Salesforce.com looks to hook Siebel staff

John Paczkowski at the San Jose Mercury News is reporting that Salesforce.com is offering Siebel employees a $5,000 signing bonus if they jump ship to Salesforce.com before the end of the year.

"Following the proposed acquisition of Siebel by Oracle, many existing Siebel employees may be concerned about their career prospects. We want to offer them an alternative to an environment of declining commissions, confused customers and uncertainty around career viability," Salesforce CEO Marc Benioff wrote in a company memo leaked to the tech media. "We would be delighted to hear from any Siebel employee that would like to join our company that meets our rigorous standard for excellence and dedication to customer success."

At the time Oracle announced the Siebel deal, it indicated that Siebel's product offerings would form the core of its future CRM roadmap. If enough of the best Siebel people accept Benioff's offer, it won't be good news for Oracle.

Related posts
Oracle faces threat to Siebel maintenance fees
Big eyes, big stomach: Oracle buying Siebel

Oracle claiming ultra-fast installs in SMB market

Several months ago I got an informal briefing on Oracle's special bundle for small and mid-sized businesses, dubbed "E-Business Suite Special Edition." Although the pricing on the applications and database looked great, what really interested me was Oracle's claim to be able to do ultra-fast implementations based on some system configuration tools ("Oracle Accelerators") that Oracle is making available to its resellers. I was waiting to see whether Oracle's approach would work.

Now it looks like some results are in, and they do look good. I'm hearing of a local install here in Southern California that was accomplished in a few weeks. This is consistent with an Oracle press release that has business partners claiming installs in seven weeks. It's not clear whether these installs are for the full suite or just financials, but other discussions indicate that a three month implementation for the full E-Business Suite is a reasonable expectation for projects taking this approach.

The Accelerators
The key to the rapid implementation is Oracle's Accelerator tool. The tool presents a series of 100+ questions to the client (e.g. how many future periods do you want to see in the GL?). The tool uses the answers to these questions to configure the application specifically for the client's business and explode the test scripts that the client will use to test the system. This approach essentially automates the design phase of the implementation, which formerly could take several weeks.

With design and configuration out of the way, the implementation effort then becomes largely a training exercise--to train the client's personnel in using the system exactly as it is configured for the client's business. Traditional ERP training is often done on a demo version of the system that may not look similar to the system that they ultimately use. So, user project team members become frustrated by seeing one version of the system in training, and another version when they begin testing. Oracle's approach solves this problem by configuring the system before training, making the training more effective.

R&D for Implementation
Oracle clearly seems to recognize that ERP implementations take too long and cost too much. The problem with most ERP vendors today, including Oracle, is not that their systems lack functionality--it's that they're too hard to implement. Most customers only implement a fraction of the functionality available to them. So why do vendors spend so much time and effort adding more functionality?

I've long felt that vendors should spend more of their software engineering budget on making their systems easier to implement. Prior to being acquired by Oracle, PeopleSoft had been working hard on improving what it called the "total ownership experience," and it was making good progress. Now it looks like Oracle is doing the same thing.

Of course, the next question is, if it works for small and mid-sized businesses, why not apply the same approach in larger companies? My guess is that Oracle is already working on that.

Related posts
ERP implementation: putting processes and people first
Four problems with ERP
Solving the four problems with ERP
Big three vendors target small companies

Reorg highlights troubles at Microsoft Business Solutions

If you haven't heard, Microsoft had a major reorganization last week, creating three major divisions out of what were formerly six business units. The new organizational structure once again calls into question Microsoft's efforts to increase its share of the enterprise system market.

The reorganization
First, let's look at the three new Microsoft divisions:

• The Microsoft Platform Products & Services Division, which will include the existing Windows Client, Server and Tools division along with the MSN division.



• The Microsoft Entertainment & Devices Division, which will head up Microsoft's development of entertainment and digital devices, such as IP television, Xbox, and other consumer devices.



