Enterprise System Spectator blog: ERP and enterprise system vendor evaluation, selection, and implementation.

The Enterprise System Spectator

Wednesday, May 31, 2006

SAP and Salesforce.com: opposing application platforms

Recent moves by both SAP and Salesforce.com illustrate two different approaches to building a new platform to support an ecosystem of related solution providers.

First out of the chute was Salesforce.com, which back in January announced its AppExchange platform, which allows anyone to build extensions, customizations, and complete applications on top of the Salesforce.com infrastructure. This approach allows the tiniest developer--even a single individual--to build a new application, deployed as a service, and offer it for sale through Salesforce.com's AppExchange directory. Salesforce.com recently dropped the price of entry to this game, from $75 per user per month, to $25. At that price, any developer with a hot idea can work out of his or her bedroom and develop an application for sale.

The opposite approach is shown by SAP, which recently launched a venture fund to finance software development firms that want to develop applications to work on top of SAP's Netweaver platform. In contrast to Salesforce.com, however, these applications will be on-premise deployments, and it's hard to imagine them being deployed anywhere but in an organization that is running SAP. It appears that with much of the software venture money these days going to new software-as-a-service startups, SAP needed to launch its own venture fund to get money to its partners that are using a traditional on-premise model.

So, there are two key differences between these two attempts to provide a platform for building an ecosystem of application providers: (a) Salesforce.com's on-demand model vs. SAP's traditional on-premise model, and (b) Salesforce.com's providing a very low cost, low entry-point platform vs. SAP's providing venture funding for developers.

With SAP's increasing dominance of the enterprise market, and its deep pockets, there's a good chance that SAP will be successful. But its goals are to extend the reach of its SAP installed base.

Salesforce.com's approach is more innovative, in my opinion. It is attempting to provide a web-based, on-demand operating system, upon which new applications may be deployed. Of course, there is nothing to stop other providers from offering similar platforms. Furthermore, because Salesforce.com's offering is based on a service-oriented architecture and open standards, there would appear to be nothing to stop applications from interoperating with those built on top of Netweaver. Or, vice-versa.

While it appears to be harder and harder for traditional enterprise system vendors to be successful--witness the latest merger/acquisition of SSA by Infor, now with over 50 separate systems in their combined portfolio--the models offered by SAP and Salesforce.com provide a glimpse into how applications will be developed and delivered in the future.

Datamation has more on recent moves by Salesforce.com with AppExchange, and there's a good overview of AppExchange on Salesforce.com's website. ASPnews has more on SAP's venture funding of developers for its Netweaver platform.

Related posts
The death of packaged software
Rolling up the rollup: SSA Global to be acquired by Infor
Salesforce.com publishing real-time system status

by Frank Scavo, 5/31/2006 11:12:00 AM | permalink | e-mail this!

Subscribe!

Read/post comments!
(0) Links to this post

Tuesday, May 30, 2006

The death of packaged software

Erik Keller has an interesting editorial over on Sandhill.com, where he argues that there is a shift going on in corporate IT in favor of building more applications in-house (or through contract developers) instead of buying software packages. Keller made some of the same arguments a couple of years ago, and I commented on them back then.

Basically, his argument is that there are three trends at work today that are making custom development a more viable option: service-oriented architectures (SOA), which make it easier to integrate custom software components into existing systems; the availability of open source, which can be used as a starting point for custom systems; and offshore development firms that are developing high quality code at low cost.

These points are generally well understood, although the implication that they represent a threat to software package vendors is not fully recognized. Keller made these same points two years ago.

But in his editorial this time, Keller points out something new: three negative factors on the side of commercial software providers that are fueling the trend toward custom development. Ironically, he says, these factors are exactly the same as those that worked in favor of packaged software in the past.

According to Keller, these factors are (quoting him directly, here):
Slow time to market: Like the mainframe-oriented IT shops of 1980s, many of the largest enterprise-software vendors find it difficult and expensive to quickly incorporate the latest technology into their products in a timely and innovative fashion. They also tend to have limited experience with the latest tool sets.

