByDesign share the common NetWeaver platform and Enterprise Services Repository and related infrastructure components. Dr. Zencke may well be delivering the 2009 equivalent of New Dimension products using the Business ByDesign development framework. This will give SAP Business Suite users the ease of use, deployment flexibility, and rapid configuration that they want, too.

Here’s the next question: In five years or so when Business ByDesign has reached functional, vertical, and geographic parity with SAP Business Suite, are the Business Suite customers already on Business ByDesign thanks to EhPs, NetWeaver, and new model-based applications? Or, do we begin the next wave of replacement projects designed to reduce the total cost of ownership (TCO)?

In either case, I’ve seen the future.

SAP to battle Microsoft over the “business user”

I suspect SAP will be ecstatic once the Business Objects acquisition closes. The current expected date is January 23, 2008. Business Objects will be a key part of SAP’s plans to sell to the “business user,” a goofy title for what might normally be called “knowledge workers.” The point, though, is that many employees without an SAP seat still need access to information generated by or stored in an SAP application.

SAP has already begun targeting customers that rely on Oracle’s Hyperion for business intelligence (BI) and performance management (PM). The company recently started a one-a-day program with the goal of replacing 100 Hyperion installations in 100 days. Given that there are an estimated 3,500 to 4,000 SAP customers using Hyperion today, this program could have a run that rivals that of Cats on Broadway.

To date, the primary way to touch that business user has been through SAP’s portal. Some companies have also deployed Duet, the software SAP has been developing with Microsoft to link SAP software with MS Outlook.

While Microsoft has a near stranglehold on office automation, SAP acknowledged that it will have to work closely with others, including IBM’s Lotus software, Google applications, and Yahoo!’s Zimbra applications. SAP also said that it is looking at supporting OpenSocial, the proposed widget standard for social networks that’s being promoted by Google, LinkedIn, Plaxo, Oracle, and salesforce.com. Clearly, the desktop is the key to getting to the business user.

One challenge for SAP is the plethora of competition. There are the ubiquitous Microsoft applications on one side, and free Web 2.0 products on the other. SAP is going to have to come up with some very clever pricing and licensing schemes and value propositions to reach the business worker.

…or does Microsoft buy SAP?

You may have seen the recent Reuters headline, “SAP Shares Climb on Microsoft Bid Talk.” A Microsoft-SAP link first surfaced during the U.S. Department of Justice antitrust lawsuit against Oracle. During the trial it came out that Microsoft had initiated discussions with SAP after Oracle made its bid for PeopleSoft. Nothing came of those initial talks.

Talking to the reporter about the latest rumor, I said “Re: one giant buying another … while all things are possible, I don’t see Microsoft buying SAP. Microsoft is more fixated with Google than Oracle. It’s looking for businesses with enormous growth/volume opportunities; SAP doesn’t provide that. Plus, if [Microsoft CEO Steve] Ballmer bought SAP, he would have to continue to invest in SAP’s costly direct sales and service model. That’s counter to his high margin needs.”

Jim Maniscalco, founder and CEO of Nobilis Software, e-mailed me with a contrarian view. Here’s his take:

On the surface I do agree with you that [Microsoft] is most likely focused on acquiring high-growth companies that are on the frontier of Web 2.0 rather than “mature” companies like SAP. Microsoft has a lot to lose with that strategy—namely the dominance it has enjoyed for 20 years. Microsoft overestimates its actual position in the market. If it does not buy SAP and secure its place in the enterprise through SAP’s maintenance revenue, Microsoft and its executive management risk following the same trajectory that Lotus Development Corp. had in the late 1980s through early 1990s. Virtualization, open source, and the commoditization of tools are adversaries that Microsoft can’t defend against with its current business and product model. Only the addition of SAP’s enterprise footprint can extend its leadership role. If not, it is a different company in five to seven years.

I welcome your viewpoint, too.

Coming up: social networks and enterprise software

Next week’s weather forecast includes a flurry of vendors. All of our conference rooms are jammed these days as software vendors rush in to brief us on their 2008 plans. Social network vendor LinkedIn must be watching The Weather Channel. Instead of braving Boston’s subfreezing temperatures, the executives have offered to update us via telephone instead. We will bring you some of the highlights of all the briefings, so look for our analysis next week.

In the meantime, do you think Business ByDesign is the successor to R/3 and the SAP Business Suite, or is it destined to be a midmarket only product? Does SAP have to take on Microsoft directly in order to be successful in the business user market? Or, do the two companies end up merging as Mr. Maniscalco suggests? As always, I welcome your feedback and ideas—brichardson@amrresearch.com.

FT.com / Companies / Europe - US group might bid for troubled SAP unit

2007-11-22T04:44:00.000-08:00

FT.com / Companies / Europe - US group might bid for troubled SAP unit

US group might bid for troubled SAP unit
By Helene Laube in San Francisco

Published: November 22 2007 22:56 | Last updated: November 22 2007 22:56

Rimini Street, a US-based provider of software support, said it was interested in buying TomorrowNow, the SAP unit at the centre of a corporate spying scandal.

“We are interested, but we are proceeding cautiously and need to analyse it first,” Seth Ravin, chief executive of Rimini Street, told FT Deutschland, the FT’s sister paper in an interview.

SAP, the German software group, revealed at the beginning of the week that it was exploring options for the troubled unit, including selling it.

Mr Ravin was among the founders of the Texas-based TomorrowNow and sold the company to SAP almost three years ago.

He declined to say whether talks were going on with SAP.

The scandal surrounding TomorrowNow, which like Rimini Street sells software maintenance and support to former Oracle customers, broke when SAP’s arch-rival filed a lawsuit earlier this year accusing SAP of corporate espionage.

In the wake of the scandal, TomorrowNow’s chief executive and several senior member of management resigned on Monday.

SAP is under pressure to announce a swift solution for TomorrowNow in order to avoid further damage to its image.

The announcement was widely seen as unsettling customers relying on long-term software support.

Since SAP’s announcement, Rimini Street had received a dozen enquiries from TomorrowNow customers “exploring a possible transition”, Mr Ravin said.

Customers were uncertain since SAP had not been clear about “what they are doing with TomorrowNow,” he added.

Rimini Street is seen as one of the few potential buyers for TomorrowNow, as most big IT service provider are working in collaboration with Oracle and are said not to be interested.
Copyright The Financial Times Limited 2007

SAP To Put “For Sale” on TomorrowNow? | AMR Research

2007-11-21T04:52:00.000-08:00

SAP To Put “For Sale” on TomorrowNow? | AMR Research

We’re only a couple of months away from the three-year anniversary of SAP’s purchase of TomorrowNow, a company specializing in third-party maintenance and support of Oracle’s JD Edwards, PeopleSoft, and Siebel software customers. Instead of celebrating, it looks like the couple could be heading for divorce. On November 19, SAP announced that TomorrowNow CEO Andrew Nelson and several other executives were resigning from the company. SAP also said that it was considering a sale of the independent unit. In our view, a sale is likely if only to accelerate the end of the Oracle lawsuit.

On March 22, Oracle filed a complaint in U.S. District Court in San Francisco, alleging that SAP/TomorrowNow had “stolen thousands of proprietary, copyrighted software products and other confidential materials.” Barring a settlement, the trial is headed to court in February. SAP executives would love to eliminate this distraction. It’s a safe bet that Oracle would like to see it continue indefinitely.

Safe Passage on the rocks?

In January 2005, SAP announced its plans to buy TomorrowNow for an undisclosed amount. The press release hit just hours after Oracle had held a press and customer conference to introduce Project Fusion, which I described at the time as “a futuristic product set and architecture designed as the morphing of the next generation of Oracle and PeopleSoft applications.”

TomorrowNow quickly become the centerpiece for the Safe Passage initiative to migrate PeopleSoft customers to SAP. At the time of the acquisition, SAP had 2,000 customers who were using PeopleSoft.

According to people close to the transaction, the TomorrowNow deal was initiated by SAP’s Shai Agassi despite the concern of some executive board members. It was a surprisingly aggressive piece of guerilla marketing for the very conservative ERP leader.

The most logical buyer would be Rimini Street, a TomorrowNow competitor that also focuses on maintenance and support services for JD Edwards, PeopleSoft, and Siebel customers. Rimini Street was founded in 2005 by Seth Ravin, former co-founder of TomorrowNow, who started the company after he sold his 50% stake in his old firm to SAP. For as long as I have known Mr. Ravin, he has been interested in buying TomorrowNow. He may soon get his chance.

It’s a Mad, Mad, Mad, Mad World: The Sequel

How about this for a scenario: Rimini Street succeeds in buying TomorrowNow from SAP and then later sells the whole business to Oracle. Oracle could continue the discounted maintenance program as a way of ensuring that companies remain as customers or switch them back to standard maintenance. As we have said many times before, all things are possible.

Note: We did reach out to multiple sources at Oracle, Rimini Street, and SAP. All declined to comment.

FT.com / Home UK / UK - Chief of SAP unit in US quits in spy scandal

2007-11-21T02:26:00.000-08:00

FT.com / Home UK / UK - Chief of SAP unit in US quits in spy scandal

Chief of SAP unit in US quits in spy scandal
By Richard Waters in San Francisco

Published: November 21 2007 02:00 | Last updated: November 21 2007 02:00

The chief executive of TomorrowNow, a US unit of SAP at the centre of a corpor-ate spying scandal that has ensnared the German software group in a high-profile lawsuit, quit yesterday, the company said.

SAP also revealed it was looking at options for the troubled unit, including selling it. The newsmarks the latest step in a saga that has represented an unwelcome setback for SAP in its most important market.

The scandal broke when arch-rival Oracle filed a lawsuit this year accusing SAP of corporate espionage. It levelled the claims against TomorrowNow, a Texas-based company acquired by SAP to sell software maintenance and support to former Oracle customers. That gave it a crucial role in SAP's strategy of trying to win over Oracle customers, since the need for continuing support for older software is one of the main reasons companies hesitate to switch suppliers.

