THINK IT Services

InformationWeek recently asked me to provide THINKstrategies’ perspective on the state of the cloud computing market.  In response, I’ve contributed a guest column for the publication’s Global CIO section which discusses how the initial success of Software-as-a-Service and a broader array of cloud services is quickly fueling a new generation of more mature enterprise-quality capabilities, which I’m calling “Cloud 2.0″.

I’ve been presenting this idea in my various talks at industry events and in client meetings.

So, what is Cloud 2.0?

Well, first here’s how I characterize Cloud 1.0:

• Commodity-oriented, Infrastructure-as-a-Service (IaaS) offerings
• Price and cost-savings are the primary customer value-propositions and motivators
• Reliability, availability and security are the critical criteria for selection and key success factors
• Primary ‘use-cases’ are cyclical or situational, non-core requirements
• Primary customers are start-ups, software developers and business  end-users.

Cloud 2.0 is about:

• Strategic business services aimed at ongoing operational requirements
• Corporate decision-makers are seeking vendors that can offer broad portfolio of services rather than just point-solutions
• Long-term vendor viability and financial stability key
• Value-added benefits aimed at gaining a strategic advantage essential selection criteria
• Greater focus on governance (SLAs, application performance management, reporting capabilities, etc.)

I believe the more established vendors with proven brand equity will have a greater competitive advantage in this new phase of the cloud computing market evolution, as I discussed in a previous commentary.

What do you think? Are we heading into a new era of cloud computing solutions and strategies?

THINKstrategies announced today that WaveMaker has been named the second winner of the new Cloud Computing Business Value (CCBV) Awards program, which is aimed at promoting the measurable business benefits being delivered by today’s cloud computing solutions.

The CCBV Awards program was initiated in 2010 to recognize Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS) providers delivering tangible business benefits to specific user organizations. These benefits include lower costs, faster deployment times, greater profitability, etc.

The Award program builds on the success of THINKstrategies’ Best of SaaS Showplace (BoSS) Awards program which was initiated in 2009.

WaveMaker is an open and easy-to-use development platform for web and cloud applications. WaveMaker uses visual, drag and drop tools to generate standard Java applications, boosting developer productivity and quality without compromising flexibility. WaveMaker applications are cloud-ready and include built-in support for multi-tenancy and elastic scaling. As a result, WaveMaker is a rapidly-growing company backed by a 15,000-strong developer community.

Click here to read more about WaveMaker’s award-winning business benefits.

Click here to read more about the CCBV Awards program or to apply for an award.

Seven weeks of traveling came to an end in Florida today after attending SAP’s Sapphire user conference and speaking to Tech Data’s TechSelect executives about the channel implications of the rapidly evolving Software-as-a-Service (SaaS) and Cloud Computing market.

Prior to this week’s events, I traversed the country from Boston to the Bay Area six times to speak, host and moderate sessions at SaaScon, Under the Radar, AlwaysOn OnDemand, Pervasive’s Metamorphosis and the SIIA/OpSource All About the Cloud conferences, and conduct strategy sessions with a wide range of clients in between.

The common theme of all these events and client meetings is that SaaS has become a viable alternative to legacy on-premise software across nearly every application segment, and a newer wave of Infrastructure-as-a-Service (IaaS) cloud computing services is quickly disrupting traditional data center models across nearly every industry.

Concerns about hyperbole outdistancing today’s realities are being pushed aside by a growing number of customer success stories which clearly illustrate the tangible and measurable benefits of these ‘cloud’-based services.

SaaS, IaaS and Platforms-as-a-Service (PaaS) are changing the way software and systems are designed, developed, packaged, priced, promoted, acquired, delivered, consumed and supported. 

At nearly every step of this process, the burden of success shifts from the customer to the vendor, with the potential of greater customer satisfaction, loyalty and profitability promising to offset the tremendously painful migration but necessary process for vendors, i.e. the classic ‘innovator’s dilemma’.

In response, a parade of incumbent software vendors (ISVs) are surrendering their efforts to fight off the ‘on-demand’ movement with FUD (fear, uncertainty and doubt) marketing campaigns, and replacing them with their own SaaS initiatives and cloud computing strategies.

