Project management: the missing discipline

Tom Mochal, writing for Tech Republic, has a good piece on why organizations fail at project management. His top reason? Organization don't know how to implement culture change. He writes:

Most organizations don't know how to manage culture change in general and project management in particular. You can't just train people and turn them loose. You can't just buy MS Project and turn people loose. You have to have a long-term, multi-faceted approach to managing culture change. It takes hard work and resources. Most organizations aren't committed to focus on the culture change long-term, and they don't want to spend any resources to do it. Is it any wonder then, that six months later, project management deployment ends up in the trash pile of culture change initiatives that have all failed in the past?

I would state Tom's reason more generally: project management and change management are not well-developed disciplines in many organizations. Through many years of experience, most managers are good at managing day-to-day operations. The most successful are good at budgeting, hiring, motivating subordinates, maintaining relationships, organizing the work, and managing performance--in other words, all the things it takes to keep a functional group operating effectively.

But what happens when an organization is undergoing change? The skills that are needed to manage ongoing operations are not the same as those needed to change those operations. For example, managers who only work with day-to-day operations probably do not have basic project management skills such as defining objectives, breaking down the project into discrete tasks and activities, planning and estimating costs and schedules, identifying the critical path, analyzing risks, and developing contingency plans.

Why ERP initiatives fail
This explains why many enterprise system projects such as ERP fail. Although selecting the wrong system is a sure fire path to disaster, ERP projects generally do not fail because of software problems. ERP initiatives fail because organizations think that ERP is a computer project. But ERP's use of computers does not make ERP a computer project. It is an organizational change initiative. If successful, it will change how many groups and individuals do their jobs.

After hearing war stories from other companies with ERP, executives may understand that ERP projects are difficult to manage. But many do not understand that project management, as Mochal points out, is more than just a set of tools such as MS Project. It is about dealing with the human and cultural issues surrounding change and getting people to accept and implement change. It also takes special skills in change management such as recognizing cultural and political impediments to change, identifying organizational incentives that encourage wrong behavior, team building, negotiating, and resolving conflicts--skills that many otherwise good managers do not have, because they do not have to lead the effort for change very often.

How can an organization be successful in project management? First, by recognizing that project management is not a core skill of most managers and appreciating the change management aspects of project management, as I've pointed out. Second, by treating project management as a formal discipline within the organization.

The project management office
Many companies elevate project management as a discipline by establishing a project management office (PMO). The PMO can function as a center-of-excellence: training, advising, and coaching line-of-business managers in project management. Or, it can function as a home for the project managers themselves, assigning project managers to projects in the business units as needed. Or, it can be a combination of the two.

Regardless of how the PMO is organized, the main point is that project management, including the cultural elements of change management, must be recognized and developed as a key discipline in the organization.

Related posts
Computer Economics: Staffing for Project Management and the PMO

Has spam volume doubled, or does it just seem so?

A quick check of my spam folder over the past two or three months reveals a whole lot more spam than I was getting earlier this year. Promotion of penny stocks seems to be a recurring them, sometimes with ten or more spam messages promoting the same pump-and-dump scheme.

We've known that botnets (highjacking of thousands of individual PCs into a network of drones) has been growing as a channel for spam distribution. Now, it appears that a new trojan, dubbed "SpamThru," has commandeered over 70,000 PCs into another botnet, under direction of Russian hackers.

But whether the volume of spam has increased, or merely the percentage that evade spam filters, is an open question. Ferris Research, quoted in a Datamation article, believes that spam volume only increased 20% in the fourth quarter of 2006 to date, while the percentage reaching the inbox doubled. Techniques being used by the more sophisticated botnets include use of images instead of text and more compliant response to recipient mail server requests for greylisting.

Unfortunately, spam volume is unlikely to decrease as long as the economic incentives are there. Spam costs very little to send, and even if only a tiny percentage of recipients respond, a penny stock scam can still pay off to the spammer.

The soon-to-be-results of a Computer Economics survey on IT security threats shows that of all categories of threats, IT security personnel consider spam as one of the most serious.

Like the war on terror, it may never be possible to declare total victory in the war on spam. But it is possible to minimize its impact. A recent Computer Economics study surveys the relative effectiveness of four types of spam-blocking solutions.

Rumor mill: Oracle looking at JDA/Manugistics?

Take this one with a grain of salt. A Spectator reader tells me that he has heard from two unrelated sources that Oracle may be looking to acquire retail industry software vendor JDA.

If you've been following M&A market you know that about eight months ago JDA acquired Manugistics, one of the leaders in the supply chain management space. My source also tells says that he has first-hand knowledge of dissatisfaction among ex-Manugistics sales reps.

Would such a deal make sense? In its battle agains SAP, yes. A JDA deal would give Oracle one of the leaders in the retail industry, complementing its Retek acquisition and countering SAP's nascent development in this industry. It would also give Oracle one of the strongest players in the supply chain management space, countering SAP's gains with its APO system.

If you've got any confirmation of this rumor, or a contrary thought, leave a comment or drop me an email.

Related posts
Manugistics to be acquired by JDA
SAP walks away from Retek deal
Oracle beefs up retail offerings with ProfitLogic bid
Brawl continues between Oracle and SAP

Comparing Oracle's on-demand business with Salesforce.com's

Salesforce.com is the vendor most often identified with the trend toward software-as-a-service (SaaS), otherwise known as software on-demand. But in terms of size, it would appear that Oracle has surpassed Salesforce.com in the on-demand segment. This is a recent development that has only come about through Oracle's acquisition of Siebel, and its on-demand offerings, which complement Oracle's own work in the on-demand segment and its offering of its other products through the on-demand deployment offering.

Let's look at the numbers. Earlier this month, Oracle claimed over 2,200 customers with 1.7 million users of its various on-demand offerings. In the most recent quarter, this segment of Oracle's business generated $125 million, nearly 50% higher than the same quarter last year.

Last month, at Oracle's OpenWorld conference, CEO Larry Ellison claimed that Oracle's on-demand business is the same size as that of Salesforce.com. Actually, Larry was being conservative. If Oracle's quarterly revenue from its on-demand business was $125 last quarter, that would put it ahead of Salesforce.com, which has trailing 12 month revenues of $444 million, or $111 million per quarter. Furthermore, Oracle does not count license fees in its on-demand revenue numbers, whereas Salesforce.com's revenues are "all-in" numbers.

Part of the reason that Oracle is not recognized as much as an on-demand leader is that it gets there through a number of on-demand offerings, whereas Salesforce.com basically does it with a single offering. Oracle's offerings include:

• Oracle's traditional E-Business Suite, which it offers as a single-tenant hosted offering in its own data center in Austin, TX
  
  
• Oracle On Demand for Siebel CRM, which is a hosted deployment of Siebel's traditional CRM system
  
  
• Siebel CRM On Demand, which is its multi-tenant offering, similar to Salesforce.com's
  
  
• PeopleSoft Enterprise On Demand, a hosted version of PeopleSoft's Enterprise system
  
  
• A set of retail on-demand offerings, including hosted versions of Retek, ProfitLogic, and G-Log logistics
  

Computerworld has an edited transcript of an interview with Juergen Rottler, head of Oracle's on-demand operations that gives more insight into what Oracle is doing with software-as-a-service.

An interesting point from the Rottler interview: Oracle claims that large Fortune 100 companies showing more of an interest recently in Oracle's on-demand offerings, which are often thought of as having greatest appeal for small companies. If large companies are increasing their adoption rate, it shows that large firms must feel there is a strong business case for SaaS.

Related posts
The Business Case for Software as a Service
Major ERP vendors battle Salesforce.com for SaaS mindshare

Payback begins from SAP's Netweaver strategy

SAP is beginning to reap the benefits of its service-oriented architecture (SOA), dubbed Netweaver. This week, SAP released the first group of enhancements to its mySAP 2005 system. The enhancements include new upgrades to SAP's human capital management (HCM) and financial modules, along with new functionality for the retail and manufacturing industries. The benefit to customers? The new enhancements can be applied piecemeal.

Previously, SAP rolled out major new functionality only once every 12-18 months as part of an across-the-board version upgrade. The problem with this approach, which is fairly standard among ERP vendors, is that it requires a major implementation effort on the customer's side. If the customer is only interested in a single enhancement--too bad. The new version must be implemented in its entirety, "all or nothing."

