Column 2 : SaaS

{ Category Archives } SaaS

Gartner warns against shelfware-as-a-service

Gartner’s had a good webinar series lately, including one last month with Alexa Bona on software licensing and pricing (link to “roll your own webinar” download of slides in PDF and audio in mp3 separately), as part of their series on IT and the economy. As enterprises look to tighten their belts, software licenses are one place to do that, both on-premise and software-as-a-service, but you need to have flexible terms and conditions in your software contract in order to be able to negotiate a reduction in fees, particularly if there are high switching costs to move to another platform.

For on-premise enterprise software, keep in mind that you don’t own the software, you just have a license to use it. There’s no secondary market for enterprise software: you can’t sell off your Oracle or SAP licenses if you don’t need them any more. Even worse, in many cases, maintenance is from a single source: the original vendor. It’s not that easy to walk away from enterprise software, however, even if you do find a suitable replacement: you’ve probably spent 3-7 times the cost of the licenses on non-reusable external services (customization, training, ongoing services, maintenance), plus the time spent by internal resources and the commitment to build mindshare within the company to support the product. In many cases, changing vendors is not an option and, unfortunately, the vendors know that.

There are a lot of factors in software licensing that can come under dispute:

Oracle’s (and many other vendors’) definition of “named user” includes non-human processes that interact with the database, not just the people who are running applications. This became a huge issue a few years back when enterprise systems started being connected in some way to the internet: is the internet gateway process a single user, or do all potential users have to have individual licenses?
Virtualization and multi-core issues need to be addressed; in many cases, these hardware partitioning is often not adequately covered in license contracts, and you need to ensure that you’re not paying for the maximum potential capacity of the underlying hardware, not what you’re actually using.
Make sure that you have the right to change the platform (including hardware or underlying database) without onerous fees.
Watch out for license minimums embedded within the contract, or cases where upgrading to a larger server will cost you more even if you don’t have any more users. Minimums are for small organizations that barely meet discounting thresholds, not large enterprises. Vendors should not be actively promoting shelfware by enforcing minimums.

Maintenance fees are also on the increase, since vendors are very reliant on the revenue generated from that in the face of decreasing software sales. Customers who have older, stable versions of a product and don’t generate a lot of support issues feel that costs should be decreasing, especially since many vendors are offshoring support so that it is cheaper for vendor to supply it. Of course, it’s not about what the maintenance actually costs, it’s about what the market will bear. Gartner suggests negotiating maintenance caps, the ability to reduce your maintenance if you use less licenses, and the right to switch to a cheaper maintenance offering. Document what you’re entitled to as part of your maintenance, rather than relying on a link to the vendor’s “current maintenance offering”, to ensure that they can’t decrease your benefits. Watch out for what is covered by maintenance upgrades: sometimes the vendor will release what they call a new product but what the customer sees as just a functional upgrade on their existing product. To get around that, you can try licensing the generic functionality rather than the specific products by name (e.g., stating “word processing functionality” rather than “Microsoft Word”).

When polled, 64% of the audience said that they have been approached by a vendor to do a software audit in the past 12 months. In some cases, vendors may be doing this in order to recover license fees if they have lost a sale to the customer and feel that they might find them out of compliance. Be sure to negotiate how the audit is conducted, who pays for it, and what price that you pay for additional licenses if you are found to be out of compliance. Many software vendors are finding it a convenient time to conduct license audits in order to bolster revenues, and for the first time ever, I’ve heard radio advertisements urging people to blow the whistle on their employer if they are aware of pirated or misused software licenses, which is a sort of crowd-sourced software audit.

Software as a service licensing has its pitfalls as well, and they’re quite different from on-premise pricing issues. Many SaaS contracts have minimums or do not allow for reductions in volumes, leading to shelfware-as-a-service – consider it a new business model for wasting your money on software license fees. There is aggressive discounting going on right now – Gartner is seeing some deals at $70/user/month for enterprise-class software – but there may be much higher fees on renewal (when you’re hooked). There are also some unrecognized fees in SaaS contracts: storage (if beyond some minimum that they provide as part of the service, which is often charged at a rate far above cloud storage on the open market), additional costs for a development and test sandbox, premium maintenance that is more aligned with typical on-premise enterprise software support, non-corporate use (e.g., customers/partners accessing the system), integration, and termination fees including the right to get your data out of their system. Make sure that you know what the SaaS provider’s privacy/security policies are, especially related to the location of the data storage. Most of the Canadian financial services firms that I deal with, for example, will not allow their data to be stored in the United States, and many will not allow it to be stored outside Canada.

Furthermore, SaaS vendor SLAs will only cover their uptime, not your connectivity to them, so there are different points of failure than you would have for on-premise software. You can hardly blame the vendor if your internet connectivity fails, but you need to consider all of the points of failure and establishing appropriate SLAs for them.

Bona finished up with some very funny (but true) reinterpretations of clauses in vendor contracts, for example:

What the vendor means: “We are going to send you software that you are not licensed to use. If you use this software in error, you will be out of compliance with this contract, and woe to you if we audit.”
What they actually wrote: “Licensee shall not access or use any portion of the software not expressly licensed and paid for by the licensee.”
What you probably want to change it to: “Licensor shall not ship any software to licensee that licensee is not authorized to use.”

The summary of all this is that it’s not a task for amateurs. Unless you want to just let the vendor have their way with you on a large contract, you should consider engaging professionals to help out with this. Gartner provides this type of service, of course, but there are also high-quality independents (mostly former analysts) such as Vinnie Mirchandani.

Appian Analyst Update

Matt Calkins and Samir Gulati from Appian were on a short analyst call today to give us a summary of 2008 and a preview of 2009. They had some big changes this year: expanding their marketing efforts, launching their SaaS offering with customers like Starbucks and Manulife, and expanding geographically into Europe and Asia. Much of this is fuelled by the $10M in VC funding that they took on in 2008, the first external funding in their 10-year history; based on the timing of the funding, I’m guessing that they got a much better valuation than if it had happened a few months later.

Their sales numbers are counter-cyclical, with their Q4 in 2008 being their biggest closing quarter ever. Although they built their business on their US federal government business, they’ve broadened out to a number of commercial clients in financial services, manufacturing and other verticals. They’ve also seen some milestones with systems already in place, such as a total of 1B logins to the system that they have at the US Army. I think that they’re just getting starting with BPM there, so this is likely mostly on their portal platform; still, that’s a lot of logins.

Appian’s big push in 2008 was their SaaS platform, Appian Anywhere, which is forming an estimated 30% of their new business. Currently, it’s still only available to selected large customers in a dedicated and fault-tolerant hosting environment: in other words, not a multi-tenanted SaaS solution that you can just sign up for online at any time, but more like just having your BPM servers sitting in someone else’s location. They’ll be releasing a lower-end offering hosted on Amazon EC2 in early February, with 30-day free trials for small businesses, where each customer is hosted on their own instance. This is the same sort of configuration approach adopted by Intalio, as discussed in the comments on a post that I wrote for the BPM Think Tank; there are many who would say that this is not multi-tenancy, it’s virtualization, and it doesn’t provide the level of scalability (both up and down) that’s needed for true SaaS. The subscription cost for Appian Anywhere on EC2 will be $35/user/month.

