Saturday, July 31, 2004
The ARC Advisory Group has a good overview of SSA Global's release of Baan ERP LN. Baan had been working on this next generation version, prior to the SSA acquisition, but the effort had been hampered a lack of focus and missed delivery milestones.In addition to its large customer base, one of the main attractions of Baan for SSA was the completely new platform, Baan ERP 6.0 (code name Gemini), which Baan was on the verge of releasing prior to the acquisition. Upon acquiring Baan, however, SSA management took a long hard look at Gemini and decided that it just was not ready for prime time, postponing release to a later date.ARC lists the main enhancements from a technical perspective, including a thin-client browser-based user interface, a service oriented architecture (SOA), and support for web services standards such as SOAP and WSDL to promote ease of integration.
But ARC points out that the biggest story concerning Baan is what this new release means for the Baan installed base:
SSA has often been chastised for simply being a company that is acquiring distressed ERP companies, stripping them down to lower costs and making healthy margins off of the maintenance contracts. Nothing could be farther from the truth. This release is the clearest signal yet to the market by SSA that it intends to be much more then just a graveyard for distressed and disparate ERP systems.I attended an SSA road show in Southern California last year, and there were a lot of Baan users in attendance that were quite vocal about their concerns for SSA's support. The release of this new version should go a long way in addressing those concerns.
One of the primary reasons SSA delayed the launch of Gemini was that this product, as architected by Baan, provided absolutely no clear migration path for a significant majority of Baan’s customer base who were still on version IVc4. SSA correctly saw the danger in releasing this product early as many Baan customers would have more then likely fallen into the arms of a competitor. And SSA did not stop with addressing only the needs of Baan’s customer base.
In addition to providing a clear and smooth migration path for Baan customers on version IVc4 or later, ERP LN has been architected to also provide a clear upgrade path for both the ManMan and MK installed bases [i.e. two legacy SSA products that SSA is not investing much in--Frank]. Simply put, with ERP LN SSA has consolidated the three discrete ERP solutions into one, single unified source code base. While Baan customers should be pleased with this upgrade, both ManMan and MK customers will be elated as they now have a truly viable upgrade to bring them forward.
ERP LN will be offered to all existing customers on maintenance as a standard upgrade (e.g. no cost for the software itself). SSA spent a significant amount of effort to insure that upgrades go smoothly developing several implementation tools to accelerate, as well as simplify, the upgrade process. The product has been fully vetted at a number of Beta sites, the largest currently live with over 1000 users.
Although right now SSA is mainly targeting Baan ERP LN at Baan's existing customers, it will be interesting to see whether this new version gets Baan in the door for new deals. Baan has always had Tier I functionality for its targeted verticals, such as aerospace and defense, automotive, hi-tech electronics, industrial equipment, make-to-order and even engineer-to-order manufacturing. But with questions about Baan's future, it's been quite a while since I've felt confident enough to short list Baan for new clients. Maybe it's time to take another look.
I know there are quite a few SSA and Baan readers of the Spectator. If any of you have any first hand experience with this new Baan release, please let me know.
Baan users flock to SSA road show
SSA's strategy: acquire customers and technology on the cheap
SSA Global plans to consolidate product lines
ERP ecosystems: a sustainable business model?
SSA GT rumored to be leading contender for Baan
Friday, July 30, 2004
While the U.S. Army is implementing SAP (see post from earlier this morning), across the ocean, the U.K. Ministry of Defense has selected Lockheed Martin UK as the prime systems integrator for the Joint Asset Management and Engineering Solutions first increment (JAMES1), a system to manage defense fleet assets worldwide. IFS is providing the core software, IFS applications, and implementation services for the deal, continuing the joint venture between Lockheed Martin and IFS for defense related applications and services.
The deal is estimated to be worth $4.1M (USD) to IFS, a nice boost to the efforts of IFS to continue its strength in the aerospace and defense vertical.
More details are in the IFS press release.
Latest from the IFS World conference
Never one to shy away from a mission-critical project, SAP has announced that the U.S. Army is implementing SAP supply chain applications worldwide. The offering, dubbed SAP for Defense & Security, will replace 13 existing systems that the Army custom-developed in the 1960s and 1970s.
