On-demand ERP draws mixed reaction

March 11, 2009 from InfoWorld – “While it has tested the waters of on-demand software with its CRM Online application, Microsoft still has no plans to do the same for its Dynamics ERP (enterprise resource planning) product lines, according to a top company executive.

"We don't see people saying, 'Hey, I wish you had hosted ERP, give me that, or I wish you only had hosted CRM,'" said Kirill Tatarinov, corporate vice president of business solutions, during a question-and-answer session Tuesday at the Convergence conference in New Orleans….”

180 View – We wonder whether the problem with Microsoft and other vendors in not moving faster to on-demand software is more caused by the software itself. The article later points out that “Dynamics CRM 4.0 has a multitenant architecture, allowing a single server to run multiple instances of the application.” If Microsoft ERP systems also had a multitenant architecture, it’s likely they would offer it. The on-demand model makes a good business case for companies that don’t have the resources or infrastructure to support on-premise software.

Tipping Point Reached For Cloud Computing?

January 30, 2009 from ZDNet – “…He says that mainstream adoption within small and medium-sized businesses is “accelerating” – and that 20 percent of enterprise IT workloads will be run “in the cloud” by 2013. This will lower operating costs, reduce IT staffs and cut down on carbon footprints, he says... By the end of 2010, in fact, he expects 70% of companies will have deployed at least one application in the service “cloud”...

180 View – It’s hard to find good stats on SaaS. The survey in this article is based on a survey of 150 chief financial officers with budget authority. So it’s not based on actual SaaS but planned adoption. It’s also based on a small number of companies. Nevertheless we agree that SaaS has become mainstream. There are currently few options for ERP SaaS but that will inevitably change as companies seek ways to reduce costs. The article ends with “70 percent of SAP’s installations of its R/3 set of business applications predate 1998.” Pre 1998 there were not that many ERP systems available and SAP was extremely successful in attracting companies especially those with Y2K fears. But it’s still surprising that 70% predate 1998.

Workday: The Next Software Power?

August 19, 2008 from BusinessWeek – “Ever since veteran software entrepreneur Dave Duffield launched his new startup, Workday, a year and a half ago, people have wondered if it could become the next Salesforce.com (CRM). Marc Benioff, Salesforce.com's chief executive, had shaken up the customer-relationship management software world and created a company with a market cap of $8 billion with an online service that replaces expensive and complex traditional software packages. Could Duffield and Workday do the same? Just now, there's growing evidence they can...”

180 View – We think that it’s early days for Workday that will eventually challenge other products more than Salesforce including NetSuite and SAP Business ByDesign. Salesforce is primarily CRM and WorkDay includes accounting and HR. What’s interesting is that there is a lot of investment in the next generation of ERP, CRM, HR… systems using SaaS (Software as a Service).

Nine things you need to know about SaaS

October 15, 2007 from Computerworld – “It's an alternative to in-house operations and outsourcing that IT shops can and should use to deliver services and improve their infrastructure in a cost-effective way. SaaS can offer high-quality services at a lower cost than other alternatives, and it's particularly good for supporting mobile and geographically disbursed populations, whether they are sales staffers, telecommuters, customers or business partners worldwide. And in its latest iteration, says West, the technology is offered by leading SaaS vendors as complete platforms unifying normally stovepiped sets of services, supporting underlying data capture and analysis.”

180 View – It seems to us that only a small percentage of enterprise systems are available from SaaS vendors today. An educated guess would be about 5%. But that number seems to be rising every day. In a few years, we predict the number to be over 50%.

How Real Is the Software as a Service Phenomenon?

February 2, 2007 from IT Business Edge – “Info-Tech surveyed more than 1,900 IT professionals, including more than 200 recruited by ITBE. In one area of the survey, respondents were asked to quantify the impact of SaaS as a proportion of new software spending over three time periods: two years ago, today, and two years from now.

The results show that SaaS, while still accounting for a modest portion of new software purchases, is a growing force in the industry. This year, on-demand software is expected to account for 20 percent more of your software acquisition budget than it did two years ago. If our respondents’ forecasts are correct, it will grow by a further 30 percent over the next two years. In the near term, the uptake has occurred primarily in small organizations (1-100 employees); these were already about 20 percent ahead of the industry-wide use of SaaS two years ago, and have increased by roughly 25 percent since then.

However, looking forward, it is large accounts that see the greatest proportional future growth. IT professionals in enterprises with more than 1,000 employees believe that although their organizations have been slower to respond to SaaS than smaller firms, they will experience strong growth – perhaps as high as 40 percent – in the proportion of new software acquisition budgets allocated to on-demand products.

180 View – The name has changed from Application Service Provider, but SaaS has now become mainstream. We now typically include SaaS vendors in our RFP’s. They don’t always win the day, but it’s not because the SaaS model doesn’t make sense. It’s more often that the products are not as mature as their on-premise/license-based counterparts.

Update on Workday, the new “on-demand ERP” company

February 23, 2007 from AMR Research written by Bruce Richardson – “When Workday came out of stealth mode for its launch last November, the company had already signed its first three customers. Over the last few months, it has added eight more. The new customers include two brand names in on-demand software: salesforce.com and RightNow Technologies.

The company has grown to 90 employees, up from 40 or so when I first visited the firm’s Walnut Creek headquarters last April. Head count will likely grow to 150 or so by the end of the year. Most new hires will likely be in development and customer support. Based on our conversations, it appears that Mr. Duffield is looking to control growth and assure high customer satisfaction. When asked how many new customers he hopes to sign this year, he said 30. While that represents strong, triple-digit growth, it is more manageable than the software industry’s classic strategy of aiming primarily at sales wins, not “go lives.”

