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Monday’s Musings: Understand The Four Organizational Personas Of Disruptive Tech Adoption

Published on December 2, 2012 by R "Ray" Wang

Pace of Innovation Exceeds Ability To Consume

Rapid innovation, flexible deployment options, and easy consumption models create favorable conditions for the proliferation of disruptive technology. In fact, convergence in the five pillars of enterprise disruption (i.e. social, mobile, cloud, big data, and unified communications), has led to new innovations and opportunities to apply disruptive technologies to new business models. New business models abound at the intersection of cloud and big data, social and mobile, social and unified communications, and cloud and mobile.

Unfortunately, most organizations are awash with discovering, evaluating, and consuming disruptive technologies. Despite IT budgets going down from 3 to 5% year over year, technology spending is up 18 to 20%. Why? Amidst constrained budgets, resources, and time limits, executives are willing to invest in disruptive technology to improve business outcomes. Consequently, successful adoption is the key challenge in consuming this torrent of innovation. This rapid pace of change and inability to consume innovation detract organizations from the realization of business value.

Organizations Fall Into Four Personas Of Disruptive Technology Adoption

A common truism in the industry is “Culture trumps technology”. As organizations apply methodologies such as Constellation’s DEEPR Framework in improving adoption, leaders must first determine which of the four personas best fits their organization’s appetite for consuming and innovating with disruptive technologies.

The personas of disruptive technology adoption assess organizational culture in two key axes (see Figure 1). The first is how incremental or transformational an organization looks at applying disruptive technology to business models. The second assesses how proactive or reactive an organization is in carrying out new initiatives. Based on these dimensions, the four personas include:

Market leaders. Market leaders prefer to drive transformational innovation. They look at technologies as enablers in disrupting business models. They see competitive differentiation in delivering outcomes to customers. Market leaders accept failure as part of the innovation process. They fail fast and move on.
Fast followers. Fast followers prefer to react to the success of market leaders and their experiments. When they sense success, they tend to jump in. Fast followers do not like to fail and rapidly apply lessons learned from market leaders into their road maps. Fast followers tend to deliver scale in the markets as a counter balance to arriving later in the market.
Cautious adopters. Cautious adopters proactively deliver incremental innovation. They tend to take a more measured approach and spend more time studying how they can improve an existing success than creating a transformational change. Cautious adopters often come from regulated industries where security and safety are paramount objectives.
Laggards. Laggards tend to procrastinate on applying innovations to their business models. They prefer not be bothered by trends and will only react when the trends have moved beyond mainstream. They see value in waiting as prices will drop over time as success rates increase over time. Laggards enjoy waiting.

During the interviews and discussions with the 2012 Constellation SuperNova award participants, key questions emerged in the decision process on whether to adopt or pass on a disruptive technologies. These questions aligned well with the four personas of disruptive technology adoption.

Figure 1. Organizations Should Understand Which Persona Of Disruptive Tech Adoption Describes Them Best

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Product Review: Google+, Consumerization of IT, and Crossing The Chasm For Enterprise Social Business

Published on July 3, 2011 by R "Ray" Wang

Timing of Google+ Bodes Well For Enterprise Users And Google

Lately, one could say Google’s been a bit absent from the social business party. The premature launch of Google Wave exposed a canvas looking for a masterpiece painting. Failing fast and learning from the Google Wave lesson, Google’s latest offering, Google+ shows promise in bringing similar disruptive technology concepts to market, yet packaged in easier to adopt metaphors such as activity streams, walls, hangouts, and circles (see Figure 1).

As part of Google’s aspirations to deliver enterprise offerings, it’s flagship Google Apps continues to gain traction in enterprises despite a market position that places the product between a very strong pro-sumer play and an almost enterprise app. The good news – a constant stream of incremental changes shows an evolution to an enterprise class offering built from a strong consumer bent. As of this posting, Google Apps isn’t integrated with G+, but Google’s enterprise ambitions have been strengthened with the new offering.

