OnDemand Zone

Some services with On Demand branding

2009-03-27T02:09:00.000-07:00

TV & Video

Web Events

Microsoft - On Demand Webcasts
Adobe - On Demand Seminars
AIIM On Demand Conference & Exposition

Enterprise Software

Oracle CRM On Demand (Software as a Service)
Oracle On Demand managed services
SAP - On Demand Business Intelligence at ondemand.com
Sugar On Demand - Sugar CRM
Cornerstone OnDemand - talent management
Verticals On Demand

Computing Infrastructure

Sun Solaris On Demand

Other Business Software

Vehicle repair and maintenance - ondemand5.com

Data power to the people!

2006-12-06T09:51:00.000-08:00

Swivel.com just released their beta today. In their words, its 'a place where curious people explore all kinds of data'. From its early looks, it looks like a consumer web 2.0 crossed with business web 2.0 sort of thing! Its way out there...they must think a lot of lay people out there are data junkies. I certainly am one, and can almost feel a rush about an idea like this. But its useful to stop think about who would really pay to use Swivel.

Now, I know (from being a business data junkie!) that LOTs of people (specially business people) like to LOOK at SOME amount of data analysis (operative words in caps), particularly if it is simply communicated. But relatively FEW people like to WORK and EXPLORE ALL KINDS of data, and only a miniscule number care about complex data analysis. Quite simply, IMO, not very many people are very curious about things like working and exploring data.

So who would pay for Swivel? And who would use it?

I think there are several clues about it, if you look at the past couple of incarnations of Swivel over the last 2 years. They started as Grand Central Communications sometime in 2004 to provide data integration on demand for small businesses, and were covered on this blog a little over a year back. That venture folded late 2005 - most likely because it was too much of a technology fix looking for a good problem to solve. Their next avatar was a pre-cursor to the current Swivel (see "Grand Central turning to Swivel"), where they figured small business e-commerce was the general integration problem they were going to solve....a single view of data from eBay, Amazon shops, Google ads, yahoo shops, Quickbooks, Salesforce.com...primarily for the small online business. Their latest avatar looks like they're tuning this model further, though now more broadly positioned. The problem they've zeroed in upon is general purpose, on-demand, consumer-friendly analytics. They may be onto something here....particularly while addressing the small business market, a simple and complete horizontal solution is certainly a bigger (and safer) bet than a techie-directed vertical solution.

I am sure a lot of small business owners, and particularly those with a bunch of online operations, want to look at simple analytics related to their business operations, delivered within a simple user experience. But they don't have the time, resources or inclination to buy the data infrastructure, mess around with data and get to the insight. Nor the resources to hire the people to do it. Small businesses can barely hire enough people to man their operations, leave alone analysts. That's where another user community for Swivel comes in - individual analysts and boutique consulting shops - analytic IP producers and analytic services providers , who would provide small business with analysis and insight thru Swivel.

So there you go - bring together business owners and independent analysts, connect them into a variety of data sources, assemble a turnkey data infrastructure solution, and provide the means to do business (billing, account mgmt, services marketing...)...provided on-demand, fee-based, with a collaborative, consumer friendly web experience. Voila!

If that's where Swivel is headed, I sense a decent revenue model there..I can now pretty much feel the rush! I wish these guys will take this to the moon!

New on the radar - Workday - from the PSFT folks

2006-05-01T10:33:00.000-07:00

Dave Duffield, founder of the old Peoplesoft, including others from the earliest PSFT team, have gotten together to start a new enterprise software company - Workday. This should be one to watch. They don't say so on their website yet, but I hear its going to have an on-demand model. And its going to start life building HR apps, before moving on to other application domains.

They say they want to 'tackle the traditional ERP markets, in a non-traditional way'. Its easy to imagine this team is'nt going to be content sitting along watching the ERP market divvied up between SAP and Oracle. After all, its a team that played a huge role in the same market for about 15 years. Quite the powerhouse that PSFT was, they posed a worthy challenge to everyone else in the market. So this venture will be really interesting.

Workday faces both a bigger opportunity and a bigger challenge. That's how the business of enterprise software is, compared to striking out in other types of business. Two factors that accentuate the upside and downside risk of starting out in this business -

Firstly, the rapid pace of change - technology (SOA architectures, web-services, AJAX) and business models (on-demand, open-source) - creates faster sources of opportunity, and upside, for new players to leapfrog incumbents in terms of technical and business innovation. But that horsepower of change also faces the significant drag of market friction, if you will - a peculiar downside of starting out new in this market. Enterprise software customers are notoriously slow in responding to technology change. The majority of them take a fairly large time to justify and execute technology upgrade investments. They also face high switching costs with changing software vendors. These factors also combine to impose a resultant drag on vendor R&D investment into the new generation. And while an on-demand delivery model inherently has the advantage of less of this friction for both customers and vendors, the major incumbents in the enterprise market at this point - Oracle and SAP - are'nt largely based on the on-demand model.

So how much larger is the motive force in enterprise software compared to the drag? Its a question that decides whether an enterprise startup like Workday is going to see the upside or downside of the way change works in their target market. Salesforce.com may appear to be growing blockbuster against the drag, but actually its still only nibbling at the edges of the traditional enterprise market. Mainly I would argue because its not ready yet in terms of the product. But they have time on their side to get ready until the enterprise drag is wearing off. And so too will Workday. But so too will Oracle and SAP. They've got time on their side to justify a gradual ramp to the next generation, until market friction among their installed base starts to wear off.

And as this legacy - on-premise, license-based software, custom and proprietary integration, even client server and mainframe platforms - as it wears off, the enterprise software market is going to remain an interesting one to watch.

Mr. Mickos, are you sure about Oracle?

2006-02-20T03:51:00.000-08:00

I think the urge to post a reply to Nick Carr's piece 'Oracle's open source rollup' came because I work at Oracle and after a little more than a year working there, am beginning to understand how this company ticks. In general, I thought Nick was open to the idea that Oracle may be headed to some interesting place with its OSS acquisitions, but it was the comment by mySQL CEO Marten Mickos towards the end of Nick's post that made me sit up and write out this rebuttal.

