Not Your Omi’s SAP

John Schwarz, SAP board member, former head of Business Objects, and one of the leaders of a flying wedge of change that is permeating SAP, knows what he’s talking about when he characterizes the “new” SAP that is emerging from year one of the Léo Apotheker era.

So when he offered that the SAP he was presenting to the analyst and blogger community (among others – academics and other influencers were there too) was “not your grandmother’s SAP,” it was more than just a cute turn of phrase. There are a remarkable number of changes cooking at SAP, more than most realize, and much more than meets the eye, even after almost two days of listening to SAP executives articulate the components of the change that they have chosen to make public (and a few still being delivered under NDA).

That difference between what is said and what isn’t is an important distinction to make when judging SAP in the enterprise software market. Certainly, most companies are circumspect, if not cagey, when it comes to revealing what they’ve been cooking up with their R&D budgets. SAP is something altogether: a company that constantly struggles with conflicting cultural and historical imperatives about what it can and cannot say about the future.

The cultural conflict comes from the tension between German and Silicon Valley mentalities about marketing the buzz alongside reality. It’s a classic SAP problem that has been fueled by the growing influence of SAP Palo Alto’s more freewheeling culture, and while many would see it as a positive dynamic tension, it’s safe to say that sometimes a little too much dynamism is, well, a little too much.

The historical problem comes from the scars that SAP has carried for over-promising and under-delivering. Most recently this occurred with Business ByDesign (which is about to have its redemptive moment sometime in 2010), but there are other examples as well: Master data management, Duet, adoption of the full NetWeaver stack – SAP, like every enterprise software company, can be rightfully accused of pushing a few products and concepts way out in front of the market’s ability (or interest) in consuming them and/or SAP’s ability to deliver them. It’s the oldest story in high-tech: Sic transit gloria.

What still makes SAP a German software company and not a Silicon Valley company (and by that latter term I’m including the Redmond extension of Silicon Valley) is the company’s genuine chagrin at over-promising and under-delivering. If SAP were really a member of the brotherhood of American software companies, that remorse would be either non-existent or largely ignored in the perpetual dogfight for mindshare and market share. Indeed, one of both Oracle’s (and even Microsoft’s) amazing characteristics is the ability of these companies to never let failure get in the way of the next hyperbole. Both companies have launched more failures than SAP can shake a stick at, and both have a resolute culture of never looking back. (Or if they are tempted to, they borrow Satchel Paige’s maxim and assume that all they will see is someone gaining on them). And both companies, in case you hadn’t noticed, continue to be fabulously successful, despite the jackals nipping at their heals.

With that in mind, it’s important to look at the recent SAP Influencer’s Summit as a technology iceberg moving through the marketing sea, showing its tip but hiding much of its most impressive girth out of sight. This is particularly important in looking at the criticisms of CEO Léo Apotheker’s allegedly lackluster first year, which has apparently disappointed a number of observers and lead to all sorts of speculation, among which that Léo will be replaced by Hasso Plattner and that the company will be sold to IBM (both of which reveal a lack of understanding about legal and regulatory reality, or most other forms of reality as well.)

Indeed, it’s an ironic truth that the last year has been probably the most dynamic in SAP’s history. You can see that in the eyes and hear it in the voices of almost every SAP executive you meet. Some of that look is battle fatigue, but a lot of it comes from participating in a hyperactive year in which more formerly sacred assumptions were put to test than anyone at SAP would have ever thought possible. This is one of those assertions, by the way, that I cannot back up with fact as much as I would like (violating that many NDAs would be more than career limiting). So you’ll have to trust me when I say that this has been a year like no other at SAP, and one that will begin yielding results in 2010 that will make good on Schwarz’s promise that the omis of the world (or grossmutters, if we must be more formal) wouldn’t recognize the SAP of today and tomorrow.

Part of the new SAP comes from some of the cool technology and products that won’t be under-delivered in the market – in-memory databases and Explorer, the resurgent ByDesign, new GRC applications, enhancement packs, and new sustainability apps, to name a few. Also making SAP more of a force to be reckoned with is a growing understanding of its role in cloud computing (even though there was less said about this at the Summit than many inside and outside SAP would have liked – there’s that old cultural conflict again), performance management, social networking and in lowering the total cost of ownership for its customers.

This latter subject was touched on in a number of ways during the Summit, both in the keynotes as well as in breakout sessions. The omnibus version is the following, minus the background info that is controlled by an NDA: SAP has made lowering TCO a priority as a first step towards turning it into a competitive advantage – and thereby turning a year’s bad publicity about raising maintenance costs on its head.

The growing arsenal of products and services that can effectively lower TCO is growing significantly, and more is on the way. What SAP did emphasize in public is the ability to engineer relatively painless upgrades through its enhancement packs, drive more efficiency in implementation and upgrade by the broader use of SAP’s own services, and improve education and lower the total time it takes to implement an SAP system.

There are still some potential gotchas in the overall prospects of SAP, or at least places where SAP must be sure not to under-deliver. Orchestration is the big elephant in the room: in order for the SAP vision of a process-driven, hybrid on-demand/on-premise, SAP product and partner-led enterprise of the future to be realized, a robust and extremely well-architected orchestration layer has to be added to the portfolio. This will not only make sure that SAP can deliver what its customers need with regard to business processes, it will also keep a certain Big Blue wolf from blowing down the door with a similar offering that promises to relegate SAP applications to the commodity garbage heap. And for now, SAP orchestration is slideware, at least as far as a deliverable product is concerned. (Which puts SAP only slightly behind Oracle, which has deliverable product – AIA – but hardly a critical mass of users and not enough market momentum to propel this part of its strategy forward.)

Another big gotcha really revolves around timing and political will: What also isn’t said out loud in Walldorf or Palo Alto is how hard it will be to make the sweeping changes that are needed to keep SAP on an even keel in any short order. The will is definitely there: Léo, Jim Snabe, John Schwarz, and Bill McDermott, to mention a few of the board members – are definitely interested in making grandmothers throughout the world baffled when they hear of the new SAP, but that’s not enough.

SAP cannot and will not make the big, bold, dramatic revisioning that an American company might try to do: it’s just not in the DNA of the company. What SAP can and will do is make incremental change, slowly enough that it might be imperceptible, with the goal of accumulating enough change to really make a difference over time. This frustrates many in the punditsphere, and no small number of people inside SAP as well, but it’s really the only way big change will actually happen: through small, incremental steps.

