Posts Tagged ‘RightNow’

News Analysis: Oracle Buys RightNow For $1.43B

The Acquisition Machine Heads To The Public Cloud

Users gathered at the Customer Summit 2011 at the Broadmoor Hotel woke up to the shocking announcement that Oracle (NASDAQ: ORCL) announced a $1.43B acquisition of leading SMB CRM vendor RightNow Technologies (NASDAQ: RNOW) today.  According to Thomas Kurian, “Oracle is moving aggressively to offer customers a full range of Cloud Solutions including sales force automation, human resources, talent management, social networking, databases and Java as part of the Oracle Public Cloud,” said Thomas Kurian, Executive Vice President, Oracle Development. “RightNow’s leading customer service cloud is a very important addition to Oracle’s Public Cloud.”

A quick analysis of the acquisition reveals:

  • Oracle sees RightNow as an anchor in its public cloud strategy. RightNow signals the first of many acquisitions foundational to a market place strategy.  CRM plays a pivotal role.  Bozeman, Montana based RightNow brings over 2000 customers, and 10 billion transactions per year in volume.  In fact, Kurian’s press statement hints at other areas that include anything from infrastructure to apps.

    Point of View (POV):
    Oracle’s success in the public cloud will require more than just a multi-instance virtualized cloud offering.  The lack of true multi-tenancy will prove to be a detriment to both customers and Oracle.  Oracle will need to deliver a multi-tenant version of Fusion Middleware to provide customers with the full range of deployment option choices from on-premise, hosted, multi-instance, and multi-tenant.  However, investors and customers should view the public cloud as more than an offering or technology play. In fact, this is Oracle’s new merger and acquisition vehicle.
  • Oracle pokes at Salesforce.com on the customer service side. While Salesforce.com would most likely not acquire RightNow, Oracle brings on a key customer service competitor to Salesforce.com and aligns it with the Oracle sales and marketing machine. Meanwhile, Oracle gains an emerging web experience and social experience product line to complement a robust contact center and solid customer experience suite.

    Point of View (POV):
    With most of RightNow’s customers coming from the customer support side of the house, Salesforce.com will feel the heat in the market place.  Despite the Assistly acquisition, Salesforce.com still has a lot of work to move the Service Cloud offering to par with competitors.  Quite frankly, this is a direct attack by Larry Ellison to Marc Benioff in this space.
  • Oracle plans a long term customer experience play. Oracle’s previous acquisitions of FatWire, Endecca, ATG, and Sigma Dynamics signal a potential play to get serious about customer experience management.  Oracle will need to re-purpose assets to the core CRM team to share in the innovation.

    Point of View (POV):
    Social business, online experience optimization, and gamification represent huge holes in Oracle’s product portfolio.  RightNow brings tremendous amounts of thought leadership to the table should Oracle retain the product teams.  More importantly, the SMB focus will help Oracle bring in a new customer base.

The Bottom Line For Buyers:  Proceed With Caution

RightNow customers should shore up existing contracts and extend maintenance and subscription pricing as far out as possible.  As with most acquisitions, expect Oracle to raise rates to fund the acquisition.  Customers and prospects should seek additional guarantees in product road map commitments and service level commitments.

The Bottom Line For Vendors: This Acquisition Makes Little Sense At First.

Vendors and competitors will most likely wonder why Oracle started this process with RightNow.  As with the PeopleSoft and Siebel acquisitions in the past, competitors were caught off guard.  Expect companies such as eGain, Moxie, Mzinga, Taleo, SuccessFactors, Zuora, Xactly, and others to be targets on the buy list.  Had Oracle or another vendor rolled-up the SaaS vendors during the 2008 downturn, they would have only expended less than $1B for all the players smaller than Salesforce.com.  Instead, cloud has now emerged as threat to legacy vendors such as Oracle.  After waiting on the side lines for the right moment, Oracle now enters the ring and will do what it does best – acquire and assimilate innovation.  In the long-term, Oracle will directly compete with Dell, Salesforce.com, and VMWare for the SMB market place via cloud.

Your POV.

Does this announcement surprise you?  Are you a RightNow customer?  Will you be ready to make the leap with Oracle?  What has your experience with Oracle been post acquisition?  Add your comments to the blog or reach me via email: R (at) ConstellationRG (dot) com or R (at) SoftwareInsider (dot) com.