According to Oracle, TomorrowNow had used the sign-on details of several Oracle customers to access that company's computers and allegedly remove information about its products.

The German company admitted in July that TomorrowNow had made "inappropriate downloads" from Oracle's machines, although it also said the information had been kept inside the subsidiary and none had been viewed by executives in other parts of SAP.

SAP said yesterday And-rew Nelson, chief executive of TomorrowNow, and "several members of his senior management team" had "chosen to resign". It did not give details.

When the scandal first broke, SAP sent one of its own executives, Mark White, to oversee the subsidiary as executive chairman. Yesterday it said Mr White was working to "assure retention of key managers and support personnel" and safeguard customer support.
Copyright The Financial Times Limited 2007

FT.com / Companies / IT - SAP shakes up leadership at US unit

2007-11-20T05:29:00.000-08:00

FT.com / Companies / IT - SAP shakes up leadership at US unit

SAP shakes up leadership at US unit
By Richard Waters in San Francisco

Published: November 20 2007 02:06 | Last updated: November 20 2007 02:06

The chief executive of TomorrowNow, a US unit of SAP at the centre of a corporate spying scandal that has ensnared the German software group in a high profile lawsuit, quit on Monday, the company said.

SAP also revealed it is looking at various options for the troubled unit, including selling it. The news late on Monday night marks the latest step in an unfolding saga that has represented an unwelcome setback for SAP in its most important market.

The scandal broke when arch-rival Oracle filed a lawsuit earlier this year accusing SAP of corporate espionage. It levelled the claims against TomorrowNow, a Texas-based company that had been acquired by SAP to sell software maintenance and support to former Oracle customers. That gave it a key role in SAP’s strategy of trying to win over Oracle customers, since the need for continuing support for older software is one of the main reasons companies are hesitant to switch between suppliers.

According to Oracle, TomorrowNow had used the sign-on details of several Oracle customers to access that company’s computers and allegedly remove information about its products.

The German company admitted in July that TomorrowNow had made “inappropriate downloads” from Oracle’s machines, though it also said that the information had been kept inside the subsidiary and that none of it had been viewed by executives in other parts of SAP.

SAP said on Monday that Andrew Nelson, chief executive of TomorrowNow, and “several members of his senior management team” had “chosen to resign”. It did not give details about the extent of the departures, or whether SAP had asked for the resignations.

When the scandal first broke, SAP sent one of its own executives, Mark White, to oversee the subsidiary as executive chairman. On Monday, it said that Mr White was working to “assure retention of key managers and support personnel” and make sure customer support was not interrupted.

The signs of upheaval at TomorrowNow appear to represent a victory for Oracle in what has turned into one of the most heated confrontations in the corporate technology market. The US and German software companies have been on a collision course over the past four years, since Oracle embarked on a series of acquisitions to challenge SAP in its core application software market. While confined to an arcane part of the corporate IT market, the bitterness of the rivalry has guaranteed it a prominent place in business press headlines, culminating in the barbs thrown over the corporate espionage suit.

“Our primary focus is TomorrowNow’s existing customers, who will be supported through this management transition,” Mr White was quoted as saying. “SAP is prepared to manage through these changes to ensure that TomorrowNow’s obligations to its current customers are met.”

Copyright The Financial Times Limited 2007

Of Facebook and Business, Electricity, and Virtualization | AMR Research

2007-11-12T01:14:00.000-08:00

Of Facebook and Business, Electricity, and Virtualization | AMR Research

Aberdeen Group:Acquisition-Mania Generates More Questions than Answers

2007-11-08T13:19:00.000-08:00

Aberdeen Group:Acquisition-Mania Generates More Questions than Answers

A recent flurry of acquisitions has the top two ERP vendors locked in a battle for market share. Not satisfied with what has become the "run of the mill" acquisition of competitive ERP players and complementary applications, both SAP and Oracle have upped the ante and ventured outside the realm of the conventional acquisition. On October 7, 2007 SAP announced its planned acquisition of Business Objects, a leading supplier of Business Intelligence (BI) and Corporate Performance Management (CPM) solutions. Not to be out-done, Oracle followed five days later with its own move to acquire BEA Systems, a market leader in enterprise infrastructure software. And now, on October 17, 2007 SAP counters with yet another announcement that it will acquire YASU Technologies, a privately held provider of business rules management systems.

FT.com / Companies / IT - Oracle walks away from BEA offer

2007-10-29T05:27:00.000-07:00

FT.com / Companies / IT - Oracle walks away from BEA offer

Oracle walks away from BEA offer
By Richard Waters in San Francisco

Published: October 29 2007 00:45 | Last updated: October 29 2007 00:45

Oracle late on Sunday carried through on its threat to drop its $6.7bn offer for BEA Systems, though it did not rule out renewing its bid if shareholders succeed in pressuring the embattled software company to put itself up for sale.

It also issued a thinly veiled invitation to Carl Icahn, the activist shareholder who has become one of BEA’s biggest shareholders, to launch a proxy battle to force BEA’s hand.

“If the BEA shareholders are unhappy with the behaviour of the board, it is up to those shareholders, not Oracle, to take the appropriate action,” it said in a statement late on Sunday.

The comments came minutes after 5pm California time, the deadline set by Oracle for BEA to agree to its $17-a-share offer. BEA had already said it planned to let the deadline lapse, and that it would not consider a sale for less than $21 a share.

Oracle said that its offer had now expired, and that BEA shareholders should “not assume” it would renew the bid at that price in the future. “Over time many things can change,” the company said. “BEA’s business might materially weaken, the stock market can fall further from its recent record highs, or Oracle may have committed its capital elsewhere.”

Mr Icahn called on BEA’s board late last week to start negotiations with Oracle rather than let it walk away. He has also indicated he will take legal action to prevent BEA from taking any actions that would make it less vulnerable to a takeover.

“They are vulnerable to a proxy fight and they know it,” said one shareholder, who said that the BEA board was likely to accept a bid below the $21 it has held out for.

However, any attempt to force BEA’s hand is likely to be complicated by the investigation that is currently underway into its accounting for stock options. While that review continues, the company is not able to file accounts or hold a shareholding meeting, effectively putting it into limbo.

Copyright The Financial Times Limited 2007

FT.com / Companies / IT - Icahn criticises BEA over Oracle bid

2007-10-27T05:31:00.000-07:00

FT.com / Companies / IT - Icahn criticises BEA over Oracle bid

Icahn criticises BEA over Oracle bid
By Richard Waters in San Francisco

Published: October 27 2007 03:30 | Last updated: October 27 2007 03:30

Activist investor Carl Icahn turned up the heat on BEA Systems on Friday, pressing the embattled software company to let shareholders decide on a $6.7bn bid from Oracle if no better offers emerge.

His call came after BEA had declared that it was quite prepared to let Oracle walk away rather than start negotiations at the price that is currently on the table.

Mr Icahn’s intervention late on Friday came as the two software companies prepared for a weekend of brinkmanship over the unsolicited bid. Oracle has promised to abandon its offer, of $17 a share in cash, by Sunday afternoon if BEA does not either accept the terms or agree to let its shareholders vote on the proposal.

For its part, BEA on Friday released a terse letter that repeated its view that the price “significantly undervalues” the company, and that it therefore assumed the offer would expire this weekend. The biggest independent maker of the “middleware” used to build internet-based applications, BEA has held out of a price of $21 before it will enter negotiations.

Rather than risk losing the premium represented by the Oracle bid, BEA should launch a full auction of the company, Mr Icahn said.

“If a topping bid emerges, then all the better,” he said. “But if no topping bid arises it should be up to the BEA shareholders to decide whether to take the Oracle bid or remain as an independent company.”

One person familiar with the matter said BEA had held discussions with other technology companies since Oracle went public with its offer earlier this month. However, the nature of those discussions, or whether another bidder might emerge, was unclear.

Few rival bidders would be able to match the sort of cost savings from a deal that Oracle could achieve, according to analysts. One of the few that could, IBM, is BEA’s biggest rival, making it likely that any offer would attract anti-trust attention. The scale of the potential savings have led some analysts to suggest that Oracle could pay over $20 a share for BEA and still generate short-term financial benefits for its shareholders.

Copyright The Financial Times Limited 2007

The Future of Software? Think Visual Apps | AMR Research

2007-10-26T07:51:00.000-07:00

The Future of Software? Think Visual Apps | AMR Research

The days of static applications will soon be over, as will 2D screens that look like forms or reports. The future is coming and it’s far more visually appealing.

Since the start of this year, we’ve been tracking a wide range of companies and concepts that will change how we think about and use software. This week, we introduce Forterra Systems and provide some insights from recent meetings with IBM and salesforce.com.

FT.com / Companies / IT - Oracle issues BEA deal ultimatum

2007-10-24T06:42:00.000-07:00

FT.com / Companies / IT - Oracle issues BEA deal ultimatum

Oracle issues BEA deal ultimatum
By Richard Waters in San Francisco

Published: October 24 2007 03:48 | Last updated: October 24 2007 03:48

Oracle on Tuesday threatened to walk away from its proposed acquisition of BEA Systems by Sunday unless the embattled software company agreed to a deal.

While the threat wiped nearly 4 per cent from BEA’s share price by mid-afternoon, the stock still stood above the $17-a-share Oracle offer, pointing to a belief on Wall Street that the brinkmanship had not seriously damped the prospect of a deal and that Oracle or another buyer would still end up paying a higher price.

“Oracle has no interest in a long, drawn-out process to acquire BEA,” Chuck Phillips, Oracle’s president, wrote in a letter addressed to the company’s board on Tuesday. The letter followed what Oracle said had been another rejection by the BEA board of its all-cash offer.

BEA rejected the latest approach, repeating its earlier claim that the offer “seriously undervalues” the company and adding that it was open to “a transaction that appropriately reflects BEA’s value, reached through a reasonable process.”