Before I start, I did hear the buzz somewhere that the Oracle-JBoss deal closed last week for $485m. Now that would be an amazing development!

Also by the way, this is the first post on this blog that's not about on-demand services, but I think it marks the beginning of my intent to start writing on Open Source as well out here. They're two different animals, On-demand and OSS, but in ways not entirely unrelated. They're both about the collision between the worlds of software and services. They're both about marginal cost economics of software products continuing to play their hand, with software prices tending ever closer towards reflecting the cost of service delivery and product costs tending to reflect...well..marginal costs. :o They're both where the future of the industry is going. Currently, both suited for different purposes - OSS for infrastructure software, and on-demand for Apps delivery - but that's not a strict divide, and they are both increasingly intertwined parts of the same services. RightNow being a perfect example here of on-demand service running on open source infrastructure.

Getting back to Mr. Mickos' comment, I think he misunderstands Oracle, even underestimates. Oracle is fully aware of the commoditization that OSS is driving up the tech stack and the consequent blur its creating between software and services. Of licensed databases selling on Linux, the fastest growing server market, Oracle has an 80%+ market share so they're pretty warm to working with OSS. About 60% of their revenue comes from support services, so they fully well know the value services drive. Also - recent hire is Omar Tazi (check his blog here), Oracle's chief evangelist for OSS. The fact is, Oracle is quickly sizing up the OSS force. I think their OSS acquisition moves - Sleepycat last week, possibly JBoss this week, maybe Zend as well...reflect a trade-off between the unstoppable risk to proprietary license revenue, versus the more manageable risk of seeking to embrace and bake in OSS-based IP creation processes into the company's development and business model. Tazi even calls it OPAL (Oracle, PHP, Apache, Linux)!

From the community angle, deep technology firms like Oracle, Sun, IBM and Microsoft are strongly aware of how their business success has its roots in the technical and creative capabilities of talented engineers. A lot of this talent today is passionate about working for OSS projects. What better way to align with the interests of OSS communities than to find mechanisms to work with and sponsor them and their members, afford them the freedom to keep tinkering and creating IP in a sustained way, invest in productizing the IP, while providing a reliable, global service and support infrastructure to companies who need it and will pay for it. Ofcourse, Microsoft may take far longer to figure this out for their server products, or maybe never (or maybe they're just not nice..;)), but that's really because they care more about consumer technologies where they have different, fiercer battles to fight - the internet, the living room, the device in the pocket...

So that's where I think Oracle is heading, mostly to play a friendly game with OSS. While I'm nowhere near privy to Larry Ellison's deepest thoughts on this, friendly or not, he certainly has the ability to keep Oracle playing a game that spectators don't want to miss.

SAP's isolated tenancy on-demand model

2006-02-11T14:14:00.000-08:00

Isolated tenancy - that's the spin SAP put on their on-demand CRM service they launched last week. Sounds like a fancy term for delivering software updates to on-premise installations via web services. Their 'isolated tenants' are still expected to run their software and infrastructure on-premise. There is ofcourse subscription pricing for the service.

My take - what SAP touts as the '3rd generation' of on-demand is really just them trying to sound like they're pushing the envelope. In reality, its simply the old guard taking a step closer to where the future's going to be and where those who're not of SAP's vintage are already playing. If Corio was ver 1.0 of on-demand (single tenant hosted, ASP model) and salesforce.com circa 2001-2004 was 2.0 (multi-tenant on-demand with subscription pricing), SAP on-demand is more like 1.5. And to be sure, 1.0 and 1.5 are still derivatives of the on-premise model.

But now, I would'nt heckle too much. Microsoft only just came out with a 1.0 on-demand flavor with their partner hosting program for the latest MS CRM release. And while Oracle On-Demand, another 1.0 offering, has been around a while, it surely needs an upgrade. Oracle does have newly acquired 2.0 assets in its possession via Siebel OnDemand, but as the erstwhile Siebel's experience with On-demand shows, blending 1.0 and 2.0 business models is not without its own challenges. Going from 1.0 to 2.0 is such a leap in terms of the technical architecture and more critically, the business model, that I think none of the old guard companies are going to get there without a few interim versions and a good deal of pain.

To be sure, ver 2.0 is not without its own set of growing pains - reliability issues, deep customization, integration, and integration security most notable. Some of these are getting better addressed with ver 2.5 (salesforce.com circa 2005-2006, RightNow, NetSuite, Intacct) now doing the rounds.

Getting back to SAP's 1.5 flavor, it does offer some of the benefits of pure bred 2.0 - primarily subscription pricing and remote software updates (hopefully SAP keeps this simple enough). Most likely, I'd guess SAP is also going to mandate the specs for the on-premise application infrastructure, which in turn means 2.0 type operational efficiency in product development due to a single code base. SAP marketing also found a clever, opportunistic way to exploit the reliability pains salesforce.com is facing these days with its big iron stack, and touted their isolated tenancy as the answer to that. I hope they don't believe too much of their own marketing though. Because that's just FUD against salesforce.com's particular situation rather than an industry-wide 2.0 problem.

But here's what SAP's flavor is missing - economies of scale in operations and distribution. Its biggest limitation is that its nowhere near what's required for near consumer scale, lower tier SMB distribution. Not that SAP does'nt know this, or perhaps cares about either. They know (and say so) that it will make sense only for installations with 100+ users. Its a viable option only for existing SAP customers, for larger SMBs and large enterprise divisions that SAP might not like to lose to salesforce.com or RightNow.

And therein, within this apparent threat from SAP is the opportunity for the 2.0 players. Companies like SAP are motivated to serve the larger business and have a distaste for the lower end. It because, as a business, they don't quite know a good way to make money there. If someone can do it, its the likes of Google, Yahoo, eBay. Amazon if they're interested. Salesforce.com certainly, already becoming the best proof point for lower SMB business apps. Microsoft and Intuit, if they set their mind to it. Wild card for Oracle. No way SAP.