How can we assist?

Buyers, do you need help with your apps strategy and vendor management strategy?  Trying to figure out how to infuse innovation into your tech strategy? Ready to put the expertise of over 1000 software contract negotiations to work?  Give us a call!

Please let us know if you need help with your next gen apps strategy efforts. Here’s how we can help:

  • Providing contract negotiations and software licensing support
  • Evaluating SaaS/Cloud options
  • Assessing apps strategies (e.g. single instance, two-tier ERP, upgrade, custom dev, packaged deployments”
  • Designing innovation into end to end processes and systems
  • Comparing SaaS/Cloud integration strategies
  • Assisting with legacy ERP migration
  • Engaging in an SCRM strategy
  • Planning upgrades and migration
  • Performing vendor selection

Related Resources

20111024 IDG News Service – Chris Kanaracus “Oracle buys RighNow for about US $1.5B”

20111024 Wall Street Journal – Matt Jarzemsky “Oracle Buy Cloud-Based Right Now”

20111024 GigaOm – Barb Darrow “Why Oracle paid $1.5B for Right Now”

Related Research

Reprints

Reprints can be purchased through Constellation Research, Inc. To request official reprints in PDF format, please contact sales (at) ConstellationRG (dot) com.

Disclosure

Although we work closely with many mega software vendors, we want you to trust us. For the full disclosure policy, stay tuned for the full client list on the Constellation Research website.

Copyright © 2011 R Wang and Insider Associates, LLC All rights reserved.

Monday’s Musings: A Working Vendor Landscape For Social Business

Confusion Persists In The Social Business Market

As with any new disruptive technology, the social business solution landscape faces a dynamic, confusing, and converging market. As vendors seek to grab mind share and market share, customers and prospects remain confused as to what are the right business problems to address with social business. However, rampant confusion among users hampers efforts to solve business issues. Three key factors accelerate this level of confusion:

  1. Early adopter market. Constantly changing conditions force customers to alter original plans as executive sponsorship fluctuates from intense to pensive and back to intense in short cycles. Projects remain secretive for competitive advantage reasons. Consequently, prospects lack strong case studies to build off of despite peer groups, adoption networks. Prospects seek metrics that matter and relevant use cases.
  2. Consumerization of IT. With increased social media penetration, success in consumer grade products highlight the potential for enterprise adoption. However, most enterprise class products remain one to two generations behind in achieving similar capabilities. As business users gravitate towards simple, scalable, and sexy attributes; IT departments seek to rein in shadow IT efforts with safety, security, and sustainability requirements.
  3. Marketing mayhem. Fast paced markets always generate hype in marketing messages. Hence, legacy collaboration, community platform, CRM, unified communications, integration platform, and office productivity vendors seek to reposition themselves and address the emerging and trendy social business use cases customers seek.

Social Business Vendors Converge Towards Business Value Sweet Spot

The vendor landscape for social business market represents a diverse and broad collection of solutions.  Vendors approach the market from multiple heritage points, technologies, and markets.  Four key criteria cut across two axes (see Figure 1):

  1. External facing vs internal facing.  External facing includes customers, partners, and suppliers.  Internal facing include employees and trusted networks within the corporate firewall.
  2. Platforms and infrastructure vs purpose built solutions.  Platforms and infrastructure referred to core technology solutions.  Purpose built solutions address specific applications.

Figure 1. Social Business Vendors Converge Towards Business Value Sweet Spot (Working Draft)

More…

Executive Profiles: Disruptive Tech Leaders In Social Business And Cloud Computing

Executive Profile Series Delivers The Inside View On Disruptive Technologies

Starting this week, we’ll be kicking off an on-going series of interviews with the people behind the technologies in Cloud Computing and Social Business.  The interviews should provide insightful points of view from a customer, industry, and vendor perspective.  The transcript of the 30 minute Q&A’s will follow a common format:

Cloud Computing

  1. Tell me in 2 minutes or less why Cloud Computing is changing the world for your customers
  2. What makes cloud computing disruptive?
  3. What is the next big thing in Cloud Computing?
  4. What are you doing that’s disruptive for Cloud Computing?
  5. Where do you see technology convergence with Cloud?
  6. If you weren’t focused on Cloud Computing what other disruptive technology would you have pursued?
  7. What’s your favorite science fiction gadget of all time?

