Appirio

Thursday, March 20, 2008

What Do Open Source and On-Demand Have in Common?

Chris Barbin

What Do Open Source and On-Demand Have in Common?

They both keep Steve Ballmer awake at night? Nope, too easy. They both changed the game in enterprise software? True. But the most interesting answer is "community" - they are both driven, and advanced by, the power of the community that surrounds them.

This power was one of the topics raised at this year's Dow Jones Web Ventures conference held earlier this week, where Appirio joined Vauhini Vara of the Wall Street Journal and Salesforce.com president Steve Cakebread onstage.

(Interesting side note: Steve Cakebread is not only president and Chief Strategy Officer at Salesforce.com, but also a Salesforce.com user, and the system administrator at his family's well known wine business - Cakebread Cellars. It's a testament to the simplicity of Salesforce.com that the same platform can serve both a 60,000 person company like Japan Post, as well as a 50-person SMB shop like Cakebread Cellars.)

We joined Steve and Vauhini onstage to discuss how we're using the Force.com platform to create custom SaaS applications for enterprises like Dolby Labs and CRC Healthcare. The questions during Q&A focused mostly on core topics - about a potential recession, whether hybrid vendors like Oracle and Microsoft will succeed in on-demand, why Salesforce is betting on the platform play versus offering more applications, etc.

One of the most interesting questions - the one prompting this blog - came from an audience member who asked, "How does Salesforce take user feedback into consideration when developing their platform?"

Steve said that Salesforce.com is giving the community - users, partners, customers, prospects, developers - a public forum where they can share their ideas and suggestions and implementing a process to take action. Salesforce has created an on-demand product called Ideas to create this forum that turns ideas into action. It ranks the most requested suggestions, which they then incorporate into their own product development. They also use it to encourages their partner community, including vendors like Appirio, to address the other ideas that don't make it into their own development cycle. Salesforce Ideas is now being implemented at other companies, like Dell and Starbucks.

This illustrates a fundamental shift in how product development, IT and enterprise software organizations operate now. Taking a page from the open source model, smart companies like Salesforce.com, Amazon and Dell are tapping into the community to drive innovation internally. The Internet has given them the means of collaboration. Each of these companies focuses on transparency, openness and getting rid of the "not invented here" syndrome.

We like to say here at Appirio that you have two ears and one mouth for a reason - you have to listen to your customers if you're going to win and keep them. It's nice to see that we're in agreement with the leaders in our industry.

Labels: Dow Jones Web Ventures, IDeaS, on-demand, open source, SaaS, salesforce.com, Software as a Service, VC

Friday, March 14, 2008

The SaaS Fight for the Enterprise Continues - Google Antes Up (Again)

Tony Bianco

The SaaS Fight for the Enterprise Continues - Google Antes Up (Again)

Google continued to make its run at the enterprise last week, following up the splashy Google Sites launch with the quieter introduction of some new tools and APIs for Google Apps. These include a new tool that will enable two-way syncing between Google Calendar and Microsoft Outlook, as well as a new Google Contacts Data API that provides secure, programmatic access to contacts in a Google address book. This enables developers to access and share contacts between different applications (e.g. social networking sites, contact managers), without providing full access to a user's Google account. There is a great Wired blog on why this is so important.

If You Build It They Will Come

This closes an important gap in Google's API coverage for Apps, and like the introduction of Google Sites last week, should increase enterprise interest in Google Apps. Not that they need much help. Google already has over 500,000 businesses using Google Apps and claims to add over 2,000 businesses each day. This easily puts them at over a million users and growing rapidly.

This kind of growth shows that customers are becoming much more comfortable moving their email, calendar, contacts and documents to the cloud. It's enough to motivate traditional software juggernauts like Microsoft and IBM to sit up, take notice and react. Last week Microsoft continued their dance toward their version of SaaS, which they call "software plus services," with a beta version of a Microsoft-hosted SharePoint and Exchange.

With all the recent SaaS talk from traditional on-premise vendors, it'll be interesting to watch the battle. We believe Google has a head start for a few reasons.

• Google makes it easy for their applications to work with other systems - the new Calendar Sync tool and Contacts API are great examples of this. Google also makes it extremely simple to migrate data over from existing applications, which is critically important for enterprises.
  

• Google is focused solely on the SaaS model and they are well aware of the requirements to make that model work. As we've said in the past, vendors that try to split their focus between on-premise and on-demand will have a difficult time succeeding without making significant changes to the way they develop and sell their products, and how they service their customers. This is a difficult task for those who must protect existing on-premise cash cows.
  