Regardless of the platform – on-premise Appian Enterprise, the high-end hosted Appian Anywhere, or the EC2-hosted Appian Anywhere – it’s the same code base, so there shouldn’t be a problem moving from one to another as the need arises. This also means that they’re not trying to split their engineering team in three directions to serve three markets: it’s all the same code.

At the same time as the EC2 launch, Appian will be launching an application framework to allow for faster development and deployment of vertical applications, and an application marketplace to provide applications developed by Appian or partners on a subscription basis. Some initial applications will be free, with others coming in at around $10/user/month on top of the base subscription price.

Appian’s focus is on making BPM frictionless: allowing it to be purchased and deployed within an organization without all the usual hoopla that it takes for on-premise systems. I think that there could be some challenges ahead, however, with the lack of multi-tenancy causing additional administrative overhead and setting limits on how big (or small) you can get with your Appian Anywhere system and still have it be cost-effective all around.

2009 01 22 Sandy Kemsley BPM Comments (3)

Ultimus: Me on the Future of BPM

Here’s the presentation that I just delivered at the Ultimus user conference:

The Future Of BPM

View SlideShare presentation or Upload your own. (tags: management process)

First time that I’ve given this in this format, but it’s a combination of so much that I’m already writing or talking about, it flowed pretty well. I’m writing a paper for publication right now on Enterprise 2.0 and BPM, which will expand on some of these ideas.

2008 10 22 Sandy Kemsley BPM
Enterprise 2.0
Ultimus
mashups Comments (5)

Pegasystems’ Platform as a Service

Last week, Pegasystems announced their BPM “Platform as a Service” (PaaS) offering, and I had a chance prior to that to chat with Kerim Akgonul, VP of product management. My first thought on reading the phrase “internal cloud” was that they were just hitching a ride on the cloud bandwagon — check out James Governor’s 15 Ways to Tell It’s Not Cloud Computing for all the reasons that this isn’t cloud computing — but there are definite cloud-like capabilities to what they’re offering from the viewpoint of the individual projects, although not to the organization as a whole.

A problem that I see in many large customer organizations is that BPM projects end up being departmental, and even if the vendor manages to sell enterprise-wide licensing, it often ends up only deployed in one department. In many cases, this is because departments don’t want to share BPMS instances, and it’s just too hard to go through the effort of deploying another separate server and instance for every project. There’s also the need for multiple instances for development and testing, usually hand-installed at some cost. This is exacerbated in large organizations with a variety of geographically-dispersed business units, where they may have several different independent BPM projects on the go at the same time, and have difficulty in applying successes in one area to another.

Pega’s PaaS offering is a platform on top of SmartBPM that allows corporate IT to offer out independent BPMS instances to business units: true multi-tenanted instances for individual projects, but sharing the same infrastructure. Effectively, they’re turning corporate IT into an internal cloud BPM vendor, and the individual projects as customers of that offering. This gives some of the benefits of an externally-hosted SaaS BPMS — shared infrastructure, fast provisioning — while alleviating (perceived) security concerns of using external services for operational systems. You still have to buy and maintain the servers, and have in-house Pega system administration knowledge (which would not be necessary in a true SaaS environment); the real benefits come to the individual projects.

Allowing each project/department to deploy their own virtual BPMS will definitely speed some projects along, but it feeds the habits of some of the problems of departmental solutions that we’re trying to get away from. Encouraging the continuation of the silo culture makes it difficult to get to a true process-centric view of your business and tackle those end-to-end processes. However, Pega is allowing for some cross-instance sharing of artifacts using a new registry/repository to encourage reusability: different instances can share services, processes and rules directly, or make a copy into their local instance.

There’s some nice features in terms of synchronizing upgrades of instances: instances can opt out of an upgrade for a period of time to allow for custom application synchronization, although there would be limitations to how long that they could delay the upgrade. This capability is critical since many of the instances are likely to have custom applications built within them, and they’ll need time to test and make adjustments to those applications for a new version of the underlying platform.

At this point, there’s no billing capabilities or other modules that would allow this to be used as a multi-customer SaaS offering, but next year, they’ll be offering a series of applications that may be offered internally or externally, for example, by business process outsourcing firms.

The first version of PaaS is planned for release before the end of the year, although it wasn’t yet in beta when I had my discussion with them three weeks ago. I expect to see more at PegaWorld in just over a week.

I’m viewing trends like this as a long-overdue maturation of the industry: vendors are starting to realize that customers are having serious problems with rolling out large BPM programs across their organization, and starting to offer products and advice on how to accomplish that.

2008 10 10 Sandy Kemsley BPM Comments (1)

BPM Think Tank: On-Demand BPM Vendor Panel

George Barlow of Appian, Jim Rudden of Lombardi, Bino Jos of Intalio and Derek Miers of BPM Focus discussed the intersection of BPM and SaaS. Appian has Appian Anywhere and Lombardi has Blueprint, Derek has opinions about everything, but I’m not sure why a process expert from Intalio (who appears to have little understanding of where they fit from a SaaS standpoint, which is more a matter of being able to use cloud-based servers such as EC2 rather than a multi-tenanted hosted offering, and talked about everything except SaaS) ended up on this panel.

Paul Vincent of TIBCO popped up with a question about whether everyone would soon be doing BPM in the cloud; the panel responded that that’s not really the target, but rather to lower the entry costs for SMBs or departments within larger enterprises, or to provide some of the inter-enterprise collaborative functionality.

There was a discussion about the need for standards in a SaaS offering (I think triggered by Fred Cummins); BPMN is seen as important, although that’s really independent of on-demand versus on-premise.

BPM is perceived as being good in a down market, when companies are trying to cut headcount and become more efficient; SaaS is also good in a down market since there’s little or no capital outlay. In some cases, where the full BPMS is available both on-demand and on-premise (as with Appian), SaaS is the gateway drug to on-premise licensing.

George and Jim are the big contributors here: first of all, they’re both pretty smart guys, they have some major points of disagreement to liven up the conversation, and they’re the only two on the panel who actually have on-demand BPM services.

As always, it’s difficult to blog about a panel since it’s a bit disjointed, plus I had to do a wrapup of my roundtable sessions immediately following and had to comb through my notes with one brain while listening to the panel with the other. Oh, wait, maybe that’s the problem…

2008 10 06 Sandy Kemsley BPMThinkTank Comments (9)

Gartner BPM: SaaS and BPM

Having bugged out of the Agile BPM session, I arrived late to Michele Cantera’s discussion of whether software as a service is a viable option for process improvement projects. She covered off some of the same material as the SaaS and BPM session in February, but there was some new information as well. I won’t repeat the material from that session on the topic of BPM SaaS delivery and multi-tenancy models, so you might want to go back to that post and check that out as background for this. Go ahead, I’ll wait.