Social Business

  1. Tell me in 2 minutes or less why Social Computing is changing the world for your customers
  2. What makes social computing disruptive?
  3. What is the next big thing in Social Business software?
  4. What are you doing that’s disruptive for Social Computing?
  5. Where do you see technology convergence with Social?
  6. If you weren’t focused on Social Computing what other disruptive technology would you have pursued?
  7. What’s your favorite science fiction gadget of all time?

Scheduled Interviews Include A Who’s Who List Of Industry Thought Leaders And Market Makers

Cloud Computing

Social Business More…

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.

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

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

More…

Quarterly Financial Tracker: Q2 CY 2010 – SaaS Vendors Still Show Massive YoY Growth

The majority of 22 publicly traded software vendors demonstrated solid year-over-year (YoY) quarterly growth from Q2 2009 (see Figure 1).   Every SaaS vendor in the Software Insider Index® drove 14% to 26% growth (see Figure 2) despite the pick up in on-premises license sales.  Highlights for the 2010 CY Q2 2010 results:

On-Premises Trends

  • JDA Software (59.19%) and Manhattan Associates (32.93%) continue to ride the CPG, retail, and supply chain investment wave.  Manhattan solidified a significant turnaround in 2 quarters of growth.
  • Large mega vendor bellwethers Oracle (12.95%) and SAP (12.34%) showed significant double digit growth.  SAP’s license gains of 17.31% demonstrate a turnaround in the sales team.  All indications point to BOBJ and the non-EMEA regions driving sales growth.
  • The SMB vendors shared mixed results with Epicor (8.68%), Lawson (5.81%), and CDC Software (3.92%) continuing to grow key license revenues.  While IFS total revenue gains were low in the 1.40%, IFS grew license revenue by a whopping 19.77%.
  • Unfortunately, other SMB vendors Exact (-4.99%) and Deltek (-7.07%) showed negative revenue momentum.  These vendors not only lost ground in license revenue but also saw declines in traditionally stable maintenance revenue.
  • Maintenance fee growth remains healthy for most vendors as new programs to show value to customers gain traction.

SaaS Trends

  • SaaS vendors continue to grow in mid to high double digit growth rates for subscription revenue. SuccessFactors (26.81%), Salesforce.com (24.78%), and Concur (20.49%) moved past 20% year over year quarterly growth.
  • Ariba ($93.2M) nears the $100M per quarter revenue benchmark as Blackboard ($101.5M) continues to grow from this achievement in Q1 2010.
  • RightNow (19.58%), NetSuite (16.83%), Ultimate Software (15.67%), and Taleo (14.63%) all showed solid quarters of growth, though these growth percentages show slight declines.
Figure 1.  Software Insider Index® On Premise Vendors: Q2 CY 2010


(Right click to view full image)
Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.
More…

Quarterly Financial Tracker: Q1 CY 2010 – Software’s Back With Double Digit Gains In License Growth

The majority of 21 publicly traded software vendors managed to show year-over-year (YoY) gains over the dismal beating from calendar year (CY) Q1 2009.  SaaS vendor maintained their double digit gains while on-premise vendors mostly showed positive traction (see Figure 1) and (see Figure 2).  Highlights for the 2010 CY Q1 2010 results:

  • Big gains in YoY license revenue for on-premise vendors such as Manhattan Associates (188.64%) and  JDA (87.43%) reflect the investments being made in retail and supply chain.  Manhattan’s gains are the greatest across the board as they demonstrate a turnaround from last year.
  • Meanwhile, SMB bell-weathers Lawson (28.10%), Deltek (24.75%), and Epicor (23.21%) signal return of key license sales in on-premise.  Concurrently, Oracle (20.45%) and SAP (11.oo%) demonstrate a strong recovery in enterprise license revenue growth in on-premise.
  • Maintenance fee growth for on-premise vendors hold steady with mostly single digit YoY gains except JDA Software (32.71%) and SAP (11.34%).
  • SaaS vendors kept steady growth in the double digits for subscription revenue. UltimateSoftware (27.80%), RightNow (26.80%), Salesforce.com (24.47%), and SuccessFactors (24.29%) led the charge.
  • Overall growth rates on a YoY revenue basis have stabilized for most SaaS vendors at the mid teens to twenties.
  • Of interesting note, professional services fees for on-premise vendors match or double the license revenue. SaaS vendor professional services revenue are well below 1x license revenues, closer to 10% or less.
Figure 1.  Software Insider Index® On Premise Vendors: Q1 CY 2010*