• The Microsoft Business Division, comprising the existing Microsoft Information Worker group, including Microsoft Office, and Microsoft Business Solutions (MBS), the unit that manages Microsoft's ERP, CRM, and other business applications.

The reorganization puts Doug Burgum, head of MBS, reporting to Jeff Raikes, the new President of the Business Division. Interestingly, Doug Burgum used to report to Raikes until last year, when Microsoft moved him to report directly to CEO Steve Ballmer. It's hard to view the latest move for Burgum as anything but a demotion.

Furthermore, one has to question Raikes' experience in developing and selling enterprise systems. Basically, he doesn't have any. Raikes is a long-time Microsoft executive, coming up through the ranks from the MS Office line of products. But developing and selling major business applications is not at all like selling shrink wrapped software, which is Raikes' frame of reference.

How MBS got here
Clearly, Microsoft needs to do something with its ERP and CRM business, which has not done well since Microsoft created it out of its acquisitions of Great Plains and Navision several years ago. Burgum was CEO of Great Plains when it was acquired by Microsoft, and he has stayed on to lead MBS since its inception.

When Microsoft got into enterprise systems, many observers predicted that Microsoft would quickly dominate the market, especially the small and mid-tier. I recall many comments to the effect of, "Microsoft dominates any market that it chooses to enter. Look what happened to Novell and Netscape." There were even predictions that Microsoft posed a major threat to SAP.

None of those predictions have even remotely come to pass. SAP is going gangbusters, while MBS has languished. The unit has not shown a profit since inception. Its vision for a unified product, Project Green, has faltered, with Microsoft eventually redefining it as an evolution of its existing offerings (i.e. Great Plains, Navision, Axapta, Solomon, and Microsoft CRM). Earlier this month it renamed those offerings as Microsoft Dynamics--nothing more than a branding exercise.

MBS's problems are not limited to its own organization. Its reseller channel is still inadequate. Great Plains has had a decent channel program for many years, as long as a prospect is interested primarily in its financial modules. But it's hard to find very many implementation consultants that can work with the full range of Great Plains functionality outside of accounting. The problem is even worse for Axapta, which is Microsoft's higher end ERP offering. With roots in Europe, Axapta still has few trained implementers in North America, and with few new sales here it is unlikely that the population will grow quickly.

Grumbling in the ranks
None of these problems are hidden from employees working within MBS, and complaints are starting to pop up on message boards and blogs. It's easy to write off such complaints as coming from disgruntled employees. But the tone of many of the comments that I've read don't sound like sour grapes.

For example, this one:

Some have opinioned that fixing the problems in MBS/Dynamics is as simple as reducing the offerings from 4 to 1. That won't work. These products are not like Office but more like Windows. Each of the 4 products has a large eco-system of ISVs building on the respective platforms. To simply pull the rug from the ISVs and the customers all at once will do nothing but disrupt existing customers and prospects even more. People buy ERP systems for the long run. The mindset of most buyers in this market is "if it ain't broke don't fix it". Once they have an ERP system in place that they have spent upwards of 1 million dollars implementing, they will NOT simply switch. And anything less than a clear direction for moving forward will only push prospects to competitors.

I would like to see MBS succeed. The systems that MBS acquired are good products. Small and mid-sized businesses need a strong provider that can offer cost-effective, easy to implement solutions backed up by a strong, stable network of VARs and resellers.

Fortunately, Microsoft has pretty deep products, and it's unlikely that it would give up on the enterprise systems market. But I don't see anything in the latest reorganization that points toward a turnaround for MBS.

Related posts
Microsoft to put enterprise applications on the auction block?
Is Microsoft dying?
Microsoft wants PeopleSoft customers but doesn't have much to offer
Microsoft eats more humble pie in enterprise software business
Microsoft: selling enterprise software is a "humbling experience"
First look at Microsoft's Axapta ERP system
MBS is setting the stage for big-time channel conflict among resellers

Using Economic Value Added (EVA) to justify IT investments

We've posted a new article posted on the Computer Economics website on the use of Economic Value Added (EVA) as a tool for justifying IT investments.