Poor quality:
Internal IT groups often used to fail when they attempted large, complex projects. Over the last 15 years, buyers have found that most enterprise software vendors and systems integrators are no better and actually less accountable than their internal capabilities.

High expense:
With large upfront charges and on-going maintenance fees hovering around 20 percent of list price, enterprise software has taken on the same bad characteristics of inefficiently managed internal IT staffs.
As I wrote two years ago, I still believe that commercial software packages are the best route for most companies, especially small and mid-size organizations that are ill-equipped to maintain, let alone develop, comprehensive enterprise applications. For example, if a manufacturing firm has difficulty implementing SAP, or Oracle, or Great Plains, just wait until it attempts to develop time-phase material requirements planning or available-to-promise logic from scratch.

That being said, however, the economics of the build-vs-buy decision are difficult to argue with. By paying approximately 20% of the license fee for maintenance each year for Oracle or SAP, you are essentially buying the software again every five years. Although companies should continue to use commercial software for basic horizontal functions, such as finance and accounting, manufacturing, and basic order processing, the build-option is becoming much more attractive for complementary and industry-specific or company-specific functionality.

The transition of the major vendors toward service-oriented architectures (SOA) is making the build-option easier, with the ability to plug in such niche-functionality more easily. As Andy Bartels at Forrester pointed out recently, by embracing SOA, vendors such as SAP and Oracle are unleashing forces they cannot control, as the same SOA that makes it easier for vendors and partners to build composite applications also make it easier for customers to build their own composite applications.

The vendors' embrace of SOA is actually sowing the seeds of their own destruction. But they have no choice. They can either get on the SOA train or get run over it.

Related posts
Build/buy pendulum swinging back toward build

by Frank Scavo, 5/30/2006 04:06:00 PM | permalink | e-mail this!

Subscribe!

Read/post comments!
(1) Links to this post

Wednesday, May 24, 2006

Oracle going dark

Josh Greenbaum is complaining that Oracle seems to be less and less open these days in dealing with the press and analyst community and is adopting a "circle the wagons mentality" as it moves into year two of its Fusion strategy.

In his article in Datamation, he writes, "Oracle is harder and harder to cover, and harder and harder to understand – at a time when its message is more complex and craves more understanding than ever before."

Josh contrasts Oracle's recent "closed door policy" with that of two of its top competitors:
Two recent conferences I've attended, SAP's Sapphire and Microsoft's Convergence, were noteworthy for the opportunities the companies afforded analysts and the press to talk to executives, customers, and partners. For anyone trying to answer the hard questions – like which company has a better long-term strategy – it's much easier to have an opinion when you're given something to go on. Especially if that information is constantly updated and refined by access to the actual decision-makers.
He also points out that when access is limited, it's easier for analysts to write negative stories than positive.

Ironically, I've been hearing positive things recently about Oracle's work with its J.D. Edwards acquisition. One source, who had a long career with JDE and still has contacts within Oracle's JDE offices in Denver, says that Oracle is doing a far better job with JDE than PeopleSoft ever did.

Furthermore, in spite of some misteps at first, Oracle seems to have gotten its act together in how it tests and releases upgrades for JDE.

So, why the entrenchment at Oracle?

by Frank Scavo, 5/24/2006 09:50:00 AM | permalink | e-mail this!

Subscribe!

Read/post comments!
(0) Links to this post

Monday, May 15, 2006

Rolling up the rollup: SSA Global to be acquired by Infor

SSA Global, one of the primary consolidators of enterprise system vendors is now itself being acquired by Infor, another consolidator. There's a short press release on Infor's website just now, announcing the deal, which gives $19.50 a share to SSA shareholders, the majority of which are two investment firms, Cerberus Capital Management and General Atlantic Partners.

