An Analyst's Day

Holger Kisker

5:30am, the family sleeps and it’s time to prepare – today is Analyst Day in Frankfurt. I’m on the road 2h45min before the event starts (1h20min should be sufficient) but sometimes the traffic is terrible. Last week I missed a flight because the highway was completely closed after an accident and I had to give up after 3h driving for nothing. When the concern of missing an appointment slowly turns into certainty, these are the moments that cost me some of my (remaining) hair.

(Of course) I arrive much too early, but other analysts are already there (probably they don’t sleep at all). Plenty of time to look through my presentation again for some final adjustments and for some small talk with customers that arrived early.

1min before the kick-off, I make the last slide changes and load it to the presentation laptop. Another analyst colleague goes first. I have seen some of the slides a hundred times and look around at the faces of the attendees. For most, it’s the first time they see e.g. our market sizing and forecasting data, and they make hectic notes into their notebooks. They don’t know yet that we will distribute all slides after the event. I’m getting a bit nervous, but I’m used to it. When I'm not nervous any more before a presentation, it’ll get boring for me and the audience, and I should probably do something else.

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Software License Revenues Roar Back In Q1 2010 -- And Why Licensed Software Will Co-Exist With SaaS Beyond 2010

Andrew Bartels

TECH DEVELOPMENTS:  With SAP's release of its Q1 2010 earnings, it is clear that those who saw an irresistible shift from licensed software to software-as-a-service (SaaS) are a bit premature in their obituaries for the licensed software model.  SAP's license revenues increased by 11% in euros, and by 18% when its euro revenues are converted into dollars at the average exchange rates in Q1 2010 and Q1 2009.  Oracle's license revenues for its fiscal quarter ending February 2010 rose by 13% in US dollars (and 7% in euros).  Among other vendors, Lawson reported a 28% increase in its license revenues (in dollars), and Epicor reported 23%. 

These growth rates partly reflect how badly licensed software (which is treated as capital investment) got hit in the general cutbacks in business corporate investment in 2009, as panicked companies scrambled to conserve cash and avoid having to borrow from shut-down financial markets.  However, I think there's more to the recovery than rebound from depressed levels a year ago.

Forrester's surveys of companies about why they don't like software-as-a-service consistently turn up five reasons: 1) inability to customize; 2) difficulty in integration to other systems; 3) security of data and information; 4) worries about pricing models that put clients on a constantly rising escalator; and 5) lack of SaaS products.  SaaS vendors are addressing all of these, and there is no question that these barriers are eroding.  But they still persist, and mean that the license software model has a high degree of persistence in software categories like core ERP systems (integration and security of core data), industry-focused applications (need for customization), eProcurement products (integration to ERP systems), and contract life cycle management products (security of contract data).  

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CeBit 2010 Enterprise Trends

Stefan Ried

I had the chance to visit the CeBit last Friday and like to share some personal impressions around the show and my conversations with execs indicating some enterprise IT trends:

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Oracle's Sudden Jump Into The Cloud

Stefan Ried

Oracle is about to launch its Cloud Computing strategy with a worldwide roadshow. What does this mean for Oracle customers and partners?

First of all, Oracle remains a technology platform provider and will not jump into the hosting business themselves for PaaS. Only for the space of hosted applications, will they remain in the OnDemand hosting business. Let’s have a look at the SaaS and PaaS segments separately:

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Q4 2009 IT Market Data As We Expected Shows End of Tech Downturn

Andrew Bartels

The first reports on the IT market in Q4 2009 are now in, and they are in line with our prediction that the tech market recession ended in that quarter (see US And Global IT Market Outlook: Q4 2009). Overall, the tech market in Q4 2009 was more or less flat with the same quarter the year before – an improvement from prior quarter when growth was negative, and evidence that the 2010 tech market will post positive growth. 

  • The US economy was stronger than expected, by 5.7% real GDP is an aberration.  The US Department of Commerce released preliminary data on Q4 2009 economic growth, and the results was a surprisingly strong 5.7% in real GDP, 6.4% in nominal GDP from the previous quarter (on a seasonally adjusted annualized basis).  However, about two percentage points of that growth was due to inventory re-stocking, which will not be repeated in future quarters.  And based on prior GDP reports, this growth rate will probably be revised down as new data comes in.  (In Q3 2009, the growth rate in real GDP started at 3.5%, but ended up revised down to 2.2%.)  Still, this report confirms that the US recession is over, and slower by steady growth is likely for the rest of 2010.
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What’s The Price Of Software Tomorrow?