For good or for bad, that's splendid isolation indeed.

Outages: growing pains at salesforce.com

2006-02-01T12:48:00.000-08:00

Salesforce.com (SFDC) has recently been getting the wrong kind of attention about its outages - Salesforce.com Crashes Again. There's a chorus of people complaining in public - company watchers, analysts, customers. Competitors are opportunistically picking on it as well. Wall Street initially got a bit nervous and slammed SFDC a bit, although they seem to have come to terms with it. And check this out - a blog called GripeForce!

So what is the ballyhoo about?

At a perception level, its simply people asking a poster child to be more accountable about, well, being a poster child. Outages like these, even more, are common with on-premise software. But on-demand outages occur at a concentrated point of failure, affect lots more people simultaeously, and this sets up a big common target whose neck can be wrung. The market even has an incentive to talk more publicly about it than it has for on-premise failures.

At a service operations level, outage risk is inherent with shared infrastructure and simply needs the right kind of risk management practice - usually, the right level of investment in infrastructure redundancy and monitoring tools, with an SLA providing the sort of skin-in-the-game that gives customers the assurance they need. And heck, outages are like teenage awkwardness...everyone that grows up in the web world goes through it. Yahoo had them back in 2000, Ebay back in 2001, and Google got hit last year.

From SFDC's standpoint, their outages are actually not a bad problem to have. Sure they've probably gotten a bit ahead of themselves with the explosive growth they're seeing, the new products (err...services) they're building and the market foment they're working up. They did see some of this coming and started taking steps to avert it a few months back with the MirrorForce datacenter investments. I'm sure they also have more coming to address Forrester's recent comment “Salesforce.com: Time For A Standard SLA”. I would'nt doubt this company's ability to execute on growth.

And while competitor RightNow was certainly not as strained about managing growth as SFDC, they do appear to have made very different operational choices. With due credit to them, they're now even crowing about it. A couple of little secrets about RightNow's sauce is that they don't actually run their own data center...they use co-located facilities, and they run their platform on open-source tech components. To some extent, RightNow's uptime performance validates a couple of very useful things to know about running on-demand operations - 1) that data centers are best run by specialists that manage large scale infrastructure...a point that Nicholas Carr makes in his post 'Salesforce.com's hiccups' . 2) Open-source tech components have a high enough degree of reliability to run SLA grade on-demand operations and if there's a glitch..Can We Fix It...Yes We Can! (Just got carried away a bit there with my son's Bob-the-Builder slogans...). So what does SFDC do when something like this happens - they point their finger at their proprietary database vendor. Tough luck. Tough choices.

Getting past the operational level, matters start to get really interesting from a market strategy perspective around outages. What is a fair and reasonable benchmark for application availability levels? Is 99.98% good enough? Are there customers who can manage their application infrastructure better on their own? Are they a useful market for on-demand vendors to address? How much better can those customers manage and what is it worth to them to do it? How much are they willing to spend doing it? Is it worth segmenting and serving market demand along varying degrees of SLA availability levels priced differently per customer needs? Or are multi-tenant on-demand platforms like economy-class air travel - inherently self-segmenting in terms of the market segment they address and the mission criticality of customer needs that they serve. Basically goes like this - if you're one of the sorts who needs home-in-the-air sort of air travel, whenever you like and to wherever you like, you don't buy an airline ticket. You buy and run your own corporate jet. ;)

So while its fair for customers to demand benchmark service availability levels and for vendors to bear the cost of delivering it, there may actually be some opportunity around outages as well.

VC firm focuses on on-demand businesses

2005-11-30T00:20:00.000-08:00

Emergence Capital Partners is focused only on on-demand services. It appears to be a narrow niche, but it actually isn't. I'm nearly sure that Emergence knows the prospects of on-demand services are huge. Their value prop is usually solid. Their applicability cuts across industries and functional areas. And they're gradually going to be sweeping more and more across the conventional software world. I think Emergence basically found a good positioning opportunity to stand out uniquely, without having to trade off on the overall market of investment opportunities they can address. And they're also pretty 'get-it' about the scalability and cost efficiency that on-demand service models enable.

No wonder what set the ball rolling for Emergence was a windfall 10X gain from an investment in salesforce.com. Nice to think that everyone's favorite on-demand middle-schooler is actually already starting to generate a legacy...

As the founders of Emergence say, "...the singular focus of their investments is modeled on Salesforce.com, which they argue has changed everything. "Salesforce.com has come in with a sales approach and fundamentally disrupted the $200 billion software market. Virtually every area of the software industry can be targeted with that fundamentally different approach."

Touche.

I'm going to be tracking the Emergence portfolio. Their other investments include -

- Adapt Technologies: automated online advertising
- Goodmail Systems: e-mail certification services
- SuccessFactors Inc: on-demand HRM
- HireRight Inc: on-demand background screening service for companies

Watch them; there just may be some gems in there!

Its the business model,stupid!

2005-11-17T12:16:00.000-08:00

From someone who knows the enterprise software business well, I recently heard scepticism about the value that salesforce.com was creating for their customers. After all, SFDC offers pretty basic functionality for the most part. They go fairly broad, but not deep. Their various modules appear to have more of a toy-like feel when compared to the sort of functionality that old guard enterprise vendors like Oracle, SAP and Siebel build into their business applications. We've heard Gartner say that before in their note 'Complex Salesforce.com Deployments Will Cost You' . And as I've noted on this blog before, I agree with Gartner's argument here. There's limited inbuilt functional value here from a typical large enteprise perspective.

So why should investors pay 10X rev/100X earnings for SFDC's commoditized value? Over 20X for Google!..Why indeed? Because its the business model, stupid! Its their growth potential being factored into the multiples here, no relation (inverse, if at all) with the absolute selling price of their products (a metric held very dear in the enterprise software world). Think of this like the paradigm shift from mainframes to PC's in terms of the market expansion these companies are driving.