So, here’s a few of those steps that augur much bigger changes (in no particular order):

A fundamental focus on the line of business: This is pretty much one of the most fundamental changes underway at SAP, and it effects everything from how products are designed to how services are delivered to how customers are engaged. Along with this focus is an understanding that the user base of SAP needs to expand exponentially in order for the company to survive and prosper. The number of initiatives and efforts underway at SAP to tackle this problem is impressive, and many of them will be unveiled during the course of 2010 and 2011. But putting out new products and services isn’t the only way this LOB focus can succeed, it needs a change in the sales organization as well.

A shift towards changing how and what the sales organization sells: One of many examples of this can be seen in the fact that Bill McDermott recently stole Sanjay Poonen from the product and marketing side to spearhead SAP sale’s continuing focus on enterprise performance management and related products. This isn’t the first time McDermott has crossed the sales/marketing dividing line for some top talent: Doug Merritt went over from the product side a little over a year ago to help out on sales too. Poonen had been helping the product and marketing side be more competitive against Oracle, particularly its Hyperion product, and was instrumental in getting SAP’s OutlookSoft acquisition into the limelight. Now he’ll be doing this on the sales side as well.

McDermott has also hired a top talent from Cisco to build an internal training program for sales, and has helped push an effort to change how customers discover the value in their SAP systems by creating an “academy” to transfer best practices into the partner and customer base.

The sum of these changes on the sales side the architecting of a new sales force that is more strategically focused on delivering value, not fulfilling quotas, and reaching the line of business user. This can’t be a slam-dunk, overnight success kind of effort. But over time, it could make a huge difference.

A shift in the partnering model in favor of Microsoft: The announcement at the Analyst Summit that Silverlight, aka the Adobe Flash-killer, will be the user interface technology for ByDesign follows quickly on a deal with Microsoft to make OutlookSoft, now called BusinessObjects Planning and Consolidation, the preferred EPM tool for the Microsoft stack. Meanwhile, the old Duet product name was actually mentioned at the Summit, a further sign that these two partners are getting closer than ever before. Azure, Microsoft’s cloud platform, may be the next stop in this growing partnership, though it’s not clear that Azure can satisfy all of SAP’s cloud ambitions. It’s not hard to speculate that there could be further aspects to this partnership, particularly with respect to significantly increasing the traditional dotted-line relationship between the NetWeaver stack and .NET.

I could go on, but this is turning into a dissertation, and not a blog post (Not to mention a tweet). Suffice to say that the reports of SAP’s stagnation are greatly exaggerated, and, indeed, what is really happening is an unprecedented renewal across multiple parts of the company. The question then becomes one of timing and ability to execute, which brings us back to where we started: SAP’s fear of following inevitable failure (as per the industry norm) with buzz and hyperbole may make it hard to see where the success has been until its impact has become almost mundane. At which point there is a genuine concern that customers, at least US customers, who are used to feasting on a diet rich in hyperbole, may become disenchanted by the reluctance of SAP to engage their taste for the next new thing.

My sense is that 2010 may be the year in which SAP whets the market’s appetite for buzz as it emerges from its info-cocoon and starts to boast a little more about what it was up to in 2009. It won’t be easy to pull all this change into a simple, easy to tweet, set of concepts that don’t take an hour (or the case of this post, more than 2000 words). But if SAP can go public with a coherent message around change, it could have an enormous impact on proving Schwarz’s contention. And, regardless of what everyone’s omi thinks, changing SAP as dramatically as Apotheker, Schwarz, and others would like will be a good thing for everyone. Even Oracle and IBM. But that’s another post altogether.

Focus on Analytics and BI: Understanding The Interplay Between SAP, Microsoft, SAS, IBM, and Oracle

There’s no more an important and convoluted marketplace than business intelligence and analytics, a hodge-podge of tools, solutions, applications, technology, and other “stuff” that often defies analyst taxonomies and baffles customers.

This places an additional burden on trying to sort through the recent coverage about the SAS Institute duking it out with IBM, a recent deal between SAP and Microsoft in the enterprise performance management space, and what all this means for customers and competitors in this crowded, confusing marketplace.

What isn’t confusing is the recognition that a new era of analysis is dawning on the enterprise, one in which the proliferation of data and data types (relational, non-structured, image, etc.), data sources (inter-enterprise, intra-enterprise, consumers, smart devices, etc.), and users (everyone with a brain and a task or goal) is making it painfully obvious that the old problem of turning data into information has become orders of magnitude more difficult even as it is becoming similarly more essential.

Into the widening breach between data and action have ridden more companies than you probably would ever want to consider in an RFP: in addition to the big names above, my friends at IDC name another 45 companies that pull in 80 percent of the revenues for analytics alone. The 50^th company is that ubiquitous “other”, commanding 20 percent of the market and a very respectable 7.8 percent compound growth rate from 2006-2008.

And that’s just the analytics side of the business. Borrowing IDC’s taxonomy, this BI/analytics market space actually encompasses almost a dozen distinct and not-so-distinct categories: financial performance management, supply chain analytics, CRM analytics, production planning, services operations, and workforce analytics on the applications side. Then there are the BI tools (three sub-categories) and of course the business warehouse side (with two sub-categories, all stained with gallons of red ink).

In short, what IDC calls Business Analytics looks at everything from end-user tools to finished, packaged applications to underlying ETL and database technology. It’s a pretty messy market: for the most part this tortured analytical framework is the result of a market taxonomy that is more about what vendors have to sell customers than what customers need to get the job done.

What the customer – as in end-user/business analyst – wants is more and more found in the performance management sector of the market, and therein lies perhaps the most exciting market competition in enterprise software (actually, the database side is pretty exciting too, but in the interest of focus, we’ll leave that aside for now.) And this is where the significance of the recent SAP and Microsoft deal comes into play.

Microsoft has been great at the tools side of its business, and SQL Server is getting kudos across the industry for its scalability, embedded analytics, and generally excellent design. Sharepoint is also surging as a platform for analytics and collaboration. But Microsoft has lagged in its ability to create the high-end performance management apps – planning, consolidation, budgeting, etc. – that require a deep understanding of the inner workings of a business.

(In all fairness, there’s a decent amount of business process knowledge in Microsoft’s Dynamics applications business, but it’s hampered by three problems: a Microsoft policy that refuses to favor Dynamics over other partners in key parts of the business, a lack of understanding among members of the Microsoft BI team that they could and should tap Dynamics’ expertise despite the ban on favoring Dynamics, and the fact that much of this business process knowledge comes from the partner community, and is not part of the core of the Dynamics offering.)