Although the SAP deal appears to have been in the works prior to the recent Iraq war, the Army no doubt elevated the priority of the implementation because of serious problems in resupplying material during the invasion.
According to project leader Lt. Col. Forrest Burke, the implementation will take 2-3 years to complete. It is "on an order of magnitude more complex than most companies' installations of SAP," he said.
Computerworld has details on logistics problems during the Iraq invasion, as well as a summary of the Army's SAP project.
Thursday, July 29, 2004
Some market analysts are not buying PeopleSoft CEO Craig Conway's argument that Oracle's takeover bid is the main cause (or, as Conway put it, the "elephant in the room") behind PeopleSoft's latest earning shortfall. In particular, Charlie Di Bona writes in a research note (quoted in an article in The Street):Let's take a closer look at what Di Bona says are the strategic factors that are working against application software vendors today:
We remain unconvinced that this [the Oracle hostile bid] was the sole factor behind the shortfall. Instead, we believe PeopleSoft was impacted by the same market factors impacting Siebel Systems and other applications vendors that missed: namely an infrastructure-focused software spending cycle; systemic pricing pressure exacerbated by the declining cost of custom development; and overblown expectations for the past several quarters that had pressured companies to meet numbers even if that meant draining pipelines.
- At this point in the economic cycle, customer spending appears to be oriented more toward infrastructure software (operating systems, databases, messaging, middleware, etc.) than application systems.
- The cost of custom development is declining, probably due to cheaper labor offshore, which is putting pricing pressure on application software providers. I'm not sure I buy that for general purpose applications (e.g. financials, HR, manufacturing), but it might be the case for company-specific applications.
- In order to pump up their financial results, application software vendors have been discounting heavily in the past several quarters, which has "drained the pipeline." This is exactly the point that I made in my post yesterday.
As evidence that it's not delayed sales that are the problem, Di Bona pointed out that the total number of PeopleSoft sales transactions increased in the quarter from 596 in Q1 to 725 in Q2, and the number of new customers increased from 120 in Q1 to 160 in Q2. At the same time the average selling price dropped from from $382,000 in Q1 to $346,000 in Q2.If customers were delaying deals based on Oracle concerns, it doesn't seem logical that transaction volumes should be up sequentially given the abundant press reporting of the trial in the second quarter....If customers are truly delaying purchases because they are concerned about PeopleSoft's future independence, then price should be immaterial and even heavy discounting would not drive any sales.
So, if Di Bona is correct, PeopleSoft's problems go beyond the uncertainty around Oracle's takeover bid. We already know from the Oracle trial that in competitive situations the major application vendors are discounting to a much greater extent than most of us realized. Although PeopleSoft is the latest example, most of the major vendors, with the exception of SAP, are posting disappointing performance. Apart from a general lackluster recovery in the tech sector, perhaps Di Bona has identified some of the reasons. If Di Bona's analysis is legitimate, it's going to mean continued tough going for most vendors.Related posts
PeopleSoft earnings coming up short
SAP keeps on keepin' on
Wednesday, July 28, 2004
PeopleSoft announced Q2 financial results yesterday, and numbers don't even meet the lowered expectations that the company set just three weeks ago. The firm is still profitable, at 3 cents per share (down from 11, same quarter last year). But most significantly, Q2 software license revenue was only $130M, far short of the $150-170M that PeopleSoft forecast in April. Although the $130M in new license sales is up from $112M last year, last year's numbers did not include J.D. Edwards. Therefore, license sales now from the combined company are up only $18M from the PeopleSoft-only numbers a year earlier.
PeopleSoft is blaming the poor showing on prospect uncertainty around the Oracle anti-trust lawsuit. During an analyst conference call, CEO Craig Conway said that the Oracle takeover bid was the "elephant in the room" whenever PeopleSoft visited sales prospects. He also said that several deals had been either lost or delayed due to the uncertainty around Oracle's takeover bid.
No doubt, buyers are finding it easy to push off a decision until the judge rules whether Oracle can continue its quest to acquire PeopleSoft. I might add that over the past 12 months PeopleSoft has been desperate to keep up its financial performance and has been providing lots of incentives to pull revenue in to current periods. That would have left fewer deals in the pipeline, which could be contributing to the weakness of Q2 results. It's a vicious cycle: your revenue is short, so you provide incentives to pull in deals from future periods, leaving future periods weak, which means you need to cut more deals. At some point, you run out of deals and you take a hit.