Figure 1. Logging Into Google+

Convergence And Shift To A P2P World Enables GooglePlus To Go After Both Consumers And Enterprises

Google+ launch comes at an exciting time of convergence among the mega trends for the decade: social business, mobile enterprise, cloud computing, and unified communications. The five pillars of Consumerization of IT (CoIT) fall in Google’s favor as consumer users rapidly seek to bring these innovations into their enterprises. Subsequently, Google+ already takes advantage of Google’s assets to:

Unify the communications channels. Enterprises spend millions trying to get their fragmented communications systems to work, let alone integrate. Google+ takes chats, emails, tweets, voice, mobile, and video and rolls it all up neatly into one offering. More importantly, it works off of one login and its integrated. Key video features such as Hangouts allow for impromptu video con calls without the hassle of most other video conferencing systems.
Provide an initial alternative to Facebook for the enterprise offerings. Procurement managers and line of business buyers face Cloud/SaaS best of breed hell as a flurry of purpose built solutions attack the enterprise IT landscape. Should Google stream line convergent offerings for the enterprise, it will be poised to dethrone many incumbents. Google can only succeed if they can match functional parity over the next 12 to 18 months. Keep in mind, the long-term goal goes beyond Facebook for the enterprise.
Aggregate the user’s social sphere. Facing near term social networking overload, enterprise users can’t possibly fathom another social networking service. Aggregation by a major player makes sense from a market position and user convenience. Google’s initial list allows users to notate key services in their profiles through connected accounts from Facebook, Yahoo!, Flickr, LinkedIn, Quaora, Twitter, Yelp, Hotmail, and Plaxo (see Figure 2). A quick look into the codes shows that these connection services potentially can support a Microsoft Outlook email, an SAP feed, or Salesforce.com Chatter stream and may potentially support direct integrations in future road maps.

Figure 2. Google+ Delivers Social Sphere Aggregation With Ease

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Research Summary: Best Practices – The Case For Two-Tier ERP

Published on March 1, 2011 by R "Ray" Wang

Forward And Commentary

Legacy optimization remains a key component for funding future innovation. Two-tier ERP emerges as one strategy to optimize existing systems while adding innovation. The report capitalizes on the recent Software Insider survey of 235 companies looking at future strategies.

A. Introduction

Organizations continue to face an onslaught of business requirements that their existing ERP systems can no longer address. Stuck in the past century, these ERP systems are expensive to run, difficult to upgrade, and impossible to modify for today’s fast changing requirements. Two-tier ERP has emerged as a strategy to enable legacy optimization while reinvigorating the organization’s existing ERP systems.

B. Research Findings

Two-tier ERP refers to a business and technology strategy that enables organizations to keep existing ERP systems at the corporate level while empowering divisions or business units to innovate with a second ERP system. Consequently, two-tier ERP deployments continue to gain favor. Why? Organizations must optimize legacy systems while delivering on business value. In fact, in a recent Constellation Research survey, 48% of respondents indicated that they are considering at two-tier ERP strategy (see Figure 1). These results reflect a 27-point increase from 2009.

Figure 1. Two-Tier ERP Growing In Popularity As A Key Strategy

While today’s two-tier strategies mostly involve on-premises solutions, cloud based solutions will gain favor over the next 18 to 24 months because of their rapid deployment capabilities, constant innovation qualities, and subscription pricing. Organizations challenged by diverse lines of business, multiple localization requirements, or needs to phase in legacy system modernization will find a two-tier ERP strategy one that can reduce costs and provide better business value than a one-size-fits-all solution. Whether SaaS, on-premises, or hybrid, a two-tier ERP strategy will reduce costs, meet new business requirements, and provide better business value. More…

Research Report: Constellation’s Research Outlook For 2011

Published on January 4, 2011 by R "Ray" Wang

Organizations Seek Measurable Results In Disruptive Tech, Next Gen Business, And Legacy Optimization Projects For 2011

Credits: Hugh MacLeod

Enterprise leaders seek pragmatic, creative, and disruptive solutions that achieve both profitability and market differentiation. Cutting through the hype and buzz of the latest consumer tech innovations and disruptive technologies, Constellation Research expects business value to reemerge as the common operating principle that resonates among leading marketing, technology, operations, human resource, and finance executives. As a result, Constellation expects organizations to face three main challenges: (see Figure 1.):