One interesting bit, based on 2007 estimates, segmented the BPM SaaS adopters into four categories:

Pragmatists, forming 49% of the market, who are replacing departmental on-premise applications but don’t have an enterprise-wide scope.
Beginners, 40% of the market, who are replacing low-end software tools with simple utility applications. These are often small or medium businesses who don’t want to grow an IT department.
Masters, 10% of the market, who are weaving SaaS applications into their enterprise-wide application portfolio.
Visionaries, a mere 1%, who are actively replacing on-premise applications with SaaS wherever possible.

She showed these plotted out on two axes: comprehensive strategy versus IT ability to execute. Pragmatists are low on comprehensive strategy but high on IT ability to execute; beginners are low on both, masters are high on both, and visionaries are high on strategy but low on ability to execute (since they don’t need to have internal IT skills). I really like this segmentation, since I think that it provides a good way to characterize SaaS customers in general, not just SaaS BPM customers.

She went through the list of current BPMS SaaS vendors, split out into business process modeling, process-based applications, and BPMS as a service. The SaaS modeling vendors are Lombardi, Metastorm and Appian; BPMS as a service is offered by Appian and Fujitsu. Process-based applications are typically offered by companies who have taken a commercial BPMS and built a specific vertical application on top of it; the underlying BPMS is not necessarily offered as SaaS directly, and in most cases, the BPMS vendor is not the one providing the service (with the exception of DST, whose BPM product grew from their own mutual fund back-office application), since most of them are not in the vertical applications market. There are going to be more entrants into all of these spaces in the near future, as well as changes to the multi-tenancy models offered by the vendors; you’ll want to keep your eye on what’s happening in this space if you’re considering BPM via SaaS, and start to consider how you’re going to handle process governance when your business processes aren’t running on your own systems any more.

She also showed a chart of different SaaS services types (BPO, application outsourcing, hosting, traditional ASP/SaaS model, process-based applications using BPMS/SaaS, BPMS as a platform, BPMS as SaaS-enabling platform) mapped against operating characteristics (operational cost, degree of customization, process agility, cost of process agility, number of suppliers): for example, BPMS as a platform has high process agility, whereas a traditional ASP/SaaS application that likely doesn’t include a BPMS has low process agility.

There was a list of do’s and don’ts of using SaaS for process agility, such as using BPMS via SaaS for pilot projects in order to make the business case for on-premise systems. Of course, if you do that, you might just find that you like the SaaS model well enough to stick with it for the long run.

2008 09 11 Sandy Kemsley BPM
Gartner BPM Comments (2)

Enterprise 2.0: How Cloud Computing is Shaping Enterprise Technology

The Enterprise 2.0 conference kicked off yesterday with some workshops, but I just flew in this morning and am at my first session of the day (although not *the* first session of the day), a keynote by Google’s Rishi Chandra on cloud computing. The same key message (buy lots of Google cloud computing ) but some complementary points to the presentation that I saw by Matthew Glotzbach at IT360 a couple of months ago; considering that they’re both in product marketing for Google Enterprise, that’s not surprising.

The focus of the presentation is cloud computing, and how the trends in consumer applications are starting to bleed over into the enterprise world. Chandra discussed several trends in cloud computing for the enterprise:

Simplicity wins, and applications that provide targeted functionality well are more likely to succeed than monolithic all-singing, all-dancing applications.
Rise of the power collaborator, as the important things being done in many organizations shift from being individual efforts to team efforts. A key team member will be the well-connected collaborators who can leverage the skills of others to help the entire team to succeed.
Economics of IT are changing, and many companies are looking at combinations of on-premise software and software as a service.
Barriers to the adoption of cloud computing for the enterprise are falling away: connectivity, user experience, reliability, offline access and security are all valid issues, but are all being addressed. He made some great points here (with which I totally agree) about the illusion of security of your existing internal systems, and how better security be achieved by putting corporate data in the cloud for remote access instead of having it on an unsecured laptop that can be stolen. You already trust a variety of outsourced vendors with your data — payroll, legal, IT — so how is outsourcing your data and application infrastructure any different? In fact, it used to be quite common (in the days when everyone had a mainframe) for third parties such as IBM and many long-dead competitors to host many companies’ data centers.

I’m totally on with cloud computing: my email is hosted on Google Apps, and I backup daily to an encrypted Amazon S3 service. Although I would not be keen to have my laptop stolen, I had a moment a couple of days ago when my laptop spontaneously died, and I felt absolutely no panic about it. It turned out to be only a temporary coma, but I knew that I could recreate my working environment on a new machine in pretty short order.

By the way, yes, there’s free wifi.

Tagged google, rishi chandra

2008 06 10 Sandy Kemsley E2.0 conf Comments (3)

SAPPHIRE: Léo Apotheker Keynote

This afternoon, we heard from the other co-CEO of SAP, Léo Apotheker (I think that I forgot to mention Henning Kagermann’s title of co-CEO in my post this morning), starting with some fairly general comments on the nature of competitive differentiation in business, and the power of collaboration.

He was joined on stage by a couple of customers:

Proctor&Gamble, who discussed how they’ve used SAP as essential infrastructure for innovation and growth in the consumer products industry; P&G has become well-known in social media circles for crowdsourcing their R&D after being featured in the book Wikinomics.
Harley Davidson, who are using SAP to provide the information necessary to enrich their customers’ experience, further deepening the relationship and increasing loyalty in order to increase revenues.
Coca-Cola, through a really funny sequence using voice-activated ordering, picking and delivery, ending with a real person from their warehouse delivering two Cokes to the stage, then giving a short (and rehearsed) bit on how it helps his day-to-day work. A Coca-Cola executive was there to help serve the drinks. And, oh yeah, talk about how SAP and a service-oriented architecture have improved their warehouse operations.

All of this is about business processes, and I don’t mean just the narrow view of process that we have in BPM: this is about the business processes embedded within every business application, from legacy ERP to agile composite applications.

Apotheker talked explicitly about NetWeaver BPM and what it brings in terms of process agility; this product announcement is obviously a big deal for SAP, since it’s mentioned in both of the CEO keynotes today. He talked about the power of picking and choosing components from the core SAP applications and assembling them into composite applications for new functionality and increased agility, while maintaining the power of the underlying ERP functionality.

2008 05 06 Sandy Kemsley BPM
SAPevents Comments (0)

IT360: Matthew Glotzbach, Google Enterprise

I’m at the IT360 for a couple of hours this morning, mostly to hear Matthew Glotzbach, director of product management for Google Enterprise. It’s a sad commentary on the culture of Canadian IT conferences shows that this session is entitled "Meet Matthew Glotzbach of Google" in the conference guide, as if he doesn’t need to actually talk about anything, just show up here in the frozen north — we need to work on that "we’re not worthy" attitude.

