Friday, May 27, 2005
A reader tipped me off today on the acquisition of Xelus by Click Commerce.
First, some background on the buyer and the seller. Click Commerce started out as one of several up-and-coming supply chain vendors focused on coordinating and optimizing supply chain processes across multiple suppliers, customers, and partners. Its technology is leading-edge, based on open Internet standards and a component-based architecture. Then over the past couple years, it rapidly expanded its product offerings by picking up several niche providers:
So what did Click Commerce see in Xelus? According to the press release, Click Commerce will broaden its footprint with the service parts planning and reverse logistics expertise of Xelus. But, more importantly, Xelus has developed some analytics capabilities that leverage RFID data. RFID, which is being rolled out by Wal-mart and other leading players in various supply chains, are producing a flood of data, most of which is not being fully exploited. Analytic applications, such as those developed by Xelus, are critical in making sense out of all the data being generated by RFID.
- Optum, a leading warehouse management vendor, in February, 2005
- bTrade, a specialist in connectivity and Internet-based EDI (AS2), in 2004
- Webridge, a provider of secure extranet portal solutions, in 2004
- Allegis Corp., a data center and hosting provider, in 2003
My tipster, who has had contact with both companies, provided some insights into both of them. Xelus, as indicated above, is not a young company. They have been in business for over 25 years, but they have never been able to capitalize on their strengths. Their products are good, but they are based on older technology. Therefore, they have been losing market share to companies such as MCA Solutions, which provides solutions for service parts management that may not be as mature but based on newer technology.
Click Commerce is a different story. The management team is young and aggressive. The company has an outstanding list of customers, such as Microsoft, Delphi, Honda, Citibank, FedEx, Carrier, Samsung, Hitachi, and Ryder. The product suite is broad, and getting broader, as Click Commerce continues to pick up weaker vendors, such as Xelus.
My source also indicated that layoffs were announced today at Xelus and that the top management team is for the most part gone or demoted.
Sterling Commerce moving into supply chain apps by acquiring Yantra
i2 fires 300, struggles to refocus
Thursday, May 26, 2005
Apparently, SAP has been watching with alarm as Salesforce.com has been gaining ground in large organizations that SAP considers its turf. In response, SAP is said to be ready to launch its own CRM on-demand offering. The announcement looks to be coming in the next few weeks.
According to CRN,Many industry observers say SAP is becoming increasingly concerned as Salesforce.com gains traction among large enterprises. Last week, for example, the San Francisco-based CRM vendor revealed that Merrill Lynch has signed on for 5,000 seats of its hosted software. Other big customers include ADP, Kaiser Permanente and Nextel.SAP's strength as an on-demand provider will be its ability to offer integration with its own back-office applications, a challenge for standalone providers such as Salesforce.com. On the other hand, SAP is a big company that's used to selling software as a license. Can SAP do what it takes to sell software as a service? As I indicated yesterday regarding Siebel, it's not easy to do both.
On the other hand, some early customers of Salesforce.com are said to be looking at other alternatives. For those that are already SAP customers, maybe SAP can capture them.
CRN has the scoop.
Software on demand: attacking the cost structure of business systems
Siebel shaken by new shareholders
Wednesday, May 25, 2005
According to the Wall Street Journal, Siebel's status is growing more uncertain as shareholder activists such as Carl Icahn and others are increasing their stake in Siebel, determined to force the company to pay out some of its $2.2 billion cash hoard to buy back shares, or sell out to the highest bidder. At the same time, Fidelity Investments, which often takes a pro-management position, is selling shares. Siebel's stock price has climbed 12% in the past seven weeks as speculation grows.
For its part, Siebel management is not making welcoming noises to the dissidents.Siebel's new chief executive, George Shaheen, and Chief Financial Officer Ken Goldman so far have rebuffed calls to distribute Siebel's cash through a stock buyback or dividend. The company this month said in a Securities and Exchange Commission filing that "potential opportunities have recently been presented to us," but provided no details, and said none of the offers had been considered by Siebel's full board of directors. Representatives of Oracle Corp. and Siebel, which has a market value of about $5 billion, recently discussed a potential acquisition, but talks aren't active, according to a person familiar with the matter.As I've said in the past, Siebel's problem is that it is stuck in the middle. At the high end, SAP and Oracle have credible offerings that keep their customers largely out of reach of Siebel these days. At the low end, on-demand vendors such as Rightnow and Salesforce.com offer a less expensive and much less painful alternative. Siebel responded in 2003 by acquiring on-demand CRM vendor Upshot, renaming the offering Siebel CRM On-Demand. But its hard to do two things well at the same time.
