IT Investment Research

What’s with these SaaS Enterprise Software Fanboys?

Saugatuck Research is out on October 8, 2009 with one of its periodic hallelujah pieces about a so-called class of enterprise software suppliers it calls Software as a Service (SaaS) software providers. (This link requires you to sign in but I believe there is no charge to see the summary.) To be fair, Saugatuck is not the only firm putting out this poorly structured view of the enterprise software industry. Look at Saugatuck's and similar SaaS-slanted research very skeptically from an information technology (IT) investment and IT market analysis point of view.

According to Saugatuck, the SaaS class is posited as different than “On-Premise software providers,” which it periodically also calls "ISVs." The SaaS class is regularly described as a new phenomenon. In one Saugatuck report, this SaaS class is even said to be “…Starting to Feel the Effects of Tough Economy” (see Saugatuck report RA-602, published on 28 May 2009). But the October 2009 announcement says,

“By YE2010, our SaaS basket will be growing at a 20 percent year-over-year rate (with the slope suggesting a potential path to achieve 30 percent or higher segment performance in 2011).”

There is no better way to understand the Saugatuck research’s flaws than to look at its so-called “baskets” of different classes of enterprise software suppliers

On-Premise ISV Basket: 
• Autodesk (ADSK)
• BMC (BMC)
• Compuware (CPWR)
• Epicor (EPIC)
• Lawson (LWSN)
• Oracle (ORCL)
• SAP (SAP)

SaaS Market Basket:
• Blackboard (BBBB)
• Concur (CNQR)
• DemandTec (DMAN)
• Kenexa (KNXA)
• NetSuite (N)
• RightNow (RNOW)
• Salesforce.com (CRM)
• SuccessFactors (SFSF)
• Taleo (TLEO)
• Ultimate Software (ULTI)

It is the most misleading bit of cherry picking and revisionism I’ve seen among this sort of SaaS fanboy research. It is absurd to include BMC and Compuware in a listing that is otherwise made up of enterprise applications suppliers.  Or if there were any logic in including BMC and Compuware, why not include Red Hat (RHAT) and VMware (VMW) also?  Maybe Saugatuck left them off because it would skew the results of Saugatuck’s share-price comparisons in a direction that invalidates Saugatuck theories?

It is equally absurd for Saugatuck to leave off Microsoft (MSFT) and IBM from a list that is supposed to accurately portray the so-called “on-premise software community.” Saugutuck says that’s because the two market leaders do not segregate “their reported revenues between new license sales, maintenance and services revenues” but of course neither do most of the so-called SaaS providers.  So you cannot compare apples to apples. 

And on which list should I put Google (GOOG)?

Then you have the research's logic problem that all of the so-called on premise software community also offers its software functionality as a service--that is, SaaS--and has done so for years.  In fact, although I don’t buy Oracle's actual claimed dollar amount, I agree directionally with Oracle’s claim that it is already the number-two provider of software delivered via SaaS delivery mechanisms.  Of course that is what SaaS is: an enterprise-software delivery mechanism, not a market. That misunderstanding is the biggest flaw in Saugatuck’s and similar SaaS research perspectives.

Conversely, as explained in my IT Business Edge research, almost all of the so-called SaaS basket entrants also offer or used to offer “on-premise software.” That’s another way to say they are all or mostly also 10 or more years old so any share-price time-series analysis similar to that included in the Saugatuck research should span a few decades, not a few quarters.

There are all kinds of finer points to watch for but bottom line: don’t use this stuff to decide on how you invest in the enterprise software market.

-- Dennis Byron

Judge Microsoft-EU Deal Investment Implications by Its Opponents

In reading about the almost Microsoft (MSFT) agreement with the European Union (EU) announced October 7, I feel Microsoft investors have finally got a good deal from the EU regulators. The mounting opposition to the deal is my proofpoint. Just as the Opera (on Oslo stock exchange) company executives that started the anti-Microsoft (MSFT) browser complaint in EU now feel chained to an EU Competition Commission (EUCC) boat anchor being thrown overboard by Neelie Kroes abandoning ship, Free Software Foundation Europe (FSFE) executives are also worried by what looks like a done-deal agreement between Kroes and Steve Ballmer.

The oddly named European Committee for Interoperable Systems (ECIS) is supposedly against it but has not posted a formal statement. [It's oddly named in that the leading members of the "European Committee" appear to be the North-American-domiciled corporations Adobe (ADBE), Corel, IBM, Oracle (ORCL), Real Networks, Red Hat (RHAT) and Sun (JAVA).]

