In some recent conversations with Andy Seidl of MyST Technology Partners, (Disclaimer: Their technology runs this blog), I came to the thought that the whole practice of creating a corporate website is passe. Unless you require a shopping cart, in which case your must have an item catalog that you would like to exhibit, there is really no particular need for a typical, static, plain html corporate site.

Think about it like this: The average corporation spends $1000 to $2000 per page for a corporate site of roughly 50 pages. That's $50,000, if you catch a good deal! What are you getting for this? Essentially, the ability to forget about your online presence. Once the site is built, everyone gets back to work, no longer worrying about not being able to point to a credible online presence. In other words, the corporate site is like a flag planted on the moon: Yes we have been there, but there is no other signs of life. Many corporate sites don't even have the ability to capture an interested party's particulars. So, come and look, but don't let us know who you are. Seems strange - like what would you think if a stranger just showed up in your office, stared at you for a few minutes and then left? (OK, we have all had strange work mates - that's not what I mean).

But we do need an online presence, you're thinking. Sure, of course, without question. Look at this blog that you are currently reading: This is online presence to the nth degree. The ability to post dynamic content, provide a comments channel for readers, capture their information if they would like to talk in person, feed them new content automatically through RSS, and so much more. This is not a static site, this is a corporate advertorial. This gives you the ability to speak directly to people who seek what you have to say. They are interested, believe it or not, to hear about what you do, how you do it and why you do it.

You can also provide them with other interesting content here. For example, if you are a law firm with a patent law practice, what better place to talk about your expertise and also aggregate interesting articles about patent law from other sources than your website. On a typical site it would mean creating an article and sending it to a web developer. Three weeks later, and many $ later, it would appear in your website. Now consider a blogsite like this one: Write your own topical post for the blog, decide when to publish it, aggregate other interesting articles about the same subject, create links within the post to other sources, and when it becomes public it will automatically feed into the online world of your readership. You are now a leader in you field. How's that work for you?

The more I think about this idea of blog as primary internet presence, or primary website, the more interesting it becomes. Now I must say that SightLines did not follow this path. When we began blogging, almost 3 years ago now, it was anything but a mainstream practice. In fact, blogging still has a bit of a bad reputation because of the lunatic political fringe that tends to take more advantage of the medium than others. But this is really starting to change over the last 6 months or so. More and more mainstream writers have entered the medium. The corporate world will follow, and sooner would be better than later. I am not sure what we will do with our primary website, but we'll probably keep it and continue to work this blog and the primary site together.

After all, it certainly does not hurt your internet presence to have both a primary and a blogsite. The two do wonders for your organic search results, to be sure. So if you already have a corporate site and do not want to kill it, then I would say that's not a problem. Keep both. But if you are just getting started and do not yet have your $50,000 corporate site then I would tell you to hold on their big guy. You might want to take a look at what's next in internet technology. There will soon come a day when not having a blogsite will be akin to not having a website at all.

As an IT service vendor, and license reseller, SightLines Consulting spends a fair amount of time considering the IT services market and the best way to offer, quote, sell, measure, quantify and qualify IT services. Fellow Enterprise Irregular and guest weblogger Vinnie Mirchandani talks about the state of IT Service procurement in a recent post here. Vinnie makes the point that IT services are notoriously difficult to rationalize on the buy side, and he's right. My point is that IT services are just as difficult to rationalize on the sell side.

Currently, SightLines offers IT services in two flavors: Fixed Bid when the scope of work is defined and per hour time and materials when the scope is vague or when the customer doesn't want to establish a scope.

The Fixed Bid is easier to work under because it does not require exact time records for the client, and that's the problem. As the vendor we are never entirely certain how of if we are profitable. Sure, we can do a better job of managing hours, but that's not as easy said as done, especially in the Small and Medium Enterprise (SME) space where you have to work more than one project at a time.

