Amy Wohl's Opinions on SaaS

IBM's Blue Cloud Platform

A while ago I noted that we would see the emergence on the web of platform vendors, each providing a set of services and APIs and each collecting an ecosystem of partners around them.  I noted that the first platform was SalesForce.com and that we were likely to see more, including IBM, Microsoft, Oracle, and Google -- and perhaps a few that don't exist yet but rise, Google-like, from the web.

Of course, for this to get started in a big, enterprise-specific, way, someone like IBM had to make a move.  They have, announcing their Blue Cloud utility service.  Now we shall have to see how, over time, this platform evolves and how richly it is surrounded with IBM and partner services (and applications). 

Nothing matters unless customers decide they like this idea, but I would be amazed if some large IBM customers (and quite a few smaller ones, up and down the mid-market) didn't find this a tantalizing proposition.  Getting IT for less from a first class vendor who will provide what you need and want and offer it with a QoS guarantee will be very appealing. 

We'd guess that a lot of IBM's efforts to enrich it's already bulging software portfolio (such as its recent announcement to acquire Cognos) are designed to provide the broader integrated offering that a web platform vendor needs.

There's a great article on the subject by Dan Gardner at ZDNet, if you'd like to read more.

SaaS as a Platform

Sitting in the audience at the Office 2.0 conference last week (you can read my musings on that at my Amy Wohl's Opinions blog), I was struck by the thought that SaaS is going to move in a new direction.

In fact, it's moving in that direction already.

There is no possibiity that customers, particularly enterprise customers, are going to agree to buy dozens of individual SaaS applications from individual very small vendors and then try to deal with their different user interfaces and APIs to say nothing of how to provide any level of interoperability.  We doubt that standards will ever provide a satisfying level of interoperabiity and integration across all applications -- there are just too many ways to make improvements and not be standard.

So we think you should look at SalesForce.com and realize that it isn't really an application vendor any more (although it does, indeed, sell a popular SaaS CRM application), but rather a platform vendor, providing a SaaS platform on top of the web.  In SalesForce.com's case theiy have chosen Model A -- they provide a platform and APIs and make the rules and build an ecosystem on top of that platform where partners gather.  They then make substantial revenue from the success of these partners.

But there's a Model B coming.  That will be vendors who provide not just the platform but a large portfolio of applications.  It might be a horizontal portfolio (perhaps with partners providing vertical market specialization) or it might be a vertical portfolio, aimed at a specific market.  In this case, the platform vendor will also own the appications, probably buying most of them from the hundreds of applications now available in the Web 2.0 marketplace.  This platform vendor could choose to provide any level of integration and interoperability he choose to support, such as a single user interface, single sign-on, and application integation.  He could still offer APIs for further refinement of his applications by business partners -- or by the customers themselves.

We don't expect too many platform vendors.  It's a role that calls for deep pockets and the ability to do significant technical work and systems operations and management.  We wouldn't be surprised to see such vendors as Google (some might argue that they're already at work), IBM (they have the SaaS infrastructure complete with rich middleware, which they offer to SaaS ISVs), and perhaps Microsoft and Oracle.  Of course, there's always the chance that one or two next generation Googles might appear.

Eventually, we might begin to see interoperability across the major SaaS platforms, but never the same level of integration as you'd see within a single platfrm vendor's portfolio. 

Reports of SaaS's Death are a Bit Premature

From time to time we have had a SaaS provider fail to provide his promised services.  Usually it's because of a server or software failure.  Occasinally it's because of an inability to handle increased volume (scale) or an act of nature (power outage).

Each time, naysayers use that as an occasion to say that SaaS can't work.  Perhaps it might be better to use it as a way to look into the failure and figure out a way to evoid it n the future.

SaaS Naysers will enjoy John Dvorak's article on the occasion of the failure of Microsoft's WGA Server, which provides authentication.   It took them most of a day to get back in business.  Personally, I wouldn't judge the SaaS business on Microsoft's performance -- they are scarcely a seasoned performer here.

But it is good advice to consider where your applications are running in the distant cloud and just how secure the system behind your delightful software might be.  Happily, the days when ASPs insisted on running their own (tiny) data centers is over and most SaaS ISVs take advantage of specialists who make sure that the services they provide can keep up and running even when a server goes down or a power outage requires transferring users to a server in another physical location.  If the application is criticl to you, asking who and how its infrastucture works is cheap insurance.

Bombarded by Innovation

Last year I attended two Office 2.0/Web 2.0 conferences and I left them feeling overwhelmed, humbled, and totally delighted.  For a technology junkie like me, there's nothing like spending a day or two being bombarded by technology and trying to sort it out on the fly.