Google’s Enterprise division includes, as you might expect, search applications such as site search and dedicated search appliances, but also includes Google Apps which many of us now use for hosting email, calendaring and document collaboration functions.

Glotzbach’s actual presentation title is "Head in the Clouds", referring to cloud computing, or more properly in this context, software as a service. He made an analogy between SaaS applications and electricity, referencing Nicholas Carr’s book The Big Switch, talking about the shift from each factory generating its own power to the centralized generation of electricity that is now sold as a service on the power grid. Just as it took a cultural shift to move from each company having their own power generation facilities (and a VP of electricity who was intent on defending his turf), we’re now undergoing a cultural shift to move from each company managing all of their own IT services to using best-of-breed services at a much lower cost over the internet.

He discussed five things that cloud computing has given us:

Democratization of information, giving anyone the chance to have their say in some way, from Wikipedia to Twitter to blogs. This is dependent upon and facilitated by standards, particularly simple, easy-to-use standards like RSS; in fact, all public APIs for Google Apps are RSS-based. What IT can learn from this is to keep things simple, something that enterprise IT is not really known for. Cloud computing also allows for a much freer exchange of information between people who don’t speak the same language, through real-time translation capabilities that aren’t feasible on a desktop platform: for example, add en2zh (en2zh@bot.talk.google.com) to your Google group chat so that you can have a text chat with someone with one of you typing in English and the other in Mandarin Chinese.
Economics of the new information supply chain. Cloud computing fundamentally changes the economics of enterprise IT: the massive scale of cloud-based storage (e.g., Google Apps, Amazon S3) and computing (e.g., Amazon EC2) drives down the cost so much that it’s almost ridiculous not to consider using some of that capacity for enterprise functionality. Of course, we’ve been seeing this manifested in consumer applications for a couple of years now, with practically unlimited storage offered in online email and photo storage applications, but more companies need to start making this part of their enterprise strategy to reduce costs on systems that are essential but not a competitive differentiator.
Democratization of capabilities, allowing a developing nation to compete with a developed country, or a small business to compete with a major corporation, since they all have access to the same type of IT-related functionality through the cloud. In fact, those without legacy infrastructure are sometimes in a better position since they can start with a clean slate of new technology and become innovative collaborators. It’s also possible for any company, no matter how small, to get the necessary Googlejuice for a high ranking in search results if they have quality, targeted information on their site — as the cartoon says, on the internet no one knows you’re a dog.
Consumer-driven innovation will set the pace, and will drive IT. The consumer market is much more Darwinian in nature: consumers have more choices, and are notoriously fast to switch to another vendor. Businesses tend not to do this because of the high costs involved in both the selection process and in switching between vendors; I’m not sure that Glotzbach is giving enough weight to the costs of switching corporate applications, since he seems to indicate that companies may adopt more of a consumer-like fickleness in their vendor relationships. As more companies adopted more cloud computing, that will likely change as it becomes easier to switch providers.
Barriers to adoption of cloud computing are falling away. The main challenges have been connectivity, security, offline access, reliability and user experience; all of these have either been fully addressed or are in the process of being addressed. My biggest issue is still connectivity/offline access (which are really two sides of the same coin) such that I use a lot of desktop applications so that I can work on planes, in hotels with flaky access, or at the Toronto convention centre that I’m at today. He had some interesting stats on security: 60% of corporate data resides on desktop and laptop computers, and 1 in 10 laptops are stolen within 12 months of purchase — the FBI lost 160 laptops in the last 44 months — such that corporate security professionals consider laptops to be one of the biggest security risks. In other words, the data is probably safer in the cloud than it is on corporate laptops.

He finished up with a slide showing a list of well-known companies, all of which use Google Apps; alarmingly, I heard someone behind me say "just show me one Canadian company doing that". I’m not sure if that is an indication of the old-school nature of this conference’s attendees, or of Canadian IT businesspeople in general.

Glotzbach’s closing thoughts:

On-premise software is not going away
Most of the interesting innovation in software and technology over the next decade will be "in the cloud"
Market will have lots of competitors
Your new employees are the cloud generation, both welcoming and expecting that some big part of their social graph lives in the cloud
We (Google and other cloud providers) need to earn your trust.

Great presentation, and well worth braving the pouring rain to come out this morning.

Tagged google, matthew glotzbach

2008 04 09 Sandy Kemsley Enterprise 2.0
IT360 Comments (3)

Lombardi analyst update

On April 2nd, Lombardi held their second analyst update by teleconference; I found the first one back in January to be informative, and obviously Lombardi had sufficient positive feedback from it to continue. Strangely enough, we were instructed to embargo information about the new Blueprint until today, although the Blueprint team blogged about it on the weekend.

Phil Gilbert started out with a high-level corporate update, including their growth — both new hires and through their channel — and some of the new sales where they continue to compete successfully against larger vendors. However, most of the information was about their products and services.

Blueprint, their SaaS process discovery tool, now has 2,400 customer accounts (averaging 5 users per account) in 88 countries. A major update was just released, where they’ve moved on from just business mapping to a more complete BPMN modeler. Later this year, they’ll be improving the wiki-style documentation capabilities in the process repository, and at the end of this year or early next year, they’ll be moving some of Teamworks’ performance analysis tools — process simulation and executive dashboards — into Blueprint. Phil tried to counter the fears of companies not wanting to keep key business information in a hosted environment outside the firewall, but I know that until Blueprint can be hosted outside the US, where privacy laws are not well-aligned with many other countries such as Canada, a lot of my customers wouldn’t even consider it. I asked Phil if they planned to host outside of the US, and he said "probably in 2009" but indicated that it would be based on customer demand. The only other analyst on the call who seemed concerned about this — especially when it includes passing back operational data to the modeling environment for simulation — was Neil Ward-Dutton, who was the only other person who wasn’t US-based.

We had a demo of the new version of Blueprint, which includes the ability to reuse processes across Blueprint projects as linked subprocesses: a significant architectural improvement. The new diagramming capabilities include in-line embedded subprocesses that can be expanded and collapsed in place (nice!), the ability to easily convert a single step to a subprocess, and backward looping. It also includes a Visio importer, although not in the free version. In other words, this has clearly moved beyond the "toy" label that many other vendors have been applying to Blueprint, and appears to be a fairly full-featured process modeling tool now.

They’ll continue with their current Blueprint pricing model that has a free version for a single user and a limited number of processes in order to try it out, then subscription pricing of $50/user/month for the professional version, which includes the Visio importer and Teamworks integration.

