ERP Graveyard

Ned Lilly, the main man behind the quasi-open source OpenMFG ERP system, has started a blog, ERP Graveyard, in which he tracks ERP vendor mergers and acquisitions. The thought behind it, of course, is that if you go with open source, you don't have to worry as much about your vendor going out of business.

What's best, however, is that Ned has put together a map of ERP vendor acquisitions over the past several years. I took a quick look and it appears complete.

Ned calls it the ERP Graveyard Scorecard, which is a mixed metaphor, but you get the point.

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Open source: turning software sales and marketing upside down

It doesn't take a PhD these days to figure out that it's getting harder and harder for the majority of enterprise software to make money. Now Larry Augustin points out that the traditional model of selling software licenses really means that the vendor charges the customer to sell to him.

The problem is that the traditional enterprise software business model is broken. A rabid search for new customers and revenue growth has caused sales and marketing costs to spiral out of control. In fact, Rick Sherlund at Goldman Sachs estimates that in 2005 software companies will spend 82 percent of new license revenue on marketing and sales efforts. That's up from 66 percent in 2000.

This quest for additional revenue has created an untenable cost structure for the industry - one that doesn't serve vendors or their customers. In essence, vendors spend a lot of money to convince customers to buy, and then charge them a lot of money for the license which covers the sales and marketing costs. We're charging the customer just to sell to them.

Augustin is the creator of SourceForge.net, the world's largest open source software development community. He also serves on the boards of directors of open source vendors JBoss, SugarCRM, Pentaho, Medsphere, and the Open Source Development Lab, which is the keeper of the keys for Linux.

So, as you can imagine, Augustin's solution for this problem involves the open source model. But whether you agree that open source is the answer, it's hard to argue with Augustin's depiction of the problem.

Read the whole essay on Sandhill.com.

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Bill Gates pushing Microsoft toward software-as-a-service

The Wall Street Journal has released excerpts from internal Microsoft correspondence in which Bill Gates is calling on Microsoft to jump with both feet into the trend toward software applications being delivered as a service over the Internet.

Whether referred to as Internet services, software-as-a-service (SaaS), or software on-demand, the idea is the same: instead of buying and installing software applications, users simply access such apps over a network. There's no software to buy. Instead, the application is either paid for on a subscription basis or supported by a third party, such as advertisers.

Analysts are comparing Gates's memo to his call in the 1990's for Microsoft to embrace the Internet (leading to Microsoft's Internet Explorer browser and MSN online services), and to his call earlier this decade to embrace web services (leading to Microsoft's .NET framework).

Interestingly, Gates quotes heavily from an internal memo by Ray Ozzie, Microsoft's CTO, who has been on board only a few months. Ozzie is a big name in information technology. He is best known as the inventor of Lotus Notes, which was later acquired by IBM. Microsoft's catch of Ozzie was a big scoop, and Gates's memo shows how influential he is within Microsoft in a short time.

Whether Microsoft can make this transition will be interesting. Microsoft's core business--make no mistake, Windows and Office--is the antithesis of software as a service. The previous two "call to arms" by Gates were easily layered on top of that core business. But to truly embrace Internet services will require a willingness to cannibalize sales of Windows and Office--not something that is going to come easily to Microsoft shareholders, or to Microsoft decision makers whose compensation is tied to Microsoft earnings.

The technology press is all over this story. So rather than cover it further, I'll just point to the Wall Street Journal article (free access this week) and this Computerworld article that gives a good summary.

Update, Nov. 11. Bob Cringley thinks that Gates' email and Ozzie's memo were written as PR documents, and planned to be leaked. The fact that at least three news organizations all received them at the same moment is suspicious.

While ostensibly written solely for internal discussion, the documents from Bill Gates and new Microsoft CTO Ray Ozzie were clearly supposed to be leaked. These are external marketing documents -- the equivalent of those ubiquitous white papers -- only Microsoft is pretending they aren't. We won't see any witch hunt at Microsoft trying to find the leaker, because I'm sure he or she was just following orders.

Here is a copy of Bill Gate's full email. And here is a full copy of Ray Ozzie's memo.

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Infor to swallow half of Geac

There seems to be no let up in the ERP vendor consolidation trend. The latest target is Geac Computer Corp., a software provider, based in Canada, with a broad portfolio of applications, including its SmartStream financials system, which it picked up in 1996 from Dun & Bradstreet, and its System21 ERP suite, a well-regarded (at the time) process industry system, which Geac picked up in its acquisition of JBA in 1999.

