I had the pleasure earlier this week of attending Lawson Software’s conference and user exchange, aka CUE, in Boston.
The midmarket ERP apps vendor had the singular misfortune to throw its annual user party at a time of great uncertainty for both Lawson and its customers. Lawson has yet to respond to an unsolicited $1.8 billion acquisition offer from ERP rival Infor, aside from acknowledging receipt of the offer on March 11. Despite the Infor elephant in the room, CUE was a good-humored affair. Lawson execs exhibited grace under fire while customers expressed concern but remained cheerfully stoic and pragmatic.
Do you think Lawson will end up part of Infor? Alternatively, will it remain independent or will it be bought by a private equity firm and no longer be publicly traded à la Epicor? As apps vendors try to navigate fluctuating revenue mixes — rising subscriptions versus falling maintenance — being privately held may prove to be an attractive option.
Lawson is currently evaluating whether to break out subscription revenue as a separate line item in its next fiscal year. Of its 4,500 largely on-premise customers, around 350 use a Lawson SaaS product, the fruit of purchases such as Enwisen and Healthvision. Like other apps players, Lawson’s embraced Amazon.com’s EC2 as the cloud infrastructure for its HCM, M3 and S3 ERP apps. Several Lawson cloud services early adopters at CUE talked about their organizations’ experiences and there were some similarities in those stories:
They faced hardware refreshes and/or obsolescence of the app and database versions they used
They were already successfully running third-party SaaS apps or remotely hosted software
They used Lawson managed services as a steppingstone between the on-premises and cloud services worlds
Forrester’s Forrsights Software Survey, Q4 2010 has quantified for the first time how enterprise demand is shifting from traditional licensing models to subscriptions and other licensing models, such as financing and license leasing. However, the shift to subscriptions for business-applications-as-a-service is the major driver of this change. Traditional enterprise licenses are slowly decreasing, and Forrester predicts that subscriptions for SaaS applications will drive alternative license spending up to 29% — as early as 2011. This demand-side change goes beyond front-office applications like CRM. In 2011 and 2012, enterprises will opt for “as-a-service” subscriptions for more back-office applications, such as ERP, instead of licensed and on-premise installations. Detailed data cuts by company size and region are available to clients from our Forrsights service.
Base: 622 (2007), 1,026 (2008), 537 (2009), and 930 (2010) software decision-makers predicting license spending for the coming year Source: Enterprise And SMB Software Survey, North America And Europe, Q3 2007; Enterprise And SMB Software Survey, North America And Europe, Q4 2008; Enterprise And SMB Software Survey, North America And Europe, Q4 2009; Forrsights Software Survey, Q4 2010
What does this means for existing independent software vendors (ISVs) and infrastructure vendors?
Hi, and thanks for stopping by. I joined Forrester just over a month ago and I plan to post here regularly with some thoughts on the ERP apps arena. I’m hoping this blog will serve as a place for us to exchange views, and I very much welcome your input.
As you know, Forrester is structured around roles, and I’m part of the analyst team serving the needs of business process professionals. My primary area of focus is enterprise resource planning software. I’m currently pulling together my research agenda for 2011, and I was wondering what top-of-mind issues you think I should be tackling.
At a high level, some of the areas I’m considering include:
SaaS ERP and PaaS.
ERP-flavored project management.
I’m also interested in hearing about midsize organizations and enterprises that have benefited from the successful deployment of one of the following:
A two-tier combination of one vendor’s SaaS ERP integrating with another vendor's on-premise ERP.
Forrester’s survey and inquiry research shows that, when it comes to cloud computing choices, our enterprise customers are more interested in infrastructure-as-a-service (IaaS) than platform-as-a-service (PaaS) despite the fact that PaaS is simpler to use. Well, this line is beginning to blur thanks to new offerings from Amazon Web Services LLC and upstart Standing Cloud.
The concern about PaaS lies around lock-in, as developers and infrastructure and operations professionals fear that by writing to the PaaS layer’s services their application will lose portability (this concern has long been a middleware concern — PaaS or otherwise). As a result, IaaS platforms that let you control the deployment model down to middleware, OS and VM resource choice are more open and portable. The tradeoff though, is that developer autonomy comes with a degree of complexity. As the below figure shows, there is a direct correlation between the degree of abstraction a cloud service provides and the skill set required by the customer. If your development skills are limited to scripting, web page design and form creation, most SaaS platforms provide the right abstraction for you to be productive. If you are a true coder with skills around Java, C# or other languages, PaaS offerings let you build more complex applications and integrations without you having to manage middleware, OS or infrastructure configuration. The PaaS services take care of this. IaaS, however, requires you to know this stuff. As a result, cloud services have an inverse pyramid of potential customers. Despite the fact that IaaS is more appealing to enterprise customers, it is the hardest to use.
I've always liked the approach Dimdim took in offering web conferencing services. The pillars of the business model, which I profiled last year, were lean operations, smart viral marketing and technology partnerships with larger companies like Novell and Nortel CVAS. The technology they built emphasized ease of use, providing an audio/video/web conferencing experience through the browser, allowing information workers access to a web meeting regardless of the device or operating system they were using. So it was not surprising when software vendors looking for conferencing capabilities started sniffing around Dimdim as an acquisition target. It was even less surprising when Salesforce.com picked up the company for $31 million yesterday.