A business that focuses on promoting mass usage i.e. commoditization, particularly one that's innovating towards that goal, is really more about building barriers for new entrants through scale and volume. Its about production and service delivery capacity that scales up without degrading, and a selling operation that scales as well. Its not so much about value per sale, as much as it is about addressing new underserved markets by dramatically reducing the cost of serving a customer.

SFDC is adding 10-15K users a month, at a steady clip so far, small business by small business. For good measure, there's an emerging trend of larger businesses getting drawn towards it as well. I don't see how/why this growth among SMB's will change soon, if their execution stays the way it has been so far. Sure, this is not a model with network-like effects and exponential growth, and that makes for some conservatism. But its built for long term linear growth, and more importantly, its game changing in nature.

There are millions more users of the kind they have so far (~350K). For a lot of them and the businesses they work for, $1000 a year is a pretty good deal for what SFDC allows them to do, its robustness and simplicity, its transparency, and the hassle it takes away.

And note all the ingredients - Visionary leadership. Business model innovation. Scalable architecture. Broad, horizontal, low cost/high volume positioning. Emerging platform-like characteristics and a nascent developer community. Self-serve provisioning. Product globalization. International sales operations. Aggressive infrastructure investments. Appealing branding and marketing. Presence in both underserved developed markets and high potential emerging markets. Finally now, a partner distribution model with exciting potential (AppExchange)...

Yes, there's value here. Its in the model's scalability, and its ability to serve a large underserved market.

(Disclaimer: I own stock in salesforce.com)

The End of Corporate Computing?

2005-11-07T02:36:00.000-08:00

Nicholas Carr, the author of 'Does IT Matter' fame, recently wrote this piece - The End of Corporate Computing. He talks about how on-demand technologies are set to ring in the demise of in-house corporate computing. Here's an excerpt -

"...the wastefulness of the current, fragmented model of IT supply is unsustainable. As with the factory-owned generators that dominated electricity production a century ago, today's private IT plants will be supplanted by large-scale, centralized utilities...Computing utilities will bring to an end the traditional model of "corporate computing" in which computing is carried out within individual corporations - just as electric utilities made "corporate electricity generation" obsolete. And utility computing will represent "the end" toward which business computing in general is heading. It's IT's destination."

Here too are excerpts of interesting responses from writers around the web -

- "a utility model for IT supply seems "natural and necessary," (but) "it will take decades to kill the way corporate computing is practiced today."..."we don't yet "have efficient marketplaces, like commodity futures, for selling IT services. Nor is the standardized metering and billing infrastructure in place to enable IT utility marketplaces."

- "(the reality) is a lot more complicated..."..specially "managing all that data as it traverses its way along a multitude of cyberpathways through potentially millions of unknown sources and destinations."

- "..(he) illuminates (the on-demand trend) with a plausible historical parallel...",.."(he is) overselling the general economic upheaval, however."

- "run the numbers on utility computing or 'renting' applications...offload as many capital costs, operating costs and upgrade costs as possible",..."(but) the smart CEO will still keep his corporation computing...how you embody your strategic thinking in code...will be the source of competitive advantage for decades to come."

- "'CEOs and managers in general want to think hard about the information. They don't care about the machinery."

- "(he) missed ...the one fundamental point, that the concept of utility is predicated upon common platform multi-tenancy."

In general, I like Carr's provocative presentation, although I agree more with most of the commentators who say he's half-right, BUT...not quite so. Firslty, he tripped up in saying 'corporate'...which to a lot of people signifies large companies. He'd be more on the mark if he contends that his thesis is a fair degree more applicable to the large numbers of small and midsized businesses than it is to large companies.

A variety of reasons, some relatively more quantifiable and some not, lead large companies to often make Own (Buy or Build) decisions versus Rent decisions for particular corporate assets or functions. It depends on how important it is to their long term competitiveness, sustainability, profitability and/or shareholder interests. When they do work the numbers, asset ownership can often turn out to be cheaper and less complicated than renting. The equation may veer more towards rent (outsourcing) for non-critical corporate functions, because that would factor in softer issues and people-related costs as well (eg. morale costs in scenarios of corporate restructuring, skill depreciation costs vs. learning curve gains due to experience).

In the case of IT assets, the more standardized, simplified and commodity-like they become, the more one could argue for ownership. The more economies of scale IT investments allow, or conversely the more they present high investment barriers, the more utility like they would become. Depends on how one views commoditization - is it about the technology or its usage. In fact, Mr. Carr may actually prove to be right and IT will look as utility-like as phone services or electricity if IT becomes highly specialized and capital intensive, not if it becomes more commoditized. One can't simply hire Joe Mechanic after all to run 1200 megawatt electricity turbines or 250,000 line telephone switches, no matter how commodity-like electricity and dial tones may be ;)

So said, one can also find plenty common examples of large enterprises owning non-core assets and/or functions -

- they may own their office buildings rather than renting, and may have their own facilities maintenance staff and/or exercise various flavors of outsourcing options for asset maintenance...
- they often own their own executive aircraft, why of all things! And get a load of this..Google just bought a souped up Boeing 747 for its executives...apparently their numbers worked in favor of buying it.
- one example I like - big companies own their own PBX equipment even though Centrex services with comparable features have been around from phone companies for atleast a couple of decades.
- large companies do continue to hire their own plain Jane and John employees (commodity?), Business Process Outsourcing notwithstanding.

So there...I could go on. Would rather end saying that its interesting to read Mr. Carr's stuff, but important to stay realistic about it as well.

Middleware-on-demand

2005-10-09T22:00:00.000-07:00

The growing population of software using web standards is creating its own demand for integration - on-demand apps talking to other on-demand apps, and/or to private apps running behind a firewall, and/or private apps talking to each other. So what have you, a couple of flavors of what I'd call 'middleware on-demand' from a couple of software companies. Each with a different offering, yet interesting to compare from a product marketing perspective.

