Can IBM become a business leader and a software leader?

When I first started as an industry analyst in the 1980s IBM software was in dire straits. It was the era where IBM was making the transition from the mainframe to a new generation of distributed computing. It didn’t go really well. Even with thousands of smart developers working their hearts out the first three foresees into a new generation of software were an abysmal failure. IBM’s new architectural framework called SAA(Systems Application Architecture) didn’t work; neither did the first application built on top of that called OfficeVision. It’s first development framework called Application Development  Cycle (AD/Cycle) also ended up on the cutting room floor.  Now fast forward 20 years and a lot has changed for IBM and its software strategy.  While it is easy to sit back and laugh at these failures, it was also a signal to the market that things were changing faster than anyone could have expected. In the 1980s, the world looked very different — programming was procedural, architectures were rigid, and there were no standards except in basic networking.

My perspective on business is that embracing failure and learning from them is the only way to really have success for the future. Plenty of companies that I have worked with over my decades in the industry have made incredible mistakes in trying to lead the world. Most of them make those mistakes and keep making them until they crawl into a hole and die quietly.  The companies I admire of the ones that make the mistakes, learn from them and keep pushing. I’d put both IBM, Microsoft, and Oracle in that space.

But I promised that this piece would be about IBM. I won’t bore you with more IBM history. Let’s just say that over the next 20 years IBM did not give up on distributed computing. So, where is IBM Software today? Since it isn’t time to write the book yet, I will tease you with the five most important observations that I have on where IBM is in its software journey:

1. Common components. If you look under the covers of the technology that is embedded in everything from Tivoli to Information Management and software development you will see common software components. There is one database engine; there is a single development framework, and a single analytics backbone.  There are common interfaces between elements across a very big software portfolio. So, any management capabilities needed to manage an analytics engine will use Tivoli components, etc.

2. Analytics rules. No matter what you are doing, being able to analyze the information inside a management environment or a packaged application can make the difference between success and failure.  IBM has pushed information management to the top of stack across its software portfolio. Since we are seeing increasing levels of automation in everything from cars to factory floors to healthcare equipment, collecting and analyzing this data is becoming the norm. This is where Information Management and Service Management come together.

3. Solutions don’t have to be packaged software. More than 10 years ago IBM made the decision that it would not be in the packaged software business. Even as SAP and Oracle continued to build their empires, IBM took a different path. IBM (like HP) is building solution frameworks that over time incorporate more and more best practices and software patterns. These frameworks are intended to work in partnership with packaged software. What’s the difference? Treat the packages like ERP as the underlying commodity engine and focus on the business value add.

4. Going cloud. Over the past few years, IBM has been making a major investment in cloud computing and has begun to release some public cloud offerings for software testing and development as a starting point. IBM is investing a lot in security and overall cloud management.  It’s Cloud Burst appliance and packaged offerings are intended to be the opening salvo.   In addition, and probably even more important are the private clouds that IBM is building for its largest customers. Ironically, the growing importance of the cloud may actually be the salvation of the Lotus brand.

5. The appliance lives. Even as we look towards the cloud to wean us off of hardware, IBM is putting big bets on hardware appliances. It is actually a good strategy. Packaging all the piece parts onto an appliance that can be remotely upgraded and managed is a good sales strategy for companies cutting back on staff but still requiring capabilities.

There is a lot more that is important about this stage in IBM’s evolution as a company. If I had to sum up what I took away from this annual analyst software event is that IBM is focused at winning the hearts, minds, and dollars of the business leader looking for ways to innovate. That’s what Smarter Planet is about. Will IBM be able to juggle its place as a software leader with its push into business leadership? It is a complicated task that will take years to accomplish and even longer to assess its success.