The FSFE and ECIS, rightly so, seems more concerned about the interoperability part of the agreement than the trivial "browser ballot" bulloney. On September 28, Karsten Gerloff—FSFE President—wrote in a blog:

“We are concerned that the Commission may end up reversing years of successful antitrust work if Neelie Kroes settles for far too little in order to close a deal, any deal. That would mean that Europeans remain stuck with the present Microsoft monopoly in most areas of the desktop. Even worse, that monopoly would have the Commission’s official seal of approval, effectively ruining many years of outstanding work by Ms Kroes and her team.”

“Of the desktop” is the key phrase in Mr. Gerloff’s complaint. Microsoft no longer cares about the desktop.  It’s just a cash cow it will milk as long as it can. Technologically and from a business model perspective, Microsoft has moved on, while the EUCC, ECIS and FSFE continue to look backward.

At least the FSFE--looking backward--has a hint that something’s about to hit it in the back of the head. On October 6 (apparently after the story of the impending Microsoft-EUCC deal began to spread), Gerloff wrote Kroes in an open letter saying:

“Microsoft must be required to provide interoperability information either royalty-free or in return for a one-time payment. Running royalties are incompatible with Free Software. The PFIF agreement, which resulted from the Samba case, provides a tested and working instance of such an agreement.
“Microsoft must provide a legally binding assurance that it will not assert those of its patents which relate to the interoperability information against Free Software. The lack of such assurance would let the company use Fear, Uncertainty and Doubt (FUD) to discourage competitors from making use of the interoperability information, leaving the remedy ineffective.”

On October 8, the FSFE posted an even more strident complaint to the EUCC.  With all guns blazing, it says

"There is no clear commitment from Microsoft to adhere to web standards in the future, nor to end the company's habit of adding proprietary extensions to standards."

Bingo, the FSFE is on to something even though it does not appear to know what it is. Microsoft is totally willing to let the European Free Softies re-invent all the desktop spreadsheet and word processors they want, and let them waste even more cycles making their “free” spreadsheet and word processors work with deskbound Word and Excel if they want.

While the FSFE and the EUCC is worrying about 20th century technologies, Microsoft is moving on to augmented reality that makes browsers prehistoric, clouds that make permissive licenses and desktop applications irrelevant, and new (or repurposed Entertainment and Device Division) hybrid consumer/enterprise products that bundle software down in the silicon, where the FSFE cannot find it to re-invent it.

While the FSFE and EUCC is worrying about standards no one in the industry cares about (including all the Microsoft competitors that pay lip service to the ECIS), Microsoft is not only not promising to adhere to any standards, Microsoft is making all these standards irrelevant.  Steve Ballmer explained why and how this works at his July 2009 Microsoft Financial Analyst presentation (see second bullet).

-- Dennis Byron

Be careful what you wish for, Opera!

The failed Norwegian browser provider, Opera, says it is not sure about the Microsoft proposal for a European-Union (EU)-mandated “browser ballot” to be used with Windows 7 as an alleged means to lessen Microsoft (MSFT) Internet Explorer (IE) market power. According to one of the UK information-technology rags (I now can't find the link) Håkon Wium Lie, Chief Technology Officer at Opera, said:

"Opera Software supports the concept of a ballot screen to give users easy access to better browsers. The important question is how this ballot screen is implemented. We are still studying the announcement from the European Commission and will have further comments at a later stage."

Opera (on Oslo Stock Exchange) of course is the sore browser-market loser that started this whole waste of time and investor value.

I can see why he is withholding comment. The example ballot available on the Microsoft site implies that Opera makes it into an all-important top 5 listing of browsers by “share” (term in Microsoft document) or by popularity (term in EU terminology). But neither “share” nor popularity is defined in the accompanying legal blather that I can see. Nor is the time period being measured. Opera’s “share” at given moments in time by various counts hovers around 1%, a third the size of the fourth place browser (which is of course years behind IE. But Opera could actually be surpassed by Netscape or Mosaic for all I know if some more meaningful cumulative criteria were used. Cumulative usage would seem to be the best metric. For example if I started with Netscape years ago, I still want to use Netscape.

It would be poetic justice if after this collosal waste of effort the product didn't even make it on to the ballot?