No matter how you slice it, it's not going to be easy for PeopleSoft. As I indicated last week, some observers think that it's quite possible that the judge could rule in favor of Oracle. If so, it will be difficult for large institutional shareholders to say no to Oracle's tender offer, in the face of PeopleSoft's financial performance. When software buyers look at this scenario, it's easy to for them to say, let's just wait a few months to see how this thing is going to turn out.
Reuters has a summary of PeopleSoft's results.
Wednesday, July 21, 2004
The Oracle antitrust trial wrapped up this week. From the news reports, it appears that the judge directed some pretty tough questions to both the government and to Oracle, making it difficult to discern whether he will decide in favor of the government, or allow Oracle's hostile bid for PeopleSoft to move forward. However, several reports I've read indicate that Oracle appears to be in better shape after the trial than it was going in.
Among the many software industry people I know, few expect this deal to go through. But we might all be in for a surprise. If it does go through it will send shock waves through the application software industry.
The San Jose Mercury news has a summary of the final day.
Blogger in the court
Quick look at DOJ's complaint against Oracle
U.S. to block Oracle's takeover of PeopleSoft
Oracle: It ain't over till it's over
Thursday, July 15, 2004
There's an interesting discussion going on over at TechRepublic between Michael Sisco, a writer for TechRepublic, and a reader, "Rob_Pro." Sisco first wrote an article, "Practical tips for aligning IT strategy with company needs," that, predictably, advised CIOs to do a better job of aligning IT with the business.
Although Sisco's advice was good, Rob_Pro would not let him get by with the usual motherhood and apple pie, such as "Tip #1: Communicate openly with operational groups and clients," and "Tip #2: Find out what's needed." In an insightful comment, Rob_Pro pointed out that while the alignment problem is common at many companies, one should not assume the problem is all on the IT side.While this is common at many companies, what I have yet to see are any articles on how to resolve these issues from the other direction. The advice given is usually to align the IT plan to the business plan, or something similar. Here are a few questions I would like insight on:With that set-up, Sisco had enough of a prompt to write another whole article, entitled, Aligning IT with the business: The other side of the story." This second article was more insightful than the first, and included good first hand experiences.
Almost every article I have read lately puts the task of correcting any misalignment squarely on the shoulders of IT management. What happens when the problem isn't necessarily the IT department? Here is the challenge: How do you address the alignment issue from the other direction?
- What happens if your company doesn't have a business plan?
- What happens when there are no strategic goals for you to try and align your support efforts with?
- What happens when you sit down with the business unit managers and they claim they are getting all the support they need from IT, but tell a very different story to the CIO?
- What do you do when the business units don’t know what their needs are?
- What are some strategies you can use to convince the CEO that you are a support department and need a direction to align yourself to?
- What strategies can you use to persuade the business units to develop the business case for adding technology so you can show that IT is contributing to their success and the success of the company?
But Rob_Pro was still not satisfied. In a comment on the second article, he expanded on the problems that CIOs experience in trying to get users to clearly articulate their business needs:I’m not looking for a department manager to tell me what their technology needs are, that would be hoping for far too much, and besides that’s what they pay me for. I’m just looking for a clear understanding of their business needs. If I sit down with ten business managers and ask them where the company is going in the next year and what our top goals are I will get ten completely different answers, many of them contradictory.In my experience, the situation Rob_Pro describes is very common. Many companies have much less clarity around strategy, goals, and objectives than one would like to believe. It is difficult if not impossible to develop a coherent IT strategy in a company where the business strategy is ill-defined. Not only is there not alignment between IT and the business, there is also little or no alignment between various parts of the business itself. When working on IT strategy with companies like this, I have found it more useful to back up and help the business leaders in a strategy roadmapping exercise, to first formulate and communicate a coherent business strategy. Then it is a much simpler task to derive a strategic roadmap for IT.
For example, if I ask the CEO what the sales goals for the next year are he will tell me we are doubling sales. If I ask how we are going to accomplish this goal he will tell me we are diversifying our product mix and increasing our client base.
If I then sit down with the VP of Sales, he will also tell me we are doubling sales next year. If I ask him about diversification, he will tell me we don’t want to go down that road, but instead we will sell more of the same product mix.