The new approach, which lets customers pick and choose which enhancements to apply, is made possible by SAP's Netweaver platform. A service-oriented architecture reorganizes system functionality into "services" which interact with one another by means of messages built on open industry standards.

SAP isn't the first to market with this approach. IFS has been building its IFS Applications products on a service-oriented architecture since the late 1990s, although it referred to it as a component-based architecture until recently. Nevertheless, SAPs market share is many times larger than SAP's and its practical application of SOA raises the bar for other major vendors. Oracle is also rearchitecting its applications for SOA, using its Fusion middleware, but I don't believe it is yet able to release new versions incrementally as SAP has done this week.

Computerworld has more on SAP's enhancements released this week.

Related posts
Computer Economics: A Phased Approach to SOA

New federal rules for discovery of electronically stored information (ESI)

Amendments to the Federal Rules for Civil Procedure (FRCP) take effect today that include major changes regarding how companies must produce electronic information during discovery proceedings of civil litigation.

The new rules now explicitly identify "electronically stored information" (ESI) as a distinct category of discoverable information, separate from "documents." The rules dictate what the parties do during discovery to identify and produce ESI.

Nossaman Litigation has an excellent bulletin summarizing the changes from a legal perspective. I would also recommend this summary from Morgan Lewis Resources, on the impact of the changes. Morgan Lewis's document categorizes the new rules as follows:

The eDiscovery amendments cover five areas:

1. Parties [to the litigation] must meet and confer early to address issues relating to eDiscovery, including the form and preservation of electronically stored information, the problems of reviewing the electronically stored information, and assertion of privilege.
   
   
2. Electronically stored information that is not "reasonably accessible" does not have to be produced, unless the requesting party can show good cause.
   
   
3. In limited circumstances, a claim of privilege may be asserted if a party inadvertently produces electronically stored information that is potentially privileged. The producing party may require the return, sequestration, or destruction of the information pending resolution of the privilege claim.
   
   
4. Any review of business records conducted in response to interrogatories must now include searches of electronically stored information. "Electronically stored information" is specifically distinguished from "documents" or "things."
   
   
5. A safe harbor from sanctions is available when "despite reasonable steps to preserve discoverable information" electronically stored information is lost as a result of routine computer operations.

I see very little in the technology press about these amendments. John Soat at Information Week has been following the issue, but most others have not.

I believe that the new rules will have a major impact on IT organizations. Many CIOs are not yet aware of these new regulations. The definition of ESI includes all kinds of information--unstructured data such as voicemail messages, email, and images, as well as structured information such as database records. There are major implications for how companies manage backup media and disaster recovery storage. The rules do seem to cut some slack in cases where electronic information is too difficult to product--but I don't see anything in the rules that lets small companies off the hook.

And all this is taking place at a time when storage management disciplines in companies are actually declining.

One thing is for certain: this spells big business for storage vendors and vendors of information management solutions. And lawyers.

Major ERP vendors battle Salesforce.com for SaaS mindshare

eWeek has a good overview of the ongoing battle between the major traditional vendors of enterprise applications and Salesforce.com for the hearts and minds of enterprise system buyers.

Salesforce.com, of course, has put all its eggs in the software-as-a-service (SaaS) basket, going so far as to proclaim "the end of software." While Oracle defends the value of its on-premise offerings, it continues to build up its on-demand offerings, which range from simple hosting of its E-Business Suite to the multi-tenant CRM on-demand offering that it inherited from Siebel.

"You'll see us ramp up quite a bit—more advertising, more marketing, more sales," [Juergen Rottler, Oracle's executive vice president of Oracle On Demand and Oracle Support Services]. said. "We've incorporated Siebel CRM OnDemand and [developed] three new releases. We've rearchitected our entire underlying architecture to scale the business a lot faster. We've made core investments … that require a pretty heavy investment in R&D and services that a lot of niche players can't really make."

This leads, of course, to the argument over who has more customers and users:

On the heels of Salesforce.com's announcement of its $500,000 revenue mark in November, Oracle released a statement that it has surpassed a milestone of more than 1.7 million on-demand users, representing more than 2,200 customers buying Oracle's subscription-based solutions, managed applications or software managed services (compared with Salesforce.com's 27,100 customers and 556,000 users).

Another battleground is over ease of integration. Major vendors such as Oracle and SAP contend that on-demand offerings do not easily integrate with on-premise applications, such as ERP. It's still a strong argument in favor of on-premise software, but Salesforce.com is firing back with its ApexConnect offering, a set of tools that allow interfaces to be built with third-party applications, including pre-built interfaces for Oracle and SAP.

As with many trends in information technology, there is no one right answer to the on-demand vs. on-premise argument. Organizations will need to evaluate their needs along with the advantages and drawbacks of each approach. My own view is that the economics of the on-demand model are too strong for it not to succeed. It may not be suitable for many applications within many organizations today, but the barriers -- such as the integration challenge -- are slowly breaking down. Although on-demand applications are unlikely to completely replace on-premise offerings, over time they will increase their share of the enterprise applications market. The only question is how much.

Related posts
Salesforce.com's AppExchange proving its viability for developers
Computer Economics: The Business Case for Software as a Service
SAP and Salesforce.com: opposing application platforms

Microsoft threatens Linux users

It didn't take long for Microsoft to make clear its intention in forming an alliance with Novell to support Linux earlier this month: legal intimidation of Linux users.

Microsoft CEO Steve Ballmer said yesterday that Microsoft signed the deal with Novell because, in Microsoft's opinion, Linux infringes on Microsoft's intellectual property rights and Microsoft wanted to "get the appropriate economic return for our shareholders from our innovation."

According to Computerworld,

A key element of the agreement now appears to be Novell's $40 million payment to Microsoft in exchange for the latter company's pledge not to sue SUSE Linux users over possible patent violations. Also protected are individuals and noncommercial open-source developers who create code and contribute to the SUSE Linux distribution, as well as developers who are paid to create code that goes into the distribution.

It also quotes Ballmer, threatening,

"Novell pays us some money for the right to tell customers that anybody who uses SUSE Linux is appropriately covered," Ballmer said. This "is important to us, because [otherwise] we believe every Linux customer basically has an undisclosed balance-sheet liability."

Continuing the sabre-rattling,

"Only customers that use SUSE have paid properly for intellectual property from Microsoft," he said. "We are willing to do a deal with Red Hat and other Linux distributors." The deal with SUSE Linux "is not exclusive," Ballmer added.

With SCO's lawsuit going nowhere against IBM and other Linux providers, Microsoft apparently thinks it needs to do more to discourage organizations from adopting Linux. Or, as an alternative, only deal with Microsoft-approved distributions.

Ballmer, of course, provided no substantiation that Linux infringes on Microsoft patents. SCO has tried and has so far failed to prove similar allegations relative to Linux infringement on Unix IP rights.

Our research shows that in corporate data centers, Linux's share of workload processing is tiny compared to Microsoft's. Ballmer's disclosure shows, however, that Microsoft considers Linux a major threat. In forming its alliance with Novell, Microsoft is on the one hand embracing Linux, and on the other hand attempting to instill fear in corporate decision makers concerning Linux.

Update, Nov. 18: Jason Matusow, Microsoft's Director of Corporate Standards, posted to his blog asking for feedback from the open source community on the Microsoft/Novell patent covenant "not to sue." Read Matusow's post with all the comments to understand that the majority of open source developers do not trust Microsoft's intentions here.

Update, Nov. 18: The Seattle Intelligencer has a full transcript of Ballmer's original remarks. He says much more than the original Computerworld article quoted. And there are a ton of good comments attached to the article as well.

Update, Nov. 21: Now Novell is publicly distancing itself from Ballmer's remarks. In an open letter published on Novell's website, Novell's CEO Ron Hovsepian says,

We disagree with the recent statements made by Microsoft on the topic of Linux and patents. Importantly, our agreement with Microsoft is in no way an acknowledgment that Linux infringes upon any Microsoft intellectual property. When we entered the patent cooperation agreement with Microsoft, Novell did not agree or admit that Linux or any other Novell offering violates Microsoft patents.