One bay area startup, Grand Central Communications, provides its integration services via a hosted software model. They like to call it 'Integration On Demand', and the company's name itself comes from a big railway routing junction. Another start-up, Cast Iron Systems, literally provides integration out-of-the-box with a bunch of software - integration server, XML server, apps connectors, and master data management tools - all pre-loaded on a linux-based appliance. They like to call it an 'Application Router' (..and don't ask me how or why their company name came about!).

Its notable that their core products - pre-built connectors for apps integration - essentially do exactly the same thing. They move data and instructions from one software program to another. I can't claim to have seen either product, but am certain each is unique about how it looks and feels, its overall user experience.

What is interesting however, as an observer of their marketing pitch, is how each ones business and offering stand out from the crowd. For analogy, think electricity and battery packs. Tap water and bottled water. Piped gas and butane cylinders. Phone service and EPABX machine. Each so different, yet so alike. One comes out-of-the-pipe, the other out-of-the-box.

Each of these integration products has the same fundamentally attractive appeal to the same buyer need. Its about reducing the cost, time and risk of making different software applications talk to each other. Both bring a plug-and-play sort of value prop to the software integration problem, offering to solve what is essentially a big hairy problem for software buyers.

And ofcourse, both have some wit around their branding as well...like a railway routing junction, application router...whatever. Hey, go ahead and call the rose anything you want to, as long as it smells sweet!

10/18/2005: Update - The similarities don't end. A buddy who works with Iron Cast tells me that both companies I wrote about above actually had the same VP of Engineering at different points of time.

AppExchange: SFDC's marketplace for on-demand applications

2005-09-16T12:06:00.000-07:00

Raise a toast for the folks at salesforce.com for their latest innovation - the online marketplace for on-demand apps, launched this week. Neat strategy. Whittled down to its core, its basically better packaging for their partner network. And partner networks are very common in the software world. But the more interesting thing it says to me about Mr. Benioff and Co. is how they're looking at the staid enterprise software business with a refreshing new perspective - infusing it with a DNA more typical of consumer marketing.

AppExchange has the potential to benefit business software marketing the same way that Amazon helped book marketing. Both democratize access to the market, to customers, particularly for smaller entities that want to do business - AppExchange for software authors and publishers as Amazon does for book authors and publishers. As long as you can figure out the finances for creating and publishing your intellectual product, software in this case, the cost of bringing it to market and distributing it is dramatically lower with AppExchange. And there is a ready audience of potential customers - already over 17,500 businesses and 320,000+ users of salesforce.com - who participate in the market.

Ofcourse, doing business in this market is going to require that 3rd party software runs off SFDC's on-demand platform. AppExchange is thus SFDC's mechanism to attract and make it commercially worthwhile for a development community to build around their platform. Its an essential part of building towards their vision of being a general purpose, more universal sort of platform for on-demand applications.

So what else should be on their roadmap to make their vision a success? A quality certification process for on-demand apps sold on AppExchange would be a good idea, as also a score for each application on AppExchange based on a composite of the number of users, transaction volumes, data volumes, etc. I don't think the current user rating system will be as effective. Its a subjective measure for something that can be measured very objectively. That sort of measure is more suited if SFDC decides to create an online market for SFDC developer skills once they have a sufficient community around their platform. The developer market would also be amenable to an Elance-style bidding model, and SFDC may just find a big community of software writers and publishers in markets like India. At some point in the future, an SFDC university that imparts training and certifies development skills for the SFDC platform may also be worthwhile.

All of this is pretty damn exciting. A business software company that's as dot-com as can be, adept at applying consumer marketing principles to SMB marketing. They're truly showing the Microsoft and Intuit sort of genes, only without the legacy of older technology & business models, and I doubt there is another on-demand play that has the same sort of DNA, and traction, and can challenge them yet.

And guess who else is an on-demand player!

2005-08-10T22:45:00.000-07:00

Oracle Corporation. Yeah, sometimes its easy to think of them as the old guard. And make a major under-estimate of Oracle's technology vision. But the company's opinion on on-demand is public now.

Oracle's Charles Phillips: On demand is the future by ZDNet[...]

And this means something. Oracle's no.2 executive is'nt talking about on-demand applications. That too, in some measure, but he's really talking about the infrastructure to deliver on-demand - databases and middleware. Scalable, reliable and cost efficient on-demand needs grids built with Linux-Intel powering it. Oracle ofcourse can very credibly claim to have figured this out and brought solutions to market faster, better than anyone else.

That's where they shine. The future's bright, and I share Mr. Phillip's view. The more enterprise AND consumer computing moves on-demand, consumed like a utility, the better it gets for Oracle's infrastructure products. (Somehow the utility connection always makes me think of on-demand infrastructure like the turbines of a power plant!). Its not going to be easy to get them off that perch anytime soon in the big enterprise. No secret Microsoft wants to get there. So does SAP. Both still got much climbing to do. IBM actually had a place, but lost it with DB2 on Linux. What's to say WebSphere can't go the same way?

Granted, open-source believers would say that they're creeping up too (literally creeping up the tech stack), and MySQL and JBoss are the nascent seeds of something that Oracle needs to worry about. But that's a pretty far way off. By that time Microsoft's going to be way more than worried, Windows might have gotten corroded by Linux. And there's some chance that salesforce.com might just keep making steady progress alongside and grow their infrastructure services (Multiforce and sforce) to become an on-demand 'applistructure' force to reckon with. Its a shot they have. And that's something for another post.

Amen to the hype

2005-07-18T20:32:00.000-07:00

Let's start by getting the hype out of on-demand for a bit. Really, its just a distribution method built on top of the internet. It covers several big sectors of the economy - software, media, entertainment, telecom, education. Some of these sectors have had far reaching distribution models even before on-demand came along. Like media, entertainment and telecom for example. They've always reached out to millions of consumers through traditional distribution channels like grocery stores and mail (for printed media), air waves (radio and TV), and wire (telephones, cable). So on-demand models like online gaming, iTunes, pay-per-view TV, even VoIP, are simply another step in lowering the cost of distribution a notch further. Distribution over the internet expands the addressable market in each case, can even allow a vendor to start serving a global market if they so wish, but it really is'nt that big a deal.

