The Deep End

The Deep End: SAP Plans To Acquire Business Objects

S. Sadagopan — 2007-10-08T10:33:33-08:00

The rumors have come true . SAP 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 the fastest growth area in enterprise application space today. The consolidation in the BI space was expected for sometime.

First, the acquisition is being positioned to accelerate SAP’s reach to the information worker to leverage SAP’s upcoming core enterprise product – the Business Process Platform. BOBJ also brings a core BI asset that SAP currently lacks, in the form of an ad-hoc query and reporting product and on a platform that this system agnostic. Second, it may also be seen as a further response to ORCL’s recent acquisition of HYSL . A large part of HYSL’s financial applications user base runs SAP on the back end, and although SAP acquired Outlooksoft (a financial consolidation vendor), the addition of BOBJ may be a further bold statement. It is to be noted that a large part of BOBJ’s enterprise customer base runs on ORCL databases.

SAP also 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. Over a period of time, Business Objects has itself grown beyond its core BI heritage via acquisition to add additional product segments such as extract, transformation and loading (ETL), data quality, corporate performance management (CPM) as well as dash-boarding, on-demand BI and unstructured data handling capabilities. SAP/BI combined entity has the opportunity to lead the pack in the convergence of the domains of data and process. BI vendors have traditionally thought of the world as being data centric. The real world is process centric and data exists only as a byproduct of business processes and executable rules. Business Objects has more than 43,000 customers, according to its own data, and made 2006 sales of $1.25 billion(expected sale: 1.65 billion in 2008). 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, Microstrategy 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.

The compelling positive driver of growth of this space is globalization and business competition. The criticality of software for mature, as well as emerging, industrialized countries and relentless business pressures for innovation, quality, productivity, price, and faster time to market will be positive drivers in extending the reach of BI beyond the executive decision making framework to extend into operations. Global business, moving forward would need to think and operate globally to achieve and maintain competitive strengths. This implies continuing needs to support global operations forcing to leverage software that is Web native, that embraces standards such as XML that offers visualization of patterns to enable real time decision making – a crying need for enterprises today.

This is an opportunity for enterprises to review the BI contracts and get favorable terms incorporated therein. In the enterprise BI software space, clearly vendor consolidations will reduce the number of players and further strengthen those that already hold a substantial share of the BI Market. This would force collapse a number of products to be highly feature rich. This would mean that typically functionalities that two years ago were still offered as separate modules/products may become part of larger product suites.

S. Sadagopan, heads consulting and eBusiness for Satyam based in Santa Clara. He has led several consulting and technology transformation engagements covering multiple industries cutting across a wide variety of technologies around the world. His blog is focused on emerging technologies & trends. These are his personal views.

The Deep End: Enterprise Software Industry: Directions

S. Sadagopan — 2007-08-03T10:53:30-08:00

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 Deep End: The Changing Enterprise Technology and Business Paradigm

S. Sadagopan — 2007-07-09T10:03:14-08:00

While traveling back home from Marco Island last month, my colleagues drew my attention to the ascending influence of Second Life. While the discussions began to center around Avatars and business implications, I was thanking myself to be in the company of incredibly smart people – being in the company of such smart people, always takes discussions and understanding to a different level. Nissan embracing second life is quite an endorsement of the power and reach of Second Life, so went the discussions. Coming right after being part of a global summit focussed on innovation, the discussions were more interesting.

The Deep End: Agile Software Gets Acquired

S. Sadagopan — 2007-05-16T10:45:24-08:00

While the top-tier vendors boast of wide-ranging, integrated functionalities with deep pockets, specialized solutions like PLM, SRM, MDM, Content management, BPM, Document management, Compliance and Vertical solutions coming from best-of-breed players continue to remain attractive to buyers of different spectrum.

The Deep End: SAP Buys Out OutlookSoft

S. Sadagopan — 2007-05-09T10:26:12-08:00

SAP is acquiring OutlookSoft.

The Deep End: Microsoft and Yahoo: Will They Come Together?

S. Sadagopan — 2007-05-04T10:33:16-08:00

Will Microsoft buy Yahoo? That’s the prospect that’s gaining currency this morning .

Few days back, I wrote that Google’s aggression is not only going to help its cause but very likely to drive Yahoo and Microsoft to come together. It's interesting to see what all a shrewd market leader can do – expand the market, consolidate its position and define what competition needs to do!! The increased likelihood for consolidation within the Internet space given the challenges of running the optimal mix of businesses, which we have identified as content, portal, search, marketplace/e-commerce, communications (IM, e-mail, VoIP), and payments looks like is waiting to happen. Every advance being made in anyone of the spaces here needs resources to build and expand but Google’s money making machinery makes all these advances from players like MSN & Yahoo look puny.

A rapid acceleration in the shift of audience and advertisers online towards Google, and Microsoft’s inability to build effective search engine and online advertising arms of its own is really hurting it in a big way. Last year, Mr Semel commented on MSN trying to relaunch, "My impartial advice to Microsoft is that you have no chance. The search business has been formed."

