Predictions for 2011: getting ready to compete in real time

2010 was a transition year for the tech sector. It was the year when cloud suddenly began to look realistic to the large companies that had scorned it. It was the year when social media suddenly became serious business. And it was the year when hardware and software were being united as a platform – something like in the old mainframe days – but different because of high-level interfaces and modularity. There were also important trends starting to emerge like the important of managing information across both the enterprise and among partners and suppliers. Competition for ownership of the enterprise software ecosystem headed up as did the leadership of the emerging cloud computing ecosystem.

So, what do I predict for this coming year? While at the outset it might look like 2011 will be a continuation of what has been happening this year, I think there will be some important changes that will impact the world of enterprise software for the rest of the decade.

First, I think it is going to be a very big year for acquisitions. Now I have said that before and I will say it again. The software market is consolidating around major players that need to fill out their software infrastructure in order to compete. It will come as no surprise if HP begins to purchase software companies if it intends to compete with IBM and Oracle on the software front.  But IBM, Oracle, SAP, and Microsoft will not sit still either.  All these companies will purchase the incremental technology companies they need to compete and expand their share of wallet with their customers.

This will be a transitional year for the up and coming players like Google, Amazon, Netflix, Salesforce.com, and others that haven’t hit the radar yet.  These companies are plotting their own strategies to gain leadership. These companies will continue to push the boundaries in search of dominance.  As they push up market as they grab market share, they will face the familiar problem of being able to support customers who will expect them to act like adults.

Customer support, in fact, will bubble to the top of the issues for emerging as well as established companies in the enterprise space – especially as cloud computing becomes a well-established distribution and delivery platform for computing.  All these companies, whether well established or startups will have to balance the requirements to provide sophisticated customer support with the need to make profit.  This will impact everything from license and maintenance revenue to how companies will charge for consulting and support services.

But what are customers be looking for in 2011? Customers are always looking to reduce their IT expenses – that is a given. However, the major change in 2011 will be the need to innovative based on customer facing initiatives.  Of course, the idea of focusing on customer facing software itself isn’t new there are some subtle changes.  The new initiatives are based on leveraging social networking from a secure perspective to both drive business traffic, anticipate customer needs and issues before they become issues.  Companies will spend money innovating on customer relationships.

Cloud Computing is the other issue in 2011. While it was clearly a major differentiator in 2010, the cloud will take an important leap forward in 2011.  While companies were testing the water this year, next year, companies will be looking at best practices in cloud computing.  2011 will be there year where customers are going to focus on three key issues: data integration across public, private, and data centers, manageability both in terms of workload optimization, security, and overall performance.  The vendors that can demonstrate that they can provide the right level of service across cloud-based services will win significant business. These vendors will increasingly focus on expanding their partner ecosystem as a way to lock in customers to their cloud platform.

Most importantly, 2011 will be the year of analytics.  The technology industry continues to provide data at an accelerated pace never seen before. But what can we do with this data? What does it mean in organizations’ ability to make better business decisions and to prepare for an unpredictable future?  The traditional warehouse simply is too slow to be effective. 2011 will be the year where predictive analytics and information management overall will emerge as among the hottest and most important initiatives.

Now I know that we all like lists, so I will take what I’ve just said and put them into my top ten predictions:

1. Both today’s market leaders and upstarts are going to continue to acquire assets to become more competitive.  Many emerging startups will be scooped up before they see the light of day. At the same time, there will be almost as many startups emerge as we saw in the dot-com era.

2. Hardware will continue to evolve in a new way. The market will move away from hardware as a commodity. The hardware platform in 2010 will be differentiated based on software and packaging. 2010 will be the year of smart hardware packaged with enterprise software, often as appliances.

3. Cloud computing models will put extreme pressure on everything from software license and maintenance pricing to customer support. Integration between different cloud computing models will be front and center. The cloud model is moving out of risk adverse pilots to serious deployments. Best practices will emerge as a major issue for customers that see the cloud as a way to boost innovation and the rate of change.

4. Managing highly distributed services in a compliant and predictable manner will take center stage. Service management and service level agreements across cloud and on-premises environments will become a prerequisite for buyers.

5. Security software will be redefined based on challenges of customer facing initiatives and the need to more aggressively open the corporate environment to support a constantly morphing relationship with customers, partners, and suppliers.