You stand there in the aisle thinking:

• Is this really new and unique?
• Is it valuable? So valuable that everyone will want it?
• How does it fit into the way the market is evolving?Does using it demand rearranging all our ideas and plans?
• How much is it going to cost?
• Who are the people who are going to bring it to market?  (Tricky -- the people who invented it may have brought it to the conference in the hopes of finding a buyer or a marketing partner)
• And -- most important - would I kill to have one now right now?  (I remember feeling that way the first time I see the pre-alpha version of PowerPoint, back when we did slides by using an Orator Typeball on our selectric or paying a graphics artist to create the slides.)

So, once more into the fray I go at Office 2.0 in San Francisco (at the St. Regis Hotel, September 5-7).  They are expecting more than 50 of these goodies in two jam-packed days.  Since they will have multiple things going on at once (no fair:  I want to see it all), I will no doubt be zipping around like a maniac trying to be certain I haven't missed anything amazing.  If you want to join me, click here:  http://www.o2con.com/

And bring your roller skates.

Workday Challenges the ERP Market

Sitting in the SaaScon audience last April, listening to David Duffield of Workday speak about their ambitious plans to have not only an HR product, but a full business suite, including financial and customer resource management, we perched eagerly on the edge of our seat, watching the roadmap unfold.  We knew that Duffield and his PeopleSoft team had a great track record and had, in fact, brought the HR applications up and to the market very quickly, but it still sounded very ambitious.  Since then, we've been waiting for the other shoes to drop.

Today, Workday dropped the shoe.  They announced the beta of their financial software, inclulding both Business Measurement and Revenue Management.  The offerings start out as substantial but incomplete, when judged against offerings from major vendors, but the rest of each offering is on the roadmap, so beta users (none have been announced yet) can be reassured that they're coming. 

Who will these customers be?  Workday targets customers in the upper mid-market, from firms with $500 million to $2billion in revenue, especially in the services industries.  They're not targeting government, education, or manufacturing, all SAP territory, and they're staying away from large enterprises.  We'd expect initial customers to come from some of the 20 customers who are already using their HR software.

Workday intends to go to market with a direct salesforce, but notes that its had some difficiulty hiring -- we suspect that's because of it's aggressive pricing.  Workday expects to be able to provide its financial for $100,000 per year, a small fraction of what traditional financial software would cost.  Implementation costs for SaaS software are also usually much lower than the multi-million dollar cost of SAP implementations. 

Of course, the devil is in the details:

1. Can Workday finish its software offering on time?  (its track record suggests it can)
2. Will the functionality of its products be competitive?
3. Will it be able to integrate legacy applications into its SaaS model? 

The last is the most intriguing.  Workday is using an Object Management model rather than the SQL database model that other ERP packages rely on.  This, they claiim, makes it far more flexible in being able to offer infinite variations and in being able to integrate legacy software.  Still, they admit, the legacy software is the hardest part.

I'd recommend an excellent overview article in ZDNet and an excellent analysis by Phil Wainewright.

I'd also like to recommend that you check out the survey on Saas at SoftLetter, if you're an ISV and participate so you can share the results.  Click on http://www.softletter.com/survey/saas_2007.htm?sm=zokfa7246nv7oosNOtwl6w_3d_3d

And check out the seminar SoftLetter is holding on SaaS October 3-4 in Santa Clara, CA at http://www.softletter.com/pages/marketing_and_selling_SaaS_seminar.shtml

What Will a Microsoft Services Model Look Like?

Addressing their Partner conference in Denver yesterday, Steve Balmer of Microsoft walked a tightrope, trying to energize partners to continue to aggressively support sales of Vista and Office 2007, while offering glimpses into a more Web-centric future.

He has to do both.  No one can walk away from the billions of dollars of revenue Windows and Office generate without a strong, in-place, new plan, already successfully executing, to replace them.  Microsoft isn't ready for that.

On the other hand, partners are clearly concerned about making more investments in the current Microsoft model while they watch the new Web 2.0 model take root (and perhaps take over). 

So Balmer has promised them tools by year-end to permit them to build on top of a Microsoft Services model, based on .Net.  Not clear is just how much it will depend on Microsoft services based in the cloud and just how much desktop and server software will still be required.

A good overview of Balmer's speech is in Mary Jo Foley's blog at http://blogs.zdnet.com/microsoft/?p=567&tag=nl.e539.

More interesting is the hint that Microsoft is going to offer a web-based collaboration and communication service based on the custom application it created for Energizer, plus the notion that partners could create differentiated offerings of their own on top of Microsoft's offering.

Could Google Buy SalesForce.Com?

Phil Wainright has speculated on the delicious possibility of what could happen if Google bought SalelsForce.Com and used the merger to enter the business applications market.

This is one of those rumors that is so delicious it's hard to pass up, even though there are reasons it would be hard to pull off:

• It would be a high ticket merger and Google has just done that -- probably at least $10 billion.  Of course, with Google's huge market cap, anything is possible.
• Mark Benioff, SalesForce.com's colorful and forceful founder and CEO might not like the idea of working for someone else.  Phil suggests that he might accept if he was offered head of a well-funded business applications software division for Google (what he'd like SalesForce.com to grow into anyway) and the chance of running Google itself, in the long run.
• This would be a big step for Google, who is just figuring out how to provide business applications and support.  However, SalelsForce.Com has lots of experience here, so they might actually be able to help.