How can the competition get on an even keel – perhaps when Microsoft buys out Yahoo.It needs a sustainable critical mass in terms of content, infrastructure and advertiser base and Yahoo comes in handy there. Chances of organic growth look too dim for Microsoft to look at alternate ways of getting there center stage and literally fight eyeball to eyeball with Google for traffic and monetization opportunities. Outside of Yahoo, the only other player that Microsoft can look at is eBay.

The vertical business of a combined entity would be indeed powerful – ranging across different vertical channels, the combination may have leadership position. Such a position would mandate that all advertisers seriously look at utilizing the new platform - after all content is king in the internet world. So there may be a need to retain/leverage existing channel/brand strengths in unique ways.

I do think that the DNA of the organizations need to be aligned if these two choose to come together. I would think that MSN & YAHOO should ideally be spun off as a separate business. Today, the Microsoft empire is besieged on all fronts by a multitude of players ranging from behemoths like IBM, Sony to internet giants like Google to internet startups and opens source players.

Despite its industry standing, firepower and resources, when it came to the internet world, the desktop emperor failed to click in a noticeable way – and that too after trying with a number of things ranging from launching and relaunching MSN many times to creating hype around Microsoft live platforms. May be culture & DNA matters a lot more here – all other thing being equal. And the only way that the enormous talent in Yahoo gets retained post acquisition is with stock lock-ins and building something really substantial post coming together.

The rub-off effects can also be useful for Microsoft in its mobile business. Yahoo is strong in the mobile internet space and in many emerging markets, Yahoo is far more powerful force than is seen in the US. The acquisition can provide Microsoft with powerful assets – proven scalable platforms, stakeholder relationships, monetizable content and channels drawing eyeballs. On the flip side, mega deals always carry huge risks – no one can forget Time Warner – AOL fiasco. I get a sense that something might happen – but as again execution would be the key – the opportunity to change the rule of the game is very bright if these two players choose to come together.

Update : YahooSoft : Still Possible?

Reports that talks happened between the two companies & that the merger discussions are no longer active, but that doesn't preclude the two companies from some other form of cooperation. So the merger possibilities have died down – temporarily!!

To me it points to a couple of things – both indisputable: There is no logic to say that large deals may not happen – as a matter of fact, I feel that in this current age, no deal, no matter how large or small or one that appears audacious, is out of the realm of possibility.

Secondly, stakeholders are expecting Yahoo to act decisively to regain the lost edge it had in the internet space – where Google is sees as smartly marching ahead. Yahoo is massively under leveraging its brand strength, content and platform superiority.

Companies like Microsoft, eBay and Yahoo would always keep talking about possibilities and frankly they should be talking and it is fair to expect some action centered around Yahoo in the days to come.

S. Sadagopan, heads consulting and eBusiness for Satyam in the Asia Pacific, Middle Eastern and African markets based out of Singapore. He has led several consulting and technology transformation engagements covering multiple industries cutting across a wide variety of technologies around the world. His blog is focused on emerging technologies & trends. These are his personal views.

The Deep End: The Impact of Shai Agassi's Departure

S. Sadagopan — 2007-03-28T10:31:45-08:00

The WSJ first reported that Shai Agassi is leaving SAP. SAP followed with a press release.

The Deep End: The Flat World and R and D/Innovative Networks

S. Sadagopan — 2007-02-26T10:20:18-08:00

The “Well-Designed Global R&D Network” begins to deliver goods when organizations configure their innovation networks for cost and manage them for value. The world is beginning to see a shift from a Vertically Integrated Model to a Globally Distributed Process Network.

The Deep End: 20 Offshoring Predictions for 2007

S. Sadagopan — 2007-01-05T10:57:59-08:00

With increasing marketshare, the Indian-headquartered offshore players are, without doubt, making a significant and irreversible impact on the entire IT services landscape. A look at the revenue ranking of the top 15 or 20 IT service providers show that the list is still dominated by the largest and most established global companies that occupy those positions today.

The Deep End: Enterprise Software on the Verge Of Getting Redefined

2006-11-10T10:07:21-08:00

Historically innovations in the software space have happened through two means: Incremental innovative growth (feature additions, more bells and whistles & some release management) and technology/architecture centric platform innovations.

The Deep End: SaaS: Issues, Adoption and Future

S. Sadagopan — 2006-10-09T10:13:15-08:00

Software as a service (SaaS) is actually becoming a more widely talked about term in the technology circles, of late. Clearly, the interest in the SaaS model is growing, with a number of specialist areas like CRM, HCM, Billing vendors beginning to show early signs of succeeding due to their well defined focus of their offerings. Newer entrants also bring to bear their attention on areas like usability, ease of configuration and feature richness primarily aiming at the business users to positively assess suitability and provide for accelerated adoption by business.

The Deep End: Trendwatching in Offshore IT Services and BPO

S. Sadagopan — 2006-09-11T10:50:33-08:00

A financial analyst recently asked me about the current trends in the IT & BPO industry. Here is my perspective.