In related news, Dave Kaefer, Microsoft's GM for IP licensing, says that Microsoft will not identify what Microsoft patents are being misappropriated in Linux. Quoted in Computerworld, Kaefer says,

"Patents are hard to understand. You have to have a certain level of expertise to understand the scope. And there are legitimate questions about patent quality," he said. "The reality is that you'd have to look at thousands of patents and thousands of products. To focus on every single one would be prohibitive."

Busted.

Update, Nov. 29. Via Computerworld, Novell CEO Ron Hovsepian gives a behind-the-scenes look at what triggered the original deal with Microsoft. Most interesting are the things that the two parties discussed but did not agree to, such as allowing Linux to run as a guest OS under Windows but not Windows under Linux, and allowing Microsoft Office and Visual Studios to run under Linux.

Related posts
Windows Rules the Data Center
Strange bedfellows: Microsoft and Novell in Linux deal

Dave Duffield debuts new on-demand ERP

It's been almost two years since David Duffield resigned from PeopleSoft, the firm he founded, in the middle of its hostile takeover by Oracle. Since that time, in addition to building a home bigger than the White House, Duffield has been working with a small startup, Workday, more or less in stealth mode. The buzz was that it had something to do with HR, and something to do with on-demand and open source thrown in the mix.

Well, the firm has finally announced its product line: Workday Enterprise Business Services, which it calls an on-demand ERP solution, although its roadmap falls far short of comprehensive ERP functionality. The first offering is Workday Human Capital Management, which is now in general availability, after successful implementation at Biosite, a medical device firm, and Kana Software, a software development firm. Future offerings will include Financial Management, Resource Management and Revenue Management, scheduled for release beginning in 2007.

Workday's press release points out the technical architecture of its on-demand services, which includes a multi-tenant architecture, built-in auditing to comply with increasing government regulations, and web services integration. According to Computerworld, the product makes heavy use of Asynchronous JavaScript and XML (AJAX), a web development approach for creating interactive web applications.

There are competitors to Workday, such as NetSuite, that come closer to offering complete ERP functionality. But with Duffield's involvement, the 65-employee Workday is getting a lot more publicity right now. Major technology product and service providers, such as Accenture and ADP, have already formed partnerships with Workday, and Microsoft is working with Workday to provide integration with Microsoft's Outlook, SharePoint Server and Exchange Server products.

So, will Workday be a serious competitor in the enterprise systems marketplace? If it is, Duffield says it will be because of Oracle's hostile takeover of PeopleSoft. According to Computerworld,

Toward the end of the 18-month hostile takeover bid that Oracle waged to acquire PeopleSoft, Duffield came out of retirement to rejoin PeopleSoft. "We worked like crazy for several months to keep PeopleSoft from the clutches of Oracle," he said. "When Oracle prevailed, it inadvertently opened a door for us." Duffield and former PeopleSoft colleague Aneel Bhusri founded Workday in March 2005.

Duffield gets a lot of sympathetic press because of the people-friendly culture he built at PeopleSoft and his charitable activities, such as his fund to help unemployed PeopleSoft workers after the Oracle takeover and his pet rescue foundation.

Everyone wants to see Dave succeed. Whether that translates into market share for Workday remains to be seen.

Computerworld has more on Workday's debut.

Related posts
Dave Duffield's next thing: bigger than the White House
Duffield comes to aid of former PeopleSoft employees
The ax begins to fall at PeopleSoft

Strange bedfellows: Microsoft and Novell in Linux deal

It continues to amaze me how technology vendors can be competitors and partners at the same time. The latest example is Microsoft and Novell, which have announced a deal to promote interoperation of Microsoft Windows and Linux and -- the strange part -- promote each other's products.

According to CNET, the deal has many components--let me try to itemize them:

1. The parties will work to make Windows and Linux interoperate more effectively.
2. Microsoft will promote Novell's SuSE Linux and Novell will promote Windows.
   
3. Microsoft and Novell will provide each other's customers with patent coverage for each other's products, and Microsoft will not take patent enforcement action against individual non-commercial Linux developers.
4. Microsoft and Novell will create a joint research facility to develop new products for virtualization, web services for server management, and MS Office/OpenOffice compatibility.
5. Microsoft will optimize its virtualization technology for Novell's SuSE Linux, and Novell will do the same with its virtualization technology for Windows.
   
6. Microsoft will recommend SuSE Linux in cases where Microsoft customers want to run Linux and will promote Novell's maintenance and support offerings.
   
7. Microsoft and Novell will share help desk resources for each other's products.

It's not hard to imagine why Novell might want this deal, but why would Microsoft want to do anything to make it easier for data centers to run Linux? Based on our most recent technology trends survey at Computer Economics, we estimate that Linux averages just 5-7% of the processing workload in North American data centers. Microsoft, on the other hand, averages over 50% of the workload.

Once again, Slashdot has interesting insights (if you can get past the one-liners such as "Hell called, they want their ice back"). Here are some of the more plausible theories by Slashdot contributors on why Microsoft did this deal:

• Open source applications, such as SugarCRM, are gaining ground, and they tend to run better on Linux than Windows. Microsoft wants to have an opportunity to get those apps running on Windows.
  
  
• Microsoft is concerned about anti-trust actions and wants to appear more open to competing operating systems. The recent trouble with the EU over Vista is a case in point.
  
  
• Microsoft needs a low-cost OS offering for overseas markets (where it can't charge its usual price for Windows), so that it can gain ground in those markets and sell its applications.
  
  
• Microsoft wants access to and influence over Mono, Novell's project to develop an open-source .NET-compliant set of tools. (.NET is Microsoft's framework for web services.) Promotion of Mono is promotion of Microsoft's .NET framework, which is a platform for Microsoft's applications.
  
  
• Microsoft is trying to force consolidation of the Linux distribution market so that it has one larger competitor to deal with instead of a fragmented, decentralized enemy.
  

But the most interesting insight is this one, where the writer ties the deal to Microsoft's need to be able to control digital rights management (DRM) as it plans to do in the next generation of Windows:

Remember the recent MSoft/Xen collaboration? MS is making a version of Windows that can serve as the hypervisor that other OS's run on top of. Microsoft's interest here is to make sure Windows is at the bottom layer so they can enforce DRM, "trusted computing" and ultimate control of the box, and collect fees when everyone is using virtual Linux etc. What they want to prevent is a future where free software is at the bottom of the stack and virtual Windows instances are brought up when needed.

All these theories are plausible, and Microsoft is no doubt pursuing multiple objectives in this deal. But ultimately, I think it's all about control. For example, both Microsoft and Linux have virtualization technologies--but which will be the host and which will be the guest? Microsoft realizes that although Linux's share in the data center is small, it is growing. If Linux is not going away, then it's better for Microsoft to be the host than the guest. And where it must be the guest, Microsoft wants to ensure that it's a business partner (Novell) that is the host, not someone else.

Furthermore, Microsoft recognizes that Linux is threatening to make the bottom layer of the software stack a commodity, just as Intel has made the hardware layer a commodity. Although much of Microsoft's profitability in the past has come from Windows, Microsoft is positioning itself to derive even more value from its Office products and other applications, especially in overseas markets where Linux adoption is taking place even faster than in the U.S.

As I mentioned earlier, Microsoft already averages over half of the workload processing in data centers. Microsoft really doesn't need to increase that share, but it does need to maintain it. By interoperating with Linux it ensures that it maintains its position in the data center.

Update: The ink is barely dry on the Novell deal and now Microsoft CEO Steve Ballmer is suggesting that other Linux distributors form similar patent deals with Microsoft. Strange. Why all the talk suddenly about patent infringement? Is this a threat or an attempt to spread fear, uncertainty, and doubt? eWeek has the story.

Steven J. Vaughan-Nichols, writing for Linux Watch has good insights:

I used to think that Microsoft wouldn't dare use its patents against the Linux companies. My logic was that if Microsoft started really throwing its patent weight around, IBM or Novell could retaliate in kind. Thus, if any one company tried to smash Linux with an overly aggressive patent enforcement, they would be blasted by the pro-Linux companies with large patent portfolios. It was the old geopolitical idea of MAD (Mutually Assured Destruction) . brought into the PC age.

Well, now Novell and Microsoft have a non-aggression treaty. Yes, the Novell/Microsoft deal also frees individual, non-profit open-source developers, and programmers who work on openSUSE, from any Microsoft patent danger. But what about programmers who work on, say, Red Hat Linux?

