Oracle’s Sun Deal and the IBM Factor: The Future May Not Be What It Appears (Especially for SAP)

At first blush it looks like Oracle’s deal to buy Sun plants a large, made-in-Redwood Shores boot right in the [name your favorite body part] of IBM. Oracle will now take over the competition with IBM that Sun had waged for so many years, and that this will lead, among other things, to IBM and SAP getting closer than ever before.

I was buying into this for a few minutes, despite the fact that IBM has been the silent partner of so much of Oracle’s M&A strategy of recent years that it was almost as if Oracle was actually consulting with IBM about these deals (which, it turns out, was exactly what happened.) In fact, when you look at the main acquisitions of the last six years, Oracle has been acquiring an IBM customer base as much as it has acquired a PeopleSoft, JDE, Seibel, Retek, Profitlogic, iFlex customer base — all of which were major close partners of IBM before they were acquired.

Furthermore, behind the deal to buy Sun is a clear focus on rescuing Java from the ashcan of history — something that is in both Oracle’s and IBM’s interest. Not that it was going to happen any time soon, but with Sun in a slow, inevitable decline, the threat that someone or something hostile to Java could come in and buy up the detritus of the once-great Sun had to worry IBM and Oracle equally.

With this in mind, let me propose an alternative to the zero-sum, IBM vs Oracle/Sun view of the deal. While it looks like Oracle and IBM will now be close competitors, the fact is they will remain even closer partners moving forward. Sure, there is this little business of the companies now competing in the hardware department. But, hey, hardware isn’t exactly IBM’s strong suit anymore, relative to software and services, both of which are foundation product lines that are highly integrated with the Oracle customer base. And, well, let’s be honest, Sun’s hardware business hasn’t been too much to sneeze at lately either — so much so that Larry Ellison has said he’s buying Sun for Solaris and Java (and not MySQL.)

In other words, with Oracle now the owner of Java, IBM becomes a stauncher ally than ever before. In fact, life in the Java world will be much better for IBM now that one of its main rivals has been nuked and its biggest software partner now owns the Java brand. You can almost imagine the call from Larry to Sam, and then Larry to Scott, ensuring that stewardship of the Java brand would continue and that everyone would be better off with Oracle in charge. If it didn’t happen before the fact, I’m sure it happened after the announcement.

Which leaves us with the notion that IBM must now buy SAP. Guess which way I’m tilting on this one. In fact, I would argue that, if IBM wanted some real regulatory scrutiny (which the company claimed was the main reason it backed away from the Sun deal), it should try to buy SAP now. Not only is the current IBM/SAP business so big that the marriage of the two would meet the test for constraining competition, but, with IBM and Oracle ever more closely aligned, IBM/SAP’s market position would be so locked in it would make Standard Oil of New Jersey look like a local non-profit.

So, with speculation as my main proof point, I maintain that IBM and Oracle have too much at stake to suddenly dust it up over a little hardware competition. Nor does this mean that SAP must now become part of IBM. What is does mean is that SAP needs to reorder its thinking about one of its biggest allies — IBM — and begin to look at alternative partners to balance off a growing IBM/Oracle axis of competition.

Steve Ballmer, you’re wanted on the phone…..

Bye-bye MySQL, Bye-bye: Buried Alive By Oracle

If you were still wondering what Oracle was going to do with its newly acquired MySQL database (other than write-off the ridiculous $1 billion that Sun paid for the open source leader), the answer just arrived in my email inbox: Oracle plans to trash-talk MySQL to death.

In case it needed to be made any clearer, here’s what Oracle is pitching for its “get MySQL outta-here”  webinar on April 28th:

As the global economy slows down, companies continue to look at alternative technologies that they feel are more cost effective and will save money on their bottom line. Learn why choosing an Oracle technology platform lowers the total cost of ownership for your company during this live, interactive one hour program. Tony Tarone, the Director of Operations at Cedar Document Technologies, will discuss how he gained a reliable, scalable, secure, and cost effective platform by moving from MySQL to Oracle. Here is the agenda for the session:

  • Oracle Database Overview
  • Cedar Document Solutions
  • The Move to Oracle for Cedar Documents
  • Oracle comparison to MySQL
  • Live Q and A with Tony Tarone, Cedar Documents Director

That was fast work, wasn’t it. The corpse isn’t just still warm, it’s not even a corpse yet. The question is whether there will be anything to sell after the trash talk seminar series is done working its magic. The other question: Could Oracle care less?