Project based Fixed Bids are also difficult for the client.  One big number for the whole implementation does not provide a good handle on what they can expect from the implementation. The vendor pushes to finish while the client pulls back the implementation finish line. The client finds it hard to finally say the implementation is done and now we are going to take ownership. Likewise the vendor often tries to manage to time and budget without asking if the client is ready to take ownership, or what it will take to bring the project to successful conclusion.

On the other hand, Hourly Time and Materials projects fix some of these problems but are not without their own issues. Instead of the vendor focusing too much on hours and not enough on the project's and client's progress, the client does; that is, the client ends up pouring over the hours consumed and fixating on the hours yet to be billed. Ultimately the project suffers.

So what's the answer? Well, as in so many things, improvement is possible when you are NOT willing to let the perfect be the enemy of the good. Managing IT projects is like managing any long term relationship, there just has to be flexibility on both sides and the willingness to do more than just communicate needs - you have to listen too. We are not perfect in the listening part, and frankly neither are our clients. One of the problems is that when we enter into the contract we don't always have a heart to heart about what each of us expects, for fear of offending, I suppose. Then again, a heart to heart is not necessarily the fix for all that happens going forward.

Apart from better communications, we have also implemented the fixed bid by module contract in most cases. What this means is that we bid an implementation module by module. If the client wants more in one module than they originally requested, then we can add to that module and keep within budget by lessening another module. We think it provides both us and the client with a means of adding some flexibility to project scope without constantly re-negotiating contracts.

In the end, though both parties must see and understand the importance of the long term relationship. This is the best way to navigate in a sea of unknown and sometimes unknowable variables.

Many years ago, fresh out of school I took my first technical consulting job for a Payroll Service company. It was a start and turned out to be a good move. Like so many of our early jobs, the pay was forgettable but not the experiences.

One client was a local church. A pretty sizable institution in fact. When I arrived for the initial consultation, the office manager ushered me into the 'inner sanctum'. It was a beautiful office with a large wood desk and lots of dark wood all around. I wasn't really expecting to meet the reverend, but there he was and then the office manager left and the two of us shared a quiet, awkward moment before he got started. He explained as clearly as he could bring himself how his church had been ripped off to the tune of a 'great deal, a great deal' by the bookkeeper, who was now in prison.

Wow! I could barely believe what I was hearing. Ripping off a church. Yeah, you bet. She made off with hundreds of thousands in fact and did it quite easily. The key? She ran payroll in one system and posted it into another. She'd create a 2nd check, on another run, and after she cashed it, she would just fix the bank balance with a journal entry. Easy. The committee would look over the main payroll run and not see anything unusual, and they would see the bank balance matching. Perfect.

I hadn't thought about this in years until I started working with a new NetSuite client. The company was actually a prospect 2 years ago, then they went dark and I got busy with so many other implementations that I put them on the back burner. Finally, I called to check in and heard the whole story. The fraud, the arrest, the trial, the whole nine yards. And again, the issue was a really lax accounting group with no audit and a bunch of standalone systems that allowed the perpetrator to receive checks and cash them while never enter the sale from one system into the other.

It went further than that, though. There were bill payments to ghost companies and more hidden little charges and stuff than you can shake a stick at, as Mom used to say. The long and short of it was that the accounting system was being manipulated in ways that an accounting system should never be manipulated, and with little oversight from an overworked owner the result was almost ruinous.

What's the lesson? Of course a devious person can do damage in many ways, but take some precautions as a business owner to make sure that systems are being used properly. For example, Vendor credits should be entered as Vendor Credits, not surreptitiously added to bills to reduce the total amount owed. Vendor Credits are easy to track, individual line items on a bill are not. Journal entries need to be closely monitored.

You also need to really think about the hand-offs from one system to another if you are running multiple systems. The biggest problem that led to fraud at my client's site was Quoting system completely separate from the accounting system. No one ever tried to tie the two out. The best way to avoid this problem is to have a single integrated system to run your business. Every sales order is either closed or it becomes an invoice.