If I then sit down with the Director of Business Development, he will also tell me we’re doubling sales and we’re going to do it by utilizing a CRM package to better leverage client relationships and attract new customers with the same product requirements. Of course he doesn't want to pay for the CRM package, or try and cost justify it. That, he believes, is my job, but it should be obvious to me that we need a CRM.
Finally, when I sit down with the Plant Manager, he will tell me there is no sense in doubling sales because we lack the capacity to produce that volume of product anyway. And building a new line and hiring staff so that we can diversify is far too cost prohibitive.
This is the situation I face in trying to develop a plan. They can't tell me the business needs of the company, much less the technology needs. The answer to this problem might well fall outside the scope of "normal IT," yet from experience I can honestly say this is often the norm that I have encountered. Never mind having a written business plan to follow, there is no agreement on a non-written business plan.
IT decisions that are too important to leave to the IT department
Escaping the ROI trap
Escaping the ROI Trap, Part 2
Monday, July 12, 2004
Many major applications vendors are reporting a slide in license revenue sales in the most recent quarter. License revenue is traditionally considered a better indicator of overall trends, since it pulls maintenance revenue and professional services in future period. Here are some numbers for the most recent quarter vs. same quarter last year, as calculated in research from Schwab Soundview Capital Markets:Based on interviews in the field, Soundview attributes SAP's positive momentum to the following:
Oracle Applications: down 6% PeopleSoft: down 15% Siebel: down 14% SAP: Up 15%
Clearly, SAP is executing well and is continuing to build market share.
- Success in moving down-market. "SAP began morphing its organization to target smaller deals a couple years ago to better leverage a maturing applications market and to accommodate changing customer buying patters."
- Focus on under-served verticals. "According to [system integrators] surveyed, SAP is taking share in verticals historically under-penetrated, including broad-based US, with increased traction in higher education, public sector, and retail."
- Competitor problems. "Close competitors Oracle and PeopleSoft appear to be somewhat distracted by their trial and other best of breed apps competitors including Siebel and Manugistics, appear to have some underlying execution issues (large deal focus, poor sales execution)."
- Perception of SAP as the safe choice. "Customers surveyed are shying away from those vendors who might be acquisition targets or are less financially viable. Importantly, SAP's products are generally credible and vision compelling, which enables customers to think more seriously about move to a single source vendor."
Microsoft and SAP: the merger that didn't happen
Clash of the titans
SAP scores big win at Medtronic
SAP sales and earnings are ... up
Saturday, July 10, 2004
Charles Cooper comments on recent disappointing earnings announcements from some major software vendors and wonders whether it's a sign that companies are no longer cooperating with vendors' never-ending upgrade cycles:
Folks are simply tired of running like hamsters on the software upgrade mill. Unlike years past, they can select viable alternatives, such as open-source software or rent-an-application providers such as Salesforce.com. The upshot is IT directors have options that won't lock them into expensive upgrade cycles or onerous maintenance contracts. That's a handy club to beat down an obnoxiously aggressive software salesman.My own observation is that in the past there has been a definite pick up in activity by companies to improve their information systems. Unfortunately for software vendors, that doesn't necessarily mean that companies are willing to rip out and replace existing systems as they did in the run up to Y2K, or do a major version upgrade just because the vendor says they should. The smartest companies have learned that getting the benefits from enterprise software has more to do with business process improvement and change management and less to do with simply installing the latest and greatest new version.
For traditional enterprise software providers, any challenge to the software upgrade cycle is bad news in bells. They prefer to keep things just the way they are. The industry's dirty little secret is that in many cases, their customers do not really need to install an entirely new CRM (customer resource management) or ERP (enterprise resource planning) system. Truth be told, many probably can't even use the one they already have!
Tightwad tech spenders can't hold out much longer
IT budgets: spending less but getting more
Customers pushing back against enterprise software maintenance fees
Word on the street: IT spending is up, but not across the board
Tuesday, July 06, 2004
Somehow I seemed to have missed this last week. Microsoft has decided to slow down development of its next generation ERP offerings, code-named Project Green. This is according to Doug Burgum, SVP of Microsoft Business Solutions (MBS), in his testimony last week in the Oracle anti-trust lawsuit. The number of developers assigned to Project Green will be reduced from the current 200 to about 70, with the first release scheduled now for 2008.