Unintended consequences of the cloud – part II

As I was pointing out yesterday, there are many unintended consequences from any emerging technology platform — the cloud will be no exception. So, here are my next three picks for unintended consequences from the evolution of cloud computing:

4. The cloud will disrupt traditional computing sales models. I think that Larry Ellison is right to rant about Cloud Computing. He is clearly aware that if cloud computing becomes the preferred way for customers to purchase software the traditional model of paying maintenance on applications will change dramatically.  Clearly,  vendors can simply roll in the maintenance stream into the per user per month pricing. However, as I pointed out in Part I, prices will inevitably go down as competition for customers expands. There there will come a time when the vast sums of money collected to maintain software versions will seem a bit old fashioned. In fact, that will be one of the most important unintended consequences and will have a very disruptive effect on the economic models of computing. It has the potential to change the power dynamics of the entire hardware and software industries.The winners will be the customers and smart vendors who figure out how to make money without direct maintenance revenue. Like every other unintended consequence there will be new models emerging that will emerge that will make some really cleaver vendors very successful. But don’t ask me what they are. It is just too early to know.

5. The market for managing cloud services will boom. While service management vendors do pretty well today managing data center based systems, the cloud environment will make these vendors king of the hill.  Think about it like this. You are a company that is moving to the cloud. You have seven different software as a service offerings from seven different vendors. You also have a small private cloud that you use to provision critical customer data. You also use a public cloud for some large scale testing. In addition, any new software development is done with a public cloud and then moved into the private cloud when it is completed. Existing workloads like ERP systems and legacy systems of record remain in the data center. All of these components put together are the enterprise computing environment. So, what is the service level of this composite environment? How do you ensure that you are compliant across these environment? Can you ensure security and performance standards? A new generation of products and maybe a new generation of vendors will rake in a lot of cash solving this one.

6. What will processes look like in the cloud. Like data, processes will have to be decoupled from the applications that they are an integral part of the applications of record. Now I don’t expect that we will rip processes out of every system of record. In fact, static systems such as ERP, HR, etc. will have tightly integrated processes. However, the dynamic processes that need to change as the business changes will have to be designed without these constraints. They will become trusted processes — sort of like business services that are codified but can be reconfigured when the business model changes.  This will probably happen anyway with the emergence of Service Oriented Architectures. However, with the flexibility of cloud environment, this trend will accelerate. The need to have independent process and process models may have the potential of creating a brand new market.

I am happy to add more unintended consequences to my top six. Send me your comments and we can start a part III reflecting your ideas.

Can we free process and data?

I am still at IBM’s Information on Demand conference here in Las Vegas (not my favorite place..but what can you do). In listening to a lot of discussions around strategy and products I started thinking about one of the key problems that customers are facing around business process and managing increasingly complex data. What companies really want to do is to have the flexibility and freedom to leverage their critical data across applications and situations. They also want to be able to change processes based on changing business models.

This is the core issue that companies will be facing in the coming decade and will be the difference between success and failure for many  businesses.  Here’s an example of what I mean. Let’s take the example of a retailer in a competitive market. Let’s say our retailer had five or six applications: Accounting, Human Resources, supply chain management, a customer support system, and a customer facing e-commerce system. Each of these systems has an underlying database; each one manages this data based on the business process that is the foundation of the best practices that is the value of these packages. Even if each of the packages are the best in their markets there is a core problem since each solution is a silo. Processes that move between these systems tend to fall through the cracks.  This is why we, as customers of such retailers, are often frustrated when we call about a product that wasn’t delivered, doesn’t work, or requires a change only to discover that one department has no ability to know what is happening in another area. For most companies the dream of single view of the customer is aspirational but not practical right now. In reality, it is hard for companies to mess with their existing applications. These solutions are customized for their business environment; they were expensive and complicated to implement — and change is hard. In fact, companies only change when it is more painful to stay with the status quo than it is to change. In a retail scenario, companies change their approach to process and data management when they must change their business model because the current processes will lead to failure. Retailers are currently faced with emerging approaches to selling and managing customer relationships that are challenging traditional selling models.  Look what a company like Amazon.com or Netflex have done to their slower moving competitors.

A number of customers I have spoken with understand this very well. They are looking at ways to separate their core data assets from the underlying applications. Many of these customers are at the forefront of implementing a service oriented architecture (SOA) approach to managing their software assets. They are increasingly understanding that the secret to their future success is the knowledge they have about their customers, their needs and future requirements within their own set of offerings and those from partners. These companies are setting a priority of making this data independent, secure, and accurate. These business leaders are preparing for inevitable change.  At the same time, I have seen these customers creating SOA business services that are, in essence, codified business processes. For example, a business service could be a process that checks the credit of a potential partner or links a new customer request for service to the set of applications that confirms the request, orders the part, and notifies a partner.