I hope I'm wrong. I hope that in the next few weeks, I'm not writing about Microsoft suing Red Hat. That Linux company has had more than enough trouble recently with Oracle. Or, maybe it won't be Red Hat. Maybe Ubuntu would be the target.

Why do I fear Microsoft might try this? I fear it because Microsoft's proxy war on Linux via SCO is finally coming to its endgame. And no one, probably not even in SCO's own offices, believes that SCO will win.

So, what can Microsoft do? It can bend, ever so slowly, to the simple fact that Linux is here to stay -- but at the same time, it can free itself to attack individual Linux companies in the court room.

Cynical? Yes. But after covering Microsoft for almost two-decades, I trust Microsoft the least when it looks like they're co-operating with others the most.

Related posts
Oracle plays hardball with Linux support
Microsoft to support Linux, virtually
Linux vs. Windows survey results
Microsoft-sponsored study on Win2K vs Linux is NOT all good news for Microsoft

Oracle plays hardball with Linux support

Oracle just threw a monkey-wrench into the Linux machine shop. It announced last week at its user conference that it will take Red Hat's distribution of Linux, remove Red Hat's trademarks, and begin maintaining the product under a support agreement for about half the price of what Red Hat charges.

Oracle is touting its new offering, dubbed Unbreakable Linux, as a way to increase the enterprise-class status of Linux. "Oracle's Unbreakable Linux program is available to all Linux users for as low as $99 per system per year," said Oracle co-President Charles Phillips in Oracle's press release. "You do not have to be a user of Oracle software to qualify. This is all about broadening the success of Linux. To get Oracle support for Red Hat Linux all you have to do is point your Red Hat server to the Oracle network. The switch takes less than a minute."

What's striking in Oracle's press release is how many other parties are quoted as positive about Oracle's move. Oracle got Dell, Intel, HP, IBM, Accenture, AMD, Bearing Point, EMC, BMC, and NetApp all to say good things about Oracle's decision. Some of them that have their own Linux support services, such as HP and IBM, are caught between maintaining their relationship with Oracle and building their own Linux businesses.

Red Hat is in a really tough position, with its stock plunging 24% on the news. It responded on its website, with a FAQ entitled "Unfakeable Linux," in which it points out deficiencies and incompatibilities in Oracle's offering, specifically Oracle's lack of support for Red Hat and JBoss applications, as well has potential hardware, software, and other incompatibilities between Oracle and Red Hat Linux. (Red Hat's website is extremely slow today, probably because of all the hits it is getting from the Linux community on this FAQ.)

As usual, the most insightful commentary is on Slashdot, if you can find it. For example, "Korgan" writes...

Actually, the whole reason they're doing this is because they're pissed off with Red Hat for buying JBoss when Oracle wanted it.

I kid you not. Search Google for comments from Larry just after Red Hat made the purchase and you'll see why.

This is just continuing that. Oracle at the time said they were considering their own Linux distro in an attempt to compete with Redhat. To paraphrase Ellison...

If Redhat are going to step on our toes, we'll stomp on theirs

This isn't going to make any real difference to Redhat in the long term. Oracle would be smart to position their distro as the best possible platform for their own primary products (such as the databases, ERP software and so on.) However, the chances of that are pretty slim.

Given Oracle just recently released a mammoth patch for their 9i and 11i products that, while containing more than 100 bug fixes, didn't manage to fix all known bugs, I seriously doubt they're in any way prepared to take on the responsibility of a full fledged Enterprise ready Operating System. This is going to kick them hard.

Although I think this may overstate Oracle's motives, I don't think it is far off. It wouldn't surprise me at all, now, if Oracle's intention is to drive down Red Hat's stock price and ultimately be able to buy Red Hat along with its recent JBoss acquisition.

That would allow Oracle to own the entire technology stack, from operating system through database and middleware, all the way to enterprise applications.

TomorrowNow a threat to Oracle's maintenance business?

I conducted a phone interview last week with Andrew Nelson, founder and CEO of TomorrowNow, a third-party maintenance support provider for Oracle's PeopleSoft, J.D. Edwards, and Siebel products. I've mentioned TomorrowNow in the past, but I was interested in how its business has been progressing in the year and a half since it was acquired by SAP.

TomorrowNow has not yet announced its third-quarter results, but Nelson indicated a major increase in new customers: over 200 today, with 60% running PeopleSoft, 30% on JDE, and 10% with Siebel (its newest support offering). The firm plans to offer support for Baan (now Infor's ERP LN) beginning in January 2007, and has already signed up some customers for this offering. Over the past year, TomorrowNow has built out its worldwide support organization to Europe, Asia, and Australasia, in addition to its base in the U.S.

Target Market
Although TomorrowNow markets its services for all users of PeopleSoft, JDE, and Siebel, in my view there are a few key segments where the firm's offerings are most attractive. Nelson confirmed that one sweet spot is companies that are running SAP globally but still have instances of PeopleSoft, JDE, or Siebel. These firms, which may be looking to standardize on SAP, have little reason to stay on Oracle support contracts, and they welcome a lower-cost option that is backed by a major player such as SAP.

Another sweet spot is companies that have many modifications and do not intend to upgrade Oracle's Fusion product. In Nelson's view, such customers are paying maintenance fees to Oracle (at 22% of their license cost) to "prefund Fusion," even though they have no intention to upgrade to Fusion. Why shouldn't they save 50% or more on maintenance fees by going with TomorrowNow?

Furthermore, TomorrowNow actually supports the customer's modifications to source code as part of the support contract. Oracle's support agreements, in contrast, only provide support for original source code.

A Threat to Oracle?
The short answer is no, and yes. On the one hand, even with TomorrowNow's apparently prosperous third quarter, the firm's scale is still small. Its 200 customers are a drop in the bucket in terms of Oracle's installed base. Its 200 or so employees are a small workforce compared to the thousands in Oracle's support organization. The bulk of Oracle's customers are fearful of cutting off maintenance support from Oracle. As discussed earlier, TomorrowNow's greatest appeal is to customers that are either planning to migrate away from Oracle's products or have so highly modified their systems that they have no plans to upgrade.

On the other hand, third-party support providers play an important role in tipping the balance of power a little bit back toward the customer. It's no secret that the major software vendors derive a healthy part--sometimes even the bulk--of their revenue from maintenance agreements. It's something of a captive relationship. Once a customer has implemented a major enterprise system, it's not an easy matter to change systems. If the software vendor is the only source of support, the vendor can almost name its price and the customer has little choice except to "go naked" (drop support).

But the existence of third-party support organizations such as TomorrowNow gives customers a much-needed choice, which pulls the balance of power back toward the customer, even if the customer does not choose to go with the third party.

As the enterprise software market continues consolidation, there are many good packages that are being lost in the portfolios of the remaining vendors. Infor's collection of 50-plus systems is an extreme example. Vendors enjoy a continual revenue stream of maintenance dollars from the installed base of each of these systems. But if they get greedy, it's likely that we'll see many more providers such as TomorrowNow stepping in to deliver more value at a lower price.

Related posts
Rimini Street expands 3rd party maintenance for Oracle products
SAP to provide maintenance for PeopleSoft products
Oracle faces threat to Siebel maintenance fees

Trends in IT security threats

Over at Computer Economics we're running a new survey on the current and expected severity of various IT security threats. If you have responsibility for IT security in your organization, please take the 10 minute survey now.

Respondents who complete the survey will receive a free summary of the results, which will be useful in assessing the relative priority of IT security measures to counter these threats.

The pointlessness of user security training

Stefan Gorling, speaking at the Virus Bulletin Conference in Sweden this week, thinks that most user training on IT security is a waste of time.

From a CNET report on the conference:

"Might it be so that we use the term and concept of user education as a way to cover up our failure?" he asked a crowd of security professionals. "Is it not somewhat telling them to do our job? To make them be a part of the IT organization and do the things that we are bound to do as a specialized organization?"

In Gorling's view, the answer to those questions is yes. In corporations in particular the security task belongs with IT departments, not users, he argued. Just as accounting departments deal with financial statements and expense reports, IT departments deal with computer security, he said. Users should worry about their jobs, not security, he said.

On the one hand, Gorling does have a point. Filtering out email attachments containing malicious code is a far better approach than exhorting users not to click on attachments from unknown senders. Similarly, new browser technology to flag counterfeit websites is a more effective solution than trying to train users to discern a phishing attempt.