1. A fundamentally different and something akin to a generational restructuring is happening wherein the ITO contracts are being brought down to shorter term from the average terms of engagement.

2. There is a marked tendency towards employing multiple vendors being used for outsourcing. Challenges in terms of managing such deals and overall cost effectiveness needs some more analysis. Lack of widely accepted standards for outsourcing may complicate the matters.

3. Legacy players continue to grow at less than average growth rates- clearly attributable to multiple vendor outsourcing models followed by customers and owing to shorter contracts, order booking is also coming down. There is a need to watch this slightly closer before calling it an established trend as patterns of unevenness have been observed in the past as well.

4. Several of the next generation contracts in ADM space are clearly going in substantial volumes to the Indian headquartered offshore vendors in large numbers - the effect of this is seen in bringing down the contract values (TCV) as there these players operate in a significantly different cost structure and operates in a different value paradigm.

5. Early indications show that the traditional Indian vendors will increase their market share on the IT service projects but probably will do lot less in the BPO segment.

6. Consolidation of the traditional Indian Big 5 appears unlikely at this time, but some of the second-tier players could find the need to grow through acquisitions/get acquired as the market becomes more competitive.

7. The offshore BPO players are actively engaged in the process of building consulting capabilities, expanding global presence, increasing their functional expertise and enhancing their industry vertical experience and are single-mindedly acquiring skills to package offerings for larger deals.

8. In the BPO segment, established global players possess an advantage as currently they are seen to be having broader set of skills and generally established relationships with big clients help them to move work offshore easily.

9. The next big wave in outsourcing will most likely come from finance and accounting and procurement. Mega deals in this segment are getting announced.

10. With global legacy vendors aggressively investing in offshore facilities - some adjustments in the wage equilibrium could affect Indian outsourcing companies .

11. There' s a fundamental shift happening in the BPO space. With ITO, low-cost offshore workers have been able to alter the cost structure of application development & management and actually help drive innovation and business' ability to optimize their technology infrastructures. This has helped to raise the bar in terms of quality and innovation. In contrast, BPO is having a dramatically different impact as the possibility now extends to a scenario where complete professions are getting to being globally distributed.

Case in point is that of finance, accounting and procurement, FAO (Finance and Accounting Outsourcing). Look at this carefully - this is almost becoming a key candidate that can best leverage global resource arbitrage. In the world of three billion capitalists, thousands and thousands of accountants are coming out of developing countries and western enterprises can hardly ignore the possibility of end-to-end outsourcing. Lesser degree of complexity, more mature processes, regulatory pressures and high degree of scalability associated with FAO all make this a distinct possibility. The adoption is real fast - from transactional functions to risk management to payroll - all are now getting re-badged under FAO with flexibility to keep any strategic processes in house. The whole profession is on the verge of moving offshore. This explains the often repeated cliché -"commoditized nature of ITO contracts & transformational nature of BPO contracts."

12. There are several main BPO areas that the industry is getting expanded into and the current ranking of top sectors include :

Customer management
Human resources, including administration, and payroll
Finance & accounting
Vertical industry specific processes
Supply management

13. In these areas, on an overall basis, half the deals involve some degree of offshoring and half of these deals involve offshoring to India. One-third of the BPO deals are also seen as transformative in nature.

14. The traditional Indian BPO players are pricing aggressively and are now focusing on increasing the functional depth, and on delivering end-to-end process solutions.

15. To serve clients globally offshore vendors, offshore vendors are slowly beginning to invest in near-shore facilities to augment delivery footprint. Latin America, Eastern Europe and several spots in Asia Pacific are becoming preferred locations.

16. Offshore pure-plays are working hard to get to a situation to be ready in providing a compelling suite of differentiating capabilities to convince customers that they can be credible, long-term, transformational partners in BPO.

17. Just as in ITO, large single vendor mega deals are out of fashion in BPO and multi-vendor sourcing is now more prevalent. Customers are beginning to demand best-of-breed services and challenges remain in managing the multi-sourced environment given that the risk exposure is more closely tied back to the business operations with BPO.

18. In BPO, the multinationals are pricing aggressively to leverage offshore delivery centers, undermine offshore pure-plays and are focused in build early mover advantage and protect their competitive advantage in a growth area.

19. Talent retention is becoming a key concern for BPO clients as it is important to ensure a smooth and complete transfer of knowledge of business practices and processes when most them are more contextual and less codified. Concerns about lack of documentation adds to the complexity of BPO engagements.

20. Traditional global players are bundling a lot of high-end services into the deals to gain competitive advantage over more tactical vendors

21. Some of the ITES companies backed by private equity are very attractive as their go-to-market approach is good. Their approaches towards managed growth, determination in go-to-market aggressiveness, focus on target verticals, and top-notch opportunity screening capabilities are quite noteworthy and are yielding results. Their desire and openness to partner with niche players helps these players to round off their capabilities.

22. Slowing growth in value terms on account of more offshoring and multi vendor contracts and some amount of rise in in-house development work characterize the change in the landscape in the ITO sector.