That business process knowledge is something that SAP has been first cultivating, then acquiring, during the years that Microsoft has been building is technology platform. In fact, the recent deal between the two centers around a former Microsoft partner, OutlookSoft, that SAP acquired in 2007 in order to compete with Oracle’s acquisition of Hyperion earlier that year. Which adds some color to the reasoning behind why Microsoft likes this particular part of the SAP portfolio: it’s built on the Microsoft stack, and therefore pulls a decent amount of Microsoft technology into the enterprise, at the expense of a common enemy of SAP and Microsoft: Oracle.

This performance management deal is further evidence of a widening partnership between Redmond and Waldorf (and Palo Alto) that is refining the demarcation lines in the overall market. SAP and Microsoft have a growing list of common enemies, and a growing set of reasons to find common ground in the applications space. SAS is one of those enemies, and to judge by the coverage SAS is getting in what’s left of the mainstream press, one would think SAS is the company to beat in the market. But is it?

BusinessWeek most recently anointed SAS as a major contender against IBM, and by extension SAP and Oracle, claiming that SAS’s positive license revenue growth was in contrast to SAP and Oracle’s negatives. But comparing SAS’ revenues to Oracle and SAP’s overall revenues is like comparing apples to a fruit salad: both SAP and Oracle have much broader software portfolios than SAS, and in fact the majority of both companies’ revenues are not in the same competitive arena as SAS at all.

If you look specifically at the business analytics market, where SAP, Oracle, and SAS compete, SAP and Oracle outpaced SAS’s growth in the 2006-2008 timeframe that IDC’s most recent report covers. As did IBM. And Microsoft. Of course, SAP and IBM had recent mega-acquisitions, which the silver-tongued CEO of SAS, James Goodnight, poo-pooed in his BusinessWeek 1500 words of fame. Despite Goodnight’s dismissal of these acquisitions, the fact is that BOBJ and Cognos didn’t actually compete directly with SAS, and the IDC numbers for 2006-2008, which include BOBJ in SAP’s 2008 data, show that SAP, and possibly Oracle, was outpacing SAS’s revenue growth without having to depend on acquisitions to do so.

Meanwhile, just to make sure SAS keeps its eyes open, IBM bought traditional rival SPSS last summer, and is hiring business consultants and domain experts to fill out its bench and go directly after SAS’s tool+consultant business model.  It’s not easy being SAS these days.

But, to close the loop here, what SAS has to offer is important to the market, and its birthright as the consummate data analysts’ tool is unparalleled. (I was both a SAS and an SPSS programmer back 20+ years ago when my business card said “statistical programmer”, and SAS was the consummate data analysis toolset.) What SAS can offer the analyst who knows what he or she needs to analyze is pretty much top drawer in the analytics market. As long as you know what you need to know about your data, SAS can help.

This capability, however, turns out to be more of a liability than an asset as the proliferation of data and users of data grows across the enterprise. The problem is that SAS, like most of the BI/analytics firms that its rivals have acquired, is hampered by the fact that the bulk of SAS’ business process knowledge is not embedded in the software itself: in the SAS market, business process knowledge is most often baked in by SAS’ army of consultants, who adapt its more standard tools to the requirements of the individual company. This and their licensing structure makes the resulting solution relatively expensive to own and maintain, especially when considering more packaged solutions.

This is why IBM+Cognos and SAP+BOBJ were powerful combinations: two companies with deep business process knowledge (IBM’s via its Global Services arm, SAP via its Business Suite). And this is why Goodnight is wrong about the impact of these acquisitions. And it is also why Microsoft is turning to SAP to provide the business-aware solution for enterprise performance management that Microsoft failed to provide in its now defunct PerformancePoint product.

In an era when a one terabyte hard drive costs less than $100, the issue of the proliferation of data, data types, and data analysts is only going to be more profound. The moves of the likes of IBM, Oracle, SAP, Microsoft, and SAS are sometimes obscured by the confusing terminology the surrounds the different components of the solutions to this issue.

But, whether obscured by nomenclature or not, the essence of all these recent activities is the same: the biggest battleground in the enterprise is shaping up to be about converting a growing mountain of data into information, and there is a common realization that this requires better proscriptive solutions, a la the SAP/Microsoft deal, that are pre-packaged and relatively easy to consume. How each of these vendors responds to this challenge will determine who wins and who loses the most important battle for customer mindshare and walletshare in recent memory.



Why Windows Azure is the Future of Microsoft (and Enterprise Software as Well)

One of the advantages of a being a relatively ancient industry analyst is the ability to look back on over 25 years of innovation and spot the real paradigm shifts amidst the updates, revisions, and otherwise mundane changes that attempt, but never deliver, something radically new

Basking in the nerdacopia that is Microsoft’s Professional Developers Conference this week, which has marked Windows Azure’s coming out party, it’s clear that Azure is one of those shifts, on a par with just about anything Microsoft has done in my decades of covering the gang from Redmond, particularly with respect to enterprise software. The trick will be in getting the rest of the world to understand, and, true to the Microsoft model, prove Microsoft right by building the apps the justify, and thereby define, Azure’s ascendancy.

The only Microsoft products that I believe are comparable in their enterprise impact are SQL Server, which Microsoft didn’t even develop but licensed from Sybase in the mid-1980s, and then spent a decade or two trying to scale up to enterprise class functionality; and the way-too-prescient multimedia PC, which Microsoft co-created in 1990 without any concept of its “killer app” (the original demo showed a children’s video game, as-if), and then went on to glorious realization once the World Wide Web arrived to justify the by-then dead standard. (Okay, there may be other big products, but we’re digressing.)

Why Azure is so important boils down to two compelling needs in the enterprise software market: the need for an enterprise-class cloud to host a growing number of net-new enterprise applications emerging in the market, and the need for a means to leverage the existing Microsoft skill sets in the enterprise (and ISV community) towards the combined goals of lowering total cost of ownership and making cloud, and particularly hybrid cloud/on-premise computing, safe and reliable for the enterprise.

We’re beginning to see inklings of these net new applications running on Azure: some of them were shown last week to industry analysts at the Dynamics Analyst Summit in sunny Redmond (for a few brief hours, anyway).  The basic takeaway from the Summit was that the Dynamics gang understand that Azure isn’t just a place to host existing Dynamics functionality (and definitely not the place to run AX in the cloud: one can rent Dynamics AX in a hosted model from a Microsoft partner, but it won’t be running on Azure), but a platform for a new class of enterprise application that can be simultaneously on demand and on premise, and deliver net-new functionality that can’t be readily delivered in an pure on-premise mode. It’s a good start.

