Hello from Dubai! I arrived a few days ago for customer visits across the region including UAE, Qatar and Bahrain. Although I’ve traveled extensively, this is my first trip to the Middle East.
As a frequent flyer (both in terms of travel and airline loyalty), I looked first to my preferred airlines when I booked my flights to the region. Neither of them (yes, I fly two airlines regularly which suggests that I’m not all that loyal) provided service to my destinations. So, I looked for a partner airline – one that is part of my preferred airlines’ networks. I went with Emirates which not only serves the Gulf States I was planning to visit, but enabled me to stay within network and collect my frequent flier miles. Why do I mention this? Well, I have been thinking about that model of a “Star Alliance” or a “Skyteam,” and how it could apply to service providers of other kinds.
For those of you unable to attend, I will summarize some of the content that I presented on SAP’s overall growth and innovation strategy. SAP has a double-barreled product strategy focused on Growth and Innovation.
The Growth strategy rests heavily on the current Business Suite, which includes the core ERP product that is used by approximately 30,000 companies worldwide. SAP claims that it touches 60 percent of the world’s business transactions, which is hard to validate but not all that hard to believe. The main revenue source today is Support, which comprises 50% of the total revenues of the company at more than 5 billion Euros annually, and it grew by 15% in 2009. Other growth engines include:
IBM has been talking a good cloud game for the last year or so. They have clearly demonstrated that they understand what cloud computing is, what customers want from it and have put forth a variety of offerings and engagements to help customers head down this path – mostly through internal cloud and strategic rightsourcing options. But its public cloud efforts, outside of application hosting have been a bit of wait and see. Well the company is clearly getting its act together in the public cloud space with today’s announcement of the Smart Business Development and Test Cloud, a credible public Infrastructure as a Service (IaaS) offering. This new service is an extension of its developerWorks platform and gives its users a virtual environment through which they can assemble, integrate and validate new applications. Pricing on the service is as you would expect from an IaaS offering (and free for a limited time). If you are testing with IBM software you can either bring your licenses or check out the equivalent instances from their service catalog. There’s even a new version of Rational Software Delivery Services for shops familiar with Jazz.
NetSuite, a leading SaaS ERP/CRM provider, recently announced that it is revamping its channel partner comp model: 100% on Y1 subscription revenue, and 10% thereafter. VARs have been remiss in taking up the SaaS torch, largely because most SaaS vendors haven’t provided a financial model conducive to VARs’ cash flow requirements. Per the on-premise license model, channel partners make a big portion of their nut on initial product margin, i.e., up front. But vendor SaaS economics minimize up-front remuneration and spread revenue out over a long period of time. Though it sacrifices year-one revenue, NetSuite’s 100/10 model more closely mirrors VARs’ accounting practices.
NetSuite’s model will be the first of many SaaS channel model “experiments” that will ultimately be a shot in the arm for the SMB market in particular. Contrary to popular belief, SMBs have been slow on the uptake of SaaS (application hosting outpaces SaaS adoption by SMBs by a factor of 3-4x) ...
... due to the fact that VARs, in ownership of the customer trust asset, haven’t been pushing SaaS. But the financial barriers to channel partners’ SaaS advocacy are being broken down.
Now that the path for VARs to play in the cloud is being forged, and their play along with software vendors, aggregators, and ISPs being validated, distributors and DMRs, long wedded to on-premise license models, are going to have to figure out their place in the new cloud channel order.
What do you think? Is this one of many experiments? What is the role for distributors and DMRs in cloud computing?
I spent a couple of days with HP executives this week here in Boston. As I worked there myself for 20 years (up to 2001, so I have distance as well), I’d like to comment about how their enterprise business strategy now looks. Of course, I wasn’t alone there; there were 250 of us. Those who follow my peers in Twitter may already be overloaded with multiple 140-character cuts: my impression is that the tool tends to makes them behave more like adolescent journalists than analysts. Often, they were broadcasting tweets before even noticing that a particular statement was “under NDA”. Vendors will learn to be more cautious in the future; which is not good for us analysts. Anyway, here are my highlights of the HP briefings.