6. The fear of lock in will reach a fever pitch in 2011. SaaS vendors will increasingly add functionality to tighten their grip on customers.  Traditional vendors will purchase more of the components to support the lifecycle needs of customers.  How can everything be integrated from a business process and data integration standpoint and still allow for portability? Today, the answers are not there.

7. The definition of an application is changing. The traditional view that the packaged application is hermetically sealed is going away. More of the new packaged applications will be based on service orientation based on best practices. These applications will be parameter-driven so that they can be changed in real time. And yes, Service Oriented Architectures (SOA) didn’t die after all.

8. Social networking grows up and will be become business social networks. These initiatives will be driven by line of business executives as a way to engage with customers and employees, gain insights into trends, to fix problems before they become widespread. Companies will leverage social networking to enhance agility and new business models.

9. Managing end points will be one of the key technology drivers in 2011. Smart phones, sensors, and tablet computers are refining what computing means. It will drive the requirement for a new approach to role and process based security.

10. Data management and predictive analytics will explode based on both the need to understand traditional information and the need to manage data coming from new sales and communications channels.

The bottom line is that 2011 will be the year where the seeds that have been planted over the last few years are now ready to become the drivers of a new generation of innovation and business change. Put together everything from the flexibility of service orientation, business process management innovation, the wide-spread impact of social and collaborative networks, the new delivery and deployment models of the cloud. Now apply tools to harness these environments like service management, new security platforms, and analytics. From my view, innovative companies are grabbing the threads of technology and focusing on outcomes. 2011 is going to be an important transition year. The corporations that get this right and transform themselves so that they are ready to change on a dime can win – even if they are smaller than their competitors.

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.

What are the Unanticipated 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.

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.

Is there beef behind SalesForce.Com?

I have been following Salesforce.com since its founding in the mid-1990s. Initially the company started by creating a contact management system which evolved into the sales force platform it offers today. Last month I attended a small dinner meeting in Boston hosted by Marc Benioff, Chairman and CEO of SalesForce.com, for some partners and customers. I met the Steve Pugh, CEO of CODA Financials, a subsidiary of Coda, a UK based developer of accounting software. I was intrigued that the company had built its new generation financial application on top of Salesforce.com’s infrastructure. In my next post, I’ll talk about Coda and why they made this decision. But before that I wanted to take a look at the Salesforce platform.

What is most interesting about Salesforce is that it intended to build a platform from day one. In my discussions with Marc in the early days he focused not specifically on the benefits of CRM but rather on “No Software”. If you think about it that was a radical concept ten years ago.

Therefore, It goes without saying that Salesforce has been a Software as a Service pioneer. For example, in June 2003 launched sforce, one of the first web services based SaaS platforms. It offered partners a published SOAP-based API. Rather than viewing Salesforce as an application, it views it as a “database in the sky.” It interprets this database as an integration platform. Likewise, from a customer perspective, Salesforce has designed its environment to “look like a block”. What does that mean? I would probably use a different term maybe a infrastructure blackbox.

Salesforce’s approach to creating its ecosystem has been incremental. It began, for example, by allowing customers to change tabs and create their own database objects. Next, the company added what it called the AppExchange which added published APIs so that third party software providers could integrate their applications into the Salesforce platform. Most of the applications on AppExchange are more like utilities than full fledged packaged applications. Many of the packages sold through the AppExchange are “tracking applications” for example, there is an application that tracks information about commercial and residential properties; another application is designed to optimize the sales process for media/advertising companies; still another package is intended to help analyze sales data.

But this is just the beginning of what Salesforce has planned. The company is bringing in expertise from traditional infrastructure companies like Oracle and BEA — among others. It’s head of engineering came from eBay. Bringing in experienced management that understands enterprise scalability will be important — especially because of Salesforce’s vast ambitions. I have been reading blogs by various Salesforce.com followers and critics. Josh Greenbaum, whom I have known for more than 20 years has been quite critical of Salesforce and has predicted its demise (within 18 months). He makes the comparison between Salesforce.com and Siebel. While any company that has risen as fast as Salesforce.com has will be a target, I do not believe that Salesforce.com is in trouble. There are two reasons I believe that they have a good chance for sustainability: their underlying SOA architecture and the indications that ISVs are beginning to see the company as a viable infrastructure.

