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In the Business Apps Casino, change is afoot. For a long time, one table – software-as-a-service ERP – attracted a limited number of players and fans. However, over the past 12 months, an increasing number of ERP vendors have lined up to place sizeable SaaS bets, while more potential customers are paying close attention to the gambles those vendors are making.
In Forrester ERP inquiries, it’s now the norm for clients to ask us about SaaS ERP. In fact, it’s unusual to field a call where SaaS isn’t mentioned. Firms may be actively considering a future change in deployment model or simply wanting to kick the tires on SaaS ERP adoption, pros and cons, and comparisons with on-premises ERP. They also seek more information about SaaS ERP market players and likely future entrants. In general, what’s changed since a year ago is that companies want to include SaaS ERP options in their assessments.
Each ERP vendor’s SaaS bet differs somewhat from those of its peers, determined both by the type of customers it’s aiming at and architectural concerns. However, there are some shared themes:
Repurposing existing apps. Some ERP vendors began their SaaS endeavors with apps targeted at small and midsize businesses. They’re now working to deepen the functionality of those apps to appeal to a broader, more enterprise audience. There are two key approaches: 1) expand the scope of an existing SMB product and aim it up market; or 2) carve off functionality from a SaaS midmarket apps suite (while retaining that suite) and create a new enterprise app.
It’s been a long time coming; I’ve been having conversations around ServiceNow’s IPO or their acquisition by another vendor for as long as I have been an IT analyst (and that’s late 2008). Last night its initial public offering price was set at $18 (above the previously expected $15-17 range – yes, even after what happened to Facebook) and I assume trading will have commenced by the time you are reading this blog.
But I’m not a market analyst, I’m an IT industry analyst … so bar there being a major hiccup with the valuation post-trading the real meat for me is what it all means for ServiceNow, its customers, and the IT service management tool market. And let’s not forget other software markets that it no doubt has its eyes set on. Build a platform and then exploit it – why not?
So let’s get you up to speed with ServiceNow
ServiceNow was started by Fred Luddy, the ex-CTO of Peregrine Sytems, in 2004 with the intention of making a better IT service management (ITSM) tool: "The IT industry deserves a tool that just works. We're going to give it to them." So much has happened since then: rapid growth in customer numbers and revenues (and market share), in employee numbers, and in the solution’s capabilities. In capability terms, today’s offering is a radically different beast to the initial offering – SaaS (or more specifically its PaaS) has allowed ServiceNow to grow the offering at a spectacular pace.
Where is ServiceNow now? Some quick facts and opinions
Without boring you with a ten page overview of the current ITSM tool market and ServiceNow’s capabilities, ServiceNow sits with the two previous heavyweights of the ITSM tool space (BMC and HP). BUT ServiceNow is more than just a SaaS ITSM tool:
Just three months after SAP acquired SuccessFactors, a cloud leader for human capital management solutions, for $3.4 billion, it has now announced the acquisition of Ariba, a cloud leader for eProcurement solutions, for another $4.3 billion. Now, $7.7 billion is a lot of money to spend in a short amount of time on two companies that hardly make any profit. But it’s all for the cloud, which means it’s for the future business opportunity in cloud computing services. So far, so good; SAP has invested and acquired quite a number of cloud companies over the past years: Frictionless, Clear Standards, Crossgate, etc. The difference in this most recent acquisition is the big overlap with existing solutions and internal R&D.
Following the first wave of cloud acquisitions, SAP was sitting amid a zoo of cloud solutions, all based on different platforms: ePurchasing, CRM-OnDemand, BI-OnDemand, Carbon Impact, ByDesign, Streamwork . . . They all used very different technology, resulting in big integration and scale challenges behind the scenes. The market welcomed with open arms SAP’s announcement 1.5 years ago that it would consolidate its cloud strategy on the new NetWeaver platform for both ABAP- and Java-based cloud solutions.
SaaS vendors must collect customer insights for innovation and compliance.
As of the end of last year, about 30% of companies from our Forrsights Software Survey, Q4 2011, were using some software-as-a-service (SaaS) solution; that number will grow to 45% by the end of 2012 and 60% by the end of 2013. The public cloud market for SaaS is the biggest and fastest-growing of all of the cloud markets ($33 billion in 2012, growing to $78 billion by the end of 2015).
However, most of this growth is based on the cannibalization of the on-premises software market; software companies need to build their cloud strategy or risk getting stuck in the much slower-growing traditional application market and falling behind the competition. This is no easy task, however. Implementing a cloud strategy involves a lot of changes for a software company in terms of products, processes, and people.
A successful SaaS strategy requires an open architecture (note: multitenancy is not a prerequisite for a SaaS solution from a definition point of view but is highly recommended for vendors for better scale) and a flexible business model that includes the appropriate sales incentive structure that will bring the momentum to the street. For the purposes of this post, I’d like to highlight the challenge that software vendors need to solve for sustainable growth in the SaaS market: maintaining and increasing customer insights.
Extending core offerings through marketing technology. eCircle joins Teradata’s two prior investments in marketing technology: Aprimo Marketing Studio (AMS) and Aprimo Relationship Manager (ARM), which were separately acquired in previous years. Teradata confirmed that it will position the eCircle product within its standalone Aprimo division.
Complementing data warehousing with big data analytics. Through the acquisition of Aster Data, Teradata moved to beef up its presence in analytics for large-scale data sets, such as log files, clickstream, and sensor data. eCircle’s platform is built on a similar (Hadoop-based) platform, allowing marketers to co-mingle and analyze customer records, campaign data, online behavioral interactions, and more.