23. An analysis of the financial reports show that the Indian headquartered vendors are able to mine accounts faster and are becoming a strong force in the area of applications development work, but as things stand, legacy vendors are able to provide a broader array of service offerings for more complex IT outsourcing requirements. This includes the likes of fusion between technology and process which leverages their systems integration expertise.

24. Several clients are certainly viewing China as an emerging and credible location in addition to India. The strategy for all majors is India plus asia and not asia instead of India. China's attractiveness comes from multiple dimensions:

a) serving as a center for BPO companies to support clients' Asian operations;
b) as an application development hub for companies with large operations or headquarters in Japan, Korea; and
c) a global risk diversification play beyond India for multinationals.

25. Surveys report that the supply base is highly fragmented and more than 90% of the thousand of the firms have less than 40 employees - these are mostly focused on the domestic markets and not on export markets.

26. Costs are a major issue and the premium value can range 20% upwards of average Indian rates and attrition levels are higher than Indian averages. Managerial talent is hard to spot.

27. Western clients continue to be concerned about IP related issued, where sensitive work is involved.

28. Despite all these, China may score well as a regional hub for a selective set of engagements - that may involve technologies centered around

Embedded software
Product engineering;
Build solutions
BPO

Attention Bangalore readers: I will be delivering the keynote address for the salesforce.com India launch meeting in Bangalore on Sep 12. at the Taj West End.

S. Sadagopan, heads consulting and eBusiness for Satyam in the Asia Pacific, Middle Eastern and African markets based out of Singapore. His blog is focused on emerging technologies & trends. These are his personal views. Email Sadagopan at sadagopan@gmail.com.

The Deep End: Enterprise Software: Consolidation, Innovation and Business Value

S. Sadagopan — 2006-08-28T10:36:04-08:00

Of late, traces of real innovation have been rarely spotted in the enterprise software sector - so complain a majority of stakeholders. If one were to think of the situation, it is clear that innovation, or lack thereof can be paradoxically seen to enjoy a well defined pattern of cause and effect relationship. Come to think of it, this is clearly driven by the oft-heard maxim: consolidation is stifling innovation, and where lack of innovation is driving consolidation.

The raison d'etre for consolidation happens to be the ability to bring out positive outcomes based on bringing together supplementary and complementary offerings. In reality we are getting to see megavendors racing to integrate acquired technologies into wide suites. This has an inevitable consequence - that of managing a maturing stack (which no doubt would consume significant efforts). With this lopsided approach towards gaining strength in the market, the mega vendors are forced to focus their energy and resources to integrating diverse and newly acquired technologies into so-called "best-in-class" enterprise suites. In reality it is seen that their original maturing IT stacks are holding back their powers of innovation as this absorbs substantial share of their R&D outlay. New ideas and new product development take a back seat - resulting in a slow pace of progress. This preoccupation of bringing together such new solutions as against developing new programs is certainly not a healthy trend. Owing to the consolidation frenzy, smaller firms are also focused on developing solution allied to megavendors and larger brands and not necessarily focused on rolling out innovative products.

Many think that the innovation amongst enterprise software vendors is getting stifled and essentially what we see today is essentially a strategy as followed by the vendors is towards grabbing more market share, not necessarily improving the technological base over time but extend products through marginal functionality additions/extensions, plug the holes in the providing a common platform centric stack of applications. Product offerings across both these sectors continue to collapse into each other. Vendors are filling out their technology stacks to push "whole" offerings. Segments are splitting into low- and high-end solutions.

Some may argue that the reason for lack of innovation in the enterprise space may be attributed to the fact that IT systems have become more complex than ever and most of the corporate IT spending is aimed at maintenance/extension/enhancement of existing infrastructure and applications. In fact, theoretically speaking, with more and more enterprise software applications slated to be available as services (Web or otherwise), the scope for development of new products begin to decline. Vendors have also developed a vested interest in perpetuating this situation: After all many of the large software manufacturers are earning more money from maintenance services (mostly systems integration related) than from new software license sales. The focus of enterprise software has shifted from emphasizing depth to parading breadth. How is this breadth acquired - not by traditional means but mostly be acquisitions and in the process make themselves busy in solidifying the products and evolving new architecture(s). It is indeed ironic that at a time when business needs more and more of IT, the choking of innovative energy would clearly not bode well for the technology industry.

Look at the demands on the vendors today: There is a fair expectation on their part to be seen at par with their competitors - with built-ins like pre-configured business processes, have almost standard functionalities and come with pre-defined vertical solutions. Add standard transactional and simulation reports, it appears as if the common denominator across different solutions far exceed variations by a long mile. If the commonalities across competing business have such a large swipe of commonality, its only natural that specialized solutions come with a matching degrees of commonality. The differentiation becomes mostly centered on the platform architectures.

