Sightings in SaaS

Archive for September, 2009

Like one of those old TV police shows where the preferred method of killing your enemy was to cut the brake cable on their car, I awoke yesterday to a snapped Emergency brake cable on my vehicle. Could not therefore release the emergency brake and had to have the car towed over to my mechanic at Nightingales to put in a new cable.  I was thinking maybe one of the blog’s readers had done the dirty deed, but comments have not been particularly abrasive lately, so I think I’ll chalk it up to operator misuse, or something.

At any rate, after going through the process of having it fixed by Ray and the boys for a mere $74 I caught up with an interesting article by Vinnie Mirchandani about using a local repair shop, like Nightingales, compared to a Dealership. It’s an interesting article, more so because Vinnie uses the Dealership/Corner Auto Repair comparison  as a proxy for software support from the Vendor vs a 3rd party. I think the analogy makes sense, especially in terms of the interests of various parties.

We have a similar situation at SightLines. When a prospect interviews us about NetSuite implementation they often ask why should we use SightLines instead of the vendor’s own professional services group. Our answer is straight out of the corner auto repair playbook: We only answer to you, the client, and your needs, not corporate’s; and since we are a small consultancy, not employees of a large company, your reference means a lot to us – it’s how we build our business.

Having been an Oracle Consultant for Oracle earlier in my career, I can relate to the interest in having the software vendor handle the implementation. Oracle used to ask prospects “Who knows our software better than us, Oracle?” Well, actually, a lot of smaller consultancies knew Oracle as well or better than Oracle’s own consultants because they had been at it longer.  Oracle tended to hire and train the newbies while the small solid consultancies brought in experienced users and trained them in consulting.

If you are looking for experience and for a consultant who will look out for your interests more than the software vendor’s folks then look at an independent consulting firm. They often have well trained, experienced people who not only want to complete the project on time and budget, but also want to delight the client and perhaps pick up a reference along the way.

Lyrics by the infamous Robert Johnson, screaming guitar by the legendary Eric Clapton Cream Play Crossroads. Why the blues reference? This is what SAP users do when their software version is iced and they are forced to upgrade, at the cost of several hundred thousand dollars, to the latest release or pay increased maintenance costs, as will happen to thousands of them currently running SAP R3 v4.6 and 4.7.

NetSuite’s recent initiative is therefore aptly named Crossroads, not that they had Eric Clapton in mind. What NetSuite is thinking is that as many large companies with dozens if not hundreds of divisions, many of which may be running SAP at a huge cost, many others which have still not migrated to SAP, face the decision to upgrade or pay greater maintenance taxes over the next few months, they have an opportunity to look at other alternatives in the marketplace. No, NetSuite will not replace SAP at the Corporate office, but large companies can deploy NetSuite successfully at the division or business unit level, at greatly reduced costs. And using one of NetSuite’s integration partners, we have used Boomi successfully to integrate applications with NetSuite, the division can roll their results up to corporate without a problem.

I have seen this exact scenario play out in an Oracle ERP implementation earlier in my career. The client was a Fortune 100 employment services organization that was opening offices across the globe. But there is no way to roll out Oracle to such small business units. So they found a smaller software package and implemented it at several of these offices. Unfortunately at this time there were not the internet based services available to them and results from each office had to be sent via ftp to corporate and manually consolidated.

Today the situation is both the same and better. The same business requirements exists for far flung business units but with NetSuite they could all operated under a single account using NetSuite’s SaaS OneWorld, with multi-subsidiary, multi-language and multi-currency functionality. Using one of the integration partners the NetSuite OneWorld results can be electronically consolidated with Corporate results. What an enormous improvement. If the parent company has actually forced the divisions to run SAP, or try to run SAP or Oracle, then the advantage is even greater: Jettison the resource intensive package and roll out NetSuite for literally pennies on the dollar for what is costs you to run and maintain SAP or Oracle.

The press has covered the announcement pretty well here,  and here and our friend Vinnie Mirchandani has also jumped in. Whatever the take by the press, NetSuite is absolutely correct in doing everything they can to highlight the awesome efficiencies they can offer in the business unit/division space.

I read this article yesterday about SAP’s recent update to prospects, analysts and press about their new SaaS offering and it took me a bit to digest. How is this possible that you can screw this up so monstrously when you are one of the largest software vendors in the world?

One reason is that SAP was always an application company and what they know really well are business processes, the backbone of business applications. Thousands of the world’s largest companies run on SAP and you cannot this away from them.  But when you are creating a new SaaS service you have to not only think about the applications, but the database and the overall system architecture differently, and for a company that never ran a data center this was apparently a bridge too far.