So, here is the problem. These customers are implementing this new model of abstracting data and process based on specific projects or business initiatives.  These projects have gotten the attention of the C-team because of the impact on revenue. But, in reality, the real breakthrough will happen when the separation of data and process are the rule, not the exception.

This is going to be the overriding challenge for the next decade because it is so hard. There is inertia to move away from the predictable packaged applications that companies have implemented for more than 30 years. But I suggest that it will be inevitable that companies will begin to understand that if they are going to remain agile and change processes when they anticipate a competitive threat. These same companies will understand that their data is too important to leave it locked inside an application linked tightly to a process.

I don’t have the answers about what the tipping point will be when this starts to become a wide spread strategy. I think that the cloud will became a forcing action that will accelerate this trend. I would love to start a dialog. Send me your thoughts and I promise to post them.

The end of maintenance?

I admit that I didn’t read the whole article but then I really didn’t have to. I knew what Marc Benioff, CEO of Salesforce.com was trying to start. I remember many years ago seeing Marc at an industry conference where he proudly announced the end of software.  A nice marketing approach that definitely got everyone’s attention. Of course, at that time Marc was working on a little software as a service enviornment that became Salesforce.com. The rest is history, as we like to say.  Now, Marc is on a new mission to attack maintenance fees. While it is clear that Marc is trying to tweak the traditional software market I think that he is bringing up an interesting subject.

Software maintenance is not a simple topic to cover and I am sure that I could spend hundreds of pages discussing the topic because there are so many angles. Maintenance fees began as a way of ensuring that software companies had the revenue to fund development of new functionality in their software products. It is, of course, possible to buy software, pay once, and never pay the vendor anything else. Those situations exist of course. Ironically, the better designed the software, the less likely it is that customers will need upgrades. But, clearly that circumstance is rare.

There are major changes taking place in the economics of software. Customers are increasingly unhappy with paying huge yearly maintenance fees to software providers. Some of these fees are clearly justified. Software is complex and vendors are often required to continue to upgrade, add new features, and the like. There are other situations where customers are perfectly happy with software as is and only want to fix critical problems and don’t want to pay what they see as exorbitant maintenance fees.

Now, getting back to Marc Benioff’s comments about the end of maintenance. Here is a link from Vinnie Mirchandani’s recent blog on the topic.Marc is making a very important observation. As the world slowly moves to cloud computing for economic reasons there will be a major impact on how companies pay for software. Salesforce.com has indeed proven that companies are willing to trust their sales and customer data to a Software as a Service vendor. These customers are also willing to pay per user or per company yearly fees to rent software. Does this mean that they are no longer paying maintance fees? My answer would be no. It is all about accounting and economics. Clearly, Salesforce.com spends a lot of money adding functionality to its application and someone pays for that. So, what part of that monthly or yearly per user fee is allocated to maintaining the application? Who knows? And I am sure that it is not one of those statistics that Salesforce.com or any other Software as a Service or any Platform as a Service vendor is going to publish. Why? Because these companies don’t think of themselves as traditional software companies. They don’t expect that anyone will ever own a copy of their code.

The bottom line is that software will never be good enough to never need maintenance. Software vendors — whether they sell perpetual licenses or Software as a Service– will continue to charge for maintance. The reality is that the concrete idea of the maintenance fee will evolve over time. Customers will pay it but they probably won’t see it on their bills.  Nevertheless, the impact on traditional software companies will be dramatic over time and a lot of these companies will have to rethink their strategies. Many software companies have become increasingly dependent on maintenance revenue to keep revenue growing.  I think that Marc Benioff has started a conversation that will spark a debate that could have wide ranging implications for the future of not only maintenance but of what we think of as software.

Oracle Plus Sun: What does it mean?

I guess this is one way to start a Monday morning. After IBM decided to pass on Sun, Oracle decided that it would be a great idea. While I have as many questions as answers, here are my top ten thoughts about what this combination will mean to the market:

1. Oracle’s acquisition of Sun definitely shakes up the technology market. Now, Oracle will become a hardware vendor, an operating system supplier, and will own Java.

