Yet more outages at Salesforce.com

According to eWeek, Salesforce.com is not yet out of the woods with its service level problems. Customers report that the CRM on-demand pervice was down for several hours on January 30, and certain selected features have been unavailable from time to time during the month of January.

Wall Street takes note:

While the earlier outages have had little apparent effect on Salesforce.com's stock valuation, there are indications that "this morning's outage is apparently leading to more aggravated customer and prospect responses," analyst Michael Murphy wrote in a First Albany Capital Inc. market update.

From Salesforce.com customers' views, "the outage experience has transitioned from an isolated event into a recurring trend and the 'get out of jail free card' has been used," Murphy wrote.

Salesforce.com denies that the problems are as extensive as eWeek is reporting.

I think Salesforce.com is suffering from its success, as hundreds of new customers sign up each quarter. It reminds me of the problems that AOL had back with dial-up service in the 90s after it ramped up its marketing efforts. Eventually, AOL got the situation under control, but in the meantime there were many defections to competitors such as Earthlink.

Salesforce.com will eventually get its service levels back up to where they need to be. But in the meantime, how much damage will this do to Salesforce.com and to the software on-demand trend in general?

Update, Feb. 2. Computerworld has reactions from other users, many of which are not deeply concerned about service levels.

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Software industry predictions for 2006

Sandhill.com is running a good podcast regarding predictions for the software industry for 2006. Analysts M.R. Rangaswami, Erik Keller, and Vinnie Mirchandani provide the forecast. I'll summarize a few of the items that I think are right on the money:

Rangaswami believes that software as a service (or, software on-demand) will continue to thrive in 2006, although providers need to address service problems such as the recent outages at Salesforce.com. Kellerl points out, however, that buyers need to distinguish between software as a service as a license strategy (subscription pricing) and as a delivery strategy (hosted applications). He rightly points out that some vendors of on-premise software (e.g. SAS) have offered subscription pricing for years.

Erik Keller thinks that there will NOT be a big push to service-oriented architecture (SOA) anytime soon. He says, "The industry is not going to go off and spend a half-trillion dollars and make this upgrade in the next couple of years. No major vendor has given their customers a good reason to do the upgrade other than this techno-flash-babble about SOA being more flexible and more wonderful."

Keller also thinks that both Oracle and SAP are going to have a hard time meeting the growth expectations of Wall Street, primarily because customers do not have the maintenance budgets that these vendors need to grow. There's also concern about both vendors pushing customers into major upgrades that they just won't have the money for.

Mirchandani thinks that industry will finally be getting some relief from the tremendous burden of Sarbanes-Oxley (SOX) compliance. Corporate lobbying of Congress will finally result in some relaxing of the rules. The compliance burden is a hidden tax on U.S. companies that overseas providers do not have to pay.

You can listen to the whole podcast (about 35 minutes) for free at http://sandhill.com/opinion/editorial.php?id=64.

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Is Oracle's Fusion really half complete?

Josh Greenbaum attended Oracle's briefing on Project Fusion, where co-president Charles Phillips said that Oracle is "half-way to Fusion." Josh thinks that Fusion is more like 25 percent complete, based on a start date of January 2005 (when Oracle acquired PeopleSoft) and Oracle's projected completion date of 2008.

Josh is also questioning the timeline based upon the fact that Oracle is counting on functionality from acquisitions to fill out Fusion:

I'm still very pessimistic about these dates, mostly because I still see a lot of unfinished business that I'm not sure can be resolved in time. One of the main issues is CRM: with the Siebel acquisition still not closed, it's hard to imagine that Fusion CRM, and the all-important customer record and vertical functionality that are supposed to be coming from Siebel, will also be delivered in this 2008 timeframe.

Then there's all those yet-to-be-acquired vertical applications that are supposed to propel Fusion into serious competition with SAP's vertical functionality. I’m not sure how you can deliver by 2008 something you haven't even tried to buy, much less integrate. Call me negative, but it's hard to imagine that Oracle is anywhere near half-way to its stated goal of a broadly verticalized product suite.

Read the whole article on Datamation.

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Another service outage at Salesforce.com

Salesforce.com is not out of the woods yet with service reliability. In December, many customers in the U.S. were down for approximately five hours due to database problems in one of its network centers.

Now, apparently, many of its customers in Europe, the Middle East, and Africa, suffered an outage earlier this month.

News of the most recent outages come at a particularly bad time as Salesforce.com is
in the midst of releasing its "Winter '06" product suite, which includes a service dubbed Mirrorforce for disaster recovery.

I'm assuming that eventually Salesforce.com will get its act together with its redundant data centers, but in the meantime these service disruptions are going to slow the company's progress. As I've said in the past, one of the major attractions to the software on-demand model is that it frees the customer from having to worry about things like backups and disaster recovery. But these recent outages take away from that selling proposition.

eWeek has more.