The attempt to bring a quick end to the BEA battle is in stark contrast to the fight over PeopleSoft, the deal that launched Oracle’s ambitious attempt to force consolidation in parts of the business software market. That fight lasted 18 months, in part because Oracle had to persuade a court to overturn a US antitrust objection to the deal.

Though he started by offering $16 a share for PeopleSoft and insisting at one point that that was his “final” price, Larry Ellison, Oracle’s chief executive officer, eventually paid $26.50 a share to win over the PeopleSoft board.

Justifying the offer for BEA, Mr Phillips said it represented a 21 per cent premium to the price the day before the proposal was announced and a 44 per cent premium to the level before activist investor Carl Icahn disclosed in August that he had bought a stake in the company.

Mr Icahn, BEA’s biggest shareholder and a critic of the company’s management, has been pressuring BEA to find another buyer.

Copyright The Financial Times Limited 2007

SAP to Bolster Business Rule Capabilities With Yasu Buy

2007-10-23T02:45:00.000-07:00

SAP to Bolster Business Rule Capabilities With Yasu Buy

SAP's offer to acquire Yasu will bring business rule engine technology to NetWeaver customers. This smart, if late, acquisition will challenge the status quo of the BRE and business process management technology markets.

Oracle Seeks to Consolidate the Middleware Market With BEA Deal

2007-10-19T13:32:00.000-07:00

Oracle Seeks to Consolidate the Middleware Market With BEA Deal

Oracle's offer to buy BEA Systems will create short-term uncertainty. If the deal proceeds, Oracle will strengthen its position and emerge as the most powerful competitor to IBM, the current middleware market leader.

SAP Software Sales Soar 16% | AMR Research

2007-10-19T07:47:00.000-07:00

SAP Software Sales Soar 16% | AMR Research

SAP posted another strong quarter, as expected, for its third quarter ending September 30. Software and software-related service revenue topped 1.74B euros, up 16% in constant currencies from the year-earlier period. Total revenue was 2.42B euros, up 13% in constant currencies. Translated to dollars at the rate of this writing, SAP’s revenue came in at $3.46B. SAP repeated guidance of 12% to 14% growth for the full year.

There were at least two departures from previous earnings calls. For one, the call was audio only, compared to previous video broadcasts. Secondly, there are normally three presentations: the opening set of financial results from CFO Werner Brandt, additional color from CEO Henning Kagermann, and a review of global sales performance from Deputy CEO Leo Apotheker. If you go to SAP’s website, you will only see Mr. Brandt’s slides.

Mr. Apotheker had several interesting statistics that didn’t make it into the slides or the press release. The number of new contracts increased 22% from the year-earlier period. New customers accounted for 26% of order entry. Midmarket customers represented 34% of the new contracts. The number of deals greater than 5M euros was 20% versus 33% for 3Q06. Last year, there were more deals in the 10M to 20M euro range; Mr. Apotheker said that the 20% figure was more typical. The number of deals less than 1M euros was 46% versus 36% last year. This is due to increased sales to smaller companies.

It would be helpful to have a bit more color on the number of contracts signed. SAP closed the second quarter with 41,200 customers and ended this quarter with 43,400, an increase of 2,200.

Oracle Seeks to Consolidate the Middleware Market With BEA Deal

2007-10-17T13:32:00.000-07:00

FT.com / Companies / US & Canada - Executive departure may delay Oracle plan

2007-10-16T06:46:00.000-07:00

FT.com / Companies / US & Canada - Executive departure may delay Oracle plan

Executive departure may delay Oracle plan
By Richard Waters in San Francisco

Published: October 16 2007 22:46 | Last updated: October 16 2007 22:46

Oracle’s ambitious plan to unify the software applications it assumed through acquisitions appeared on Tuesday to be heading for a delay, following news that the executive in charge of the project is to leave the company.

John Wookey’s elevation two years ago to run Project Fusion put him in one of the most high-profile positions in the company following its purchases of PeopleSoft, Siebel Systems and other smaller companies.

By unifying these companies’ software applications on a single-code base, Fusion is intended to create integration between the various products, making it a central part of Oracle’s long-term strategy to compete with SAP.

Oracle refused to comment on Mr Wookey’s position. Yet one person close to the company said he would leave early next year, after a transitional period. The job of overseeing the Fusion work has been passed to Thomas Kurian, who will combine it with responsibility for Oracle’s middleware, the software layer on which the applications depend.

The shake-up has also led to greater responsibilities for Charles Rozwat, executive vice-president of server technologies.

The upheaval has prompted speculation that Fusion has fallen behind schedule. Large parts of the software seem likely to appear next year as planned, according to the person close to Oracle, though this person stopped short of saying the entire project would be completed next year.

Copyright The Financial Times Limited 2007

SAP haalt neus op voor BEA Systems | Nieuws | Strategie | Computable.nl

2007-10-16T03:26:00.000-07:00

SAP haalt neus op voor BEA Systems | Nieuws | Strategie | Computable.nl

FT.com / Companies / Media & internet - SAP falls on static full-year forecast

2007-10-16T02:31:00.000-07:00

FT.com / Companies / Media & internet - SAP falls on static full-year forecast

SAP falls on static full-year forecast
By Gerrit Wiesmann in Frankfurt

Published: October 18 2007 23:56 | Last updated: October 18 2007 23:56

Shares in Germany’s SAP dropped Thursday after it shied away from raising its full-year forecast even after a solid nine months’ business.

SAP stock closed 3.3 per cent lower at €38.29 after reporting that software sales rose 11 per cent – or 15 per cent at constant currencies – to €715m in the third quarter, while operating income rose 9 per cent to €601m.

Although these figures were in line with analysts’ expectations, investors were rattled by SAP’s refusal to raise its full-year forecast. They now fear the world’s largest maker of business software is preparing for a weaker-than-expected Christmas quarter.

The company’s share price was under pressure last week after it caught investors off guard in announcing the €4.8bn ($6.8bn) takeover of rival Business Objects, a move many saw as an end to a strategy of organic growth.

Henning Kagermann, chief executive, said he expected full-year revenue from software and software-related services to grow at the upper end of the forecast range of 12 per cent to 14 per cent in constant currencies.

Given that growth in the first nine months of the year reached 16 per cent, analysts at Citibank lamented that “implied growth” of about 10 per cent in the all-important fourth quarter looked disappointingly conservative.

The company did not reach its targets in the final quarter last year, a clear sign of the dangers it faces as it tried to broaden its product scope from a saturated market for supplying software to the world’s biggest companies.

In July, August and September, SAP saw overall sales rise 9 per cent – 13 per cent at constant currencies – to €2.4bn. It said it had gained one point in market share and now held 27 per cent.

Copyright The Financial Times Limited 2007

FT.com / Companies / IT - SAP allays fears of Oracle bid war

2007-10-14T05:58:00.000-07:00

FT.com / Companies / IT - SAP allays fears of Oracle bid war

SAP allays fears of Oracle bid war
By Gerrit Wiesmannin Frankfurt

Published: October 14 2007 22:03 | Last updated: October 14 2007 22:03

SAP has sought to allay investor fears about a new bidding rivalry between the German business software maker and US rival Oracle by pledging big acquisitions only to enter new markets rather than to consolidate existing ones.

Henning Kagermann, chief executive, said the offers by SAP for software maker Business Objects and that of Oracle for BEA Systems – both valued at €4.8bn – showed the two groups were still on different paths.

“We bought a company that complements our product line in a fast-growing market in which SAP is not market leader,” he told the Financial Times.

“We believe in complementary deals. We’re not interested in a classic consolidating of markets.”

Investors last week dumped SAP stock for fear the largest business software maker in the world had given up its goal of growing organically to ape Oracle, which has spent $31bn (€21.8bn) on rivals in recent years. The German group’s stock price lost 5 per cent after it announced by far its biggest acquisition to gain a leading position in the market for business analysis programmes, an “end-user” area in which SAP is weak.

But investor fears of a bidding war with Oracle ebbed on Friday when the US group announced an unsolicited bid for BEA Systems, a move to consolidate its position among makers of software to bundle disparate applications. Mr Kagermann said SAP was well positioned in the market for so-called service oriented architecture.

He was not considering a counter offer for BEA, or a bid for any other company in a market that had “so much overlap” with SAP.

He said this was consistent with SAP’s strategy of growing organically in its two core units that provide the software spine or “platform” for corporations, and address the needs of small and medium-sized companies.

But he repeated adverse investor reaction would not stop SAP from committing to more deals in the end-user market. “We’re categorically not excluding further big acquisitions,” he said.

Business Objects specialises in programmes that sift corporate data to help executives decide strategy. Mr Kagermann noted “that many analysts believe that there are still interesting opportunities in this sector”.

Copyright The Financial Times Limited 2007

FT.com / Companies / US & Canada - SAP warns surprise tactics might resurface

2007-10-14T05:56:00.000-07:00

FT.com / Companies / US & Canada - SAP warns surprise tactics might resurface

SAP warns surprise tactics might resurface
By Gerrit Wiesman

Published: October 14 2007 23:48 | Last updated: October 14 2007 23:48

Perhaps Henning Kagermann, the chief executive of German business software maker SAP, senses that catching investors off guard once could be construed as an accident, but that doing it twice could smack of carelessness.

In January, the world’s biggest maker of business software shocked the stock market when it announced that a new internet-based product for small companies would demand computer centres costing an unexpected €400m ($566m).

Last week, the company surprised again by appearing to give up on its strategy of growing organically when it bid €4.8bn ($6.7bn) for Business Objects, a Franco-US company specialising in corporate analysis software.

“Finding the right way to communicate is a challenge,” Mr Kagermann tells the FT.

“We don’t want to surprise the market too much. At the same time, we don’t want to be taken hostage so that we can’t react quickly anymore.”

Having watched SAP stock take a drubbing for the second time running after a big strategic announcement, he almost ruefully concedes: “We always try our best to master this challenge. But sometimes our efforts aren’t perfect.”

It is a delicate mea culpa that follows a week in which SAP shares closed at €39.51 in Frankfurt, 5 per cent below prices seen before the announcement last week of its agreed bid for Business Objects.

