Beyond Adoption: Why GenAI in the Enterprise Needs Strategy, Not Just Software

When we talk about GenAI today, the conversation often revolves around features and capabilities. But as Aparna astutely noted in a recent LinkedIn post, transformation isn’t just about what the technology can do—it’s about what the organization is willing to believe, adopt, and scale. And that’s a much more human, messy, and strategic terrain.

Two recent essays helped crystallize something I’ve been observing across boardrooms and transformation programs.

The first is the classic Innovator’s Dilemma—revisited for the GenAI era. As explained in a sharp Substack post, it’s not that enterprises lack ambition. It’s that they optimize around their current customer and revenue models. Disruption doesn’t come from lack of awareness. It comes from being too good at what you already do. So when GenAI presents itself—not as a 10% enhancement, but a 10x rethink—legacy mental models start to panic.

The second is more subtle—and in some ways, more dangerous. The George Costanza Effect: the idea that software in enterprise settings is trapped by its historical perception. A CRM is a tool to record interactions, not to initiate them. An HR system manages benefits—it doesn’t coach your people. So when GenAI features try to elevate software into new roles, users freeze. Not because it doesn’t work—but because it feels “wrong.” Like Costanza in Seinfeld—when someone behaves differently from how we expect, our minds reject it, no matter how effective it might be.

Now combine these two forces: on one side, an organization held hostage by its own strengths. On the other, users conditioned by a decade of muscle memory about what enterprise software “should” be.

This is why GenAI isn’t just a product challenge. It’s a strategic choreography challenge. And that’s where consulting firms—particularly those embedded deeply inside enterprise operating models—can play an outsized role.

So what’s the playbook?

1. Anticipate the Dilemma, Don’t Wait for It

Most large organizations launch GenAI pilots with cautious optimism. But often, those pilots are constrained by the same legacy thinking they hope to overcome. The key is to separate exploration from exploitation. That means creating GenAI tiger teams that don’t report into the same KPIs and customer feedback loops as the core business. These teams need the freedom to imagine adjacent use cases—ones that feel small today, but could become tomorrow’s core.

2. Mind the Identity Trap

If you’re going to launch a GenAI assistant inside a CRM, you’re not just launching a feature. You’re asking users to see the software differently. That’s a branding challenge as much as a technical one. Introduce it as a new role. Give it a name. Build narrative scaffolding around it. Help users rewire what this tool is for. Without this step, you risk rejection not on merit—but on memory.

3. Fuse Strategy with Behavior Design

This is where Aparna’s insight really matters. The success of GenAI adoption isn’t in the codebase—it’s in the change narrative. Consultants must co-create with business teams. Use pre-mortem sessions to surface fears before rollout. Build success frameworks that measure time saved, new insight surfaced, or the emotional shift in how teams perceive their tools. These are soft metrics—but they often precede the hard ones.

4. Redefine What 'Adoption' Means

We’re used to measuring rollouts by the number of users onboarded, or workflows integrated. But GenAI tools are not infrastructure—they’re collaborators. True adoption means people trust the system. They’re delegating thinking, not just tasks. That trust must be earned and carefully nudged. Otherwise, you’ll get surface-level engagement and deep-level skepticism.

When you combine the Innovator’s Dilemma with the Costanza Effect, you begin to understand the real barrier to GenAI in the enterprise: not feasibility, but believability.

So here’s my proposition to enterprise leaders, CIOs, and transformation advisors:

- Don’t just build GenAI features. Redesign the roles your software plays.

-  Don’t just chase productivity metrics. Track the story your teams are telling themselves about the tools they use.

-  And don’t assume resistance means failure. Sometimes, it means you’re finally changing the script.

We’re not just at the edge of a technology shift. We’re at the edge of an identity shift—for systems, for teams, and for what “work” even means.

Curious how your platform might be stuck in a Costanza loop? Or how to pilot a GenAI solution that doesn’t get rejected by legacy perception?

Let’s open that conversation.

Labels: Enterprise Software, GenAI

Die Zukunft des SaaS: How Enterprise Giants Defy the Stack Fallacy in the GenAI Era (Part II)

In Part 1 of Die Zukunft des SaaS: How the Stack Fallacy Sabotages GenAI Ambitions, we explored the Stack Fallacy, which explains why companies at lower stack layers—like cloud infrastructure or foundational AI models—often fail to succeed in customer-facing SaaS markets due to insufficient customer empathy. We also examined how Generative AI (GenAI) threatens to disrupt the Software-as-a-Service (SaaS) industry by enabling new entrants, commoditizing features, and raising customer expectations. In this second part, we analyze how enterprise giants—Salesforce, ServiceNow, SAP, Microsoft, Oracle, Workday, Pega, Adobe, and Blue Yonder—navigate these challenges to lead in the GenAI era. By leveraging their higher-layer expertise, strategic partnerships, and customer-centric innovation, these companies sidestep the Stack Fallacy to maintain dominance. We’ll also delve into the broader implications for the SaaS industry and what lies ahead in this AI-driven landscape.

Defying the Stack Fallacy: Strategies of SaaS Giants

As outlined in Part 1, the Stack Fallacy highlights the peril of moving up the stack without deep customer understanding. Major SaaS providers, operating at the application layer, hold a natural advantage: they already know their customers’ needs. Below, we explore how these companies integrate GenAI to stay ahead, weaving in insights from industry reports and company strategies.

Deep Customer Empathy at the Higher Stack Layer

These companies serve specific business domains—CRM (Salesforce, Microsoft Dynamics), IT service management (ServiceNow), ERP (SAP, Oracle, Workday), process automation (Pega), marketing and creative tools (Adobe), and supply chain management (Blue Yonder). Their decades of experience provide direct insight into customer pain points, such as streamlining sales pipelines, automating IT workflows, or optimizing logistics. IDC’s 2024 SaaS Market Trends report notes that 65% of enterprise SaaS success hinges on domain-specific expertise, which these players possess in abundance. Unlike lower-layer providers, these companies don’t need to infer user needs—they have direct feedback from millions of customers. For example, Workday’s HR platform uses customer input to tailor GenAI features like talent insights, ensuring relevance to HR professionals, unlike generic AI tools from infrastructure providers.

Strategic Integration of GenAI

Salesforce embeds GenAI via its Einstein platform, offering predictive lead scoring and conversational assistants for CRM workflows, as detailed in its 2025 Einstein AI Roadmap.

ServiceNow uses Now Assist to integrate GenAI into IT service management, automating ticket resolution and virtual agents, per its 2024 Now Platform Updates.

SAP leverages its Joule AI assistant to automate ERP tasks like procurement and supply chain planning, ensuring compliance with industry regulations (SAP, 2025, Joule AI Overview).

Microsoft incorporates GenAI through Copilot across Dynamics 365, Power Platform, and Azure AI, enabling natural language data analysis and automation (Microsoft, 2025, Azure AI Innovations).

Oracle uses OCI AI services to embed GenAI in ERP, HCM, and supply chain applications, focusing on verticals like healthcare (Oracle, 2024, OCI AI Strategy).

Workday powers HR and financial platforms with GenAI features like automated payroll insights, as outlined in its 2025 AI in HCM Report.

Pega enhances process automation with GenAI-driven decisioning for complex workflows (Pega, 2024, Pega Infinity Updates).

Adobe integrates GenAI via Adobe Firefly and Experience Cloud for content creation and personalized marketing (Adobe, 2025, Experience Cloud AI Roadmap).

Blue Yonder uses GenAI to optimize supply chain tasks like demand forecasting (Blue Yonder, 2024, Luminate Platform Enhancements). Gartner’s 2024 AI Adoption Trends report highlights that 75% of successful enterprise AI deployments rely on partnerships rather than in-house model development, explaining why these companies partner with providers like XAI to avoid lower-layer traps.