Investments in information technology often involve major investments in capital. In fact, in some industries, IT accounts for over half of all capital expenditures. Therefore, if information systems executives want new systems to be approved, they need to understand how executive management expects large capital expenditures to be justified.

Historically, many IS organizations have not used formal ROI calculations to justify technology investments. There are two main reasons for this. First, in the past, business executives often did not ask for formal justification. It was often good enough for a CIO to quote one or two case histories, or to make general statements about industry best practices. During the run-up to Y2K in the late 1990s and the dot-com boom that followed shortly thereafter, many IT projects were approved with little financial justification at all.

The second reason is that, for many IT investments, the exact correlation between an IT investment and its benefits is not always explicit....

In spite of the difficulties in quantifying the benefits of IT investments, senior executives are now asking IS leaders much tougher questions about how a proposed technology investment will improve key business and financial metrics.

In order to answer such questions, CIOs must be able to “think like the CEO.” To that end, this article is intended to familiarize the reader with the way in which many large companies think about business performance and to show how it can be used to justify IT investments.

Read the whole article on the Computer Economics website.

Ellison comments on acquisition plans

Some interesting news coming out of Oracle's OpenWorld conference this week in San Francisco. The San Jose Mercury News is reporting on comments made there by Larry Ellison to reporters after his keynote address.

• Most of Siebel's workforce will not be laid off. Ellison says that Siebel has already cut enough staff. This is consistent with Oracle's previous indications that Siebel's products will be the basis for CRM in Project Fusion. However, I wouldn't take that to mean there will be no layoffs as a result of the Siebel takeover. I wouldn't want to be an Oracle CRM developer right now.



• Oracle has no plans for any more big acquisitions, for at least the next year. Specifically, BEA is not on Oracle's radar screen, having fallen from the number two spot for application servers to number three.



• Ellison does not see less competition in the applications marketplace as a result of vendor consolidation. He pointed specifically to Microsoft and software on-demand vendors such as Salesforce.com and NetSuite as growing competitors.

Interestingly, Ellison noted that he is an investor in both NetSuite and Salesforce.com, but he would like to see his investment go to zero.

Related posts
Big eyes, big stomach: Oracle buying Siebel
Oracle faces threat to Siebel maintenance fees
Software vendor consolidation and buyer concerns
Oracle mulls support for competitor databases

Oracle mulls support for competitor databases

Prior to Oracle's acquisition binge, one key aspect of its strategy was to use sales of its business applications to pull through sales of its database and tools, which represent 80% of Oracle's revenue. Oracle spoke convincingly of the benefits of owning the entire technology stack from applications down to development tools and database management systems.

But now Oracle is facing a major conflict between its acquisition strategy and its technology stack strategy. In buying PeopleSoft and J.D. Edwards, Oracle acquired a large customer base running IBM's DB2 and Microsoft's SQL Server databases. Its acquisition of Siebel adds a significant number of customers running IBM and Microsoft's databases.

Charles Phillips, an Oracle tri-President, acknowledged the problem at Oracle's OpenWorld user conference this week. He indicated that Oracle will decide March of next year whether its Project Fusion--its product roadmap for combining its many acquisitions--will include support for rival databases.

Since the PeopleSoft acquisition, I've been wondering what Oracle would do with this problem. Oracle is really caught in a no-win situation. On the one hand, supporting a single database will alienate a significant percentage of customers that don't see any benefit from migrating from their current database. On the other hand, supporting multiple databases will leave money on the table and allow IBM and Microsoft to maintain market share of their database sales.

Phillips did announce that Oracle will offer "lifetime support" to customers that want to stay on their existing systems, such as PeopleSoft, JDE, or Siebel, and not move to Project Fusion. That should help with customer retention, but not for those customers that want more than bug fixes and help desk support. Lifetime support for what will eventually be legacy systems seems to me to be a weak compromise, not a solution.