2. Oracle gets a bigger share of the database market with MySQL. Had IBM purchased Sun, it would have been able to claim market leadership.

3. This move changes the competitive dynamics of the market. There are basically three technology giants: IBM, HP, and Oracle. This acquisition will put a lot of pressure on HP since it partners so closely with Oracle on the database and hardware fronts. It should also lead to more acquisitions by both IBM and HP.

4. The solutions market reigns! Oracle stated in its conference call this morning that the company will now be able to deliver top to bottom integrated solutions to its customers including hardware, packaged applications, operating systems, middleware, storage, database, etc. I feel a mainframe coming on…

5. Oracle could emerge as a cloud computing leader. Sun had accumulated some very good cloud computing/virtualization technologies over the last few years. Sun’s big cloud announcement got lost in the frenzy over the acquisition talks but there were some good ideas there.

6. Java gets  a new owner. It will be interesting to see how Oracle is able to monetize Java. Will Oracle turn Java over to a standards organization? Will it treat it as a business driver? That answer will tell the industry a lot about the future of both Oracle and Java.

7. What happens to all of Sun’s open source software? Back a few years ago, Sun decided that it would open source its entire software stack. What will Oracle do with that business model? What will happen to its biggest open source platform, MySQL? MySQL has a huge following in the open source world. I suspect that Oracle will not make dramatic changes, at least in the short run. Oracle does have open source offerings although they are not the central focus of the company by a long shot. I assume that Oracle will deemphasize MySQL.

8. Solaris is back. Lately, there has been more action around Solaris. IBM annouced support earlier in the year and HP recently announced support services. Now that Solaris has a strong owner it could shake up the dynamics of the operating system world. It could have an impact on the other gorilla not in the room — Microsoft.

9. What are the implications for Microsoft? Oracle and Microsoft have been bitter rivals for decades. This acquisition will only intensify the situation. Will Microsoft look at some big acquisitions in the enterprise market? Will new partnerships emerge? Competition does create strange bedfellows. What will this mean for Cisco, VMWare, and EMC? That is indeed something interesting to ponder.

10. Oracle could look for a services acquisition next. One of the key differences between Oracle and its two key rivals IBM and HP is in the services space. If Oracle is going to be focused on solutions, we might expect to see Oracle look to acquire a services company. Could Oracle be eyeing something like CSC?

I think I probably posed more questions than answers. But, indeed, these are early days. There is no doubt that this will shake up the technology market and will lead to increasing consolidation. In the long run, I think this will be good for customers. Customers do want to stop buying piece parts. Customers do want to buy a more integrated set of offerings. However, I don’t think that any customer wants to go back to the days where a solution approach meant lock-in. It will be important for customers to make sure that what these big players provide is the type of flexibility they have gotten used to in the last decade without so much pain.

My Top Eleven Predictions for 2009 (I bet you thought there would be only ten)