Navigating disruptive technologies. Innovative leaders must quickly assess which disruptive technologies show promise for their organizations. The link back to business strategy will drive what to adopt, when to adopt, why to adopt, and how to adopt. Expect leading organizations to reinvest in research budgets and internal processes that inform, disseminate, and prepare their organizations for an increasing pace in technology adoption.
Designing next generation business models. Disruptive technologies on their own will not provide the market leading advantages required for success. Leaders must identify where these technologies can create differentiation through new business models, grow new profit pools via new experiences, and deliver market efficiencies that save money and time. Organizations will also have to learn how to fail fast, and move on to the next set of emerging ideas.
Funding innovation through legacy optimization. Leaders can expect budgets to remain from flat to incremental growth in 2011. As a result, much of the disruptive technology and next generation business models must be funded through optimizing existing investments. Leaders not only must reduce the cost of existing investments, but also, leverage existing infrastructure to achieve the greatest amount of business value.

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Research Report: 2011 Cloud Computing Predictions For Vendors And Solution Providers

Published on December 28, 2010 by R "Ray" Wang

This blog was jointly posted by @Chirag_Mehta (Independent Blogger On Cloud Computing) and @rwang0 (Principal Analyst and CEO, Constellation Research, Inc.)

Part 1 was featured on Forbes: 2011 Cloud Computing Predictions For CIO’s And Business Technology Leaders

As Cloud Leaders Widen The Gap, Legacy Vendors Attempt A Fast Follow
Cloud computing leaders have innovated with rapid development cycles, true elasticity, pay as you go pricing models, try before buy marketing, and growing developer ecosystems. Once dismissed as a minor blip and nuisance to the legacy incumbents, those vendors who scoffed cloud leaders now must quickly catch up across each of the four layers of cloud computing (i.e. consumption, creation, orchestration, and infrastructure) or face peril in both revenues and mindshare (see Figure 1). 2010 saw an about face from most vendors dipping their toe into the inevitable. As vendors lay on the full marketing push behind cloud in 2011, customers can expect that:

Figure 1. The Four Layers Of Cloud Computing

General Trends

Leading cloud incumbents will diversify into adjacencies. The incumbents, mainly through acquisitions, will diversify into adjacencies as part of an effort to expand their cloud portfolio. This will result into blurry boundaries between the cloud, storage virtualization, data centers, and network virtualization. Cloud vendors will seek tighter partnerships across the 4 layers of cloud computing as a benefit to customers. One side benefit – partnerships serve as a pre-cursor to mergers and as a defensive position against legacy on-premises mega vendors playing catch up.

Cloud vendors will focus on the global cloud. The cloud vendors who initially started with the North America and followed the European market, will now likely to expand in Asia and Latin America. Some regions such as Brazil, Poland, China, Japan, and India will spawn regional cloud providers. The result – accelerated cloud adoption in those countries, who resisted to use a non-local cloud provider. Cloud will prove to be popular in countries where software piracy has proven to be an issue.

Legacy vendors without true Cloud architectures will continue to cloud wash with marketing FUD. Vendors who lack the key elements of cloud computing will continue to confuse the market with co-opted messages on private cloud, multi-instance, virtualization, and point to point integration until they have acquired or built the optimal cloud technologies. Expect more old wine (and vinegar, not balsamic but the real sour kind, in some cases) in new bottles: The legacy vendors will re-define what cloud means based on what they can package based on their existing efforts without re-thinking the end-to-end architecture and product portfolio from grounds-up.

Tech vendors will make the shift to Information Brokers. SaaS and Cloud deployments provide companies with hidden value and software companies with new revenues streams. Data will become more valuable than the software code. Three future profit pools willl include benchmarking, trending, and prediction. The market impact – new service based sub-categories such as data-as-service and analysis-as-a-service will drive information brokering and future BPO models.