As I've said in the past, Oracle is aggressive, but its not stupid. I'm eager to see how it will resolve this conflict.

CNET has more.

Related posts
Oracle, IBM, Microsoft battle for technology infrastructure of PeopleSoft customers
IBM is a loser in Oracle/PeopleSoft deal

Software vendor consolidation and buyer concerns

Oracle's aggressive acquisition strategy is just the latest evidence of a consolidation trend underway in the software industry. In the enterprise applications space, players such as SSA Global have also been primary consolidators.

One might think, therefore, that the software marketplace will ultimately consolidate around a handful of large vendors, which will enjoy economies of scale and offer long-term stability and one-stop shopping.

But M.R. Rangaswami of the Sand Hill Group argues that the enterprise software market is still open for other players.

The perception that customers want to buy everything from a single vendor--however warranted--is idealistic. Once a single software vendor manages everything, the customer is beholden to that vendor. Smart CIOs know this--and are hedging their bets. They are balancing the right amount of business they give one vendor with the need to keep that vendor honest and serving them well. This fact ensures that small and mid-sized best-of-breed vendors will always have a place in the enterprise technology lineup.

Rangaswami is touching a point that I feel strongly about: the balance of power between sellers and buyers of commercial software. (I'll let the reader guess where my sympathies lie).

Vendor power over the customer is especially troublesome in the enterprise software market, where customers are making a decision that will tie them to the vendor for many, many years. Once a customer implements an enterprise system, it is extremely difficult to undo that decision. Vendors know this, and some of them act like they own the customer, treating them like a captive audience. This explains, in part, the overall low level of customer satisfaction in the applications software industry. In most other industries, satisfaction levels like this would put a supplier out of business.

Yes, CIOs want fewer vendors to manage, and they want the stability and continuity of service that a larger vendor can offer. But they don't want to give up too much power in the relationship. As much as possible, they want to control their own destiny and preserve their freedom to choose.

In my opinion, the need to maintain freedom is driving several trends in the enterprise software industry that seemingly have nothing to do with one another. It is behind the popularity of Linux and open source. It is behind the trend toward open standards and service-oriented architecture, which should allow buyers to mix and match software components from different vendors. It is behind the rise of third-party maintenance organizations that provide an alternative to the vendor's own support services. One could even argue it is one factor behind software on-demand (or, software as a service), where the buyer does not need to make a huge up-front commitment to the vendor.

The vendor consolidation trend will no doubt continue, and it needs to continue. There are still too many weak performers. But that doesn't mean that the door is closed to new entrants, especially those that offer new and innovative solutions to real problems and commit themselves to customer service.

Related posts
Executives hesitate to recommend their ERP vendors
Key advantage of open source is NOT cost savings

Oracle faces threat to Siebel maintenance fees

The Oracle/Siebel deal hasn't even closed yet, and a third party is already eyeing the lucrative Siebel maintenance revenue stream.

The company, Rimini Street, is so new that the its website hasn't even been spotted yet by Google. But it was the subject of a Wall Street Journal article this morning, which will no doubt give it a huge publicity boost.

Third party support organizations are not unusual. But this one is interesting because it is headed by Seth Ravin, who was already a thorn in Oracle's side when he was running TomorrowNow, a third-party PeopleSoft support organization. Ravin left TomorrowNow in March when it was purchased by SAP, prompting a veiled threat from Larry Ellison. Prior to starting TomorrowNow, Ravin was an executive at PeopleSoft.

It's a pretty good bet that SAP's buyout terms included a non-compete clause for Ravin, to prohibit him from setting up another PeopleSoft support organization. But that wouldn't stop him from taking SAP's money and setting up a third-party maintenance group for Siebel customers. Who knows, maybe he'll build up Rimini Street to the point where he can do another deal with SAP.