Platform Approach and Ecosystem

These companies leverage platforms and ecosystems to amplify GenAI adoption without overextending into lower layers. Salesforce’s AppExchange, ServiceNow’s Now Platform, Microsoft’s Power Platform, SAP’s Business Technology Platform, Oracle’s Fusion Cloud, Workday’s Extend, Pega’s low-code platform, Adobe’s Experience Platform, and Blue Yonder’s Luminate Platform enable customers and developers to build GenAI-powered applications. For instance, Microsoft’s Power Platform allows businesses to create custom GenAI apps for retail analytics, reducing Microsoft’s need to build every solution itself (Microsoft, 2025, Power Platform Case Studies). McKinsey’s 2023 study on platform-based SaaS models found that such approaches boost adoption rates by 40%, showcasing their effectiveness. By empowering ecosystems, these companies sidestep the Stack Fallacy, avoiding the need to solve every customer problem directly while enabling innovation at the application layer.

Data Advantage and Trust

Superior Product Disruption

Broader Implications for the SaaS Industry

Opportunities for Leaders

Big Players like Salesforce, ServiceNow, SAP, Microsoft, Oracle, Workday, Pega, Adobe, and Blue Yonder thrive by focusing on domain-specific GenAI applications and partnering with lower-layer providers and complying with agent standards like MCP, A2A etc. Their ecosystems and trust frameworks give them an edge, per market trends.

New Entrants and Niche Markets

GenAI enables startups to target niche markets, but they must avoid the Stack Fallacy by ensuring customer empathy. The Stack Fallacy emphasizes customer empathy. SaaS leaders succeed by solving real pain points, like Microsoft’s Copilot for sales forecasting or Blue Yonder’s GenAI for supply chain optimization

The Future of SaaS : As the SaaS market grows, GenAI’s transformative power will intensify competition. Leaders who balance customer empathy with strategic GenAI integration will shape Die Zukunft des SaaS, while those ignoring the Stack Fallacy risk obsolescence. These companies demonstrate that success lies in understanding customers, not just mastering technology.

Labels: Agentic AI, Enterprise Software, Gen AI, SaaS

Die Zukunft des SaaS: How the Stack Fallacy Influences GenAI Ambitions – The Disruption Dilemma (Part 1)

The Stack Fallacy, originally popularized by my friend Anshu Sharma, reveals a critical flaw in business strategy: companies often overestimate their ability to climb “up” the technology or business stack to create successful products at higher layers, hindered by a lack of deep customer empathy. As Generative AI (GenAI) transforms the Software-as-a-Service (SaaS) landscape, this fallacy provides a powerful lens to understand why some firms—particularly those rooted in lower stack layers like cloud infrastructure or foundational AI models—struggle to compete in customer-facing SaaS markets, while others thrive by mastering domain-specific needs. In this first of a two-part series, we dissect the mechanics of the Stack Fallacy, explore how GenAI threatens to disrupt the SaaS industry, and highlight the risks it poses to incumbents. Stay tuned for Part 2, where we’ll uncover how enterprise giants like Salesforce, ServiceNow, SAP, Microsoft, Oracle, Workday, Pega, Adobe, and Blue Yonder navigate these challenges to lead in the GenAI era.

The Stack Fallacy: A Strategic Pitfall

The Stack Fallacy describes the mistaken belief that expertise in one layer of the technology or business stack—like infrastructure or databases—translates seamlessly to success in higher layers, such as customer-facing applications. The “stack” is a hierarchy of components, from raw infrastructure (e.g., cloud computing) to platforms (e.g., APIs) to applications (e.g., CRM or ERP software). For example, a database company may excel in managing data storage but struggle to build enterprise applications like CRM because its engineers lack direct insight into the workflows of sales teams or supply chain managers. Conversely, moving “down” the stack—say, a software company building its own servers to support its platform—is often easier since firms understand their own lower-layer needs.

This concept aligns with Clayton Christensen’s The Innovator’s Dilemma (1997), which argues that incumbents miss disruptive innovations by focusing on existing customers and high-margin products. The Stack Fallacy adds a structural dimension: success at one stack layer doesn’t guarantee success at another, especially without deep customer understanding. A 2023 McKinsey study on digital transformation found that 70% of failures stem from misaligned customer understanding, underscoring the Stack Fallacy’s relevance in today’s tech landscape. In the GenAI era, the Stack Fallacy is more critical than ever. Companies at lower layers, like cloud providers or AI model developers, may assume their technical expertise equips them to conquer SaaS markets. As we’ll explore, this assumption often leads to strategic missteps.

The GenAI Stack: A New Competitive Landscape

The GenAI era redefines the technology stack, creating distinct layers that amplify the Stack Fallacy’s risks:

Lower Layers: Cloud infrastructure (e.g., AWS, Azure, Google Cloud), foundational AI models (e.g., GPT-4, Llama), and data platforms provide the raw computing power and AI capabilities for GenAI applications.

Middle Layers: AI platforms and APIs, such as xAI’s API or Hugging Face, enable developers to integrate GenAI into applicatio>

Higher Layers: Customer-facing SaaS applications—think CRM, IT service management, ERP, HR, marketing, or supply chain tools—deliver specific business value by embedding GenAI.

The Stack Fallacy suggests that lower-layer players, like those developing foundational AI models, may struggle to build SaaS applications that resonate with enterprise users. For instance, a general-purpose conversational AI model excels in broad tasks but lacks the tailored workflows needed for HR analytics or supply chain optimization without significant customization. This gap in customer empathy at higher layers is where the Stack Fallacy creates vulnerabilities.

GenAI’s Disruptive Threat to SaaS

Disruption from Below the Stack

GenAI empowers startups to challenge established SaaS players by leveraging foundational models to create niche applications. This mirrors Christensen’s disruptive innovation model, where new entrants target underserved markets with simpler, cheaper solutions that improve over time (The Innovator’s Dilemma, 1997). For example, a startup using xAI’s API (https://x.ai/api) could build a low-cost, GenAI-powered customer support tool to rival ServiceNow, targeting small businesses or “non-consumers” priced out of traditional SaaS. Gartner’s 2024 Critical Capabilities for IT Service Management Tools highlights that such tools are gaining traction by offering streamlined, AI-driven alternatives. However, lower-layer players like those providing foundational models or cloud platforms face Stack Fallacy risks. A cloud provider’s AI platform may offer powerful models but struggle to deliver the industry-specific workflows that ServiceNow’s IT service management tools provide, as it lacks direct customer insight at the application layer.

Commoditization of SaaS Features

GenAI can replicate features that once differentiated SaaS platforms, such as predictive analytics, content generation, or data visualization. A marketing SaaS platform’s unique analytics dashboard, for instance, could be mimicked by a GenAI model generating real-time insights from raw data, eroding its competitive edge.The Stack Fallacy exacerbates this threat. SaaS incumbents relying on proprietary algorithms risk disruption if they don’t integrate GenAI to maintain differentiation. Meanwhile, lower-layer providers attempting to move up the stack may offer generic AI features that fail to address specific needs, such as compliance in healthcare or logistics in supply chain management.

Shifting Customer Expectations

GenAI’s ability to deliver hyper-personalized, conversational, and automated experiences is raising the bar for SaaS providers. Users now expect natural language interfaces, real-time insights, and seamless automation. Deloitte’s 2025 AI in Enterprise Software Trends study found that 80% of enterprise buyers prioritize AI-driven personalization in SaaS solutions. A CRM platform without a GenAI-powered chatbot, for example, may lose customers to a startup offering conversational sales assistants.The Stack Fallacy trips up lower-layer players here. A cloud provider’s AI platform may offer robust GenAI capabilities but struggle to create SaaS applications that meet industry-specific needs, such as GDPR compliance for European ERP users, due to limited customer empathy at the application layer.

The High Stakes of GenAI and the Stack Fallacy

The Stack Fallacy’s relevance in the GenAI era stems from the technology’s transformative potential. Lower-layer providers, armed with powerful AI models and cloud infrastructure, may be tempted to enter SaaS markets, assuming technical expertise is enough. Yet, success at higher layers requires deep customer understanding, not just technical prowess, as Christensen’s work suggests. The SaaS industry’s massive growth potential makes it a prime target for GenAI-driven disruption. Startups can rapidly prototype solutions, while customers demand AI-enhanced experiences, creating a perfect storm for incumbents who fail to adapt.