On the other hand, I don't think user security training is pointless. The primary focus, however, should be to educate and remind users of the organization's security policies, such as acceptable use of computing resources, such as use of e-mail, instant messaging, backup procedures, encryption, and wireless access.

By the way, at Computer Economics we've just launched a new online survey regarding IT security threat trends. The survey takes about 15 minutes, and if you respond we'll send you a free copy of the resulting report. Take the survey now.

Salesforce.com to allow customization of its hosted service

Salesforce.com, the hosted CRM provider, is introducing a Java-like programming language called Apex to its services. Apex, which is currently in beta-testing, will allow users of Salesforce.com to customize the service or add new features. General availability is expected by the end of the second quarter of 2007.

CEO Marc Benioff announced Apex in his firm's Dreamforce conference in San Francisco yesterday.

The new capability allow users to go beyond mere customization of the user interface. It allows customers to add entire chunks of new business logic to the application. According to a presentation on Salesforce.com's website, Apex operates in a fashion similar to triggers and stored procedures.

What's really interesting about Apex, however, is that Salesforce.com is built on a multi-tenant architecture, which means that Apex code for each customer is being segregated from the code from every other customer, even though each customer is running on the same instance of Salesforce.com.

If Salesforce.com is successful with this capability, it removes one more objection to software-as-a-service (SaaS), the inability of individual customers to customize it. It is consistent with the firm's related work on its AppExchange platform, which allows customers to build, share, and sell entire applications running within Salesforce.com's hosted environment.

CNet has a brief article on Benioff's keynote. The Salesforce.com website has quite a bit of information on Apex and how it works.

Related posts
Salesforce.com's AppExchange proving its viability for developers

Compiere's open source ERP business model and growth plans

Late last week, I interviewed Jorg Janke, founder and CEO of ComPiere Inc., an open source ERP/CRM developer. In June, the firm announced it had received $6 million in venture capital to expand its business, and I wanted to find out what it planned to do with the money. I had also gotten word of a plan by a few members of Compiere's open source developer community to "fork" Compiere's source code into a separate version, and I wanted to get Janke's view on that.

Through the rest of this post, "Compiere" refers to the open source product, and "ComPiere Inc." refers to Janke's corporation, which manages the development of Compiere.

Business Model
Like most attempts to make money with open source, ComPiere Inc.'s business model requires some explanation. Janke along with co-founder Kathy Pink began Compiere development in 1999. They released it under an open source license that mimics the Mozilla Public License. Basically, this means tha anyone can download the software, play with it, implement it, use it, and enhance it--all at no charge. You can even redistribute it and create derivative works from it as long as such derivatives are distributed under the same open source license.

ComPiere Inc. makes money by offering services to its worldwide network of consultants, many of whom pay a fee to ComPiere Inc. to become "Partners," in exchange for sales and marketing support, second level technical support, and training services.

The Partners, which currently include about 100 organizations employing a total of 300-400 individuals, make money by providing traditional implementation and consulting services. Some of the Partners also develop complementary products or extensions to Compiere, which they are free to sell as proprietary products, as long as they do incorporate Compiere's source code. (ComPiere Inc. itself makes money from sales of proprietary products, such as migration tools that facilitate upgrade between versions of Compiere.) Partners also form the bulk of Compiere's open source development community, as they submit bug fixes and enhancements to Compiere Inc. for incorporation into the product.

In addition, Janke estimates that there are another ten to fifteen "freelancers"--independent consultants who are not Partners but provide implementation consulting services for Compiere. These freelancers also participate in Compiere's development community.

Business Volume
Since there are no sales transactions recorded for open source software, it is difficult to make head-to-head comparisons between Compiere and commercial software vendors such as SAP or Oracle. Open source projects like to use "number of downloads" as a substitute for sales figures, but although these numbers may run into the hundreds of thousands or even millions, they do not represent actual use of the product.

I was able to determine from Janke, however, that there are about 250 companies paying for support from ComPiere Inc. or its Partners, which is a pretty good indication of Compiere's installed base. There are, no doubt, some companies that have downloaded Compiere's source code and have managed to run it in production without any knowledge of ComPiere Inc. or its Partners. According to Janke, some of these companies eventually reach out to Partners for support, especially when they get in over their heads. But the total number of such organizations is difficult to determine.

Problems in the Development Community
As indicated earlier, there have been grumblings among Compiere's development community that have evolved to the point that a few of the non-Partner developers (freelancers) have forked development of Compiere into a separate open source project, dubbed Adempiere.

A public discussion on the decision to fork Compiere's source code is available, and it provides interesting insights into the dynamics of an open source development community.

The motivation to fork Compiere's source code seems to be centered around several issues:

1. The speed at which ComPiere Inc. processes fixes and enhancements submitted by contributors and the refusal, in some cases, to even accept them.
   
   
2. The refusal of ComPiere Inc. to provide Compiere version migration tools except in the sale of a support agreement.
   
   
3. Rumors that ComPiere Inc. is planning to limit the functionality of its open source offering, to better position some future proprietary offering.

I asked Janke about each of these issues. In the case of the first, Janke admits that resources at ComPiere Inc. have been limited: basically, all product development at ComPiere Inc and contributions from the community are funneled through Janke and Pink. One of the reasons that ComPiere Inc sought venture capital was to be able to hire more developers to support contributor efforts to enhance Compiere.

In the case of the second issue, Janke indicated that licensing of migration tools is one of the services from which ComPiere receives revenue, which it needs in order to fund its services to the development community.

As for the third issue, Janke denied any plans to restrict functionality of Compiere in order to make a separate closed-source offering more attractive. I would also add that if a closed source offering made any use of Compiere's source code, it would by definition need to be an open source product. After our discussion, Janke wrote an even stronger rebuttal of this point:

There is certainly no plan to cripple the product or discontinue or "privatize" functionality - the very opposite is the case. We will continue to develop substantial new functionality Open Source, and hope to increase Open Source contributions from the community. It's disconcerting to see people spreading unsubstantiated false rumors in this regard.

Janke said that he hopes the addition of new developers at ComPiere Inc. will enable new enhancements and fixes submitted by the development community to be incorporated more quickly, and that the developers who have forked the source code will want to return to the original Compiere project. It takes a lot of work to maintain an open source project, and certainly one combined effort will be more productive than two.

While I was writing this post, Janke wrote a Compiere status update that addresses the issues I have outlined above, and more. It is worth reading for a more complete view of what ComPiere Inc. is doing with the venture funding.

The future of open source ERP
Compiere is just one attempt to build a complete ERP system under the open source model. Open For Business (OFBiz) is another. ERP5 and Tiny ERP are still others. OpenMFG might be considered as well, although its license is not truly open source. In addition, there are several open source CRM projects, most notably SugarCRM, which offers an open source version as well as a "professional" or commercial version.

Although open source ERP has been gaining some ground, none of these projects match the scale of open source efforts such as Linux, Apache, mySQL, or JBoss. It appears that the higher one moves up the technology stack, the more specialized the requirements and the narrower the development community. ERP applications, at the top of the stack, would appear to be the most difficult market in which to sustain an open source development effort.

If this be the case, then it would appear that the primary success factor is a critical mass of developers. ComPiere's greatest asset, in my opinion, is not Janke's knowledge and experience as a developer--it is the 100 Partner organizations that are committed to extend, enhance, and support Compiere. Janke is right to devote a good chunk of his venture funding to hire new developers (he indicated four new programmers added in the past few weeks, and a total goal of about 20 a year from now). His development staff's top priority should be the rapid evaluation and incorporation of changes submitted by the Partner network. In addition, the freelance contributors should be treated the same as the Partners--if they have fixes or enhancements, they should be evaluated on the quality of their contributions and not given lower priority just because they don't pay a Partner fee. The freelancers--especially those in developing countries--have more time than money, and ComPiere Inc. should take advantage of that fact. The development community--whether Partner or freelance--is the competitive advantage for open source, and organizations such as ComPiere Inc. should take every opportunity to serve and grow that community.

Other open source projects, such as Linux and the others mentioned earlier, demonstrate that open source products can be as good or better than their commercial equivalents and that they can even claim a dominant market share, as in the case of Apache for web servers. Open source ERP may not reach this level of market share, but it can certainly gain more than it has today--as long as it fosters a robust and thriving development community.