-- Dennis Byron

Enterprise Software Lock-in: Red Hat to Use Bungee Cord, not Handcuffs

At its financial analysts briefing on October 6, Red Hat (RHAT) reconfirmed that it still plans to

• gain half of server operating software and middleware market share during the 2010-2019 decade
• stay focused on the lower layers of the stack, as opposed to developing or acquiring applications and database products

CEO James Whitehurst explained the uberthinking and then to explain how Red Hat would reach those goals, Product and Technology VP Paul Cormier took attendees through a 30-year history of and 10-year look-ahead into how information technology (IT) systems/software suppliers try to lock-in IT users.  For example, he explained:

• the total systems-supplier lock in of the 1980s, broken by Intel (INTL);
• the Microsoft (MSFT)/Intel Windows lock-in of the 90s, broken by Red Hat (according to Red Hat of course);
• the IBM/Oracle (ORCL) SOA lock-in of the current decade, broken by JBoss.

I would contend that an SOA lock-in never really occurred (or has not yet occurred and may never occur).  But I like the symmetry. Coming next, according to Cormier is the emerging virtualization lock in led by VMware (VMW). See What Virtualization Means for Enterprise Software Tomorrow.

Cormier made an interesting observation after explaining how Red Hat Enterprise Linux (RHEL) saved the world from Wintel and JBoss saved the world from IBM WebSphere and Oracle/BEA WebLogic.  His question: why were users so willing to turn around via virtualization and go back to the total single-supplier stack lock-in of the 80s?

• His answer: It’s easier for independent software vendors (ISVs) to deal with an integrated stack.  That has some merit but shows his Digital Equipment Corp. heritage.
• My answer: Everyone, including IT management and staff as well as ISVs, want an integrated stack.  Except they don’t think of it that way; that is, they don’t think of it technologically.  What they want is ease of use and one throat to choke.

Of course, despite all its good-marketing hoopla about breaking up lock-ins, Red Hat wants to tie up IT users also.  In fact it will have to meet those 50% market share goals. It looks like Red Hat will offer a bungee cord rather than handcuffs but it’s still lock-in. 

And that’s OK, because as I say, that’s what the market wants. It's human nature not technology.  I bought a Chevy recently.  I did not want to buy an engine from Taizhou Jili and a transmission from Dyna and a power train from Getrag and try to put them together myself using my old beat-up Chevy as the body (and it wasn't even a clunker).

Whether you like his answer or mine, the symetrical timeline is already marching on. Next Cormier sees other suppliers, especially Microsoft (who he notes he also actively partners with) trying to lock in users in the cloud.  The technology to accomplish this is found in messaging and grid computer science and Red Hat has been actively working at that layer for two or more years already.

(As a sidelight, Red Hat didn’t take on Microsoft the way Microsoft took on its competitors--including Linux suppliers--at its Financial Analyst day in July 2009. As I noted in the Red Hat middleware post linked to above, I miss Marc Fleury.  Has Red Hat decided to leave it to its lawyers to play hardball?)

-- Dennis Byron

Red Hat Still Wants to Own Half its Markets

Red Hat (RHAT) executives briefed financial analysts October 6.  The key question I brought to the session is

“Where does Red Hat stand against its previously announced plans to gain half of market share in server operating software (see Feb 14, 2008 entry) and middleware during the 2010-2019 decade?”

Red Hat CEO James Whitehurst addressed the goals out of the chute by explaining differences between revenue and sites when it comes to operating software, and the difference between “paid share of application server workloads” vs. the many unpaid JBoss instances in the market.

Red Hat estimates JBoss already has 30% share of application server workloads vs. a like amount for Oracle (ORCL)/BEA WebLogic and IBM (IBM) WebSphere. Whether or not this is somewhere between too optimistic and outright delusional, the problem is that most of the JBoss instances result from product-only downloads licensed via open source terms and conditions (Ts&Cs) with no associated subscription maintenance. Which means no accompanying Red Hat revenue. Red Hat recently trifurcated the JBoss/Red-Hat middleware lineup so as to potentially increase the paid instances.

I was surprised to hear--and assuming that I heard correctly--that Red Hat also believes there is as much unpaid Red Hat Enterprise Linux (RHEL) in the market as paid RHEL. That’s not the same as unpaid JBoss, because—while users can get JBoss under open source Ts&Cs—users should deal with the open source Fedora project, not RHEL, if they do not want Linux subscription maintenance. Red Hat is actively trying to “recover” revenue where RHEL is present at no fee. Whitehurst said Red Hat recaptured $2-$3 million of such RHEL potential in its last fiscal year.