But as we’ll explore in Part 2, enterprise giants are not standing still. Companies like Salesforce, ServiceNow, SAP, Microsoft, Oracle, Workday, Pega, Adobe, and Blue Yonder are leveraging their customer-centric strengths to integrate GenAI and maintain dominance. Part 2 will reveal how these titans avoid the Stack Fallacy, balancing customer empathy with technological innovation to shape the future of SaaS.The Stack Fallacy exposes why lower-layer players struggle to conquer SaaS markets, but how do industry leaders like Salesforce, Microsoft, and SAP sidestep this trap to thrive in the GenAI age? In Part 2, we’ll dive into their strategies—from AI-powered platforms to ecosystem-driven innovation—and explore how they shape Die Zukunft des SaaS. Join us to uncover the art of surviving and thriving in a GenAI-driven world.

Labels: Enterprise Software, GenAI, SaaS, Stack Fallacy

SAP Buys Concur - Interesting Mix!

Labels: Business Model, Cloud, Digital Enterprise, Enterprise Software, SAP

Salesforce.com: Onto Becoming The Enterprise Nerve Center

I attended Dreamforce 2012, Salesforce.com’s 10th annual user conference, in San Francisco, and came away feeling very positive about the company, product and the possible solutions that can get conceptualized. With ~90,000 registered attendees, 350+ partner companies and ~750 sessions, Dreamforce 2012 could very well be the largest user conference by any IT company ever on earth. From a day filled with so many sessions, conversations and demos, the key takeaways:

1) New product Community, based on Chatter technology, will become the bedrock of external facing customer and partner on-line communities. This will not only have the effect of replacing old portal products, but also make external facing CRM functions to be more social, and for business create avenues for generating new revenue streams.

2) Work.com, a major area of investment for Salesforce.com, aims to transform how work is organized and managed by present day businesses. A tight integration between Work.com with CRM applications could increase the productivity and effectiveness of sales/marketing/service operations.

3) Radian6’s, which SFDC acquired last year and is gaining lot more teeth with more integration with other SFDC assets -in the process the Marketing Cloud story gets more powerful, potentially tapping the multi-billion business potential therein. Through Buddy Media, Radian6, and CRM platform integration, Salesforce.com offers a product differentiated through its breadth of features.

4) The Service Cloud is getting more and more powerful with lot more focus on making it broad based and feature rich.It’s now clear that Service Cloud’s social and mobile focus will certainly position it to capitalize on a large market opportunity and develop into a $B business.

5) Salesforce Touch, and Data.com, Social Key: Salesforce Touch, powered by HTML5, expands on salesforce.com‘s native mobile strategy and will bring Salesforce to any mobile device—this is regardless of platform—and empower sales to collaborate on deals anytime, anywhere. And Salesforce Data.com Social Key will unite the best context from social networks with traditional company data, enabling enterprises to build stronger relationships with customers and close more deals, faster.

6) Salesforce Chatterbox: Salesforce Chatterbox will deliver simple and secure file sharing across any device with the proven trust of Salesforce. With Salesforce Chatterbox, people will be able to manage and share files in the context of their business.

Chatter based Communities for customers and partners It may be noted that Chatter( aimed at facilitating internal employee collaboration) has achieved significant adoption since launch two years ago with a little less than 200K company networks till date. It appears that SFDC s leveraging Chatter technology to enable more of customer and partner facing functionalities. Along came the announcement that a new product called community will be launched in summer of 2013 that will power various online communities for enterprise critical functions such as customer service, channel partner collaboration, marketing engagements and enterprise sales execution. Chatter is now broadbasing its role by essentially becoming the platform technology that infuses various external facing CRM business processes covering different stakeholders of the enterprise. The roadmap descripton shows that this new Community product will entirely replace the old customer portal or partner portal products - a big shift appears to be in the offing here. Although so far Chatter has primarily been used as a tool to increase the customer engagement with CRM apps, with this annoucement of Community, it’s also clear that Salesforce.com will take the next big step of directly monetizing the Chatter technology with separate licensing. Chatter is indeed making the entire CRM function to become more social and collaborative for all participants- covering all the stakeholders -customers, partners and employees.

The Big One: Marketing Cloud As per data shared by SFDC, currently 65% of marketers feel pressure to improve social media effectiveness, and 48% feel pressure to report quantified outcomes of social media marketing. SFDC has sensed correctly so that this will be a big area of focus for enterprises to invest and reap returns. Marketing Cloud is well positioned to address these top concerns by marketers. Marketing Cloud ties together some existing Salesforce products and delivers the key outcome that businesses need in the social age – the ability to initiate actions, measure, and react to external social influences. The story here is that when marketing cloud is enabled along with the monitoring aspects of social and when tied to actual workflow and automation, Salesforce provides a end-to-end solution that will lower the barriers to entry into the social realm for its enterprise customers. Through the Buddy Media and Radian6 integrations, the Marketing Cloud offers a more comprehensive product - enabling both creating marketing content and mining marketing intelligence data, all integrated with the core CRM platform. This is a powerful combination when it works effectively for enterprises. Radian6 enables enterprises to keep an active pulse on customer sentiment and use data to drive launch and content strategy. With Radian6 enterprises can generate reports including volume, geographic location, age/gender demographics, word cloud charting, and volume of positive and negative social comments. The integrated functionality can help enterprises respond to social media mentions across a variety of channels from a single operating platform . If cases get raised through the CRM, they can be automatically routed to relevant departments such as sales or customer service depending on key words/tags/attributes in the social post. This integration is a key differentiator for the Marketing Cloud, creating synergies across CRM’s product portfolio and broadening the product footprint.

Service Cloud adoption on the rise Service Cloud is well positioned to become another mega business over the next several years. The product itself is getting better with time and with a number of success stories around the world, this is only gaining huge momentum. One of the most notable feature is the 3rd party application integration, as it allows a company to incorporate in-house or industry specific applications in the Service Cloud interface, dramtically expanding the reach of the application. The more powerful part of Service Cloud : Integration across multiple channels (web chat, email,phone, video) permitting cases to be managed across various channels from an an integrated mannner. The social dimension kicks in here with the launch of features like live news feed - these can push urgent notifications from multiple sources directly to the agent, empowering the agent much more in the process. Integration with Radian6 also allows rapid response to social media posts on Facebook, Twitter, and other social media channels. Like in every other part of SFDC product spectrum,the emphasis on mobile and tablets were clearly seen as coming - and SFDC higlights that the interface experience through tablets would be identical to the desktop experience - an important one as mutiple tablets are enabled within the larger SFDC platform.

Salesforce Touch Experience Salesforce touch delivers on Salesforce’s long opined perspective that the future will be delivered over multiple devices and in multiple contexts. They were arguably the first company to really recognize the enterprise value of the tablet, and touch will enable their customers to deliver highly contextualized applications to their staff and stakeholders. Similarly with Chatter Communities we see Salesforce spread a fabric of social engagement outside of the organization itself and create continuity across the spectrum of customer to vendor touchpoints. And Data.com Social Key simply allows the organization to move away from the current paradigm where enterprise contact data is seen as distinct from external contact data – rather the two things will be merged into one global contact – the way most of us work in our day to day lives.

Other significant announcements

• ChatterBox enables content to be deeply embedded within an enterprise application and ChatterBox does this. As it can be seen, content is an integral part of core workflows and processes and not something in and of itself. Well evolved deep integrations of third party applications can be a very compelling model for content management, but a native product brings with it huge advantages. • The new Salesforce Identity will deliver “Facebook-like identity for the enterprise,” a single, social, trusted identity service to access and centrally manage every cloud app. With nine major enterprise cloud platform services, companies can now accelerate innovation and deliver next generation social and mobile apps with unparalleled levels of speed, mobile and trust on the Salesforce Platform. • Heroku integration with the Salesforce assets will now be enabled through the newly developed identity that works across all Salesforce assets as well as integrate across clouds – in a manner similar to Active Directories within the enterprise but the scale here can be really much large.