The punishment meted out by investors may have been a touch harsher in January, when shares fell almost 7 per cent. But the recent drop still stings.

“I didn’t expect to see such a big market reaction,” Mr Kagermann says.

But he is too self-assured and too convinced of his mission to do more penance than that.

As humbled as he may feel, his message throughout the rest of the interview is clear: “I don’t think we could have done it any other way.”

For one thing, he says stock market reactions in January and October were not comparable.

Investors knew SAP was working on a new so-called mid-market product, what surprised some was the cost of online availability.

“A year before [the announcement], I had flagged the fact that we no longer excluded on-demand solutions for [so-called] ERP [enterprise resource planning] applications,” he says – and it was only later that SAP could forecast the cost of the move.

Flagging a major acquisition would, to boot, have been counter-productive, he says.

“It wouldn’t have been very helpful to say, ‘We’re looking at acquisitions in this and this area’ because there weren’t that many targets around.”

Mr Kagermann stresses that investors are wrong to see an end to SAP’s organic-growth strategy: It will continue in the core areas of providing the software spine to big corporations, and addressing the needs of smaller companies.

“The business user segment is a different field,” he says. A fast-growing segment in which SAP was not market leader, it called for a different approach.

“We want to buy innovation,” he says, signalling an appetite for more.

At the same time, he says SAP is not embarking on an acquisitive strategy in this field akin to its American rival Oracle.

It has spent $31bn in the three years to buy rivals and consolidate the various markets it is in.

The top priority now is to integrate Business Objects. Mr Kagermann hopes this will be done by 2009.

“By then we should have been able to convince the market that this was the right decision,” he says.

But he cautions: “You can’t pass up opportunities just because you feel you need a quarter or half a year to prepare for them.”

Perhaps he fears that shocking shareholders a third time would appear deliberate. Now they have been warned.

Copyright The Financial Times Limited 2007

FT.com / Companies / IT - Oracle launches $6.7bn bid for BEA

2007-10-12T15:19:00.000-07:00

FT.com / Companies / IT - Oracle launches $6.7bn bid for BEA

Oracle launches $6.7bn bid for BEA
By Kevin Allison in San Francisco and Maija Palmer in London

Published: October 12 2007 13:33 | Last updated: October 12 2007 23:38

Oracle, the US business software company, on Friday made an unsolicited $6.7bn (£3.3bn) bid for BEA Systems, a San Jose-based software maker that has come under pressure from Carl Icahn, the billionaire activist investor.

The deal comes as Oracle is trying to overtake rivals SAP and IBM by pursuing an aggressive acquisitions strategy.

BEA rebuffed the offer, arguing that it “significantly undervalues” the company.

Shares in BEA rose above Oracle’s offer price of $17 a share, indicating investor hopes of an increased bid. On Friday, shares in BEA closed more than 38 per cent higher at $18.82.

Oracle’s $17-a-share offer represented a 25 per cent premium to BEA’s share price at the close of business on Thursday.

“We have made a serious proposal including a substantial premium for BEA,” said Charles Phillips, Oracle president. “We believe our all-cash offer provides the best value for BEA’s shareholders and the best home for BEA’s employees and customers.”

If successful, the deal would represent Oracle’s biggest takeover since its $10.3bn acquisition of PeopleSoft three years ago.

It would also mark the latest in a string of deals in the software sector this year. SAP earlier this week announced plans to buy Business Objects, the Franco-US software company, for $6.7bn.

Shares in Oracle edged 2 cents lower to $22.44 on Friday in New York.

Mr Icahn last month sparked a fresh wave of takeover speculation when he reported that he held more than 8 per cent of BEA shares and called for the company to be sold.

The corporate raider has since increased his stake in the company to 13 per cent. Mr Icahn did not return a request for comment.

Shares in BEA, which makes middleware, or software that connects business functions such as billing and supply chain management to back-office databases, fell more than 30 per cent between October and March. They began to rise again in August after the company reported its second-quarter results.

BEA has been the subject of takeover speculation since the beginning of the technology downturn in 2001.

The company was an early leader in the middleware market but it has struggled to gain momentum in recent years amid strong competition from rivals such as Oracle and SAP, both of which have moved to bolster their middleware offerings.

Charles di Bona, an analyst at Sanford Bernstein, said the deal’s valuation was “financially unattractive” for Oracle at $17 a share. However, Brent Thill, an analyst at Citigroup, said a price of up to $20 a share could still make financial sense for Oracle, assuming big cost cuts at BEA. Mr di Bona said he did not expect a rival bidder to emerge.

Copyright The Financial Times Limited 2007

SAP Customers on Business Objects; salesforce.com’s VC Fund | AMR Research

2007-10-12T01:44:00.000-07:00

SAP Customers on Business Objects; salesforce.com’s VC Fund | AMR Research

SAP Customers on Business Objects
by Bruce Richardson

By now, you know that SAP is buying Business Objects. (See “SAP Buys Business Objects” below in News of Note for more details.) When the deal is completed in 1Q08, SAP will have the broadest business intelligence / performance management (BI/PM) offering in the world. That’s both good news and bad news. If anything, SAP will have too many products.

I spent two days last week with 15 IT executives at an SAP event, and they all wanted to talk about the Business Objects deal. Ironically, the last time I saw most of these people was the week after Oracle announced that it was buying Hyperion for $3.3B. Many were Hyperion customers, too.

When I asked how many had Business Objects software in their companies, more than two-thirds of the executives raised their hand. I then asked whether they had Hyperion, and the same people raised their hand again. It will be interesting to see whether these executives can get their companies to adopt SAP-Business Objects as their standard or if they will continue to support a multivendor BI/PM world.

When Oracle bought Hyperion, several of the SAP customers I talked with were looking at big Hyperion upgrade bills. They were hoping that SAP would soon unveil plans for bolstering its business consolidation software. Six months later, they are still waiting for SAP to declare its plans for weaning them off of Hyperion.

SAP won’t be able to discuss its plans for Business Objects until the deal closes. The customers I talked with were concerned about which of the SAP and Business Objects products will survive. This is a bit unsettling for those that have already started down the Pilot Software or OutlookSoft path.

At the SAP event, several CIOs told me that their Business Objects reps were filling their BlackBerrys with invitations to seminars or requests to meet. I would expect the Business Objects reps to be very aggressive; I’m sure all good salespeople are racing to drain their pipelines before the deal closes.

What should SAP customers do for BI/PM? In next week’s First Thing Monday, we’ll look at areas SAP needs to address for this to work.

Crossgate Challenges B2B Market With Tight Alliance With SAP

2007-10-11T13:51:00.000-07:00

Crossgate Challenges B2B Market With Tight Alliance With SAP

Crossgate has announced an alliance with SAP that has the potential to change the vendor dynamics in the business-to-business infrastructure market. But crossgate will need to grow rapidly to ensure market success.

SAP's Planned Business Objects Buy Signals Strategic Shift

2007-10-10T13:35:00.000-07:00

SAP's Planned Business Objects Buy Signals Strategic Shift

SAP's plan to buy Business Objects will put SAP into the lead for revenue from business intelligence platform products. However, many integration and execution challenges lie ahead.

Übernahme von Business Objects SAP befeuert Software-Krieg - Wirtschaft - sueddeutsche.de

2007-10-08T14:13:00.000-07:00

Übernahme von Business Objects SAP befeuert Software-Krieg - Wirtschaft - sueddeutsche.de

Im Duell mit Konkurrent Oracle rüstet SAP auf: Der deutsche Softwarekonzern stemmt für knapp fünf Milliarden Euro die teuerste Übernahme seiner Geschichte.

Logistiek.nl - SAP koopt Business Objects voor 4,6 miljard

2007-10-08T07:46:00.000-07:00

Logistiek.nl - SAP koopt Business Objects voor 4,6 miljard

FT.com / Companies / Europe - A new mantra to explain SAP purchase

2007-10-08T06:04:00.000-07:00

FT.com / Companies / Europe - A new mantra to explain SAP purchase

A new mantra to explain SAP purchase
By Gerrit Wiesmann

Published: October 8 2007 20:20 | Last updated: October 8 2007 20:20

Having spent years stressing organic growth over the acquisitive strategy of arch-rival Oracle, the departure of German business-software maker SAP from its big corporate mantra proved surprisingly matter-of-fact.

But, as so often with Henning Kagermann, chief executive of the world’s largest maker of business software, it was not so much that he was changing tack – the world was at last beginning to understand things he said all along.

The €4.8bn ($6.7bn) agreed takeover offer for Franco-American software group Business Objects was entirely consistent with SAP’s goals to grow in three sectors, Mr Kagermann said in Frankfurt.

Organic growth was – and would remain – the mantra for the two areas that had been the focus of attention for the past four years: revamping the software backbone that all companies need, and luring smaller businesses.

In both areas, buying other companies made no sense because SAP was a clear market leader and so confident about its technological leadership that it saw no need for any outside help, SAP’s chief executive explained.

But, apparently forgotten by everyone, except Mr Kagermann, was SAP’s third ambition: to diversify from supplying software backbones, so-called business-process platforms, to selling programmes for end-users. And this, Mr Kagermann implied, had always been a very different proposition. So-called “business user solutions are very different”, he said, noting that this market is growing and consolidating extremely quickly.

“We have some innovation and know-how [in this field], but we have to accept that there are other [market] leaders,” he said, noting a slew of smallish companies that had long focused on addressing specialised user needs.

“People expect us to embrace the latest and coolest technology,” Mr Kagermann said. That’s why SAP decided it would be better quickly to buy in potential big sellers rather than start time-consuming development.

One of these is compiling and sifting through corporate data to improve performance. According to SAP, Business Objects is the clearleader in this market with annual sales of €10bn and yearly growth of 10 per cent.

Mr Kagermann said adverse reaction by investors – SAP stock fell 4 per cent to €39.95 – had more to do with the fact that “the market is not educated” than with any inconsistency at SAP. It would in time come around.

