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VCSY - A Laughing Place #2
Wednesday, 11 April 2007
Speaking of CRM and SaaS
Topic: SOA

Appropo toward the subjects of CRM and SaaS

Revenge of the Software Customer

By John Finneran, CFA

January 5, 2007

According to technology analysts AMR Research, more than 80% of customer relationship management (CRM) software deployments either don't add value, encounter user resistance, or fail outright. Such disappointment has made CRM customers vengeful and ready to support the growth of the software-as-a-service (SaaS) market, which includes customer-relationship specialists such as (NYSE: CRM) and RightNow Technologies (Nasdaq: RNOW).

With SaaS, software is transforming from a product to an on-demand service, whereby software is delivered over the Internet in return for a fixed fee. Unlike the traditional software license model, there are either no up-front fees or very low ones.

Soothed by the business case
The business case for SaaS customers is soothing -- it's especially compelling for small and mid-sized businesses, which lack the infrastructure and large user populations of their bigger brethren. But the case is equally convincing for all company sizes.

  • It saves a lot of money. A Yankee Group study found the total cost of operating an on-demand software package is less than half that for an equivalent system bought the traditional way.

  • It's quick. With SaaS, software can be deployed in days and weeks, rather than six to 18 months with traditional license-and-install software.

  • It allows IT departments to offload the delivery and maintenance of software applications. The SaaS firm, not the customer, invests in the technology, hardware, and ongoing support services.

  • It lowers risk. Small and mid-size companies live in fear of the failure rates of large-scale enterprise resource planning (ERP) and CRM implementations.

  • It's sound economics. In the traditional model, the supply and demand for features usually don't match. Companies buy software loaded with bells and whistles they don't need. In a 2005 IDC survey of 250 IT execs, companies said they use just 16% of the software they buy.

  • It produces healthier relationships. The SaaS provider earns its return over the term of the relationship, rather than front-loading with a license sale.

So SaaS is great for customers. What does it mean for investors in the business software, services, and hardware sectors?

The SaaS model and investment opportunity  SaaS changes the way a software company designs its products and how it delivers them, but most of all, it changes its economics. A quick tour of a typical SaaS income statement is instructive. At the top, revenue is initially smaller, but it's also much more stable and predictable, because customers make regular subscription payments instead of large up-front license fees and professional service fees. And these payments are annuity-like, since they are locked into two- to four-year contracts. The cost of revenues should also improve, since there is less investment in professional services because of rapid deployment and Web-based delivery. A fully developed SaaS company should produce gross margins comparable to those of the traditional software licensing model, but without the margin drag of professional services. Operating expenses also drop, because an  SaaS company can support many customers on a single, shared application and infrastructure.

The investor opportunity in SaaS remains attractive and will continue to develop in 2007. There are at least three key themes to think about. First, has matured into the dominant pure-play SaaS provider, and its AppExchange platform moves the company well beyond CRM applications. In addition, the company is successfully reaching the large-company market, with clients including Cisco, ADP, and Merrill Lynch.

Second, as SaaS spreads to non-CRM functions, it creates new investment opportunities. Webex Communications (Nasdaq: WEBX) helps road warriors stay at home by offering Web conferencing and collaboration tools. Valuation of Webex remains calm compared to Salesforce -- it trades at a price-to-sales ratio of 4.5 and an enterprise value-to-EBITDA ratio of 12, as opposed to Salesforce's respective ratios of 10 and 94. According to SaaS expert Michael Mankowski at Tier I Research, the human capital management (HCM) application should be hot in 2007, and publicly quoted companies in this space include Kronos, Kenexa, and Taleo.

The final theme to consider is that of acquisitions and consolidation. In 2006, Intuit (Nasdaq: INTU) acquiredDigital Insight (Nasdaq: DGIN), and such transactions will likely continue.

SaaS affects hardware and IT services, too
SaaS is expected to grow to capture more than 25% of the $200 billion business software market by 2011, according to technology analysts Gartner. SaaS also accelerates some visible industry trends.

The first trend is that large enterprise software companies are treated as value, not growth, investments. After a rugged, high-growth youth, large software companies are mellowing into value stocks. They earn stable recurring maintenance revenues (40% of total revenue is typical) from large installed customer bases and have growing piles of cash. Understandably, to protect this business, they are taking a measured approach to expanding their SaaS offerings. Also, software companies tend to be lightly leveraged, which, coupled with the steady maintenance revenues, makes them targets for the merchants of debt. Witness the purchase of SunGard Data Systems by a consortium of private equity firms for $11.3 billion.