Some analysts, such as Peter Coleman at ThinkEquity Partners, are speculating that Siebel's best path might be for management to do a leveraged buyout, take the company private, and radically restructure its business model, say, to focus more strongly on the on-demand business. Such a move, however, would no doubt bring forth competing bidders, with deeper pockets, that would put Siebel in the hands of someone with different ideas.
It doesn't look like the situation with Siebel will be resolved quickly, and that's not good for Siebel or its customers. The protracted Oracle/PeopleSoft battle showed that there's a limit to what managers can do to influence the outcome. As one PeopleSoft executive told me right after Oracle took control, "I used to think that if you built a good product and took care of your customers, everything would work out in the end. But I forgot about the arbitragers."
It's too soon to tell what the outcome will be for Siebel, but it appears that staying the course is not an option.
Update, May 27. Siebel has just disclosed that it is putting in place additional severence pay and health benefits for employees in the event that the company is taken over. Analysts are divided over whether the motive is defensive--to make Siebel more expensive to a hostile acquirer, or whether it is intended to ensure that key resources stay on board--in other words, to facilitate the transition to a new owner. Either way, what's interesting to me in this that Siebel is worried about losing key employees. This is consistent with our recent findings at Computer Economics that the IT labor market is tightening. Siebel has some of the best people in the CRM marketplace, and I'm sure Oracle, SAP, and Salesforce.com would love to scoop up some of them.
Siebel swept up in takeover rumors regarding Oracle
Management shakeup at Siebel
Tuesday, May 24, 2005
Something is going on behind the scenes at Oracle that may involve creating an open-source alternative to Microsoft's Outlook. Apparently, Oracle has hired three people to work on an open source project, known as Mozilla Lightning, that will integrate the open source Mozilla's calendar with its e-mail application.
The only confirmation of this comes from Mozilla itself, which has refused to comment further. And Oracle is remaining tight-lipped on its intentions. However, it's not hard to see what Oracle may be up to. Oracle has made a heavy investment in porting its database and applications to Linux, giving it a low-cost platform as an alternative to Microsoft's server operating systems. But when it comes to messaging and collaboration applications, Oracle doesn't have much of an alternative to Microsoft's Outlook and Exchange. Oracle has been trying to crack into the collaboration market with its own Oracle Collaboration Suite (OCS), but frankly, until this morning, I didn't even know Oracle had such a product. IBM's Notes/Domino is an alternative, but Oracle's not about to promote an IBM product.
Therefore, Oracle's best shot is to promote an open source alternative. Mozilla, which also forms the basis for the popular open source Firefox web browser, is a good choice. Although Oracle risks taking potential market share away from its own collaboration suite, the success of Mozilla's Lightning project is of more strategic value to Oracle for three reasons:
- Lightning is likely to gain market acceptance more quickly, as Firefox already has done.
- Lightning gives Linux users a messaging and collaboration capability, the lack of which is a barrier to organizations that want to go completely with Linux.
- Mozilla's products are a potential threat to Microsoft's hold on business users, which Oracle wants to break.
Lightning is targeting a general user release in mid-2005. CNET has more on the story. For a fuller description of Lightning itself, check out the Lightning section in Mozilla's wiki.
Key advantage of open source is NOT cost savings
The Microsoft ERP lock in effect
Sunday, May 22, 2005
When offshore outsourcing of IT is mentioned, certain countries such as India and the Philippines come to mind. But a number of other locales are building such capabilities, specifically eastern Europe. I've mentioned Romania in the past, after reading Tony Radford's blog, which unfortunately seems to have gone dark since January.
Then in March, a Romanian blogger, Adrian Pintilie, contacted me about the growing offshore outsourcing services market in Romania. At the time, he didn't have much of a story to tell. But since then, he has conducted a survey and has collected some detailed metrics on Romanian service providers and hourly rates.
The firms that Adrian surveyed seem quite small, all of them being under 100 employees, but I suspect that's because those are the firms that he got to respond to his survey. On the other hand, according to this article in the International Herald Tribune, the Romanian outsourcing sector is in fact dominated by small firms. Romania does not have the huge universities, as found in India, pumping out thousands of IT grads each year. So, Romania will probably be a better choice for small, focused development projects rather than massive business process outsourcing operations.
Still, as Adrian points out on his blog, there have been a number of Romanian outsourcing firms acquired recently by multinationals, such as Siemens. Obviously they must know a good thing when they see it. And labor rates are still attractive. According to the Tribune article, programming costs in Romania are actually less than in China. If so, then they're certainly less than India's.