SaaS (Consumption Layer)

Everyone will take the SaaS offensive. Every hardware and system integrator seeking higher profit margins will join the Cloud party for the higher margins. Software is the key to future revenue growth and a cloud offense ensures the highest degree of success and lowest risk factors. Hardware vendors will continue to acquire key integration, storage, and management assets. System integrators will begin by betting on a few platforms, eventually realizing they need to own their own stack or face a replay of the past stack wars.

On-premise enterprise ISVs will push for a private cloud. The on-premise enterprise ISVs are struggling to keep up with the on-premise license revenue and are not yet ready to move to SaaS because of margin cannibalization fears,lack of scalable platforms, and a dirth of experience to run a SaaS business from a sales and operation perspectives. These on-premise enterprise software vendors will make a final push for an on-premise cloud that would mimic the behavior of a private cloud. Unfortunately, this will essentially be a packaging exercise to sell more on-premise software. This flavor of cloud will promise the cloud benefits delivered to a customer’s door such as pre-configured settings, improved lifecycle, and black-box appliance. These are not cloud applications but will be sold and marketed as such.

Money and margin will come from verticalized cloud apps. Last mile solutions continue to be a key area of focus. Those providers with business process expertise gain new channels to monetize vertical knowledge. Expect an explosion of vertical apps by end of 2011. More importantly, as the buying power shifts away from the IT towards the lines of businesses, highly verticalized solutions solving specific niche problems will have the greatest opportunities for market success.

Many legacy vendors might not make the transition to cloud and will be left behind. Few vendors, especially the legacy public ones, lack the financial where with all and investor stomachs to weather declining profit margins and lower average sales prices. In addition, most vendors will not have the credibility to to shift and migrate existing users to newer platforms. Legacy customers will most likely not migrate to new SaaS offerings due to lack of parity in functionality and inability to migrate existing customizations.

Social cloud emerges as a key component platform. The mature SaaS vendors that have optimized their “cloud before the cloud” platform, will likely add the social domain on top of their existing solutions to leverage the existing customer base and network effects. Expect to see some shake-out in the social CRM category. A few existing SCRM vendors will deliver more and more solutions from the cloud and will further invest into their platforms to make it scalable, multi-tenant, and economically viable. Vendors can expect to see some more VC investment, a possible IPO, and consolidation across all the sales channels.

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Trends: 2011 Cloud Computing Predictions For CIO’s And Business Technology Leaders

Published on December 27, 2010 by R "Ray" Wang

This blog was jointly posted by Chirag Mehta (Independent Blogger On Cloud Computing) and R “Ray” Wang (Principal Analyst and CEO, Constellation Research, Inc.)

Cloud Adopters Embrace Cloud For Both Innovation and Legacy Optimization

Once thought to be the answer to deployment options for just the SMB market, early cloud adopters proved otherwise. Stereotypes about industry, size of company, geographies, and roles no longer hold back adoption. Cloud adoption at all 4 layers of the cloud passed the tipping points in 2010 as a key business and technology strategy (see Figure 1). For 2011, we can expect users to:

Figure 1. The Four Layers Of Cloud Computing

General Trends Reflect Natural Maturation Of The Cloud Market

Replace most new procurement with cloud strategies. Preference in deployment options and lack of availability of innovative solutions in on-premises options will result in a huge shift for 2011. Add capex swap out for opex, and most CFO’s will be singing the praises of Cloud along with the business and IT leaders.

Start with private clouds as a stepping stone to public clouds. Conservative CIO’s looking to dip their toes into cloud computing will invest into private cloud while evaluating the public cloud at the same time.

Get real about security. Customers will move from “the cloud is not secured” to “how can security be achieved in the cloud?”. They will start asking real questions about security. The result — cloud vendors must further showcase various industry-specific compliance approaches.

Move to private clouds as a back up to public clouds. Forecasts in cloud security breaches will call for partly cloudy cloud adoption. Despite the woes in on-premises security and the march to the cloud, cyber attacks will force companies to mov e from public clouds to private clouds in 2011. Concern about cyber gangs hacking into commercial and military systems leads to a worldwide trend that temporarily reduces public cloud adoption. Hybrid models for apps in the public cloud and data in the private cloud emerge as users migrate from on-premises models. Data integration and security rise to key competencies for 2011. The bottom line – improved data security reliability will drive overall cloud adoption in the latter half of 2011. Organizations will keep private clouds for both security and back up.