Second, SaaS may contribute to harder times for hardware sellers who don't shift themselves to an on-demand model. Companies do not need a lot of gear with SaaS: A Web browser and a broadband connection is the entire IT infrastructure needed. On the other hand, of course, SaaS companies do need others to manage their infrastructure -- data centers, servers, storage, and middleware -- and they need service delivery platforms.

Third, the traditional model of selling enterprise software -- IT-service firms that serve as a sales channel, in return for a consulting engagement to implement the software -- may suffer. Companies such as IBM (NYSE: IBM) and Accenture (NYSE: ACN) are responding by stressing industry expertise and cutting integrator partnerships with the larger SaaS players, such as

SaaS expands across functions and businesses
The base case for investing in SaaS companies is the ability to access a new growth opportunity -- the 50 million small- and mid-sized companies in the world that cannot afford or fear the risk of enterprise-class software. As SaaS matures, the opportunity to extend to large companies and across functions beyond customer relationship management creates the most important software growth opportunity for 2007.

Related Foolishness:

This article was originally published on June 6, 2006. It has been updated.

Intuit and Accenture are Inside Value recommendations. Take a free test drive of Inside Value to see the full market-beating portfolio.

Fool contributor John Finneran writes and advises on increasing the financial value of technology. He is currently ranked 26 out of 19,225 participants in Motley Fool CAPS and does not own a position in any of the companies mentioned. The Fool has a disclosure policy.

Posted by Portuno Diamo at 6:50 PM EDT
Updated: Wednesday, 11 April 2007 7:05 PM EDT
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Once upon a time you really could find gold on the ground...
Mood:  caffeinated
Topic: SOA

This is worth the read for nuggets to make a profit by such as this:

 " From a transaction point of view, the most important considerations for a database are performance and reliability. When looking at database platforms, and making choices around selecting a database, it’s very important to look at the functional requirements within a database that the customer will need, and match that to what the database delivers right from the start, without requiring additional customisation by a professional services team. If the choice of database also enforces a concomitant requirement for specialised skills in consulting around the technology, the customer is then forced into a situation where the amount of engineering required for the application will only increase."

© Copyright 2001: Indian Express Newspapers (Mumbai) Limited (Mumbai, India). All rights reserved throughout the world. This entire site is compiled in Mumbai by the Business Publications Division (BPD) of the Indian Express Newspapers (Mumbai) Limited. Site managed by BPD.

Posted by Portuno Diamo at 2:01 PM EDT
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Wednesday, 4 October 2006
Previously on ProgrammersHeaven
Topic: SOA

Re: who is richwade?
By: Portuno_Diamo on October 04, 2006 at 8:34:51 PM
Read 1 times (Updated daily). 
Reply    Edit    Delete message   Bookmark Thread    

: : Do you know who the Richwade poster is?
: : Anyway in case you missed it(which I doubt),but here's a couple of cut and pastes...
: :
: : VCSY Message list | Reply to msg. | Post new msg. « Older | Newer »
: : By: danfl_11
: : 19 Sep 2006, 10:58 PM EDT
: : Msg. 169308 of 170156
: : Jump to msg. #
: : rich, when is the next pr coming?
: :
: : « VCSY Message list | Reply to msg. | Post new msg. « Older | Newer »
: : By: richwade
: : 19 Sep 2006, 11:31 PM EDT
: : Msg. 169312 of 170156
: : (This msg. is a reply to 169308 by danfl_11.)
: : Jump to msg. #
: : octapuss 9th.
: :
: : then today...
: : By: danfl_11
: : 03 Oct 2006, 10:29 PM EDT
: : Msg. 170109 of 170156
: : Jump to msg. #
: : hmmmmmmmmm...October 9th??
: :
: :
: : Enabling XML and SOA Applications with DB2 Viper
: : This Webcast teaches you about XML app development for the upcoming DB2 Viper. You will also learn about how to work with XML data in DB2 Viper through XQuery and SQL/XML using various development environments (Eclipse, .Net, etc.) and programming languages (Java, C/C++/C#, PHP, etc.).
: :
: : « VCSY Message list | Reply to msg. | Post new msg. « Older | Newer »
: : By: richwade
: : 04 Oct 2006, 01:08 AM EDT
: : Msg. 170116 of 170156
: : (This msg. is a reply to 170109 by danfl_11.)
: : Jump to msg. #
: : november 6th will be the big day.
: :
: : ******So if we get an October 9th Press Release,who is this guy and what do we expect on November 6th?
: : _____________________________
: : Is that the date IBM official release
: : of the viper????
: : Almost got tos'ed by I think TePe
: : Got sick of his wineing SxxT and
: : came back at him sorta strong. RB
: : warned me to be careful on posts.
: :
: :
: :
This stuff from the above link. Worth the watch/read.