For Salesforce, this was a straight technology acquisition, as evidenced by the seemingly near total shutdown of Dimdim's website: Monthly accounts cease on March 15 and annual accounts will be allowed to complete their term but will not be able to renew. While the rapid sunsetting of the Dimdim brand probably won't make Salesforce any friends in the Dimdim user base -- reportedly north of 5 million -- it should provide some interesting new services for Salesforce CRM and Force.com customers. Why? Dimdim's real-time communications technology fleshes out the collaboration story Salesforce began with its social offering, Chatter, last year. This blending of tools will boost the collaborative power of some key Chatter features:
With its latest public cloud offering, T-Systems not only comes close to Amazon’s EC2 pricing, it might even be cheaper than Amazon. The €4 billion, German headquartered IT services firm announced today a public beta running from November 2010 to February 2011.
Although Amazon recently made a time-bombed version of its EC2 available for free, a real, unlimited service still costs in the range of $0.095 per hour for a small server of one core with 1.7 GB RAM in Europe. Last week, Forrester had the chance to look at a beta version of T-Systems’ public cloud offering. Although no pricing has been announced officially, the beta showed the price for a virtual machine of a similar size to the aforementioned Amazon machine starting at €0.2/hour. T-Systems inidcated that they even like to go below the Amazon pricing! T-Systems has been working for more than a year with cloud provisioning tools from Zimory to manage the virtualization of larger-scale server and landscape compositions. Leveraging this experience, T-Systems manages to drive efficiency even further than the current economies of scale, which makes this aggressive move possible.
Is T-Systems planning to seriously compete with Amazon in the future and does it make sense for a traditional large enterprise IT services and hosting firm to compete with low-price public cloud offerings?
T-Systems’ public cloud beta shows a continuous memory sizing in a state-of-the-art self-service portal.
On September 15th between 11am-12pm EDT Forrester held an interactive TweetJam on the future of cloud computing including Forrester analysts Jennifer Belissent, Mike Cansfield, Pascal Matzke, Stefan Ried, Peter O’Neill , myself and many other experts and interested participants. Using the hashtag #cloudjam (use this tag to search for the results in Twitter), we asked a variety of questions.
We had a great turnout, with more than 400 tweets (at last count) from over 40 unique Tweeter’s. A high level overview of the key words and topics that were mentioned during the TweetJam is visualized in the attached graphic using the ManyEyes data visualization tool.
Below you will find a short summary of some key takeaways and quotes from the TweetJam:
1. What really is cloud computing? Let’s get rid of 'cloud washing!'
Have questions about cloud computing and the top challenges and opportunities it presents to vendors and users? Then join us for an interactive Tweet Jam on Twitter about the future of cloud computing on Wednesday, September 15th, 2010 from 11:00 a.m. – 12:00 p.m. EDT (17:00 – 18:00 CEST) using the Twitter hashtag #cloudjam. Joining me (@hkisker) will be my analyst colleagues Mike Cansfield (@mikecansfield), Pascal Matzke (@pascalmatzke), Thomas Mendel (@drthomasmendel), and Stefan Ried (@stefanried). We’ll share the results of our recent research on the long term future of cloud computing and discuss how it will change the way tech vendors engage with customers.
Looking through the current industry hype around the cloud, Forrester believes cloud computing is a sustainable, long-term IT paradigm. Underpinned by both technology and economic disruptions, we think the cloud will fundamentally change the way technology providers engage with business customers and individual users. However, many customers are suffering from "cloud confusion" as vendors' marketing stretches cloud across a wide variety of capabilities.
To help, we recently developed a new taxonomy of the cloud computing markets (see graphic) to give vendors and customers clear definitions and labels for cloud capabilities. With this segmentation in hand, cloud vendors and users can better discuss the challenges and benefits of cloud computing today and in the future.
In discussions on cloud computing, I often talk to architects who have been told to create a "cloud strategy." This sounds appropriate enough, but there’s a devil in the details: When the task is "create a Technology X strategy," people often center strategy on the technology. With cloud, they aim to get a good definition of pure cloud and then find places where it makes sense to use it. The result is a technology strategy silo where cloud is placed at the center and usage scenarios are arranged around it. The problem with this is three-fold:
Considering the full business dynamics of any given usage scenario, there is a wide continuum of often strongly competing alternatives to pure cloud (including cloud-like and traditional options).
The rapid pace of market development means that business value equations along this continuum of options will keep changing.
Your business needs integrated strategy for many technologies, not simply a siloed cloud strategy.
[More in a series of posts inspired by the "PM in an on-demand world" research that I've been doing. Here's the link to yesterday's thought du jour.]
During the research interviews about PM and SaaS, I was struck by how philosophical the conversations got. To the interviewees, SaaS was not merely a delivery vehicle, but a fundamental decision about their business. Bringing technology producers and consumers closer together forced many vendors to admit that they had a vague, incomplete idea of who adopts their products and services, why they do it, and how they do it. The subscription model led to many hard questions about how the company makes money. Marketers had to deal with a significantly modified value proposition, while simultaneously knocking down some new potential objections (most notably, security).
But those are just the most obvious consequences. The deeper we got into the research, the more I felt that we were talking about other ripple effects of SaaS, PaaS, and the other aaSes. At least a couple of Big Industry Trends – the kind that Very Serious People spend a great deal of time talking about – owe a great deal to SaaS. Without the success of SaaS, many organizations would not have been as open to embracing other changes. I'll mention just two of them, Agile and social media, among several that we'll discuss in the final report.