New blog on offshore outsourcing (re: Tony Radford's blog)
Risks of offshore outsourcing
India losing its cost advantage
Tuesday, May 17, 2005
Joshua Greenbaum drills down into the details of IBM's relationship with enterprise software vendors, such as SAP. On the one hand, in order to drive sales of its infrastructure products such as WebSphere and development services from its Global Services unit, IBM promotes custom software development--a position that puts it at odds with major software vendors, such as SAP.
On the other hand, IBM's relationship with major enterprise application vendors pulls through huge revenue at IBM for its database, hardware, and services offerings--pushing IBM closer to vendors such as SAP.
These conflicting motivations came to the surface at a recent press conference. Josh writes,When asked what guarantees Global Services was willing to give that it was going to remain neutral in the selection of a platform -- bearing in mind that its big applications partners are also selling infrastructure to compete with WebSphere -- you could hear the waffling noises loud and clear. First they said that WebSphere was the preferred platform, but then they clarified that by saying they were technologically agnostic, and that technology wasn't really a major part of the initial SOA [service-oriented architecture] engagements Global Services was working on. Then they said...Well, it doesn't really matter.Josh concludes that IBM's relationship with SAP is worth far more to IBM than any increased WebSphere revenue it realizes from promoting custom software development.
The basic problem is that one part of IBM wants to be friend number one to its enterprise software partners, while another part is increasingly packaged software enemy number one.
Read Josh's analysis on Datamation.
My take? Customers need to understand the relationships and motivations of their various IT providers, and IBM is a major influence in many IT organizations. Therefore, customers should understand that IBM's reliance on SAP is growing. This is especially true now that Oracle has come out on top in its acquisition of PeopleSoft and J.D. Edwards, which effectively removes a large number of enterprise customers from IBM's direct sphere of influence. This makes IBM's relationship with SAP even more important to IBM, and customers should not be surprised that when they are making major enterprise system decisions, they may see IBM coming down more and more on the side of SAP.
IBM is a loser in Oracle/PeopleSoft deal
Monday, May 09, 2005
As I wrote in January, Lawson has been aggressively courting existing customers of JDE, who are now by no choice of their own, customers of Oracle. I took the opportunity this afternoon at Lawson's user conference to check with a Lawson representative about the success of their efforts.
It appears that Lawson is in discussions with about 30 JDE customers, mostly those on the older World software, although a few are running JDE One World (now EnterpriseOne). Although none of these deals have closed, Lawson hopes to have some wins within the next two or three months.
I pointed out that installed base customers, by nature, are a conservative group, and I wondered what would motivate them to consider switching to Lawson. Lawson indicated that most of these JDE customers are concerned about the long term commitment of Oracle to support them on the IBM iSeries platform and a fear that they will be forced to migrate to Project Fusion. Lawson also feels that they have a strong story to tell regarding total cost of ownership, although to me the low cost solution is to not undertake a new system implementation.
There are several aspects to Lawson's offer. First, Lawson is giving JDE customers a discount of up to 50% on Lawson software license fees, along with a prebuilt tool to assist in file conversions from JDE to Lawson. If additional IBM iSeries hardware is needed, IBM's standard discount to ISVs will apply. Finally, through its relationship with Ciber, a third party systems integrator, Lawson will even provide maintenance and support of the customer's JDE system during the transition to Lawson.
Update May 17. Revised the final paragraph, based on additional clarification provided by Lawson.
Competitors swarm around PeopleSoft customers
I'm in San Diego today, attending the Lawson "CUE" user conference as a member of the press. I'll be updating this post through the day with observations. There is an announcement about to be made concerning a major change in the technology platform for Lawson, code-named "Landmark," and we're supposed to learn more in the keynote session that starts in a few minutes. In the meantime, read the press release on Lawson's website.
Lawson's Landmark business application platform
Dean Hager presented an overview of Landmark, and Richard Patton, Lawson's Chief Architect, provided more details in a press conference. Afterwards, for more answers, I interviewed Patton along with founder Richard Lawson and Pramod Mathur on the Landmark team. The rest of this section is going to be a bit more technical than I normally write, so be forewarned.
