Archive for November, 2010

News Analysis: SAP’s TomorrowNow Debacle Ends With Jury Award Of $1.3B To Oracle

The recently announced jury award of $1.3B to Oracle marks the end of a tumultuous public trial on intellectual property (IP) theft.  Fellow Constellation Research Board of Adviser, Dennis Howlett provided commentary on the award stating,

“The jury were given the choice of making an award based upon a fair market value license or lost profits. If the jury had looked at lost profits then it is difficult to conceive how they could have awarded anything approaching this amount. Even looking at fair market value, one wonders how they managed to compute such a figure given the number of customers TomorrowNow actually secured and the value of those contracts”

Should the record breaking award be upheld, the decision will serve as a lesson carefully studied by every high tech company on how and how not to handle IP theft cases.  Oracle has made a significant win and SAP acknowledged guilt throughout the case.

The Bottom Line For Customers And Buyers Of Enterprise Software
Though many pundits have commented on the impact to SAP and the overall high tech market, a few key points should be clarified for customers:

  • Penalty award significant in size but not detrimental to SAP. The award will not materially impact SAP’s ability to conduct business or invest in future products.  Insurance, rainy day funds, and other sources of revenue should cover this amount.  Given SAP’s 30%+ profit margins and its ability to generate revenues of $12 to $15B a year, this is a small price to pay for a huge mistake in judgment.  Customers should not be concerned.  SAP can also appeal.
  • Verdict does not impact the third party maintenance market. This trial focused on IP theft.  This trial does not address the issue of whether or not third party maintenance is or is not a right for customers.  This trial does not provide the ground rules on how third party maintenance could be delivered by a solution provider.   The trial does put some frameworks on ownership of support and maintenance IP.  A separate lawsuit by Oracle with RiminiStreet will address this issue of third party maintenance rights.
  • HP escapes with minimal damage. With a settlement out of the way, HP and its new CEO, Léo Apotheker,  can carry on with future plans without the albatross of a lawsuit.  In many ways, Leo avoided the limelight with a little luck and deftness.

Your POV.

Will the lawsuit impact your purchasing plans w/ SAP?  Do you care that Oracle won?  Do you feel the jury made the right decision?  Please post or send on to rwang0 at gmail dot com or r at softwareinsider dot org and we’ll keep your anonymity.

Related Resources And Links

20101123 ZDNet: Irregular Enterprise – Dennis Howlett “Jury Slams SAP With $1.3B In TomorrowNow Lawsuit”

20101123 Wall Street Journal – Cari Tuna “Jury Rules SAP Owes Oracle $1.3B”

20101123 SAP Global Communications – Bill Wohl ” SAP Statement on Jury Verdict in Oracle v. SAP”

Reprints

Reprints can be purchased through the Software Insider brand or Constellation Research, Inc.  To request official reprints in PDF format, please contact r@softwareinsider.org.

Disclosure

Although we work closely with many mega software vendors, we want you to trust us.  A full disclosure listing will be provided soon on the Constellation Research site.

Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

Quarterly Financial Tracker: Q3 CY 2010 Enterprise Software Vendors Solidify Performance Turnaround

The super majority (26 of 27) of publicly traded software vendors in the Software Insider Index® delivered turnaround stories for Q3 Cy 2010 year-over-year (YoY) performance.  SaaS vendors and middleware vendors led the charge with solid double digit gains against tough comps.  Performance of on-premises apps vendors reflected the easy comps from a dismal 2009 downturn.  An analysis of the 2010 CY Q2 2010 results show:

SaaS Vendors Continue To Crush All Expectations In Subscriber Growth (Figure 1.)