SaaS (Consumption Layer) Emerges As The Primary Access To Innovation

Begin the transition from best of breed purpose built solutions to cloud mega stacks. Customers will still need stacks to be augmented by best of breed purpose built solutions. As with the early days of ERP and CRM, expect su ite consolidation to occur for SaaS apps vendors. However, the vendors with both the best PaaS platform and ecosystem will win. Mature cloud customers will bet on several emerging platforms and apps as well as content driven cloud platforms complemented by strong integration solutions. Access to deep industry vertical solutions will play a key role in this migration. The need to quickly innovate will hasten SaaS adoption.

Leverage apps market places and ecosystems for the last mile. The growing consumerization of enterprise apps includes a shift in how software is acquired and consumed. Market places will be the predominant channel for not only the acquisition of last mile apps but also, the request for proposal for custom app development. System integrators will have to deliver solutions in the cloud. Software vendors will emerge as information brokers.

Superior user experience and scale won’t be mutually exclusive. The customers, especially the line of businesses (LOBs) will demand superior user experience as well as the scale in the SaaS applications and the tools that they will use. Ease of use will be on top of the list while evaluating a SaaS application and will help the SaaS vendors win a deal against on-premise incumbents whose products may have more features but poor user experience.

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Research Report: How The Five Pillars Of Consumer Tech Influence Enterprise Innovation

Published on October 4, 2010 by R "Ray" Wang

Most Enterprise Software Vendors Fail To Deliver Innovation

Despite hundreds of billions wasted on failed research and development projects, most market influencers would agree that enterprise software vendors have produced a dearth of innovation over the past decade. Vendors often cite UI re-skins, major functionality additions, integration of acquisitions, technology re-platforms, and weak attempts at faking cloud computing as innovations. In fact, let’s call it what it is. Only a handful of enterprise software vendors have truly innovated. Many enterprise software vendors are fast followers. Most are innovation laggards living off fat maintenance revenue streams. Ask any product strategist where they gain their inspiration and they will all cite advancements in consumer technology; and not peer enterprise competitors.

Innovative Enterprises Push Forward Mostly On Their Own

During this year’s Information Week 500 event, conversations with over 50 leading business technology leaders highlighted the growing gap in innovation. These next gen leaders demonstrated how they were turning to consumer tech advancements to influence their custom development efforts; and/or seeking emerging vendors with innovative offerings.

For example, Bill Martin, the CIO of Royal Caribbean showed how design thinking coupled with real-time analytics and on-board mobility could improve the cruise experience on the largest ship ever built. Shawn Kleim, Director of Development at WetSeal, provided proof points on mobility and social convergence in driving retail sales and eCommerce in the highly competitive teen apparel market. Dave Bent, Senior VP of eBusiness services and CIO of United Stationers, proved how a company could deliver cloud services to partners and create competitive advantage across a value chain.

A number of CIO’s showcased how they were taking advantage of the cloud with SaaS apps and private clouds. Others discussed their efforts to optimize costs using third party maintenance to pay for innovation. The common lessons learned – most did not expect to gain market advantage from their existing and legacy vendors. Innovations came from the consumer tech side and next generation solution providers. Consumer tech advancements influenced business driven technology advancements.