Summary : Let's now look into how the CRM industry itself is changing:

• Shift from transaction to engagement. CRM traditionally focused mostly on the customer management, and later evolved to cover functions like relationship, service etc. Shift forward to engagement strategies point to a move towards bi-directional conversations, unstructured information, and models of influence.

• The distinction between consumer and enterprise is slowly melting away – In other words the consumerization of the enterprise is becoming more and more real.

• The emergence of customer experiences. CRM/Front office system’s typically covers SFA, marketing, service, eBusiness. Integrated customer experience is a reflection of aligning the front office and back office functions to provide an unbeatable customer experience.

Labels: Cloud Computing, Dreamforce, Enterprise Software

Adobe + Day Software Coming Together: Cautious Optimism

The Enterprise Software space is undergoing big change. No, I am not talking about just the shift to SaaS, Cloud, Potentially increasing spend etc. Its seeing momentum of a different kind - form a moment of pause, it is getting rediscovered as being sexy again. Different enterprise players make different moves to sort of remain relevant and continue their growth. This week, Adobe announces its plan to buy Swiss software maker Day Software. Day Software is a content management company focused on the high growth markets of Web Content Management, Digital Asset Management, Social Collaboration and Targeting & Optimization. A quick reading shows that following Adobe’s acquisition of Omniture in September 2009, this move by Adobe is clearly aimed at getting into the web experience management (WEM) market place . The expectation here is that Adobe would help its customers through its combined offerings the capabilities to bring together the audience insight gained through the web analytics of Omniture and Day’s CRX content platform. The acquisition price is about US$240 mn, a 67% premium over Day’s last 90-day average price. Analysts note that Day Software had $44 mn in TTM revenue (based on filings and current exchange rate) and has been growing at 40% yoy. Goldman Sachs estimates the EV value of Adobe to be about $214 mn, which implies an EV/LTM revenue multiple of 5.1X vs. 5.0X for Adobe’s Omniture acquisition.

Day has been positioning itself as a leader in the web experience management space for a while. Web experience management, sometimes called customer experience management acts a single platform to manage all interactions, across a variety of apps and business systems like ERP, CRM etc. Day’s products like Web CMS CQ5 and their content repository CRX will become integral bedrock to this solution set. Adobe has outlined its vision of leveraging the benefits of Day being a leader in the WEM market and a as a heavyweight in developing the concept of next generation content management with focus on web experience. Day comes with an array of capabilities – particularly its Social Collaboration and CQ 5.3 Personalization, Segmentation and Targeting capabilities make its case as a leading player in the arena of web engagement.

Day Software has been making substantial efforts to improve on their capabilities and were sort of repositioning themselves as THE WEB EXPERIENCE management Company for some time and were building rich functionalities centered around personalization, collaboration and analytics leveraging its content repositories. A robust content repository integrated well with a variety of functionality centric add-ons one that can integrate with social networks is a killer combination and that’s the direction that Day was moving towards. A larger company like Adobe with higher resources and a killer analytics product like Omniture in its stable can potentially create a new momentum for Day’s product. The integration roadmap would be a key thing to watch here. Day might be less known in US corporate circles given that it is Europe headquartered and most of the leading CMS players are US headquartered, but Day has widely known in the open source and open standards community. Day has been an active contributor to the Apache projects like Sling & Jackrabbit and the open source community is watching to see how Adobe will work on this moving forward. Similarly Day has been a big supporter of CMS repository standards (JCR and CMIS, JSR standards) and it has to be seen what direction Adobe would like to take moving forward post the acquisition. For some, Adobe and open standards represent opposite ends of the spectrum!

For Adobe, a big player in the creative and front end space, this deal is significant, as it helps them to do two things:

A. First time Adobe gets a real shot at getting a slice in the back end – content management space – traditionally they have partnered to get a grip on this space and have made limited impact with their own efforts in getting there thus far. It’s a paradox that was unfathomable for awhile and with this move, Adobe gets a real crack at it.

B. Adobe, based on the nature of their core business has been mostly doing shrink wrapped solutions whereas a content management solution has to be sold to enterprises as an infrastructure with different sales and support mechanisms.

However, for their customers, some answers to questions /scenarios like these are very important :

A. How would Adobe help move Day’s offering into cloud – given Omniture’s experience in the cloud and Adobe’s clickstream and how much and which way these could be brought to work with Day’s software. (Moving transactional data and content into the cloud is the hottest area for enterprises today – this is a VERY BIG OPPORTUNITY here)

B. Day’s customers would be hoping that Adobe keeps the direction of the product evolution in its core areas and can invest more and accelerate research and development besides potentially integrating with Omniture and Adobe’s content creation tools.

C. Adobe has OEM’d Alfresco in some of its Livecycle Enterprise - how classy Day product could integrate there is an open issue.

D. Cultural Integration : Day Software is Swiss based software maker and Adobe is primarily based in the Silicon Valley and ably supported by their teams in India – this is going to be kind of tough getting them together . (My view is for Adobe to leverage Day’s talent besides in integrating Day products with Adobe by leveraging them to work in Adobe platforms like Extensible Metadata Platforms

The risks of enterprise software mergers and integration are well know but in this case , the space is a reasonably neat fit (with some minor conflicts) but the upside possibilities abound!. The hidden value is to bring together content creation, content management and analytics together and straddle the transaction to analytics value chain - this is indeed a great space to play in. On the whole, upside for Day’s customers exist but Adobe needs a very finely thought out plan, to be executed really fast and with sophistication for this marriage to deliver and endure well enough

Labels: Adobe, Day Software, Enterprise Software

Enterprise Software : The Moments Of Pause

SAP announced major executive board level changes on Sunday. Léo Apotheker moves out out as CEO and in comes Bill McDermott, head of the field operations, and Jim Hagemann Snabe, head of product development, who will now share the top job. Interestingly, SAP promoted Vishal Sika, chief technology officer (CTO) to the SAP Executive Board.

Joab Jackson and Chris Kanaracus have an excellent write up at Computerworld, with some excerpts from an internal email from Apotheker to SAP employees. I found in it a curious piece of information - references to the results of a recent SAP employee survey, which found a dramatic loss of confidence in senior management, according to a Financial Times report.

In the conference call earlier this morning, Plattner sounded a humble note on SAP's unilateral decision to increase its software maintenance fees, in the midst of a recession. As reported by Computerworld:

He addressed head-on one of the most heated issues in SAP's recent history -Its recent decision to move customers to a richer-featured but more expensive Enterprise Support service. The plan rankled users worldwide, particularly those with older, stable systems and little need or desire for additional support.

"I was part of the decision that we had to raise maintenance fees," he said. "That is not something we can put in Léo's shoes. This was done by SAP. We made a mistake and we have to change course here, and regain trust from the customers who were more than upset. Unfortunately, the head of the company takes the blame, whether it was just or not."

On the same development, Bob Evans has a very good piece in InformationWeek on SAP's failure to put its customers front and center:

Speaking in broad strokes about trust and the need to rebuild it, Plattner said this: "What SAP has to re-establish is that we have trust between all involved parties: the [SAP] Supervisory Board, [SAP] Executive Board, the co-CEOs, the management team, the employees, the works council, the partners, the customers, and the employees working for our customers." Do read Bob Evan;s very insightful perspective on the order of importance provided to various stakeholders therein.