The question, of course, is what would happen in the overall market.  Let's speculate:

1. Software as a Service (SaaS) would immediately be enormously more important.   Companies like SAP who thought they had plenty of time to get to a full SaaS model may find that they are much more pressured.  Companies like Microsoft will need to rethink exactly how their hybrid (desktop plus Internet) model competes.
2. Google could help business applications penetrate lower in the SMB and SOHO markets using an advertising-supported model. 
3. Developers might feel compelled to develop for the Google/AppExchange platform because of its reach and economic strength.  This could overcome Microsoft's very strong hold on developers for the SMB market.
4. Enterprise customers might feel more comfortable with a much bigger company behind SalesForce.Com's applications and infrastructure, again expanding its reach.

It's fun to speculate.  Just don't assume anything will happen. 

Is Software Dead?

Last week Mark Benioff, the colorful and controversial CEO of SalesForce.com, gave a keynote speech at Software 2007, under the provocative title "Software is Dead."

Of course, Benioff, didn't actually mean software was dead, just the kind that wasn't provided across the Internet as a service, a la SalesForce.com and its many partners. 

Perhaps it's time to think about just what it is that the SaaS revolution is up to and offer a status report.

1. SaaS is certainly catching on as a valid method for acquiring and using software, not just in the SMB market (where some ISVs wish it would stay), but also in the large Enterprise market where it proves suitable for a number of applications, particularly those where fast implementation or complex software for just a few users can be realistically offered with SaaS, but not at all with traditional software offerings, implemented by the IT department behind the firewall.  SalesForce.com is perhaps one of the best examples of a SaaS application that has appeal to companies of every size and enjoyed great success.
2. Traditional software isn't going to go away.  Even the most optimistic projections for SaaS expect it to be 25-30% of the new  software market by 2010.  That means the we'll still have lots of existing (installed) software around and we'll still be installing lots of traditional software.  Expect some of that to be for critical applications where customers want more control, some to be the continuing use of existing (and successful) products, and some to be in product areas where no one has written a competitive SaaS offering (think smaller vertical niche markets dominated by a single successful player or two).
3. One tool is never the best answer to every problem.  That's like hammering in nails with a screwdriver because you forgot to buy a hammer.   I love SaaS for its flexibility, its ability to offer a solution now (or very soon), and its lower cost (mainly in administrative savings for implementing, running, and supporting the software), but I'm sure there will always be other "best answers" for some questions.
4. We love what we already have.  Look at all the IT shops, large and small, that still run very old software because it does the job.  In big companies that could mean 30 year old main frame code.  It's so important to big users that we're creating a whole new set of undergraduate and graduate colleage courses in the programming and management of these big systems because it's clear they're not going away.  In smaller companies it might mean custom code written for the company -- or just an Excel spreadsheet -- three editions old -- that does exactly what the company needs.  This doesn't mean the company is behind the times -- they may run these older applications right next to web application servers and business intelligence applications -- and access to newly acquired SaaS applications -- but rather that they are making choices about what serves them best.

SaaS is a great idea but it's just one way to acquire and use software.  I suspect that it will eventually be more than 30% of all software -- if it fulfills its promise and nothing better comes along.  But we'll keep looking, just in case the next best thing is already warming up.

In Praise of Google's Office Plans

David Berlind has written two great articles on just what Google is really up to.  You'll want to read them both. The first article is a very detailed tale about how a business user of Google can set up the equivalent of a very fine, easy-to-use and very cheap collaboration space.  Set aside 20 or 30 minutes for this one -- it's definitely worth it -- not just for the details of what's there, but for Berlind's assessment of what Google could do with it.

The second article is his thinking about what Google thinks it might need to do to have a fully fledged competitive offering, keeping in mind that they're not trying to compete with Microsoft Office 2007 and SharePoint, etc., etc. but rather with a notion of what users are doing in a new, on-line, web-based context, with much lighter-weight, but much more collaborative tools.

Since I'm working on a White Paper on just that subject, I read every word of both articles very carefully.  I agree with much of what Berlind says, although second guessing Google based on what they've done so far isn't always easy.

I'll be writing a lot more about Office 2.0, an attempt to consider all the office tools, from traditional desktop suites to the lightest web applications, and where and how they might fit together.  I'll be posting a description and outline of the White Paper on line shortly, in case you'd like to know more about it.

Join me at SaaScon

I'm going to be speaking at the SaaScon Conference in Santa Clara, April 17-18 (I'm a program advisor) and the program looks great. 

If you read this blog and you'd like to join me, you can take $100 off your registration fee by going to www.saascon.com/register  to register and using the following code:  AWDEAL47.

I'd love to see you there.

Amy Wohl