Ravin says he will offer support at 50% of the cost of Siebel's current fees, which is similar to what he did for PeopleSoft. Finding engineers to provide Siebel customer support shouldn't be difficult. Oracle is expected to quickly cut staff as part of the deal to integrate Siebel. That should put a number of skilled Siebel resources on the street. In addition, there may be a certain number of Siebel engineers that would prefer to work for someone like Rimini Street than become part of Oracle.

In terms of absolute dollars, it's doubtful that Ravin will take a large amount of business away from Oracle. To illustrate, TomorrowNow only reached a total of 30 people before Ravine sold out to SAP. Furthermore, most customers are not going to want to give up the rights to Oracle's product roadmap, code-named Fusion. Rimini Street will appeal primarily to customers that have heavily modified Siebel's program code and don't particularly need or want access to future releases.

But the mere availability of maintenance support from Ramini Street will be a check on Oracle's ability to dictate terms to Siebel customers. Maintenance fees accounted for $469M in revenue to Siebel last year, over one third of its revenue. With competition for new license sales extremely competitive these days, software vendors increasingly count on maintenance fees to stay profitable. In the case of Siebel, which has a particularly tough time on the revenue front, those maintenance fees certainly count for a lot in Oracle's arithmetic.

My prediction? Oracle will downplay the existence of Rimini Street for now. But if Ravin's new firm starts to get traction, it wouldn't surprise me if Oracle threatens legal action.

Related posts
SAP to provide maintenance for PeopleSoft products
Ellison threatens SAP regarding PeopleSoft support
High software maintenance fees and what to do about them

Big eyes, big stomach: Oracle buying Siebel

Oracle and Siebel announced the deal this morning, ending months of speculation on the future of Siebel and whether it was next on Oracle's target list. Oracle is paying a net of $3.61B (excluding Siebel's cash on hand), making the deal about a third of what Oracle paid for PeopleSoft last year.

In a conference call this morning, Oracle CEO Larry Ellison indicated that assimilation of Siebel should prove much less daunting than the takeover of PeopleSoft. One reason is that Siebel is welcoming the deal, another is that PeopleSoft had just acquired J.D. Edwards, making the integration more complex. It doesn't hurt either, that Siebel's technology platform is closer to Oracle's.

Interestingly, during the conference call, Ellison gave quite a bit of weight to Siebel's on-demand offering as justification for the deal, even though it represents a fraction of Siebel's business today. He even said that he expects to see all of Siebel's functionality to ultimately be included in the on-demand offerings.

As I've indicated in the past, Oracle's own on-demand offerings are simply a hosted deployment of its licensed software. Each customer still requires its own license and its own installation in Oracle's data center. Siebel's on-demand offering, however, is the so-called "multi-tenant model," which allows a single instance of the system to host multiple customers--a much more cost-effective architecture. Ellison's embrace of Siebel's on-demand offering most likely indicates that Oracle realizes its need to move to the multi-tenant model for its hosted offerings.

The Oracle/Siebel deal ups the ante once again in the battle between Oracle and SAP. The combination of Oracle and Siebel vaults Oracle ahead of SAP in terms of worldwide CRM position and closer to SAP in terms of total application revenue.

"In a single step, Oracle becomes the number one CRM applications company in the world," said CEO Larry Ellison. "Siebel's 4,000 applications customers and 3,400,000 CRM users strengthen our number one position in applications in North America and move us closer to the number one position in applications globally."

The announcement is on the Oracle website. Computerworld has more.

Update, 10:30 a.m.: Several Wall Street analysts, such as Prudential's Brent Thill, are questioning the deal, based on "Siebel's deteriorating fundamentals." I disagree. As I've pointed out in the past, Siebel's main problem is that it is stuck in the middle. At the high end, it faces competition from Oracle and SAP, which offer CRM functionality integrated with their ERP suites. At the low end, it faces competition from on-demand vendors, such as Salesforce.com and Rightnow, which offer easy-to-implement CRM functionality at a much lower price point. Siebel's own on-demand offering is as good a solution, but it only represents a fraction of Siebel's revenue. So the Oracle deal, in my opinion, represents the best approach for addressing Siebel's "deteriorating fundamentals," by pairing Siebel's best-of-breed CRM functionality with one of the two leading enterprise suite vendors.