For me, the issue that bothered the most :Why did the customer backlash was so felt? Even when Leo assumed office, it was widely believed that SAP needed someone to destroy the set ways of doing business fully factoring in the market transitioning away from the upfront license and implementation and operating cost model. When the year-on-year spend on SAP kept to be a very large numbers, business concerns on SAP spend was always an agenda item for discussions inside enterprises. When the 2008-2009 slowdown happened, while the IT spend was coming down, many were seething when the big ticket items like that of SAP spend could not be touched at all and there was really very little that business could to step out of this logjam! In fairness to SAP, this might have been generally tue of most of the big on-premise enterprise software vendors, but SAP probably had to bear the brunt as the core/ frontline software inside many business. This at a time SaaS & Cloud were the ringing buzz all across the enterprise while like the big old iron – SAP was there reminding business of the just gone era’s model of software and operations! The need for innovation in the SAP eco-system has been amply clear – customer’s were always vocal about this - but the almost regimented groups within SAP appears to have hardly got it and continued to persist on the past operational models - we are now going to see what quick steps SAP takes to reposition itself – how it becomes more agile, nimble , caring and friendly to customers. There are some tough and challenging positions that SAP may have to take to move forward and come out successful – the talent is there, the heart seems to be there going by Hasso’s comments– fast execution would make the ultimate difference here.

There are great lessons here – When a company gets dangerously out of touch with what its customers do and want and need, and with how those customers rate and reward IT vendors in these days – there is a big discernable shift – the ringing message is customers want to do a great deal more with a whole lot less. In an age of short cycles, the model of software product companies trying to harvest with almost EOL products with maintenance coming at a high price when the commercial barriers to adoption of the next generational technology constantly coming down is quite comical to say the least. The whole enterprise software ecosystem is closely watching the next steps here and what happens here wil in many forms affect the entire enterprise software ecosystem. I do no want on –premise enterprise systems to be thrown out with the bath water, though. Without doubt, wherever designed and implemented properly, these systems continue to serve the their purpose . What comes in the way is their rigid and sometimes monolithic architectures, which bring unreasonable rigidity and inject unwanted complexity in the way business can leverage them. With the result, they tend to become a costly asset akin to an old utility that needs massive budgets for maintenance – whereas identical spend in newer technologies can perhaps yield far better business demonstrable business results. My wish is simple :Like in the world of mass customization - I want simple, service enabled modular functionalities with multiple delivery options – On-premise, SaaS & Cloud based made available and with reasonable integration/orchestration mechanisms these can be brought together on need basis and which can bring down the TCO of enterprise software adoption while simultaneously, increasing business benefits realized!

As I see it, gone are the days of investments centered on big-bang inititatives. In the userbase that am interacting with, there's almost a near fatigue effect all around when it comes to fresh IT investments, while supporting existing/ongoing initiatives consume most part of the planned spend budget. Here comes the opportunity actually - this forces people to think of highly innovative and purposeful initiatives - this opens the space for newer software players with fresh solutions - big monoliths obviously can't get there that fast. Smaller software players who have been weakened by the onslaught of consolidation and slowdown, unfortunately would fall by the wayside. In sum the situation is slowly but surely opening up opportunities for fresh play. Some see it as SaaS opporunity, some see it as new players ..but for sure a slow but steady momentum is building up in search of the elusive futuristic solutions and no software vendor – however big and mighty can ignore /try go against the stream or swim slowly along the stream!

Labels: Emerging Trends, Enterprise Software

The Changing Enterprise Software Momentum

Changing economic sentiments, and diminished IPO market create the perfect storm for the Big 4 MISO - (Microsoft, IBM, SAP, and Oracle)as they see the medium/small sized vendors are beginning to make M&A moves. See this:

-> Adobe acquires Omniture

-> CA buys NetQoS

-> VMware buying SpringSource

-> PE players scooping Skype

-> Intuit buying startup Mint

- >Avaya buys parts of Nortel

Clearly momentum is slowly beginning to hit the M&A circuit - the backdrop has been that this year has seen very few deals compared to last few years averages. Some trends at work that shape the thinking on why the immediate future could see more and more of continued consolidation. Sramana Mitra assesses the prospects of some players. One may ask - why think of enterprise software when consumer technologies and internet infra/app players are getting more attention. As I wrote here, the consumerization of enterprise technology has the potential to open up new powerful combinations. The possibilities of such fusion of different worlds may open up good chances for disruptive innovation - this provides a platform for such an ideal fertile ground that can lead up to a potential business model innovation – so enterprises need to be well prepared to capitalize on such possibilities. What should the CXO’s do in such contexts: Embrace such technologies faster and in innovative ways align them to their business growth plans. Consumer technologies are not a taboo to be shunned - these need to be constantly assessed for their potential for innovative leverage in growing business.

• Strategic acquisitions target vendors with new product presence/ strong recurring revenue streams in well established areas. The cognoscenti keep whispering that large maintenance revenues as an area for potential targets. Look at Oracle’s reported numbers for this quarter: GAAP new software license revenues were down 17%; software license updates and product support was up 6%.Nurturing a profitable and recurring revenue stream will allow many vendors to share overall development and support costs as they weather the next storm. The hunt is on for vendors who fit this bill as megavendors and private equity actively chase after these assets.

• Weaker companies would see much lowered publicly traded vendor valuations. For companies on the prowl for acquisition with a target class, its never been cheaper and easier to acquire a competitor. Most P/E ratio have become quite attractive and fall below the standard 2X to 3X revenue price target.

• International market expansion. the larger vendors express tremendous interest in acquiring new distribution channels, micro industry verticals, and new geographical coverage. Many in the MISO ecosystem see a lot of turbulence and rumors of M&A run fierce as the partners consolidate to gain scale for regional and global delivery.

• Most privately held vendor exit strategies revolve around acquisition not IPO. Many firms with IPO plans have been told by their boards to refocus on revenue growth and partnerships. The intention - use partnership success to both drive revenue growth and attract acquisition by a larger vendor. Many see acquisition by the Big 4 as the best exit strategy at this point in time.

• Newer delivery models get more and more acceptance : If we analyze the standalone new sales numbers we may get to see this trend clearly. MISO on-premise license revenues may keep dropping/stagnating and in some cases record very moderate growth (in specialized areas). The ERP refresh rates may slowly begin to show a downward trend! SaaS and cloud players need to and i would believe will expand their presence beyond FAS,CRM & HCM spaces - this may also include on premise players getting to offer SaaS solutions in niche areas like procurement, PLM etc. Cloud computing models would over time get to become more popular with ease of use, quick implementation times, pay as you go, no infrastructure model a la google or salesforce and are in fact seeing more faster adoptions.

• Net-Net : Despite the expectations of a slow moving economy, end users should assume that the biggest vendors/ faster moving niche vendors will continue their torrid pace of acquisitions. As these acquisitions factor into long term apps strategies and planning for 2010 purchases, users must assume that truly specialized solutions with significant industry footprint will be acquired. Many customers recommend niche vendors that they work with to the megavendors to acquire them so that their investments are deemed to be safe.

Labels: Enterprise Software

Opportunites For New Billion Dollar Software Companies

MR Rangaswami opens up a refreshing discussion on software’s billion dollar question, The article - highly recommended for reading points to possibilities of new billion dollars emerging (while some are skeptical of such large software companies coming out in the near future). I, for one firmly believe that possibilities of new billion dollar software companies are very bright. Lets examine the why and how of such a scenario. The business dependence on digitized processes are getting more and more pronounced. The warp and the weft of business processes are firmly centered around technology . With increasing complexity of enterprise applications, we see that the dilemma of business in supporting existing tech investments which keep increasing on the one hand and the pressure to gain more yields from such investments to make the business more competitive. This challenge is in many ways pushing the business to look for and invest in more and more innovative technology centric solutions. With large software vendors respond slowly to the changing realities or have their own delivery program schedules for providing such solutions, many best-of-breed vendors would be able to move in and begin to provide relief. This demand will provide the fodder for the growth and sustenance of many more billion dollar software companies albeit with varying means of delivery.

The enterprise2.0 technologies are providing huge opportunities for enhancing business competitiveness and the bottoms up participation centric approach of technology and tools of the enterprise 2.0 era enables a new trajectory and momentum for organizations to leverage technology in very many innovative ways. Surveys find that technology buyers are highly socially active, and software vendors are matching their appetite by being in the forefront of selling social media centric solutions. Today in the consumer driven technology age, technology buyers inside enterprises encompassing both the business and IT users are highly switched onto the social media and use/tend to use many of these tools in their business. The key here is to help create enterprises go after and attain tangible and sustainable value. Lets build this further and see one or two instances where this could create a huge market opportunity for software vendors.The enterprise 2.0 technologies provide firms with the mechanisms to create value by inviting many stakeholders to interact real time and enhance the value creation process with its openness and timeliness. There are examples of social networks that help business manage the entire product development processes and an interactive one enables it to be enriching and more valuable.