Holger Kisker

Traditional Software Licensing Comes To An End 

Cloud computing, on-demand solutions, subscription fees… software licensing is undergoing significant changes. Enforced by the current economic crises with tight IT budgets, companies don’t have the money to pay upfront licenses and are reluctant to take financial risks over many years when purchasing software. A key factor of the current growth of cloud computing is its financial benefits: no capital expenditures, no upfront financial risk, no depreciation and nothing on the balance sheet! But pay-by-use licensing models are not necessarily limited to cloud deployment models and can be applied to more traditional implementations as well.

Traditional software licensing with upfront payments has served vendors well over the last 40 years. However, over time vendors had to face significant disadvantages as well. The pressure to successfully close quarter by quarter and the fiscal year has led to a common practice by customers to push decisions until year end for a special deal. Discounts up to 80% became not uncommon in the software business. Another problem is the revenue volatility in difficult economic times. In 2009 many software companies had to face a decline in new license revenues of 10 to 25%. Without the constant stream of maintenance revenues many software companies would be facing severe financial problems today.

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What recent acquisitions mean to SAP?

Holger Kisker

Dali-elephantsHow Many Legs Does An Elephant Need?

 

While Oracle’s acquisition of Sun Microsystems is still pending there has been a lot of speculation about which IT giant will take the next big acquisition step in response.

 

Is there a rule of cause & effect that fuels the spiral of acquisitions?

 

·         Know your enemy and know yourself

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IBM Moves Ahead In Smart Computing, But Still Has Ways To Go

Andrew Bartels

IBM threw a big event in New York City on Thursday, October 1, and Friday, October 2, to publicize its Smarter Cities initiative, part of its Smarter Planet marketing message. The event featured an impressive list of politicians (Mayor Bloomberg, NY Governor Patterson, governors from Vermont and North Carolina) and CEOs (CEOs from ABB, Verizon, American Electric Power, etc.). I was part of the crowd of hundreds of attendees and IBMers on Friday, and my colleague Doug Washburn attended on Thursday.

It would be easy to dismiss this as part of hype machinery that IBM is running to build awareness of and create customers for its Smarter Planet initiative and the emerging offerings that it is creating under that rubric. But I think there is more going on here. What IBM is really doing is creating a vision - or more precisely, half a dozen visions - of how a new generation of technology can help address some critical challenges facing the planet. Visions of course can easily become hype. But as several speakers noted, visions are also a necessary first step in any transformation process, building awareness of what can be different at the end that will inspire people to start the journey. And IBM to its credit put concrete examples behind the proposals.

Here is what IBM is doing right:

  • Focusing on key social and economic problems facing many countries around the world. Cities and national governments face challenges of providing healthcare more efficiently, improving the quality and delivery of education, managing greater and greater volumes of people travel and goods transportation, providing public safety and security in the face of increased threats of terrorism and persistence of crime, and encouraging energy conservation and alternative energies to counter global warming. These are the problems that IBM's Smarter Cities initiative focused on.
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Categories:

Infrastructure, Software And Services – The Lines Are Blurring

Holger Kisker

CSC celebrates its 50th anniversary at Innoventure Europe 2009

 

At Innoventure Europe 2009 on June 22 & 23 in Paris CSC outlined their new strategic concept – increased industry focus and innovation.

After 2 years of transformation CSC has finally settled on their new vertical organization and strategy around the 6 industry clusters Public Sector, Financial Services, Manufacturing / Aerospace & Defense, Technology / Consumer, Health Services and Chemical, Energy & Natural Resources. With solid figures for FY09 including a net income of $1,115 million and strong sector growth in e.g. Healthcare (+30%) and Public (+4%) based on the new vertical strategy, CSC seems to be well positioned to navigate the stormy waters of the current economic crises. However, with the new vertical company orientation CSC will face some new fundamental challenges and questions that need to be addressed.

 

·        Technology Agnostic or Pre-packaged?

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