Loosening Microsoft's hold over midmarket software vendors
Michael Vizard writes at eWeek's Channel Insider that some application software vendors are growing cool in their attitude toward Microsoft, as the software giant is increasingly moving onto their turf. He says that because the small and mid-size business (SMB) market is dominated by Windows, it has been a natural platform for software vendors targeting that market.
But a curious thing is starting to take shape in the SMB market as the loyalty to Microsoft among ISVs in this space becomes increasingly strained. The process that drove a wedge in that loyalty was Microsoft's decision to acquire a number of companies and begin aggressively marketing applications targeting the midmarket space. This naturally set ISVs on edge, with many of them shifting their stance from being pro to neutral about Microsoft to being neutral or against.
Vizard points to Cognos and Sage Software as two examples of vendors moving away from the Microsoft camp.
Earlier this month, Made2Manage and Onyx Software announced their agreement for Onyx to be acquired by M2M. Now, CDC Software, a Chinese software company based on Hong Kong is making a third offer to acquire Onyx, after having been rejected twice before by Onyx.
Onyx’s weird trip started last December, when it received an unsolicited bid from CDC, a Chinese company that previously had bought up two minor companies, CRM vendor Pivotal Software and ERP vendor Ross Systems.
According to filings by Onyx, CDC embarked on a strategy of mixed messages and seemingly bizarre behavior, setting up meetings with Onyx executives and then putting out press releases claiming that Onyx was avoiding CDC. After a few weeks of this kind of behavior, CDC retracted its bid, only to reinstate it in March.
Even at this writing, with the M2M deal looking like it will gain widespread shareholder acceptance, CDC continues its pursuit of a very unwilling Onyx, claiming publicly that the fees Onyx would have to pay to retreat from the M2M deal were "unusually high" and offering to fight the fees in court. Meanwhile, CDC has written to the SEC claiming that Onyx failed to consider other legitimate offers. And so the saga continues.
Onyx Software becomes the latest catch for Made2Manage, which continues to build out its portfolio of software offerings. Onyx is one of the last remaining standalone CRM vendors.
The deal is worth about $92 million, all cash, and is expected to close in Q3.
In picking up Onyx, M2M is making an exception to its strategy of focusing on niche industry solutions. The deal appears simply to provide M2M with a good horizontal CRM product that it can offer to new prospects or cross-sell to its installed base.
M2M plans to operate Onyx as a separate business unit.
Chen starts by listing three companies that have adopted Open4Biz and why they went the route of open source:
Ameniti Travel Clubs, a subsidiary of UAL Corp and a sister company of United Airlines. They chose open source because it is easy to modify and allows them to move quickly with new business opportunities.
Snaidero Engineering and Trading, a subsidiary of the Snaidero Group, Italy's number one kitchen cabinet manufacturer. They liked the freedom to customize open source and implement it in many sites around the world without having to pay additional license fees every time they redeployed it.
British Telecom, one of the largest telecom firms in the world, which is implementing the Open4Biz application to support catalog management and online ordering for mobile products and services. Chen says, that British Telecom "will be serving all 18+ million residential and commercial customers in the United Kingdom with this system. As such, it is a very large deployment: they are scaling it out to support up to 16,000 simultaneous visitors using a cluster of 72 CPU's."
Concerning why British Telecom chose open source, Chen says,
When we asked British Telecom why they are going the open source route, we got a very interesting answer. The commercial solutions they looked at were expensive, given their volume and growth rate. It would have been several millions British pounds a year. More importantly, the commercial solutions would have still required a lot of coding and development. So it's like spending a lot of money to buy one of those mail order toys, only to get a box full of little plastic parts that you have to paint, glue, and assemble. Not much fun.
Conversely, with open source, they found that it had a reasonably good fit for their requirements. It still needed work, but they thought it was a good strating point because of a "well thought out data model," and it was "easy to change." Best of all, it was free, so the low cost helped as well.
The second part of Chen's presentation focuses more generally on the reasons that organizations choose open source over commercial software. Here he has a balanced view. His basic premise is that commercial software is the best choice when user requirements are generally the same across many organizations, there is little need for customization, and commercial software is not costly.
Conversely, however, when the organizations requirements are unique and there is the need to modify the software and the cost of commercial software is prohibitive, then open source is a good choice.
Although Chen doesn't put it this way, the point I got from this is that open source really shouldn't be viewed as an alternative to commercial software--it is an alternative to in-house custom development. Where companies today are spending much energy and effort to custom develop applications to support unique requirements, they really should be investigating whether there is an open source product that can be used as a starting point. The open source approach gives a head start to the development team and it also has the potential to leverage other development efforts of other organizations that are investing in the same open source product.
Chen has several other good points, which I won't elaborate on here. He talks about how service oriented architectures and the trend toward software as a service are catalysts for open source. He also talks about the current software vendor consolidation trend as reducing the choices in commercial software and thus strengthening the alternative of open choice.
I met Si Chen for coffee late last year and was impressed at the time with his vision for the potential of open source to change how business applications are developed and supported. Now, nine months later, he's still convincing.
Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.
Send tips, rumors, gossip, and feedback to Frank Scavo at
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Send tips, rumors, gossip, and feedback to Frank Scavo at
. I'm especially interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.