Finally, make sure that any fraud must be a conspiracy. Force different people to do different things in the system. For example, one person should enter bills and another person should pay them. And no one but the Administrator should be able to delete a transaction. This will make them crazy, but it's one of the best ways of preventing fraud.

Last week Microsoft announced its intention of acquiring Yahoo!. Does not seem like a bad idea from Microsoft's point of view, at least. They have a lot of cash, and you have to buy something or hand out dividends again; you can't just watch the bank balance grow.

I am not going to try to sort out all of the reasons that MS wants Yahoo, but I have to believe that these two were in the mix:

1. Take on Google before it's too late. Google is going to move into the PC in a big way and Microsoft needs to protect the homeland. Google is also moving into the server with their cloud computing platform. Microsoft needs to compete in the adwords market to thwart some of this growth. Google is not the annoying little brother anymore - they are starting to fill out and become a rival, on many fronts and in ways that Microsoft has not been relevant (Internet computing).
2. There must have been a discussion about the eventuality of a large corporate Microsoft client putting in a Purchase Order for 10,000 low priced ($350 - $500) laptops running virtual Linux and Ubuntu. This eventuality is going to become a reality sooner rather than later. Microsoft butters its bread with corporate clients and its profits in this enterprise sector are going to come under increasing pressure. Where to grow? Consumer services, advertising, that's the ticket.

So what does all this mean to us, to you, out here in the small and medium enterprise market. I believe it means that we have to start thinking seriously about what we use to run our businesses and what we will use in the future.

Look in the large enterprise market, Oracle made the same determination several years ago that Microsoft made last week in the enterprise market: It's not going to grow at nearly the same rates that it has in the past. And when your main line of business does not grow, you must take action. Oracle chose to consolidate. Microsoft chose to move into another market very aggressively. By doing so they are going to try to protect their base by merging a lot of new internet technologies with their PC technologies. This allows them to continue to charge excessive prices for software that has not been innovative in years. And while they protect their base they will put their energies into newer markets, like media and advertising and consumer internet technologies.

The downside to all of this is that corporate clients continue to pay the big sticker prices for Microsoft software, and thereby helping to capitalize Microsoft's turn toward the consumer market. It's one thing to pay for software and maintenance year after year and get little innovation in return. It's another to sit by and watch your hard earned cash invested in a bunch of interesting stuff like Facebook, which neither you nor your business will ever find useful. That's some serious ouch.

I have asked several times over the past few years what happened to Microsoft's enterprise application division? They are still dead silent. Outside of a few commercials on the radio. But what is new? Wasn't Microsoft supposed to roll out new SaaS (software as a service) versions of the their 5 DIFFERENT ERP systems? Weren't they going to merge some or all of them into a new application? And how about Microsoft CRM? The only people who run it are the people - many resellers and partners - who receive it for free. It has not been thoroughly integrated with a single one of the ERP systems.

I know that a lot of small and medium business owners love Microsoft because no one at the club will ever laugh at you for running Dynamics, and with the Microsoft's bank account it does look like a horse with some strong legs. But what is reputation and riches buying you these days when you invest in Microsoft? A chance to help them get into consumer technologies? If you want consumer technologies, go get a Facebook account - it's free, and innovative in its own small way. You are wasting some big coin on Microsoft, and the payback is not what you think.

My fellow Enterprise Irregular Dennis Howlett says "Forget Predictions, get a wishlist." And I am going to take his advice.