Whitehurst provided this data as part explaining three key Red Hat board-level initiatives in meeting its goals:

• build subscription value

• increase routes to market, and

• encourage mainstream adoption

There are two or more key Red Hat people associated with each of these initiatives, each of these with specific subtasks (e.g., using both the indirect and direct channels to reach market, playing nice with Microsoft to encourage mainstream adoption, etc.).  It sounds like there is a very good program for slapping tasks on people's foreheads and taking names when objectives are not met.

Whitehurst also noted that in addition to market and shareholder goals, Red Hat--from a brand point of view--wants to be known as the“’trusted’ open source leader,” trusted being the key word according to Whitehurst.  I feel that users don't care what Ts&Cs Red Hat's products are distributed with and that users don't go into the market specifically looking for open source software. Users care that these products are good (and Red Hat's are). This branding approach is especially an issue if the goal is half the operating software and middleware markets.

I was good to hear Red Hat re-confirm that it is going to stay focused on operating software and middleware (as expanded with virtualization and cloud-computing-related technologies). Whitehurst says he is not looking for apps or database acquisitions. 

-- Dennis Byron

Spend More on IT To Save a Trillion Dollars on Open Source

In a recent headline, ComputerworldUK promises to answer the question How to Save $1 Trillion a Year with Open Source. The headline is based on a blog post using multiple dated studies about worldwide information technology (IT) spending, tortured logic, and footnotes about the logic that lead nowhere. To be fair to the author (Glyn Moody), I don’t know if the headline is his or a ComputerWorld UK editor’s.

So as a public service to the IT community I have read the actual source material cited in the blog post and figured out that the world can save a trillion dollars with open source if you in IT simply increase your IT spending 400% to 500% and migrate all your mainframe and Unix boxes to Wintel.

It’s that simple.  Why has no one thought of it before?

Of course, open source terms and conditions (Ts&Cs) do not relate directly to most IT spending (personnel costs, overhead, systems, storage, training, IT or professional services spending, etc.) that make up the bulk of the costs noted in the 18-month-old Standish’s report cited in the ComputerWorld UK blog post. In my experience there might be the following indirect relationship:

• open source Ts&Cs might reduce your software license spending by a small amount (the Standish research confirms that)

• but will probably increase your personnel or IT services by at least the same amount, creating a wash

I admit that I have not confirmed that opinion in any statistically significant research.

All I needed to answer the headline’s question was to consult the recent release of worldwide gross domestic product (GDP) numbers by the World Bank and the previously mentioned Standish Report, called "Trends in Open Source." A subscription is required to read Standish’s research but the report was widely distributed to press and analysts at the time of publication. The arithmetic is simple especially compared to the arithmetic in ComputerWorld UK:

• Standish says users can derive 6% savings from using open source, both in initial and ongoing costs (I am just reading the report, not verifying its conclusion)
• The World Bank says the total of all countries’ GDPs is $60 trillion (other sources such as the International Monetary Fund and the U.S. Central Intelligence Agency publish similar numbers)
• If IT users spend 27% of revenue on IT (using aggregate worldwide GDP as a proxy for aggregate worldwide corporate revenue), use open source in the way Standish recommends (“running open source using commodity hardware”), the 6% savings will be a trillion dollars

Forget the fact that most IT users spend 5% or less of revenue on IT according to Gartner, not 27%. This is an open-source-related blog post. I can make any outrageously misleading claims I choose.

-- Dennis Byron

Microsoft Hides Its Poor Services Performance Behind the Client Cash Cow

As described in my recent post, Microsoft (MSFT) Puts “IT Investment Research” Out of Business, Microsoft’s Windows Live and related services businesses are a train wreck. Back at the end of its 2009 fiscal year in July, Microsoft announced some reorganization changes for this group. On Tuesday September 22, Microsoft provided more details. The answers is not substantive change but simply to bury the Windows Live losing operation in the cash-cow Client Division where its fiscal-year-2009 $520 million in revenue and $560 million in losses become invisible in the cash-cow’s 15 billion spots. Microsoft will also bury Mobile Services over in the Entertainment and Device division ($50 million in losses on $70 million in revenue), with its $7 billion worth of Xboxes and mice. Office Live and the CRM Software as a Service (SaaS) business have been in the Office-brand-dominated Microsoft Business Division (MBD) for some time. 