But there’s going to more to cloud computing than deployment choice, or even hybrid on-prem/on-demand apps. As I’ve been writing a little obsessively, the cloud, particularly the Azure cloud, will reach its apogee as a platform for next-generation, on-demand applications that deliver functionality to the enterprise that can’t be delivered for love nor money on premise. This new generation of application aggregates data, process, and services in the cloud, and in doing so for its many stakeholders, becomes a self-improving, self-appreciating asset that grows in value the more data, processes, services, and stakeholders it accumulates.

This happens in two ways. The first is that the aggregation of data, services, processes, and stakeholders in the cloud lowers the cost of the transactions it supports as it simultaneously increases their potential value. For example, a supply chain in the cloud is cheaper to manage the more its stakeholders are using the same transaction platform, even as the accumulation of stakeholders makes it possible for participants to achieve economies of scale that also improve performance and functionality across the supply chain. That’s already possible, and already in place, albeit in a few lonely examples.

The second, perhaps even greater value, is that the data the accumulates in the cloud becomes more and more valuable as it grows in quantity and quality. That supply chain in the cloud begins to accumulate a tremendous amount of data about the behavior of the stakeholders, data that can begin to drive predictive models about how the supply chain functions. Those models can be used to improve performance, lower rates, create new service offerings, and otherwise make the cloud a crucible for process improvement, best practices, and new functionality that wouldn’t be possible without the aggregating effects of the cloud. A supply chain in the cloud would thus also be able to use statistical modeling to predict the behavior of the stakeholders, and in doing more carefully define the risk profile of the supply chain, its stakeholders, and, even, an individual order. Those risk profiles would have a genuine monetary value: if you could prove that your supply chain cloud raised your perfect order rate, you can take those data to the bank and get a lower loan rate, and then take the data to your insurer and get a better insurance rate too. Repeat ad infinitum across the entire supply chain.

That’s only one example in a single industry: I think the analysis of the behavioral data in these commerce cloud sites would have a significantly greater – and more genuine – value then all that click-stream analysis that Google (and many others) now performs. The difference lies in the direct correlation of this cloud behavior to specific commercial transactions, as opposed to the much more flaky notion that “page-views” equal actual views, which is the basis of so much of the analysis of consumer activity that is driving the over-evaluation of Google today.

Back to Azure: as a platform for enabling this kind of application, and its ensuing value-add, Microsoft has several distinct advantages. One is an understanding of enterprise-class computing. The Azure gang gets that security, reliability, high-availability, and all those other things that are important to IT are built into Azure. Remember, unlike Amazon and Google, Microsoft lives in the IT department, products like SQL Server power some of the world’s largest databases, and this experience infuses Azure with a sense of enterprise purpose that the consumer cloud providers simply can’t find when they sequence their relatively short DNA strands.

The other advantage for Azure comes from Visual Studio, and every other dev tool and service that falls under the somewhat ubiquitously confusing moniker of .NET. I sat in several rooms this week at PDC and watched that geekiest of geek crowds absorb the relative simplicity of converting their existing skillsets to Azure. To say Azure is a couple of clicks away from most of the several million .NET apps developers is only the slightest of exaggerations: while they all won’t be able to build the kind of app I’ve outlined above, assembling a team of developers to build a next-gen Azure app will be trivial compared to, say, assembling a crack team of Apex developers to build something comparable on Force.com. And when you add the growing library of existing Microsoft services available on Azure – such as SQL Server, as well as Dynamics xRM, and many more on the way – you’ve got the cloud platform Marc Benioff thought he could dreamforce into existence (and couldn’t, and won’t.)

One other thing standing in the way of using the cloud to drive value-added data modeling services is the terms of use that need to be put into practice for these next-gen applications. The app provider – bolstered by the cloud platform provider – would need to set down a TOU that would allow cloud data to be used in the way I’ve described, or the concept gets backfilled quickly. Setting up the TOU would be relatively easy, though it will definitely be tricky in some industries and geographies where privacy laws and regulations are relatively restrictive. The point is that this value-added data modeling capability needs to be built in to the app’s, and cloud’s TOU, not glommed on as an afterthought, and the case for providing value to the entire stakeholder community needs to be well-established.

So, a few thousand words into this post, let me return to the initial premise. Microsoft is sitting on top of the next generation application platform the one that, like the PC, before it, will define not just the future of Microsoft but the future of enterprise software as we know it –and can only envision it – for some time to come. This won’t be 1985 all over again, when the debut of Windows presaged an unparalleled, and so far unbeatable, monopoly on the desktop. Others can, and will, figure how to do an enterprise cloud a la Azure. But when you put it all together – enterprise-class cloud, value-added services, millions of developers – it’s a pretty impressive, and hard-to-beat combination. Now it’s up to the ISV and developer community to make those killer apps real, and prove Microsoft right. The future of enterprise software hasn’t looked this interesting in a long long time.

Let MySQL Go: Oracle, Open Source, and the EU

The news that the European Commission thinks Oracle should jettison MySQL as part of its deal to acquire Sun is a typical case of bad analysis yielding potentially good results. I have to agree with Oracle’s contention that MySQL + Oracle DBMS does not constitute an unfairly competitive combination, and the EU’s perception to the contrary proves Oracle’s point Brussels doesn’t understand Open Source, or the database market, for that matter.

I also have to agree with the EU that selling MySQL would be a good resolution to the problem, but I also feel that letting Oracle hang on to MySQL would have pretty much the effect that the EU is looking for, albeit not exactly in the manner the EU would have liked.

Here’s how I see it. If Oracle hangs on to MySQL, which has carved out a niche in the new world of Web-based businesses, two things will happen. Oracle will work day and night to convert those MySQL customers to a cloud-based Oracle DBMS environment, and basically try to pick off as many MySQL customers as possible. Meanwhile, Oracle will be happy to collect service and support fees from those customers that remain in the MySQL camp.

Over the long run, this will produce the same effect as Oracle’s acquisition of the old Rdb database from Digital Equipment Corp., or IBM’s acquisition of Informix: dead, gone, and forgotten, with no impact on the top vendors’ market share.

But, don’t forget, this doesn’t actually mean that MySQL has to die: it’s an open source database, which means there are no end of suckers – oops, I mean dedicated database experts – willing to work for free to better a product that drives a significant, VC-funded or publicly-traded company-based service and maintenance business. There will always be open sourcers willing to help make for-profit companies successful, and MySQL, even if it is totally neglected by Oracle, will likely still progress through a reasonable innovation cycle.

Even if Oracle could manage to kill MySQL, there’s plenty of other open source DBMSes to take its place. Ingres and PostgreSQL, among many others. So, open source will continue to thrive, the for-profit service and support vendors for open source will continue to make suckers – I mean heroes – out of the free labor they derive from the open source movement, and not much will change, except the names of the contenders for top open source database.

