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
Thursday, March 27, 2008
Friday, March 21, 2008
Of Terabytes, March Madness, and Network Performance
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.
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.
Wednesday, March 19, 2008
What’s new: SAP woos mid-sized enterprises
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.
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.
Tuesday, March 18, 2008
SAP's Enhanced GRC Offerings Expand Integration Options
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.
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.
Saturday, March 15, 2008
Convergence 2008: Microsoft Is Serious About Business Applications | AMR Research
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.
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.
Friday, March 14, 2008
SAP Insights: The View From the Castle | AMR Research
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.
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.
Friday, February 29, 2008
Microsoft + Yahoo! or Microsoft + SAP? | AMR Research
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.
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.
Thursday, January 31, 2008
FT.com / Companies / IT - SAP confident of software sales
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
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
Friday, January 18, 2008
Oracle Buys BEA to Strengthen Position in Middleware Market
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.
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.
Thursday, January 17, 2008
FT.com / Companies / IT - Oracle acquires BEA for $8.5bn
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
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
Tuesday, January 15, 2008
FT.com / Companies / IT - Strong holiday sales lift SAP shares
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
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
Monday, January 07, 2008
i2: Think Services Play, not Software Vendor
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.
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.
Friday, January 04, 2008
The AMR Research Supply Chain Top 25 Blows Away Market with 17.89% Return | AMR Research
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.
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.
Friday, December 14, 2007
The Year in Review and a Look Ahead: M&A, IPOs, and Breaking a Million
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.
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.
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© Copyright by AMR Research, Inc.
Tuesday, December 11, 2007
Oracle Strengthens Its Application Management Capabilities
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.
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.
Monday, December 10, 2007
SAP Unveils Web 2.0 Look for Its CRM Tool
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.
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.
Friday, December 07, 2007
24 Hours With SAP
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.
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.
Thursday, November 22, 2007
FT.com / Companies / Europe - US group might bid for troubled SAP unit
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
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
Wednesday, November 21, 2007
SAP To Put “For Sale” on TomorrowNow? | AMR Research
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.
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
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
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
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