The Mathematical Inevitability Of The SMB-led Economic Recovery

Tim Harmon

[Co-authored with Zachary Reiss-Davis]

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.The Historic Employment Rate Performance Of Small Businesses And Enterprises

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.

SAP Jam Teleconference Notes: SAP's Growth and Innovation Strategies

Paul Hamerman

Thanks to those of you that attended our SAP Jam Teleconference today, part of a series that will run throughout the week. For details on the next event in the series, see http://www.forrester.com/rb/teleconference/sap_jam_session_what_should_sap_clients/q/id/6292/t/1.

 

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.

 

Growth Strategy

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:

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Adapting to Cloud: The Channel Models They Are a-Changin’

Tim Harmon

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) ... Business applications; deployed via on-premise, SaaS, or application hosting

 ... 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?

Bottom Up And Top Down Approaches To Estimating Costs For A Single BI Report

Boris Evelson

How much does it cost to produce a single BI report? Just like typical answers to most other typical questions, the only real answer is “it depends”. But let’s build a few scenarios:

Scenario 1: Services only. Bottom up, ABC approach.

Assumptions.

 

  • Medium complexity report. Two data sources. 4 way join. 3 facts by 5 dimensions. Prompting, filtering, sorting ranking on most of the columns. Some conditional formatting. No data model changes.
  • Specifications and design – 2 person days. Development and testing - 1 person day. UAT – 1 person day.
  • Loaded salary for an FTE $120,000/yr or about ~$460/day.
  • Outside contractor $800/day.

Cost of 1 BI report: $1,840 if done by 2 FTEs or $2,520if done by 1 FTE (end user) and 1 outside contractor (developer). Sounds inexpensive? Wait.

 

Scenario 2. Top down. BI software and services:

Assumptions:

  • Average BI software deal per department (as per the latest BI Wave numbers) - $150,000
  • 50% of the software cost is attributable to canned reports, the rest is allocated to ad-hoc queries, and other forms of ad-hoc analysis and exploration.
  • Average cost of effort and services - $5 per every $1 spent on software (anecdotal evidence)
  • Average number of reports per small department - 100 (anecdotal evidence)
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SaaS: Vendors Separated By A Common Language

Peter O'Neill

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.

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