Thursday, June 5, 2008

How Oracle, IBM, SAP, Microsoft, and Intuit are Responding to the SaaS Revolution

In my previous blog entry, I discussed the possibility of a software giant failing to adapt to the SaaS revolution. I used the history of DEC as an example of how a highly successful company could miss a major shift in the market and capsize. This blog entry is a reference guide to what each of the major software vendors are doing in the SaaS space. I won't be sensational and predict the demise of any of these vendors. I think it's far too early to tell how the future will pan out.

I can say subjectively that I am impressed with Larry Ellison's pioneering efforts in the space. I can also say that SAP is currently the media whipping boy in the space, with delays in their Business ByDesign program costing them credibility. But this revolution is far from done, so let's not waste time trying to speculate the distant future.

Note: I am now an employee of Oracle, via the BEA acquisition

 

Oracle

Strategy

Larry Ellison, Oracle's CEO, has be talking about on demand software for a long time (10 years I believe), so it is clearly on his radar. In fact, he was an investor in both Salesforce and Netsuite, showing his belief in the business. Charles Phillips, Oracle President, has also spoken to the topic.

Larry and Charles Phillips have articulated a strategy on how Oracle can deliver SaaS and retain its focus on its core market (large enterprise). Larry does not intend to make a major push into the lower end of the SMB market.

Current SaaS Initiatives:

Oracle supports the following SaaS initiatives:

Weaknesses

Critics have primarily focused on the lack of end-to-end multitenancy in the On Demand business. The argument is that Oracle will not be able to provide a cost efficient solution unless the entire stack is multi-tenant.

Further reading:

 

Microsoft

Strategy

At an architectural level, Microsoft is promoting an S+S model, instead of a pure SaaS model. S+S stands for Software+Services. The idea with this is that Software as a Service is most useful when pared with local software (like Office). Microsoft obviously has a major incentive to make sure desktop software is not left behind in the SaaS world, so this makes for good strategy. Whether consumers will buy into it is another matter. See the weaknesses section below for more on this topic.

Current SaaS Initiatives

The following is a selection of  the SaaS offerings from MSFT:

  • SaaS On-Ramp Program - aids ISVs in building out SaaS solutions
  • Microsoft Online Services - its businesss applications ondemand offering
    • Hosted versions of Exchange, Sharepoint, and LiveMeeting
    • Dynamics CRM Live - hosted version of the Dynamics CRM offering
  • Windows Live - a family of hosted offerings for the small business/consumer
    • Live Mesh - touted as a SaaS solution, it currently is just a file synchronization service
    • Messenger (IM), Windows Live ID, Virtual Earth, Search, Spaces (blogs), and Gadgets
  • Architect Center - provides architectural guidance for ISVs
    • Lead by Gianpaolo Carraro and Fred Chong
    • Have produced a SaaS reference application, LitwareHR
    • While some of what they write is MSFT centric, most of the articles are generally applicable
    • As an architect myself, I admire the work that they do

There are more services listed here, but not all are really SaaS.

Weaknesses

Critics contend that Microsoft will struggle to succeed in the SaaS market while preserving its existing franchises. It already stumbled with its business model when a European partner began offering Office as a service:

Its Office franchise is already being eroded by service based offerings (Google Apps, Zoho, Adobe, etc). Somehow it has to prevent Office revenue from being decimated by pure SaaS players.

 

IBM

Strategy

Searching for interviews on SaaS with IBM's CEO Sam Palmisano or VP of Software Steve Mills does not bring up much of interest. This is a bit alarming, remembering the lessons from my previous DEC  post. Of the 5 major software giants covered here, IBM appears to have the least amount of executive mindshare for SaaS.

I am not the only one who sees this: Larry Barrett wrote an entire article analyzing IBM's apparent sluggishness when it comes to SaaS. While I don't see a high level business strategy, IBM has embarked on some SaaS initiatives, covered in the next section.

Current SaaS Initiatives:

IBM has these intiatives:

Weaknesses

As Larry Barrett noted, IBM doesn't appear to be aggressively pursuing the SaaS model. Sure, it has some initiatives going, but for the size of IBM those initiatives seem undersized.

Also, Jeff Nolan has pointed out that IBM lacks the business apps necessary to execute on an effective SaaS strategy.

Further reading:

 

SAP

Strategy

SAP CEO Henning Kagermann helped launch the major SAP SaaS initiative: Business ByDesign which is a hosted version of several of SAP's traditional heavy weight business applications. The intent was to target SMB, but due to problems in execution that strategy may be changing. It also plans to be a SaaS hybrid, with some on-premise software in the mix.

The bright spot for SAP and SaaS comes from its acquisition of Business Objects (BOBJ). BOBJ was already offering Crystal Reports at the time of the acquisition, and appears to be a healthy business.

Current SaaS Initiatives

SAP has three major initiatives:

Weaknesses

By far the biggest perceived weakness with SAP is its failure to execute on its much publicized SaaS release (BBD). Critics point to the major delays (possibly 24 months) as a sign that SAP's applications are a poor fit for the SaaS model. Worse, SAP validated the concept to its customers but failed to deliver, providing key advantage to competitors like NetSuite.

  • Loraine Lawson: SAP’s SaaS Is Dead. Long Live SAP’s SaaS.
  • Dennis Howlett: SAP Business By Design likely to be delayed
  •  

    Further reading:

     

    Intuit

    Strategy

    CEO Brad Smith isn't the most vocal about SaaS, but his company is doing the talking for him. Intuit is clearly pushing the SaaS model, with major product offerings already available. The strategy appears to be simple: offer online equivalents of their product suite:

    Current SaaS Initiatives

    Intuit offers the following products as SaaS offerings:

    Weaknesses

    I haven't seen any weaknesses other than stiff competition. The space Intuit plays in will become crowded, with Netsuite and Intacct already delivering SaaS, and Sage likely to become a contender as well.

     

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    2 comments:

    pw said...

    Terrifically well researched post - a mine of value here.

    What leapt out at me though was the accidental freudian slip caused by the omission of the letter 'i' here:

    "Microsoft is promoting an S+S model, instead of a pure SaaS model. S+S stands for Software+Services. The idea with this is that Software as a Service is most useful when pared with local software (like Office)."

    That's 'pared' as in 'trimmed down' rather than 'paired' as in 'twinned'. I'm sure Microsoft would love to 'pare' SaaS with local software - to the bone if possible!

    Thanks for the content. Please keep up the great work.

    Peter Laird said...

    pw (phil?) -

    Very observant, and since MSFT is a competitor you could hang a conspiracy theory on that. But as you guessed it was just a freudian slip. :)

    Thanks for the encouragement - as you can see by all the links in my postings, a lot of folks contribute to the material. Viva the community.

    Cheers - PJL