Just to fill out my thoughts, I also think that Oracle could and probably should jettison MySQL if that’s the only way to get the EU to play ball. Jettisoning the database doesn’t mean jettisoning a service and support business for MySQL (a la Red Hat), which is anyway where the money is in this open source “business”. And, while providing high levels of support and service to MySQL customers, Oracle could pursue its merry conversion business unimpeded by regulators or the messiness of corralling open sourcers to do high-value, enterprise-class work.

So, successful if they do, successful if they don’t, the current flap with the EU is just that, a flap. Oracle can and will prevail in its efforts to buy Sun, and, whether MySQL comes with it or not, Oracle can and will start the process of moving MySQL customers to a cloud-based DBMS world. It’s not a matter of if, just when.

 

PS: to all of you open source database developers offended by this column, please bear in mind I have your best interests in mind. Stop working for free to make VCs and shareholders rich, your work deserves honest remuneration, not exploitation.

 

 

 

Oracle the Partner-Friendly Partner, Round Two: E2Open, Oracle, and Transportation Management

One of the largely unheralded changes at Oracle this year has been its sudden willingness to partner at a strategic level with other enterprise software companies. This departure from previous strategy has been noted here before, as has its implications for the enterprise software community. (Great if you’re an ISV looking for a strong partner with long reach and a huge sales force, bad if you’re an Oracle competitor trying to build your own partner community.)

The latest announcement from the newly partner-friendly Oracle comes in the form of a joint agreement between Oracle and E2Open, one of the poster-children of the nascent SaaS 2.0 movement. The specifics of the deal are simple – Oracle Transportation Management is now strategically connected to E2Open’s ELN supply chain hub-in-the-cloud, making it possible to use the massive connectivity and aggregation of data in ELN to power OTM.

Networks like ELN – really latter-day net markets – have an enormous value to tools like OTM by providing data and process connectivity to a worldwide supply chain network that grows more valuable to its stakeholders the more that stakeholders in a supply network sign on to the network. I’ve been a fan of this model of SaaS company for a while, as the self-improving, self-appreciating aspects of E2Open’s ELN provide a significant value-add that cannot be brought to bear just by flipping on-premise functionality into the cloud a la Salesforce.com

What is perhaps more significant than the new functionality unleashed by this agreement is what the agreement itself means to the industry. Oracle’s avid interest in cultivating strategic partnerships has become a virtue that gives the company some new credentials beyond its highly successful M&A chops (though, I have to question the pending Sun deal – this one may break the mold yet.) Those new partnership credentials have yet to morph into a full-blown ecosystem strategy, which may mean a reprieve for SAP, which has made its ecosystem a calling card in the enterprise software market for the last few years.

But whether there is a formal program or not, the softening up of Oracle’s former strategy – as characterized by Charles Philips’ comment three years ago that “if we like a company and they demonstrate success in our market, we’ll buy them” – is a major move in a market that needs to track and understand every move by top tier players like Oracle and SAP.

The bottom line analysis is that this is a smart, pragmatic move on Oracle’s part that also puts the pressure on SAP to put up or shut up in the partnership/ecosystem category. The idea that an arms race might now be on in the enterprise software market for the best partner ecosystem should be somewhat heartening to the myriad companies looking for a big brother or sister to walk them into the CEO’s office. The cautionary side to this is that a stepped up partnership strategy may signal a slow-down in Oracle’s acquisition strategy, something that every privately-held ISV would hate to see happen in a market that hasn’t had a decent run of enterprise software IPOs since forever. But, a strong partner is certainly better than going it alone, and as such the new Oracle may engender the same interest in the software community as SAP did when it acquired Versa and launched its own ecosystem/IPO-alternative market.

It will be interesting to see what level of exclusivity Oracle requires of its partners in order to play in the Oracle partner sandbox. E2Open already has a number of SAP and Oracle customers, and is a “Powered by NetWeaver” SAP partner as well. That could signal a certain willingness to waive the usual exclusivity requirements, though E2Open is a relatively big and established company. Things may be tighter for the smaller ISVs that both SAP and Oracle are courting.

Whatever the details, the overall strategy is good for the industry, and good for customers looking for choice, built-in integration, and a set of vendors that come to the table already playing well together. The trick will be to keep things that way, and avoid the puppy farm partner mentality that places a greater value on quantity than quality. So far it looks like Oracle is getting it right.

Year Two in the Reign of SAP’s Léo Apotheker: Predictions and Proscriptions

In the aftermath of a relatively decent Q3, all things considered, that nonetheless earned SAP the wrath of the stock market, it’s important to take a look at what SAP, its customers, and its competitors have to look forward to as CEO Léo Apotheker rounds the end of his first full year at the helm.

And it’s far from the dismal outlook that a number of analysts, and the equity markets, are ascribing to SAP. Indeed, at a moment when many are questioning SAP’s continued viability as the only pure-play enterprise software giant left standing, there’s actually a lot to be said for letting SAP be SAP in a market full of hardware vendors, PC software vendors, and service providers that also happen to dabble in enterprise software.

Importantly, I see 2010 as a major battleground year not just for SAP but for SAP’s now unique business model as well. And, far from counting SAP out, I count them very much in for a fight they have a strong chance of winning.

Let’s start with the competitive landscape. I think there’s been a major defocusing of Oracle’s enterprise software energy in the wake of the Sun-to-be acquisition. Count the time devoted to applications in Larry Ellison’s Open World keynote versus his hardware time. Factor in the appearance of Marc Benioff at Open World, apparently approved at the highest levels, which could only send a signal to Oracle’s apps team that there are other agendas more important than maintaining a consistent competitive position in the CRM market. And then look at how much revenue applications are making at Oracle relative to the database side of the business. Oracle is many many things today, and in some ways that’s becoming a problem at Oracle. And an opportunity for SAP.

While there is something to be said about having a complete, turnkey hardware, database, and applications offering for the beleaguered CIO, it’s not clear to me that complex enterprise applications can be sold that way. Or, I should rather say, those apps that can be sold that way should really be sold on-demand, at which point Oracle/Sun begins to make much less sense than many thought. And a distraction from pushing its forthcoming Fusion Applications into this on-demand opportunity.

The other problem with Oracle/Sun is that IBM is now the new foil for Larry’s marketing machine. I admit I’m perplexed by this, I had thought that Java would bring the two closer together. Maybe Larry thinks that Java makes Oracle so important to IBM that it will forgive the fact that Oracle is now offering a $10 million bounty to anyone who can beat Oracle’s new Exadata TPC benchmark running IBM hardware and software. Most importantly, I think Larry has actually taken a swipe at a major ally and in the process may have given SAP some important cover.