Microsoft will probably give investors some color on how the services businesses are doing for a few quarters but clearly the intention is to bury these dogs the way Microsoft buried its five flailing Dynamics ERP/CRM businesses into MBD--where 90% of the revenue is Office--back in 2006, once it realized it could not integrate the applications products as originally planned when it acquired Great Plains and Navision.

Spreading the losses around means Microsoft executives can continue the "software plus services" mantra out of sight of investors’ prying eyes.  According to Microsoft, you should invest in Microsoft because it is going to make money in the future distributing software-enabled services as opposed to the way it has made money for the last 30 years, channeling its software to market via original equipment manufacturers (OEMs) and highly skilled solutions providers. Based on results to date, this is looking less and less likely.

As I explained on September 16, my concern is related to personal experience.  But that does not make it less real. I was actually willing to pay Microsoft to get my problem fixed but that was not possible dealing directly with Microsoft. Since my last post, it turns out that Microsoft was unable to back up my web site even after escalation of the issue to the “Product Group,” whatever that means. However, as I also said on September 16, some of

“the other good things about using Microsoft products and services in my experience is that there is always a work around that costs me no money and that the whole combination of blogging engine, email support, website design tools, domain name charge, word processor, spreadsheet processor, presentation application, contact database and search engine costs less than $100 a year.   But that’s another good reason not to invest in Microsoft. How can they make any money when the stuff is so cheap, rarely needs support, the support is so poor, and you can’t buy it even if you want to.”

-- Dennis Byron

Microsoft Puts “IT Investment Research” Out of Business

One of the good things about using Microsoft (MSFT) products in my experience is that they do not need much in terms of support services.  One of the bad things about Microsoft as an investment is the fact that it has such a bad support-services group.

As bad as the situation is if you are thinking about becoming a Microsoft services user (Don’t!  Especially don’t become a beta user of a Microsoft service), it is even worse if you are thinking about buying Microsoft shares. That’s because Microsoft’s only profitable future is in moving from developing technology-based products to delivering technology-enabled services. That’s the case for two reasons: Microsoft is not a very good technology company and technology is now a commodity.

That fact is especially an issue from an investment perspective given the now four-year-old Microsoft executive management mantra of “software plus services.” According to Microsoft, you should invest in Microsoft because it is going to make money in the future distributing software-enabled services as opposed to the way it has made money for the last 30 years, channeling its software to market via original equipment manufacturers (OEMs) and highly skilled solutions providers. During its first 30 years, it has been those OEMs and solutions providers that delivered Microsoft support services, not anyone in Redmond.

I think the above is well reasoned impartial investment advice and I have given it in multiple ways over the last four years. But I admit my analysis this week is colored by the fact that Microsoft’s support-services operation has put me out of business for the last two weeks. I have been dealing without success with Rajendra, Sangya, Aishwarya.S, Gaurav and others to fix what I would have thought was a pretty simple problem.  As of September 1, I cannot synchronize my PC-based Outlook application folder structure with my web-based Microsoft Office Live Small Business email account folder structure, something I have been able to do for over three years. (Office Live is similar to Google (GOOG) Apps, particularly gmail. Office Live Small Business adds some ERP and CRM capabilities for small businesses like mine.) 

I have lost the synchronization features because on September 1 Microsoft stopped using an old email protocol called DAV for its Office Live Small Business email accounts (which are basically Hotmail accounts). The solution is simple if you are a vanilla Hotmail user apparently. Download and install a Microsoft application called Outlook Connector.  But Outlook Connector on my PC says it can’t synchronize the two email-address folder structures. I suspect that’s because I am not a vanilla Hotmail user but a Microsoft Office Live Small Business email user. 

But that’s just my guess. The error message says it’s because I am not a Windows Live Hotmail user.  Actually it says

“User is not in Kahuna”

Apparently Rajendra, Sangya, Aishwarya.S, Gaurav and the others are neither surfers nor into Hawaiian culture and have no idea what that means.

And in fact Outlook Connector is wrong. I have been a proud Windows Live Hotmail user since the service was introduced. I have the congratulatory Microsoft email to prove it.