SAP had in past years already bought software makers Virsa and OutlookSoft to offer its customers, respectively, integrated programmes to check legal compliance and assess corporate performance. But in spending $200m on OutlookSoft, for example, SAP long made these moves look part of a pocket-money financed sideshow that would not lay claim to corporate resources to any noticeable extent.

Having announced a deal 34 times bigger than the OulookSoft move this spring, Mr Kagermann strongly hinted that the time of trifling “fill-in acquisitions” had ended, presaging fill-in purchases easily above the billion mark.

SAP had proven it could grow organically and that it could innovate. “Now we are on our way to proving that we can make larger acquisitions,” he said, declining to name what fields are next.

“There are other areas in which such a move would make sense,” Mr Kagermann said, noting that ever more companies wanted integrated software “But [the acquisition of Business Objects] is by far the most important.”

Copyright The Financial Times Limited 2007

FT.com / Companies / Europe - SAP signals hunger for deals

2007-10-08T03:22:00.000-07:00

FT.com / Companies / Europe - SAP signals hunger for deals

SAP signals hunger for deals
By Gerrit Wiesmann in Frankfurt and Pan Kwan Yuk in Paris

Published: October 8 2007 20:20 | Last updated: October 8 2007 20:20

Germany’s SAP, the world’s largest maker of business software, Monday signalled it could look at further acquisitions even as its departure from an avowed strategy of organic growth sent investors running for cover.

Outlining an agreed takeover offer worth €4.8bn ($6.7bn) for Franco-American software house Business Objects, SAP chief executive Henning Kagermann said SAP was on its “way to proving we can make larger acquisitions”.

The company’s announcement late Sunday that it was buying the market leader in programmes to collect and sift corporate data knocked 4 per cent of SAP stock in trading Monday.

The shares closed at €39.95 in Frankfurt.

Investors were rattled because Mr Kagermann had for years underlined SAP’s superiority to US rival Oracle by pointing out the German company was focused on organic growth – not dealmaking.

To catch SAP, Oracle has spent billions on buying rival makers of central business programmes as well as end-user suppliers such as Hyperion, a Business Objects rival, it bought for $3.3bn (€2.3bn) this spring.

But at a press conference in Frankfurt, Mr Kagermann said the largest acquisition in SAP’s history was not a reaction to Oracle.

“We have not seen … that Oracle is gaining market share,” he stressed.

He said the move was consistent with SAP’s strategy outlined as far back as 2003. Having “done our homework” in its two core sectors, which would still grow organically, SAP now had time to look at end-users’ needs.

As demand for traditional manufacturing and supply-chain management slows, SAP said that sales of business analysis software were growing at around 10 per cent per year from current annual sales of about €10bn.

In buying Business Objects, SAP would be able to offer its clients more integrated features, Mr Kagermann said, stressing that demand for such end-user features would likely continue to rise over the next years.

“There are other areas in which such a move would make sense,” Mr Kagermann said, noting that ever more companies wanted integrated software. “But [the acquisition of Business Objects] is by far the most important.”

SAP has spent the past years reinventing its so-called business process platform, the nervous systems of companies’ IT systems, and making a foray into the market for mid-sized companies, which critics argue came late.

Copyright The Financial Times Limited 2007

FT.com / Companies / IT - SAP buys Business Objects for €4.8bn

2007-10-08T01:41:00.000-07:00

FT.com / Companies / IT - SAP buys Business Objects for €4.8bn

SAP buys Business Objects for €4.8bn
By Gerrit Wiesmann in Frankfurt and Lina Saigol in London

Published: October 7 2007 21:55 | Last updated: October 8 2007 00:07

Germany’s SAP on Sunday night launched a €4.8bn (£3.3bn) bid for Franco-American software maker Business Objects in what seems a departure from its long-term strategy to expand only organically and by smaller purchases.

The world’s largest maker of business software said it would offer €42 a share for the company, which specialises in business-analysis packages; a 20 per cent premium to Friday’s closing price in Paris.

The decision was seen as a response by SAP to a purchase by Oracle, its US archrival, which in March bought Hyperion, a smaller rival of Business Objects, for $3.3bn (£1.6bn).

SAP denied its agreed bid was a change of tack. Henning Kagermann, chief executive, said the company had bought interesting applications with “end-user appeal” before. SAP would continue to expand its core business organically.

In a conference call, he said that was consistent with SAP’s 2003 strategy statement. After changes to the main software platform, SAP was looking at individual applications.

Mr Kagermann said this opportunity to combine “market leaders in their respective domains” was “an opportunity unparalleled” in the German group’s history. He declined to give details of new products.

SAP said the move, financed by cash and debt, would go through if supported by 50.01 per cent of Business Objects’ shareholders. It hopes to close the transaction in the first quarter of next year.

The deal would mildly dilute earnings in the coming year, but boost profits in 2009 and beyond. “Financially and not just strategically, this is a good deal,” Mr Kagermann said.

It comes at a sensitive time for the German software maker. It is spending €400m to introduce software for small businesses, which will, for the first time, be hosted on the web by its own computer centres.

Copyright The Financial Times Limited 2007

SAP - SAP to Acquire Business Objects in Friendly Takeover;Combined Companies to Accelerate Leadership for Business User Applications

2007-10-07T03:41:00.000-07:00

SAP - SAP to Acquire Business Objects in Friendly Takeover;Combined Companies to Accelerate Leadership for Business User Applications

Software Potpourri for $500, Alex | AMR Research

2007-09-28T07:56:00.000-07:00

Software Potpourri for $500, Alex | AMR Research

Software potpourri could be a future category on Jeopardy, “America’s favorite quiz show.” If you’ve never seen the TV show, a contestant picks a one of 30 blocks on a six column by five row grid. Game show host Alex Trebek reads the answer. If the contestant gets it right, he/she collects the points for the correct response: “American History for $100, Alex.” If not, the other two competitors can respond. For example, the answer might be: “Team that won the World Series in 2004.” Of course, the correct response would be “Who are the Boston Red Sox?”

In addition to the television program, there is a home version, an online game on the website, and even a version for your cell phone. While we don’t have the space to replicate the whole six columns of categories and five rows of answers, here is a chance to play FTM Jeopardy.

SAP: Big Businesses Won't Be Interested In On Demand ERP > Information Management > Intelligent Enterprise: Better Insight for Business Decisions

2007-09-22T14:05:00.000-07:00

SAP: Big Businesses Won't Be Interested In On Demand ERP > Information Management > Intelligent Enterprise: Better Insight for Business Decisions

SAP Business ByDesign — One Step at a Time | The Intelligent Enterprise Blog

2007-09-21T14:34:00.000-07:00

SAP Business ByDesign — One Step at a Time | The Intelligent Enterprise Blog

FTD.de - Kommentare - Leitartikel - SAP - Mit den Kleinen wachsen

2007-09-20T13:11:00.000-07:00

FTD.de - Kommentare - Leitartikel - SAP - Mit den Kleinen wachsen

Der Softwarekonzern SAP ist auf dem richtigen Weg: Das vorgestellte neue Produkt für den Mittelstand eröffnet dem weltweit führenden Anbieter von Unternehmenssoftware neue Wachstumsperspektiven. Diese Perspektiven sind nötig, denn im Geschäft mit Großkunden ist der Spielraum ausgereizt.

FT.com / Technology - Control of the supply chain turns critical

2007-09-19T02:59:00.000-07:00

FT.com / Technology - Control of the supply chain turns critical

Control of the supply chain turns critical
By Stephen Pritchard

Published: September 19 2007 00:54 | Last updated: September 19 2007 00:54

An efficient supply chain is a prize worth striving for. According to Accenture, the consultancy firm, “supply chain leadership” can increase a company’s market capitalisation by between 7 and 26 per cent above the industry average.

But for a business, even competing for that prize demands a significant investment in resources. In sectors such as consumer goods and retailing, established companies have already achieved the easiest supply chain efficiencies.

“Things that are likely to move the dial have to make a significant difference, rather than be technology experiments,” says Stephen Proud, a partner in Accenture’s supply chain practice.

None the less, an efficient supply chain is a must for a widening range of businesses. Fashion, hi-tech and grocery retailers grasped early on the importance of ensuring the right stock reached the right store at the right time.

No one wants a warehouse full of summer dresses in October, or indeed shelves of last season’s mobile phones in the run-up to Christmas. But the supply chain is now moving up the agenda in slower-moving sectors such as heavy manufacturing.

Effective supply chain management is the only way to make efficient use of global sourcing strategies and especially, the huge manufacturing capacity of China and the Pacific Rim.

Although globalisation has reduced production costs in a wide range of sectors, the trend to source components or even finished goods from China and elsewhere has made the supply chain manager’s task far harder.

“Our internal systems handle more than 700 suppliers,” says Christian Verstraete, worldwide supply chain expert at Hewlett-Packard. “We have to be able to ex-change messages not just with them, but with their suppliers.”

Supply chain managers in many sectors are looking for greater visibility of what is happening in their supply chains and faster access to more accurate data.

This means that if there is an unexpected event, be it storms affecting shipping or a production shortfall, companies can divert stocks or bring in alternative suppliers.

“Companies are not just asking suppliers why there is a problem with an order,” says Sanjiv Sidu, president of supply chain management software vendor i2. “They are asking: ‘When did you first know, and why did you surprise me?’”

In sectors such as retail, supply chain problems lead to “stock outs” or empty shelves, which send customers elsewhere. In heavy or complex manufacturing, supply chain problems can lead to cancelled orders running into billions of dollars, or severe penalties for late delivery.

As manufacturers move away from vertically integrated production, the supply chain suddenly becomes critical.

“In aerospace and defence, we are 10 years behind the hi-tech or even automotive sectors and how we improve the performance of our supply chain is quite a challenge,” explains Bill Black, chief quality officer at aerospace manufacturer EADS.

“The cost of running our supply chain logistics is minor, set against the $100m cost of an aircraft. But the cost of failure is enormous.”