So, what is the path that Salesforce is following on its quest for infrastructuredom (is that a real word — probably not). One of the primary reasons for my optimism is that Salesforce.com has a combination of traditional development through a procedural language it calls Apex that is intended to help developers write stored procedures or SQL statements. While this may disappoint some, it is a pragmatic move. But more important than Apex is the development of a standard XML based stylesheet interfaces to a service designed for use with Salesforce applications. This allows a developer to change the way the application looks. It is, in essence, the interface as a service. A third capability that I like is the technique that Salesforce has designed for creating common objects. In essence, this is a basic packaging that allows a third party to create their own version of Salesforce for its customers. For example, this has enabled Accenture to create a version of Salesforce for its customers in the health care.

But what is behind the curtain of Salesforce? First, Salesforce uses the Oracle database as a technique for serving up file pages (not as a relational database). But the core Intellectual Property that sits on top of Oracle is a metadata architecture. It is designed as a multi-tenancy service. Salesforce considers this metadata stack as the core of its differentiation in the market. The metadata layer is complex and includes an application server called Resin. The Resin Application Server is a high-performance XML application server for use with JSPs, servlets, JavaBeans, XML, and a host of other technologies. On top of this metadata layers is an authorization server. The metadata layer is structured so that each organization has a unique access to the stack. Therefore, two companies could be physically connected to the same server but there would be no way for them to access each other’s data. The metadata layer will only point to the data that is specific to a user. The environment is designed so that each organization (i.e., customer) has a specific WSDL-based API. In fact, the architecture includes the approach of access APIs through the WSDL interface. There are two versions of WSDL — one general and one for a specific customer implementation. If a customer wants to share data, for example, they have to go through the general WSDL interface.

Salesforce’s approach is to use XML based interfaces as an integration approach. It has used this to integrate with Google Apps. Salesforce has already begun partnering with Google around Adwords. This move simply deepened the relationship since both companies are faced with competitive threats.

The bottom line is that I think that Salesforce.com is well positioned in the market. It has an underlying architecture that is well conceived based on a SOA approach. It has created an ecosystem of partners that leverage its APIs and rely on its network to build their businesses. Most importantly, SalesForce.com has created an application that is approachable to mortals (as opposed to software gods). Companies like Siebel, in contract, created a platform that was complicated for customers to use — and therefore many purchased the software and never used it.

Salesforce.com is not without challenges. It needs to continue to innovate on its platform so that it does not get caught off guard by large (Microsoft, SAP, and Oracle) players who aren’t happy with an upstart in a market they feel entitled to own. They are also at risk from upstarts like Zoho and open source CRM players like SugarCRM. If Salesforce.com can collect more packaged software vendors like Coda to build their next generation applications on top of Salesforce’s environment, they may be able to weather the inevitable threats.

Has IBM Changed its Partner Strategy? The Hunt for OEMs

Partners are getting more and more important to the major software players. IBM announced a very interesting relationship with Kana, a $60 million solution provider of multi-channel customer service software. This is indeed a growing area in the market. Kana sells its software to about 60% of the Fortune 100. The company started in 1996 and has managed to survive some rough times and come out strong.

While IBM, like other major industry players rely on their partner ecosystem as an important go to market strategy. Some partnerships work better than others. What I thought was particularly interesting about the Kana partnership is its depth. Kana has decided to embed IBM’s DB2, WebSphere (including the WebSphere Process Server) into its solutions. SOA is an important new direction for Kana and the two companies plan to do some joint development in this area. Relationships like this don’t just happen. More than half of Kana’s customers are also IBM customers. This is important because increasingly the customers that I am talking to are looking to buy solutions from one trusted provider rather than trying to get a bunch of individual vendors to work together.

IBM has had a strategy for more than a decade of partnering with packaged software providers rather than being in that business. On one level, this can be viewed as a risky strategy. One only has to look at the roles of Oracle and SAP in the market to wonder if these packaged offerings will swallow up the entire ISV partner ecosystem like a black hole. I guess that my conclusion is that it just isn’t that simple. Customers that I have spent time with look at software packages from a different vantage point than infrastructure software. Because Oracle or SAP provides an excellent package for supply chain management or accounting management does not necessarily mean that they are the right choice for middleware or SOA infrastructure.

IBM’s partner strategy with ISVs has evolved over the past several years. I see a change from the desire to have lots of partners who will enable their software to run one or more IBM software offerings to deeper more strategic relationships. The Kana relationship is an OEM relationship — not a simple membership in a partner program. In fact, IBM has more than 30 of these OEM partnerships with vendors including Fair Issacs, Cisco, Nortel, and PTC — to name a couple. I expect that OEM partners are going to became an important center focus of IBM’s partnering strategy in the coming year.