CA and BMC have unveiled SaaS IT management solutions built on Salesforce.com’s Force.com PaaS. Software AG is offering a hosted version of its CRM solution, rebranded as update software AG.  (6/15: A spokesperson for update software AG has informed me that it is an independent company which is not associated with Software AG.) And, Microsoft is giving away a free version of Office…and suing Saleforce.com for patent infringements.

Few ISVs have more at stake and face tougher challenges as a result of this transformation process than SAP.

Over the past four decades, SAP has built a portfolio of complex enterprise applications which are at the heart of the operations of the world’s largest corporations, and thousands of others. It has created an equally vast internal organization and intricate set of channel relationships to develop, deliver and support its products, and serve its customers.

SAP’s shift to SaaS has been plagued by a series of perceptual, philosophical, developmental and sales missteps. The company underestimated the level of customer discontent with traditional software and their willingness to adopt ‘on-demand’ alternatives. It also discounted the architectural and operational requirements of developing and delivering competitive SaaS solutions.

After two false starts with its Business ByDesign (ByD) flagship SaaS offering, the company’s leaders are now more determined than ever to get it right. This week’s Sapphire conference was a coming out party to convince SAP’s customers and partners, as well as press and analysts, that ByD is now on the right path.

SAP has rebuilt the application with a new multi-tenant architecture to make it more scalable and economical. Even more importantly, ByD is being positioned as a part of a broader, corporate-wide portfolio of cloud solutions which the company’s leadership is hoping will be ”game-changing”.

As a guest of the company (SAP is a client, and paid my way to the conference) I had the privilege of meeting one-on-one with key corporate executives for a series of candid conversations about their new strategies. 

They intend to differentiate ByD, and the broader cloud portfolio, by embedding greater analytics into the solutions and offering an integrated suite of modules spanning nearly every corporate functional area across on-premise and on-demand environments, as well as various mobile devices.

Although ByD sits within the SAP’s Small- and Mid-Size Enterprise (SME) division, key executives are now willing to offer ByD to large enterprise (LE) divisions and regional offices as well.

While SAP has put a lot of investment into rebuilding the ByD architecture, it still has a long way to go to match today’s market leading solutions from a user experience perspective. ByD’s straightforward functional capabilities lack the type of dynamic, user-friendly interface common in most SaaS applications. As a result, it has limited user configurability and can be inflexible at times according to one customer I spoke with. Despite these limitations, ByD is winning more customers who are pleased with its operational and financial benefits.

I also got demos of the latest versions of SAP’s StreamWork collaborative decision-making tool and its Carbon Impact and Sustainability service. Both demonstrate SAP’s growing understanding of the type of dynamic user experience expect in today’s market, which will hopefully find its way into ByD soon.

Underlying SAP’s growing portfolio of SaaS and cloud computing solutions is the analytic expertise and skills of SAP’s Business Objects unit. Company executives are hoping they can also leverage the Sybase acquisition to fortify its in-memory capabilities to support its SaaS solutions and extend its mobility capabilities.

There is no question that SAP is determined to succeed in the SaaS and cloud computing arena. Ironically, the company’s biggest challenge will be the tendency of company executives and its army of developers to over-engineer SAP’s solutions.

In the past, SAP succeeded by focusing its vast resources on the enormous complexities of enterprise environments. Today, a growing number of SAP’s customers are seeking to streamline and simplify their operations, so they can become more agile and responsive to rapidly changing market requirements. In many cases, the customers are willing to accept less functionality if it improves their productivity, effectiveness and profitability.

SAP must recalibrate its efforts and solutions to match these changing requirements and expectations. If SAP’s leaders and staff can learn this lesson from the SaaS movement, they can become an important player in the maturation of the broader cloud computing industry.

THINKstrategies announced today that PowerSteering has been named the latest winner of the Best of SaaS Showplace (BoSS) Awards program, which is aimed at promoting the measurable business benefits being delivered by today’s Software-as-a-Service (SaaS) solutions.