(Right click to view full image)
Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.
More…

Quarterly Financial Tracker: Q4 CY 2009 SaaS Vendors Continue To Trump On Premises Vendors In YoY Growth

The Year Of SaaS Shows… And Yes, In This Economy.

The recession continued to take its toll on software sales with a slight impact to the SaaS vendors.  Growth rates have come down from the high 30′s to the low 20′s.  But with “flat” the new growth metric in this down economy, SaaS vendor results remain impressive.  On the other hand, traditional on-premises vendors see some light at the end of the tunnel.  License revenues have started to stabilize on a year-over-year basis.  Major events in the 2009 Calendar Year (CY) Q4 include:

  • In YoY quarterly revenue growth, Taleo (23.29%) led the pack followed by SalesForce (22.26%), and Blackboard (17.66%) (see Figure 1).
  • Salesforce.com achieves $1.4B in revenues for CY 2009.  As the biggest SaaS vendor in the market, Salesforce.com is bigger than Microsoft Dynamics, Lawson, and Unit 4 (Agresso).  To put this in perspective, Salesforce.com’s revenue alone is at the size of all the other public SaaS vendors listed in the Software Insider Index.
  • Most on-premises vendors stabilized declines in new license revenue (see Figure 2).  Keep in mind that on-premises vendors have remained profitable in this downturn.  Maintenance continues to provide a cash cushion for most on-premises vendors.
  • License revenues versus maintenance revenues for some vendors such as Deltek, Epicor, Exact, JDA Software,  Lawson Software, Manhattan Associates, and Oracle reach or exceed 1:2 ratios.  The result – lagging growth in acquiring new customers on latest releases.
  • IFS leads with a (21.38%) gain on YoY license revenue with Manhattan (3.21%), Epicor (2.32%), and Oracle (1.92%) following with positive license revenue for calendar year Q4

Figure 1.  Most SaaS Vendors Continue Break Neck Growth

screen-shot-2010-03-18-at-94656-pm

Figure 2. Many On Premises Vendors Rely On Maintenance To Bolster Sagging License Revenues

screen-shot-2010-02-23-at-24228-am

The Bottom Line – Clients Now Expect On-Premises Vendors To Have A “SaaS” Option

As we tally up the winners and losers for 2009, SaaS vendors have shown to the industry what’s required for success in today’s tough economic condition.  The secret to their success transcends subscription pricing, cloud services, rapid levels of innovation, and point solutions.  In fact, the success in SaaS comes from the attention to the relationship and the willingness to take a customer friendly stance.  On-premises vendors who have delivered on a partnership with their customers have known this for years.  However, they risk being consumed by the new business models of SaaS and Cloud.   Customers expect their vendors to deliver hybrid options; and private and public clouds.  Expect on-premises vendors without a Cloud deployment option to fade away in this decade as they become the legacy vendors they replaced in the client/server and Internet eras.

Your POV.

As an end user, have you seen the pace of SaaS adoption increase in your organization?  Do you continue SaaS solutions with the same level of comfort as on-premises.  As a software vendor, do you feel you have the right go-to-market cloud strategy for 2010? Please let us know if you need help with your enterprise apps strategy by:

  • Develop your SaaS apps strategy
  • Assist with SaaS contract strategies and the Customer Bill of Rights: SaaS
  • Improving innovation via SaaS and other deployment options

You can post or send on to rwang0 at gmail dot com or r at softwaresinsider dot org and we’ll keep your anonymity.