Software And Tech Vendors Rush To Incorporate The Five Pillars Of Consumer Tech

Ten elements drive key design points for next generation apps. These design points showcase how advancements in consumer tech now permeate the enterprise. Design thinking concepts drive dynamic user experiences, business process focus, and community connectedness. Based on existing research, deep dives into major vendor road maps, and validation with clients, five pillars of consumer tech have emerged as the foundation for future inspiration in the enterprise (see Figure 1):

Figure 1. Five Pillars Of Consumer Tech Will Influence Enterprise Software Throughout The Next Decade

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Event Report: Top 10 Questions To Ask At The Microsoft TechEd/STB Analyst Summit

Published on June 6, 2010 by R "Ray" Wang

Clients Now See Microsoft As The Neutral Vendor, Hence All The Questions

Just less than 3 years ago, Microsoft was still perceived as part of the “evil” empire. Business leaders worried about the complicated and expensive licensing and pricing structures. IT leaders bemoaned the lock-in and proprietary and often buggy software. But in a reversal of fortune, customers now worry about Google lock-in, fret over Oracle’s quest to dominate IT through M&A, wonder how hardware vendors will become software providers and vice versa, and remain in shock as Apple’s proprietary and closed approach over takes Microsoft’s market cap.

In conversations with 71 business and IT leaders, the perception on Microsoft has definitively shifted. In fact, more than 74.6% (53/71) see Microsoft as the neutral and trusted supplier. With an aging and retiring workforce that grew up on IBM and SAP, the next generation of IT leaders increasingly will exert their leadership and run to their comfort zone of Microsoft and Oracle. (Note: Don’t expect this to last as the next generation of IT leadership comprises of millennials and digital natives who will try to move everything to open source and the cloud.) Consequently, Microsoft’s technology offerings receive a renewed interest and reinvestment among customers, partners, and critical OEM’s. Among this group, many are attending TechEd 2010 in New Orleans, LA. Key questions they will be asking include:

When will Azure have a viable business model for partners, OEM’s, and customers?
Is Silverlight really ready for prime time or should organizations still leave one foot in the door with HTML 5 or Adobe Flash?
What true social features will Microsoft deliver in Sharepoint, UC, and Office?
After wasting a decade with Windows Mobile can Windows Phone 7 really beat out iPhone?
What will the rise of NoSQL databases and in memory computing mean for SQL Server?
Will Office Web Apps emerge as a significant challenger to Google’s App strategy?
How quickly can Microsoft convince other apps vendors to adopt the STB platforms?
Will Internet Explorer ever become W3C compliant?
What’s Microsoft doing to win over the Web 2.0 crowd?
What partner ecosystems will Microsoft have to rely on to gain leadership in the Cloud?

What’s your question?

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Tuesday’s Tip: Understanding The Many Flavors of Cloud Computing and SaaS

Published on March 22, 2010 by R "Ray" Wang

Confusion Continues With Cloud Computing And SaaS Definitions

Coincidence or just brilliance must be in the air as three esteemed industry colleagues, Phil Wainewright, Michael Cote, and James Governor, have both decided to clarify definitions on SaaS and Cloud within a few days of each other. In fact, this couldn’t be more timely as SaaS and Cloud enter into mainstream discussion with next gen CIO’s evaluating their apps strategies. A few common misconceptions often include:

“That hosting thing is like SaaS”
“Cloud, SaaS, all the same, we don’t own anything”
“OnDemand is Cloud Computing”
“ASP, Hosting, SaaS seems all the same”
“It all costs the same so what does it matter to me?”
“Why should I care if its multi-tenant or not?
“What’s this private cloud versus public cloud?”

Cloud Computing Represents The New Delivery Model For Internet Based IT services

Traditional and Cloud based delivery models share 4 key parts (see Figure 1):

Consumption – how users consume the apps and business processes
Creation – what’s required to build apps and business processes
Orchestration – how parts are integrated or pulled from an app server
Infrastructure – where the core guts such as servers, storage, and networks reside

As the über category, Cloud Computing comprises of

Business Services and Software-as-a-Service (SaaS) – The traditional apps layer in the cloud includes software as a service apps, business services, and business processes on the server side.
Development-as-a-Service (DaaS) – Development tools take shape in the cloud as shared community tools, web based dev tools, and mashup based services.
Platform-as-a-Service (PaaS) – Middleware manifests in the cloud with app platforms, database, integration, and process orchestration.
Infrastructure-as-a-Service (IaaS) – The physical world goes virtual with servers, networks, storage, and systems management in the cloud.