Geac is now being acquired in a friendly transaction by Golden Gate Capital, the investor firm behind Infor, which has been on its own acquisition binge for several years. Golden Gate will pull Geac's ERP offerings, such as System21, Runtime, RatioPlan, Streamline, and Management Data, and will move them to Infor as part of Infor's application portfolio.

What happens to the rest of Geac? Golden Gate plans to create a new company--separate from Infor--to manage these products, including Geac's Enterprise Server, SmartStream, Anael, Extensity and Comshare products. The CEO of the new company will be named prior to closing the transaction.

After picking up a string of acquisitions, most recently Lilly Software Associates and MAPICS, it's hard to know what to think about Infor's roll up program. I'm hoping to get some more information later this week.

There's a long press release on the deal--which is quite complicated--on Infor's web site.

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Vote for me!

The second annual Blog-X awards are open for nomination over at Techweb. This blog was one of 10 finalists last year, when the award was known as the 2004 Readers Choice Awards. I've got a limited advertising budget, so the publicity is nice.

If you think the Spectator is worth reading, please hop over to http://www.techweb.com/blogawards and nominate the Spectator as follows:

Title: The Enterprise System Spectator
URL: http://fscavo.blogspot.com
Covers: Software

Thanks in advance!

Sainsbury pulls the plug on Accenture outsourcing deal

I've been following the outsourcing problems at major UK retailer Sainsbury for some time, and it looks like the firm has finally decided to call it quits.

It's tempting to say that Sainsbury's action is a sign of a trend away from outsourcing (backsourcing, as some call it). After all, over the past 12 months, Sears ended its outsourcing agreement with CSC, and JP Morgan Chase gave the boot to IBM. But, as I reported previously, Sainsbury's experience is a case study in how NOT to outsource IT. Although Accenture has to bear part of the blame, Sainsbury no doubt bears more.

Ziff Davis has the story on Sainsbury's latest move.

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Oracle plans free version of database

Here's a good move by Oracle. It plans to release, by year end, a free version of its 10g database. Dubbed Oracle 10g Express Edition, the free version will run on 32 bit Windows and Linux systems. Use of the free version is limited to 4GB of data, 1GB of memory, and one processor servers.

No, Oracle hasn't suddenly gotten generous. It needed to do this to counter Microsoft's similar program for its Sequel Server database, and especially to counter the open source MySQL database, which is widely used by developers at the low end of the market--and increasingly is moving up into higher end applications.

Furthermore, developers tend to stay with tools they learn when they are young, and there's no doubt that many students, hobbyists, and small development firms are getting to know MySQL a lot better than Oracle these days.

As I noted last month, Oracle is also countering MySQL's popularity by acquiring Innobase, a tiny firm that is the primary developer of the open source InnoDB, which is used as a storage engine by MySQL to provide higher end features such row-level locking. It's still not quite clear what Oracle plans to do with InnoDB.

Computerworld has more on Oracle's freebee.

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Oracle CFO out the revolving door

Oracle tri-President and CFO, Gregory Maffei, resigned today after only four months on the job. He is reportedly looking to take a job as CEO of another company, not yet named.

Maffei claims his departure doesn't have anything to do with Oracle. In a press release, he says, "My resignation from Oracle is not a reflection on the company, its executives or employees."

Still, after only four months? The Wall Street Journal, in an email alert, points to conflict at the top at Oracle.

The people close to Mr. Maffei say his new job offer may be appealing because it gives him a chance to run a company -- something he now believes may not be possible at Oracle. When Mr. Maffei joined the Redwood Shores, Calif., software maker, he became one of three "co-presidents" working for Mr. Ellison.

The other executives are Charles Phillips, a former Wall Street research analyst, and Ms. Catz, a former investment banker to whom Mr. Ellison is believed to be very loyal. People familiar with the matter say Mr. Maffei and Ms. Catz clashed over some issues during his short tenure.

Not a moment that inspires confidence in Oracle.

Update, Nov. 4. Maffei's departure is looking more and more like a simple personality clash in the executive suite. According to Marketwatch,

At Piper Jaffray, analyst David Rudow echoed other analysts' views that the CFO's departure doesn't signal "any fundamental issue at the company or any potential negative accounting issue."

"We think Mr. Maffei's departure was more of a cultural or personality fit with other management team members," Rudow said, based on his conversations with software industry insiders.

"The culture at Oracle appears to be intense, to say the very least," the Piper Jaffray analyst commented in a research brief. He rates the stock outperform.

Interestingly, Oracle's stock is up today on the news.

Update, Nov. 4. Today's Wall Street Journal online has more:

Some analysts said the high rate of executive turnover at the company lately -- and the fact that its top managers were being recruited from the outside, instead of from within -- raised questions.