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.

Top 10 Predictions: Innovation, ROI, Cloud Computing and more…

I love the end of the year. I get to sneak out of the office for a few days and stay off of airplanes. I also have a chance to look ahead to the new year. I like making predictions. Sometimes, I am years ahead of the market; other times I am able to hit the nail on the head. So, for what it is worth, here are my top ten predictions for 2008 (Hey, how did that happen? What happened to 2007? I thought it just started!)

1. There will be two hot buzzwords this year: innovation and ROI. Companies want to find ways to leverage the technology they have invested in, to do things in totally new ways. At the same time, companies are nervous about investing in technology. They want assurances that there will be a return on their investment — quickly. So, you will see a lot of discussion of both issues. But here is one prediction that I guarantee: most of the proof about innovation and ROI will be fluffy and devoid of any real meat!

2. Here come the clouds! I think that cloud computing, one of the latest versions of virtualization, will become one of the hottest trends of 2008. Any infrastructure company you can name will come up with a cloud computing strategy. No single leader will emerge in 2008 but you won’t be able to move without bumping into the hype.

3. Software as a Service goes mainstream. Sure, SalesForce.com has been the industry darling over the past few years. There can be no doubt that SalesForce CEO Marc Benioff’s imaginative adventure hit the bulls-eye. But I expect that in 2008 there will be numerous mainstream, innovative approaches to Software as a Service. We already saw SAP announce SAP By Design as its entry into the SaaS market. Expect a lot more from mainstream players. Now add a social networking twist and things really get interesting.

4. The world gets more virtual. VMWare’s spectacular IPO made the rest of the market wakeup and smell the roses. Maybe there is money in this virtualization stuff after all. There will be three virtualization market segments: client, server, and application. I can’t decide which one I think is more important. How about all three!

5. More vendors will make more acquisitions (that’s another one you can take to the bank). Yes, Oracle will certainly make more acquisitions, but I don’ t think that BEA will be in the mix. Nor will HP buy BEA. However, I do predict that BEA will probably go private. I predict that HP will buy more software companies, especially in the data management area. IBM will continue its buying especially in software — more companies in what they call information management, more in systems management, and in the collaboration space. I expect to see more action from EMC as well primarily in management and security. The list is too long for this entry but stay tuned, it is going to be a very, very busy year.

6. So, I didn’t mention Microsoft yet. This is the year when Microsoft’s server/enterprise business will get the respect it deserves. Therefore, I expect to see Microsoft continue to make small but strategic acquisitions that will fit into the forthcoming Oslo strategy. I would expect to see Microsoft look for information management picks (among others). However, I don’t expect that Microsoft will be buying big, traditional software companies. I expect that Microsoft will make interesting acquisitions in web collaboration, social networking, and advertising.

7. Online goes off-line. Companies like Zoho are starting to gain traction because they can provide both online services combined with offline usage. Being able to continue working when you can’t get connectivity is the tipping point for these collaboration offerings to challenge Microsoft in the office and collaboration space.

8. This is the year that Service Oriented Architectures (SOA) moves from IT strategy to business strategy. Therefore, SOA will officially move out of the hype cycle and into mainstream. CEOs and CIOs have bought into the importance of consistent business oriented services. Therefore, expect that customers will get down to serious business of moving out of pilots into slow, deliberate implementations. This doesn’t make for splashy headlines but it does make business sense.

9. Google will continue to move into any market that leverages the advertising revenue model — including collaboration software and various cloud computing options. No surprise there. I do not expect that Google will make a bid for the traditional enterprise applications. I do expect to see a strengthening partnership with IBM.

10. Partner ecosystems will reach a new level of intensity this year. Enterprise software leaders will be working hard to make sure the most popular emerging players support their platforms. They will be joined in the mix by Software as a Service players who are trying to build up their arsenal of partners. Emerging players will live or die by their ability to sign the best partnerships. At the same time, enterprise software leaders are upping the requirements for participation. The bottom line is: what’s in it for me?

11. I know I promised 10 predictions but I have to add one more. There will be at least a few trends that will come out of the blue. But that is what makes things interesting!

 

What’s SAP’s Plan: Innovation, SOA, and Winning?