I doubt it.

What’s Oracle Up To: First Enterprise Software, Then Sun. Next Stop: Computer Services (and a Faceoff with IBM)

Bear with me while I brag a little. Way back in 2003, as Oracle was just winding down a hostile takeover of PeopleSoft, I wrote a column that predicted two things: Oracle would buy a major IT services company (Cap Gemini was my favorite pick), and Oracle would buy Sun. Not the Sun of 2003, but the Sun that I felt was never to recover from the fallout of the dotcom bust. I would like to think I get things like this right all the time, but truth is it’s a lot easier to handicap the races than predict what the likes of Larry Ellison and Scott McNealy will do.

But I did get it right, as today’s news shows. Oracle is going to start down the journey towards  beating IBM at its own game. Beating is the operative word, because at the moment IBM has no packaged enterprise software portfolio of note, whereas Oracle has amassed a major war chest of products it can offer the market. I always felt that this lack of software heft was the major reason Sun drifted meaninglessly in the market, and I think that the main flaw in IBM’s worldview is its own lack of packaged enterprise software. Because packaged software means packaged processes, and process, not bits and bytes, is what has a high value today. Sure IBM has lots of process capacity in its Global Services group, but the repeatability and margins in packaged processes are much greater, and more sustainable, than a consultancy full of best practices.

Will Sun be as strategic an investment as Oracle’s enterprise software portfolio has been so far? I think yes, though not without a large quantity of rationalization (Bob Warfield’s cynical take is that only Java and MySQL are worth a headline) . There’s a lot of reasons why Sun hasn’t done well over the last few years, and much of that has to do with a slew of non-commodity products competing in a commodity hardware world. Then there’s Sun’s historic inability to market the advantages of its platform in the enterprise software world: for years, Sun hardware was the fastest platform for SAP’s R/3, though you’d never ever hear that from Sun.

Finally, there’s that Java thing. Greatest software product never to make any money in the history of the industry. Sun’s stunning inability to monetize this brand has been its most spectacular failure, and it will be interesting to see what Ellison, Phillips and Catz can come up with. The bar is set quite low for doing better by Java, so I expect some quick upside soon.

So, as the latest Valley M&A saga unfolds, it’s nice to see that there is some method to the madness that Oracle’s M&A strategy seems at times to contain. First, buy a strong portfolio of products and a boat-load of customers. Stir vigorously. Then buy a major hardware vendor. Leverage the benefits of vertical integration and one of the strongest brands in enterprise software. Then buy a services company and take the fight to IBM in a major way.

I’ll be back in a few years to see how that last prediction has held up.

Multi-Tenant vs. Single-Tenant: SaaS Debate 1.0 Needs an Upgrade

There’s a debate raging again in the on-demand, software-as-a-service market that bears some curmudgeonly commentary. The essence of the debate — which I contend seriously needs to be upgraded to reflect the real future of SaaS –is whether multi-tenancy or single-tenancy is the true path to enlightenment in SaaS. My curmudgeonly comment is this: Neither methodology will matter in a few short years, because the SaaS market is set to evolve beyond delivering a “faster-better-cheaper” version of on-premise enterprise software into delivering significant value above and beyond anything that on-premise can deliver today. And once that evolution truly sets in (and the market’s DNA is recombining constantly in the service of this ideal) these tenancy debates — which are basically about the cost-structure of competing with on-premise solutions — will cede their primacy to debates about the premiums that SaaS 2.0 solution providers will be able to charge their customers. At which point the basic cost issues that are fueling the great Debate 1.0 will be off the table.