* Not responsible for any math errors or erroneous revenue information.  Calendar year estimates based on the quarter nearest the calendar year.  Exchange rates as of February 24th, 2010.  Not responsible for currency flux.  Please read the quarterly filings yourself =)

Related resources and links

Take the new and improved survey on 3rd party maintenance

2009 Calendar Year Q3

2009 Calendar Year Q2

2009 Calendar Year Q1

2008 Calendar Year Q4

2008 Calendar Year Q3

2008 Calendar Year Q2

2008 Calendar Year Q1

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

Quarterly Financial Tracker: Q3 CY 2009 SaaS Vendors Face Some Headwinds, On-Premise Still In The Tank

Purchasing in Q3 reflected both economic downturn and summer doldrums.  While on-premise vendors continued massive double digit declines in year-over-year new license revenue, SaaS vendors faced some pressures in keeping up with tremendous growth.  However, long term economic outlook still favor SaaS players and early indications on Q4 budget flush indicate that SaaS and Cloud are top of mind.  Major themes in the 2009 Calendar Year Q3 include:

  • On the SaaS front, Salesforce.com (19.55%) continues to lead the pack followed by Blackboard (18.44%) and Concur at (12.94%) (see Figure 1).  While SaaS vendors still experienced growth, Concur (12.94%), Ultimate Software (9.76%), and Taleo (8.77%), NetSuite (3.22%) experienced drops in rate of growth.  Taleo and NetSuite faced the biggest drops in Q3.
  • Tracked publicly traded SaaS vendors represented $756.2M in Q3 software revenues.
  • On-premise vendors showing gains in EPS despite revenue drops (see Figure 2).
  • Specialty on-premise vendors JDA Software (-2.63%) and IFS (-5.07%) reversed license growth and lost year-over-year quarterly gains.
  • Lawson Software reversed a license free fall showing growth in Q3 (22.77%). Healthcare and HCM continued to bolster its license growth and come back.
  • Maintenance revenues continue to float losses in license revenue for on-premise vendors.  Growth in maintenance continues to slow.

Figure 1. SaaS Vendors Face Q3 Headwinds And Growth Slows Vs Q2

2009 Q3 Calendar Year SaaS Revenues

screen-shot-2010-03-18-at-95239-pm

2009 Q3 Calendar Year SaaS Revenues - Copyright © 2009 R Wang and Insider Associates, LLC. All rights reserved.

2009 Q2 Calendar Year SaaS Revenues

screen-shot-2010-03-18-at-95444-pm

2009 Q2 Calendar Year SaaS Revenues - Copyright © 2009 R Wang and Insider Associates, LLC. All rights reserved.

Figure 2.  On-premise Vendors Face Continued Market Brutality

2009 Q3 Calendar Year On-Premise Revenues - Copyright © 2009 R Wang and Insider Associates, LLC. All rights reserved.

2009 Q3 Calendar Year On-Premise Revenues - Copyright © 2009 R Wang and Insider Associates, LLC. All rights reserved.

The Bottom Line For Users – Expect Continued Discounts in Q4

A poor Q3 will bring good news to buyers in Q4 as vendors will continue to heavily discount licenses and professional services while delivering more value to retain maintenance margins.  Conversations with 41 CIO’s indicate that a Q4 budget flush is in the works.  The conditions favor end users as poor economic conditions, realization by vendors, and need to invest will yield a great buying season.

The Bottom Line For Vendors – Start The Subscription Revenue Model Shift

It’s time to go on a SaaS offensive.  The train has left, but its not too late.  Expect hardware vendors, telecom providers, and other companies looking to gain software multiples to enter the market via SaaS.  2010 will bring significant acquisitions in this space as well as more proliferation of SaaS offerings and PaaS delivery models.  Best of breed solutions delivered via SaaS will cut into on-premise market share.  Cloud computing will not be an end all be all.  Hybrid deployment will continue to be the norm.

Your POV.

Ready for some great renewal conversations in Q4?  Feel free to post your comments here or send me an email at rwang0 at gmail dot com for any assistance in contract negotiations with your vendor or the development of a software licensing and pricing strategy for 2010.