The argument can then be extended and seen as given the high degree of commonality amongst stakeholders in a given vertical/segment, it is only to be expected that the software functionalities from packaged vendors would be similar in nature. While uniqueness, differentiation is an absolute must for healthy growth of software products/vendors, increasingly it is being seen that differences in architectural approach becomes a key weapon in the arsenal of software vendors. With all this, how does the landscape look like today - the established trend is to move to a SOA centered around processes, and in the process defocusing an event-based/transaction-centric approach. Market presence, references, economics, good partner ecosystem - all of these play a much bigger role in helping organizations make decisions about product purchase. Seen from an overall perspective, while all the hoopla about product being seen as superior in multiple counts, ultimately the relationship and the consulting team matter more.

Vendors tell us that customer demands, market dynamics, and technology advancements are pushing solution frameworks to be aligned towards an experience of end-to-end process fulfillment. This forces the vendors to acquire new functionalities faster and integrate them to increase the richness and appeal of their application stack. In this wave of consolidation, brute force mergers are becoming more and more pronounced. This leads to a situation where some tend to view that increasingly because of its value proposition getting based on its consolidated avatar, all enterprise systems are running the risk of being seen at its core as essentially the same. Of course, vendors would make us believe that there is so much of differentiation that provides an edge to their respective products. Leaving aside ROI assessments, feature and function comparison, market share or cost comparisons, vertical spreads, but seen from an end user perspective, mature enterprise software today seems to provide performance advantage just within a band. Even before the consolidation frenzy, as seen a few years back, studies have shown that close to 95% of large enterprises used enterprise software from a handful of vendors.

A number of studies confirm that investments in IT by business enterprises are a non-negotiable to be very big, global and competitive. While being amongst the best in business entails using right software -the reverse may not be true - using the best software may not mean that the business will be large and successful. This also can open up a line of thinking that despite what software/solution that one uses - success may depend on entirely different set of factors!

After all, increasingly it is getting clear that IT is business. The enterprise applications have become so well entrenched that it is simply impossible to think of doing business without them. Today CIOs can choose from a variety of options - ranging from buying seasoned products to innovative best-of-breeds - one that would help meet most of their business needs. There are some who think that applications are getting commoditized and of late, we are also seeing a lot of consolidation moves happening in the enterprise software industry. Smaller, niche vendors are getting gobbled by stronger players. In a way some see this has made the selection of solutions more tough for the buyers as look-alikes abound. At a fundamental level, the role of software is not meant for just enabling business alone but to keep pace with the dynamics of changing trends in business. Packaged apps are struggling to keep up with today's dynamic business processes. Some see that there is a fundamental mismatch between application functionality and their core business requirements. Preconfigured software provides for supporting a number of pre-determined, "flexible" options; reality shows that this flexibility is not without limits - the enabling choices boil down to a list of existing, preordained combination of options. This leads to the situation that mostly IT applications become a barrier & not an enabler of business change, as the application rules, processes, data definitions, and user interfaces are encompassed as codes -calling for deep technical skills to modify. Business improvements, transformations & innovations are clearly not getting the needed support from these flexible features.

The hope is based on the trends which show that componentized software products, interoperability standards and Internet technology will lead to a rich array of considered choices for enterprises to adopt. Software vendor's execution of their futuristic strategies would come into sharper focus as users would realize that migrating older instances and/or integrating them to other software will remain resource consuming and painstaking for some time to come. New solutions within enterprises shall find easy fitment to newly rearchitected products, capable of actualizing automation and transformation of processes end-to-end. Enterprises shall actively begin looking at new protocol adherences, standards and technologies in order to benefit from Web services/SOA frameworks. With large scale consolidations happening within the industry, the basis of competition shifts from plain market muscle, promotions and fast moving abilities to providing future proof architectures and good support to business processes through repository centric integrated offering benefiting the business across the extended value chain.

Moving forward, we may begin to see software ecosystems rather than standalone products and/or platforms being used by enterprises. Upon maturity of the ecosystems we may get to see new set and/or new model platform players dominating the industry. Businesses shall begin to demand people who can consult them and can leverage consultants to leverage SOA-based products as much as possible. System integrators may have to move from best-of-breed solutions to some level of mass-customized solution that offers reduced total cost of ownership (TCO) through standardization and simplification. Architectural governance, application portfolio management, change management shall begin to be felt more.

As I wrote recently , the enterprise software market will have to reflect and embark on an important restructuring and transformation to become more vibrant, broad based, innovative and bounce back as a serious contributor to the growth of the industry ecosystem and the business at large.

S. Sadagopan, heads consulting and eBusiness for Satyam in the Asia Pacific, Middle Eastern and African markets based out of Singapore. His blog is focused on emerging technologies & trends. These are his personal views. Email Sadagopan at sadagopan@gmail.com.

The Deep End: Open Source Enterprise Software – Not Yet

S. Sadagopan — 2006-08-07T10:33:56-08:00

I was somewhat surprised to see Guy Smith’s OP-ED note titled –“Is Enterprise Software Doomed? While there are many things that get said there – I was particularly intrigued by two recurring themes therein – Enterprise software is almost commoditized and that most of the IT needs of enterprises can be met through open source. While a detailed response needs to address things from multiple perspectives – a task that the blogging irregulars are currently carrying out, I want to just focus on the relevance of the open source as enterprise software and the leave the rest for discussions at a later point in time.