About 80 per cent of the cost of an aircraft is accounted for by suppliers and partners,” says Black, making EADS “architects of complex products”.

“I need to know if an event can affect our master schedule and that means that I need to know what is happening, not just with my tier one, but with tier four, five or six suppliers.”

The increasing demands of customers, as well as the drive to cut supply costs, are causing manufacturing companies in particular to renew their investment in supply chain technologies.

But efficient supply chain technology can also open up business opportunities.

For Kautex-Unipart, an automotive component manufacturer based in Coventry, in the UK, supplying BMW’s Mini production line with fuel tanks came with an onerous condition attached. The company had to achieve 100 per cent delivery accuracy, matched to BMW’s JIS 5000 manufacturing process.

Kautex-Unipart is BMW’s sole tank supplier for the Mini plant at Cowley, in Oxfordshire. It has to supply 250,000 tanks each year, in exactly the order specified by BMW, for each of the 13 tanks used on the Mini car.

The tanks even have to be stored the right way round in the shipping containers. If they are not, BMW’s production robots cannot fit them.

The company used a photographic identification system, Visidot, from Israeli vendor Image ID to ensure that tanks can only leave Coventry if the order exactly matches BMW’s requirements.

“Getting supply wrong is the cardinal sin in the automotive industry,” says Jan Parylo, IT manager at Kautex-Unipart. “But the BMW contract has also brought us benefits. We used to have 24 to 48 hours’ visibility of orders. Now BMW can give us six days. As a result, we have more flexibility in our manufacturing and supply processes.”

Visidot is one of a number of new technologies that are helping businesses improve supply chain visibility and the speed at which they collect supply chain data. Others include radio frequency identity (RFID) tags as well as three-dimensional and even colour bar codes.

“In the past, for manufacturers [supply chain] visibility stopped at the batch or lot level,” says Krish Mantripragada, head of RFID and Auto-ID solutions at enterprise software vendor, SAP. “But recalls and quality issues are putting a lot of pressure on companies to make their data more granular, and to be able to track single items.”

The response to RFID, however, differs from industry to industry. Mr Mantripragada says that interest is greatest in sectors such as pharmaceuticals, aerospace and defence “where complete traceability and product integrity are the priorities”.

In other industries, some companies are looking to use RFID to make their supply chains more efficient, but they are finding the costs to be higher than expected. The costs of RFID tags may be heading downwards, but there is far more to a supply chain project than the tags alone.

RFID, for example, produces a unique serial number for each product, while conventional tracking systems may be designed just to record a product’s stock code, and assume that each product with the same code is identical.

“It is partly an infrastructure problem, with the need to deploy sensors. But the second problem is serialised data management,” says Mr Mantripragada. “Many production processes batch supplies, so business processes need to adapt to handle serialisation.”

Business processes that are already designed around items with individual serial numbers often lend themselves best to technologies such as RFID; for others, bar codes or similar scanning technologies might be good enough for some time to come.

“We are certainly not wedded to RFID as a technology. If the project is about better serialisation and that could be done as well with coloured dots, that would not be an issue. And there are environments where radio frequency technologies are not applicable,” says Mr Proud at Accenture.

For businesses considering their supply chains, the most important step is to look at the business process and how it could be improved, and then pick the technology that fits best.

Nick Costides, portfolio manager for UPS Supply Chain Solutions, based in Atlanta, says: “As an express delivery company, barcodes meet our needs. But in the long term, there are opportunities. For example, if every item in a warehouse had an RFID tag, it would make taking physical inventories much easier.”

Companies also need to consider how access to item-level data, or indeed more up-to-date status information from the supply chain will support decision making.

“Distribution centre operators clearly have different needs from C-level executives,” says Mr Costides. “We give them the information they want to see, so they are not overwhelmed.”

Fortunately, modern enterprise IT systems have the capacity to handle the increased data coming in from systems such as RFID. But technologists caution against relying on a single change to improve supply chain performance.

“There is not one killer application but rather a series of incremental steps before we see the ground shift,” says SAP’s Mr Mantripragada. “Some customers have seen significant returns on investment from better data accuracy and visibility, but no two customer scenarios are the same.”

Copyright The Financial Times Limited 2007

pVelocity: Software Plumber for Profit Leakage | AMR Research

2007-09-14T03:47:00.000-07:00

pVelocity: Software Plumber for Profit Leakage | AMR Research

Some Northern Exposure on Software Innovation | AMR Research

2007-09-14T03:39:00.000-07:00

Some Northern Exposure on Software Innovation | AMR Research

We recently spent a couple of days in Toronto to meet with a leading Canadian venture firm and three software companies. While it had been years since my last trip to Canada, the combination of beautiful late summer weather and the buzz around the start of the International Film Festival made Toronto the ideal September destination.

The trip was proposed by Derek Smyth, a partner at EdgeStone Capital Partners, whom we first met when he was COO at Ironside Technologies, one of the e-commerce pioneers. Ironside was acquired by SSA Global Technologies in June 2003. While at Ironside, Mr. Smyth helped grow the company from zero to C$50M (Canadian dollars) in four years.

While many U.S. venture firms shy away from enterprise software startups, EdgeStone focuses almost exclusively on this sector. In fact, the firm’s preferred role is to be the lead investor in early stage companies by taking a healthy equity position in exchange for cash and expertise.

Best early bets: SlipStream, Taleo, and Workbrain

The EdgeStone Capital Venture Fund I raised C$104M in 2000, which as been invested in 15 companies. Key investments included Workbrain, Taleo, and SlipStream Data. Workbrain and Taleo went on to have successful initial public offerings, while SlipStream was acquired by Research in Motion (RIM) (Blackberry owners) in July 2006. To date, that fund has returned 1.6 times in invested capital to investors, ranking it near the top of all North American tech venture firms in the post-bubble period.

Four years later, EdgeStone raised C$108M for Fund II. I was struck by two differences between the portfolios of the two funds: the newer fund broadened EdgeStone’s portfolio outside of enterprise software and beyond Canada, too. To date, Fund II has been invested in eight companies. There is capital available for one or two additional investments.

The Fund II portfolio includes Solace Systems, pVelocity, Shoplogix, CiRBA, RedMere Technology, Varicent Software, MusicIP, and RapidMind. On our trip, we met with pVelocity and Shoplogix (see below). The others seem intriguing, too. Solace is in the XML routing market. CiRBA, with its virtualization software, would love to be the next VMware. RedMere is an Irish fabless semiconductor company that serves the consumer electronics and multimedia markets. Varicent provides incentive management software. MusicIP is a digital-music platform, which helps listeners discover similar types of artists that map to their favorite music. RapidMind provides development tools for multicore platforms.

Steady deal flow, fewer VCs, tighter pockets

EdgeStone has begun raising money for Fund III. The goal is to build a C$150M fund. The Canadian VC market has changed dramatically since Fund I. In 2001, there were 55 early stage Canadian VCs; now there are 12. More than C$4B was raised in 2001 compared to C$1.5B in 2006. Despite the contraction, deal flow has remained relatively constant over the same period. EdgeStone looks at 150 to 160 deals a year, before settling on the two or three best.

One advantage of investing north of the border is the R&D tax credits that the Canadian government provides for early-stage companies. This can result in a 45% lower net cash cost compared to their U.S. counterparts. In some provinces like Quebec, the net cash cost delta is even greater. On the flip side, the primary challenge for firms like EdgeStone is finding experienced CEOs to run the startups. As a result, Canada has a greater percentage of first-time CEOs.

EdgeStone is well-positioned to take advantage of gyrations in the tech market. Its parent company is GMP Capital Trust, one of Canada’s leading investment banks with a strong technology investment practice. In addition to its venture group, EdgeStone has a buyout/later stage equity team. That side of the firm has raised nearly C$1.35B for its three funds. These have gotten progressively larger. Fund I raised C$179M in March 2000. Fund II took in C$361M in October 2003. Fund III generated C$800M in summer 2006.

Meet the portfolio companies

Our journey took us to two companies in EdgeStone’s portfolio, three if you count the Shoplogix customer we also met with, and one company not in its portfolio, but with which Mr. Smyth is highly enamored. For each of their stories, click the following links:

“pVelocity: Software Plumber for Profit Leakage”
“Shoplogix: A Single Version of ‘Machine Truth’”
“Panorama: Silicon Valley Meets Toronto”.

SupplyScape Adds New CEO to Team and $10M in Financing

We also recently met with Mark O’Connell on his sixth day as CEO of SupplyScape, the fast-growing provider of software and services for the life sciences industry. If the name is familiar, Mr. O’Connell was the former CEO of MatrixOne, a leading product lifecycle management (PLM) software company. At MatrixOne, he led the company through several milestones: a successful IPO in March 2000; achieving the status as the largest independent provider of PLM software ($145M in revenue); and the successful sale of the company to Dassault Systemes for $408M last year. Mr. O’Connell joins SupplyScape as president and CEO.

On the same day, SupplyScape also announced it raised $10M in Series C financing from its existing investors: IDG Ventures Boston, North Bridge Venture Partners, Pilot House Ventures, Bethesda Partners, and Pfizer Strategic Investments Group.

SupplyScape is an interesting company to watch. The 70-person company has emerged as the software leader in the nascent e-pedigree market. E-pedigree is designed to secure the distribution channel for pharmaceuticals as finished goods move from the manufacturer to the dispensing point (such as pharmacy or hospital) and guard against counterfeit products and diversion. To date, the company has 63 customers, including many of the best-known pharmaceutical manufacturers and top retailers and pharmacies.

Coming next week: salesforce’s Dreamforce and SAP’s A1S launch

By the time you read this, we will be at salesforce.com’s annual Dreamforce user conference in San Francisco. This event has traditionally provided a sneak preview of the future of software. From there, we head to Manhattan for the official launch of SAP’s new business offering, code-named A1S, for the small and midsize market.