What a difference a year makes. The past year was filled with a lot of interesting innovations and market shifts. For example, Software as a Service went from being something for small companies or departments within large ones to a mainstream option.  Real customers are beginning to solve real business problems with service oriented architecture.  The latest hype is around Cloud Computing – afterall, the software industry seems to need hype to survive. As we look forward into 2009, it is going to be a very different and difficult year but one that will be full of some surprising twists and turns.  Here are my top predictions for the coming year.
One. Software as a Service (SaaS) goes mainstream. It isn’t just for small companies anymore. While this has been happening slowly and steadily, it is rapidly becoming mainstream because with the dramatic cuts in capital budgets companies are going to fulfill their needs with SaaS.  While companies like SalesForce.com have been the successful pioneers, the big guys (like IBM, Oracle, Microsoft, and HP) are going to make a major push for dominance and strong partner ecosystems.
Two. Tough economic times favor the big and stable technology companies. Yes, these companies will trim expenses and cut back like everyone else. However, customers will be less willing to bet the farm on emerging startups with cool technology. The only way emerging companies will survive is to do what I call “follow the pain”. In other words, come up with compelling technology that solves really tough problems that others can’t do. They need to fill the white space that the big vendors have not filled yet. The best option for emerging companies is to use this time when people will be hiding under their beds to get aggressive and show value to customers and prospects. It is best to shout when everyone else is quiet. You will be heard!
Three.  The Service Oriented Architecture market enters the post hype phase. This is actually good news. We have had in-depth discussions with almost 30 companies for the second edition of SOA for Dummies (coming out December 19th). They are all finding business benefit from the transition. They are all view SOA as a journey – not a project.  So, there will be less noise in the market but more good work getting done.
Four. Service Management gets hot. This has long been an important area whether companies were looking at automating data centers or managing process tied to business metrics.  So, what is different? Companies are starting to seriously plan a service management strategy tied both to customer experience and satisfaction. They are tying this objective to their physical assets, their IT environment, and their business process across the company. There will be vendor consolidation and a lot of innovation in this area.
Five. The desktop takes a beating in a tough economy. When times get tough companies look for ways to cut back and I expect that the desktop will be an area where companies will delay replacement of existing PCs. They will make do with what they have or they will expand their virtualization implementation.
Six. The Cloud grows more serious. Cloud computing has actually been around since early time sharing days if we are to be honest with each other.  However, there is a difference is the emerging technologies like multi-tenancy that make this approach to shared resources different. Just as companies are moving to SaaS because of economic reasons, companies will move to Clouds with the same goal – decreasing capital expenditures.  Companies will start to have to gain an understanding of the impact of trusting a third party provider. Performance, scalability, predictability, and security are not guaranteed just because some company offers a cloud. Service management of the cloud will become a key success factors. And there will be plenty of problems to go around next year.
Seven. There will be tech companies that fail in 2009. Not all companies will make it through this financial crisis.  Even large companies with cash will be potentially on the failure list.  I predict that Sun Microsystems, for example, will fail to remain intact.  I expect that company will be broken apart.  It could be that the hardware assets could be sold to its partner Fujitsu while pieces of software could be sold off as well.  It is hard to see how a company without a well-crafted software strategy and execution model can remain financially viable. Similarly, companies without a focus on the consumer market will have a tough time in the coming year.
Eight. Open Source will soar in this tight market. Open Source companies are in a good position in this type of market—with a caveat.  There is a danger for customers to simply adopt an open source solution unless there is a strong commercial support structure behind it. Companies that offer commercial open source will emerge as strong players.
Nine.  Software goes vertical. I am not talking about packaged software. I anticipate that more and more companies will begin to package everything based on a solutions focus. Even middleware, data management, security, and process management will be packaged so that customers will spend less time building and more time configuring. This will have an impact in the next decade on the way systems integrators will make (or not make) money.
Ten. Appliances become a software platform of choice for customers. Hardware appliances have been around for a number of years and are growing in acceptance and capability.  This trend will accelerate in the coming year.  The most common solutions used with appliances include security, storage, and data warehousing. The appliance platform will expand dramatically this coming year.  More software solutions will be sold with prepackaged solutions to make the acceptance rate for complex enterprise software easier.

Eleven. Companies will spend money on anticipation management. Companies must be able to use their information resources to understand where things are going. Being able to anticipate trends and customer needs is critical.  Therefore, one of the bright spots this coming year will be the need to spend money getting a handle on data.  Companies will need to understand not just what happened last year but where they should invest for the future. They cannot do this without understanding their data.

The bottom line is that 2009 will be a complicated year for software.  There will be many companies without a compelling solution to customer pain will and should fail. The market favors safe companies. As in any down market, some companies will focus on avoiding any risk and waiting. The smart companies – both providers and users of software will take advantage of the rough market to plan for innovation and success when things improve – and they always do.

Will packaged applications sink under their own weight? Five recomendations for change.

I have been researching and thinking about the problem of the packaged application for many years now.  Over the years I have had conversations with many CIOs who are planning to implement large complex ERP systems as part of their initiative to streamline their operations.  There is an assumption that implementing one of these systems will simplify corporate IT. There is also the assumption that it is possible to implement an ERP system as is – in other words, without complex customization.  The sad reality is that this just doesn’t happen in the real world.