But it’s not like SAP was the first into this market. Their were literally dozens of SaaS providers by the time that SAP stepped into the fray. But apparently none of them provided any guidance or wisdom to SAP when they made decisions about how to do a SaaS offering.

That they screwed it up royal is not a joke. It’s a sad truth. Nothing would give the SaaS model more credibility than an offering from SAP. NetSuite’s CEO Zach Nelson has often said that he knew a large competitor would announce a SaaS offering and then fail to deliver, validating the market and then not delivering all in the same graceful fall down the stairs. But, as I was kidding a friend the other day, it’s almost like they are doing it on purpose at this point. By not delivering and having as many issues as they have, are they causing the market to question the viability of SaaS?

Well, that’s madness, plain and simple, but what else can you say about a product launch this poor? It’s hard to compute. But I have learned never to underestimate the sheer arrogance of people, especially after having ridden a 20 year wave of success. Is it possible that we could be wrong? You stop asking this question at some point in the ride that SAP enjoyed.

There has long been a discussion of business continuity with regards to the use of software as a service. The question is simply that with both your data and tools of business – read applications and database – running on a cloud infrastructure that belongs to a vendor, how do you plan for disaster or loss of a vendor. After all, in this economic climate it’s not if some vendors will fail, but when.

The question is a good one, let’s be honest. As companies like SF.com and NetSuite move upmarket they are bound to hear more questions of this kind from prospects in all markets. In other words, it’s not unreasonable to ask these questions. On this blog, in its last incarnation, we wrote about this topic often, but with, as I now realize, a bit of a chip on our shoulder.

We always argued that forcing SaaS vendors to answer these questions was unfair because no one ever asks these questions of on-premise software vendors. There is some justification for this defense, but I don’t think it really stacks up, all things considered. If an on-premise vendor ceases to exist, the customer has some ability and time to put together another solution and migrate, etc. But if you lose your SaaS provider you’re in some deep water.

So what is to be done? The question of business continuity came up again when my fellow Enterprise Irregular, Vinnie Mirchandani, questioned a post by Frank Scavo. I respect both of these gentlemen a good deal, especially now that several industry players got involved in a debate on both Frank’s and Vinnie’s posts. Some of the ideas were excellent and should be more widely circulated. Here they are in a nutshell:

• Provide a backup mysql database to the customer (RightNow idea).
• Provide a Trust, setup for and by customers, that in the event of vendor liquidation has the ability to take over operations of the software. This would at least give customers the time needed to migrate to a new solution, and therefore make on-premise and SaaS even in this regard.
• Software Escrow Account
• On-premise vendor managed backup system

The ideas are across the board as you can see, but what finally has to be answered is what works and what is affordable. In my mind this leave the first two option as both workable and affordable, and the last two fall off as unworkable, the escrow idea, or simply not affordable – the on-premise, vendor managed solution.

If I had to choose one idea I would select the Trust. SaaS providers could set aside $5 bucks per year per user into a trust that would pay to continue maintaining the software for a full 6 months in the case of vendor insolvency, or to restore the service in the case of data center emergency, etc. This makes a lot of sense to me and I hope that SaaS providers start thinking along these lines in the near future.  Regardless of what they finally come up with, it’s important to take this whole contingency planning/business continuity issue seriously. In the end, serious businesses are taken seriously.

On the other hand, it’s really discouraging to see some of the on-premise pimps show up on the comments as well. You can tell some of these writers are not technology professionals but simply the pr types/hacks spreading around the FUD. I think in some ways it is the presence of so much FUD that makes SaaS providers avoid this issue. Put that issue aside though and meet the challenge head on. That’s the best way to win in the end.

Enterprise 2.0 is the idea of a Harvard Business School prof, Andrew McAfee, who believes that the adoption and use of social software, like wikis, blogs, microblogging, facebook, etc., alters the Enterprise, transforming it from a hierarchical structure built on rules and disciplines, into an egalitarian community. One of my fellow Enterprise Irregulars, Dennis Howlett, who writes at ZDnet, penned a post recently about the hype of Enterprise 2.0  and the reality – social software is not changing the enterprise in ways its proponents would suggest, nor can it. I am inclined to agree.

Howlett is a self-acknowledged curmudgeon when it comes to technology. He, like many of us, has seen a lot of things come and go over the years, and much of it was useless. Of the Enterprise 2.0 hype he asks what are the activists’ interests; the company, the brand, the product or the community? His answer is simply that most Enterprise 2.0 enthusiasm is really all about the community and I tend to agree. The use of an internal community may not be a bad idea but community alone does not new products make. Nor does an external community create brand. It may help on the edges to connect to customers, but people buy a product because it has an excellent reputation, especially if they have purchased the same product before. 