• Google has made it clear that they're investing heavily in this area with new services like Google Sites and recent acquisitions like Postini. Most importantly, they have the resources and the experience to make it successful. With the rate of innovation coming from Google, we're sure competitors will need to stay on their toes.

Labels: Google, Google Apps, Lotus Notes, Microsoft Exchange, Microsoft Sharepoint, SaaS

Thursday, March 06, 2008

Can Google Bring Enterprises Together?

Mike O'Brien

Last week marked the official launch of Google Sites, a web-based collaboration service that has been lovingly dubbed by some as the "Sharepoint killer." It lets you pull together information from across Google Apps to create customized company intranets, team sites and more. It's the reincarnation of JotSpot, which Google acquired over a year ago, with a few new twists.

Appirio has been using JotSpot for over a year as our employee intranet and knowledge base, using it as a way to disseminate information and best practices, document processes and methodologies, ramp up new hires and archive content. It has become an enormous corporate asset for a company like Appirio that has employees and consultants distributed across the U.S.

We're excited about the progress of Google Sites, but rather than review the new features or the pros and cons of the service, we'd rather highlight what this type of collaboration service means for enterprises and why on-demand collaboration is so compelling.

It's clear that approaches to collaboration inside enterprises have not had anything close to the same level of success as social networking sites for consumers. Why is that? People like to interact with other people. They like to do less work to be more productive. Yet despite these core truths, enterprise-based collaboration tools lag far behind the maturity and growth of sites like Facebook, mySpace, Digg and others.

We believe that if enterprise collaboration services shared some of the same characteristics of these successful social networking sites, we'd see a lot more progress.

• Keep it simple, stupid - On the whole consumers migrate to things that are intuitive. We want products that give you the features you need, without going overboard or making things overly complicated. No site represents this better than google.com. By making this so simple and intuitive, even the slightest change can draw substantial attention or mindshare from the user.This is where Google shines and it's very different from the way most enterprise collaboration tools have been built in the past. In the enterprise software world more attention is often given to the number of boxes you can check on an RFP response than to the actual user experience.

• Make users WANT to be there - The beauty of social networking sites is people actually want to be there. How many people can say that about Sharepoint? By making it easy to embed photos, slideshows and videos using services like Picassa and YouTube, employees are more apt to come to and stay on the site. Also, make it easy to update and navigate. Team collaboration may not always be FUN, but it should never be painful.

• Leverage the "wisdom of crowds" - The 2004 book by James Surowiecki describes how and when the collective intelligence of the "crowd" is far superior to that of any individual. The Internet is the ultimate enabler of that. eBay, Digg and other sites actively harness that capability every day. As a result, its critical to be able to embed services from across the Internet. That is one way Google Sites (embed any web gadget), Facebook (embed any application) and others become so powerful so quickly.

• Apply the network effect - The success of social networking sites correlates to size of the user community (wisdom of crowds) and the volume of interactions (e.g. Twitter). The same could be said for intranets or team sites. The more information and interactions happening on these sites, the more valuable they become. Google gets that, which is why their sites can be easily networked and searched, why users are encouraged to create their own sites, and why Google's marketing is often aimed more at the users themselves than IT departments.

The Cloud Inside the Silver Lining

Google Sites is making a lot of progress in the areas above. However, there are several things that CIOs and IT departments need to be conscious of before they deploy Sites or other collaboration tools like it in the enterprise. First is that these tools are going to get used whether you sanction them or not. Google Docs, Spreadsheets, Presentations and now Sites will emerge from the ground up. Understanding this can help plan and integrate natural momentum from a business user's consumer side influences.

Also, the easier it is to create sites the more employees will want to create their own. Google Sites encourages this, which may be a conscious decision to employ the network effect. However, it can create "pockets of knowledge" and reduce the impact of having a single, comprehensive site. The Internet tends to empower the end user not the IT administrator. The only way to get ahead of this in the enterprise is to do what good Internet sites do - become the most relevant site for the user. Creating relevant content, integration and awareness of a core set of capabilities makes it less likely that end users will stray into unsupported territory.

The Internet is the future of collaboration - whether it occurs inside or outside the enterprise. The innovative business that wants to drive productivity through collaboration must embrace this change to create a passion for working together.