Landmark is Lawson's new technology platform that will, over time, replace the current Lawson "environment" that allows Lawson applications to run across multiple databases and operating systems. Landmark allows Lawson's business domain experts to specify applications in a high level domain-specific language (DSL) which then generates JAVA program code. Lawson's approach is based on "pattern language technology," including the work of architect Christopher Alexander in The Timeless Way of Building. Patterns have been a hot topic for a long time in the software engineering community, especially among practitioners of object oriented design and development, but I have not seen it discussed at all in the realm of enterprise application software.
When I read the press release, at first I was concerned that Lawson was heading down the path of developing a proprietary CASE tool or 4GL, a strategy that has failed most other vendors. But Lawson is not taking such an approach. Landmark is essentially a plug in for the open source Eclipse application development framework. The program code that it generates runs on any J2EE-compliant application server, such as the open source Tomcat or JBOSS, or proprietary servers such as IBM's, BEA's, or Oracle's. Software objects created by Landmark will be enabled for web services, allowing them to interoperate in a service oriented architecture.
Lawson believes that its approach allows it to focus on its domain expertise and what it calls its "signature features," such as "drill around," audit trails, and effective dating. Software quality should increase greatly as Landmark's code generation approach allows orders-of-magnitude reduction in the number of lines of program code. Patton quotes a 17x reduction in lines of code for Lawson's Vendor module, and a 41x reduction in Lawson's Employee module.
In terms of customer rollout, Lawson is emphasizing a co-existence approach: new Lawson modules will be written from this point forward under Landmark and will coexist and interoperate with existing Lawson modules. Existing modules will be "re-factored" in Landmark. Installed base clients can move incrementally to Landmark written versions.
Lawson's leadership is genuinely excited about the introduction of Landmark. Richard Lawson himself largely disappeared from public view for the last three years as he led a team of technology architects in crafting this vision and developing the basic framework of Landmark. What appeals to me most about Lawson's approach is that it may be leading edge, but it's not something created by Lawson in a vacuum. Domain specific languages (DSL) are commonly used by software developers in other domains. When I pressed for examples, Lawson pointed specifically to discussions they have had with Bell Labs and with another software developer that it was not free to name.
At this point, to Lawson's customers, Landmark just is a vision--although after three years in the lab, Landmark is much more than a statement of direction. The first Landmark application should be introduced within the next year and at that point we should have a good indication whether Lawson is able to deliver.
Offshore delivery of professional services
Lawson announced today that it has put together a "blended professional services" offering in partnership with Indian offshore services provider Xansa. Lawson was already using Xansa internally to provide some maintenance programming for existing Lawson products, leveraging the lower cost of labor offshore. Now Lawson will offer Xansa offshore resources to Lawson clients, to be managed by Lawson personnel onshore, to deliver customer projects such as integration and interface programming, data conversion, and development of custom forms and reports.
Lawson customers will appreciate the lower cost of delivery, as long as Lawson continues to step up to the role of being the "one throat to choke."
Update, May 11. Lawson and IBM have now announced that Landmark will be based on IBM's Websphere technology. I guessed this on Monday when I interviewed Lawson executives about Landmark, but they wouldn't confirm it at the time. I don't know why they had to hold back this piece of the puzzle for two days after the Landmark announcement, except that I suppose it gives them one more thing to announce during their user conference. Basing Landmark largely on IBM technology is a good thing. Application software vendors are notoriously poor at building proprietary development toolsets, and the more Lawson can incorporate publicly available components in its development platform, the better. IBM, which doesn't compete with ISVs, is a great choice.
Lawson says that during the first half of 2006, it will releases upgrades to its financials, SCM, HR, performance management, and procurement modules, with embedded core components of IBM's WebSphere, DB2, Rational, and Tivoli technology.
For more, check out Lawson's press release.
Sunday, May 08, 2005
Nicholas Carr is back at it again. In 2004 he wrote an article in Harvard Business Review entitled, "Does IT Matter?" that IT professionals are still arguing about. Now he's authored an article in the MIT Sloan Management Review, entitled, "The End of Corporate Computing," where he makes that case that utility computing will one day make corporate data centers as anachronistic as the private power plants in factories of the early 1900s.
Utility computing is the delivery of computing power as a service, instead of a fixed asset that is maintained internally by organizations. Carr puts together a powerful argument that, because of the economics, utility computing will one day become the dominant model for corporate information systems. He ticks off a list of corporate IT assets that are tremendously underutilized: servers average 10-35 percent of their capacity, storage, 50-60 percent; and desktops, 5 percent. In addition, 60% of corporate IT personnel time is spent on routine support and maintenance--like the teams of highly skilled engineers that maintained electrical generators in factories of the early 1900s. This overcapacity, combined with technology advances that allow centralization of IT resources, are creating a powerful incentive for the utility model.