As for education, specially the basic kind i.e primary and advanced schooling, its value lies in its life experience. Internet distribution would take away a good part of that. At most, it can supplement it some bit. Like when you goof off in a class, and catch up on the internet. But who'd ever want their kids to graduate from an internet high school or university?

But think about software. Here is an industry where so far there have been essentially two thriving worlds, but both quite far apart. There was the shrink-wrapped world of mass distributed software, perfected by Microsoft, that placed wonderful affordable tools like MS Office on millions of desktops in homes and offices. But it really was personal software. And then there was the elite world of enterprise software that costs from hundreds of thousands to millions of dollars. It addressed a market of 10,000, at most 20,000 of the biggest, richest companies. But where did that leave literally millions of companies bigger than a single-person shop and smaller than those fortunate 10 or 20 thousand? ...in a dark, dark world in between.

And then light shone on that empty space. Along comes on-demand software distribution. With it, more or less the same kinds of software that have hitherto been used by the big, rich companies to run their vast organizations is becoming available to every little business owner. Now that, in my opinion, is where on-demand deserves its hype. Because it is changing the game. It signifies the democratization of enterprise software. For the business software industry on the one hand, it creates a disruption by sharply reducing the cost of software distribution and delivery for new entrants. More significantly, for small business owners of any type who are right now discovering on-demand software, it opens up a bright blue sky of possibility. Business owners can now win back their precious time from several of the mundane headaches of running a business, and can again start to dream big. And I work for Oracle, but don't want to sound condescending here, because I did come here more recently from the SMB world.

But think about this. Small business owners can now begin to run their businesses - their accounting, sales, marketing, customer service, inventory, billing, payroll, employee expenses, webstore, collections, projects, email - almost the whole shebang, with business software that in several cases actually even ties into each other. And if it does'nt quite well yet, even the big businesses struggle with that sort of thing all the time :) Small business owners don't need to buy complicated hardware and software gear. Don't need to hire IT people. Don't need to worry about making techie things work. Just work on the things they love doing that made them start their business in the first place.

Think about how cool that is for a business owner. They've always had lower overheads than big business. They now have easy, affordable accessibility to powerful technology to run their business. Just the right passion to deliver a product or service that their customer wants, the sort of passion that can often be missing in the way large organizations work, and that business owner can really free himself up a fair bit to think and work on getting bigger. And he could quite possibly be anywhere in the world. That, in essence, is the power of on-demand. The potential of productivity and economic growth across the globe.

Amen to the hype.

Rearden Commerce: On-demand services procurement

2005-07-04T04:35:00.000-07:00

Rearden Commerce has been in stealth mode for five years. They've emerged with a buzz about them, that prompted me to write this post. Sounds like they started out building an on-demand business services procurement service. Travel, hotel, shipping, etc, integrated through web services with major business service providers. Five years in stealth for that? Maybe it took a while to find big clients and get service providers signed up to connect. They do have a bunch of large enterprises signed up, each with a potential few thousand employee users. All good so far. Not a mega idea, but a unique niche to own - procurement for indirect, C-category cost items - the kinds that are typically overhead line items.

But now, they also want to pitch being a general purpose on-demand e-commerce platform. Its a slippery slope. Fresh no-name company, VC backed, with a tall sounding platform pitch. Just my opinion.

If it sounds like wannabe salesforce.com, its really not. Salesforce.com, freshman too in the platform world, first got a beachhead with on-demand CRM. Then they grew in the popularity ranks, expanded footprint with Supportforce, dug their heels in with an IPO, and then set about launching their Sforce and Multiforce platform-style offerings. And credible bandwidth to support a partner program around it as well. You would'nt think of them like WebSphere, .Net, Oracle Fusion or SAP NetWeaver. But if we do end up with something such as a hosted application platform of choice for SMB's, SFDC has the best seat on the bus. (I'll leave an analysis of hosted SMB 'applistructure' for another post...).

So what with the overloaded pitch by Rearden Commerce? (technology marketing, I tell you). Why not stick to on-demand services procurement and mellow a bit first? Looks like their VC may be getting impatient here. For a company that seems to have been conceived in the heady days of 2000, has used $42 million so far, stayed in stealth far too long, basically gained some traction in a niche segment, and has a CEO who sounds bombastic. Jump into the cauldron, I hear the VC's chant...time for a trial by fire.

Beachhead for on-demand computing

2005-06-06T13:26:00.000-07:00

Jonathan Swartz, COO at Sun has been discussing Sun's on-demand grid computing offerings for some time now. Here's how he proposes Sun would pitch it to customers - (Quoted) "..we'll tell our customers - if you have comptutational workloads, that require 10's or 100's or 1,000's of cpu's, for defined periods of time (ie, 5 hours, or 3 days or 3 months) - discrete jobs like rendering a movie, or doing a monte carlo or geophysical simulation, or modeling a protein - then we can run your loads on demand for less than anyone in the industry."...

Sounds like Sun's beach-head for the CPU grid will be CPU intensive 'peak workload' computing requirements. I think this also gives a peek into Sun's sense of where on-demand CPU grids are in terms of their market maturity and customer acceptance. Sounds like they're still a good while away from prime time. (I think storage grids are well further than that though).

While Sun goes about developing its on-demand infrastructure business, its also worth noting how their approach contrasts with that of vendors who've seen success in the on-demand applications space. The success of ASP's like Salesforce.com, the erstwhile Upshot, NetSuite, came from establishing beachheads in the small-midsized business (SMB) segment, where customer needs are ideally served via a utility style commodity model. That essentially holds true for eBay and Google as well.

Beyond their beachheads, on-demand ASP's have typically started to address more specific customer needs as well. They provide options - public API's, custom toolkits, custom deployment options, professional services - to address more sophisticated pockets of demand. Always, the basic commodity service has utility style pricing based on a standard unit of measure, and value layered on top of the basic service results in pricing and costs that are more and more specific. In serving this segment, the utility model actually becomes weaker.