So here they are, my wishlist entries for 2008. Most business and some personal, I wish:

1. That Phil Wainewright is correct and 2008 is the year of SaaS (software as a service). Phil makes a compelling case, and he is a realist if ever I have read one. I would be willing to send him a bottle of my favorite red if he is right. But how will we know if Phil is right, or no? I would suggest this as a measuring stick: SAP and NetSuite are now two solid, fully integrated suites in the SaaS market. If NetSuite shows > 50% growth in 2008, coming off their successful IPO this is certainly doable, and if SAP's new entrant can hit a 1000 new customers this year, then I think we can say that 2008 is the year of SaaS
2. The summer of 2008 will have as much sunshine as we had in 2007. It was a great year for growing grapes and I made the best wine to date from our little vineyard. I can only hope that we have superb sunshine again in 2008.
3. That SightLines breaks through with our new vertical offering for brand owners. The first hurdle is that you are now wondering what I am talking about when I mention brand owners. Think about Contract Manufacturing. This is a two sided transaction, there is the manufacturer, of course, but then there is the company that owns the brand, contracts for its manufacture and distribution and runs the entire network of companies that together bring the product to market and put it into the hands of the retailer. These are the brand owners, and our goal in 2008 is to get in front of them and let them know that we have a remarkable and well tested solution for their business.
4. That my partner Tom Nguyen gets over the crushing defeat of his Sooners in the Fiesta Bowl and gets on with his role as Client Services Director. C'mon Tom, it's time to come up from the basement and face the sunshine again.
5. That NetSuite maintains its current prices, which are fair and still acceptable in a challenging economic environment.
6. That the US economy does not fall into recession
7. That my daughter continues to work hard in the one class which is not easy for her - she knows which one - and proves to herself most of all that she can handle challenging curriculum at the next level.
8. That SightLines grows by 100% again in 2008 with our new verticals, new integration appliance and new partner Tom Nguyen
9. That my Tigers get back the World Series this year
10. That we do not come to blows over the presidential elections. It is going to be a heated election, but in the end we will all have a leader we should, and should be able to, respect.

Vinnie Mirchandani, The Deal Architect, and one of our favorite bloggers asks an interesting question about the ramifications of NetSuite's IPO. Of course, yesterday 'N', as it is now known on the street, debuted on the NYSE. It had originally sought a price of $13 - $16 a share, but ended up with $26, and the stock ended the trading day at $35.50. Vinnie's states:

---

Oracle 's Application Group would not exactly want to share too many details with the brash new player in the market flush with $ 160 million in its coffers.  

---

The implied question is '"Does Oracle fear NetSuite?"

Maybe, maybe not. During my years in Oracle Consulting, I worked on a couple of smaller deals and frankly, you felt like a pair of brown shoes in a world of tuxedos. But when I say small in the Oracle context, we are talking about a company with 350 employees. I cannot imagine Oracle in a deal with a 200 employee company, much less a 100 employee company.

There are however several NetSuite clients that could probably run Oracle, if they were willing to live with the headache. A couple of them are our clients. One, Lyris, is a publicly traded software company with multiple subsidiaries. Another, UCG, is a trade publishing company, print and electronic, with over a 1000 NetSuite users. So while NetSuite can move upmarket in many cases, Oracle is too big to make it down the staircase to the SME market.

With NetSuite’s IPO buzz at a fever pitch, I just read in a recent San Jose article where NetSuite expects to increase its initial public shares from $16 to $19, which is up from its earlier estimate of $13 to $16 a share.  At the higher price it could mean NetSuite could potentially raise upwards of $100m in the IPO.  With shares heading north, what does the market tell us about our increasing comfort with not just NetSuite but SaaS? 

I think is says that SaaS is gaining true acceptance as a viable option for companies to run their business on, from lead to cash, and man, it's time to put your money where your mouth is. It was interesting when SaaS companies offered human resource functions, or customer service, or sales force automation. But NetSuite offers the most difficult SaaS product yet - the entire suite fully integrated.

Sure, we heard and read about the promise of SaaS delivering big box features and scalability, without the high annual license fees, maintenance fees, and upgrade costs of the traditional on premise solutions, and of course without the cost of human resources to maintain it. But with NetSuite's IPO we now have evidence in the most difficult software can be delivered on-demand and meet all of these promises.

The advantages for SMEs using SaaS is quite compelling.  Total cost of ownership - check; reliability - check; security - check; support - check.... and the checks go on and on.  And what's more, NetSuite, focused primarily on the SME market could be headed to the club house at the top of the SME leader board in the not so distant future. 