Social networking tools may find some traction in knowledge based businesses, but the bulk of our economy is still product based businesses, and in these environments hirearchy still rules, as it must, Howlett argues. 

At any rate, community already exists at most companies, regardless of social software. Visit any popular restaurant in my area at lunch and you will see groups of designers and engineers sharing meals and discussing work. Is social software going to change this, or even enhance it? Hard to see that.

Then I just read an article in the NY Times about people leaving facebook. This is new and interesting. I often wonder myself about facebook and its long term prospects. I emailed the article, by the way, to my daughter Haley and her response was “Who cares?” She uses facebook as a matter of fact, and all of the conversation swirling around it seems like wasted breath to her. My feeling is that facebook in her life will eventually occupy the same realm as pokemon, Buffy the Vampire Slayer, Gilmore Girls and sleepovers – fond memories all. 

So many people have recently jumped on fb but what value have they really found there? I’m still looking for it. I have no idea where the value is. I found a former teacher of mine, actually he found me, who has developed an embarrasing habit of impressing the hell out of very young women (former students). That’s not good. I also found an old college friend who appears to still, well, be in college. Most of the photos on his page were taken in a bar.  That’s not good either. Several family members have recently ‘friended’ me and that’s nice, but it would be better to see them in person, frankly. Reading the remarks of their friends on their ‘wall’ leaves me feeling like  a stranger.

I like community and have joined many over time. But there is also a place for hierarchy in the business world. I don’t believe that communities can carry a business forward. In the personal realm, if I want to know you I should want to spend some time with you. Facebook does not fill the void of distance, or lack of time, or cash, or inclination.

I have, in our previous iteration of Sightlog, railed against FUD, fear uncertainty doubt, a way too common tactic in technology sales, especially software sales. What’s the point, finally? And what does it say about our industry that FUD is so prominent in our sales and marketing? Just state the facts, without a lot of fudging. If there is any sector of the economy that offers a better opportunity for competitive differentiation than software, I don’t know what it is.

But FUD continues. Last month I read a blog post that tried to throw ice cold FUD on NetSuite’s acquisition of QuickArrow, a software service in the ‘professional services automation’, or PSA, market. I thought it was strange, especially given the source of the article. Essentially, they tried to link NetSuite to Oracle, and suggest that QuickArrow would be rolled up into NetSuite, its client list assailed and treated recklessly, like this is possible in a SaaS business when clients can walk at any time. I was going to write about it then but felt that I would be just promoting the problem, not solving it, so I let it go.

But I did scratch my head about it a bit. After all, NetSuite has already purchased OpenAir and continues to support customers who do not use NetSuite financials, who use only OpenAir. But the real chutzpuh was the suggestion that NetSuite would take the ‘low road’, whatever that is, while the writer churns out a post with nuclear amounts of FUD. Really? There was a line about something his company was up to in the same PSA market, but without more details I whistled by it.

As it turns out, this company has much to worry about in NetSuite’s acquisition of QuickArrow and OpenAir. They have a PSA offering of their own now. So this was the reason for the FUD. They are a direct competitor with NetSuite. That’s fine. There should be several companies in this market as PSA is an important and underserved market. But why all the FUD? After I read the post again and then read a new post about the new PSA service I still do not understand what they offer, but I have a really good idea of what they are not – NetSuite. They give no indication of how their PSA offering enables any type of billing transaction, or profitability analysis, or anything else that might be important to a company running a large professional services staff. But we do know that they are built on salesforce’s force.com platform. That’s it; that’s their entire claim to fame, what some other company built.

For the life of me I cannot figure out why people get so focused on the competition that they forget to make even an attempt at explaining their own offering and its advantages. Does running on force.com really offer such an outstanding advantage that you needn’t tell us anything else? What is the force.com advantage, by the way? Well, building a hardware and software infrastructure is difficult, so rolling out new code on an existing platform is easier. So this is great for the vendor, but what does it do for the client? Nothing, that I can tell, and I read the posts twice. Having poured all of his energy into his illuminating article about NetSuite’s reincarnation as the grim reaper, the author had none left for prospective clients of his new service. Desperation makes intelligent people do stupid things, honestly.

You only have so many opportunities to connect with people. When you do have a new service announcement take advantage of it, explain, be gracious and intelligent and people will respond. Honestly, let’s stop with the junior high antics of poking out competitors in the eye and running away. It not only makes you look stupid, but it reflects poorly on all of us. 

If you would like to read the posts that got me started today, you can see them here. You have been warned about gangly junior high boys with more energy than good sense.