Sun seems to be looking to niche pockets of demand for a beachhead. Or quite likely, they don't think they need a beachhead, and can afford to slowly evolve from their current position. In which case, their grid story simply serves to capture mindshare by projecting a certain thought leadership. This is unlike the situation that ASP's faced when they started out.

My take - I would'nt expect major hits from their on-demand CPU grid if its primary business case is not based on serving high volume, low price markets. Its also possible that direct uptake in SMB markets will be challenging because Sun technology has'nt traditionally been aligned with the SMB market. SMB exposure is more likely via indirect channels, through uptake of infrastructure grids among ASP's themselves.

Coming sooner than you thought - On-Demand Storage Grids

2005-06-02T16:01:00.000-07:00

Industry pundits out there have been quick to trash Sun Microsystem's deal today to buy StorageTek. That leaves me scratching my head. Putting aside the number crunch - deal price, earnings accretion, cash outflow, etc. The numbers actually work out just fine, going by that sort of tactical financial analysis. But I'm not sure why the bigger market picture is'nt clearer to more analysts out here. Sun's got the R&D discipline, and an interest in the storage market. And StorageTek is a gorrilla, carrying technology flab and looking for a workout. Put the two together, and there's a strong chance that Sun can make real good out of this.

Sun has recently been pitching the vision of storage as a utility service - its storage grid - just plug in for $1/GB/month (OK, not as simple as 'just plug in', but bear with a little market-speak here). With StorageTek's customer base, sales strength and storage expertise, Sun gets to jumpstart this innovative service model. I'd predict with these two companies getting together, Sun can significantly accelerate adoption of storage grid services among businesses with big storage needs. And to be sure, storage does quite perfectly fit the description of a computing commodity, ripe for the utility model. Even before adoption of CPU grids starts to happen. Not to forget that data storage needs are growing explosively - 70% annually by some counts. Storage services offer a low risk entry point for customers to start exploring the reliability, security, efficacy and cost savings from grids. And businesses can start by using them in baby steps, incrementally growing in maturity, first with secondary backups, to archiving, to primary backups and finally to primary storage.

And while we get closer to that scenario becoming more of a reality, in the immediate future, Sun now has the opportunity to pitch StorageTek customers with computing, storage and network solutions all under one roof. I'm sure that will help Sun snag some share from IBM, HP and Dell; Sun surely needs that. But I'll be waiting for those new customers to cosy up a bit with Sun, and then...hallelujah, give them the gospel of the grid and plug them right in!

Its classic acquisition synergy. StorageTek has the experience and relationships. Sun has the smarts and vision. Together they can build real value in the storage marketspace. So its worth repeating - why are'nt more analysts seeing it this way?

Salesforce.com: enterprise-minded, but SMB at heart

2005-05-30T02:48:00.000-07:00

A couple of analyst firms - Gartner and Nucleus Research - recently commented that Salesforce.com had a limited value proposition for the complex needs of large enterprises. They further added that over the long term, this limitation would lead to a higher cost of using salesforce.com compared to clients owning their own software infrastructure.

While I remain buoyant about salesforce.com in the SMB segment, as far as its current offering is concerned, the analysts have a valid point. And there's an analogy I like to cite from another old time on-demand market that substantiates the analyst's views.

Consider the Centrex market for hosted communication solutions. Centrex is essentially the name for hosted PBX technology, and has been around for around 25 years. Its a substitute for buying full featured PBX infrastructure, and offers a distinct value proposition, albeit a limited one, attractive to many small and midsize businesses (SMB's) and branch offices of larger companies. Instead of buying and setting up their own PBX infrastructure, Centrex phone line users can subscribe to Centrex services for a monthly fee. Centrex has a mature market, with a share of around 12% out of the total market for business phone lines, and this has been quite stable for several years.

What is important to note about Centrex services is that their user surveys reveal 2 key findings - a) Centrex users are just as likely as existing PBX users to evaluate the purchase of a PBX system, and b) 70-80% of Centrex users make the evaluation each year whether they should buy their own PBX infrastructure or continue to use the hosted Centrex service.

The Centrex market and its user behavior point to the challenges of churn and long term growth saturation that salesforce.com will probably have to address at some point of time in their core SMB market. But SMB's are a huge and underpenetrated segment - and the company can very credibly claim a lot more of that segment. Their model of software as a service is simple, powerful, 'platform' minded, scalable and affordable enough for them to serve SMB's on a global scale, and continue to fuel their growth for the next several years.

None of that still makes salesforce.com (atleast so far) the right fit for the complex, large scope, usually highly customized, long term needs of large enterprises. The Merill Lynch deal last week for a 5000 user subscription for salesforce.com does not make it any more so. Neither does Accenture's recent endorsement. And besides, there really are only a couple of thousand enterprises on the one hand that would classify as large, and millions of SMB's on the other hand that salesforce.com can effectively serve.

I could certainly guess the reasons why, even with the success they're having, they appear shy about their bread-and-butter market and more eager to embrace the large enterprise. Maybe I'd even cheer them more if they proved me wrong on that. But it's a hard one - would you rather be richer or happier?

R&D cost advantage of salesforce.com's on-demand model

2005-05-29T01:38:00.000-07:00

This post was authored in Feb 2005
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There's an inherent cost and competitive advantage in an ASP business model such as salesforce.com (SFDC), and it gets less attention than it should. Its the efficiency of their software development and delivery process as compared to the process in a traditional license based software product development firm. That makes a newcomer like salesforce.com an even more potent competitive threat to incumbent vendors in the enterprise software space. Salesforce.com is simply able to add more functionality cheaper and faster because of the advantage their business model lends to their software process.

I notice this every few months, when I sign up for one of SFDC's trial accounts to get a quick status check on their functionality. Usually I'm pleasantly surprised with what I find in terms of functionality they've added. They're on their way to being not just a sales or CRM service, but a more complete business suite. Salesforce.com now includes modules for managing Documents, Contracts, Knowledge-base, Analytic dashboards. And as of Spring 2005, Order Management and Billing are coming soon. And as they expand the scope of what they offer, some of their earlier functionality in the Sales (SFA) area is now getting pretty mature after several rounds of releases. And increasing penetration among larger companies underscores the evolving maturity of their offering.