Some items from
September SWTV Video Transcript

...update on our SOA (Service Oriented Architecture) announcements that we made about four months ago. If you remember at that time, everything started with innovation, as it does today, with 87% of CEOs saying that change is needed in order to innovate and make their companies more competitive in the marketplace.

...Service Oriented Architecture is the way to enable change in your organization.

How do you make it easy to get started for enabling your cutomer to innnovate, or to change.(?)

How do you make it easy to get started for enabling your customer to innovate, or to change.(? the transcript doesn't use question marks and it drives me nits.) April... (IBM) made a couple of announcements aroudn business-centric SOA.

(Analysts rating of IBM:)
IBM in the leadership area of Forrester's latest ESB (Enterprise Service Bus ) wave
IBM rated as visionary for BPMS (Business Process Management) Magic Quadrant by Gartner

[ESB Whitepaper:]
[ESB defined: {read it and weep, heh heh heh}] do you make sure that you've got the right processes and you can simulate and monitor what's going to happen from those.(?) And around information, about how do we manage all that information that exists out there today.(?) ("all that information that exists out there today" meaning please include the unstructured data that is the other 80% of the 100% represented by the tip of the ideberg in the 20% that fits in a box.)

Enterprise Service Bus (ESB)
From Wikipedia, the free encyclopedia
(Redirected from Enterprise Service Bus)
Jump to: navigation, search
In computing, an enterprise service bus (ESB) refers to a software architecture construct, implemented by technologies found in a category of middleware infrastructure products usually based on standards, that provides foundational services for more complex architectures via an event-driven and standards-based messaging engine (the bus).

(the wheels on the bus go round and round.)

Salient characteristics
Although the exact definition of an ESB varies, most agree that the following characteristics are common:
-It is not an implementation of service-oriented architecture.
-It is usually operating-system and programming-language agnostic; for example, it should enable interoperability between Java and .NET applications.
-It uses XML (eXtensible Markup Language) as the standard communication language.
-It supports web-services standards.
-It supports messaging (synchronous, asynchronous, point-to-point, publish-subscribe).
-It includes standards-based adapters (such as J2C/JCA) for supporting integration with legacy systems.
-It includes support for service orchestration and choreography.
-It includes intelligent content-based routing services (itinerary routing).
-It includes a standardized security model to authorize, authenticate and audit use of the ESB.
-To facilitate the transformation of data formats and values, it includes transformation services (often via XSLT) between the format of the sending application and the receiving application.
-It includes validation against schemas for sending and receiving messages.
-It can uniformly apply business rules, enriching messages from other sources, the splitting and combining of multiple messages and the handling of exceptions.
-It can route or transform messages conditionally, based on a non-centralized policy (i.e. no central rules-engine needs to be present).
-It is monitored for various SLA (Service Level Agreement) threshold message latencies and other SLA characteristics.
-It (often) facilitates "service classes," responding appropriately to higher and lower priority users.
-It supports queuing, holding messages if applications are temporarily unavailable.
-It is comprised of selectively deployed application adapters in a (geographically) distributed environment.

Did we miss anything?
I like this one: "Ei is the german word for egg "
...and we're getting stratosfearic for the expert journalists. Need to bring it down a little closer to earth to be believable, now, boys. Really. Alien technology about to take over the world? hah hah cough That's rich. What's this here racket ship do, anyway? What's this button?

We might as well get informally associated with this because that's next:
I'm fascinated by:
"EAI is a tool paradigm
EAI is not a tool, but rather a system and should be implemented as such. "

(I take that as: Enterprice Application Integration is a tool world that needs to be handled as a world and not as a collection of tools, you dumba$$. Don't go buying bogus tools thinking you're going to get the same results, people. You were warned. The waterhole is pizined, pilgrim. Best tank up your canteen with swamp water. At least you can eat the critters.)


Posted by Portuno Diamo at 11:52 PM EDT
Updated: Thursday, 5 October 2006 9:31 PM EDT
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