There are many bright spots where opportunities for new software that can pay back enterprises in very short time exist. For example in the cusp of collaboration technology and supply chain software we see the advent of new innovations like demand signal management. Here we see that enterprises replace relying on internal data such as order and shipment records with analyzing weekly and even daily point-of-sale data from retailers so they can better see what's selling where. Sustained efforts to exploit the growing importance of complex interactions could well generate durable competitive advantages and this can be done only by a new set of enabling software – and these are all big ticket opportunities. In all these leading edge opportunities, unarguably, small vendors and upstarts tend to move faster and therein lays the growth opportunities for software vendors to create billion dollar enterprises. The contours of such emerging software companies are clearly there to be seen.

Labels: Emerging Technologies, Emerging Trends, Enterprise Software

Microsoft Set To Acquire FAST Search

Microsoft announces intent to acquire FAST search. FAST, one of the significant player in the enterprise search space post the Verity acquisition by Autonomy, now bites the dust. FAST has had some financial woes of late – but it has good technology capabilities and a large customer base. FAST specializes in enterprise search –particularly centered around unstructured data and has a enterprise scale application with good deployments to showcase. Microsoft has indeed made the right move. The valuation is at around 6X EV/Sales. Clearly, the acquisition of FAST bolsters Microsoft's positioning in the enterprise search market, making it that much more formidable in its enterprise search business against Google. Lets look at this –Microsoft can now span across the stack –covering the entire back-end infrastructure inside the enterprise and with collaboration tools and search – on paper, it shows formidable strength for someone trying to compete with it.

As Mary J Foley points out, Microsoft’s enterprise-search strategy is focused on SharePoint Server, a family of back-end servers and services which includes content-management and search. Microsoft also offers a Microsoft-hosted version of SharePoint, known as Office SharePoint Online, which is currently targeted at companies with more than 5,000 seats. After all Microsoft viewed Sharepoint as thenext big operating system from Microsoft. – sharepoint is aggressively muscling inside enterprises.

Seen at another level, this is part of consolidation streak and clearly almost all companies aged upwards of six-seven years in the <200 Mn$ sales are surefire hurts/beneficiaries in the consolidation fever and almost all software enterprises less than 500 Mn$ would be evaluating options, except for very niche players and those seeing growth. We can now expect some action from other big players here – to storm into a fast growing enterprise search space. This wave of consolidation is not necessarily a great development from a customer perspective - in terms of pricing and support. I also believe that this would unleash a lot more entrepreneurism in the market - people and money are floating out now. Players upwards of 1 Bn$ sales would be looking at this from a different perspective of identifying the potential catch - I guess the name of the game is changing.

Labels: Emerging Trends, Enterprise Search, Enterprise Software, Mergers And Acquisitions

Enterprise Software : Not The Significant Other

Scoble says that enteprise software isn’t sexy. Vinnie makes a passionate defence.By definition, enterprise software products are designed to integrate computer systems that run all phases of a businesses' operations to increase internal coordination of work and cooperation across an enterprise. These products facilitate the integration of core business operations and processes, including sales, accounting, finance, human resources, inventory and manufacturing. An implementation might involve a single application, or portions of a single application, or an enterprise system could control all major business processes in real time, via a single software architecture on a client/server platform.
Tibco’s Vivek Ranadive highlighted somewhere that some banking customers of TIBCO have infrastructures that are bigger than the public Internet in terms of the storage they consume, given all the data and equipment they have to support. It’s massive.
The current developments in the web have given the users a sense of empowerment . This means people can do things very quickly and on their own, so the velocity of information is a lot faster. This gives a sense of illusion that things move only faster in consumer space. Lets step back – what is the future of the darlings of consumer space of today : moving into the enterprise . Matt Asay points out,the real enterprise software companies of tomorrow are probably the biggest consumer technology software/online brands of today: Google, Yahoo, Digg, Facebook, LinkedIn, etc.

As I wrote here, the consumerization of enterprise technology has the potential to open up new powerful combinations. The possibilities of such fusion of different worlds may open up good chances for disruptive innovation - this provides a platform for such an ideal fertile ground that can lead up to a potential business model innovation – so enterprises need to be well prepared to capitalize on such possibilities. What should the CXO’s do in such contexts: Embrace such technologies faster and in innovative ways align them to their business growth plans. Consumer technologies are not a taboo to be shunned - these need to be constantly assessed for their potential for innovative leverage in growing business.

Imagine a world of business and commerce without those huge software applications. The global prosperity wave that we are seeing, significantly leverages enterprise software capabilities.There are repeating patterns of significance from the cavalcade of mergers, products, partnerships, and technologies on the enterprise software market . The highly competitive and high-IQ nature of software technology guarantees that the tide of significant advancements in the enterprise software industry will not likely be seen next week. The scope of impact is dramatically different between the enterprise software applications and that of the consumer space. A macro-trend cuts a swath through the software industry's silos, affecting the industry cross-region, cross-vendor, cross-market, cross—vertical industry, and cross-customer – a feat that enterprise software specializes in and one as irregulars, we are happy to facilitate make it happen faster, better and cheaper. Like they say that brevity in expression is a hallmark of an expert, extend the line of thinking, the blog traffic is not the indicator of impact - in real sense.In doing so, we don’t need to feel glamorous on a minute-to-minute basis.After all, enterprise software is not the significant other.
Update : Irregulars - Michael Krigsman, Dan Farber, Dennis Howlett, Anshu Sharma, Craig Cmehil, Jason - offer their perspectives.

Labels: Emerging Technologies, Emerging Trends, Enterprise Software

Enterprise Software : Accelerated Innovation Is the Key

M.R.Rangaswami writes on what ails the enterprise software industry.

They say that youth is fleeting. In the enterprise software industry, the youth are fleeing.One need only look at the hairlines of today’s software leaders. The current wunderkinds are not looking to create the next wave of corporate computing applications, but are instead gravitating toward emerging fields, such as web 2.0, biotech, and anything “green.” Bill Gates was 19 when he founded Microsoft (MSFT). Steve Jobs started Apple (AAPL) at 21. Even Marc Benioff was in his 30s when he founded Salesforce.com (CRM) — and at 42, he remains one of the industry’s youngsters. Software companies need to do more to attract the next generation of business leaders who will drive the evolution of the industry for decades to come.

MR is very perceptive in his observation that the industry is dominated by old hands.His prescription for rejuvenating the industry is indeed insightful and the approach very fresh.
To be fair, the enterprise software industry continues to chug along with some advances. SaaS applications enable business to experience an increasing number of best-of-breed solutions for features such as ecommerce, human resources (HR) performance management, and product life-cycle management, all of which have been extended to incorporate on-demand delivery options without IT overhead required. Improved implementation methodologies, from preconfigured templates to expanded professional services resource capacity characterize the ecosystem today. Faster rollouts, global scale ups – all these are becoming commonplace. The future of the market leaders in this space will be largely defined by their ability to win over business users by addressing their pain points and helping them achieve common corporate goals I think innovation –accelerated innovation is the key to advancements in the enterprise software industry.
I think innovation – accelarated innovation is the key to advancements in the enterprise software industry. I think the wave of consumerism engulfing the tech world is challenging the halo of enterprise software. As I wrote here, In this age of contribution economy – a phenomenon that we are seeing ever since the Internet started to connect everyone to everyone else all the time, people from around the world can more easily contribute leading to exploding results - caused by the coming together of energy, ideas, and knowledge. Some of the more familiar examples of these collaborative efforts include blogs, open-source software, podcasts, and even the nonprofit online encyclopedia Wikipedia. We are also seeing customers leading the charge of innovation and the economist article on user-led innovation exemplifies a new form of collaboration. The rise of online communities, together with the development of powerful and easy-to-use design tools, seems to be boosting the phenomenon.
I am optimistic about the enterprise software world embracing innovation centered around consumerism sooner than later - The impact of consumerization on enterprise and opportunities to leverage such advances are all groomed in the consumer space itself. The transition of such things into enterprise IT thereby happens automatically – in a way, advances in consumer space dictates the corresponding fallout in the enterprise space. True, but difficult to believe – right? Someone referred this phenomenon as akin to a civil war. An analysis of the past shows that in a significant number of cases the technologies that were originally focused on consumer space have made deep impact over time have made deep impact on the enterprise space – Personal computers, search, IM all are shining examples of this powerful trend. Native web companies keep coming out with a lot of full blown but trial offerings that entices lot many more consumers and many a times a revenue and utilization value evolves out of more and more usage of such offerings. In the process the consumer space gets more and richer forcing successful offering to be pushed into the enterprise –in larger numbers and faster pace.