Naturally this has turned out to be only the beginning of my problems (otherwise why would I be ranting). The Windows Live Hotmail guys say this is a Windows Live ID problem.  The Live ID guys say “No it isn’t.” Then they say it is an Office Live Small Business problem (my bet too). But the issue with Office Live Small Business (which was called Office Live Basic when I signed up as a beta user in 2006—my first mistake) is that I signed up in 2006 with a personal email account that I no longer use.  Microsoft had no way at the time—and perhaps still—to change a Live Small Business user name (which is what your email address is on many such sites—see comment above about Microsoft not being a very good technology company) when I later changed my personal email address. 

So in order to remind my Office Live Small Business account that I am a proud Windows Live Hotmail user, I have to sign in as a administrator with an old defunct email address.  Actually Office Live Small Business has allowed me to do this for three years but stopped allowing it sometime this year (perhaps related to the DAV thing, perhaps coincidentially). Whichever, Rajendra, Sangya, Aishwarya.S, Gaurav and the others are not saying.  All they can tell me is that

“your Microsoft Office Live account has broken its link with the account.” 

You might think the solution would be to re-link it, or to link it to my current user name (the fact that they don’t do that is why I guess that Microsoft still has no way to change an administrator name on an Office Live Small Business account after it is set up—see comment above about Microsoft not being a very good technology company).

But no, the solution is—with no explanation—is

“you need to cancel your Microsoft Office Live account.” 

From the old “we need to kill it to save it” school of support services  I guess. After a few more emails and requests to give them a good review when I get the feedback survey, Rajendra, Sangya, Aishwarya.S, Gaurav and the others explain that I’m just screwed and I need to start over.  Now that’s classic software maintenance I can understand. 

In fact, they even admonish me to back up my web site—good advice—so that when after about 30 more steps I am again an Office Live Small Business account holder I can upload my web site without losing any thing currently on my web site.  However the links to the Office Live Small Business application that backs up web sites does not work for me. I’m guessing—vicious circle guess--that it’s because I am not signed in as the administrator.

But Microsoft support services can’t hazard a guess. They consider this a new problem.  Rajendra, Sangya, Aishwarya.S, Gaurav and the others have left the building.

So taking my situation out of the picture, Microsoft will never make "software plus services" work because

• Microsoft’s support web sites are full of jargon, inconsistent terminology and intra-Microsoft-group fingerpointing (“That’s not an Office Live problem; that’s a Windows Live problem.”)
• Every support-services email from Microsoft tells me to make sure to reply by using the same “Service Request” number so that Microsoft can be consistent in answering me but every subsequent reply from Microsoft comes from a different person proudly telling me that they have created a new Service Request number to track my concern.
• Every support-services email is full of ridiculous apologies--and a request to give the author a good review when the feedback survey comes--but no useful information, or information completely contradictory to the previous email.
• Every email asks me to repeat all the information about my problem that I put in the previous email before the new support services person can help me.

I’d actually be willing to pay Microsoft to get my problem fixed but that does not seem to be possible dealing directly with Microsoft. (“We don’t have Microsoft personnel working on this support site; it’s a community site with just people with no lives that will take a guess at what you want but they do not speak your native language.”)

However some of the other good things about using Microsoft products and services in my experience is that there is always a work around that costs me no money and that the whole combination of blogging engine, email support, website design tools, domain name charge, word processor, spreadsheet processor, presentation application, contact database and search engine costs less than $100 a year.  

But that’s another good reason not to invest in Microsoft. How can they make any money when the stuff is so cheap, rarely needs support, the support is so poor, and you can’t buy it even if you want to.

-- Dennis Byron

Has SaaS Enterprise Software Peaked in Demand?

A Forbes article posted the morning of August 4 begins

“Few doubt that, if all business software currently in use were available through the Software-as-a-Service model 10 years ago, the percentage of SaaS implementations would be much higher today.”

I guess I'm one of the few. The sentence read quickly might mislead you in your enterprise software and information technology (IT) investment decisions. I let the author, Dan Woods, off the hook because he explains the meaning of “all business software” further down when he describes the industry-centricity of the leading ERP packages.  I just hope you haven’t rushed off to bet on a so-called SaaS vendor before you have read the whole Forbes article.

In fact, all business software available through the SaaS model today WAS available 10 years ago; FROM the same so-called SaaS suppliers mentioned in the Forbes article in a tone that implies that the idea is something new in the last few years. And software was also available as a service 10 years ago from the enterprise software market leaders—SAP, Microsoft (MSFT) and Oracle (ORCL)—mentioned in the article.