The Deep End: Enterprise Software and The Future Of Smaller Players

S. Sadagopan — 2006-07-24T10:02:53-08:00

Followers of the enterprise software industry are likely now tired of the cacophony of predictions about the maturing (!) and rapidly consolidating industry. In reality, the race to serve the biggest of all opportunities that is currently hot vis-a-vis the mid-market/emerging market (SME) segments is helping different breeds of vendors to survive and gives a different face and color to the enterprise software industry.

In many ways such vendors hold the decisive swing influence in the changing face of the industry. The SME markets are all characterized by a different set of characteristics in technology selection and absorption. The distinctive factors between the aspirants, contenders and pretenders of the enterprise software industry trying to work in this segment are quite interesting to watch. The landscape of the enterprise solutions is still dotted by the all-rolled-in-one type of solution players to niche focused players with well defined solutions. The irony is that such players are running the risk of being marginalized - not just by the natural law of economic forces alone - but by the inelegant, self hurting greedy designs of the mega vendors/their stakeholders.

While the top-tier vendors boast of wide-ranging integrated functionalities with deep pockets and well-oiled organizational machineries spanning global coverage for sales & marketing, research & development with a well established customer base - the flip side of these players as seen by the SME segments are the undue complexity of the these mega vendor products and coming at high price levels - after all too complicated and overstuffed functionalities induces risks and makes the return & benefits out of such investments debatable/doubtful.

The set of vendors playing the role of "consolidator" is seen as growing by acquiring small, medium, low growth, fading enterprises - mostly surviving with their maintenance and service revenue streams. These are clearly risky for adoption from an integration perspective and the generally poor track records of data modeling capabilities make the task tougher, longer and cost ineffective - these do not and can not go unnoticed by potential customers.

Mergers facilitated by supplementary and complementary capabilities of the constituents like pockets of strengths as seen in geographical point of presence or vertical domain strengths or technology advances may seem to make a good case for coming together - these are facing integration challenges and are increasingly beginning to be seen as loose collection of solutions - an anachronism in the rapidly demanding world of global solutions. The set of vendors trying to grow organically adopting a focused growth approach by staying close to roots are also seen as becoming less and less financially robust casting doubts about sustaining their models of operation.

While the top-tier vendors boast of wide ranging integrated functionalities with deep pockets, specialized solutions like PLM, SRM, MDM, Content management, BPM, Document management, Compliance solutions, Vertical solutions coming from best - of - breed players continue to remain attractive to buyers of different spectrum. The mega vendors are trying to counter this competition with promises of rapid deployment methods and attractive packages of fixed time, fixed price based accelerated rollouts with templatized approaches. Again for reasons centered around concerns of integration and cohesion, even these options are proving to be seen less attractive by prospective buyers. Prefabricated/Cookie-cutter/fixed term/price - all look attractive on paper, in real sense these do not satisfy the prospects, despite these being SMEs. This forces onerous responsibility on the mega vendors to offer solutions that are not only cost effective, less complex and faster to implement but offer open solutions that can be extended over time and be amenable for efficient version and technology upgrades.

With all this - why is the consolidation fever repeatedly felt? Historically application vendors have grown by selling licenses by opening accounts - but alas this is not the trend any more. There are no more Fortune 1000 enterprises that have not bought/ implemented leading edge enterprise solution and so the message from the market is that the traditional approach of enterprise software vendors may not be relevant anymore. Their goals are shifting towards maximizing marketshare and begin to offer niche solutions - albeit integrated with their core offerings. The key choice available before the vendor is acquisition here. The revenue streams now shift from creating new accounts to up selling, cross selling, offering solutions across the stack, besides enhancing the reach of support and services - either case having a large and wider customer base becomes a sine qua non.

Wider reach, operational efficiencies, annuity revenues from large customer base besides some marginal revenue accruing out of acquiring the smaller firms operation, by definition would constitute the operational model for the mega vendors. The economy of scale (current indications - more than 20,000 customers) and the prohibitive switching costs for customers would be the key reasons that the mega vendors would continue to survive. The mega vendors have tasks cut out in front of them when they go in for acquisitions -integration, essentially the ability to develop technical frameworks, methodologies & tools to support varied business demands - all these need to happen quickly post acquisition. More often than not these vendors need to invest substantial time, money & efforts to make this happen. Just as switching costs are prohibitive for customers, integration costs are quite high for vendors - the money paid for acquisition is only one part of the cost. The invest, maintain and grow model for the acquired technology/solution too often sucks in more money from the mega vendors

Emerging markets shall continue to fuel the license growth rates for the mega vendors and with the near flat growth rates for the mega vendors in terms of license revenue growth, mega vendors shall begin to focus on innovation and new grade solutions. While these are the trends and approaches seen for a while in the enterprise software segment, what we need to notice is the trend that these consolidation are effecting more than reducing the number of players in the enterprise applications field, it is contributing to the widening the gap between application/infrastructure mega vendors and pure-play application providers.