* Not responsible for any math errors or erroneous revenue information.  Calendar year estimates based on the quarter nearest the calendar year.  Exchange rates as of November 189th, 2009.  Not responsible for currency flux.  Please read the quarterly filings yourself =)

Quarterly Financial Tracker: Q2 CY 2009 SaaS Vendors and Purpose Built Solutions Rack Up Big Wins

Most on-premise vendor continue to slip into significant YoY losses in license revenue and overall revenues.  Meanwhile, economic conditions continue to favor SaaS, best-of-breeds, and purpose built solutions. Major themes in the 2009 Calendar Year Q2 include:

  • Economic conditions drive demand for best of breed and point solutions delivered by SaaS deployment.  Consequently, SaaS vendors posted spectacular double digit YoY gains.  Taleo (29.78%) led the pack followed by Blackboard (21.92%), and SalesForce (20.14%).
  • Despite subscription gains for SaaS, professional service revenues dropped as client demand for rapid implementation and discounts in delivery cut deployment costs.  Many vendors reported shorter deployment times.
  • Specialty on-premise vendors JDA Software (8.38%) and IFS (6.00%) delivered significant gains as their purpose built solutions reflect the demand for deeply verticalized software offerings.
  • On-premise vendors continue to rely on maintenance revenues to stabilize or offset huge losses in YoY license revenues.  Customers are nearing a flash point over the high cost for maintenance.  Vendors will need to quickly demonstrate value or take a hit in maintenance renewals.
screen-shot-2010-03-18-at-95444-pm

Software Insider Index® Q2 CY 2009 SaaS Vendors

screen-shot-2009-09-28-at-30312-am

Software Insider Index® Q2 CY 2009 On Premise Vendors

The Bottom Line – Worsening Economic Conditions Favor Purpose Built Solutions

Continued economic pressures force customers to choose best of breed and purpose built solutions.  SaaS vendors appear to be the beneficiary as the overall business model aligns with client pain points.  On-premise vendors will also win as they reduce the cost of entry and provide effective price points for purpose built solution modules in demand by clients.  With very little hope for a recovery in 2009, vendors will have to adjust their go-to-market strategies to deal with waning deal sizes.  It’ll take more than a hat trick in 2009 to stabilize revenues.  With 4 months to go, vendors should rethink their 2010 strategies to address price points, financing options, and module availability.

Your POV.

As an end user, have you found the deal process to have tipped in favor of the buyer?  Do you continue SaaS solutions with the same level of comfort as on-premise.  As a software vendor, do you feel you have the right go-to-market strategy for 2010?  Feel free to post your comments here or send me an email at rwang0 at gmail dot com for any assistance in contract negotiations with your vendor or the development of a software licensing and pricing strategy for 2010.

* Not responsible for any math errors or erroneous revenue information.  Calendar year estimates based on the quarter nearest the calendar year.  Exchange rates as of September 25th, 2009.  Not responsible for currency flux.  Please read the quarterly filings yourself =)

Quarterly Financial Tracker: Q1 CY 2009 Slowdown Impacts All Vendors, SaaS Still Experiencing Strong Double Digit Growth

Most software vendor license revenues took a beating this CY Q1 when compared to 2008.  SaaS vendors managed to post double digit gains while only a handful of on premise vendors eeked out a positive gain.  Major highlights in the 2009 Calendar Year Q1 include

  • Big losses in YoY license revenue for on premise vendors such as Manhattan Associates (-73.12%), QAD (-54.37%), Deltek (33.99%), CDC Software (33.77%), and SAP (32.80%) signal significant long term weakness in attracting new business.
  • Few winners in YoY license revenue for on premise vendors.  IFS (13.41%), Intuit Quick Books (5.23%), and Sungard (2.53%) showed positive traction amidst a morass of bad news.
  • On premise vendors stabilized maintenance revenues from major losses.  Some vendors including Epicor (49.25%), Deltek (26.09%), and IFS (20.25%) managed to show significant gains.
  • SaaS vendors cleaned house despite the challenging market.  Taleo (34.20%), Blackboard (26.25%), Concur (25.61%), Salesforce.com (23.14%), and NetSuite (21.83%), led the growth race in YoY total revenue.
  • Growth rates on a YoY basis have slowed for most SaaS vendors, though when factoring the economic forces, these gains reflect truly substantial success.
Software Insider Index® Q1 CY 2009 On Premise Vendors