There are two basic characteristics about these SaaS 2.0 solutions that stand out. The first is that, by aggregating data, processes, connectivity, and stakeholders in the cloud, these solutions are able to provide functionality that was simply not possible in the on-premise world. Take landed cost estimates as an example. You can run a logistics application inside the firewall that will give you a landed cost estimate for your  widgets if you ask it, but as that application cannot possibly have access to the myriad data points in the real world of logistics (shipper costs, shipper performance, broker fees, customs costs and regulations, to mention but a few), it will return a number that is marginally useful at best.

Shift that same function to a SaaS 2.0 vendor like GT Nexus, and now you’re doing something you couldn’t do in the on-prem world: GT Nexus’ SaaS cloud acts as a clearinghouse for virtually every available data point from every possible stakeholder in the global logistics chain, normalizes those data, and makes them available to every eligible user or partner in the logistics supply chain.  GT Nexus handles the integration, updates, on-boarding, etc., and the customer reaps the benefit of a SaaS 2.0 service that couldn’t be replicated on premise at any price.

This model is repeated across the burgeoning SaaS 2.0 industry: E2open and Amitive have a similar function to play in the supply chain, collecting data and processes from all those “outside the firewall” partners and using the power of SaaS to provide a level of functionality and service well-above what on-premise ERP and SCM products can do. SmartTurn does this in the warehouse.  Panaya does this for the SAP upgrade market. Actio does this in the chemicals industry. The list keeps growing and growing.

The second reason why SaaS 2.0 stands out, and why the low-cost, cheaper-than-thou SaaS 1.0 debates will become increasingly irrelevant, is that SaaS 2.0 applications are a self-improving and self-appreciating asset for the customer, and not just for the vendor, the latter point being the essence of the value model of SaaS 1.0. This is an extremely important distinction, and one that bears consideration as we look to the‘s of the world for guidance as to the market’s future (which I believe would be a mistake.) A solution like any of the SaaS 2.0 examples above becomes more valuable to each individual customer as more customers sign up. Significantly more valuable. Because in every case the more customers are added, the more their industry knowledge, partnerships, connectors, and best practices become part of the common good that SaaS 2.0 can bring. If you’re in a trading or industry network environment like most of the examples above, your cost to add new partners, new customers and new best practices actually goes down over time as more and more companies in a given industrty are on-boarded and more of those companies’ technological challenges are met by the SaaS 2.0 environment,  and thereby become part of that vendors’ standard operating procedure. If you’re more in the services business, like Panaya, the more anomolies Panaya tackles in the customer base the more solving those problems become STOP as well.

And, just so we don’t miss the self-appreciating asset portion of this, as no SaaS 2.0 vendor charges more for self-improvement, a company’s investment in a SaaS 2.0 stands to provide greater ROI going forward, for no change in cost. If only all enterprise software worked this way.

So, I propose we move on to Debate 2.0: what is the value of SaaS 2.0, and how can more companies deliver this kind of functionality and get the market moving in a completely different and more interesting direction. Because I contend that SaaS 1.0 is going to become as interesting as debating the merits of one micro-processor over the other. There will be lots to talk about, but little that will be important to the buying decisions that end-users and customers have to make. To whit: why should I care if one commodity-level SaaS CRM vendor is multi-tenant versus single tenant as long as the SLAs and price meet my needs?

The answer is as relevant as Intel Inside is to running a desktop PC. As is the multi-tenancy versus single-tenancy debate. It’s interesting, but so 20th century. Sic transit gloria.

Rewarding Those Who Help Themselves: A Modest Proposal for a Tiered SAP Support System

Michael Doane,  the man who wrote the SAP Blue Book and knows more about what happens when SAP gets implemented than anyone outside of SAP (and many inside) has an intriguing idea. How about giving those SAP customers who are well-advanced in their ability to support themselves a break on their Enterprise Support costs? This isn’t a new idea — once upon a time SAP did this for customers running a center of excellence — but it’s a timely one considering the PR problems SAP has had since it launched its new 22% Enterprise Support concept last year.