Figure 1. Traditional Delivery Compared To Cloud Based Delivery

The Apps Layer In The Cloud Represents Many Flavors From Hosted To True SaaS

SaaS purists often challenge vendors on delivery models in the cloud at the apps layer (see Figure 2). Often classified as OnDemand, there are 3 common approaches:

Single Instance – (a.k.a. “On Demand”). Think traditional apps deployed one cusotmer per app or per server. Many vendors provide hosting capabilities. Customers don’t worry about the IT infrastructure and retain the flexibility to modify, customize, and in most cases choose when they want to change the code. All customers can use different versions of the software
Multi Instance – (a.k.a. “Server Virtualized”). Think “VMware” like. Apps deployed into a shared-web hosting environment. A single instance copy of the app is configured and deployed into a web directory for each customer. Vendor benefit from easier to manage multi-instance environments. Customers don’t worry about the IT infrastructure and retain the flexibility to modify, customize, and in most cases choose when they want to change the code. All customers can use different versions of the software.
Multi-tenant – (a.k.a. “True SaaS”). Apps in a multi-tenant deployments provide a single operating environment shared by multiple customers. Config files are created and deployed each time a customer request services. Customers don’t worry about the IT infrastructure and retain the flexibility to modify, configure but NOT customize the code. Customers usually receive upgrades at the same time. Everyone shares the same code.

Figure 2. Different Strokes Of OnDemand For Different Folks

The Bottom Line – Different Models Bring Varying Degrees Of Trade Offs In Cost Versus Flexibility

Keep in mind there are cases where one deployment option is more favorable than another. Just because you are multi-tenant SaaS doesn’t mean you are better. On the other hand, when vendors tout OnDemand as a SaaS offering, then the SaaS bigotry begins. Be on the look out as more vendor provide mix-mode offerings to support disconnected modes, SaaS and On-premise, Public and Private clouds, as well as other improvements in integration with stronger client side ESB’s. Expect many vendors to put their offerings into the Cloud as Cloud/SaaS moves beyond the mainstream for apps strategy. Let’s take a look at a two decision criteria:

Scenario 1: From least expensive to most expensive to run for a vendor:

True SaaS

Server Virtualized

Hosting

Why is this important? Let’s see, you choose a Hosted solution and the vendor’s costs to run the app goes up with each new customer as it has to manage the different environments. No matter how hard the vendor will try to “fit” everyone to standard configurations and deployments, that’s not always possible. Flexibility has a cost. In a “True Saas” solution, the cost to add an additional customer is minimal and each customer reduces the overall cost for everyone. Ultimately, a True SaaS deployment will have the lowest cost/user/month fee. What will you do 5 years into an Hosting scenario when you are locked in?

Scenario 2: From most customizable to least customizable for a customer:

Hosting

Server Virtualized

True SaaS

Why is this important? Your may have specific needs in an area where the SaaS vendor has not provided the deepest level of configurations. You can’t just go in and modify the code unless everyone else wants it or the vendor’s has it on the roadmap. The cost of comformity is the lack of flexibility. What will you do 5 years into a True SaaS scenario when you are locked in and the vendor won’t add the feature or functionality you need?

Your POV

What’s your view on SaaS vs Cloud? Does this help clarify the definitions? Are you looking at private, public, or hybrid cloud options? Add your comments to the discussion or send on to rwang0 at gmail dot com or r at softwaresinsider dot org and we’ll keep your anonymity.

Please let us know if you need help with your SaaS/Cloud strategies. Here’s how we can help:

Crafting your next gen apps strategy
Short listing and vendor selection
Contract negotiations support
Market evaluation

Related resources and links

Take the new and improved survey on 3rd party maintenance

20100322 Monkchips – James Governor “Defining Cloud is Simple. Get Over It. The Burger”

20100319 ZD Net: Software as Services – Phil Wainewright “Is SaaS the Same as Cloud”

Tuesday’s Tip: When To Go With A Two-Tier ERP Strategy

Published on March 2, 2010 by R "Ray" Wang

Single Instance ERP Harder And Harder To Justify

The holy grail of an ERP implementation used to be the single instance deployment. However, market forces, a move to adopt new disruptive technologies, slow pace of innovation from incumbent vendors, and high maintenance fees have changed many organization’s perspectives. Add a slew of rapidly changing business requirements battling rigid legacy infrastructures and next gen CIO’s have been forced to depart from the standard apps strategies. In fact, improved integration, web services, and SaaS deployments have now improved the success rates and ROI for Two-Tier ERP apps strategies.