If you wanted to see the full spectrum of cloud choices that are coming to market today you only have to look at these two efforts as they are starting to evolve. They represent the extremes. And ironically both held analyst events this week.
OpenStack is clearly an effort by a vendor (Rackspace) to launch a community to help advance technology and drive innovation around a framework that multiple vendors can use to bring myriad cloud services to market and deliver differentiated values. Whereas Oracle, who gave analysts a brief look inside its public cloud efforts this week, is taking a completely closed and self-built approach that looks to fulfill all cloud values from top to bottom.
Deloitte continues to ramp up its software-as-a-service (SaaS) consulting practice, both through organic growth as well as acquisition. Today, Deloitte announced plans to acquire Workday implementation specialist Aggressor. Aggressor has been one of a very small set of Workday integrators (along with Deloitte), which means Deloitte now further boosts its already-impressive Workday practice.
This move furthers Deloitte’s Workday practice, as well as Deloitte’s overall practice in SaaS implementation and integration work. Deloitte also has strategic partnerships with other leading SaaS vendors, most notably salesforce.com.
For buyers, this means a stronger and deeper bench of consultants at Deloitte. But, on the downside, it removes a boutique/specialist option from the market, which appealed to some because of its laser focus, smaller size, and (perceived or real) ability to be more nimble, flexible, and price competitive.
Are you an Aggressor or Deloitte client or prospect? We would love to hear your thoughts!
CeBIT 2012 kicks off tomorrow — and believe it or not, it’s still the world’s biggest IT show, attracting 339,000 visitors last year and very likely even more this year.
Cloud computing is all over the fair this year (again), but some vendors have managed to move beyond cloud infrastructure and are starting to combine the ease of use, standardization, and opex-based consumption with business software. I had the chance to talk to some vendors last week about their upcoming announcements. Forrester analyst Holger Kisker has already pointed it out in his 10 Cloud Predictions For 2012:
The Wild West of cloud procurement is over! More enterprises and SMBs than ever are discovering a formal strategy to purchase cloud services in 2012. The easiest consolidated way to do this is an app store or cloud marketplace.
Last week I read an article on wired.com’s Danger Room blog about the elite US military Special Forces command, JSOC. The units within the Joint Special Operations Command (Delta Force and Seal Team 6) are responsible for the most clandestine and sensitive US military operations, including the Bin Laden raid into Pakistan last year. JSOC is very similar to elite Special Forces (SF) units across the globe including: the Russian Spetnaz, British SAS, French Naval Commandos, and the Israeli Shayetet 13. These SF units are capable of addressing asymmetric threats that traditional military units aren’t prepared to handle.
In the article, Spencer Ackerman interviews Marc Ambinder, one of the authors of The Commandabout JSOC. The article piqued my interest and I just finished reading the eBook. Like almost everything I do, I considered the information security implications as I read it. Today’s infosec threat landscape is dominated by unconventional threats that are difficult to address. How can we leverage the techniques utilized by SF to deal with the cyber threats we face today? I realize that we have an international audience, and my point isn’t to focus on US policy, but rather to take a deeper look at the unique capabilities of SF units and what lessons we can apply in our roles as S&R professionals.
The rumor circulating for the past few weeks has now been confirmed: Oracle is buying Taleo, a global talent management vendor, for $1.9 billion. This is just another — albeit important — acquisition in the strategic talent management space. All companies must have core HR systems in place, but now it’s equally important to look at the strategic part of HR: the performance, succession, career development, and learning components as a layer resting on top of the core. Companies want to retain, develop, and reward their employees and need these applications in place for efficiency and effectiveness.
With this acquisition, Oracle gets a vendor with these talent management components in a pure SaaS deployment model, which provides ultimate flexibility. However, the offerings in the suite are not equally robust. Taleo is known for its recruiting app; to become a suite vendor, it added performance, which has gotten mixed reviews, and learning, which is not best in its class. Learn.com, the vendor Taleo acquired for learning, works OK for the midmarket, but its functionality does not hold up well for large global and enterprise customers.
Oracle can’t buck the SaaS tide any more. SaaS is the preferred deployment model for talent management, and the large ERP vendors like SAP (finalizing its acquisition of SuccessFactors) and Oracle are now joining the movement. Oracle offers Fusion, but a lot of work still needs to be done to develop this into a full SaaS talent suite. Once this deal closes, watch and see how Oracle positions the Taleo offerings with Fusion Talent Management.
Just three months after SAP acquired SuccessFactors, a cloud leader for human capital management solutions, for $3.4 billion, it has now announced the acquisition of Ariba, a cloud leader for eProcurement solutions, for another $4.3 billion. Now, $7.7 billion is a lot of money to spend in a short amount of time on two companies that hardly make any profit. But it’s all for the cloud, which means it’s for the future business opportunity in cloud computing services. So far, so good; SAP has invested and acquired quite a number of cloud companies over the past years: Frictionless, Clear Standards, Crossgate, etc. The difference in this most recent acquisition is the big overlap with existing solutions and internal R&D.
As of the end of last year, about 30% of companies from our Forrsights Software Survey, Q4 2011, were using some software-as-a-service (SaaS) solution; that number will grow to 45% by the end of 2012 and 60% by the end of 2013. The public cloud market for SaaS is the biggest and fastest-growing of all of the cloud markets ($33 billion in 2012, growing to $78 billion by the end of 2015).
Last week I read an 