Update, 12:05 p.m.: ComputerWorld’s editor-in-chief, Don Tennant, is quite negative on the deal, questioning whether the deal is really customer-driven, as Oracle's tri-President Charles Phillips claims it is. Tennant writes,

Certainly, Oracle will trot out reference customers who will toe the company line (typically reference customers get some sort of break from vendors when they do that). But I wonder how pervasive that sentiment really is. In the course of our reporting this week we may find that it is, indeed, what those joint customers are saying. But I'd be very surprised.

Stay tuned.

Update, 12:50 p.m.: Well, here's some bad news for current Oracle customers. The Wall Street Journal is reporting that, after the deal closes, Oracle will promote Siebel's CRM system rather than the current CRM offerings of Oracle or PeopleSoft. The language on the Oracle "Welcome Siebel" page says, "we plan to make the features of [Siebel's CRM] products the centerpiece of our Project Fusion CRM products." I interpret that to mean that it's the Oracle and PeopleSoft CRM users that will be the ones facing the greater migration as Oracle executes its Fusion strategy going forward.

Has anyone at Oracle thought about what this means for Oracle CRM deals currently in the pipeline? Not good news for Oracle sales in the short run.

Update 2:50 p.m.: Here's another problem for Oracle: to get Siebel where it wants in terms of profitability, it's going to have to cut very deep. Quoted in the WSJ, Needham analyst Richard Davis says,

Oracle stated on this morning's conference call that it plans to run Siebel at a 40% operating margin. We estimate that Oracle will have to cut 100% of Siebel's G&A [general and administrative] and 80% of Siebel's sales force to get there.

If Davis's arithmetic is right, I wouldn't want to be a member of the Oracle CRM sales staff right now, because if Oracle plans to focus its CRM offerings around Siebel's offerings its more likely to keep the Siebel guys and take it out of the Oracle and PeopleSoft presales staff.

Related posts
Siebel shaken by new shareholders
Siebel swept up in takeover rumors regarding Oracle
Management shakeup at Siebel

On a personal note...

I'll be participating on a panel discussion hosted by the Software Council of Southern California, on the subject of "Publicity on a Budget." I am being featured as an example of a "successful software industry blogger."

Nice to know.

The event is on Tuesday, September 20, at 6:00 p.m. If you're in driving distance of Encino, CA, come on over to the Encino Glen Golf Course.

Details on the program are on the SCSC Web site.

Microsoft rebranding its business applications

Microsoft is introducing new names for a number of the software applications offered by Microsoft Business Solutions (MBS). The new brand is "Dynamics," is one of the names that the Great Plains product used to go by. It is now an umbrella name for several of the MBS products. Specifically:

• Microsoft CRM is now Microsoft Dynamics CRM.
• Great Plains is now Microsoft Dynamics GP.
• Axapta is now Microsoft Dynamics AX.
• Navision is now Microsoft Dynamics NAV.
• Solomon is now Microsoft Dynamics SL.

What does this mean for customers and prospects? As far as I can tell, not much. In an interview on the Microsoft website, VP Tami Reller tries to connect the rebranding with Project Green, which is already suffering from a fuzzy definition.

The new names seem to be more form than substance.

Related posts
Microsoft: Project Green to appear in waves
Microsoft fuzzes up the definition of Project Green
Let's have a moratorium on vendor/package name changes

Would your company survive a Hurricane Katrina?

We've put up a new quickpoll up on the Computer Economics website:

Is your company prepared to recover critical systems and data and temporarily relocate essential work groups in the event of a disaster the size of Hurricane Katrina?

Hop over to the Computer Economics home page (right column) and take the poll now. It will take about five seconds.