  • SaaS vendors showed massive gains in subscription revenue at on-premises vendor expense.  SuccessFactors (33.22%) continued the lead in quarterly revenue gains followed by a record breaking Salesforce.com quarter (29.81%).  Kenexa (25.97%) and RightNow (25.46%) also demonstrated above 25% YoY quarterly gains.
  • Subscription license growth has become the norm for both SaaS and On-Premises vendors looking at SaaS revenue.
  • On premises vendors w/ subscriptions showed traction.  SAP reported $101M of subscription revenue and JDA software reported $5.758M in subscription revenues.
  • Of note, Saba (3.89%) and Kenexa (25.97%) were added to the Software Insider Index® this quarter

Figure 1.  SaaS Vendors Continue To Crush All Expectations In Subscriber Growth (Right click to view full image)


Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

Traditionally On Premises Apps Vendors Fare Well As Technology Spending Picks Up

  • JDA Software (65.29%) continues to benefit from retail and supply chain vendor consolidation.  However, JDA’s growth came from maintenance revenue, not new license gains.  In fact, the ratio of maintenance to license revenues remains dangerously high at 3.94.  The good news – focused efforts around SaaS options also grew.   Meanwhile, rival Manhattan Associates saw gains with (13.35%) YoY quarterly growth with respectable new license gains.
  • SAP (19.74%) showed a huge turnaround with significant gains.  However, new license growth came mostly from analytics revenues and not from core apps such as ERP, CRM, SCM.
  • Traditional bellwethers CA (17.21%) and Oracle (15.82%) showed above 15%, healthy YoY quarterly gains.
  • SMB vendors showed mixed results with Epicor (16.28%) leading the pack through gains in Epicor 9 and significant new license growth of 47.07%.  Epicor and Microsoft Dynamics (not listed) have been beneficiaries of the two-tier apps strategy movement.  On the other hand, IFS (5.34%), Lawson (3.35%), and Deltek (1.74%) barely moved the needle in revenues.  Deltek’s 21.38% new license growth reflected a structural shift in the business as new license gains make up maintenance losses.
  • Four vendors continue to enter dangerous trends with maintenance to license revenue ratios above 3: Manhattan (4.42), JDA (3.94) Lawson (3.86), Oracle (3.24)

Figure 2. On Premises Apps Vendors Fare Well As Technology Spending Picks Up (Right click to view full image)


Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

Middleware Vendors Benefit From Optimization Mandates (Figure 3.)

  • VMware (45.84%), Informatica (30.68%), and Software AG (28.89%) crush numbers as demand for middleware, virtualization, and integration continue to gain traction.
  • All middleware vendors maintain healthy maintenance to license revenue ratios below 2.0:  SoftwareAG (.65), VMware (1.08), Informatica (1.31), Progress (1.82).

Figure 3. Middleware Vendors Benefit From Optimization Mandates


(Right click to view full image)  Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.
The Bottom Line – Enterprise Software Is Back

Refresh cycles, demanding business requirements, and shift to hybrid deployment options fuel growth for this quarter.  Organizations continue to free up budget to support legacy apps optimization to fund innovation projects.  SaaS will be the predominant entry point for new innovation while organizations seek two-tier approaches to consolidate legacy apps.  The theme for enterprise software customers remains “Show us the business value!”

Your POV.

Are you increasing your spending on enterprise software?  Want to know more about a specific vendor’s financial health? Can we help you work with a specific vendor?  Please post or send on to rwang0 at gmail dot com or r at softwareinsider dot org and we’ll keep your anonymity.  Further, let us know if you need help with your next gen apps strategy, overall apps strategy, and contract negotiations projects.  Here’s how we can help:

  • Designing a next gen apps strategy
  • Providing contract negotiations and software licensing support
  • Demystifying software licensing
  • Assessing SaaS and cloud
  • Evaluating Cloud integration strategies
  • Assisting with legacy ERP migration
  • Planning upgrades and migration
  • Performing vendor selection
  • Renegotiating maintenance

Disclaimers* Not responsible for any math errors or erroneous revenue information.

1. Calendar year estimates based on the quarter nearest the calendar year.

2. Why these vendors than others?  Easy – because I cover them.

3. Exchange rates as of February 25th, 2010 for vendors who have not published quarterly conversions.  Not responsible for currency flux.