The identity problems at Oracle belie the serious, sound work that the Oracle apps group has done with both Applications Unlimited – the core apps – as well as Fusion. These groups are executing well, and doing so in a serious and competitive way. The only problem is that the rest of the company isn’t necessarily on board, putting the full weight of Oracle behind its enterprise apps. And this gives SAP some hope that they can successfully fight Oracle in 2010 by eschewing the confusion of vertical integration for the focus of an applications-only strategy.

Speaking of conflicted competitors, Microsoft’s continues its focus on its Azure cloud infrastructure, which is becoming the nexus of some very original thinking and some exciting market leadership that can and will make a difference in the enterprise software space. It’s hard to say the same thing about Microsoft’s Dynamics, which has been struggling with its innovation strategy and market position for the last two years.

The recent announcement that Microsoft was buying the IP assets of some of its partners pointed out a major strategic weakness in the company: key go-to-market innovation tends to come more from partners than from inside Microsoft, and, with a partner ecosystem that is largely made up of small and geographically isolated ISVs and VARS, Microsoft is going to have trouble playing innovation brinkmanship with SAP’s largely internal development efforts (aided by the Business Objects acquisition, which is making more and more sense as the months go by) and Oracle’s M&A plus internal innovations. And the expected re-entry to the market of SAP’s Business ByDesign in the next year will make Microsoft’s competitive position all the more difficult to maintain.

Then there’s IBM. With Oracle now on its case, IBM’s position as an SAP spoiler is less certain than it was earlier this year. The spoiler position is still there: The Rational team is playing for some serious stakes in the SAP market by promoting its software management tools as a means to not only manage complex SAP engagements(good for SAP) but also disengage SAP customers from SAP’s vision of business process excellence in favor of IBM’s primacy in that regard (much less good). The Rational group is being very careful to talk the partnership talk, but underneath the hood there’s a very serious threat that IBM, via Global Services, will own the business process layer that sits on top of SAP (and the rest of the enterprise software market). This, of course, wouldn’t be exactly the best for SAP, or any other enterprise software vendor (et tu, Oracle). But if Oracle huffs and puffs at IBM’s front door loud enough, IBM may find itself more willing to support SAP than ever before.

So, competition-wise, I think SAP is in better shape than many believe it to be. Bear in mind that, in parts of the market, this is not a zero sum game for SAP and its major competitors. This is especially true in the mid-market, where “other” still dominates. Nonetheless, I think SAP should really emphasize its position as the last pure-play major enterprise software vendor left, and play for the zero sum game that everyone else does: applications-only is an asset in terms of focus and purpose, not a liability, and should be played as such.

Behind this pure-play enterprise apps position must come a stronger emphasis on innovation than ever before. Stronger is the word, because, no matter how much SAP seems to push the innovation marketing button, it gets characterized as a big, back-office behemoth. This despite such innovations as in-memory database (wonderfully showcased as part of the Explore BI tool) and Business ByDesign (which everyone forgets is actually an amazing piece of innovation in terms of user experience, model-based design, and deployment options), the promise of some interesting on-demand offerings from John Wookey’s team, and more than a few other things being cooked up that hopefully will see the light of day in 2010.

SAP in year two of the Reign of Léo needs to be recognized for the innovator that it genuinely is – and that means getting these innovations out in front of the company and its messaging as much as possible.

Also needed in year two is a new emphasis on partnering. SAP recently published the first few chapters of set of much-needed, and well-articulated, guidelines for ISV partners that, when finished, will spell out in black and white the steps an ISV needs to take in order to become a full-fledged partner. One important chapter that hopefully will be written soon is the one that spells out SAP’s commitment to making the partnering process efficient and effective for small and large ISV partners alike. SAP is in danger of losing its ecosystem edge to Oracle, which has recently discovered the value of an active ecosystem strategy. Putting its process and commitments in writing will help make SAP’s ecosystem fill in the white space between SAP’s own apps and thereby better meet the needs of its customers.

The next year also has to be the year in which SAP gets the TCO bandwagon going again. The work SAP started this year with SUGEN was groundbreaking, but the rest of the TCO edifice needs to be completed as well. Making 2010 the year of TCO will help SAP in innumerable ways, including diffusing the market’s, and some critic’s, single-mindedness over maintenance as well as forcing a more comprehensive discussion about TCO – and maintenance – across competitive boundaries, as opposed to just within the SAP community.

Finally, there’s a few neglected parts of SAP’s business that need a little more love. CRM is one of them. This is a battleground area of the market that SAP needs to put out in front of the market much more concisely. CRM is a funny business, as much characterized by its marketing as it is by its functionality. On the functionality side, SAP does well, but on the marketing side, there’s a relative lack of passion and, frankly, guerrilla tactics, that handicap SAP CRM’s efforts against Salesforce.com and Microsoft CRM.

Another area for a little more love in 2010 is governance, risk, and compliance. This is a complicated problem: It’s hard to sell a big GRC vision today, mostly for lack of a unified budget item, and buyer, that can be targeted by the typical, elephant-hunting  direct sales force. Rather, SAP needs to look at GRC as a collection of solutions, targeted and sold specifically to line of business owners, that can be assembled into a larger vision if and when the enterprise is ready. There’s a lot of market leadership for SAP to lose in this space, notwithstanding a wide range of interesting opportunities.

Finally, there’s the casual user. I’ve spent a lot of time talking about the growing importance of this group as both a consumer of enterprise software and a decision-maker when it comes to deploying one vendor’s solution versus another’s. SAP gets the challenge of the business user at the executive level  – these users are as hard to please as they are valuable to the vendor that does so – but getting it right now needs to be put into practice up and down the company, from marketing to the field. The awareness is there, but the execution remains to be seen.

All in all Apotheker’s second year will start with no shortage of challenges, and in many ways may look like a thankless task. Balancing the needs of shareholders, customers, and partners has never involved so many potential conflicts, conflicts that can be resolved, though not necessarily on the timetable of any individual constituent. Successfully threading that needle and arriving at a market position that works for all three groups is what every vendor in the industry needs to focus on in 2010. SAP may have a better chance than any of the top vendors to succeed at this challenge. The rest, as always, boils down to execution. It’s going to be an interesting year.

Required Reading for the SAP Crowd: The SAP Green Book is Here

I don’t read a lot of business books, in fact, I read very very few. But this weekend I took some time off from my usual work-avoidance mode to start reading a new book that showed up in my office last week. By the end of the first chapter I knew this was one book I need to be recommending far and wide.