Software Insider Index® Q1 CY 2009 On Premise Vendors

2009 Calendar Year Q1 SaaS Software Insider Index®

Software Insider Index® Q1 CY 2009 SaaS Vendors

The bottom line – SaaS goes mainstream in 2009 and on-premise vendors must offer hybrid deployment options

SaaS vendor growth continues to defy the ball and chain forces of the macro economy.  Though overall growth rates are less than the year before, the SaaS model gains favor with all sizes of enterprises and in all industries.   Rapid implementation, subscription pricing model, and constant innovation drive significant interest. This leaves on premise vendors in a precarious situation.  Without support for SaaS or other hybrid deployment options, expect customers to wall off their current vendors and pipe in new innovation around the edges with SaaS.

Your POV.

Do you find your vendor sales person becoming more aggressive with their sales tactics?  Have you held back on new purchases or upgrades?  Is this the year you go full out on SaaS? Feel free to post your comments here or send me an email at rwang0 at gmail dot com .

* Not responsible for any math errors or erroneous revenue information.  Calendar year estimates based on the quarter nearest the calendar year.  Exchange rates as of February 25th, 2009.  Not responsible for currency flux.  Please read the quarterly filings yourself =)

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

Now with most of the craziness of Q4 behind us, its time to unveil the Software Insider Indices:

  1. SII Top 30 Enterprise Business Apps Vendors provides a snapshot of an ongoing vendor ranking by revenue.  Some vendors are private and of course not on this list, unless there’s a reasonable estimate.
  2. SII Top 5 SaaS Business Apps Vendors. provides a snapshot of an ongoing vendor ranking by revenue.  Some vendors are private and of course not on this list, unless there’s a reasonable estimate.

So drum roll please…

2008-sii-top-30-enterprise-business-apps-vendors-rev-23

Software Insider Index: Top 30 Enterprise Business Apps Vendors™

The 2008 SII® Top 30 Enterprise Business Apps Vendors*

  1. SAP $14,689.9M (€11,567.0M)
  2. Oracle (Apps Revenue Only) $8,418.3M (est.)
  3. Computer Asssociates $3,248M
  4. Amdocs $3,162M
  5. Intuit $3,107M
  6. Infor $2,200M (est.)
  7. Sage Group (oct. fiscal year) $1,893.4M (£1,295.0)
  8. Microsoft Dynamics $1,154.5M (est.)
  9. SalesForce.com $1,076.8M
  10. Lawson $843.2M
  11. Agresso $500.4M (€ 393.5M)
  12. Epicor Software $477.8M
  13. Activant $432M (est.)
  14. JDA Software $390.3M
  15. IFS $383M (SKr 2,500M) (1USD = 6.58 SKr, average quarterly exchange rates)
  16. Exact Software $337.4M (€265.4M)
  17. Manhattan Associates $337.2M
  18. Ariba $337.1M
  19. Deltek $289.4M
  20. QAD $279.4M
  21. i2 $256.9M
  22. Glovia (A Fujitsu Company) $246M (est.)
  23. CDC Software $235M (est.)
  24. IBS Software $229.6M (SKr 2035M)
  25. Concur $220.4M
  26. Cincom $178M (est.)
  27. Taleo $167.7M
  28. NetSuite $152.5M
  29. RightNow $102.6M
  30. SoftBrands $99.7M

The 2008 SII® Top 5 SaaS Business Apps Vendors*

  1. SalesForce.com $1,076.8M
  2. Concur $220.4M
  3. Ultimate Software $178.0M (added 2/26/2009 @ 17:17 GMT)
  4. Taleo $167.7M
  5. NetSuite $152.5M
  6. RightNow $102.6M

Your POV.

Am I missing a vendor?  Feel free to post your comments here or send me an email at rwang0 at gmail dot com .

* Not responsible for any math errors or erroneous revenue information.  Calendar year estimates based on the quarter nearest the calendar year.  Exchange rates as of February 25th, 2009 for vendors who have not published quarterly conversions.  Not responsible for currency flux.  Please read the quarterly filings yourself =)

Changes: March 12, 2009 converted IFS from $279.3 to $383M (SKr 2,500M)  using 1USD = 6.58 SKr, average quarterly exchange rates.  Ranking moved from 21 to 15.