As always, I welcome your feedback and ideas. Is EdgeStone smart to focus on the enterprise software market? If you were a gambler and could only pick one, would you bet your retirement fund or kids’ college fund on pVelocity, Shoplogix, or Panorama? Will Benioff surprise the world at next week’s Dreamforce? Is A1S truly designed exclusively for the SMB market or will this ultimately become the R/3 replacement product? Let me know—brichardson@amrresearch.com.

--------------------------------------------------------------------------------
© Copyright by AMR Research, Inc.
AMR Research® is a registered trademark of AMR Research, Inc.

Bridgestream Buy Positions Oracle as a Top IAM Suite Vendor

2007-09-11T12:49:00.000-07:00

Bridgestream Buy Positions Oracle as a Top IAM Suite Vendor

A complete identity and access management solution must include a role mining and role life cycle management capability. By acquiring the role management vendor Bridgestream, Oracle moves to the head of the IAM suite vendors.

Oracle's acquisition of Bridgestream, a Gartner 2005 "Cool Vendor," is the first attempt by a large user-provisioning vendor to enter the broader IAM market, which Gartner defines as including user provisioning, role management for enterprises (RME), identity auditing and resource administration. Three smaller user-provisioning vendors — Beta Systems, Courion and Voelker Informatik — already have their own RME capability. Other large software vendors — such as BMC, CA, IBM, Novell and Sun — have partnered with RME vendors (including Bridgestream) for some time.

MCA Solutions: Weekdays With Morris… and SAP | AMR Research

2007-09-07T12:58:00.000-07:00

MCA Solutions: Weekdays With Morris… and SAP | AMR Research

Over the last few months, we have had a series of meetings with executives from MCA Solutions, one of the pioneers in the service parts optimization space. We have also had the chance to interview four customers, including several that were among the first in their industry to use MCA, and another that qualifies as the most recent to go live.

Google “MCA” and the search engine returns lots of listing for various art museums, a club for Ford Mustang fans, the Music Corporation of America, the UK Maritime and Coastguard Agency, and a company offering “superior clay roofing tile.”

Communispace: Harnessing the Wisdom of Digital Crowds | AMR Research

2007-08-30T13:04:00.000-07:00

Communispace: Harnessing the Wisdom of Digital Crowds | AMR Research

Workday | Workday offers on-demand Enterprise Business Services for HR, Financial, Business Measurement, Resource Management and Revenue Management www.workday.com

2007-08-24T04:16:00.000-07:00

Workday | Workday offers on-demand Enterprise Business Services for HR, Financial, Business Measurement, Resource Management and Revenue Management www.workday.com

Workday Releases Beta Of Its On-Demand Financial Applications -- Workday -- InformationWeek

2007-08-20T04:07:00.000-07:00

Workday Releases Beta Of Its On-Demand Financial Applications -- Workday -- InformationWeek

The startup, launched by PeopleSoft founder Dave Duffield, faces growing competition in the market for subscription-based ERP software.

DocuPortal realisiert effektivere Kommunikation bei der Sitrion Systems GmbH

2007-08-10T05:25:00.000-07:00

DocuPortal realisiert effektivere Kommunikation bei der Sitrion Systems GmbH

IDC: SCM is Hot

2007-08-06T13:43:00.000-07:00

IDC: SCM is Hot

The View from Oracle OpenWorld in Shanghai (AMR)

2007-08-03T04:36:00.000-07:00

The View from Oracle OpenWorld in Shanghai
by Bruce Richardson - Chief Research Officer

It was 4:10 a.m. on Sunday when the alarm clock went off. By 5:00 a.m. I was at Logan Airport, only to find that the 6:30 a.m. flight to Chicago was delayed for an hour. Even at that early hour, Logan was pure bedlam.

We managed to make up some of that delay on the flight to O’Hare. Despite my initial concerns, we had ample time to make the connecting flight to Shanghai. We left at 10:30 a.m. central time and arrived the following afternoon just after 2:00 p.m. Despite losing a day in the air, we never encountered night. We followed the sun as the flight took us over Wisconsin, Saskatchewan, British Columbia, Alaska, the International Date Line, the edge of Russia, and northern Asia.

As we approached the airport, I was struck by how the water and the sky were the same color, a burnt reddish brown. I had been warned by a colleague about the increased pollution in Shanghai, but had not expected this. Fortunately, that color palette was confined to the airport. Shanghai, though, was in the midst of the worst heat wave in over 60 years. During the time I’ve been here, the daytime temperature has hovered around 100 degrees (38 degrees centigrade). Right now, it’s 100 degrees, with 42% humidity and a dew point reading of 77%. According to weather.com, it “feels like 113.” Nice.

While there was a bus to the conference, I preferred the six-minute walk from the Shangri-La Hotel to the Shanghai International Convention Centre. As you might surmise, this was always a bad idea. I’d arrive for a meeting looking like I had just lost a water balloon fight. Even at midnight, the city was too warm and muggy.

Outside of the initial flight delay and the hazy, hot weather, the only other disappointment was the discovery that the new Verizon BlackBerry 8830 World Edition Smartphone was hardly the global tool I was promised. Despite numerous calls to my IT department and Verizon, I could not send or receive e-mails or use the browser. The phone and text messaging worked great, but that’s not really the point of the BlackBerry. The BlackBerry issue seemed to be confined to Verizon and this particular model. Ironically, the phone had turned itself back on after I had put it away—it must have touched something inside my briefcase while flashing the “press any key to abort” message while I was turning it off. When I got to Shanghai, I had received a dozen e-mails while traversing North American airspace, but nothing after that. Maddening.

China’s economy hotter than weather: +11.9% for 2Q07, +11.5% for first half

The Shangri-La sits high over the Huangpu River. The other side of the river features a diverse mix of older European-style buildings from the first few decades of the twentieth century and new Manhattan-like skyscrapers. One Oracle executive told me that the area where my hotel sits was a rice paddy only 10 or 15 years ago. It seems hard to believe until you consider the rapid rise of China’s economy. A few weeks ago the Chinese government reported that the economy grew 11.9% in the second quarter and 11.5% for the first half of the year.

Like the architecture, the China of today is a mix of the old and the new. While the business pages of the Shanghai Daily were trumpeting the $15B invested in computer equipment and telecommunications manufacturing in the first half of this year, the front page focused on the continuing attempts to rescue 69 miners trapped in a flooded coal pit. As the paper pointed out, the Chinese coal industry is the world’s most dangerous, leading to an average of 13 deaths per day. As I write this, every few minutes a barge loaded with coal floats by on the Huangpu.

Oracle in China: 1,500+ employees, 800+ partners

I had not been to China since February 2004. Ironically, my host for that trip was Agile Software, now part of the extended Oracle family. As I said last week, I came here to get a better understanding of the Chinese software market, not to hear any new product announcements. Outside of a detailed presentation on the recently announced 11g database, Oracle made no product announcements. The primary news was the announcement of plans to open a new Oracle Asia Research and Development Center (OARDC) in Shanghai. This will be the third in China. Oracle opened the first development center in Shenzhen in June 2002 and the second in Beijing in October 2003.

Oracle OpenWorld Asia Pacific 2007 drew an estimated 8,000 attendees to Shanghai this week. This was twice the attendance of the previous event held here three years ago. About 87% of the attendees were drawn from China, Hong Kong, and Taiwan. Most were partners or employees. Oracle has more than 1,500 employees spread across 13 branch offices in China—there were eight offices a year ago. These resources are backed by more than 800 partners. The vast majority are local firms. These partners are very important to the region as the channel accounts for more than 90% of Oracle’s revenue here.

Unlike the U.S. market, it is harder to discern between independent software vendors (ISVs), resellers, and integrators in China. Often partners play multiple roles. Some also embed Oracle software into devices and other products. To draw ISVs to Oracle database and middleware products, Oracle has opened two partner solution centers that are co-located with the existing OARDCs in Beijing and Shenzhen. To date, more than 150 ISVs have been through the centers to port their applications to Oracle technologies and/or integrate with Oracle applications.

Ironically, the ISV partners include UFIDA Software and Kingdee International Software Group Company Limited. Both are fierce Oracle competitors in the ERP market for small and midsize businesses. Kingdee has been rumored to be an Oracle acquisition target.

7,000+ database customers, 700+ apps customers

One executive estimated that OpenWorld drew more than 3,600 customers and prospects. This figure may be a little low as many business partners paid for their customers and prospects to attend. Nonetheless, this would represent a sizeable number of Oracle’s 7,000 customers in China. Nearly all use its database.

It seems that the large banking, telecommunications, utilities, and energy firms use Oracle’s E-Business Suite, while smaller industrial manufacturers and energy producers and small and large engineering and construction companies deploy Oracle’s J.D. Edwards software. There are some installations of Siebel and PeopleSoft though Oracle executives said that these companies had very little presence here until after Oracle acquired them. To emphasize the point, one executive said Siebel had 16 employees here before Oracle purchased the firm.

Oracle has high hopes for Hyperion sales in China. While its classic customer has been the CIO, the bet is that Hyperion will help open up the door to the CFO’s office. Demand is building here for business intelligence and performance management software.

While walking around the convention center, I was struck by the relative youth of the attendees. Oracle’s major U.S. events tend to attract people in the 35 to 55 range. Here, most attendees appeared to be under 35. One Oracle executive confirmed that buyers tend to be younger here, even in the public sector. I viewed this as a positive indicator for the future of technology spending and deployment.

The real question: how big is the Chinese market?

Given that China has a population of more than 1.3 billion, 7,000 customers seems like a modest achievement, particularly since Oracle has had a presence here since 1989. This prompts the question, how big could Oracle China become? No one I met seemed to have a handle on the size of the potential market, especially the number of small and midsize businesses.

While SAP is acknowledged as the primary threat, custom software appears to be the real competition in the largest accounts. It’s only been in the last five years that the government has encouraged enterprises to use packaged software and offered them incentives.

As you might guess, Oracle declined to break out its revenue for China. Executives would only say that China is the “sixth biggest market” for Oracle and the third largest in Asia, presumably after Japan and India. This could change quickly—China is poised to overtake Germany this year to become the third largest economy after the United States and Japan.