I don’t even believe the term SaaS vendor is a good one to use in thinking about IT investment but for sake of my blog post, take the list of top SaaS vendors according to conventional wisdom: Salesforce.com (CRM), NetSuite (N), Concur (CNQR), Taleo (TLEO) and RightNow (RNOW). Salesforce.com is exactly 10 years old and the rest are older.

Although Salesforce.com was founded in 1999 there were plenty of other CRM functionality services available before that. For example, just using this list, RightNow was formed in 1995 and its service rolled out in 1997. NetSuite was founded in 1997 and played with various enterprise-software distribution options in addition to SaaS over the years including selling its software indirectly though Oracle, whose founder and major shareholder is also NetSuite’s supermajority shareholder. Concur is 16 years old and has offered its functionality as a service almost from the beginning, most notably via Automated Data Processing (ADP). Taleo was formed 10 years ago but on the back of 1996 Canadian start-up, Viasite.

Scratch most any other so-called SaaS supplier and you’ll most likely find a similar story.That’s because the idea basically dates back to the mists of IT market history with the terms timesharing (the business model, not the computer design concept), service bureau, application service provider, and so forth used at various times to describe the same basic idea. 

That’s why I’d turn the first sentence in the Forbes article into a question and ask

“Since all business software has been available through the Software-as-a-Service model for many years, why isn’t the percentage of SaaS implementations much higher today?”

The fact is that the percentage of what you might call SaaS adoption is already very high in certain industries, community banking and healthcare delivery in particular.   The reasons presented in the article as explanations for slow SaaS adoption are pretty accurate (except for the thing about how it is sold) but they are decades-old problems, not current events. The IT investment research question is whether SaaS—or whatever you called it over the years—has reached its peak or whether it has room to grow in other industries.

I also wouldn’t rush out and buy shares in the listed enterprise-software market leaders based on the prescription Forbes offers on how they can “catch up with NetSuite and Salesforce.com."  SAP and Microsoft have had programs to do all the things recommended also for as long as a decade. See the late 1990s SAP joint venture with Intel (INTL) called Pandesic and the reason Microsoft gave investors when it bought Great Plains in December 2000.

As for Oracle, I think its strategy is to wait and see how NetSuite does and then just fold it – or refold it – back into the corporate structure. But that's even a side bet. Already Oracle is claiming to be the second largest SaaS vendor after Salesforce.com, based on its $700-million OnDemand revenue stream. (That claim is directionally correct but the numbers are not an apples-to-apples comparison. But that’s another blog post if anyone cares.)

-- Dennis Byron

A New Competitor for Google: Shareowners.org

A bunch of inquiring Congress people got together with a bunch of variously biased academics, bureaucrats and lobbyists to discuss your rights as shareholders on July 27. Shareholders had no representatives present.

The group met under the banner of a Senate Banking subcommittee on corporate governance. Google (GOOG) was held up by one side as a great example of the benefits of ‘limiting’ shareholder rights (by dual shareholder classes in Google’s case). A new front-group social-computing web site was introduced by the government employee union, AFSCME, a sort of Facebook for janitors and RMV clerks that would like to discuss corporate governance in their spare time.  In the way Congress hearings always set up fair fights in these events, the hearing pitted a Harvard Law professor against a George Mason assistant law professor; the government-employee union guy against the lobbyist for the Business Roundtable, and an SEC political appointee against a lobbyist for pension funds.

The specific was your right to vote for public-company directors but this unreal séance, which was apparently arranged by the Senator from Goldman Sachs, Charles Shumer, rather than committee chairperson Reed of RI. It branched into a wider agenda including staggered terms for directors, “Say on Pay,” and the causes of the 2008 stock market contraction (also called incessantly by Democrat propagandists “the worst financial crisis since the Great Depression”).

A subtext was whether states—primarily Delaware—should control such processes or whether the Feds should take over even more of your lives. As is the current trend in the new Washington, the way things are done in Europe was held up as an ideal.

I found it ironic that everyone objected to directors being elected by a plurality of rather than majority of shareholders in proxy votes. No one had the temerity to note that that is exactly how Congress people (and most U.S. politicians) are elected.

Most important of course there was no mention of the fact that shareholders vote every day, when they buy and sell a company’s shares.  Not satisfied with screwing up the auto industry and the healthcare delivery process, the left-wing is moving on to really affecting you where it hurts, in the pocketbook.

Shareholders, meet your future: Obamadaq.

-- Dennis Byron