The other major announcement is about three packages of services that Lombardi will be offering, all of which involve working closely with the customer and using Blueprint to document the processes:

Process inventory, a 3-week engagement that includes a full inventory of level 1 "as-is" processes within an organization, identification of 30+ key business KPIs and SLAs, and a report of process improvement opportunities and roadmap. Expected price is $40k.
Process assessment, a 2-day engagement to assess a single process: ranking the problems and opportunities, level 1 and 2 "as-is" process maps, and identification of 5-10 key process KPIs and SLAs. Expected price is $15k.
Process analysis, a 2-week engagement that follows on from the process assessment with a full analysis of a process by adding detailed ranking of process problems and opportunities, level 1 and 2 "as-is" and "to-be" process maps, the identification of 10-20 key process KPIs and SLAs, and an estimated potential ROI analysis. Expected price is $40k.

The idea is that a customer would have the process inventory done to take a look at all of their business processes and select one or two critical ones, then have the assessment and analysis done for each of those critical processes.

These service packages are available now worldwide, and are working to train their partners to provide these services, although they don’t yet have any partners who can deliver the entire set of packages.

Tagged lombardi

2008 04 08 Sandy Kemsley BPM Comments (5)

BPM and Model-Driven Development, SaaS and the economy

It’s been a slow week for blogging due to a lot of billable client work, which takes precedence, and I’ve also missed several webinars that I wanted to attend. However, an article that I wrote for Intelligent Enterprise was picked up on TechWeb and published on the Yahoo! News Tech page (thanks to Bruce Williams of Software AG for tipping me off), which has resulted in quite a bit of traffic this week. I wrote the article at the end of the Gartner BPM summit last month, sifting through the wide variety of information that I saw there and distilling out some common themes: model-driven architecture/development, BPM and software-as-a-service, and the impact of the slowing economy on BPM.

The part on BPM and model-driven development was written prior to the Great BPMN Debate, but there’s an obvious tie-in, since BPMN is the modeling language that’s typically used for MDD in BPM. One of the webinars that I missed, but have just played back, is one from PegaSystems and OMG on Five Principles for Success with Model Driven Development (playback available, registration required), which touches on a number of the ideas of using (usually graphical) models to express artifacts across the entire software development lifecycle. Richard Soley of OMG and Setrag Khoshafian of Pega went through these principles in detail:

Directly capture objectives through executable models and avoid complex mappings between tools
Make a BPM suite the core layer of your MDD: model-driven development is achieved through BPM
Build and manage an enterprise repository of your modeling assets using a complete BPM suite
Leverage the platform and architecture pattern independence
Adopt a BPM suite methodology, center of excellence, best practices and continuous improvement lifecycle

The principles presented by Khoshafian were rather suspiciously aligned with Pega’s way of doing things — I have the feeling that Soley would have produced a somewhat different list of principles on his own — but the entire webinar is still worth watching, especially if you’re trying to haul your organization out of a waterfall development model or trying to understand how BPM and MDD interrelate.

To my new visitors arriving here because of the TechWeb syndication of the article: browse the archives by month or category (including the conference subcategories), or use the search feature to find topics of interest. I have several mostly-finished blog posts waiting for some final touches, so stay tuned for more content.

2008 03 27 Sandy Kemsley BPM
Software design Comments (4)

Gartner BPM: Pursuing Process Agility Goals Using SaaS

Michele Cantera and Ben Pring talked about the compatibility of BPM and SaaS, especially in the key issue of whether process agility can be achieved with SaaS delivery models, or if that’s only suitable for standardized applications and processes.

Pring’s area of expertise is SaaS, and the first part of the presentation was on the SaaS trends in the next five years, and the areas where it will have the most impact. He spent some amount of time defining SaaS (which I won’t reproduce here), how it is confused with outsourcing and hosting, and its benefits. It is useful to consider, however, some of the reasons why companies are moving to SaaS, since these are true for BPM as it becomes available in a SaaS environment:

Too much software and hardware that is purchased but never used.
The high cost of software implementation, particularly the cost of services required.
The hidden costs of IT that drive up the effective cost of on-premise systems.
The emergence of new technologies that enable SaaS, such as grid computing.

SaaS is almost always used to reduce costs, both the up-front costs of the systems themselves and the infrastructure required to support them. However, many organizations have security concerns (which may or may not be unfounded), and there is often a real or perceived reduction in functionality (particularly related to integration) compared to an on-premise system. SaaS is no longer seen as a crazy idea any more — Salesforce.com proved that organizations would put confidential business-critical data in a remote system — and many enterprise application vendors are looking for ways to capitalize on this growing market.

Cantera took over to talk about BPMS and SaaS, starting with the range of different service delivery models from on-premise shared services (which she refers to as “not really SaaS” — you think?), to business process outsourcing (again, not SaaS since the end-customer doesn’t provide the people in the process and/or it’s not purchased on a subscription basis), to SaaS delivery of process-based applications (e.g., Enkata, based on Lombardi TeamWorks, or L@W, based on Metastorm), to an actual SaaS BPMS platform (e.g., Appian Anywhere, or Fujitsu Interstage). In most cases, the process-based applications are fairly rigid to the end consumers; unlike the platforms, which expose pretty much the entire functionality of the equivalent on-premise BPMS, the applications may not allow any process changes, or only limited changes.

She said that she doesn’t see a push to using a BPMS platform via SaaS, but I think that’s a chicken-and-egg problem: Appian’s product isn’t even released yet, and Fujitsu’s seems to be under the radar, so customers either don’t even know that this capability exists or think (correctly) that it’s not available yet.

There are a number of architectural patterns for implementing multi-tenancy BPMS on a single SaaS server:

Each application has its own instance of the BPMS, and its own instance of a repository, but on a shared server. Gartner sees this as the dominant architecture in order to ensure process agility, although at a higher cost due to separate BPMS and repository instances for each application.
Each application has its own instance of the BPMS, but all instances share a partitioned repository on the shared server.
Each application shares a single instance of the BPMS and repository on the shared server (currently, no BPMS vendors support this model).

Cantera and Pring spoke together on what degree of process agility can be expected in a SaaS BPMS environment. They started by discussing — separately — how to determine if SaaS is right for you, and if BPMS is right for you, then looked at the process agility characteristics of BPMS in the various service delivery environments. If we look just at the characteristics for BPMS platforms via SaaS, they indicate a moderate operational cost, high degree of customization possible and therefore high process agility with a low to moderate cost associated with that process agility. The problem, of course, is that the vendors just aren’t quite there yet.

2008 02 06 Sandy Kemsley BPM
Gartner BPM Comments (1)

Outsourcing the intranet

I’ve told a lot of people about Avenue A|Razorfish and their use of MediaWiki as their intranet platform (discussed here and here), and there’s a lot of people who are downright uncomfortable with the idea of any sort of non-standard intranet platform, such as allowing anyone in the company to edit any page on the intranet, or contribute content to the home page via tagging and feeds.

Imagine, then, how freaked out those people would be to have Facebook as their intranet.