So what makes their software process efficient?...Basically, they need to produce, maintain and support just one version of their software, running on just one instance. No back porting and forward porting of fixes to multiple installed releases. No need to port to various operating systems. No need to be compatible with various databases. No need to produce a major release every 12-18 months to pull in the license revenue. Lower support costs because of the simplicity of their offering. Salesforce R&D teams can simply keep building small and large features in a continuous flow of development, and keep adding these features in smaller releases without having to wait for a major release to go to market.

A recent earnings call had analysts asking salesforce.com why their R&D was much lower than industry benchmarks, and whether that meant they were under-investing in R&D. Some industry analysts simply don't seem to get it, but salesforce.com's management did well to point out that its because of their particular business model.

The Economist on Salesforce.com

2005-05-28T01:35:00.000-07:00

This blog was originally posted on 6/19/2004, just around the salesforce.com IPO.
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Economist.com | Salesforce.com

Salesforce.com gets it! Their new IPO stock is going to be worth the buy. They clearly have the most forward thinking execution of the ASP business model.

A fair question may be to check how big their addressable market is, and how fast can they grow. After all, how big a space can 'web-hosted SFA for small and midsized companies' be? Its what they're best known for, and that space may not have enough room for a company with their ambition and potential. They've proven leadership in serving this market segment with the ASP delivery model. They started fresh, with no baggage of a legacy product license based business model. Siebel has too much baggage to actively disrupt their license revenue streams. But salesforce.com's future growth really depends on how the scope of the adressable market is defined, and the product vision & execution to serve the larger scope.

Expansion into global markets (which they're actively doing anyway) probably expands the addressable market 3X or 4X. Point awarded. The Enterprise segment could possibly give another 3X or 4X, but neither the product, nor the ASP model, nor the market are ready for each other yet in any big way. CRM as a utility in the enterprise will be a slow evolution. And there are incumbents like SAP, Peoplesoft and Siebel entrenched in there as well with enough time to work out their ASP offerings. So no points there. A growth strategy oriented along industry verticals is nice to have, but not the most attractive growth bet for a company that has the drive to pull off a horizontal play.

But now watch where this company is going with its app dev toolkit for customization and integration, Sforce. Its truly promising. May sound a bit far-fetched right now, but Sforce contains the seeds of morphing saleforce.com into an application platform player in the web services arena. Its still a childlike newbie in the big-platform-boy's camp (read Microsoft, IBM). But if they play Sforce right, they'll be the first to distinguish themselves in building a business model around providing consumable web services to businesses. As a side effect, Sforce raises significant barriers for plain vanilla ASP followers. More importantly, it also adds the tech community as an independent customer segment for the company, in addition to the salesforce.com user communities for whom the current value proposition is fairly attractive in any case. Playing BOTH these segments is the key to a platform play. Its the edge that makes an app provider a serious alternative within a more sophisticated customer segment - the ones who are used to thinking about business & technology together, as part of a coherent strategy, not one without the other.

Part of the journey for salesforce.com is going to include getting away from the confines of a CRM and salesforce branding. The current mid-market position is actually a good place to grow up unfettered for a while. Big boys usually face struggles in serving this market well, and bungle up a lot even when they try to. A big part will have to be continued innovation in applying Service Oriented Architectures, offering consumable, customizable business objects and processes. Part will have to include broadening the scope of such processes and objects available. Part will have to involve being on top of the web services business model - high granularity in provisioning, pricing, usage metering and billing for consumed web services. Part ofcourse will have to include attracting a large tech and consulting community. Right now some members in that community are just about beginning to notice them.

But everything this company is already doing in each of the above areas shows a story unfolding that's visionary and being executed well. They have what it takes to be worth your money.

Outsourcing CRM functions

2005-05-27T09:36:00.000-07:00

Originally posted in July 2002 on a discussion board in response to an article discussing the pros and cons of outsourcing CRM functions
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"It makes sense to look at the relevance of the ASP delivery model from the perspective of where a business using an ASP application is in its own life cycle. For ventures (and this includes divisions within companies) that are cash- and time-constrained in the short term (startups, or those anticipating near-term expansion), it makes a lot of sense to sign up with an ASP. As the business matures, the tradeoffs may change, and the same venture will evaluate bringing the application in-house.

Its the classic 'Rent vs. Buy' decision. In more mature phases, businesses are ready to explore more strategic ways in which they want to use their technology infrastructure . Or perhaps they anticipate that their application needs have stabilized, and they'd rather just buy a software once and run it in-house because the long-term cash outlay will be smaller.

Given such decision criteria, ASP vendors may be better off offering their customers a migration path towards a locally hosted, on-premise version of their application, to suit the needs of customers who want to make strategic use of their technology assets.

It also makes sense to look at the ASP delivery channel in terms of the maturity of a technology. If a technology is widely available, it is so mature that it has a commodity function, and there is little perceived strategic advantage in deploying it (e.g. payroll processing applications, telephone service), a business would rather have a service provider manage it for them. They would benefit from economies of scale of the service provider, and lose little in terms of strategic value by outsourcing it.

CRM apps that perform the very basic functions of customer database management and customer interaction may already be ripe to pass the commodity test and be delivered via ASP. But CRM is a pretty vast field, still young, and there are a lot of things innovative companies can do in this space.

By definition, those that want to pursue innovation in their use of CRM technology won't be able to do it through an ASP, or else there would be nothing innovative about it!

So, to really dig into the broad subject of 'CRM outsourcing,' it makes sense to look at sub-segments of the CRM market, where each is in its maturity, how companies use different types of CRM at different points of time in their life, and also other factors that drive their evaluation of 'Rent vs. Buy,' e.g., current recessionary business conditions make service providers more attractive than in-house."