Today the mega vendors have capabilities that span both the applications and the infrastructure that are needed to run them. Some best-of-breed players are leveraging this infrastructure and are beginning to offer components/solutions centered around them as well. Looking forward, the trend may get increasingly stronger. With such alliances getting stronger, those who have not joined such a bandwagon are increasingly feeling isolated - as this is more than likely to have a bearing on their competitiveness and business survival. This would mean that mega vendors may begin to focus more and more on infrastructure and less and less on applications given the fact that they have already invested heavily in applications and the other players in their ecosystem are more than willing to develop such applications. That's the conventional view but the downside is innovation and R&D for the applications are effectively outsourced (say the invisible/unconventional route) and such arrangements always come with associated risks - the principal in such an arrangement - the mega vendor can simply buy it out and integrate them into the already wide and big application suite(s). Of course this is akin to cutting the roots of the ecosystem - but the counterview is that in practice not everyone/everything gets acquired.

There is a crying need now for a new structure for the enterprise software ecosystem wherein the smaller members can participate and benefit in a fair manner from the opportunities that are arising in this space. Brutal waves of consolidation, investor reluctance to fund enterprise software startups, the not so firmed up patterns on corporate buying of enterprise software - all have gone to directly affect the prospects of a number of small software companies. This is ironic considering that invariably we have seen in the last several years that faster rollouts to market, innovation, specialized niche solutions all have come from this stable - making the software space a vibrant and progressive one. We are not seeing the growth of such firms focusing on "nichified" solutions and this is certainly not an encouraging trend. In the age of composites and SOA, these smaller firms are important constituents to make things roll. This is leading to a grave situation:

A. The mega vendors would find it increasingly difficult to keep rolling out/supporting specialized solutions and still feel satisfied about the investment returns

B. The customers may not find the terms of sale of such software/solutions to be reasonably priced and may find them inflexible in their approach.

Seen from a customer perspective, clearly they are not too enthused with the behavior of the mega vendors. While customers naturally would like to deal with vendors who are more stable and profitable, in reality they also want more choice. In the choice vs transactional costs debate, customer in general vote mostly for choice. Mega vendors seen to be restricting availability of wider choices are clearly losing the relationship value with their customers. Part of the reason that business looks at Open source, SaaS lay here - these provide choice and come from different set of players than they usually deal with.

The damage can go deeper - by more or less transferring the responsibility of application development to small players and begin to operate with the philosophy of throw money to acquire and progress, the mega vendors run the risk if not investing/fuelling in application development initiatives that could lead to innovation - the only long lasting license for survival. With limited ability to innovate in an applied way, they run the biggest of all the risks - losing their market share (the very core to their survival as we saw earlier). It would be impossible to gobble up every upcoming innovative firm (in some cases, these may also get funded by competitors to further complicate things) - these could foster the seeds for disrupting the existing industry structure. Rumblings are beginning to get heard along these lines already.

What all this could lead to: in the medium to long term, the leadership status that the mega vendors want to hold on to may slip away - faster than it took for them to build. After all being in touch with the application ecosystem, matching customer expectations are a basic requisite for enduring success and fostering innovations. Clearly, the enterprise software market will have to reflect and embark on an important restructuring and transformation to become more vibrant, broad based, innovative and bounce back as a serious contributor to the growth of the industry ecosystem and the business at large.

S. Sadagopan, heads consulting and eBusiness for Satyam in the Asia Pacific, Middle Eastern and African markets based out of Singapore. He has led several consulting and technology transformation engagements covering multiple industries cutting across a wide variety of technologies around the world. His blog is focused on emerging technologies & trends. These are his personal views.

The Deep End: The Changing Business and Technology Architecture and the Growth of the Tech Economy

S. Sadagopan — 2006-06-11T10:26:37-08:00

Historically the evolution of the technology happened along two nodes: first within and between large enterprises followed by extending outward to other enterprises and domains as standardized (continual adoption create congenial environments for creating standards based on common denominators) components - usually such a measure is accompanied with reduction in costs and faster rollouts. Perhaps signifying a discontinuity of the past, as the new technologies begin to gain hold, the absorption rate is getting faster and faster (the collective body of knowledge is changing the rules of the game - look at SAP/Oracle rollout time today and compare it with what used to be the time it took to roll out five years back, a 40% to 60% improvement in rollout measures are commonly observed while comparing identical situations. SOA & Composites threaten to accelerate rollouts faster). The rate of change is so rapid that technology based competitive advantage looks like an advantage that can hold only for a while, as the momentum in adoption forces leading edge/innovative companies to look for newer and newer technologies. Clearly this time around this cycle is getting shorter & shorter