Andrew McAfee discusses a prototype of a Facebook application that he’s seen that provides a secure enterprise overlay for Facebook, allowing for easy but secure social networking within the organization. According to WorkLight, the creators of the application:

WorkBook combines all the capabilities of Facebook with all the controls of a corporate environment, including integration with existing enterprise security services and information sources. With WorkBook, employees can find and stay in touch with corporate colleagues, publish company-related news, create bookmarks to enterprise application data and securely share the bookmarks with authorized colleagues, update on status change and get general company news.

This sort of interaction is critical for any organization, and once you get past a certain size or start to spread geographically, you can’t do it with a bulletin board and a water cooler any more; however, many companies either build their own (usually badly) or use some of the emerging Enterprise 2.0 software to do something inside their firewall. As Facebook becomes more widely used for business purposes, however, why not leverage a platform that pretty much everyone under the age of 40 is already using (and a few of us over that age)? One company, Serena Software, is already doing this, although they appear to be using the naked Facebook platform, so likely aren’t putting any sensitive information on there, even in invitation-only groups.

Personally, I quite like the idea, although I’m a bit of an anarchist when it comes to corporate organizations.

There’s a lot that would have to happen for Facebook to become a company’s intranet (or even a part of it): primarily sorting out issues of data ownership and export. There’s lots of people putting confidential data into Salesforce.com and other SaaS platforms that I think we can get past the philosophical question of whether or not to store corporate data outside the firewall; it just needs to be proven to be private, secure and exportable.

I also found an interesting post, coincidentally by an analyst at Serena, discussing how business mashups should be human process centric, which was in response to Keith Harrison-Broninski’s post on mashups and process. Although Facebook isn’t a mashup platform in any real sense, one thing that should be considered in using Facebook as a company’s intranet is how much process can — or should — be built into that. You really can’t do a full intranet without some sort of processes, and although WorkBook is targeted only at the social networking part of the intranet, it could easily become the preferred intranet user interface if it were adopted for that purpose.

Update: Facebook launched Friends Lists today, that is, the ability to group your contacts into different lists that can then be used for messaging and invitations. Although it doesn’t (yet) include the ability to assign different privacy settings for each group, it’s a big step on the way to more of a business platform. LinkedIn, you better get that IPO done soon…

2007 12 19 Sandy Kemsley Enterprise 2.0
mashups Comments (3)

LongJump revisited

I had an interview with Pankaj Malviya, CEO of LongJump, back in July, and another a few days ago to bring me up date for this week’s launch of their SaaS platform and applications. There hasn’t been a lot of new functionality since then, but they’ve accelerated their launch date: in July, they said that they’d be in an open beta by the end of the year (which I said was longish), and now they’ve done a full (non-beta) launch instead in a shorter time frame, so they must have felt the heat of the competition to get things going. They’ll be starting to offer training in about a week, and will eventually have some videos available online to allow you to preview applications.

Their focus remains on the small and medium business market, with the idea to prove to those companies that LongJump is sufficiently reliable to trust with their business data. Since they’re part of Relationals, they have a track record at providing hosted CRM for a couple of years now, which is certainly a good start over many of the other SaaS providers.

Although LongJump is a platform, they’re focussed on applications, not the platform itself. The basic package contains two applications: OfficeSpace, a group calendaring and collaboration application to manage documents, projects and discussions; and Customer Manager, a starter CRM application that integrates with Outlook. There will be other CRM applications available as well, such as Deal Manager for creating and tracking quotes, and non-sales management applications such as the IT asset tracking one that I discussed in my first post about them.

In fact in their press release, they list 12 applications that they say that they are initially introducing, although it’s not clear if all 12 are available now.

I am, of course, interested in what else that they’re doing with workflow after seeing it in the initial demo; they’re not releasing that until October, but they’re moving from a list-based set of states to a graphical process designer and there will be five applications released at the same time to take advantage of the workflow capabilities.

All of the applications will be free for the next three months in order to encourage people to try out LongJump, then it will move to regular pricing. Although the regular pricing was given to me verbally, it wasn’t confirmed so I don’t want to quote it here, but suffice it to say that the price point may give them an advantage over Salesforce.com for CRM, although you’d have to dig in and do a full functionality review (which I haven’t) to know how comparable that they really are.

You can read their full press release here.

2007 09 25 Sandy Kemsley Enterprise 2.0 Comments (1)

Appian Anywhere update

I had a chance to hear an update of Appian Anywhere, Appian’s SaaS BPM offering, while at the Gartner BPM conference this week. I’m very interested in BPM and Enterprise 2.0, and SaaS BPM fits nicely into that intersection.

Although they originally planned for GA in Q307, it looks like Q108 before they’re going to be available to their planned SMB target audience with payments by credit card and other functionality that you’d expect for a SaaS offering. The reason appears to be that they’ve had so much interest from large corporate customers that they’re offering a large-client configuration first to a small number of select customers, so have diverted resources from the SMB functionality to focus on the big fish first. It seems to me that that would tend to cannibalize their on-premise business, although I’m sure that there are large organizations who will use this as a way to try before they buy.

They’re really trying to create an ecosystem for partners to develop applications on their platform. To prime the pump, they’ve created 30+ applications of their own that they’ll offer out for free with the basic subscription; partners are developing other applications that will be offered on a subscription based in the Appian Anywhere marketplace. Encouraging this sort of application development is a web service-like integration capability (I don’t think that it is exactly web services, but similar in nature) to integrate between Appian Anywhere applications and behind-the-firewall applications, which makes it much more useful as a BPM platform, since I can’t think of any customer of mine who wouldn’t have to integrate with one of their on-premise systems at some point.

They’re also creating some video training to minimize the need for professional services to get you up and running on the platform.

There’s still a lot of resistance to SaaS for core business processes, although I think that this could catch on for the non-critical ones as a starting point. However, there’s some pure Enterprise 2.0 vendors such as LongJump who are going to creep into this space — from the other direction and with a very different sort of offering — and pick up some of the market.

2007 09 22 Sandy Kemsley BPM
Enterprise 2.0 Comments (0)

Why SaaS rocks

I hear a lot of opposition to software as a service from customers, ranging from an unformed mistrust of anything that crosses the firewall, to the feeling that anything that runs in a browser must be a toy, to a full-blown (and justified) concern of non-American companies about having their data stored on US-based servers where it is presumably accessible to US government agencies on demand. Keeping in mind that many of them are large, fairly conservative financial services organizations, I obviously have a long way to go in terms of convincing them otherwise, yet I still try.

