Wednesday, January 28, 2009

Infor reassures customers of financial viability

Infor's CEO, Jim Schaper, has published an open letter to customers to reassure them that their "investments in [Infor's] software, services, and maintenance are safe and secure for the long run."

Reading the letter, one wonders if there is really a recession going on. Schaper reports 94% of customers renew their annual maintenance agreements. In addition, he claims that over the past four quarters 495 former customers were brought back onto maintenance and 2,165 new customers were added.

Concerning Infor's financial viability he writes,
We generate significant cash flow and have a solid cash balance. While we have accumulated debt to finance some of our acquisitions, we were fortunate to have financed at the height of the debt markets in 2007, affording us low-interest rates with flexible terms. We are also backed by Golden Gate Capital and Summit Partners, two of the leading private equity funds in the US with over $19 billion of capital under management. Our global scale, leadership position, profitability, current liquidity, and access to additional capital markets make us a viable and a secure partner for the future.
My take. I have no reason to believe Schaper is not presenting an accurate picture. If Infor is in relatively better shape than many enterprise software vendors these days, I think the cause is two fold:
  • As Schaper points out, Infor is still privately-held. Golden Gate and Summit Partners, of course, still want to see results so they can take Infor public at some point. But for right now, Infor doesn't have to worry about Wall Street expectations.

  • More significantly, though, I think that Infor's reliance on maintenance revenues is serving it well right now. Although Schaper claims over 2,000 new deals in the past four quarters, I would suspect many of those are small deals for Infor's complementary products or for its smaller ERP systems, such as Lilly or Syteline. Nevertheless, living off maintenance revenues is not a bad place to be right now. It's an annuity business and much more resistent to recession than new license sales are.
On that latter point, Oracle and SAP are in much the same situation. Even though their new deal pipeline is slowing and both vendors are conducting layoffs, both vendors are in pretty good financial shape as their large installed bases can carry them through these hard times.

So, if I am a customer of any of these vendors, I wouldn't be concerned about their financial viability. But I might be concerned about their ability to support me as they conduct layoffs.

Update, Jan 30. A reader reports a layoff among Infor's professional services staff yesterday. A check with Infor's PR group, however, finds that this number is part of the 5% reduction in force that was reported on December 8. The 5% is being phased, apparently.

Related posts
Layoffs at Oracle, SAP, and Infor
Infor layoffs, Dec. 2008
SAP layoffs, January, 2009
Layoffs at Infor and Sage

SAP layoffs, January, 2009

SAP co-CEOs Henning Kagermann and Leo Apotheker this morning issued an open letter announcing a layoff of 3000 employees, or 5.8% of SAP's workforce:
The global economic crisis forces us to take further actions to help SAP successfully weather the current challenges and emerge stronger. We have just published our preliminary Q4 and Year End 2008 financial results as well as our outlook for 2009. Despite the dramatically deteriorating market conditions since September, we have achieved good results for the entire year. This has only been possible because of the remarkable efforts of all employees, and we would like to express our gratitude to all of you for this. Unlike in past years, which were characterized by double-digit growth rates, the outlook for 2009 is completely different. For this reason, we will have to intensify our cost-savings efforts by implementing additional measures.

After an exhaustive and thorough evaluation of all options, we have concluded that a reduction in the number of persons employed is necessary. This is not an easy step for us to take, and we are fully conscious of the implications of this decision.

As SAP is a global company, we will consider each region and each line of business at all levels. We are looking for fair solutions according to accepted practice, and we will make this process as transparent as possible. We owe this to our employees. We plan to reduce the number of positions globally from 51,500 to 48,500, taking full advantage of attrition as a factor to reach this goal. In countries with employee representatives we have initiated contact with the relevant employee representative bodies. This should enable us to decrease the annual personnel costs by 300 - 350 million euros in subsequent years. As long as the specific regional legal conditions permit, there will not be a salary round in 2009.
SAP is to be commended for openly announcing this this reduction in force, along with its intentions for the coming year. This is in contrast to Oracle's practice in layoffs of doing as much as possible without public disclosure, which simply fuels the rumor mill and creates uncertainty among its workforce.

The current action follows a smaller layoff earlier this month in which SAP appears to have let go a smaller number of employees. It's not clear whether those cuts are included in the 3000 number indicated today.

I knew something was up this morning when I check the Spectator's logs and found a surge in Google referrals for "SAP layoffs."

If you have insights on SAP's current action, please email me or leave a comment on this post.

Update: Dennis Howlett has insights on SAP's financial situation, which he thinks is an opportunity for SAP to recharge its Business ByDesign SaaS offering.

Update: A friend, who partners with SAP sales folks in new deals, writes to me and then follows up with a phone call to complain about turnover among SAP sales people, even before the current layoffs. He says that they tend to get moved around a lot, making it difficult for local partners to invest in relationship building. In his view, the current layoffs have just exacerbated this situation.

