Tuesday, August 31, 2004

Microsoft shortens Longhorn

The big news on the Microsoft front last week is that Microsoft is cutting back on the scope of Longhorn, its next generation of the Windows operating system for desktops and servers. The choice was either to push out Longhorn's 2006 release date or cut back on features. The release date won.

What does this say about the size and complexity of Microsoft's operating systems?

I'll get to that in a minute. But first, let's look at what Microsoft is cutting out of Longhorn:
  • The biggest item to get the ax is the new file system, WinFS. WinFS was supposed to run on top of the Windows NT file system (NTFS), allowing users to more easily store and locate data. WinFS will now be introduced later in an upgrade to Longhorn.

  • The new Avalon presentation system is being "decoupled" from Longhorn, allowing it to be introduced with Longhorn and also as an enhancement to existing versions of Windows. This will make it easier for software developers to write new versions of their applications that can run on both Longhorn and older versions of Windows.

  • The new Indigo communications subsystem is also being split off from Longhorn, meaning that it might also be introduced separately. Indigo is Microsoft's next generation communications layer for all web services and communications features such as instant messaging, voice-messaging, video messaging, collaboration and content distribution.
The result of these cutbacks is that Longhorn is turning into more of an evolution of Windows, instead of a revolutionary jump in OS architecture. It also means that application software developers will be able to more easily make the transition to Longhorn.

Mary Jo Foley, of Microsoft Watch, has the best high level analysis on the subject. Read her latest article and follow the links to her earlier articles. Foley also links to Longhorn evangelist Robert Scoble, who has more observations on Microsoft's thinking.

Backing up a few steps, however, it's hard to avoid the impression that Microsoft's operating systems continue to get more massive and more bloated. Furthermore, as Microsoft adds new features, backward compatibility to thousands of third party hardware devices and software applications is becoming more and more a burden.

Clayton Christensen, in The Innovator's Dilemma, points out that market leaders ultimately overshoot the needs of the majority of their customers, opening themselves to competition from new technologies at the low end of the market. Such "disruptive innovations," as he calls them, do not provide the extensive features and functions of the market leader. But at the low end of the market, they are good enough. And they are much cheaper and simpler to implement or use. At first, a market leader ignores the new technology, because it does not threaten the market leader in its core business. But as the new technology improves in capabilities, it begins to move up market, eventually taking major market share from the leader. Christensen points out dozens of cases where this has happened, in industries as diverse as disk drive manufacturing, to retailing, to excavation equipment.

Do the majority of home computer users (think of Aunt Millie) really need WinFS? Do the majority of businesses (think of Uncle Joe's machine shop) really need Avalon or Indigo?

I'll leave it as an exercise to the reader to speculate on what other operating system or technology represents a threat to Microsoft, especially for the majority of users at the low end of the market.

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Thursday, August 26, 2004

Sarbanes-Oxley blamed for slowdown in new systems spending

Some analysts think that spending for enterprise software in the rest of 2004 may slow down as public companies freeze systems in preparation for a key Sarbanes-Oxley (SOX) milestone that comes up at the end of this year. The relevant part of SOX in question is Section 404, which requires management to certify their financial reporting and adequacy of internal controls.

The thinking is that, at first, in preparation for Section 404 compliance, large companies invested in new software to better enable internal controls and financial reporting. That would partly explain the mini-boom in software spending last year. But now as the Section 404 deadline approaches, management is freezing systems to avoid any potential disruptions to those controls.

As the compliance deadline draws nearer, companies will freeze plans to purchase and install new financial software, fearing that major last-minute changes to business systems could compromise their compliance efforts, [JMP Securities analyst Patrick] Walravens predicted. The clampdown should begin in October and could last about six months, causing certain software companies to miss first and fourth-quarter earnings targets, he said.
Walravens thinks his predicted slowdown will hit SAP the hardest.

SAP, predictably, doesn't think so.

SAP spokesman Bill Wohl disagreed with the report. "SAP continues to see strong demand from customers to invest in solutions that address the challenges of meeting regulatory requirements, like Sarbanes-Oxley," he said. "We have not seen any slowdown, nor do we anticipate one."
Personally, I think the impact of SOX on spending for new IT systems -- either positively or negatively -- is overblown. My own observation is that public companies are indeed spending a lot of time, money, and effort on SOX compliance, but as I pointed out over a year ago it is mostly in the form of internal efforts supplemented with outside consulting to establish, test, and document those internal controls. If anything, it is the professional service firms that are largely benefiting from the compliance effort.