Personally, I view NetSuite as the company Oracle wishes it was. NetSuite is blessed with great technology and management genes, and is poised to move from adolesence to your adulthood, ready to make significant waves in the market, and potentially further blurr the line between SME and Enterprise systems. When I was an employee of Oracle, around 2000 to 2004, a shift in business strategy began to take place. They were trying to figure out if Oracle could be transformed to an On-Demand model.  I don't think it really happened like the leaders envisioned.  But I think that vision beats strongly with NetSuite and by some accounts, the market does too. 

Tom Nguyen

There has been a great deal written in the past few days about sexiness or lack thereof of enterprise software, in other words, software for businesses of what sort or another.

The whole brouhaha was started by Robert Scoble in his article Why Enterprise Software isn't Sexy. That's when the discussion began in earnest, with all the subtlety of "J'accuse!" My fellow Enterprise Irregulars were called out and they weighed in. You can take a look at a list of their articles here, courtesy of Jason Wood's The Ponderings of Woodrow.

Scoble's main point is that there are not that many people on the blogosphere who write or read about business software, or more widely software that businesses use regularly. I guess it was actually Bill Gates who was complaining about it. OK, that's probably true. Enterprise software probably does not have a lot of sex appeal for the average guy. But how about for the people who are close to it, like the people who build it, buy it, use it everyday, run their business on it? Yes, if you take a random sample of people from a wide swath of society and put them on a patio for drinks and eats, you'll probably have a lot easier time starting a conversation about Facebook than about NetSuite.

Even older people are inclined to ask about Facebook, as I experienced at the Thanksgiving table this year. A lengthy discussion about social software ensued, and I entered my two cents from a typical enterprise point of view, but my teenage daughter quickly grew impatient with my ramblings and jumped in. Her take is all about friends and human connections, and the things that humans alone seem to love, like music, art, etc.

This is a microcosm of the entire discussion about the sexiness of enterprise software.

Look, most people don't care what cuts the payroll check, or how the money gets electronically posted to their account. They only care that when they run the debit card at the grocery store they have enough to pay for whatevers in the cart.

I don't blame them since they have no vested interest in payroll, other than the cash; however, there are two groups who do have a vested interest. The first is the person paying for the software. This person has people who help them manage the decision of how to cut payroll, with what software. God knows they don't take the task lightly either. The second group is the ones who use the payroll system every day. These two groups may not describe their interest in the software as sexy, but believe me they are passionate about it. They want the software to work for them and their constituents, the payees. They are very interested in the software, including, many times, the ease of use and the look and feel of the animal.

But since they have a long term relationship with the software, theirs is more of a marriage than a one night stand. So they tend to think about not only the look and feel, but the character; the guts of it get a lot of attention. And one of the things they want to know, is will it last? Sexy, after all, is in the eye of the beholder.

Well at any rate, that's my short take on this subject. By the way I have a Facebook account now. You are welcome to find me out there, Thomas Foydel. I even started a NetSuite group. There are not, however, any compromising photos, sexy or otherwise.

Quoted from a story in the Wall Street Journal, US Edition, from 11/27/2007, B3:

---

Michael Dell says he hears one thing over and over again from the businesses he talks to: Managing information-technology is getting increasingly complex.

Michael Dell

Part of the problem is the way companies buy and deploy technology. Often, a business leader finds some great software that he just has to buy, the computer company CEO tells the Business Technology Blog. Very little of this software works with the other software that the business uses – Dell tells us that software is generally more complicated than it needs to be – meaning that IT departments have to pay for separate equipment and staff for each one. What’s left of the IT budget goes to consultants “who just stay there until you run out of money,” Dell tells us.