The only real color Oracle provided was on the overall market for Oracle Asia Pacific. The company said that the 29 countries comprising Asia Pacific accounted for $2.499B in FY07 revenues. This was up 24% over the previous year. In the recent concluded fiscal year, Asia Pacific accounted for 14% of Oracle total revenues and 19% of new license sales. Overall, the region represents 35,000 customers out of the total 275,000 customer base.

Reaching new customers through schools and OTN

According to the Shanghai Daily (July 31), Oracle has contributed more than $200M to China’s educational system since 2002. Five years ago, it started the investment with Oracle University which provided online training and certification to 600 participants. Over time it’s expanded down to primary and secondary schools via Think.com (www.think.com) which is a global online community for learning. The focus also includes college interns, new graduates, and post-graduate learning.

During a reception, we spoke with Derek Williams, executive vice president and chairman of Oracle Asia Pacific about his college recruiting plans. So far this year, he’s added 200 new college graduates in 12 cities and has plans for 100 more. He boasted that most have at least two degrees and are tri-lingual—in addition to Chinese and English, they also speak Japanese or Korean.

The overall hiring market is tight with demand exceeding supply. Mr. Williams estimates that they get 10,000 resumes in China for every 100 people they hire. Retention of younger people continues to be a challenge though turnover has yet to approach the levels of India—which has been in the high teens for many firms. The challenge is managing the lofty ambitions of today’s graduates.

While Oracle’s commitment to education has helped build the brand, it also benefits from the growing presence of the Oracle Technology Network (OTN). There are 245,000 members in China, up from 150,000 two years ago. China’s OTN membership is the second largest base in Asia, trailing only India.

Is Pakistan the next China? Who’s the next i-flex?

During one of the receptions I asked one Oracle Asia Pacific executive his views on which Asian country will become the next big market. The next day I asked two more executives the same question. I was stunned that all three instantly responded with the same answer—Pakistan. All three added Indonesia as another market to watch. Apparently some of the Indian IT boom has carried over the border to Pakistan. Rather than pursuing a business or engineering degree, enterprising students are choosing IT for a career.

I also asked the last two executives what they see as the Chinese equivalent of i-flex solutions, the India-based financial services software firm that is majority owned by Oracle. Based on their responses, you may want to keep an eye on Taiji Computer Corp. in the utilities market and Neusoft Group in telco, insurance, energy, and other sectors. Another company to watch is Digital China, a large IT services firm. While unknown outside of its core market, Digital China has emerged as one of Oracle’s top five global partners.

Add Shanghai to your list of must-see cities

On my 2004 trip, I also visited Suzhou, renowned for its Confucian gardens. This time I stayed within a five mile radius of Pudong, Shanghai. Nonetheless, if you haven’t been to Shanghai, add it to your list of must-see cities because of how well the city appears to embrace and manage change. It’s especially impressive when you consider that Shanghai spans 2,239 square miles, or nearly 100 times the island of Manhattan (23.7 square miles). I wouldn’t visit during the summer months, though.

If you come, watch out for the drivers. In some countries, pedestrians have the right of way. Here they are viewed as potential speed bumps. On the walk over this morning, a truck and two taxis attempted to turn me into a hood ornament. It was as though they were practicing their human dodge ball moves.

Next week: Back in the USA

By the time you get this, I will have spent 17 or 18 hours flying home. That’s assuming the air gods are good to me in Shanghai and Chicago. It’s that last leg that is the wild card.

In the meantime, I welcome your feedback and ideas—brichardson@amrresearch.com. What do you think will happen in the Chinese market? Will the large software and services firms become major global players or will they be content serving the enormous domestic market? Will Pakistan be the next important global tech market? Should Human Dodge Ball be an exhibition sport at the 2008 Olympics in Beijing?

Georgia on My Mind: Four Success Stories | AMR Research

2007-07-20T05:23:00.000-07:00

Georgia on My Mind: Four Success Stories | AMR Research

FT.com / Technology - E-procurement: From chaos comes the ‘eBay for business’

2007-07-11T06:36:00.000-07:00

FT.com / Technology - E-procurement: From chaos comes the ‘eBay for business’

E-procurement: From chaos comes the ‘eBay for business’
By Andrew Baxter

Published: July 11 2007 12:23 | Last updated: July 11 2007 12:23

The rapid pace of development in consumer technology has made some enterprise IT look clunky. This is certainly the case with corporate e-procurement – the purchasing of workplace goods and services online.

At home, online shoppers buy quickly and easily from a range of websites, all of which have invested heavily in making their sites as simple and intuitive as possible. The corporate world has largely missed out. But now there is growing recognition that enhanced user-friendliness could be the key to increasing the usage of e-procurement systems and extracting more benefits from them.

“If you ask any of the e-procurement vendors today for a demonstration you can guarantee it’s going to look like an eBay shopping experience,” says Sharon Crawford, principal analyst at Quocirca. “There are going to be shopping baskets and clicks and so on – everybody has built that into their software to make it easier for any end-user to participate in purchasing.”

Because the process increasingly resembles an online consumer purchase, organisations can devolve the buying process much more effectively to end users who are not purchasing professionals. It could also mean companies can keep a closer eye on who is buying what.

One of the companies in the vanguard of this new approach to e-procurement is UK-based ProcServe, which has developed a commercial e-procurement system of the same name and also led a consortium that is delivering a programme called Zanzibar for the UK public sector.

The interface for Zanzibar, launched last year, was modelled on consumer sites such as lastminute.com and eBay, says Veera Johnson, ProcServe’s chief executive. “We tried to relate it back to what experience I would want if I was a public sector employee, so the debate was about usability and not about procurement language,” she says.

This challenges long-held assumptions about e-procurement – for example, that it requires huge amounts of training because of its complexity. “The user interface is absolutely crucial for getting people to use the system based on their own experiences,” says Ms Johnson. “Training and driving the adoption of the system become easier.”

If properly implemented, corporate e-procurement should be like “eBay for business”, says Lyn Duncan, business development director at @UK PLC, a company that works with businesses to enable them to trade online quickly with their customers. Once purchasing professionals have sorted out issues such as contracts with suppliers, and who is allowed to buy what from whom, the clicking and buying for the rest of the organisation should be simple, she says.

“There are lots of people with enterprise solutions who want to make this stuff complex, because it is expensive,” says Ms Duncan. In contrast, the @UK system uses the same interface for public sector e-procurement as it does for consumer purchases. “You can set up favourites – it works just like a Tesco [online] shopping list.”

One target market for ProcServe, a PA Consulting Group company, is schools, which need a simple e-procurement system that can be used by bursars, teachers and secretaries rather than e-marketplace professionals. By last month, 600 UK schools were using the system, and a national roll-out is planned this summer.

Another cherished assumption with e-procurement is that, to increase efficiency and control, it makes sense for organisations to restrict the number of users. But once a system becomes as simple as a home shopping website, more employees will try to use it if they can.

The UK Department of Work and Pensions, one of the earliest Zanzibar customers, will probably have 30,000 users on the system once it has reached the next stage of its implementation, says Ms Johnson. That sounds a recipe for chaos, but all the purchases are made via a central collaborative contract and the entire process is electronic, from sending the purchase order to receiving the invoice, so the number and size of orders becomes largely irrelevant, even to suppliers.

As systems such as this devolve buying throughout an organisation, however, there is a need to prevent the free-for-all that the modern, intuitive home shopping website represents. This explains why corporate attitudes to user-friendliness have often been ambivalent.

Brett Mauser, director of global procurement at NCR, recalls a comment from the company’s chief purchasing officer several years ago when the US retail systems, ATM and IT services company was considering a web-based e-procurement system: “Why would we want to make it easier for people to spend money faster? What we want is for the right people to buy the right things at the right price.”

Without wishing to make web-based procurement deliberately cumbersome, says Mr Mauser, companies need a balance between user-friendliness and control. “We’re not an L.L.Bean or a Lands’ End, which have been given awards for their usability. It’s very easy to shop and buy stuff from them – they want it that way so people spend more.”

The big fear for organisations has been that employees would use the web for “maverick spending” on items that do not conform to their standards or – as often occurs with online travel – deals that look like a bargain but result in the company losing out on a discount for multiple or bulk purchases.

“One of the challenges is that there are always nice things that people will try to find a way to buy, or suppliers will find a way to users,” says Mr Mauser.

NCR, along with many other large companies, directs its buyers of indirect materials, such as office supplies, to various approved suppliers’ websites. The supplier will host an NCR page with special prices, and everyone from the company pays the same price. The supplier will then send a summary bill electronically.

Many organisations, however, want employees to go to one online source – what Ms Crawford calls a “central backbone” – which handles all the relationships with suppliers and from which purchasers can draw down what they need. This is the approach taken by ProcServe.

As employees from across the buying organisation gain access to the catalogues that have been loaded on to the system, and make purchases, their managers achieve visibility, at a very detailed level, of what is being bought by whom.

The St Mary’s National Health Service Trust in London is one of a group of hospitals introducing the Zanzibar system and Andrew Holden, the trust’s finance director, is impressed by the greater level of control over maverick purchases that the system will give.

“In the past, a catalogue might arrive on your desk and you are a doctor in orthopaedics, and you say: ‘I like that, I’ll buy one of them,’ but now you won’t see it,” says Mr Holden. “The ability to make sure people stick to buying what you want them to is much greater.”

The hope is that a user-friendly interface will encourage more employees to go through the right channels when they buy items online at work, reducing organisations’ worries about indiscriminate web-based purchasing and ensuring that companies make the most of the deals they have made with suppliers.

“Because e-procurement systems have improved, people are less likely to do their own thing, they can browse catalogues and see pictures, and that has reduced maverick spending,” says Ms Crawford at Quocirca. “This is one place where, because of the importance of purchasing and the control of it, it is recognised that the user experience at work needs to be as good as it is at home.”

Copyright The Financial Times Limited 2007