The BoSS Awards is an ongoing program which recognizes SaaS companies that are producing tangible business benefits for specific user organizations. These benefits can include increased sales, lower costs, higher customer satisfaction, faster operations and greater profitability.

PowerSteering provides project portfolio management (PPM) software that helps organizations manage a broad range of strategic initiatives that improve business performance in information technology, new product development, Six Sigma and Operational Excellence, and other business PMOs. IT and business users utilize PowerSteering to achieve better portfolio results through improved alignment of resources against strategic priorities, increased executive visibility of project portfolios, and streamlined execution of project management activities.

Click here to read about the measurable business benefits which have led to PowerSteering being named the latest winner of the BoSS Award program.

Click here to learn more about the BoSS Awards program and to apply for an award.

Based on the success of the BoSS Awards program which focuses on SaaS solutions, THINKstrategies has launched the Cloud Computing Business Value (CCBV) Awards program to recognize companies which are delivering Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) solutions producing measurable business benefits for their customers. For more information regarding the CCBV Awards, go to http://www.thinkstrategies.com/cloudcomputingawards.html.

Software-as-a-Service (SaaS) and Cloud Computing market consolidation appears to be heating up with the second important acquisition announcement of the day coming from SuccessFactors who plans to buy CubeTree, a “social business platform” which permits greater communication and collaboration across organizations.

This is also SuccessFactors’ second acquisition, following its purchase of Inform in February.

Integrating social networking software into enterprise environments has been a hot topic since the idea of Web 2.0 first emerged. It has gained even greater urgency as Facebook and Twitter have become mainstream communications tools among business professionals on an ad hoc basis and corporations in a more concerted fashion.

But, the utopia that everyone is seeking is an integrated approach to social networking which embeds its capabilities into broader enterprise applications in a ’seamless’ fashion that eliminates the integration issues, alleviates compliance concerns and encourages end-users to take fuller advantage of the applications from a productivity standpoint.

Salesforce.com has been doing a terrific job demonstrating the potential of this idea with its demonstrations and aggressive marketing programs promoting Chatter. They have also used acquisitions to accelerate the development and rollout of their social networking capabilities.

As a privately-held company, CubeTree’s revenues are not publicly available. Nonetheless, as a relatively young company which was only beginning to demonstrate its revenue potential, CubeTree has been able to convince SuccessFactors to give its team and investors $20 million in SuccessFactors stock initially, plus a contingent cash payment three years from the transaction closing date which will bring the total value to $50 million based on the long-term promise of enterprise social networks.

Although this isn’t a significant transaction from a financial standpoint, it is an important deal from a market point of view.

IBM announced its intention to acquire Cast Iron Systems today, bringing to an end the long-standing parlor game of which integration tool vendor would be the next to be acquired after Workday grabbed Cape Clear in 2008.

This is an important endorsement of the importance of the integration tools market in general, and Cast Iron Systems in particular.

Integration is often listed as one of the top three concerns among IT and business decision-makers who are thinking about migrating to the ‘cloud’, along with security and reliability.

According to IBM’s software head, Steve Mills, Cast Iron Systems fit IBM’s acquisition criteria by offering “Adjacency” and “Synergy” that can enhance IBM’s capabilities and revenue opportunities in the following areas,

• Websphere middleware
• Process management services
• Professional and hosting services
• Cloud enablement solutions

The integration tools sector has been very competitive with Boomi, Hubspan, Informatica and Pervasive Software recognized as the other leaders.

Cast Iron Systems has differentiated itself around its ‘appliance’ approach to integration. It has also established strong working relationships with Google and Salesforce.com. In fact, I saw a recent Salesforce.com presentation which identified Cast Iron System as its preferred internal integration vendor.

There have been rumors that Cast Iron Systems and the other major integration tool vendors have been in play for a while. This moves eliminates one of the independent integration tools vendors and widens the market opportunities for the remaining players in this space by legitimizing the importance of integration in today’s environment.