Purpose Built Capabilities And Cost Savings Drive Push For Two-Tier Apps Strategies

Recent Software Insider data surveys of next gen IT leaders in Q3 2009 and Q1 2010 show a 10% increase among organizations considering a Two-Tier ERP apps strategy (see Figure 1). Key drivers behind moving to a Two-Tier ERP approach stem from:

Purpose built or industry requirements (89.61%). Next gen IT leaders remain frustrated by the lack of innovation and progress in completing out promised functional footprints. As market competition intensifies, industry specific, purpose built solutions provide the competitive advantage needed for survival and success.
Existing systems too expensive (70.13%). ROI calculations on existing ERP systems often show high cost factors. The culprits – overruns in implementation, customization of reports, maintenance payments on shelfware, increasing costs to staff, and rigidity of system.
Upgrade too expensive (45.45%). Many customers face upgrade costs equivalent to reimplementation. Cost factors could equal up to 85% of the original implementation cost.
Need to innovate (35.06%). Some organizations find that their vendors have not innovated fast enough. Social channels have not been accounted for. User experiences seem dated. Reporting and analytics require experts to deliver. Paucity in mobile solutions hinder productivity.
Regulatory compliance (24.68%). The need to meet industry specific regulatory compliance drive organizations to choose purpose built solutions. Many choose SaaS to mitigate the costs of legislative and regulatory updates.
Geographic requirements (19.48%). Country or region specific requirements may require two-tier strategies based on geography. Some ERP systems lack the language or tax requirements and a separate instance will prove cheaper to run than customizing a monolithic large ERP solution.
Existing systems too rigid (15.58%). Rigidity may lead to the inability to integrate and work with other systems, new channels, and emerging stakeholders. Integration solutions can assist, but long term, next gen IT leaders will begin to surround legacy solutions with newer technologies.

Figure 1. Two Tier ERP Strategies Gain Favor In Next Gen IT Leader Apps Strategies

Figure 2. Industry Requirements And Cost Drive Push To Two-Tier Apps Strategies

The Bottom Line – Users Should Consider Scenarios Based On Business Models And Geographic Needs

Detailed apps strategy conversations highlight 3 scenarios where Two-Tier ERP strategies make sense. A number of vendors have proven to be strong partners in enabling Two-Tier ERP (see Figure 3).

Different business models. Organizations with very different lines of businesses often consider hub and spoke implementations. The drive to standardize on a single ERP system makes little sense when one subsidiary delivers services and the other manufactures goods. Several large multi-national conglomerates leverage more than two-tiers of ERP to handle a warranty business, financial services, and power generation manufacturing.
Country specific deployments. Deploying a full scale ERP solution makes little sense for new subsidiaries when options exist at lower operating costs and higher ROI. One large Japanese manufacturer found cost savings with local based systems in North America and EMEA.
Phased modernization efforts. Organizations looking to upgrade and modernize their systems may keep some legacy systems in place as they upgrade to more modern systems. One large entertainment concern has kept their financials systems and updated their retail systems with a more modern, web services based, SOA architected product.

Figure 3. Vendors To Watch In Two-Tier ERP Apps Strategies

Your POV.

Have you deployed a Two-Tier ERP strategy? How has it gone? What’s worked? What’s not? You can post or send on to rwang0 at gmail dot com or r at softwaresinsider dot org and we’ll keep your anonymity.

Please let us know if you need help with your enterprise apps strategy by:

Developing your enterprise apps strategy?
Addressing disruptive technologies like Social CRM, Cloud Computing, SaaS deployment, and Two-Tier ERP?
Assessing the ROI of a Two-Tier ERP strategy?

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