Compiere may be on the road to doing so, and I hope it is successful.

Related posts
Open source ERP gaining adherents
Why organizations choose open source software
Build/buy pendulum swinging back toward build
Key advantage of open source is NOT cost savings
Open source: turning software sales and marketing upside down
Open source ERP
Buzzword alert: "open source"

i2 innovates with hosted vendor-managed inventory services

A Spectator reader who works at i2 has just alerted me to i2's new vendor-managed inventory (VMI) offering for consumer industries.

I've written quite a bit in the past about i2's fall from leadership in the supply chain management software business. For example: i2's virtual abandonment of its SRM business. So, it's good to see something that appears to be a real innovation for i2.

i2 dubs the new offering "planning as a service (PaaS)." It combines i2's supply chain management software, hosted as a software as a service (SaaS) offering, with offshore business process outsourcing (BPO) services to operate the program on an ongoing basis.

i2's offering appears to be an outsourcing arrangement more than anything else. For example, a large consumer packaged goods manufacturer might go to i2 for help in setting up a vendor-managed inventory program. Instead of just selling software to the manufacturer and letting the customer struggle to put together all the pieces, i2 now takes the lead for all aspects of the program. It does the analysis to build the business case, designs the to-be process, sets up and tests the design through a pilot program, and implements and executes the full program on an on-going basis.

The software can be hosted by i2, or, if the client prefers, it can run the system behind its own firewall. The outsourced personnel are largely located offshore, in Banglore, India, playing to i2's strong relationships there. My source indicates that i2 is also looking at other offshore locales, including one in the Central or South America to balance out the time zones around the world. The offshore connection also suggests that i2 will be able to scale the offering more easily than if these personnel were located in the U.S. Early experiences indicate that i2's resource requirements are most heavy at the initiation of the project, when there is much work to do in understanding the client's business and normalizing/cleansing the client's data. Once the relationship moves into ongoing execution, the resource requirements taper off quite a bit.

Some might argue that i2 is finally recognizing what its clients were really looking for all along. Supply chain consultants have told me in the past that i2's products were really more of a tool set than complete package, and that it took a lot of skill and experience to tailor i2's products as part of a supply chain program that is specific to a given company and industry. Many clients simply do not have the expertise to do this.

Now, by taking responsibility for the entire program, including the results, i2 is aligning its resources to meet the real needs of the client. I suspect it is also enjoying a much larger budget (the whole pie) than it would get by just providing software and implementation service, which are just two small slices.

i2 includes a case-study for Panasonic, an early adopter of i2's VMI offering, and the results are pretty impressive:

Before deploying this consumer-oriented solution, Panasonic suffered from misdirected inventory, stock-out problems, and dead inventory in slow markets. Sales and profits were weak, and relations with key retailers were less than ideal.

After implementing the i2 solution, inventory distribution is now completely aligned with consumption, and customer availability jumped from 70% to 95%. The average week of supply in the channel went from 25 weeks in 2004 to just five weeks--and trending downward--in 2005. Unit sales of the targeted plasma television rose from 20,000 the previous year to approximately 100,000 in 2005. Operating profits for the business unit went from a 10% net loss in 2004 to a projected 13% profit for 2005.

Best Buy, the initial retailer covered by the vendor-managed inventory model, has since elevated Panasonic from a Tier 3 Supplier to a Tier 1 "Go To" Brand for plasma televisions.

Panasonic was i2's first success with its new VMI service, and my source indicates that there are two other consumer industry clients in implementation as well as two clients in high tech electronics that are in process. These accounts are not yet ready to go public, but their early progress is quite encouraging.

I believe that i2's offering is a good example of how technology providers can combine the concept of SaaS with managed services, including offshore outsourcing, to deliver greater value to clients. Other traditional vendors should take note.

Related posts
i2 kills off its SRM business
i2 fires 300, struggles to refocus
i2 founder gives up top spot to new CEO

Rimini Street expands 3rd party maintenance for Oracle products

I interviewed Seth Ravin, founder of Rimini Street, today about his firm's efforts to expand their support offerings for Oracle's Siebel, PeopleSoft, and J.D. Edwards product lines.

I covered Rimini Street exactly one year ago, when the company was first founded to provide an alternative to Siebel's support organization. At the time, I predicted: "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."

So far, Oracle has indeed been acting as though it is unconcerned about Rimini Street. Ravin today said that Oracle has taken the high road--Oracle's co-CEO Charles Phillips says that it's good for Oracle customers to have choices. However, as Ravin points out, it would be awkward for Oracle to attack Rimini Street for providing third-party support for Oracle customers while Oracle itself is, at the same time, promoting its partnership with SYSTIME to provide third-party support for SAP.

Rimini Street Customer Base
Of course, in terms of size, Rimini Street is not yet a major threat to Oracle's maintenance revenues. The firm only employs about 30 people today, according to Ravin. He also indicated the number of clients, which he asked me to not disclose until his firm announces it at Oracle's Open World conference next month. Without giving the exact figure, let me say that it's not a big number. It comprises 60-70% Siebel customers and 30% PeopleSoft customers, with offerings for JDE customers just begun.

Although the number today is not large, it does include some very large companies--Fortune 500 firms. The conventional wisdom has been that third-party support appeals mainly to small companies looking to save a buck. But, as it turns out, large companies also want to save money--especially large companies that have heavily modified the vendor's software and have no plans to upgrade. Some of these companies are not willing to continue paying 22% of the sales price to Oracle for product upgrades that they are not likely to ever install. Also, having mature systems, they don't need Oracle's help desk support.

Retail, healthcare, and governmental organizations also seem to be receptive to Rimini Street's offerings--the last especially in cases where there are significant budgetary constraints.

Beyond the Traditional Support Contract
One interesting point: Rimini Street has been expanding its support offerings to go beyond what is typically offered in software maintenance contracts. The company is now offering support, not just for vanilla code, but for the client's own customizations. There are certain restrictions (e.g. the code has to be working in the client's production environment), but once the customizations are put under maintenance, Rimini Street guarantees that they will continue to work with whatever changes Rimini Street introduces to the code. The firm also provides certain support to ensure interoperability, data quality, and system performance--the kind of real-world problems that traditional vendor support contracts do not cover.

Actually, what Rimini Street is doing is really not so radical. It is really just a system implementation consulting firm, or a system integrator, that happens to sell its services under a service contract instead of a break-fix arrangement. It is not a software company. Ravin points out that in a perfect world, Rimini Street ought to be an Oracle partner. Just because they compete with Oracle for maintenance contract dollars shouldn't make a difference--Oracle competes with its partners all the time. Just ask any of Oracle's implementation partners how often Oracle Consulting competes with them for services deals.

As I've indicated in the past, it is the software vendors' own money grab that has opened the door for third-party support organizations, such as Rimini Street. Vendors have been treating their installed client base as a captive audience, jacking up support prices to provide revenue to fund the rest of their operations. This creates a value-gap that third-parties can fill by offering tailor-made services that meet the needs of the customer for significantly less money.

In the case of Rimini Street, contract prices start at about 50% of what Oracle charges. Then, if the customer is paying maintenance for products he has not implemented, or user seats that he is not using, the price drops even further.

It's hard to see what's wrong with this picture.

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

Sun's massive ERP consolidation effort

Sun Microsystems is currently undertaking the mother of all application-consolidation projects: a three-year effort that is replacing 1,000 applications with a single instance of Oracle's E-Business Suite.

The Oracle system will run on a Sun UltraSparc E25K server for the back end, with small thin x64 Web servers on the front end. According to CIO Bob Worrall, Sun would have liked to run the system on an Oracle grid, but there are "no serious references of Oracle running in a gridded environment that supports 40,000 users."

The first big deliverable is scheduled for July 2007 when Sun goes live with services and price-quotation systems. There are "several hundred" team members working on the project.

Application consolidation of the sort that Sun is undertaking is just one of several consolidation strategies that IT organizations can use to reduce the cost of ongoing support. Other forms of consolidation include server consolidation, storage consolidation, and data consolidation. Our most recent research at Computer Economics shows that all forms of consolidation are highly popular, as companies endeavor to reduce the burden of maintaining existing systems and capabilities to free up funds for new development.