CNET has the story

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Cost of compliance with Sarbanes-Oxley isn't mainly in new systems
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Tuesday, August 24, 2004

Software buyers turn cheap

Forbes has an interesting analysis of a growing trend for corporate software buyers to turn away from high priced solutions, such as Oracle's database, to cheaper alternatives, such as MySQL.

Craig Murphy has had enough. As chief technology officer at Sabre Holdings, which runs the world's largest airfare and ticketing network, Murphy has spent millions of dollars on database and other software from companies like Oracle. But last year, when Sabre was building a new computer system for online shoppers, Murphy took a flyer on a database program from a little-known company in Sweden that charges only $495 per server computer, versus a $160,000 list price for Oracle. Guess what? The Swedish stuff works great. Fired up, Murphy is hunting for other places to use the cheaper software, called MySQL.
Forbes also points out that while hardware costs have been dropping over the past 15 years, software prices have been increasing. In 1990, software accounted for only 10% of IT spending. Today it accounts for 20%. It's hard to justify why software deserves an increasing slice of the IT spending pie.

Forbes includes an interesting graphic that shows major categories of commercial software with their open source and other low cost alternatives, such as ASP or subscription-based solutions, partly reproduced below:
CategoryCommercial ExamplesCheap Alternatives
Operating SystemsMS Windows; UnixLinux
Web ServerMS IISApache
DatabaseMS SQL Server; IBM DB2; OracleMySQL
Desktop AppsMS OfficeSun StarOffice and OpenOffice
E-MailMS Exchange; Lotus NotesScalix
Apps ServerIBM Websphere; BEA WeblogicJBOSS
CRMSiebelSalesforce.com; NetSuite
IP TelephonyCisco Call ManagerAsterisk
Scripting LanguageMS Active Server Pages; Sun JavaServer PagesPHP
Spend MgmtAribaKetera
I think that the trend toward open source and other low cost alternatives is finally reaching a tipping point.

Related posts
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Buzzword alert: "open source"

Monday, August 23, 2004

Ford kills Oracle purchasing in favor of mainframe

Sometimes in-house systems refuse to die. Sometimes, even when they seem to be dead they come back to life.

Computerworld is reporting that Ford Motor Company is abandoning a four year effort to implement Oracle Applications for purchasing and is reverting back to the in-house developed mainframe purchasing system that Oracle was intended to replace.

Ford has invested unspecified millions of dollars in the system, which was dubbed Everest and built around Oracle's databases and business applications. But Ford spokesman Paul Wood last week confirmed that the automaker has decided to shut down Everest and return the purchasing processes that were being run on the system to a set of custom-written mainframe applications. "We completed an evaluation of all the production and nonproduction procurement systems and made the decision to transition back to the proven, current system," Wood said.
Oracle declined to comment on Ford's move, citing a non-disclosure agreement.

Tuesday, August 17, 2004

QAD plans cost cuts

In response to its revenue shortfall, QAD is now indicating it will undergo a round of cost cutting. This matches what I heard informally over the weekend, that QAD had already given notice to some employees.

Some analysts are anticipating that QAD may now be a candidate for a takeover. There has been such speculation before, but I've never given it much credence, mainly because 66% of the outstanding shares are currently in the hands of insiders, mostly owned by the Pam and Carl Lopker, who founded the company and continue to run it. Of course, if they ever decided to do something else with their lives, that could change.

For details on QAD's revenue shortfall, just scroll down to my previous post.

Friday, August 13, 2004

QAD coming up short

QAD is warning that its Q2 financial results are going to come up short of what it previously forecast. QAD now expects total revenue for the quarter to come in at $56-57M, down from the $58-61M it previously forecast. The new numbers are about flat compared to the same quarter last year. QAD blames the shortfall on "slightly weaker than expected market and economic conditions."

QAD, best known for its MFG/PRO mid-tier ERP system, is not alone in its weak performance. Most other major vendors, with the notable exception of SAP, are in similar straits.

As of this writing, the market is not taking the news well: QAD is down about 30% from its closing share price yesterday.