Furthermore, three advances in information systems are now coming together to make utility computing possible. He writes,Virtualization erases the differences between proprietary computing platforms, enabling applications designed to run on one operating system to be deployed elsewhere. Grid computing allows large numbers of hardware components, such as servers or disk drives, to effectively act as a single device, pooling their capacity and allocating it automatically to different jobs. Web services standardize the interfaces between applications, turning them into modules that can be assembled and disassembled easily.The economics of utility computing are inexorable. It essentially turns information systems from a underutilized fixed asset to a variable low cost expense.
If Carr is correct, and I think he is, we are going to see changes in corporate computing in the coming ten to twenty years that will make personal computing and the Internet seem like incremental improvements. Carr thinks that the IT vendors most threatened are those that sell pieces of IT solutions directly to organizations: Microsoft, Dell, Oracle, and SAP--a list of seemingly invincible players today. He admits that the shift will take time, and the major players may be able to adjust their business models--to me Oracle comes to mind as one that is embracing utility computing. But the transition will not be easy for any of them.
Carr's article is available on the MIT Sloan Management Review web site for the incredibly low price of $6.50. Buy it and read it. It's destined to become a seminal essay on the subject of utility computing.
Software on demand: attacking the cost structure of business systems
IT: strategic investment or cost of doing business?
Saturday, May 07, 2005
Last month, at Computer Economics, we conducted a survey regarding the perceived advantages in the use of open source software, and the results are surprising.
The survey shows that, contrary to common perceptions, the appeal of open source software is not primarily its low cost. By a two to one margin, respondents ranked "reduced dependence on software vendors" as the most important advantage that open source delivers.
The results are shown below.
Jump over to Computer Economics and read this article on what this means for buyers and sellers of enterprise systems.
The Microsoft ERP lock in effect
Buzzword alert: "open source"
Wednesday, May 04, 2005
A new monthly quick poll is up on the Computer Economics website, regarding trends in offshore outsourcing.
Jump over to the Computer Economics website and take the poll now--it's in the rightmost column. It will take you about five seconds. Assuming we get a decent sample, I'll publish the results at the beginning of next month.
Stay tuned for some interesting results from last month's survey, regarding the key advantage of open source software. I should have an article on this ready in a day or two.
Tuesday, May 03, 2005
[Note: The September 12th post on Oracle's takeover of Siebel is here.]
CRM vendor Siebel has been rocked by rumors since last Friday, when TheDeal.com reported that Oracle and Siebel were in takeover discussions. The number $5 billion has been mentioned, which would make it somewhat less than half of Oracle's purchase price for PeopleSoft, but still a major acquisition.
Siebel has long been the subject of takeover speculation for years, as it has had a more difficult time than other major vendors coming out of the technology recession of the early part of this decade. Such speculation got a boost last month, when CEO Michael Lawrie was abruptly replaced by board member George Sheehan, fueling the idea that the board would soon move to position the company to be sold. In addition, a group of dissident shareholders has been meeting and demanding that Siebel do something to boost its share price.
If Oracle buys Siebel, it will give Oracle the dominant position over SAP in the worldwide CRM marketplace, at least on paper. However, you have to wonder whether Oracle will be able to digest such an acquisition while PeopleSoft and Retek buyouts are still on its plate.
Management shakeup at Siebel
Sunday, May 01, 2005
First, briefly, about me. I am co-founder and Managing Partner of Strativa, a business consulting firm in Southern California that focuses on business and IT strategy, process improvement, and information technology decision-making. I am also the President of Computer Economics, an IT research and advisory firm, founded in 1979. You can read my bio on Strativa's management page.
I launched this blog in May, 2002 as one of the first tech blogs. I started it to provide a forum for my observations on enterprise systems, the vendors that provide them, and the experiences of companies that implement them. This blog represents my views alone, and receives no sponsorship from vendors.
What is an enterprise system? I define it broadly as a software application or suite of applications that are implemented across multiple business functions. Enterprise systems include applications such as enterprise resource planning (ERP), supply chain management, customer relationship management (CRM), business intelligence, product lifecycle management (PLM), enterprise asset management (EAM), as well as other emerging applications. Essentially, an enterprise system is a business application that serves users across multiple groups, departments, or business units.
I am particularly interested in how companies achieve benefits from information technology. Over the past decade, companies have made enormous investments in IT, often with limited results. What are the lessons learned, and what can business leaders do to improve their chances of success?
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