This brings me to a conversation I had about a month ago with a CIO.  He was in charge of the IT organization in a relatively large corporation (I am not at liberty to mention the company name).  The company had decided to replace its assortment of corporate business applications with a comprehensive ERP system. The idea was correct – the company needed a system that would implement business process and best practices to support the business in a uniform and efficient manner.  The problem, in my mind was two fold – first the cost.  To purchase and then implement this software cost the company $500 million dollars. Obviously, a considerable part of this expense was for professional services.  And maybe that is the point. The idea that a company can purchase a packaged ERP system that is really packaged software is a misnomer. In reality, packaged software is not really packaged.  It is a set of tools, a set of templates and processes that are linked together based on marketing and promise.  The CIO I was speaking with provided some insight into the complexity of this implementation. It required a lot more customization than anyone had anticipated. The promise of out of the box implementation was a myth.  Once the customization was applied to this package, the concept of a packaged environment was gone.  Therefore, it should not have come as a shock when the next time the base platform of processes and tools had to be upgraded; it cost the company an additional $50 million.

So, what am I saying here? Should we throw the bums out? Should we declare that the concept of packaged software is dead and flawed? Probably.  Now, let’s get real. Obviously, companies cannot and should not go back to paper based processes. However, I think that we need to get real about what it means to package software.

Here is what I propose. Let’s not pretend that packaged software is packaged.  The reality is that good software that is designed to meet a specific corporate goal should have the following five components:
1. Business best practices should be component based.  Packaged software should be a set of business services that implement well-tested business processes that are either industry or practice based. For example, accounting practices are fairly well understood and well codified.  Accounting best practices may be different between industries but it is straightforward to create modular components that are populated with processes.  It should not be constructed as a set of complex intertwined code. It should be independent modules that can be linked to each other and that can exchange data.
2.  Create standards based links. Well defined interfaces that enable the customer to link these components and other components without complex coding, including easily usable interfaces to all data files and databases.
3. Separate business rules from code. Business rules should be contained in a separate set of components or a rules engine so that they can updated easily. These rules should have a visual interface so that management can easily review them and map them to corporate governance
4. Implementations should be configurable. It should be straightforward for an organization to change the details of a process or a service without recoding.
5. Modularity is the key. Company specific rules, configurations, and services should be modular and separate from the connective tissue that links the components of these environments.  In this way, when a system foundation needs to be upgraded, it can be done without impacting the value that is the lifeblood of a company.

The bottom line: the packaged software market is at a transition point

The state of the packaged software market is complicated.  Companies across the globe have spent trillion of dollars trying to automate business practices.  Some implementations have been successful. But even those companies that have had the good fortune of implementing packaged software to streamline their business have done so at a steep financial and organizational price.  I predict that we are entering a new stage of evolution of software.  Many of the CIOs I have spoken with lately are beginning to rethink the conventional wisdom about packaged applications.  They are beginning to take the concept of business services that is the foundation of a service oriented architecture and applying that to the packaging of codified best practices.
One CIO I spoke with has started methodically to peel away key business services from packaged applications.  This might be an order to cash process that is rewritten hundreds of times across hundreds of applications.  Now, the company has created one business service called order-to-cash.  This order-to-cash service will be used anywhere in the company where this capability is needed.  This very patient CIO plans to replace duplicated services locked in inflexible packaged applications with well-constructed and very independent business services.  And some day, there will be no more complicated, inflexible, and repetitive packaged applications.  I think this might lead to a lot more innovation at a fraction of the cost.

Packaging SOA: What serves the customer?

I was talking to a CIO the other day about the whole area of Service Oriented Architectures. It was one of those interesting probing discussions around key players, emerging technologies and the like. One of the interesting topics that came up was around packaged software. This CIO was confused about a major issue. What is the benefit and danger of implementing a package software offering that has all the industry best practices, business process, and middleware integrated together. What are the opportunities and risks of this approach? Likewise, what are the risks of buying piece parts and integrating them together?

This is an important question and one that I have obvious opinions about. I think that it can be dangerous for companies to buy a too well integrated SOA environment from a single vendor. While it might seem like the path of least resistance might be to just buy an entire software suite from a company like SAP or Oracle and be done with it. While this may seem like a pretty straight forward question it actually is much more complicated. On the plus side, a customer could get a head start by using a SOA model where everything is designed to work together. On the other hand, I would submit that this approach is antithetical to the reason companies are approaching SOA in the first place. Companies are moving to SOA in order to create a flexible, modular environment where it is easier to add or subtract components based on either a new business initiative or a new innovative technology. If the SOA platform is too well integrated, change becomes hard.