The timing of IBM’s announcement coincides with its IMPACT 2010 conference in Las Vegas where IBM is hosting approximately 6,000 attendees including over 1,200 customers and 850 Business Partners. While this announcement will certainly be of interest to many of them, IBM’s other integration tools partners attending the conference will have to put on a good face while they’re asked why they weren’t the ones who were brought to the alter. In some cases, they may actually be gloating because they can still boast about their vendor-independence.

And, there should still be plenty of customer opportunities for IBM/Cast Iron Systems and the remaining independent integration vendors as decision-makers often fall into two categories — those looking for a single-source vendor vs. others willing to piece together best-of-breed elements.

Ultimately, acquisitions of this nature generally result in one of two outcomes — either it exponentially increases the market opportunities for the acquired company, or it creates too many internal distractions which ultimately derails its growth and momentum.

The energy and enthusiasm which I heard from the representatives of Cast Iron Systems and IBM who I spoke with after the companies’ joint videocast suggests that they are in a good position to head down the right path with this transaction. Of course, the proof will be how well they follow through with their promises after the euphoria of the intial honeymoon period wears off.

However, since this acquisition probably won’t noticably ‘move the dial’ in terms of creating substantial new revenue opportunities for IBM, it may be hard to measure its financial impact.

Therefore, it will be more important to watch how IBM blends Cast Iron Systems’ capabilities into the other elements of its portfolio to enhance their overall position in the market.

It will also be interesting to see how often IBM’s Global Services group continues to turn to other integration tools partners to demonstrate to its customers that it is still product-independent.

Once again Gartner is late to the party with its ‘bold’ predictions and customer surveys.

Gartner’s latest findings show that 95% of customers currently using Software-as-a-Service (SaaS) solutions are likely to renew these services. THINKstrategies and Cutter Consortium surveys found this out three years ago.

In fact, anyone who really understands the SaaS market, knows that SaaS companies cannot survive unless they keep customer churn to a minimum which means achieving 90%+ renewal rates.

But, Gartner’s survey research still helps to validate the viability of today’s SaaS alteratives in the eyes of the old-guard IT decision-makers who tend to take Gartner’s word as gospel. It clearly shows that the SaaS market isn’t the latest overhyped idea, but a user-driven movement which is fundamentally reshaping the software industry.

This research will open the door wider for greater customer adoption of SaaS solutions and put even more pressure on legacy software vendors to add SaaS solutions to their corporate portfolios.

THINKstrategies announced today that New Relic has been named the latest winner of the Best of SaaS Showplace (BoSS) Awards program, which is aimed at promoting the measurable business benefits being delivered by today’s Software-as-a-Service (SaaS) solutions.

The BoSS Awards is an ongoing program which recognizes SaaS companies that are producing tangible business benefits for specific user organizations. These benefits can include increased sales, lower costs, higher customer satisfaction, faster operations and greater profitability.

New Relic RPM is a SaaS, on-demand performance management solution for web applications developed in Ruby, Java or JRuby. New Relic RPM can be fully implemented in minutes and provides deep, 24×7 visibility and code-level diagnostics for web applications deployed on traditional, dedicated infrastructures, private and public clouds, or any combination thereof. RPM’s real-time metrics enable application owners, developers and operations teams to quickly and cost-effectively monitor, troubleshoot, and tune application performance.

Click here to learn about the measurable business benefits which earned New Relic the latest BoSS Award.

Click here to learn more about the BoSS Award program and to apply for an award.

Based on the success of the BoSS Awards program which focuses on SaaS solutions, THINKstrategies has launched the Cloud Computing Business Value (CCBV) Awards program to recognize companies which are delivering Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) solutions producing measurable business benefits for their customers. For more information regarding the CCBV Awards, go to http://www.thinkstrategies.com/cloudcomputingawards.html.

My past fews weeks have been consumed with weekly visits to the Bay Area to speak at SaaScon, moderate tracks at Under the Radar and co-host the AlwaysOn OnDemand conference, as well as numerous on-site client meetings. In between, I also had the privilege of presenting a kickoff keynote presentation at a VIP dinner for the State of the Cloud conference in Boston.