The book is called “The SAP Green Book”, and its author is Michael Doane, who is well known in SAP circles as the author of the equally well-received “The SAP Blue Book.” Michael has been following the SAP implementation lifecyle as an analyst and consultant forever, and his knowledge of what happens when companies try to implement SAP is unparalleled. Michael is the guy I go to when I need some sage advice, and that about sums up the value of the book: sage advice on what to expect when implementation is done and it’s time to get to work using a new  SAP system. Or, as Michael puts it in his preface: “…the Blue Book addresses an SAP wedding and this book addresses the SAP marriage.”

One of the reasons this book is important is that it addresses a key issue that has been on my front burner for a long time: the care and feeding of the end user in an SAP implementation. Michael devotes a whole chapter to this subject, but it’s Topic A for much of the book. This issue of meeting the needs of end users isn’t just a good idea, it’s the only way to guarantee that an SAP investment achieves its true value. Implementation and go-live failure is almost never about software, but it’s almost always about a failure to take into account the needs of the growing number of end users who must use SAP software everyday.

While SAP customers and partners are the main audience, I think there’s a lot of reasons for SAP itself to make “The Green Book” required reading. If SAP really wants to continue to grow and remain competitive, and it definitely does, the issues raised in this book need to be understood and addressable by everyone at SAP, from the field to the executive suite. There may be debates about whether Michael’s proscriptions are the right ones, but I don’t think his analysis of why SAP marriages often fail can be disputed.

Two more points: this is a plug for a book that quotes me on its cover, so you can imagine that I might be inclined to like it. But that’s why I approved the quote — Michael speaks the truth. For my trouble I have been given me two free copies, which is the extent of the baksheesh I’m getting for writing this post. I’m also counting on some more advice down the road as well

Final point that just adds to Michael’s cachet, IMO. One of Michael’s cronies from ages ago was the creator and producer of the series X Files, and as a result Michael became the model for the most sinister — and therefore coolest — character in the series, the Cigarette Smoking Man. For those of us who know Michael, the resemblance with CSM is uncanny. ‘Nuff said.

Siemens Renews Maintenance Contract with SAP. Now For the Real Issue

As expected, Siemens renewed its maintenance contract with SAP, ending rampant speculation that the German industrial giant and one of SAP’s largest customers was going the third party maintenance route.

But if you’re SAP, or any enterprise software company, this is merely a temporary lull in a battle that will inevitably change the enterprise software market and the issue of maintenance and support with it.

The larger battle still to be engaged is about the overall issue of total cost of ownership, of which maintenance costs are one of many components. SAP’s ability to keep Siemens on board its maintenance regime doesn’t absolve SAP of the obligation to better define, and deliver, a lower TCO model to Siemens and every other customer. Working on this TCO issue will, in the long run, make it clear that maintenance costs – in fact, the overall issue of the size of the check paid to vendors for every deal – are just one part of defining the value, and cost, of the vendor/customer relationship.

Looking at TCO instead of just cost is important for many reasons, one of which is that many of the proponents of drastically lowering third party maintenance, and an overall re-architecting of the vendor/customer relationship, take the perspective that enterprise software is another item for the procurement department to obtain at the lowest cost possible. This “lowest bidder” approach is admired by bean-counters everywhere, even though lowest cost doesn’t always translate to best value, or optimal total cost of ownership either. We’ve seen this in government procurement, and in our own consumer experiences as well: just because you get the best price doesn’t mean you get the best product or service. This rule works in enterprise software as well.

While I don’t disagree that many many customers have paid too much for their enterprise software, the fact that bad deals abound doesn’t mean that blowing up the model in favor of a lowest bidder approach is the solution. I happen to think there’s a better way.

In fact, and here is where I start to part company with some of my colleagues in the analyst community, the problem with the third party maintenance problem is that it tends to look at the software acquisition and consumption process as a series of discrete financial events, each one of which has an intrinsic value that is a) knowable at the time of procurement, and b) subject to the kinds of economic analysis that procurement people tend to use to describe the relative value of two different possible choices.

I maintain that enterprise software isn’t this simple – and that the reason a company like Siemens decided to renew its maintenance contract with SAP is that there is more to the Siemens/SAP relationship than the simple dollars and euros equations that allow many in our industry to call into question the value of maintenance, software licenses, and services.

What more is there? That’s where a more complex discussion about TCO comes into play, and that’s where SAP and its competitors have fallen short in the market.

Importantly, when a company signs on with an SAP or Oracle, they do so with multiple goals in mind, only one of which may be “lowest cost”. Indeed, that goal may be foremost in the CIO or CFO’s mind, but for many line of business users, lowest cost is irrelevant to getting the job done. Discussing issues like maintenance costs feed into the needs of the buyer, for whom lowest cost is the goal, but that discussion has little or no relevance to the line of business user, who is looking at his or her P&L and wondering how the hell they’re going to get the job done, software costs be damned.

The problem with the TCO of enterprise software from an issue standpoint is that it has many components, only some of which are subject to the kind of quantitative analysis that can be applied to maintenance costs. TCO includes business value, particularly for the LOB, a class of user long-neglected in these discussions. It includes competitive value, insofar as well-designed enterprise software can be an important component in the competitive position of a company. It includes long-term cost analysis – what is the cost of upgrades, what is the cost of new innovations, the cost of changing IT to meet future business needs – that add some complexity to a pure, procurement-centered, cost-equation.

TCO also has to take into consideration what I call IT-IQ: how savvy is the consuming company in understanding its business processes and their realization in enterprise software. For the company with a low IT-IQ, paying a lot for a lot of maintenance may be the only way to consume the software. For the higher-IQ company, there may be some mutual value in discounting maintenance costs for this class of user.

It is some version of this analysis that surely went through the minds of Siemens, aided no doubt by high-level assurances from SAP that the TCO of the overall relationship between the two companies would be worth the cost. What SAP needs to do next is expand those assurances to the market as a whole, and do so in a way that adds essential nuance and color to an issue that has been over-simplified by the maintenance cost discussion. I think in the end some maintenance costs may have to go down, but I can’t see any vendor doing so until the full TCO issue is understood, analyzed, and presented to the market.

At which point we’ll stop talking about the horrors of an industry-wide average 22 percent maintenance cost and start the real discussion about the relative TCO between the different vendors. And may the company with the best TCO win.

Oracle’s Fusion Applications Are Ready. And So Is the Go-to-Market Strategy. Now The Fun Can Begin

The lid is finally off on a 12 month-old NDA for Fusion Applications, and in this case the long delay between when analysts were first shown Fusion Apps in the fall of 2008 and when we were given free hand to describe what we’ve seen now looks like a impressively smart move.