4. Estimates created for privately held vendors, when listed.

Not sure? Please read the quarterly filings yourself =)

Related resources and links

2010 Calendar Year Q2

2010 Calendar Year Q1

Software Insider Index™ (SII): 2009 SII Top 35 Enterprise Business Apps Vendors™

2009 Calendar Year Q4

2009 Calendar Year Q3

2009 Calendar Year Q2

2009 Calendar Year Q1

Software Insider Index™ (SII): 2008Software Insider IndexTM (SII): SII Top 30 Enterprise Business Apps VendorsTM & SII Top SaaS Business Apps VendorsTM SII Top 30 Enterprise Business Apps Vendors™

2008 Calendar Year Q4

2008 Calendar Year Q3

2008 Calendar Year Q2

2008 Calendar Year Q1

Reprints

Reprints can be purchased through the Software Insider brand or Constellation Research, Inc.  To request official reprints in PDF format, please contact r@softwareinsider.org.

Disclosure

Although we work closely with many mega software vendors, we want you to trust us.  A full disclosure listing will be provided soon on the Constellation Research site.

Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

Personal Log: Blast Off To Constellation!

First Things First.  Thank You Altimeter Group.

The rumors are true.  I’ve left, but on good terms.  I remain a unit member and investor of Altimeter.  I wish my former colleagues the best.  In fact, Altimeter’s been doing great work.  The firm has grown from 10 to 135 clients in 13 months.  The team is on fire.  Altimeter’s built a great brand and is trusted by clients.  We’ve proven that a market exists for high value firms.  Clients seek differentiated points of view.  Frankly, the success of Altimeter drives the inspiration by clients and member analysts for building out new models of a research firm.

Announcing The Next Wave – Constellation Research


Constellation is a next-generation research firm, comprising member analysts who take a multi-disciplinary approach to enterprise research topics.  Our main mission serves the needs of technology buyers and end-users who seek insight, guidance, and advice in dealing with IT.

The best analysts bridge the gap between theory and practice, and that’s what we seek to do.  Our research agendas look at cross-role, cross-functional, and cross-industry trends. Every analyst member of Constellation brings decades of practitioner experience, a strong network of other experts, and a passion to share and serve clients.  We take the buyer’s perspective and make the tough calls that clients will expect of us as an independent research firms.

Our research agenda includes a number of emerging trends and technologies: enterprise applications, legacy system optimization, cloud computing, mobile computing, social networking, business analytics, game theory, and unified communications.

We are first and foremost a research firm. We work to a research agenda and work with our clients to shape that agenda. We provided both open and syndicated products and we build long term retained relationships with both our buy side and sell side clients. Our primary product is our IP and knowledge which we share deliver in many mediums such as reports, webinars, and project consulting.

Software Insider Joins Constellation

Effective today, my longstanding research firm, Insider Associates, LLC, is now a member of the Constellation Research Group. We will continue to deliver services under the Software Insider banner, but in addition, we will now be able to leverage the resources of this brand-new membership research organization and extend our services to its clients.  Coverage of next generation apps require a holistic point of view across the technology ecosystem, especially given the many enterprise influences coming from consumer tech. Our mission is to constantly provide the best advice to our clients.  This partnership with Constellation opens the door to a greater portfolio of collaboration on disruptive research and advisory for our clients.

Introducing The Constellation

We have assembled a really top-notch group of analysts.