---

I could not agree more with the statements above concerning both software and services. Too many smart people do not buy IT smartly. Their IT Spend is wasted on too many initiatives that are poorly thought out from the beginning. Software applications are not toys, but too many corporate IT departments look like the rec room 3 days after Christmas morning with discarded, broken stuff scattered about. What are people thinking when they spend so much IT budget and never think about the need for integration? A lack of integration between systems will kill even the most competent IT staff.

I just hope that the SME out there is listening to this conversation. It has been going on in company after company for some time and now it is breaking out into the open. I talk to a lot of SMEs who understand the need for integration in their IT solutions. And this does not mean building bridges between disparate applications. It means starting with a single integrated software platform as your foundation. If you must have additional apps then make sure that these can be bridged to the foundation.

But there are days when I wonder. It's really too easy to make fun of some of the things that large companies do, but then I talk to SME owners and hear stories about how they plan to interface an accounting system with their e-commerce platform using, of all things, email! Wow, I bet even Dell has not heard that one. So why do smart people do stupid things with IT? Because, as in most things, there are infinite ways to screw it up and one way to get it right.

Start by respecting what IT can do for your business. Most of the IT quagmires that I see people getting into start because they think IT is to be tolerated, not exploited to their advantage. We have all had our frustrations with software and hardware, but to think for a moment that, in the big picture, IT is not an incredible boon to your business is just ludicrous. Of course it is. It makes the world go around anymore. IT gives my clients the ability to source product in China, manage worldwide logistics, distribute it from North Dakota to customers across North America and to manage this global business with 5 people in 4 states! That's why I love clients like this with their distributed networks. They are not just getting along with IT, surviving with software. They are exploiting what's possible with IT, succeeding with software. Software: The key differentiator between survival and success. I think so.

Some time ago I wrote an article in which I took at jab at accountants. Dennis Howlett, a fellow blogger and an insightful writer on business technology, and an accountant, called me out here. I was a little embarrassed by my remarks, not because I made them, but because I didn't offer a substantial argument for them. Shame on me, I should know better, undergrad philosophy degree...

But we all get caught up in business from time to time and throw ideas at the wall, instead of offering clear argument. But today I want to revisit the subject again, because over the recent Thanksgiving holiday I learned that an acquaintance had closed his business. He is the brother of an in-law, and a man that I have met on several occasions. A very decent guy by all accounts, and an accountant by profession.

I fielded several questions from him over time about business operations, software, etc.. I never questioned him about his background or qualifications; actually, never thought to, though at the time I thought his questions a little surprising. He has been an accountant for many years and worked for several Fortune 500 companies. So what happened to his business?

Frankly, from what I can gather, it was a nosedive from beginning to end. As my in-law described it, he had done his homework, but was hit by a lot of unforeseen problems, from finding the right labor to help him run it, to finding the right location. So what was the homework that he had done? Well, as you would expect he did what he knows how to do best - spreadsheets. He had it all laid out to the last penny, from budgets to cash flows, amortization and depreciation. Literally hundreds of hours of work. He is a smart man and knowing how businesses run on the books was an advantage as he spoke to interested third parties. But when it came time to operate the business he was a little lost.

The point is that we are all inclined to this pattern. We return again and again to the thing that we do best, of course. The first thing that I did when I wanted to start my own practice was to search the market for a software line that I wanted to represent, because my forte is the software. I was fortunate that the software I settled on, NetSuite, also offered a market vision that I was really in tune with. I was coming from the same Oracle background as the NetSuite founders, so I understood immediately the values with which they designed the software. But to run the business really forced me out of my comfort zone.

I was forced to learn marketing and sales in ways that I had not practiced them in the past. I learned an entirely new way of doing software implementations. And the education never ends. I can say without hesitation that we are only halfway, after 3 years of effort, to where I expect we will end up. Unfortunately, my acquaintance cannot say the same. He never considered sales and marketing challenges, or even basic operations of the business. Just the numbers.