Going back to Tim O’Reilly’s original treatise on Web 2.0, SaaS is baked right into the definition in two important ways:

the web as platform
the end of the software release cycle

The first of these is likely what sells most people originally: the idea that nothing needs to be installed at your own site, and all you need to do is pay $x per month per user (where x is about the cost of a couple of cappuccini at Starbucks) to have access to a fully-functional application. Think that this is only for small businesses? Salesforce.com announced yesterday that Dell is increasing their number of Salesforce.com subscriptions from 15,000 to 40,000 users. There’s all sorts of good reasons why to do this — lower TCO, small ongoing expense versus a large capital expenditure, no need to bring a new servers and applications into your data centre — but the somewhat unspoken reason is that it’s a way for the business to escape the tyranny of IT when it comes to purchasing applications. I’ve seen many cases of a smallish business unit within a large organization wanting to bring in new technology (BPM, BPA and BI are all ones that I’ve seen in this scenario), but IT adds on an unduly large burden of corporate standards and application vetting that kills the ROI, and the business goes back to their paper and spreadsheets. I’m not saying that IT shouldn’t be involved in these decisions, but when their time spent reviewing and “architecting” a packaged solution costs as much as the external costs, something’s wrong. If the business can get equivalent functionality from a SaaS offering with much less IT involvement and a small monthly bill rather than a large up-front capital expenditure, that’s going to look much more attractive.

The second driver for SaaS from O’Reilly’s definition is where the benefits will really accrue in the future, although that’s likely unrecognized by many people. The idea that you don’t have massive software releases that take the system down for hours or days, but that new features are gradually introduced with little or no fanfare, means that there’s much less disruption to the users, and that they’ll be pleasantly surprised by new functionality. I had exactly this experience of pleasant surprise this morning, when I noticed that Google Reader, which I’ve been using for a couple of months now, has gone from listing the number of unread items as “100+” to the actual number, a feature that I sorely missed from Bloglines since I almost always have more than 100 unread items and I really want to know how many more. They didn’t, to my knowledge, disrupt service in order to add this new functionality: it just appeared in my browser this morning (or maybe before, I’m not all that observant sometimes). I believe that there’s still the need for some major upgrades, such as a complete UI paradigm shift, but most of the enhancements to most business applications could be done incrementally and introduced as they’re ready, if the infrastructure is there to support it. That requires a browser-based application to avoid a download and install each time something changes, if not actually SaaS, but it also requires a new mindset for development teams about agile development and release: something that is much more prevalent in the SaaS vendors than in corporate IT groups.

If you read my post on Enterprise 2.0 updates recently, or the original Dion Hinchcliffe post that inspired it, it starts to become clear that Enterprise 2.0 will be dependent to some degree on SaaS, at least in the short term: many IT organizations are just not ready to start installing this new breed of application on their own servers, and the business groups will look outside to get their problems solved. This will lead to a further commoditization of IT, since once the business is using SaaS successfully, that genie’s not going back into the bottle.

Update: Google Reader also added search capabilities in this set of incremental upgrades, which I didn’t even notice (as enamoured as a I was with the accurate unread item count) until I read it on Mashable.

2007 09 06 Sandy Kemsley Enterprise 2.0 Comments (0)

BPM Think Tank Day 3: BPM vendor panel

Next up was a panel of BPM vendors: Phil Gilbert (Lombardi), Angel Diaz (IBM), Marco ten Vanholt (SAP BPX), Burley Kawasaki (Microsoft), Scott Byrnes (Handysoft) and David Shaffer (Oracle). Derek Miers moderated, and posed a series of questions to the panelists rather than having the panelists do short presentations as we saw on previous panels — a much better panel format, in my opinion, and it even generated some conversation between the panelists directly.

Phil mixed it up right away by agreeing with the other panelists that standards are important (duh), but said that the first thing that we need to standardize is the meaning of the term BPM. He also thinks that OSM (Organizational Structure Metamodel) is going to be one of the most significant standards in the coming months, next to BPMN. In other words, people are going to start modelling their business, not just their processes. Marco added that there’s going to be an increasing interest in the processes that span organizations, and standards that support that will become more important. They all seem to agree that business users don’t really care about standards explicitly, but that standards are an implicit part of things that the business types to want: portability of models and reusability of skills, for example.

One question was whether BPM offered via SaaS is reducing the barriers to entry to what is still a complex implementation. Burley feels that it will make a difference for departmental applications that just can’t justify the spend, and for cross-organizational choreographic processes where no one organization is “in charge”, but that there will still be a strong market for on-premise solutions especially at an enterprise level. Angel added that standards are going to play a strong role here, since there’s likely to be a hybrid approach that uses both on-premise and on-demand systems within the same processes. Marco made the statement that some industries will “never, ever have software as a service”; it will be interesting to come back in a few years and see if he has to eat his words. Many organizations already have their data centres outsourced, including those that require advanced security, and I think that SaaS is just a small step beyond that from a security standpoint even though it might be perceived as being something entirely different. Scott things that a template-driven, simpler type of BPM functionality could be adopted by the SMB market. David pointed out that there’s a difference between having BPM embedded in a SaaS application and offering BPM directly as a SaaS, and feels that the latter is going to see much lower adoption. Phil stated that their Blueprint product is a tactic in their way to building a cloud capability, implying that we’ll see some hybrid on-premise/on-demand functionality from Lombardi in the future

They then discussed mechanisms for supporting more collaboration and deeper embedding into a worker’s environment. Scott talked about being able to share, for example, information about the experts for a specific process, and be able to IM them directly. Marco talked about being able to do some collaborative Visio diagramming in a wiki-type plug-in (presumably on BPX); I’m not sure if this something that they have with a browser design interface, or if it’s a place to upload Visio diagrams. He also pointed out that wikis, forums and IM are going to be start to be built into applications for collaboration, further pushing the need for standards since none of us want the BPM vendors to build their own wiki or IM software.

A question from the audience asked whether the vendors are getting inquiries from other vendors to embed/OEM their BPM functionality inside another product, whether SaaS or not. David, Burley and Angel spoke up that they are seeing this; not surprising since Oracle, Microsoft and IBM are all “platform” BPM vendors that tend to offer components rather than a more cohesive suite. Although I haven’t written up my notes from the BPEL roundtable yesterday, this is one of the areas where standards like BPEL will help to facilitate that type of integration. Phil added that they’re seeing this as well, but more from the standpoint of embedding more of their suite rather than just the engine.

Another question was on the distinction between modelling processes for business improvement purposes, and modelling processes as a visual coding/RAD tool. Phil responded that if you’re just buying BPM as a RAD tool, don’t buy it: stick with Java or .Net.

There was a discussion on the role of large vendors in standards, and how large vendors can sometimes take a standard off into their own organization and develop it 80% of the way and bring it back to the standards group: sometimes this works well, and sometimes it allows the vendor to just mould the standard to their own product agenda. We also came back around to the comment that Phil made at the beginning of the panel, where we need to define what BPM is in the market: the vendors all seemed to agree that they all have their own definition of BPM that coincidentally matches completely with their product functionality, and they all agreed on the buzzphrase “BPM is all about the business”. The analysts also all have their own definitions, although they all seem to be congealing around the Gartner definition of BPM as a management practice, which doesn’t at all help the issue when the BPM vendors define it in terms of the technology capabilities. Bruce Silver lobbed a small incendiary device from the audience by stating that from the viewpoint of BPM as a management discipline, the vendor products are all exactly the same, and that customers may just see them as snake oil salesmen trying to sell the same thing in a different way. Not sure that we’re going to solve this one today.