  • Phil Fersht (@pfersht) is a well-known industry analyst covering business process outsourcing (BPO) and IT services worldwide. He is the founder of the acclaimed global sourcing blog “Horses for Sources.” Before that he worked for 15 years at AMR Research (now Gartner Group), Deloitte Consulting, Everest Group, and IDC.
  • Maribel Lopez (@maribellopez) brings deep industry knowledge in covering the communications industry. With over two decades of marketing as well as industry analyst experience, she has covered the massive shifts in the communication market. Maribel has worked in marketing at Motorola and Shiva corp and as an analyst for IDC. She also put in over 10 years at Forrester Research, most recently as Vice President of the tech industry strategies group, covering network and service strategies, enterprise communications, and consumer markets for voice, video, and data.
  • Oliver Marks (@olivermarks) is a partner at the Sovos Group. Oliver provides consulting to end-user organizations on the effective planning of collaboration strategy, tactics, technology decisions, change management and roll out. Oliver previously managed the Sony WorldWide collaboration extranet, and has worked with the American Management Association, Sun, Docent/SumTotal Systems, Harvard Business School and McKinsey on major initiatives around knowledge transfer and change management.
  • Vinnie Mirchandani (@dealarchitect) is a thought-leader on trends in software, outsourcing, and offshoring. He has personally assisted clients in negotiate technology contracts valued in excess of $5 billion and has advised companies on IT risk management, globalization and sourcing issues. Vinnie is the founder of Deal Architect and is a former Gartner analyst and an outsourcing executive with PricewaterhouseCoopers.
  • Paul Papadimitriou (@papadimitiriou) is a big thinker on online media, its impact on how brands and individuals communicate, and the redefinition of social norms through new technologies. With more than a decade of experience as a lobbyist and business consultant, he delivers intelligence to companies seeking to understand the shift in customer engagement. Paul also advises startups, writes about Japan mobile & web trends, and is a sought-after speaker at conferences around the world.
  • Sameer Patel (@sameerpatel) is a partner at the Sovos Group. Sameer is a recognized expert in accelerating business performance via the use of collaboration and enterprise social software. He has more than a decade of experience managing initiatives for large organizations to help drive sales and marketing intelligence, partner network optimization, innovation, customer acquisition, and employee productivity via communication and collaboration technologies. Sameer’s clients have included Ingres, Sun Microsystems, Computer Associates, KPMG, McKesson HBOC, WR WrigleyCo., The Sabre Group, Grupo Televisa (Mx), and Cardinal Health.
  • Frank Scavo (@fscavo) is the co-founder of Strativa, a management consulting firm providing business and IT advice to end-user organizations. He has over 20 years of experience in IT strategy, IT management metrics, enterprise applications, and business process improvement, serving end-users in a broad range of industries, including manufacturing, life sciences, consumer products, high-tech, distribution, retail distribution, and information services. He is especially skilled at aligning business and IT strategy, developing the business case for new systems, and facilitating the selection of enterprise systems, such as ERP, CRM, and supply chain management. He is also an expert in benchmarking IT spending and staffing levels for end-user IT organizations. Frank is a Certified Fellow in Production and Inventory Management (CFPIM) by APICS, the Association for Operations Management. He is also the President of Computer Economics, an IT research and metrics firm, founded in 1979.
  • Alan Silberberg (@ideagov) is a leading analyst in Gov 2.0. He speaks on transformational change, crisis and brand communications, and government 2.0 and the crossover into business and technology. Alan has government and private sector experience, having served in the U.S. White House, at Paramount Pictures and numerous technology companies as an advisor, founder or investor. His clients have included the Vatican Global Licensing group, currently elected officials, and former elected officials as well as numerous technology startups. He is focused on the business side of Government 2.0 and how the technology platforms create commercial ventures and new markets. He is the founder of Gov20LA which is the first west coast un-conference for Gov 2.0 tech.

In addition, we have a great group on our Board of Advisors that provide mentorship, guidance, and general research advice:

  • Paul Greenberg (@pgreenbe)
  • Dennis Howlett (@dahowlett)
  • Erin Kinkin
  • Esteban Kolsky (@ekolsky)
  • Brian Solis (@briansolis)

Additional members have and are expected to join Constellation Research Group in the coming months.  Stay tuned for their announcements over the next few months!

Constellation Service Offerings

We work with our clients to tailor programs of access through open research, syndicated research, and one-on-one interactive engagement. Advisory services include:

Visit the Constellation Research Group website for more information, or simply contact me if you are interested in our services.

Stay Tuned For The Launch Webinar

A free webinar on the Constellation Experience will be offered on December 2nd, 2010 at

  • 9 am Central European Time
  • 10 am Eastern Time
  • 10 am Pacific Time

Stay tuned for registration and details

Your POV.

Ready for the Constellation experience?  What are you looking for in a next generation research firm?  Would love to hear your comments on the blog or send me an email to rwang0 at gmail dot com or r at softwareinsider dot org and we’ll keep your anonymity.

Resources And Related Links

Cross posts will be linked here.

Reprints

Reprints can be purchased through the Software Insider brand.  To request official reprints in PDF format, please contact r@softwareinsider.org.

Disclosure

Although we work closely with many technology providers, we want you to trust us.  A full disclosure policy is coming soon.

Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.