HP’s Converged Infrastructure story includes the pending acquisition of 3COM
Nice to see that HP now has (servers + storage + networking) PLUS power & cooling! Now, HP has Cisco squarely within their sights with this one, dropping statements like “they’re just a $30B vendor while we spend over $50B in our supply chain”; “as soon as we can, we will replace ALL our Cisco gear with 3COM and realize 45% savings”; and “of course, all 3COM products use the same operating environment, unlike them”.
My Take: Well, Cisco started this. They are, indeed, seriously threatened. If HP apply their financial muscle and play the pricing game, Cisco’s business and margins may well suffer. Remember, networking is the highest margin area in IT infrastructure: HP is adding it, Cisco is diluting it. But, I also think that Cisco will make other game changing moves in the next months. HP strategists should not be resting on their laurels, they should be doing scenario planning - and thinking way outside the IT infrastructure box.
Larry Ellison angrily dismisses suggestions that Oracle’s business will be harmed by the rise of cloud computing. Many misinterpret Ellison’s remarks to mean he (and by extension Oracle) thinks cloud computing is a dumb idea that Oracle won’t pursue. We are now learning that Oracle does, in fact, intend to pursue cloud computing. But we're also learning that Oracle's strategy is more limited than those of IBM and Microsoft, its large-vendor competitors.
If anyone doubted CA Inc.’s intention to get into the cloud computing market, you can’t get away with that skepticism anymore. This company is serious. Its acquisition of early cloud leader 3Tera takes their nascent cloud entreaties to an entirely new level.
Geographic location plays a significant role in establishing data protection obligations in the cloud. And while many cloud services originated within the US, growing demand, global competition, and practical business models drive vendor proliferation of cloud services hosted across diverse geographic locations.
Zimbra has been the sleeper cloud-based email provider for the enterprise. I've known about the Bechtel deal -- roughly 50,000 seats globally -- for some time, but couldn't talk about it. Though it's been a while since I've spoken to Ramesh May, he did share some important facts with me:
1. Zimbra's code base is open source, with a 20,000 active members in the community. The Zimbra code base runs on Linux. It can be downloaded to run on-premises and it also is the foundation of Zimbra's cloud email service.
2. Yahoo! Zimbra was selling an email seat for $28/mailbox/year for 50+ seats. We'll be interested to see how the pricing changes.
3. The company was working with the community on adding instant messaging, expanding widgets, and building an offline email client. We also saw some interesting mashup and document viewing features.
4. Back in April, the company had 130 employees, 600+ .edu customers, 44M mailboxes, and 60,000 customers.
So why hasn't Zimbra been bigger on the national stage selling its hosted (80% of seats) and on-premises (20% of seats) email and calendaring solution? Two reasons.
First, Yahoo! did not build a direct sales force that way Google and every other enterprise email provider did.
Second, because a lot of these seats are sold through service providers. Comcast and NTT Communications have been selling Zimbra seats. You may be running Zimbra and not even know it.
So now it becomes clearer why VMWare bought this massively successful email provider.
We just had another of our regular cloud research meetings at Forrester. In these meetings, we cut across our research organization to examine cloud computing from every angle.
Compared with even just a year ago, it's amazing how important and pervasive cloud computing analysis (as opposed to cloud computing guesswork) has become in our research calendar.
You can see the existing cloud/*aaS research here and our planned research here. As the meeting host, I mostly listen, probe, and take notes, but ocassionally I get to jump in with a thought.
To wit: We are often asked about whether cloud-based collaboration (email, team sites, instant messaging, Web conferencing, social computing, etc.) works best on multi-tenant, dedicated solutions, or both. The answer is both, but trending towards multi-tenant. Our clients are interested in both multi-tenant and single-tenant or dedicated cloud solutions -- as long as the price is right.
The future of cloud-based collaboration is clearly multi-tenant for two economic reasons:
1. Multi-tenant enables the fundamental economic benefits of a shared resource. We can see this in the price war going on in email right now -- a 50% price cut in the last 12 months with multi-tenant cloud email. The floor on email cost keeps dropping, fueled by the better economics of multi-tenant solutions and high capacity utilization.