"It makes you wonder a little bit about what the whole succession strategy is, and what it says about an organization that isn't able to promote somebody to the top and have them stay," said Drew Brosseau, an SG Cowen analyst.

Red Herring has an article with lots of analyst comments on the interpersonal issues.

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Bad idea: Microsoft bid for Siebel

Forrester has an interesting angle on Oracle's bid for Siebel. The research firm thinks that Microsoft should step in and make a counter offer. Interesting, but wrong. I think that a Microsoft acquisition of Siebel would be a disaster for both parties.

But first, Forrester's idea. The article is entitled, "Memo to Microsoft: Why Not Buy Siebel?" The abstract reads:

Microsoft: You have a unique opportunity to change the dynamic in the enterprise applications market. With Siebel's strong enterprise customer base, domain expertise in verticals, integration with existing Microsoft technologies, and interoperability with .NET and J2EE, this is a unique opportunity to bring much-needed CRM credibility to the Microsoft Business Solutions Group. If Microsoft does not make the offer to purchase Siebel, you will lose a unique opportunity to Oracle, leave only two tier one players in the applications market, and make a later entry into the market more costly and more risky.

A Microsoft acquisition of Siebel would be foolish because Siebel's client base requires a significant amount of professional services, something that is foreign to Microsoft's business model.

Interestingly, a Spectator reader and I had some correspondence on this very subject last week. He wrote,

IBM/HP-like consulting does not fit the Microsoft model. Microsoft is more about delivering packaged software to a customer through a product management process (exaggerating -- in its worst incarnation -- throwing a half ready app to the customer). In a consulting business you need to listen to the customer and understand the problem in order to find a solution--if necessary, pushing it through as a side product, and enhancing the product over time.

What is meant by consulting at Microsoft is way different from the definition at IBM.

Microsoft's foray into business applications, with its purchase of Great Plains and Navision, has already been a humbling experience (Microsoft's words, not mine). Its business applications are sold entirely through VARs and resellers. Siebel's products are sold largely through a direct sales force, something Microsoft Business Solutions has never really done. So, even though Siebel's technology is Microsoft-friendly, I think that Siebel is a bad fit for Microsoft's business model.

Now, on the other hand, if IBM, HP, CSC, or any other number of large service organizations wanted to step in and make a counter-offer for Siebel--now that would be an interesting proposition.

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Latest JDE service pack spells trouble for Oracle

Today a Spectator reader has emailed me with news about the latest service pack for J.D. Edwards EnterpriseOne, 8.11 (SP1), indicating that there are serious problems with it, and that the problems are so severe that it represents a significant setback in the company's implementation schedule.

JDE customers have been waiting to see whether Oracle can deliver on its promise of "lifetime support" for JDE customers. If the service pack problems are as serious as my reader indicates, Oracle needs to take corrective action immediately. Otherwise, Oracle's relationship with the JDE installed base is in trouble.

If you have better, or different, or confirming information about this latest service pack, please email me, or leave a comment on this post.

Update, Oct. 31. Word from this new JDE customer in the field indicates that the Enterprise One 8.11 SP1 problems are finally getting some attention at the senior executive level at Oracle and that there is a SWAT team of three people dedicated to fixing them. That's good news. But, one has to ask, why did it take Oracle so long to get on top of this, and why was the service pack released in the first place if it wasn't adequately tested?

Update, Nov. 4. Oracle is working on the service pack problems, but they are not yet out of the woods. The customer's system is still unusable, hence the JDE implementation has ground to a halt.

Update, Nov. 28. Oracle appears to be making progress resolving problems with 8.11 SP1. Also, there are indications that the service pack has not been widely distributed, which may explain why I have been unable to locate anyone else that has implemented it or is reporting problems with it.

Update, Dec. 9. The customer's problems are getting high level attention within Oracle. Oracle has resolved a number of the outstanding issues and is making good progress on the rest.

Update, Mar. 8, 2006. For the sake of those that come across this post from search engines, I want to close the loop and report the final outcome of this case study. The client went live on JDE earlier this week.

The go-live went flawlessly with very few post-implementation problems. The implementation was a "large footprint" (i.e. quite a bit of functionality), and it took 11 months, four of which were due to the problems with service pack 1 (SP1) outlined earlier in this post. Implementation costs exceeded budget, but to the credit of Oracle and the implementation partner, much of the expense for correcting the problems was covered under Oracle's maintenance agreement.

Bottom line: the ultimate outcome of this implementation for the client is a success, and it is evidence that Oracle intends to make JDE a successful and viable choice for companies going forward.