It’s interesting watching a vendor panel like this, where the panelists are not allowed to do any product pitches, and where they’re all pretty smart guys: the discussion is a complex weave of philosophy, techno-geekery and thinly-veiled nudging towards their own specific agendas. This is part of what I like about the BPM Think Tank: there’s much more open collaboration between vendors than at other conferences, although there’s always a strong streak of friendly competition throughout the interactions.

2007 07 25 Sandy Kemsley BPM
BPMThinkTank Comments (0)

Enterprise 2.0: Case Studies, Part I

Another panel, this one with moderator Brian Gillooly from Optimize, and including panelists Jordan Frank of Traction, Mark Mader of Smartsheet.com, Suresh Chandrasekaran of Denodo, Todd Berkowitz of NewsGator and David Carter of iUpload (which I understood was going to undergo a name change based on what their CEO John Bruce said last month at EnterpriseCamp in Toronto). Since these are all product companies, I expect that this might be a bit less compelling than the previous panel, which was primarily focused on two Enterprise 2.0 end-user organizations.

I’m not going to list the details of each vendors’ product; suffice it to say that Traction is an enterprise wiki platform (although there’s some blog type functionality in there too), Smartsheet.com is a spreadsheet-style project management application offered as a hosted service, Denodo does enterprise data mashups for business intelligence applications (now that’s kind of interesting), NewsGator is a well-known web feed aggregator and reader, and iUpload is a hosted enterprise social software service.

Mader had some interesting comments on how by making updates to a schedule completely transparent, no one wants to be the last one to add their part since everyone will know that they were last; this, however, is not unique to any Enterprise 2.0 functionality, but has been a well-known characteristic of any collaboration environment since Og was carving pictures of his kills on the community cave wall.

There was an interesting question about who, within an organization, is driving the Enterprise 2.0 technology adoption: although the CxO might be writing the cheque, it’s often corporate communications who’s pushing for it. In the last session, we saw that in one organization, it was pushed by HR, but I suspect that’s unusual.

2007 06 19 Sandy Kemsley BI
E2.0 conf
Enterprise 2.0
blogging Comments (2)

The New Software Industry: Timothy Chou

The morning finished with Timothy Chou, author of The End of Software and the former president of Oracle’s online services group, discussing the radical changes in the software industry due to software-as-a-service. Anyone who entitles his talk “To Infinity and Beyond” and has a picture of Buzz Lightyear on the title slide is okay with me.

He looks at the economics of why the transformation is occurring, and encourages becoming a student of the economics in order to understand the shift. Considering a sort of Moore’s law for software, traditional software (e.g., SAP) costs around $100/user/month to licence, install and support in various configurations; SaaS (e.g., Salesforce.com) costs around $10/user/month; and internet applications (e.g., Google) are more like $1/user/month.

He makes the point that the SaaS revolution is already occurring by listing nine SaaS companies that have gone public (including Webex and Salesforce.com); these nine went from just over $200M in revenues in 2002 to $1.4B in 2006.

Chou gives us three lessons for the future:

Specialization matters. Think Google, which was originally an insanely simple interface for a single task: searching. Or eBay, which just does auctioning. This isn’t just a product functionality or distribution issue, however; the software development process has fundamentally changed. It’s now easier to become a software developer because of the tools, and this drives the development of niche applications. In a world where Citibank has more developers than Oracle, we’re not just buying software from the “professionals” any more; we’re creating it ourselves or buying it from much smaller players.
Games matter. Chou uses World of Warcraft as a collaboration example, and it’s a great one. People from all over the world, with different languages and ethnicity, come together for a common goal, then disperse when that goal is achieved. WoW makes specialized skills and skill levels transparent, so that you immediately know if another player’s skills are complementary to your own, and how good he is at that skill. In general, you can’t do that now in business collaboration environments, but it would be great if you could. Also of interest is the world of currency within these games, and how that currency is valued in the real world.
Service matters. The service economy is not just about human labour; service is information. Consider the information that Amazon has about books, from finding them to other user reviews to recommendations. The information is there, but some of it is hard to find/analyze. The “surface web” of approximately 100TB is what you could find on Google, but there’s a much deeper web of more than a million TB, mostly inside corporate firewalls. How much better service could we have if we had access to more of that information in the deep web?

2007 04 30 Sandy Kemsley Enterprise 2.0
NewSoftwareIndustry Comments (0)

The New Software Industry: Ray Lane

I’m at the Microsoft campus in Mountain View attending the New Software Industry conference, put on by Carnegie Mellon West and the Haas School of Business. I interviewed a few of the people from CMU West a few months ago about the new Masters of Software Management program, and ended up being invited to attend here today. Since I’m down here for TUCON this week, it was just a matter of coming in a day early and fighting the traffic down from the city this morning (although I left San Francisco at 7:30 this morning, I still arrived late, around 9:15).

Unfortunately, I missed the brief opening address which, according to the program, featured Jim Morris, Dean of CMU West, and Tom Campbell, Dean of Haas, so my day started with Ray Lane of Kleiner Perkins (formerly of Oracle) talking about the personal enterprise, or what I would call Enterprise 2.0.

Lane started with a discussion about how the software industry is changing, including factors such as packaging (including SaaS) and vertical focus. I found it interesting, if not exactly surprising, that he has a very American-centric view of the industry, so that he’s really talking about the software industry in the U.S., not the global industry; he spoke about India and China gaining market share in software as some sort of external force as opposed to part of the industry.

He had some interesting points: a call to action, which including leveraging community power via mashups and other collaborative methods; and a look at how platforms are moving from monoliths to clouds (i.e., services exist in cloud and are called as required). He covered some basic about Web 2.0 and web-driven capabilities. Since I’ve been so immersed in this for such a long time, there wasn’t much new here for me, although he had some interesting examples, particularly about collaboration and user-driven content.

He talked about the “personal enterprise”, where consumer web applications inspire new enterprise applications, or what many of us have been talking about as Enterprise 2.0. He makes a great point that somehow, being at home allows us to just try something new online, whereas the act of going into the office makes us want to spend a year evaluating rather than just trying something, and how we need to change that notion.

He gave seven laws for Enterprise 2.0 applications:

serves individual needs
viral/organic adoption
contextual personalize information
no data entry or training required
delivers instantaneous value
utilizes community, social relationships
minimum IT footprint

I’d love to expand further on each of these, but I’m trying to get this conference blogging back to something like real-time, so that will have to wait for another post.

He finished up with some examples of personal enterprise applications, with some discussion about what each of them contributed to advancing software industry business models:

Services: Webex, Skype, RIM, Google
Applications: Salesforce.com, NetSuite, RightNow
Collaboration: SuiteTwo, Visible Path

Access to the Microsoft guest wifi is tightly guarded and requires an hour or so turnaround to get login credentials, so this first post is coming out late and the other will trickle along throughout the day. All of the posts for this conference are available here.