Because application consolidation is much more difficult than server or storage consolidation, it is the least-deployed consolidation strategy. Nevertheless, it has the highest potential payback, as duplicative efforts in system upgrades and maintenance are eliminated and the organization enjoys economies of scale with a single system. Fewer servers, fewer software licenses, and few support personnel are just the beginning of the savings.

Computerworld has the interview with Worrall, discussing the project.

Related posts
Oracle knocks quarterly results out of the park

SAP plans Oracle-database killer

Shai Agassi speaks about plans to launch in-memory data warehouse capabilities for SAP. Agassi claims that, if successful, such an approach would reduce demand for high-performance relational databases, such as Oracle's.

eWeek has the interview with Agassi.

Agassi doesn't mention it, but SAP wasn't the first to come up with this idea. A BI vendor in Sweden, QlikTech, already has released this technology in its business intelligence product, QlikView. I've seen it demonstrated and it's pretty impressive.

QlikView also wins the Spectator award for the coolest name for a contest, "Think outside the cube."

Oracle knocks quarterly results out of the park

Oracle yesterday announced a 29% increase in earnings and a 30% increase in revenue for the first quarter. (The percentages reflect the increase over the first quarter last year.) Total revenue was $3.59 billion. These results far exceeded analyst expectations.

There are several aspects of Oracle's performance that are especially positive:

• These results are not just the result of squeezing more money out of Oracle's installed base: new license sales were up 28% overall, which include both database and application sales.
  
  
• New application license sales rose a whopping 80%, indicating Oracle's success in getting customers of its acquired products to continue buying.
  
  
• Oracle's core database and middleware business also expanded, at a 15% pace.
  
  
• These first quarter results follow exceptionally strong performance in the previous quarter.
  
  
• The first quarter is normally Oracle's slowest quarter, as the opportunity pipeline tends to be drained as a result of the typical year-end push by the sales force.

In Oracle's press release, it was quick to use these results as vindication of its strategy to beat SAP.

"We're rapidly taking applications market share from SAP," said Oracle President, Charles Phillips. "Q1 was the second consecutive quarter that Oracle's applications new license sales growth was 80% or more. That's ten times SAP's 8% new license sales growth rate in their most recently completed quarter."

"SAP appears to be rethinking their strategy as they lose application market share to Oracle and confront the difficulties of moving their application software to a modern Service Oriented Architecture (SOA)," said Oracle's CEO, Larry Ellison. "They've just announced that they are delaying the next version of SAP applications until 2010. That's a full two years behind Oracle's scheduled delivery of our SOA Fusion applications. And now Kagermann is talking about an acquisition strategy to augment SAP's slowing organic growth. These are major changes in direction for SAP."

Recently, I've been somewhat skeptical of Oracle's ability to fund continued development of its acquired products at the same time that it is developing its next generation Fusion applications. The financial results from this quarter and the previous quarter will certainly help in its efforts.

The Wall Street Journal has more on Oracle's performance.

Related posts
More on Oracle's Fusion strategy
Oracle's Fusion strategy: clear as mud
Fusion to build on Oracle's E-Business Suite

Business Technology (BT): a better acronym for IT

George Colony, CEO of Forrester Research, has been on a one-man campaign to change the use of the term "information technology (IT)" to "business technology (BT)." I first heard Colony talk along this line earlier this year at Forrester's conference in Las Vegas. At the time, I didn't pay much attention, thinking that it was just another attempt by a consultant to give a new name to something old.

DP, EDP, MIS, IT
This time, however, I find myself more open to the idea. What we call the IT function today has already gone through a number of name changes, from data processing (DP) in the 1950s and 60s to electronic data processing (EDP) 70's, to MIS in the 1980s, to IT in the 1990s.

I'll date myself and admit that I'm old enough to remember each one of these acronym changes. Each reflected a change in thinking about our profession. DP was all about data--whether in the form of punched tape, cards, or mag tape. The transition to EDP reflected the shift from mechanical data (cards, paper tape, etc.) to electronic data. The rise of the acronym MIS reflected the view that our job was not just about data, but about information--and especially management information, information used to manage the business, including early forms of decision support and planning systems, such as MRP. Eventually, the acronym MIS fell out of use in favor of IS or IT, reflecting the realization that the information we managed was not just management information but all sorts of information.

But what all of these acronyms have in common is that they are centered on "data" or "information." Colony's point is that the job of IT today is not just about managing information. It is about supporting the business in all aspects--from managing information, to facilitating communication, to automating business processes, to enabling collaboration. It even involves digital communication with things, such as equipment, inventory items, and vehicles that are electronically enabled through technologies such as RFID.

Therefore, it is getting harder and harder to separate the business from the technology. In the late 1990s, the term "e-business" was popular, denoting a new way to do business--electronically. Today, though, no one really talks about e-business. It's just business.

I'm mixing Colony's thoughts here with my own. But putting it all together, it's clear that "IT" is no longer sufficient to describe what we expect from IT. A better term is Business Technology (BT), denoting simply the application of technology in business.

From CIO to CBT
If IT is now BT, then it follows that the Chief Information Officer (CIO) must be something new. Colony proposes Chief Business Technologist (CBT). A bit of a tongue-twister--I might suggest Chief Business Technology Officer (CBTO). Either way, the point is that this C-level officer of the organization is responsible for more than managing the information of the organization, and more than even the technology. He or she is responsible for ensuring that the technology is actually used to the benefit of the business and that the business is enabled by technology.

Interestingly, Colony made one point that I fully agree with and seldom have heard from others. He said that the CBT probably needs to come from a technology background, not a business background. The technology is too important to not have someone at the head of BT without a background in technology. Of course, the BT needs to be fully immersed in the business as well. But it is easier for one with a technology background to become immersed in the business than for one with a business background to become adequately immersed in technology.

Some companies, frustrated by the lack of business acumen in their IT groups, have transferred someone from the lines of business to the CIO position, hoping to bridge the communication gap that too often exists between IT and the business. But such a strategy only moves the communication gap, to a gap between the CIO and the IT organization. A better strategy is to develop today's CIOs to be truly CBTs or CBTOs, with knowledge and experience in both technology and business, responsible for ensuring the success of both.

Related posts
Marketing IT like a business
IT decisions that are too important to leave to the IT department
Escaping the ROI trap
Escaping the ROI Trap, Part 2

Infosys not likely to buy large U.S. consulting firm

An interesting presentation this morning at the Forrester Technology Leadership Forum 2006. Nandan Nilekani, head of Infosys, spoke about competing and winning in the global IT marketplace. His prepared remarks were quite "big picture," but during the Q&A session afterwards, he gave some interesting insights into his view of his competitors.

An audience member asked Nilekani about the ability of the large international consulting firms to compete with Infosys. Nilekani said he believes that Infosys is not just competing on the basis of lower labor rates. Labor rates help, but more of his competitive advantage comes in how Infosys manages the work itself. In other words, Infosys doesn't just work cheaper, but better (my words).

Nilekani did acknowledge that, among the large international consulting firms, IBM and Accenture are his strongest competitors. He said that most of the other large consulting firms are have difficulty integrating their onshore and offshore service organizations, so when they provide offshore services it appears that the customer is dealing with a separate organization.

George Colony, Forrester's CEO, who was facilitating the Q&A session, then noted that Infosys is sitting on approximately $1 billion cash on its balance sheet. Couldn't that be put to use to acquire a U.S. consulting firm?

Nilekani said it was unlikely that Infosys would acquire a large traditional U.S. consulting organization, because he would view such an acquisition as (his words, not mine) "contaminating" the Infosys business model. If Infosys is doing things in a new way, why would he want to acquire a "legacy" consulting firm, he asked. He said that if Infosys were to make an acquisition in the U.S., it would more likely be to fill some niche in its capabilities or to provide a better "front end" for its business in the U.S.

Related posts
Offshore outsourcing in midlife crisis

Offshore outsourcing in midlife crisis

I sat through an excellent presentation on offshore outsourcing yesterday at the Forrester Technology Leadership Forum 2006. Forrester analysts John McCarthy and Stephanie Moore held a mock debate on the current state of the offshore IT outsourcing industry.

I won't reiterate the 10 major points of their debate, but here are a few of the items I found particularly insightful.

• The best Indian firms have moved beyond pure "body shopping," to offer higher value full-service multiline delivery capabilities. Labor rates are rising, and the best firms are responding by improving internal processes and automating routine work.
  