Believe it or not, it’s been nearly 20 years since Mr. Duffield and Ken Morris started PeopleSoft. When I asked what was different this time, Mr. Duffield said that the tools they are using today are superior. He also said PeopleSoft didn’t get its first customer until the company was two and a half years old, and it took a year for the first customer to go live.

Now, the new tools allow the firm to come out with major enhancements every six to 12 months. Customers are able to go live on the first modules in three months. This typically includes human capital management (HCM) and payroll. The follow-on project usually involves employee self-service applications, which take a month or so to implement.”

180 View – Mr Duffield has a lot of advantages over his competitors. He has no baggage code to update. He has the latest and greatest tools to work with. He knows the ERP business. He is well connected and well funded. His business model is now accepted as mainstream. Keep your eye on this one.

Two new tools that CIOs want – Virtualization and Software as a Service

May 2006 from The McKinsey Quarterly – “While many promising new technologies vie for the attention of IT leaders and CIOs, only a few of these innovations actually end up improving top-line performance or bottom-line productivity. Our recent survey of senior US IT executives and our experience with clients suggest that companies view two new technologies as highly promising tools for obtaining real business benefits: server virtualization (which helps companies improve the match between their computing capacity and their application workloads, so that they can do more with fewer machines) and software as a service (which allows IT departments to offload the delivery and maintenance of software applications). Companies clearly view these technologies as priorities that promise to help them become more efficient and agile.

Virtualization is a software technology that helps raise the utilization rates of servers. It allows companies to run several different operating systems—UNIX, Linux, and Windows, for example, as well as the applications that run on top of them—on a single machine. Distributed servers running a single operating system typically utilize only about 5 to 15 percent of their full processing capacity. Virtualization can make it possible for companies to boost their average server utilization rates to 40 percent or higher while still meeting peak demand. IT departments can then consolidate their servers, reduce the complexity of their environments, and, over time, buy less hardware (though the servers they do buy may be higher-capacity boxes). Related technologies let a single application run across several machines, further boosting reliability and utilization rates, since a machine that isn't too busy can take some of the load off others that are. Finally, the flexibility to set up and tear down test environments quickly and to move applications across physical servers helps to increase administrative productivity and to reduce hardware outlays still further.

Most companies have already begun consolidating their servers—86 percent of the CIOs we asked cited progress in this area. Virtualization is the next natural move. Consolidation aims to combine multiple instances of identical or similar applications on fewer machines. Virtualization goes a step further by making it possible to run more applications on them and by increasing a company's flexibility, so that it can meet shifting workloads without excess hardware. One CIO with a budget of $600 million told us that his company has virtualized 30 percent of its servers and plans to have 60 percent of them virtualized within two or three years. He expects to reduce capital expenditures during the next server-refresh cycle by 30 percent and to reallocate the savings to different projects.

The other trend cited by the IT executives we surveyed is the delivery of software as a service over the Internet. Rather than purchasing and deploying applications inside the enterprise, many companies are buying access to externally hosted applications, so they pay for the software as they use it. The software-as-a-service model can cut the total cost of deploying some classes of enterprise applications by 30 to 40 percent as compared with the total cost of purchasing and maintaining them in house. Of the senior IT executives we talked with, 38 percent said that they plan to use the software-as-a-service approach during the next 12 months. Popular applications include business software for human-resource management (including payroll), billing and order entry, and sales management, as well as security services that guard against spam and viruses. The range of applications delivered in this mode continues to grow, though to date few companies are using software as a service in systems (such as those for production planning and forecasting) that need a lot of tailoring or customization.

Software as a service differs from the fad of the late 1990s for application service providers (ASPs) because the most successful companies offering this latest generation of hosted software have redesigned their applications for scalable delivery over the Web. In this way, these companies innovate more quickly and thus have lower total costs—and pass the benefits on to their customers. Contrary to some expectations, the acceptance of this model isn't limited to midsize companies with understaffed IT departments; some very large enterprises are among the earliest adopters.

IT executives are shifting to the software-as-a-service model for some applications not only for lower licensing and maintenance fees but also because implementation is usually quicker and companies don't have to maintain special skills in software-specific areas. Some enterprise applications can cost tens of millions of dollars and take 6 to 24 months to implement, and many executives prefer to outsource the task. Web services protocols—transport rules that make it easier to link applications flexibly—are helping to speed this migration: 60 percent of our survey respondents said they were implementing Web services, in some cases to integrate externally hosted applications into their own systems.

Taken together, these two adoption trends indicate that a technology architecture transformation is beginning to take shape in many large and midsize organizations. In the past, CIOs deployed their own self-contained application architectures on their own servers and storage systems. This old model is giving way to a hybrid application architecture that combines hosted functionality with in-house applications running on consolidated and virtualized commodity servers. We believe that this transformation will drive efficiencies across the full stack, from business processes to physical infrastructure, while increasing IT's ability to meet new demands in a rapidly changing business environment. Of course, technology alone won't deliver this vision: IT and business leaders will need to rethink governance models and management processes to take full advantage of new technology trends.”

180 View – This article was recommended to us by a company called FavorData
that builds custom systems. The article discusses two important IT trends - Virtualization and Software as a Service (SaaS). The article says that “few companies are using software as a service in systems that need a lot of tailoring or customization.” We think that we will see more customized SaaS solutions using Service-Oriented Architectures (SOA). SOA enables a network architect to mix and match existing elements (software, data, or processes) to create custom-made composites to better serve the business’s needs. SaaS using SOA - don’t you just love acronyms?