Labels: Google Sites, JotSpot, on-demand, SaaS, social networking

Monday, March 03, 2008

Insights and Observations from the Pacific Crest On-Demand Conference

Narinder Singh

Last Thursday we had the pleasure of participating in the 3rd Annual Pacific Crest On-Demand Conference, the kickoff to Pacific Crest's Emerging Technology Summit. Salesforce.com CEO Marc Benioff invited us on stage during his keynote to illustrate how partners can harness the power of the Force.com platform, Visualforce and the AppExchange.

The participating companies covered the spectrum from large on-premise software companies such as EMC and SAP, who were describing their expansion into the newest "hot" market, to companies such as NetSuite, Salesforce.com and SuccessFactors that have built their business from the ground up with Software as a Service.

Interestingly, a number of companies there are in the process of trying to radically shift their business model from on-premise to on-demand, and they talked about the challenges. Most of these companies were small and nimble, which enabled them to make the transition cold-turkey. All were very clear that it wasn't an easy switch to make.

Can Companies Have Their SaaS Cake and Eat It Too?

Can companies successfully split their focus between traditional software and on-demand services?

This is a question we've been raising, skeptically, for quite some time in our blog. Our original Services 2.0 position paper in April 2007 described how the disruptive effects of SaaS will impact the economic models of on-premise software vendors. After a year of additional information and insight, it's even more apparent that treating SaaS as just another channel or product feature is a recipe for failure.

Spending a day with companies that have, or are attempting to make the switch from on-premise to SaaS reinforced the major challenges. IDeaS CEO Ed Booth gave a great presentation highlighting the challenges and upside of moving to an on-demand model. Concur Technologies has often been referenced as the best example of a company that successfully made the transition. Some issues raised by them and others included:

• One-time revenue hit: How do you manage through the decline in revenue growth when you move from an up-front license model to a monthly subscription model? With Wall Street and shareholders as panicky as they are today, this is a very difficult proposition for large public companies. Upfront licensing, even with longer term contracts, can drop by as much as 75%. As the Patricia Seybold Group has noted, As a company moves from perpetual licensing - where customers pay a relatively large, one-time licensing fee - to SaaS - where customers pay a relatively small, monthly license fee - financial performance slips in the short-term."

• Internal channel conflict: How do you manage the channel conflict that happens with your own partners, and even your own sales force, when offering both traditional license and on-demand software? Companies like EMC, with established business units focused on driving demand for SaaS or cloud computing, will have a serious challenge with this. The most reliable solution is to completely separate the businesses - which eliminates any synergy of having both models in the same company.
  
• Shifting to a "month by month" culture: How do you change the way you sell to and support customers when you have to earn their business every month instead instead of every few years when the next big version comes along? This is a huge cultural change for sales and support teams to make. SaaS companies require the culture of the web - where sites like eBay, Amazon, Google and others constantly monitor, serve and improve their customer's experience.
  
• Speeding up R&D: How do you adapt your product development processes to deliver an on-demand service? Successful on-demand vendors get the benefit of releasing new features quarterly, not every two or three years. When features are released, they are expected to work with other systems indefinitely. Salesforce.com still supports each of its 12 versions of its API. How many on-premise vendors can claim anything even close?
  

EMC, SAP, Microsoft and Oracle make it clear to customers and stockholders that their foray into SaaS or cloud computing is not a departure from their software strategies, but an expansion of it. They say things like "SaaS is just another delivery model," or "we're giving customers a choice." Yet they keep increasing the on-premise maintenance fees. SAP just increased its maintenance rate from 17% to 22% per year - an increase of 30%! This leads to one of two possible conclusions:

1. The cost of supporting a growing legacy of capabilities keeps increasing, which eliminates the benefits of on-premise scale. Compare this to any internet company, where increased scale lowers cost and results in expanded services for customers.
2. They are taking advantage of customers' inability to easily switch off of their on-premise software.

Traditional software companies - especially large ones - will certainly have to straddle the fence for a while. Yet the doubletalk and denial will not help in the transition. First, they must acknowledge the need to make a transition. Second, in many cases, dramatic actions, like separating SaaS products into completely independent business units or taking companies private to allow for transition, will be needed to make the change. It's likely that legacy companies will not switch until customers stop tolerating increasing TCO and diminishing innovation from their on-premise systems.

Labels: AppExchange, Concur Technologies, EMC, Force.com, IDeaS, on-demand, Pacific Crest, SaaS, salesforce.com, SAP, software-as-a-service