I am back from SAP’s annual industry influencer conference. When I attend one of these meetings I typically take lots of notes on my laptop so that after the fact I can go back and make sense of what the executives actually said. It is a fascinating process. When I take these notes and analyze them I begin to see through the “show business” factor of an event intended to influence.

I enjoyed spending time with fellow blogger Michael Krigsman (IT Project Failures blog) who makes some interesting observations in his blog and the blog of his colleague, Joe McKendrick, who writes a SOA blog for ZDNet. Their perceptions on SOA and SAP are worth paying attention to.

Now, back to my point. So, what do my notes tell me? First, SAP leadership is obsessed with three things: innovation, service oriented architectures, and winning.

So, here is my quick take on each of these issues:

Innovation. In the seven pages of pages I took during the opening keynote sessions of the meeting, I typed the word innovation 25 times. While I am sure that is not a record – every vendor meeting I have attended in the past six months has focused on innovation. SAP’s definition of innovation is not surprising — it is tied to innovation in process. In many ways, SAP is correct. You can have enormous potential for efficiency breakthroughs through a process approach. Here’s a quote that I liked from one of the keynotes, ”

It is about continuous innovation. You take the process innovation and industry innovation in SAP, multiply that with the blueprint of SOA. This creates a possible incremental breakthrough. This approach can be adopted in a step-by-step way to create break through. You can bring in new processes and add more flexibility to create a business breakthrough..”

Since I don’t take dictation, this is as close as I got to a direct quote. But what is interesting here is that SAP is talking about innovation in terms of an incremental approach, an approach that assumes a structured service architecture, and the fact that the end result will create a business breakthrough. No one could argue with these points. However, what I kept waiting for and never got was examples that put these words in context with customers’ experiences.

Service Oriented Architecture. SAP loves SOA. In several conversations I had with SAP executives I was told that they were the leader in SOA. And I agree that SAP has done a good job in taking on the task of breaking down monolithic code into modular components. This is a good approach for SAP internally since it means less work for their own development organization when they need to move from one version to the next. Using standards based web services interfaces instead of proprietary APIs helps tremendously. SAP is strong on adhering to industry standards within their platform. What I question is the company’s ability to claim leadership in SOA if it is intended to be an SAP dominated architecture where they own and control all the moving parts.

In my view, SOA has to be based on a heterogeneous approach to architecture. Business services have to be loosely coupled — no matter what platform they were build for. SAP is not the only company I have a beef with on this point — Oracle, IBM, Microsoft, BEA, etc. all would like to have their platform become the SOA standard. This would be a dangerous move for customers.

Winning. I actually think that if any one vendor “wins” the architectural game, customers lose. If I write next year that SAP has accomplished its goal and become the standard for SOA, I will be there first to proclaim SOA is dead. While SAP is a smart, competitive, and technically sophisticated company, it needs to focus on winning based on their customers success in a highly fragmented, complicated, and heterogeneous world.

 

Should the SaaS customer beware and be educated?

I had a long talk the other day with a customer who had just decided to implement SAP’s Business by Design hosted solution. The company (it wouldn’t be fair to him to name the company) is about $150 million in revenue and made the decision to move away from a home grew, inefficient system and migrate to Software as a Service (SaaS). He was excited for several reasons: he would need fewer people in the IT organization, he would buy fewer new servers, he didn’t have to worry about the details. He was reassured that the Business by Design product was called a Service Oriented Architecture based offering.

Now, I am a professional troublemaker, so I asked him the type of questions that I ask my clients about the longer term implications of buying software (even if it is hosted). Here are the questions that I asked him:

1. How do you know that the product is based on SOA?

2. Where is your data? What is the underlying database for your company’s data. How do you know that your data is clean? How often is that data backed up and where it is backed up?

3. Do you actually own your data? Is it available to you on a regular basis? If you take your data can you move it to another platform if you need to?

4. How easy it is to integrate the SaaS platform with either existing software you plan to ocntinue to use or new software?

5. If you should outgrow the platform what are your options?

6. What if you suddenly decide to take the software in house? Can you do this with the same company?

7. Do you have an internal person who understands the software well? If not, you may just have to take the vendor’s word that the software does the job you expect.

Now, don’t get me wrong. I like the SaaS model a lot. It is a very important trend that will be a lynch pin of many small and large companies strategies for many years to come. However, SaaS is not someone else’s problem. It is the customer’s problem to be on guard and educated. Ignorance and trust can sometime be dangerous bed fellows.