So, what did I suggest to my CIO friend? I told him that it is better to look at packaged software as components in an overall SOA strategy rather than the lynch pin of that strategy. It is better to begin with the overall business strategy and an Enterprise Architecture and select technologies that are designed with standardized interfaces. The foundation should be based on loose coupling of services.

A packaged offering can work if customers finds a package that is standards based and extensible does not lock them into one perspective on the world. I think we’d all like to have a world where you just buy what you need off the shelf and life is good. But unless you are buying a commodity, I think the world is still too complicated for packaged SOA. Are there SOA commodities? Of course, for example, a set of best practices that are well understood across a broad spectrum of customers can be packaged as a business service and used broadly. Even a large service such as those offered by ADP is an example of a service offering that is well understood and not differentiated. Who would want to write their own service for managing payroll.

I do think that there will be a time when the SOA software market has matured to the point where building blocks are mature and well structured enough to be able to link together services smoothly and easily. But I don’t think we are there yet…do you? Let me know what you think.

Can Experience and Performance Management Transform Business?

Just as I finished writing my last entry about how complicated it was to install my router I met with a company called Knoa that focuses on the customer experience. That got my attention.

The company was started by two engineers (Yee-Ping Wu and Dr. Philip Lui) in 2003 with experience in the consumer market. Clearly, the average consumer does not expect to require training to use products. In fact, the team’s last project before starting Knoa was creating a multimedia authoring tool for Microsoft Home project. A good background for tackling the customer experience in the enterprise application space. In essence, the company decided to follow the pain and has focused on customer experiences with SAP solutions and Oracle E-Business suite. I guess that if you are looking to solve customer problems you might as well start by focusing on real pain!

 

Knoa positions itself in the experience and performance management space. Big words that basically mean that the company focuses on how the end customer or user interacts with software. The software sits between the graphical interface of packaged software and the operation system. The software is intended to determine what is impacting the user’s ability to get their work done and is intended to pinpoint user adoption issues. There are some interesting distinctions. For example, there are mistakes that are user error such as inputting the wrong product code. This is a problem related to how that individual has been trained in their job. However, there are other errors that are related to a response time problems, poor navigation within the software, or problems related to the network or the operating system. Knoa’s focus is providing technology that monitors the behavior of the user as they are using these packaged applications.

The company uses a passive monitoring 864K agent that is implementing on each desktop. This agent intercepts any application that is running. The agent is mapped to a specific template designed to discover and monitor a core application from SAP or Oracle. In essence, these templates are intended to measure a specific set of metrics that are important to managing the end user experience. Knoa focuses on issues ranging from response time to what part of the application the user is actually using. What I thought was interesting is the type of metrics that the company focuses on. For example, the software can be used to track which parts of a CRM system a majority of the sales team is actually using. It could also be used to see where employees are having difficulty with a packaged application. Is the problem a bug in the software or is it that users do not understand how to use an application and therefore bypass it altogether. The application has obvious uses in support of call centers.

 

The company seems to be off to a good start. It’s 2007 revenues tripled from 2006. Knoa won’t state revenues, its revenue per customer ranges from $300,000 to several million dollars. It has an impressive customer list including brand names like BT, AstraZeneca, AOL, McKesson, Kimberly Clark, and Pfizer. In all the company has 50 customers and 50 employees.

I think that the company is in an interesting position in the market. It has wisely positioned itself as a packaged application in support of SAP and Oracle applications rather than a tool. Because of the design of the underlying engine, the company says that it can add support for a new packaged application in a few weeks. I like the fact that the company is not trying to be all things to all people in the application management space. It can integrate into an existing HP/Mercury dashboard and is planning to expand to support other vendors as well. The key question will be how well the company does in expanding its partner base. Clearly, customer experience management is an area that all of the major performance management/system management companies will like to have as a complementary capability. And Knoa is just scratching the surface of what is possible in this area.