I have a feeling this delay has more to do with the delay of Microsoft's next generation operating system, code-named Longhorn, than with anything else. If Project Green is designed to leverage Longhorn, and Longhorn's schedule is slipping, then it makes sense to slow down Project Green.
The silver lining to existing users of MBS existing products--Great Plains, Axapta, Navision, and Solomon--is that Microsoft appears to be redeploying many of those Project Green developers to work on enhancements to the current products. Existing customers and new prospects are likely to get improved functionality quicker under the new arrangement. It also removes the concern that I voiced previously that the existing products might become quickly obsolete if Microsoft was seeking to replace them quickly with Project Green.
Network World Fusion has more details on this subject.
Microsoft: selling enterprise software is a "humbling experience"
Yet another update on Project Green
Microsoft Project Green details emerging
Feedback regarding Microsoft's Project Green
Is Microsoft upstaging Great Plains, Solomon, Navision, and Axapta with "Project Green"?
Monday, July 05, 2004
I don't really know how many marketing folks at Microsoft read this blog, but back in April I wrote that Microsoft appears to be losing mind-share among developers, partly because free open source databases and tools are enticing young developers away from Microsoft.
Now, it appears that Microsoft is doing something about it. Last week, Microsoft announced that it is offering free "express" versions of its Visual Studio tools and SQL Server database to encourage learning and use by new developers. Express products include:
In the past, Microsoft did offer some free versions, such as Microsoft SQL Server Desktop Edition (MSDE), but those tools generally had a number of restrictions to make them less attractive than the new Express editions of these products.
- Visual Web Developer 2005 Express Edition, a lightweight tool for building dynamic Web sites and Web services,
- Visual Basic 2005 Express Edition, a streamlined programming tool for learning how to build Windows applications,
- Express Editions of Visual C#, Visual C++, and Visual J#, which are tools for learning the fundamentals of specific programming languages, and
- SQL Server 2005 Express Edition, an entry-level database.
Clearly this move by Microsoft is aimed at the threat of open source tools. The Microsoft press release announcing the Express products refers repeatedly to "students," "hobbyists," and "entry-level developers," the constituency most likely to be enticed away by open source tools. Nevertheless, it is a welcome move. It not only helps young developers that are trying to learn new skills. It also helps small IT shops and small consulting firms that may not be able to afford full developer licenses for all of their staff. In addition to the initial license fee, being able to get by with fewer licenses also reduces software maintenance fees in the future, which is a sore point among many Microsoft customers.
You can learn more about the free versions at Microsoft's FAQ page on the Express products.
Microsoft .NET losing mind-share?
PeopleSoft CEO compares Microsoft .NET to ... asbestos?
Microsoft Software Assurance: no bang for big bucks
Customers pushing back against Microsoft licensing program
Microsoft-sponsored study on Win2K vs. Linux is NOT all good news for Microsoft
Friday, July 02, 2004
SSA Global shows no signs of slowing down its acquisition binge. Last month it added Arzoon, a supply chain management vendor, to its collection. Then, just yesterday it picked up Marcam, a well established process manufacturing ERP system from Invensys, from which it also picked up Baan last year.
The analyst community has had good things to say about the Arzoon acquisition, praising Arzoon's functionality for transportation management, global trade management, and supply chain process management. When Arzoon is combined with SSA's previous acquisition of EXE's warehouse management and Baan's CAP Logistics, SSA now has an extensive set of supply chain management solutions, arguably more than Tier I vendors such as SAP and Oracle have. Of course, SSA's solutions are separate point solutions, not yet integrated, so the comparison is really not fair.
With the acquisition of Marcam, SSA's continues to expand its presence in the installed base of IBM iSeries (formerly, AS/400) customers. Unfortunately, Marcam has languished in the hands of Invensys, as did Baan. Process manufacturers need more good solutions to choose from, and hopefully, SSA will be able to breathe new life into Marcam's host-based PRISM system as well as its newer Protean solution.
SSA promotes extended enterprise apps, files for IPO
Baan users flock to SSA road show
SSA Global lays out its future in warehouse management systems
SSA's obituary was a bit premature
SSA's strategy: acquire customers and technology on the cheap
SSA Global plans to consolidate product lines