Even more unfortunate is the number of small businesses that I encounter on a regular basis who really struggle with some aspect of business. Nowadays, it is not enough to just have an accounting software, though that is a necessity. Of course, it helps if you understand the debits and credits enough to carry on a meaningful discussion of how the business is doing. But there are so many other things to consider, like how are you going to attract interest and turn that interest into cash. There is a lot of work that happens prior to a transaction that posts to the books. This work is some of the toughest in business because it is more ambiguous, less easily understood than accounting; more of an art than a science in many respects.

My advice to anyone looking at starting a new business is to think through then entire business process, from attracting interest, to delivering the goods, or services, to posting the cash. Make sure that you have both the understanding and the software lined up to manage the entire process. The earlier in the business formation process that you ask these questions, the better off you and your business will be.

SightLines Consulting is in San Francisco this week, attending the annual NetSuite Partner Conference. It's pretty amazing to see the size of the event, both in partners and 3rd Party companies. Just a few years ago this conference was a small gathering of NetSuite pioneers; now, it is a multitude that have come to hear and see the future.

What really strikes me so far is the number of 3rd party software vendors that are now on board with NetSuite. One of the great myths about Software as a Service, or SaaS, is that it cannot be integrated with other third party software vendors. I'll never understand where nonsense like this starts. I worked for Oracle for nine years and the lack of integration tag was more true of Oracle apps than it is of NetSuite. Created with a greater sense of the need for 3rd party integration, NetSuite comes with a published web services api, a lot easier to use than hooks that Oracle offered.

On premise software, most of which is written with older technologies, has always been difficult to integrate. Also, on premise software companies actually had the istrange conceit that their software would one day handle all the needs of the enterprise. That never happened and never will.

Of course, I cannot argue with the notion that an integrated suite is best of all possible worlds, being a huge proponent of the value of NetSuite. However, there are times when a third party app is necessary. For example, managing payroll is a huge challenge for companies with employees in multiple states, so it makes sense that NetSuite has a built in integration with payroll vendor Perquest. Likewise, one of our clients will integrate a third party debt collection system with NetSuite. The upshot is that the NetSuite SaaS economy grows as these third party vendors integrate theirs applications.

Speaking of integration, SightLines will soon announce our own Integration Appliance. We will enable NetSuite clients to integrate with other applications, their own or another company's, with a service in which we can define the rules and specifications of the integration. We will charge on a monthly basis based on the type of integration required, not on usage. Stay tuned.

Last week at the Oracle Quarterly Earnings Conference Call, Larry Ellison was asked about Software as a Service (SaaS) and he responded, as reported by Information Week by saying that SaaS is "very interesting. But no one has figured out how to make any money at it."

Let's put this into context. I think that Ellison was speaking not only about SaaS, but about the idea of selling into the Small and Medium Enterprise (SME) market all together. And in the context of Oracle he is perfectly correct that SaaS is a very tough fit indeed. Sales, Marketing, Distribution, Culture all need to change in order to move into on-demand software from on-premise software. This turning of the ship is much more complicated than the arduous task of re-engineering the software itself.

Phil Wainewright understands as well as anyone that SaaS is a difficult project to bring to market, especially economically. SaaS vendors know that it will take them much longer to accrue the cash flow that conventional software companies achieve with a few big deals.  In fact, Phil wonders whether most conventional software made its gains in the marketplace during tech bubbles.

And in an another really interesting post at SmoothSpan, Bob Warfield discusses SaaS with Concur CEO Steve Singh. Singh understands the difficulties that Ellison alluded to in his comments; that conventional software companies experience real pain when moving to SaaS. What I also found interesting here though is that Concur has been able to make the switch and is now doing much better than its one time rival who stuck with on premise. So vendors can make money with the SaaS model, but it takes time and a new way of doing business. Everything must change, from sales compensation to the code.

So the long and short of it is this: SaaS is a viable and durable business model for software vendors, like Concur and NetSuite, and they can over time become profitable, but the real beneficiaries are the customers who have the ability to use premium software for a fraction of the price of on-premise software.