Why the deal? My guess is that SSA's investors see it as the best opportunity to get out. SSA's stock price has been on a steady decline since the beginning of the year and was trading around $16.00 the past week or so. Infor's offer of $19.50 represents a 20% premium over its current price. Sold.

Of course, this is from the investor's viewpoint. What about the customer's perspective? At first glance, I can't imagine that customers will be excited about this deal. I won't try to list all of the acquisitions that SSA Global and Infor each have made over the past several years. Use the search field in the right column to search for "SSA" or "Infor" and you'll find everything I've written about each firm's products over the past four years. Some, such as SSA's Baan (now ERP LN), were big names in the past. Some, such as SSA's Epiphany, have good up-to-date technology. Some, such as Infor's Lilly Visual applications and the former SCP Adage (Agilisys) system have deep industry functionality. But the list of products is very, very long, and it's hard to imagine how the combined entity can give adequate attention to such a diverse portfolio of products.

If you are a current customer of SSA or Infor, please let me know your experience with either vendor and your view of this deal.

by Frank Scavo, 5/15/2006 07:05:00 AM | permalink | e-mail this!

Subscribe!

Read/post comments!
(0) Links to this post

Powered by Blogger

(c) 2002-2014, Frank Scavo.

Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.

About the Enterprise System Spectator.

Frank Scavo Send tips, rumors, gossip, and feedback to Frank Scavo at .

I'm interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.

Selecting a new enterprise system can be a difficult decision. My consulting firm, Strativa, offers assistance that is independent and unbiased. For information on how we can help your organization make and carry out these decisions, write to me.

For reprint or distribution rights for content published on the Spectator, please contact me.


Go to latest postings

Custom Search

Join over 1,700 subscribers on the Spectator email list!
Max. 1-2 times/month.
Easy one-click to unsubscribe anytime.

Follow me on Twitter
My RSS feed

AddThis Feed Button


Computer Economics
ERP Support Staffing Ratios
Outsourcing Statistics
IT Spending and Staffing Benchmarks
IT Staffing Ratios
IT Management Best Practices
Worldwide Technology Trends
IT Salary Report

Get these headlines on your site, free!


Awards

2013 Best ERP Writer - Winner

Alltop. We're kind of a big deal.
 
Constant Contact 2010 All Star Technobabble Top 100 Analyst Blogs


Blog Roll and Favorite Sites
Strativa: ERP software vendor evaluation, selection, and implementation consultants, California
StreetWolf: Digital creative studio specializing in web, mobile and social applications
Vinnie Mirchandani: The Deal Architect
Si Chen's Open Source Strategies
diginomica
CISO Handbook


Spectator Archives
May 2002
June 2002
July 2002
August 2002
September 2002
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
April 2003
May 2003
June 2003
July 2003
August 2003
September 2003
October 2003
November 2003
December 2003
January 2004
February 2004
March 2004
April 2004
May 2004
June 2004
July 2004
August 2004
September 2004
October 2004
November 2004
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
January 2006
February 2006
March 2006
April 2006
May 2006
June 2006
July 2006
August 2006
September 2006
October 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
July 2008
August 2008
September 2008
October 2008
November 2008
December 2008
January 2009
February 2009
March 2009
April 2009
May 2009
June 2009
July 2009
August 2009
September 2009
October 2009
November 2009
December 2009
January 2010
February 2010
March 2010
April 2010
June 2010
July 2010
August 2010
September 2010
October 2010
November 2010
December 2010
January 2011
February 2011
March 2011
April 2011
May 2011
July 2011
August 2011
September 2011
October 2011
November 2011
December 2011
January 2012
February 2012
March 2012
April 2012
May 2012
June 2012
July 2012
September 2012
October 2012
December 2012
January 2013
February 2013
March 2013
May 2013
June 2013
July 2013
September 2013
October 2013
December 2013
January 2014
February 2014
March 2014
April 2014
May 2014
June 2014
July 2014
August 2014
Latest postings