My hectic travel schedule has given me little time to comment on a variety of industry announcements which have occurred during this period. So, here’s my ‘lightening round’ assessment of some of the more significant events worth noting,

• Cloud Conference Observations
  • SaaScon: When was the last time you heard CIOs talk about being heroes in their organizations? Well, the CIOs who spoke at SaaScon repeatedly described how the SaaS solutions which they’re implementing in their organizations are generating an overwhelmingly positive response from their end-users and corporate executives. And, they admitted that this has made their jobs gratifying again.
  • Under the Radar:  This was a terrific day of company presentations and American Idol-style judging sessions aimed at uncovering the next hot Cloud companies. Most of the presenters won’t become major players, but many may be acquired by bigger companies. While the remainder will die on the vine because of poorly conceived solutions or go-to-market strategies.
  • AlwaysOn OnDemand: It was a privilege to work with Tony Perkins and his staff to organize and co-host this first-time event. Tony is a living legend in the tech industry because of his association with the Red Herring publication and his very influential conference business. The AlwaysOn events have become important meetingplaces for industry leaders, investors and aspiring companies. The content of the OnDemand conference was also first-rate as you can see in the online videos.
  • State of the Cloud: What happens when a major financial institution decides that it wants to better understand the rapidly evolving cloud computing marketplace? Well, in the case of Fidelity Investments, they decided to put together a first-class conference aimed at top-level enterprise decision-makers. And, because of Fidelity’s tremendous influence, they were able to bring together a very impressive list of speakers and sponsors to examine various aspects of the cloud computing environment.
• VMforce: Salesforce.com’s new alliance with VMware might seem like a minor event for the casual observer who has yet to fully grasp the strategic importance of the company’s Force.com platform. However, Salesforce.com’s long-term success is predicated on building a large and loyal cadre of software developers on its Platform-as-a-Service (PaaS). While it has had some initial success, its growth as been stymied in part because of the proprietary nature of its development language. VMforce opens Force.com up to a vast community of Java developers and alleviates much of the concern about vendor lock-in. I expect Salesforce.com to reach out to other important development communities to encourage even broader acceptance of its PaaS capabilities, especially as it begins to feel competitive  pressure from Microsoft Azure.
• IT Service Management Wars: One of the key battlefields in 2010 which I identified at the beginning of the year is SaaS-based IT service management (ITSM). The latest entrant into this space is BMC which unveiled a new version of its Remedy solution built on Salesforce.com’s Force.com platform. BMC’s new offering follows Nimsoft’s release of an on-demand version of its solution shortly after its acquisition by CA was announced. You can expect plenty of additional acquisitions in this market segment as IT organizations become increasingly receptive to SaaS alternatives to traditional, on-premise management systems.
• Cloud-Oriented Application Monitoring and Management: Now that SaaS solutions are becoming mainstream and more enterprises and ISVs are leveraging PaaS and Infrastructure-as-a-Service (IaaS) to develop and deliver applications, the new battlefield is Application Monitoring and Management. I’ve not only be deluged by a continuous stream of briefings from start-ups in this segments, but also had the pleasure of moderating the Application Management track of  the Under the Radar conference where some of the hottest new players in this segment showed their wares. While the fundamental value proposition of these companies is compelling, I expect many of them to struggle to convince corporate decision-makers, as well as  service providers, that their solutions are necessary to optimize the performance of their cloud-based applications and operations as opposed to ‘nice to have’. So, you can expect a flurry of quick acquisitions and then a prolonged series of company failures.
• Interesting reading,
  • Banks to build their own cloud-based global banking infrastructure and network - Is this a new cloud or the realization of the old ‘extranet’ idea?
  • SaaS-querade: When On-Premise Vendors Try to Pass as SaaS Vendors - This column echos the talks I give about why SaaS is different than hosting and the old ASP model.
  • The Next Crisis For Customer Satisfaction - This column challenges CIOs and business decision-makers to understand how enterprise applications must change to better serve end-users and achieve their corporate objectives. Salesforce.com Chatter is an example of where the world must go.

Finally, check out my new online presentation entitled, “Will SaaS and Cloud Computing Dis-Intermediate the Channel?”