MR is in a way definitely right – a mixture of more young people along with some of the best minds (who could be older)driving the enterprise industry would make this transition happen faster.

Labels: Emerging Ideas, Emerging Trends, Enterprise Software

SAP Plans To Acquire Business Objects

I wrote a brief note for sandhill on SAP's plans to acquire Business Objects. Recently, Oracle moved into the BI space aggressively by acquiring Hyperion. I wrote then,” All I can say is that once can expect more attention on Cognos & Business objects while expecting more traction for players like Outlooksoft". Few weeks later SAP acquired Outlooksoft.
BI is clearly one among the fastest growth area in enterprise application space today. The consolidation in the BI space was expected for sometime. SAP says that the primary driver for the acquisition, its biggest and a reversal of its avowed organic-growth strategy, was the potential to gain new business. SAP is racing towards reaching its goal of more than doubling its customer base to 100,000 by 2010, mainly by winning more small and medium-sized companies as clients. Business Objects has more than 43,000 customers, according to its own data, and made 2006 sales of $1.25 billion. It says about 40 percent of its customers are already customers of SAP.The two companies said they would continue to offer standalone software as well as integrated solutions from an unspecified future date.
BOBJ's preannounced less than expected numbers for 3Q07. This reflects the increasing competitive landscape within the BI sector. Analysts infer that the license growth were negative this quarter. Business Objects also offers its software on demand over the Web as so-called software as a service. SAP plans to start selling a broader on-demand offering next year, though the launch has been delayed, and Oracle mostly inherited on-demand customer-relations service Siebel.com with its acquisition of Siebel Systems. Oracle has spent more than $20 billion in recent years on buying companies to challenge SAP's lead in the business application software space. The business intelligence-software market is worth at least $8 billion and is expected to grow by 11 percent annually until 2010, faster than the wider software market. SAP said the acquisition would be earnings-dilutive by a single-digit eurocent amount next year but would add to its earnings per share from 2009 onwards. Next in line – perhaps players like Cognos, Informatica etc. As an aside, would like to revisit this acquisition 12/24 months from now to see how such mergers benefit the players , industry etc. – and that include the customers.
Read the full note here.

Labels: Emerging Technologies, Emerging Thoughts, Emerging Trends, Enterprise Software, SAP

Enterprise Software : Complexity & Effectiveness

Just came across this interesting article on the state of the enterprise software industry. The article raises the question, Is enterprise software just too complex to deliver on its promises? After all, enterprise systems were supposed to streamline and simplify business processes. Instead, they have brought high risks, uncertainty and a deeply worrying level of complexity. Rather than agility they have produced rigidity and unexpected barriers to change, a veritable glut of information containing myriad hidden errors, and a cloud of questions regarding their overall benefits
Cynthia Rettig, the author adds, “The way most large organizations actually process information belies that glorious vision and reveals a looking-glass world, where everything is in fact the opposite of what one might expect. Back office systems — including both software applications and the data they process — are a variegated patchwork of systems, containing 50 or more databases and hundreds of separate software programs installed over decades and interconnected by idiosyncratic, Byzantine and poorly documented customized processes. To manage this growing complexity, IT departments have grown substantially: Impressive statistics to support the point: As a percentage of total investment, IT rose from 2.6% to 3.5% between 1970 and 1980. By 1990 IT consumed 9%, and by 1999 a whopping 22% of total investment went to IT. Growth in IT spending has fallen off, but it is nonetheless surprising to hear that today’s IT departments spend 70% to 80% of their budgets just trying to keep existing systems running.
Software’s supposed flexibility and unending ability to manage complexity contributed to the discrepancies between the great expectations and mediocre reality that plagued the first round of implementations of enterprise resource planning systems. The upcoming promise of SOA does not give any substantial relief. SOAs become additional layers of code superimposed on the existing layers. That means it is possible that a process will fail at some point due to some fault in the layers below, and in order to understand and fix that problem, software engineers will need to deal with the layers of enterprise applications below the modular business processes. The advice to CIOs is to get more deeply involved in the business issues and educate executives on what IT is and what it actually does. Corporations see in software’s seductive invisibility and seemingly open-ended flexibility a never-ending frontier of promise, where hope triumphs over reality and the search for the next new thing trumps addressing difficult existing problems”.
All these are not going to stop the increase in IT spending. The advice to business is :
- What do business do now to stay protected for now and to be prepared for the future?
- While context can provide more meaning to answers to such questions, a few guidelines may be in order for the user business.

From a Technology Standpoint:
-There are no more standalone initiatives – look at all initiatives as part of a larger program and assess readiness and commit resources
- Make it a mantra to adopt stronger emerging technologies faster: the likes of mobility solutions, Enterprise 2.0 solutions, BPM etc.
- Business case if non negotiable even for technology assessments
- Security management - at all levels becomes very important
- Technology governance and standards adoption are changing fast – enterprises need to ensure that they follow the progress in adoption.
From a Management Standpoint:
- Rigorous assessment of all investments with strong business case as the anchor.
- Investing in developing and using in industry wide IT value approach is a good practice for enterprises to follow.
- Focus on metrics in value measurement: count the tangibles and intangibles vigorously
- Assess risks for all programs with more rigor – risk mitigation plans, cost benefit analyses all need to be instilled as a discipline for IT investment committees to carefully assess while clearing investments
- An integrated view of costs, risks and benefits need to be made and constantly reviewed – this include, setup and ongoing costs

In reality, misaligned investments and uneven absorption of technology are contributing to the rise of inefficient business and technology architectures. Enterprises need to be focused on service orientation to meet the future needs and ought to focus on innovation around processes in order to stretch IT capabilities to its limits.
Global growth & innovation shall fuel IT spending. As I wrote here, the consumerization of enterprise technology has the potential to open up new powerful combinations. The possibilities of such fusion of different worlds may open up good chances for disruptive innovation - this provides a platform for such an ideal fertile ground that can lead up to a potential business model innovation – so enterprises need to be well prepared to capitalize on such possibilities. What should the CXO’s do in such contexts: Embrace such technologies faster and in innovative ways align them to their business growth plans. Consumer technologies are not a taboo to be shunned - these need to be constantly assessed for their potential for innovative leverage in growing business.

Labels: BVIT, Emerging Trends, Enterprise Software

Enterprise Software Industry: Directions

I wrote a brief note in sandhill.com after attendingthe Enterprise 2007 event. Here’s my reflection of the state of the enterprise software industry, as shared by me with the other participants. The note can be read here.

Observers of the enterprise software industry can't avoid the glaringly noticeable trend therein. This is an industry - seen as ever-maturing by some and "never maturing" by others - and an ecosystem that is demonstrating growth indicators which are now becoming visible to all observers. A range of data clearly supports the notion of growth: starting from value added by the industry over the last few years - take the number of people that the industry employs, the projected growth rates, the capital outlay for the industry, and so on.