In such a scenario creating a new business & technology architecture is increasingly becoming an art, a craft, a discipline to build globally competitive enterprises. It may not be an overstatement to state that just as the copernicus revelation completely flipped the known notion that the sun revolves around the earth, the new business architectures are forcing out known notions of the ways of doing business, and technology is the single most important factor enabling this albeit rapid transition. Accelerated business process change becomes a given that new IT/Business architecture should support. The Customer demands and fast changing competitive landscape will not anymore wait for next release of a technological product or a grandiose future vision. To stay where they are, enterprises now realize that the jaded world of hard coded software applications, technology lockins, consultant/user centric knowledge of logic/application and the likes are all set to give way. The technology world would be forced to deliver on its promise: enable new form of architecture enmeshing process specifications to fulfill business requirements

The second-generation Internet technologies - along with earlier tools like the Web itself and e-mail - are drastically reducing the cost of communicating, finding things and distributing and receiving services online. That means a cost leveling that puts small companies on equal footing with big ones, making it easier for upstarts to innovate, disrupt industries and get big fast. The phenomenon is a big step in the democratization of information technology. Its imprint is evident well beyond business, in the social and cultural impact of everything from blogs to online role-playing games.

While watching, hearing, reading and discussing several emergent developments, it appears that the key tenets of such a business and technology architecture coalesce around addressing a few pronounced trends that we are seeing in the business, social and technological realms:

The new framework of extended Internet is enabling digital technology to move its frontiers beyond the established world - to deploy IT innovatively as in technologies like RFID, Telematics etc.
The intersection of new technologies are providing powerful propelling forces of innovation (eg) Document Management & RFID, BPM & SOA, Composites & SaaS, Search & Content Management with enterprise analytics etc.
Data analysis and business intelligence solutions, linked with device or sensor networks, helps companies deal with the torrent of data - thus setting the stage for finding new insights and turn more competitive.
The data insights, reports must help companies take right decisions and facilitate follow on actions - . See Thomas Davenport's article titled competing on analytics.
Realtime operational dashboards, innovation dashboards, performance measurement dashboards -these are becoming more and more heard as implemented and used inside enterprises.
From situations of intermittent connections, flashes of insight & ever disabled systemic gain, competitive forces & technological advances are forcing enterprises to try out business analytics and close the loop by working on actionable insights.
Companies come together in hitherto unknown ways through properly designed innovation networks - some create new range of services, some innovate faster and better , rigidity gives way to considered and manageable flexibility in services ranging from research, product development to market research and this phenomenon extends to tapping global expertise.
The IT ecosystem inside enterprises gets rearchitected around business processes rather than functional applications with web services software and service-oriented architecture (SOA) providing consistently better capabilities.
As the technology stacks begin to collapse, virtualized infrastructure resources like storage & processing provide support to agile business processes.
Grids & SaaS are showing promising signs of heralding big ticket changes.
Social networks transpose the power of institutions to individuals. Pervasive technologies fan out their reach faster and in innovative ways. Institutions begin to slowly lose relevance - with technology powered people centric activities like blogging, search begin to move into the mainstream of applied technology usage stream.
Digital homes are becoming a reality wherein IT enters the living room in a determined way to play a larger role. Broadband/WiFi are redefining the consumer electronics sector. The intersection of IT with home electronics shall unleash sweeping changes in the established communications and entertainment industries and related applications. So many disruptive innovations/ technologies are expected to come out/play a bigger role of this collision triggering new forms of innovation and provide interesting business opportunities centered on new things such as :

-The "Cell" microprocessor.
- The home-entertainment gateway.
- The home-entertainment hub.
- Internet telephony over mobile phones.
- Electronic, networked health-care records.
- Ubiquitous mapping

Technology advances, innovative networks, social networks and a few others shall unleash a huge amount of forces chasing innovation & facilitating competitiveness in unique ways - & with most enterprises ever willing to adopt newer & newer technologies - the tech sector is poised for a huge growth moving forward. Those who doubt tech's ability to grow moving forward will have a huge surprise as these forces get unleashed and begin to demonstrate value to enterprises.

S. Sadagopan, heads consulting and eBusiness for Satyam in the Asia Pacific, Middle Eastern and African markets based out of Singapore. He has led several consulting and technology transformation engagements covering multiple industries cutting across a wide variety of technologies around the world. His blog is focused on emerging technologies & trends. These are his personal views.

The Deep End: A New Technology and Business Architecture

S. Sadagopan — 2006-06-02T10:40:04-08:00

The technology world has grown significantly in the past several decades - contractions & expansions have characterized the several cycles that it has passed through. From mainframes to personal computing to networked systems, each phase has benefited business world in unique and substantial ways. In a few cases technology has defined the ways business can conduct its operations. With a healthy rate of investments made in the enterprise solutions space in the past few years, user organizations are now beginning to assess the next wave of IT centric growth opportunities. For a long time,IT investment growth has always been slightly greater than the GDP growth (atleast in the last ten years). With no clear investment sucking big idea on the horizon, the technology ecosystem is probably focusing now on extending & rationalizing the infrastructure, with an increasing focus on ROI and business value (Some go to the extent of seeing the current state of the technology industry and call it as a non growth sector!!).