  
• A massive shakeout is coming among the Indian offshore providers. Offshore contracts are rising in complexity and few of the providers have the management expertise and account management skills to handle them. As a result, only two or three of the top Indian firms will make it as full multiline suppliers.
  
  
• Some large multi-national consulting firms--specifically IBM and Accenture--are effectively competing with the Indian service providers for outsourcing contracts. For large complex offshoring contracts, therefore, IBM and Accenture are a viable alternatives to the large Indian outsourcers. But, in Forrester's estimation, other international consulting firms are far behind in their ability to scale offshore contracts.
  
  
• "Captive sites"--offshore operations set up as part of the customer's own organization--are not working. Companies see the large margin that Indian firms enjoy and think they can set up their own offshore operations and keep that money for themselves. But, John and Stephanie noted that nearly all such efforts have only succeeded in driving up labor costs for everyone, and that captive sites experience attrition two to three times greater than third-party sites. Forrester is strongly discouraging clients from setting up their own offshore operations.

John and Stephanie also pointed out that project failures are common in offshoring contracts, but most of them can be attributed not to a lack of expertise with the service provider, but the client's own lack of process discipline and a hands-off management approach.

Offshore vendors "need adult supervision and governance. Outsourcing does not mean abdicating responsibility" for project success.

Related posts
Trend toward offshore outsourcing not yet peaked
Offshoring leaves software firm not so jolly
Productivity risks in offshore outsourcing
Risks of offshore outsourcing

IBM's software business: view from the top

Steve Mills, Senior VP in charge of IBM's software group, gave a keynote here at Forrester's Technology Leadership Forum 2006 today.

People forget how big IBM's software business is: Mills is sitting on top of a $17 billion organization. And, he's been with IBM for 33 years, so he's seen many changes in business computing over the years, and at IBM in particular.

Some of the interesting points from his presentation:

• As organizations continue to build IT assets, the percent of IT spending going toward new development has been declining over the years. Today, only about 20% of IT spending is for new systems. Therefore, it is a challenge for CIOs to meet the demand for new systems, while controlling the costs of maintaining existing systems.

• IT is the transforming technology of the past 60 years. It has transformed nearly every industry and affected many areas of our lives. It is the labor-saving innovation of all time. But IT itself is labor-intensive--an interesting paradox. The labor-intensive nature of IT is the greatest inhibitor to the improvement of IT utilization. The greatest problem facing IT organizations is their being overwhelmed with work and rising labor costs.

• There is a consolidation of software vendors today, but the industry is still expanding and new vendors are being introduced. There is still new venture money flowing into the software sector at a rate of $4-5 billion per year.
  
  
• The opportunity for business process outsourcing (BPO) is far larger than that for software-as-a-service (SaaS). Worldwide spending for BPO was $422 billion for BPO but only $2 billion for SaaS. In 2009, IBM expects the BPO market to grow to $641 billion, but SaaS to grow to only $3.9 billion.
  
  
• Service-oriented architecture (SOA) is really just a continuation of things we have been doing in software for many years, such as object-oriented programming, remote procedure calls, and message-oriented middleware. The added promise of SOA is in greater flexibility in building and maintaining applications. SOA as a buzzword might go out of favor, but the concept will continue.
  
  
• The greatest opportunity to reduce the cost of maintaining existing system is to "consolidate like crazy." The best way to cut software costs is to buy less software, and you do this by consolidating systems. How many ledgers do you have, how many inventory systems? Multiple redundant systems drive additional costs for hardware, software, and labor. The fewer systems, the better.
  
  
• As an example of application consolidation, Mills offered IBM's own experience in going from 16,000 applications in the 1990s to 4,000 today.
  
  
• Mills pointed out that IBM's software-related business is larger than SAP's because IBM plays not just in software but in hardware, middleware, and services--a market that is five times as large as the initial software sale.
  

During the Q&A session, Mills was asked whether Oracle's many acquisitions were good or bad for IBM. Given that IBM actually partners with Oracle at several levels, Mills was polite in his references to Oracle. But he did indicate that in all of the acquisitions IBM has done, it has learned to focus on growth of the businesses they buy, not just the financial leverage that might come from buying the revenue stream and cutting expenses (which he later referred to the "Computer Associates game.") According to Mills, Oracle has "a tough job ahead." He also said that Oracle's strategy has been a "dream come true for software vendors such as SAP and Lawson."

Related posts
IBM compromising its partner strategy with bid for MRO Software
IBM and Oracle: strange bedfellows
IBM: friend or foe to SAP?

What is an IT ecosystem?

I'm participating as a blogger here at Forrester's Technology Leadership Forum 2006 in Scottsdale, Arizona, this week.

This event, aimed at senior IT and business executives, has as its theme, "Prospering in Your IT Ecosystem." Forrester's use of the term ecosystem is somewhat new. I've used the term ecosystem myself in reference to the relationships between major technology vendors (e.g. SAP, Oracle, IBM, Microsoft) and the hundreds of complementary product and service providers that co-exist with those major vendors. The smaller providers survive, and sometimes thrive, by filling gaps in the solution set, and the major vendor benefits by extending its reach and representation much farther than it can on its own.

Forrester's concept of an IT ecosystem, however, is much more comprehensive. The CIO is no longer just responsible for leading the "IT department." He or she is responsible for managing relationships within an "ecosystem" comprising three types of participants:

• Consumers: the end-customers and users of technology within the organization.
  
• Producers: the technology vendors, including both product and service providers
  
• Influencers: the key stakeholders within the business that have an increasing voice over the direction and role of IT.
  

The boundaries between participants in the IT ecosystem are becoming less definite, leading to many interesting complications in the role of the CIO today. In the first two sessions Forrester's Tom Pohlmann and Laurie Orlov each highlighted some of these issues. For example,

• A recent Forrester survey of CIOs indicates that IT strategy is increasingly being dictated by business leaders (influencers) outside of IT, and CIOs expect this trend to accelerate over the next two years.
  
  
• The perception of CIOs versus CEOs are quite different regarding the value of IT to the organization. CIOs are an optimistic bunch: 82% see the outlook for their industry as positive and they expect a 5% increase in IT spending this year. CEOs take a much more cloudy view: an recent IBM survey asked CEOs to indicate sources of innovation within their organizations, they listed nearly every function except the IT group. They only mentioned IT when asked to identify barriers to innovation.
  

Clearly, the challenges facing the CIO and other senior IT executives is evolving. The technologies to master have never been more diverse, the expectations of the business have never been greater, and skilled IT resources are getting harder to find. Pohlmann pointed to a UCLA study that found a 70% drop in college student interest in computer science from 2000 to 2005.

There was much more, of course, in these first sessions, but this will need to suffice for now. I'm off to another presentation.

Wal-Mart continues RFID push, despite doubts about supplier benefits

Walmart is announcing an addition of 500 more stores that are RFID enabled, and it is mandating 300 more suppliers to comply with its RFID requirements.

Line56 has more on Wal-mart's RFID program.

In the meantime, I've been getting some feedback from Spectator readers in response to my request for real-world experiences with RFID. The bottom-line? RFID adoption in fact is slowing and even stalling in the face of technical problems and questionable payback.

RFID vendors and service providers may not be publicizing this, but that's what they're telling me off the record.

If you've got more feedback, please send me a message.

Related posts
RFID adoption stalling?

Doug Burgum leaving Microsoft Business Solutions

The transition of MBS top leadership is now fully complete, with Doug Burgum announcing he will leave Microsoft next year.

Burgum came to Microsoft with its acquisition of Great Plains, which was the start of the MBS unit. He has run the unit since then. Last year, Burgum stepped down as head of the group, giving up the top job to a yet-to-be-named successor. At that time Burgum said he would stay on in the role of "chairman"--more of an honorary post than anything else.

But this week, MBS announced that the top MBS job would be given to current Microsoft corporate VP Satya Nadella, who has led MBS's global research and development operations for the past five years. Burgum then took the opportunity to leave altogether.

Burgum has not indicated what he plans to do next.

Computeworld has more on Burgum's move.

Read the related posts below for my take on Burgum's tenure and Microsoft's efforts to gain traction in the ERP space.

Related posts
Burgum pushed aside as head of Microsoft Business Solutions
Reorg highlights troubles at Microsoft Business Solutions
Microsoft: selling enterprise software is a "humbling experience"