The consumerization of the enterprise is moving ahead at full speed and may become irreversible. While some enterprises are experimenting with this –wherever adoption has happened the surge in interest appears high promising to make the adoption of such technologies faster and deeper within enterprises. The interesting part of the equation is that a number of newcomers are coming with a variety of solutions but enterprises see before them humongous opportunities for differentiation and for fostering competitive advantage in adopting such technologies.

The role of IT inside business may get more and more strong and the actual disappearance of border between IT & Business may be happening – it’s definitely begun as of now. From IT being a LOB, IT shall be a dominant force in every LOB. While all this is happening, there is a discernible movement that is being felt all across the ecosystem: the customers are beginning to slowly assert themselves in taking control of their IT destiny. Read more here.

Labels: Emerging Trends, Enterprise 2007, Enterprise Software

Enterprise Software System : More Innovation Ahead

Innovative software ecosystem is propelling the recovery and growth of the high tech industry – this is the key message of the sandhill customer survey of enterprise software users. Pointing out that innovation is happening at the industry level and not at the product level –MR in his opening note at Software 2007 said the innovative streak can be seen in advances in the form of SaaS, SOA, Vertical Apps, Enterprise 2.0, Delivery innovation etc. Taken as a whole – these have far reaching effects when these intersect.

Such a model of innovation gives more than adequate role for small players to participate and at a time when IT spend is expected to be more or less flattish, the investment commitment made for software in the sandhill.com administered survey shows an increased outlay for software purchase! Good news indeed. This time the event has become really big with internal pavilions & innovation showcase areas. It was good to see Hasso talking about the new SME focused product that SAP is all set to unveil – the key is this is fully centered on on-demand model(though on premise model shall also be supported). Plattner says the yet-to-be-named project involves a completely new code base different from SAP's existing suite - this is a massive one - Hasso says that this has been under development for over three years, with more than 3,000 developers. Key takeaway - The system shall have all services exposed - this means that all features of the software will be accessible either through a Web browser or through “smart client” software - additional functionaliites would be rendered here.

HP’s Shane Robinson succinctly captured the shifts that are happening forcing giants like HP to shift their R&D allocation from software – hardware ratio of 30:70 to 70: 30 today. Some of the shifts he brought out are quite interesting:

Consumer Vs Enterprise to Consumer + Enterprise
Hardware Vs Software to Hardware + Software
Individual Productivity to Communication + Collaboration
Connecting Devices to Connecting users to services

And a few more…

No wonder all the recent acquisitions of HP is in the software field. Mark Benioff was his usual self – very articulate & humorous while the CIO panel moderated by Ernest von Simson, Senior Partner, Ostriker von Simson with Panelists - Neil Cameron, CIO, Unilever; Rob Carter, CIO, FedEx; Patricia Morrison, CIO, Motorola; Tony Scott, CIO, The Walt Disney Company was quite focused and had a great advice to vendors:
Tony Scott,Disney: Drop this "we are the greatest in the world" thing and give me an implementation strategy so I can bring this across my company.
Motorola: 12k engineers and we have tons of software that isn't warranted and indemnified. My plea to the industry is quality. The amount of time we put down bugs.
Neil Cameron,Unilever: Fantastic. Absolutely.
Rob Carter, FedEx: Every time we add something new, we get more cost an complexity. This is a relationship oriented business and you have to cut through the noise, provide technology migration strategies. We just don't have time for all the opportunities that come at us.
Bullishness, growth, innovation, a sense of recognition that small players would also begin to not only survive but also force change on the larger ecosystem – all bode well for the enterprise software industry’s future.

Labels: Emerging Trends, Enterprise Software, Innovation, SAP, Software 2007

Shai Agassi's New Blog

Shai Agassi has a new blog. Subscribed. His postings in the SDN used to be widely read. His farewell blog post at SDN was widely read and had emotional comments left by some of his admirers. My views on his departure from SAP is available here. He is now publishing a new blog. His first blogpost on enterprise software in his new blog opens up an interesting discussion. The debate on monolith vs best-of-breed software. Needless to say that Shai envisions a future where ERP's are core for enterprises for scaling up business. He views that closer to the core processes the harder it is to live with best of bread. But on the edges, he definitely sees things on the boundary line of ERP that will get interesting offers from many vendors.

Shai - welcome to the blogosphere this way outside the SAP world. My sense is that best-of-breed will again get more and more pronounced - after this consolidation binge peters out. Big companies take years and years to upgrade their software to cope with technological advances and when corporates struggle so much to upgrade to new versions- besides being costly, upgrades are becoming quite tough to execute. The joke amongst CIO community is that one-in-three CIO's may lose their job at the end of an ERP upgrade exercise( This is just a general comment).In general, customers also talk about difficulties in reconfiguring applications ( the reality is far from the easy reconfig flexibility that they hear during salescycle).

I went to the SAP SDN network site and searched for Shai Agassi. I wanted to get the URL of your hugely popular farewell note - but the results that appeared in the first page did not throw that result. Instead I got some URLS of posts made by others about your departure and threw 3 or 4 results that pointed to your presentations made years back. Neither timeliness nor relevance was the criteria there. Am sure a specialized search product would give more options for search and provide more relevant examples. That's where the best-of-breed players measure up well - for precision attack so to say as against carpet bombing. For example, even in the Apple example that Shai has higlighted in terms of implementation success( am quite sure that there's a solid story of SAP implementation there - like the case with several other of its global customers), I have seen other product vendors taking credit for being able to scale up their supply chain for their iPod distribution. Couple of years back, Phillip Merrick,the founder and ex- chairman of WebMethods shared with me how WebMethods has been quite critical for Apple in building their supply chain covering their logistics & fulfillment. The point here is best-of-breed may find takers at different points in time by business - though they may over a period of time try and consolidate, by then some other business in some other part of the world would fine best-of- breed to be appropriate for their immediate or specialized needs. Recent gartner estimates suggest that between oracle & SAP, they have just 40% of the enterprise application market - a vast % of market are served by a variety of specific solutions - some good, some average and some mediocre. This space is definitely not going to look only at stereotypical options and may like to experiment a lot owing to a variety of issues ranging from cost, legacy & specialization needs.Long before companies swith their core applications to SOA/Web services, the clod reality is that there will be something newer for IT to absorb. Am not just talking about future versions of Web services/SOA technologies “legacize” previous versions!

We will look forward to more of your thoughts Shai. Welcome again to the blogosphere outside the SAP World.

Labels: Emerging Trends, Enterprise Software, Shai Agassi

Showcase Innovation Winners In Software Space

Innovation would be the mantra for growth & survival for enterprise software players, including those seen as walking dead – In the valley it is innovation driving the growth

It is refreshing to see sandhill group recognizing the Top 25 Software Innovators. Released few weeks before the software 2007 meet with the theme,"Powered by Innovation” the list makes interesting reading. Innovation Showcase is comprised of four categories - Fast Track(demonstrated market traction. With substantial revenues), Software(younger than their FastTrack counterparts, these companies are generating real revenues with real innovative ways to apply software to business., International(pioneers are building substantial businesses addressing real needs around the world) and Software-as-a-Service (the next generation of pioneers that are filling out the suite of Software-as-a-Service applications across critical business divisions.)– that represent growth, innovation and are likely to experience material events in the next year. The list is well strcutured and covers a wide range of new breed of players.

I recently wrote,atleast in respect of the enterprise software, which is closer to the heart of CIO’s its clear – as I had always been telling - while vendors are addressing market realities to keep their industry vibrant and with consolidation fever ahead - one could clearly hear the voice :whether customers would benefit a lot because of this, add the need to make more innovation happen and absorb faster. No,I am not talking about Marc Benioff finding SAP innovation free, while I certainly agree with his perspective that observers tend to overestimate the creativity and innovation that entrenched technology companies can bring to a particular problem and underestimate the effect of business-model conflicts that lurk behind the scenes ( as applicable to all majors). Innovation need not not be always of the disruptive type but every type of Innovation counts. In today’s hypercompetitive world ,simply put innovation is non-negotiable and innovation streak is of very high value to enterprises.

Labels: Emerging Technologies, Emerging Trends, Enterprise Software, Innovation, Software