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SAP keeps on keepin' on

Thursday, August 12, 2004

HP blames SAP migration for revenue shortfall

SAP suffered a public relations setback today when HP indicated that a problematic SAP implementation in its $3B+ Enterprise Servers and Storage (ESS) group was partly to blame for a quarterly revenue shrinkage of 5%. CEO Carly Fiorina said that "migration to a new order processing and supply chain system was more disruptive than planned."

In the conference call, Fiorina seemed to indicate that the problems were in the implementation of SAP and not in SAP software itself. However, this distinction is likely to be lost in most reporting. SAP's competitors will no doubt jump on HP's problems as evidence that SAP is a system that is difficult to implement.

Adding insult to injury, HP happens to be an implementation partner for SAP. One would think that HP would have put its best people on the implementation in the ESS group.

My own view is that any enterprise system implementation in a $3B plus organization is going to be difficult. If you dig deep enough, you'll find plenty of similar examples involving other vendors.

Computerworld has more on HP's problems.

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Wednesday, August 11, 2004

Made2Manage sees bright future in plastics

Made2Manage (M2M), a Tier III ERP vendor, is acquiring DTR Software, a specialty ERP vendor focused exclusively on the plastics industry. DTR's package, known as The Manufacturing Manager (TMM) will be re-branded as a separate Made2Manage Systems product.

I short listed and evaluated DTR's product a number of years ago, and at the time I liked what I saw. Although DTR is a small, niche player, it definitely has an appeal for small plastics manufacturers. It has specific functionality for finite scheduling and other issues unique to plastics. As I recall, it even had a solution for scheduling fixtures separately from the molding machine, something you often don't see even in higher end packages.

I'm generally a fan of industry-specific solutions like DTR. For small software application vendors, I think the secret is to focus on one or two narrow vertical markets. If Made2Manage, itself a small player, can provide better marketing, DTR's product might have a good future. The company plans to turn DTR's Florida headquarters into an M2M office. It also intends to keep the executive team and most of DTR's staff in place. At the same time, M2M is promising to increase support for current DTR customers. All are good signs that M2M intends to grow the business.

A press release is on the M2M web site.

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Monday, August 09, 2004

Microsoft breaks its own CRM package

Microsoft is warning clients of its Microsoft CRM package that the application will not work properly if users download the latest service pack for Microsoft Windows XP. The service pack, SP2, is intended to close a number of security holes in the operating system.

To be fair, Microsoft has been warning software developers for some time that SP2 will cause problems for existing applications unless developers make specific code changes. But one would think that Microsoft would ensure that its own applications were properly updated before releasing SP2.

Having said that, it's better that Microsoft tighten security of the OS, even if it means breaking older applications.

By the way, if CIOs have not already done so, now would be a good time to implement centralized administration of desktop operating systems, rather than let individual users visit Windowsupdate.com whenever they feel like it. Although most larger companies centrally administer desktops, that's not the case in many smaller organization. Rollout of a major change, such as SP2, should be done in a controlled fashion, with a full-blown pilot test to identify potential application problems and plan for remediation.

Internet.com has details on the how SP2 can be disruptive to existing systems.

Update: Now IBM is telling its employees to hold off on applying SP2 until a more thorough analysis can be done:
In the memo to employees, seen by CNET News.com, IBM's internal technology department stated that Windows XP SP2 will "change the behavior of Internet Explorer and cause some application incompatibilities." The memo also noted that some "high-profile, business-critical applications are also known to conflict with SP2."
CNET has more.

Thursday, August 05, 2004

Offshoring leaves software firm not so jolly

Less than three months after offshoring software development to India, Jolly Technologies is having difficulty protecting its intellectual property.
The company said that according to a report obtained from its branch in India, a recently hired software engineer used her Yahoo e-mail account, which now allows 100MB of free storage space, to upload and ship the copied files out of the research facility. The company detected the theft and is trying to prevent the employee from further distributing the source code and other confidential information.
Jolly thought it had covered its basis by having its Indian employees sign an employment agreement that prohibits such actions. However...
Though the Indian branch of Jolly Technologies requires employees to sign a similar employment agreement, the sluggish Indian legal system and the absence of intellectual property laws make it nearly impossible to enforce such agreements, the company said.
Because of this incident, Jolly has halted all development in its Indian development center.

This is the sort of problem that many U.S. companies do not recognize as a risk in offshoring software development.

Computerworld has the story.

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