What was smart was that, while the apps looked pretty snazzy a year ago, the go-to-market strategy wasn’t as zippy. In fact, it really didn’t exist at all. Now, in anticipation of a 2010 release date (new revenue recognition rules at Oracle have clamped down on any specifics, but you can be sure that the Fusion team would be less vague if the lawyers would let them) Oracle’s Fusion team not only showed off a well-designed set of applications: they’ve got a pretty well-designed GTM strategy as well.

The basics are this: Fusion Apps can be consumed as a suite or as individual components, on-demand or on-premise. This means that existing Oracle customers – the target market, at least at the initial roll-out – won’t have to look at Fusion Apps and start planning a rip-and-replace of their eBusiness Suite/PeopleSoft/JDE/Siebel applications. Instead, they can look at the different modules of Fusion and decide that, for instance, Fusion Talent Management is the tool that will clean the competition’s clock. The customer then buys FTM (upgrading to Fusion Apps is free only for the components that fit the “like for like” free exchange that Oracle is offering its customers) and automagically hooks it up to their existing application. On-premise, on-demand, whatever. It’s up to the customer.

The automagic part of this is, of course, based on Oracle’s Application Integration Architecture, which is more and more becoming the linchpin of the company’s ultimate choice strategy. AIA, once it is fully decked out with process integration scenarios that cover the main pieces of Fusion and the Applications Unlimited suites and standalone packages, becomes the interstate highway system of the Oracle customer base. That automagic, of course, isn’t exactly as simple as anyone would like, nor is the uptake of AIA exactly reaching the stratosphere in the Oracle market today. But the roadmap to best-of-suite nirvana has at least been carefully drawn, and that big orange highway connecting all the points is called AIA.

This AIA strategy, of course, works for the SAP customers that Oracle wants to lure to its existing products and, eventually, to Fusion as well. As a testimony to the SAP-lust that inspires so much of Oracle’s marketing efforts, their erstwhile German-American rival was mentioned in Larry’s keynote and the ensuing Fusion Apps demos at least six times that I could count. Only IBM was mentioned more (in the competitive category, anyway. Larry said Sun so many times the folks in row one were getting a tan). The idea that an SAP customer could consume Talent Management, or Fusion CRM On Demand, in a Trojan-horse strategy, is one that Oracle is already executing with its existing apps, and will be executing for Fusion Apps as the products and GTM strategy mature.

Which brings us to the question weighing on SAP’s minds as the reality of Fusion Apps begins to head to the market next year: how much will Fusion Apps cramp the expected re-launch of Business ByDesign, which SAP has been carefully nurturing back to life after a false start two years ago? The answer is complicated, and full of unknowns, but here’s a try. The main reason for the comparison isn’t about market focus — Fusion Apps won’t specifically target the mid-market that ByD is focused on – but about the fact that Fusion Apps and ByD represent each company’s first foray into fully functional on-demand ERP. My opinion is that this distinction, particularly by later in 2010 when one could envision a head-to-head competition between the two might actually take place, will be the least important issue on the table. The companies that will consider on-demand will quickly move past that check-list item to the more important issues of feature/functionality, cost, and consumability that will drive the ultimate buying decision. And, at that point, may the product with the right fit for the job win.

There may be an advantage in the compartmentalization strategy of Oracle, which will make it easy to sell to an installed base in the large enterprise market, whereas ByD’s initial GTM was about finding net-new customers in the SME market interested in a highly configurable, model-driven suite. That will likely get more early adopters raring to go with Fusion, as this product will fit nicely into an existing market for Oracle. (The number of Oracle customers who were making the pilgrimage to Redwood Shores to test drive Fusion Apps was huge, and many were, of course, also SAP customers.) ByD will need to find net-new customers, and that’s always harder.

But these distinctions also mean that there will be little head-to-head competition between Fusion Apps and ByD, unless SAP changes its focus for ByD and starts more actively pursuing large enterprise opportunities as well. Or Oracle changes its focus and starts moving more Fusion Apps towards the SME market. We shall see.

Two companies have a lot more to worry about with Fusion Apps than SAP. Salesforce.com is the first: Fusion CRM On Demand many just be the perfect fix for some lingering antipathy towards Siebel in the market. Fusion CRM On Demand will represent a clean break from the Siebel past, and will have many of the cool bells and whistles that was shown in the Fusion Apps demo yesterday. And it will be positioned as an on-demand/on-premise product, unlike Salesforce’s OD-only offering. I think Salesforce, despite Marc Benioff’s marc-keting coup at this year’s Open World, will have a lot to worry about when Fusion CRM On Demand hits the market next year.

Also in trouble is Netsuite, which never really did much to market itself as anything more than a on-demand ERP provider. With two more such offerings now hitting the market in 2010, Netsuite will need to gen-up some means to distinguish itself against Fusion and ByD with some message other than “we’re on-demand.” Good luck with that.

So, Fusion Apps are finally here, and we NDA-bound analysts can finally start opining on one of the most anticipated, hyped, and poo-pooed product launches in recent memory. We’ll be watching carefully as these products start hitting the market next year to see if Oracle can meet the SLAs that are required in the on-demand market, particularly in light of SAP’s missteps in that regard with ByD. We’ll also watch for signs that customers are stalling buying decisions now that they have Fusion Apps to add to the short list: this is Oracle’s nightmare scenario, and the reason why the GTM strategy came so much later than the product development strategy. I think the compartmentalization of Fusion Apps will work to Oracle’s benefit, but only the market will tell.

Finally, we will need to see how SAP responds to Fusion Apps, and what Microsoft can do between now and mid-2010 to solidify its own on demand strategy for its ERP apps.  This is going to make 2010 a great year for customers, who will now have more choice and more offerings than ever before – and more eager vendors like Oracle anxious to prove that their big investments will pay off in revenues and market share. Stay tuned.

Larry Ellison Unveils Fusion 1.0

Here are the basics:

Version 1.0 includes the following modules:

Finance

Human Capital Management

Sales and marketing

SCM

Project portfolio management

Procurement

GRC

Notably, there is no manufacturing module. So the focus will be on the service industries.

Also notable: Each of these individual components will be deployable in a SOA architecture as standalone modules attached to an existing non-Fusion application suite, such as eBusiness Suite, Peoplesoft, Siebel, and, as Larry made a point of pointing out, SAP.

The other highlight is the user experience. It’s a pretty good looking system, having seen it under NDA (which has now blissfully been lifted).  I’ve seen a fair amount of it, more than Larry will be showing at Open World, unless everyone stays there through dinner. It’s definitely a beautifully designed  system.

More to follow.