You can read Micheal’s calculations here, and I leave you to figure out whether it makes sense or not. But fundamentally, addressing the notion that some customers need more support than others does make some sense. There may be more complex metrics involved in genuinely modeling the different combinations of what makes one SAP customer easier to support than another, but the basic idea isn’t exactly off base.

What’s perhaps more intriguing about this idea is that SAP would be helping customers benchmark and achieve one of the main goals of 21st century: lower TCO. This isn’t just in the customers’ interests, of course. Low TCO is a major competitive weapon for the vendor that can really sink their teeth into the concept, and — bonus! — customers with low overall TCO will have more money to spend on net new, innovative products, upping their value to their vendor in a more mutually beneficial way than maintenance revenue can provide.

Putting some rewards into the maintenance issue that in turn yield better TCO best practices ought to be a win/win for everyone.  It has to be done carefully so that SAP doesn’t end up fighting with customers who think they should be in the low-maintenance category despite all evidence to the contrary. (And who hasn’t been in a relationship like that?) And it needs to be done within the context of the real increase in support requirements for SAP systems as the overall complexity and footprint grows. So, all this may be harder to do than Michael suggests, but the linkage to the Holy Grail of TCO makes this more than just an interesting idea.

This is hardly the last word on the subject, and I think before we’re done we’ll see a lot of other ways to make enterprise support make more sense to more customers. There’s still a month to go before Sapphire. So stay tuned…..

Twitter Killed The Global Economy! News at 11

My colleague from the old days (the 80’s, you whippersnappers) Loring Wirbel posted a chart on his blog this week that is such a perfect indictment of the evil of Twitter that I have to alert my loyal readers (all 12 of you, and that doesn’t include mom) to this incontrovertible fact: the growth of Twitter is directly correlated with the recent crash of the global economy.

All you Twits tweeting about which nostril you’re now cleaning out have effectively brought the world to a standstill. It’s time to get back to work, put down your Tweetberries, and stop making the world safe for socialism. While you’re at it, please stop linking Twitter to Facebook, you’re cluttering up my preferred waste of time with more clutter than I can process, and therefore wasting more time that should be better spent doing something useful.

Rant over. Next week’s headline tease: Blogging Killed the Global Economy! News at 11

The End of Pan-European Conferences? Microsoft Convergence Vienna Bites the Dust

Microsoft is following SAP’s much-discussed decision to can its European Sapphire event with a similar decision to do away with the Microsoft Convergence Conference in Vienna this year. Like SAP, Microsoft Dynamics will be hosting a series of local events across Europe, keyed to local interests and languages, and designed to be much more accessible to local attendees.

What Microsoft Dynamics didn’t say they would do is rely on more virtual events as well, but don’t be surprised if they key up something virtual as part of this move. The recent MIX developers conference got strong reviews for its online/virtual nature, and I would imagine this lesson is being studied across the company. Others top tier vendors are dabbling in the virtual trade show concept as well, though Oracle’s most recent attempt was a little shy on technical excellence.

This shift away from a massive nerd migration to a big convention town isn’t just a good way to supply those ever-disunified Europeans with the local content they so crave. It’s also a major cost-savings exercise for vendor and attendee alike. The difference between the cost of a virtual event and a “real” event is mind-boggling: inviting a few thousand of your closest customers and partners to Vegas or Orlando can set you back tens of millions of dollars. Doing it on line is an order of magnitude cheaper. And on the attendee side, it’s hard to spend less than $1000 to go to a three-day event, during which the typical attendee’s productivity and net value decline in proportion to the number of evening “events” they attend.

Of course, while the sex and drugs (euphemistically speaking, of course) of an on line conference just don’t compare (yet!), the bigger problem is that the industry will be all the poorer for virtualizing the entirety of its interactions. So a mix of virtual and real will be the way to go.

Meanwhile, hats off to Dynamics for taking the step of cutting back on some unnecessary waste in the conference circuit. And if Euro-nerds still want to play the pan-European conference game, there’s always CEBIT. That’s one show that couldn’t die if its life depended on it.