To paraphrase Charles Dickens, Q2 2010 seemed like the best of times or the worst of times for the big software vendors. For Microsoft, it was the best of times; for IBM, it was (comparatively) the worst of times; and for SAP it was in between. IBM on June 19, 2010, reported total revenue growth of just 2% in the fiscal quarter ending June 30, 2010, with its software unit also reporting 2% growth (6%, excluding the revenues of its divested product lifecycle management group from Q2 2009). Those growth rates were down from 5% growth for IBM overall in Q1 2010, and 11% for the software group. In comparison, Microsoft on June 22, 2010, reported 22% growth in its revenues, with Windows revenues up 44%, Server and Tools revenues up 14%, and Microsoft Business Division (Office and Dynamics) up 15%. And SAP on June 27, 2010, posted 12% growth in its revenues in euros, 5% growth on a constant currency basis, and 5% growth when its revenues were converted into dollars.
What do these divergent results for revenue growth say about the state of the enterprise software market?
I joined an impressively large crowd at SAP’s World Tour event in Birmingham,UK, last week and was able to spend an hour with Tim Noble, head of SAP’s UK and Ireland business unit, and Chris McLain, who leads SAP’s team focusing on its 150 largest accounts in EMEA. I'm writing an update of my 2007 report "Effective SAP Pricing And Licensing Negotiation" and wanted to know what they thought about the clash between traditional deal-based sales incentives and Forrester’s clients’ need for commercial flexibility and more recognition, by their key software providers, of the wider relationship. It’s a topic I’ve raised before (http://blogs.forrester.com/duncan_jones/10-03-19-open_letter_season_sap), and I was very pleased to hear some things that SAP is doing to reduce this conflict.
I explained why, from my research, software vendors’ insatiable craving for recognizable license revenue at the expense of creating shared incentives for success is damaging to customers and to the vendor. Both Tim and Chris clearly understand the problem. Tim keeps reps on the same accounts for several years and rewards them for metrics such as customer satisfaction to avoid the revolving door sell-and-run approach that characterized software selling before the advent of SaaS. Chris has a team of Global Account Directors that works with local sales, pre-sales, and delivery teams to provide the holistic view that Forrester clients want and struggle to get from SAP’s competitors.
We just published a new report entitled "The Evolution Of Cloud Computing Markets". It recaps many of the cloud computing market observations from the last two years and categorizes the business models in a consistent taxonomy. Basically all current offerings from pure Infrastructure as a Service, in the upper left, via virtualization tools up to SaaS applications can be categorized by this. We explain the key characteristics of each business model and give vendors guidance to position and communicate their cloud service.
Beyond the preview on this blog, the full document predicts the future market momentum around:
Informatica is one of the traditional leaders when it comes to data quality and data integration. More than 4,000 customers trust Informatica's software products globally and drive more than half a billion dollars in revenue. Informatica solves many of the traditional data integration challenges, for example, between custom developed apps and packaged ERP solutions. As a result, IT operations professionals and enterprise architects are well aware of Informatica’s solutions. However, what has gone under the radar so far is Informatica's cloud computing approach. For about two years now, Informatica has provided www.informaticacloud.com, a cloud-based integration offering, for customers. Informatica recently announced a new version of this service, and Forrester had the chance to talk to the vendor prior to the launch. The new solution offers an improved service for data quality, B2B data transformations, and a number of continuous improvements. But what really caught my attention is Informatica's well-kept secret of a sophisticated agent technology.
Back-office managers and European customers have ignored the message — until now