Update, Jan. 18. Salesforce.com CEO Marc Benioff commented on the recent service outages yesterday. According to CNET,

Benioff, who has commented little about the incident publicly, said in an interview at a media and customer event here that outages are an inevitable part of computing and that they happen very rarely at Salesforce.

"We don't want outages and we're doing everything we can not to have them, but we'll occasionally have them," he said. "That's part of computing...nothing runs at 100 percent availability."

Not the right answer. Fortunately, Salesforce.com is taking a more proactive approach than Benioff's defensiveness would indicate. The firm is in the midst of rolling out a major infrastructure upgrade that includes database mirroring and instant failover from one data center to another in the event of a disruption.

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Quickpoll: IT spending on maintenance vs. new development

Companies are always asking the IT organization to do more with limited budgets. But much of the IT budget is spent just to maintain existing systems and capabilities. How much? We'd like to know.

At Computer Economics, we're running a new quick poll to try to get a handle on how much of the IT budget is going toward maintenance of existing systems.

Help us out by taking the poll now, in the right hand column of the Computer Economics website. It will just take five seconds. We'll write up our analysis of the results next month.

Infor buying top asset management system vendor

Infor continues its acquisitions, the latest of which is Datastream Systems, one of the top vendors of enterprise asset management systems. The deal is expected to close in Q2 2006.

Datastream is a good catch for Infor. It has more than 6,700 customers in 140 countries, including (it claims) 60% of the Fortune 500. It has deep expertise in asset intensive industries, targeting sectors such as manufacturing, hospitality, health-care, transportation, telecom, facilities management, and government. Its primary offering, Datastream 7i is its new Web-based product, allowing users to view maintenance activities across multiple plants. Datastream is strong in asset tracking, work order management, scheduling, preventive maintenance, parts inventory, and MRO procurement. It is built on a service oriented architecture (SOA).

Datastream also has a separate e-procurement package (iProcure), which is integrated with 7i to provide automatic requisitioning of parts as reserved to maintenance orders, with access to catalogs of hundreds of MRO suppliers, plus support for internal catalogs.

Infor now has something like 30-plus individual software offerings. Infor's business model appears to be to let the software vendors that it acquires continue to be managed as standalone businesses, which could allow it to continue to acquire companies indefinitely. One has to wonder exactly where the economies of scale are, however.

Nevertheless, asset management is a high-value segment, and Datastream is a well-respected name in this space. Infor made a good move with this deal.

The press release has details.

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2005 Malware Report: The Impact of Malicious Code Attacks, now available

Over at Computer Economics, our latest study, the 2005 Malware Report: The Impact of Malicious Code Attacks is now available.

This report, which is widely referenced in the business press, breaks down the total financial impact malware on businesses by type of cost, based on our interviews and surveys of IT security professionals over the past year. It also highlights the major malware events of 2005, and tracks the worldwide economic impact of viruses, worms, Trojans, and other malicious code attacks since 1999.

IT executives will find this study a good source of economic statistics for justifying new IT investments that harden the IT infrastructure against malware attacks.

Warehouse management system prices falling for small companies

It appears that prices have been falling dramatically for warehouse management systems (WMS) over the past several years, for software, hardware (scanners, label printers, RF guns, etc.) and even services, to the point where WMS solutions are genuinely affordable for small companies.

Steve Banker at ARC Advisory Group writes recently,

The price for solutions for small companies can be startlingly low. ARC talked to 6 suppliers who have an average selling price for software licenses of less than $50,000 for this segment. These solutions would also typically require an implementation fee of roughly $1,500 per day. Implementations would range from about 3 days for a simple, prepackaged solution to about 40 days for a more functionally rich solution.

My consulting firm, Strativa, has some direct insight as well. We recently conducted an IT due diligence exercise for a private equity firm. The investment target is wholesale distribution firm with under $50 million in annual revenues. In the course of our due diligence we found that the company was about to implement a warehouse management system in three warehouses nationwide. We were pleased to find that management is only spending about $150,000 on the project, all-in. Hardware is about $60,000, which leaves $80,000 for software and implementation services, including integration into the company's Tier III ERP system. Furthermore, this is not a low-ball bid. The vendor has good references for this type of project and is on target to meet its budget.

WMS used to be a big ticket item for small wholesale distribution firms, but no longer. It's a welcome trend.

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Business impact of the MS Windows WMF vulnerability

If you haven't yet heard, hackers are beginning to exploit a zero-day flaw in the way Microsoft operating systems handle Windows Metafile Format (WMF) files, and malware exploiting this vulnerability is already circulating in the wild. As of this writing, Microsoft has not yet released a fix, but there are temporary workarounds available.

At Computer Economics, we've written a short research byte on the likely economic impact of such malware events on businesses.

Read it here: Microsoft WMF Vulnerability: Business Impact