This week, I was at the Microsoft Worldwide Partner Conference in Washington, D.C., and it was all about THE CLOUD. Now, many colleagues argue that Microsoft will be the second-to-last major vendor to show a 100% cloud commitment, saying that “it’s too embedded in its traditional software business,” “it doesn’t understand the new world,” and “it’d be scared of cannibalizing existing and predictable maintenance revenues.” But I remember Stephen Elop, president of Microsoft Business Systems, tell me with a mischievous grin that he’ll probably earn more money from Exchange Online than the on-premise version — “firstly, it’s mainly new business from other platforms like Lotus Notes, and second, I even generate revenues by charging for things like the data center buildings, the infrastructure, even the electricity I use.” That was in Berlin last November. I suspected then that Microsoft did get it but was just getting its platform ready. This week, I am convinced — Microsoft is “all in,” as they say.
And at the Microsoft Worldwide Partner Conference, it was driving its partners to the cloud as aggressively as any vendor has ever talked to its partners at such an event. All of the Microsoft executives preached a consistent mantra: “MOVE to the cloud, or you may not be around in five years.”
Microsoft’s cloud-based Business Productivity Online Suite (BPOS) is already being promoted by 16,000 partners that either get referral incentives for Microsoft-billed BPOS fees or bundle it into their own offerings (mainly telcos). There are nearly 5,000 certified Azure-ready partners. This week, Microsoft turned up the heat with these announcements:
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.
Yesterday at its annual analyst meeting, Accenture unveiled its new software group. Yes, the company has formally set up a software organization to sell packages and SaaS offerings. The group was internally established back in September 2009, but publically launched this week. The group has 48 products, 36 of which are vertical packages that Accenture has done on its own; the remainder are enhancements to existing packages from vendors like Oracle and SAP. The vertical packages include freight and logistics, hotel property management, and a claims components solution. Sample “enhancements” cover P&C billing with SAP, banking with both SAP and Oracle, and a human capital management offering with SAP. The numbers on the group: the offerings cover 8 industry segments and it has 2,000 people and claims that it has signed 600 deals where there is an explicit software license. There are 12-15 software factories in support of 48 products. This is an extreme example of the standardized offerings that services vendors will bring out as the market evolves.
Back in February 2009, I wrote a report titled “A New SMB Market Phoenix Is Rising” which examines how small and medium businesses (SMBs) will be the initial source of job growth and creation which leads us out of the current recession, as they have in most previous recessions. The report also examines how SMBs use technology, and how technology vendors can best market to them - this figure highlights my conclusions.
Today, Paul Kedrosky, who has a Ph.D. in the economics of technology and writes extensively on macro-economic trends, wrote a piece I found very insightful about why young firms (small businesses) not only historically account for most of the job growth in the United States, but that their doing so is mathematically inevitable.
My upcoming report, “Fueling the New SMB: Marketing Services-as-Software” on this topic, will work its way through our editing process in the next week. In the meantime, I encourage you to read his post and my older report and let me know if they match what your marketing team is seeing today.
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:
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?
Software-as-a-Service (SaaS) is rapidly becoming “Everything-as-a-Service” (or, as a client said to me last week, “All-as-a-Service”).I’ve been reporting the impact of SaaS on IT management software for nearly two years now and I keep saying that SaaS is really a phenomenon of new market entrants with compelling arguments against incumbent suppliers. Operators like ServiceNow.com, ManageEngine, Splunk, and SpiceWorks are leading a charge to replace HP, BMC Software, and CA installations. So it’s NOT really a trend impacting small and medium businesses only: many enterprises, even large ones, now also prefer a SaaS solution for their systems monitoring, IT asset management, service desk, or even discovery and CMDB management.
In the last weeks there has been a series of SaaS announcements by the megavendors. But the inquiries coming in from Forrester clients imply that things are not all that clear on these announcements. So here is a quick summary. As you will see, while riding the SaaS wave, they each interpret it differently.
CA now has a Service Desk On Demand offering based on their Service Desk r12 product. It’s run on dedicated installation in their data center or as a multi-tenant instance in one of CA’s partners installations also hosted there. CA clearly wants to limit the service to their target enterprise market. They will control this by requiring a minimum 1 year contract (with financial incentives for signing for 2 or even 3 years), a minimum of 50 service desk analysts (you pay per analyst per month) and, most importantly, you cannot just sign up for the service on the web, you have to be approved by CA first.