Tuesday, January 27, 2009

Software vendor audacity: imposing "gag rules" on clients

Ray Wang blows the whistle on a new practice by some, unnamed, software vendors: onerous conditions in software license agreements that limit the client's ability get outside help. Ray gives two specific examples that he's heard about over the past several months:
  • Contracts that limit the client's ability to use outside consultants to help negotiate contacts.
  • Contracts that restrict the client from disclosing details about bugs, defects, and contractual breaches to the press, peers, and user groups.
This is the sort of thing that raises my blood pressure. Is there any other type of commercial transaction where the seller would attempt to put these types of restrictions on a buyer? If there is, I would really like to know.

But stepping back for a minute, it reveals some things about these unnamed vendors. On the first point, they must be in a very weak position these days if they feel they need to take outside advisors out of the game. On the second point, the state of their software quality and ability to deliver on promises must be pretty poor if they feel they need to gag their clients.

My advise to buyers is this. Read the draft contract. Any vendor that includes such terms and conditions should be viewed with suspicion. Software vendors are always talking about how they want to be viewed as partners. Well, this is no way to start a partnership.

If you still want to move forward with such a vendor, just say no to these terms. Walk away from the table until these conditions are removed. In this economy, I don't think it will take long.

Obligatory disclaimer: I'm not a lawyer, and this post is not legal advice.

Update, Feb. 2: My "cousin Vinnie" gives additional recommendations. I especially like his last point: turn the tables on the vendor and require them to get all of their advisors to sign your NDA.

Related posts
Negotiating enterprise software deals in Q4
Reading the fine print on ERP contracts
SaaS: plan to get out before you get in

Monday, January 26, 2009

Tom Kelly out as Epicor CEO

Epicor announced the departure of Tom Kelly as CEO and board member, but I'm just hearing about it now. According to Epicor's press release, Kelly is leaving "to pursue other interests."

Replacing Kelly will be George Klaus, who held the CEO post from 1996 to February, 2008. This essentially blows the succession plan for Klaus, as Kelly was his designated successor.

Klaus will have his work cut out for him. He takes the reins in the midst of a recession, leading to recent Epicor layoffs at the end of 2008. Although Epicor's most recent forecast is generally in line with analyst expectations, the current business climate is not favorable to a turnaround. Plus, Epicor is still facing another potential bid from Elliott Associates. Epicor fought off a hostile bid from Elliott last year, but the hedge fund is still buying up Epicor shares and currently owns over 10% of the business.

So, why did Kelly leave? If you have insights, please leave a comment, or drop me an email.

Related posts
Epicor's publicity stunt
Fresh round of layoffs at Epicor
Epicor facing unfriendly takeover bid
More layoffs at Epicor
Epicor in transition: revenue up, profits down
More on Epicor's management changes
Layoffs coming at Epicor?

Sunday, January 18, 2009

SAP's Leo Apotheker on Charlie Rose

Enterprise software is not normally a topic for TV news shows, but Charlie Rose takes on the challenge with his interview of SAP co-CEO Leo Apotheker. I'm not a big fan of Rose, but I think he did a great job getting Apotheker to explain ERP in general to a lay audience.

Some points of interest:
  • Much to the pleasure of Apotheker, Rose positions SAP as the leader in enterprise software, with Oracle attempting to catch up. In the interest of equal time, Rose needs to interview Oracle's Larry Ellison. He's done so in the past, but it's been awhile.

  • Apotheker shows little respect for open source as a business model, claiming SAP engages in open source development with its partners, even though the software they produce is not licensed as such.

  • Apotheker mentions as an aside, that in five years, SAP might be in the hardware business. (Would have loved to see Rose follow up on that one.)

  • Rose asks if sales are tight in the current recession. Apotheker says, not really. And, price is not really a factor in selling enterprise software. (If it were my interview I would have followed up to ask why, then, in competitive deals is SAP so willing to compete aggressively on price?)
There are lots of other interesting points in the interview. I would have loved to see Rose ask about SAP's attempt to raise maintenance fees in a recession and how customers are reacting to that. But Rose is too much of a softball interviewer to take on that subject.

Andrew Mcafee of the Technology and Operations Management Unit at Harvard Business School shares the interview with Apotheker, and makes some great points as well concerning IT for competitive advantage.

Dennis Byron has his take on the interview. Byron Bennett also has a short summary.

Related posts
Layoffs at Oracle, SAP, and Infor
Crack in the dike for SAP maintenance fee hike
IT spending pull-back: SAP warns on Q3 earnings
SAP in expense-cutting mode
SAP maintenance fees: where is the value?
SAP under the spotlight for "broken promises"
Mad as hell: backlash brewing against SAP maintenance fee hike
Pass the Kleenex

Friday, January 09, 2009

Layoffs at Oracle, SAP, and Infor

Go to latest news on Oracle layoffs, November 2009.

Several sources are reporting to me regarding layoff activity among major enterprise software vendors in January, 2009.

Oracle layoffs: An anonymous source reports this morning, "I just got laid off from oracle today. Layoffs are happening company wide today and will be done by the end of the day."

This follows several days of the Spectator receiving a large number of Google referrals on keywords such as, "Oracle layoffs," "Oracle reduction-in-force," and "Oracle severance pay." The volume of such referrals increased further this morning, consistent with this latest source.
Update: My source now reports that the Oracle layoff is company wide and is in the order of 10-15%, depending on the group.

Update: Another source emails me, "A lot of Oracle layoffs today. Specifically NA Sales, Technology Business Unit, NA Consulting, NA Alliances & Channels, Retail Global Business Unit. Based on discussions with other Oracle employees, the number is around 8,000 globally. Some consolidation of operational groups. No warning at all. Just a call, and the FedEx truck showing up in front of the house an hour or so later."

Several sources reference the 10% number and 8,000 headcount, which would be consistent with Oracle's worldwide employment number of appoximately 84,000.

Update, Jan 13. Computerworld has a good roundup of the Oracle layoff news, including links to the Spectator. Some analysts are doubting the 8000 figure. Oracle could easily end all the speculation, but for some reason just doesn't like making layoff announcements.

Update, Jan. 13. The Wall Street Journal, citing unnamed "people familiar with the matter," puts the Oracle layoff count at 500, but only counts employees in North America sales and consulting units. Still, it would indicate that the 8,000 number is well overstated.

Update, Jan. 15. Brian Sommer has a thoughtful piece analyzing Oracle's cost-containment strategy. He tries to get to a more accurate count of layoffs, but can't get confirmation either.
SAP layoffs: A source reports that SAP is making some deep cuts in SAP's Strategic Growth Enterprise (SGE) unit (focused on the SMB space).
Update: a comment on this post indicates 300 sales-related positions were affected in North America.

Update: See latest post for SAP layoffs, Jan. 28.
Infor layoffs: A source reports that "Infor just laid off a staggering 85% of their senior managers and executives across UK and Europe." However, I checked with Infor's PR department in North America, which reports the following:
While I cannot confirm specific figures, any recent headcount reductions in Europe were part of the initiative you reported on earlier in December -- a worldwide reduction of approximately 5 percent of our workforce.

The EMEA region remains a very strategic part of Infor's overall business.
The enterprise software industry is not immune to the cutbacks we are seeing among businesses in general and IT vendors and service providers in particular.

If you have further information or insights into the situation, please leave a comment or email me.

Tuesday, January 06, 2009

Addressing business continuity issues with SaaS providers

Vinnie Mirchandani writes about the latest attack of traditional software vendors against software-as-a-service (SaaS) vendors: raising concerns about their viability. The argument is that, basically, if a traditional software vendor goes out of business, you still have a working system. But if your SaaS provider goes out of business, you've lost the system itself.

Vinnie thinks SaaS providers should proactively address these concerns, by laying out contingency plans for the worst-case scenario. I agree--and I would take it a step further.

SaaS vendor viability concerns are real and should be top-of-mind for any potential buyer of on-demand services, especially if they are mission critical or even "important but not mission-critical" systems. Vinnie is right that SaaS vendors need to address these concerns--not just as a sales tactic, but as a real issue.

Customers, on the other hand, should augment their internal disaster recovery plans with scenarios involving SaaS outages as well as "vendor-goes-out-of-business" scenarios. Business continuity planning (BCP) and disaster recovery planning (DRP) are well-established disciplines in IT management. Organizations just need to make sure that SaaS is not excluded from the BCP and DRP, just because they are not internal systems.

What are you going to do if your SaaS provider goes belly-up?

Related posts
SaaS: plan to get out before you get in

Monday, January 05, 2009

IT spending in recessionary times

Over at Computer Economics, we've just released our latest forecast for IT spending, based on how IT spending recovered after the past two recessions, in 1990-91 and 2001. We have annual survey data that goes back nearly 20 years and forms the basis for our analysis.

Bottom line: we see see a recovery in 2010.
Although the past is not always a precursor of the future, we find evidence that IT spending should rebound more quickly than it did during the tech-led recession in 2000, following a pattern more akin to what occurred after the deep 1990-91 downturn. Our long-range forecast, however, does not anticipate a return to the 1990 boom years, when Internet and Y2K spending produced a bubble that distorted historical patterns. Rather, we anticipate spending should rebound to the more modest rates of recent years.
Read the free executive summary, or purchase the full report, IT Spending in Recessions: 2009-2010 Forecast.

Related posts
Computer Economics: 2009 IT Spending Forecast: No Growth