THINK IT Services

Today’s official launch of Microsoft Office 365 squarely positions the company as the latest major contender seeking to win a share of the rapidly growing Cloud Computing marketplace.

Although Microsoft has been saying that it is “All In” and funding a TV ad campaign which has made the catchphrase “To the Cloud” popular, Microsoft 365 represents the company’s boldest offering to date. The company has been watching its Office suite suffer attacks from Google Apps for years. In fact, Google Apps are quickly becoming the basic productivity suite of choice for most new college graduates entering the workforce.

Many of these new entrants to the workforce are forgoing email altogether by relying more on Facebook, Twitter and text to communicate. In response to these trends, Salesforce.com is pushing its Facebook-like Chatter communications platform as a dramatic switch from traditional email.

IBM is also attacking the Microsoft Office franchise with its revamped LotusLive offering. And, VMware is pushing its Zimbra alternative. You can also expect Apple to put more emphasis on its web-based productivity tools to build on its iCloud platform which has already captured plenty of market attention.

All of these players recognize that the first step in the corporate migration process to the Cloud tends to be via email. While this seems like an easy place to start the journey to Cloud-based alternatives, there are still plenty of risks associated with moving in this direction, ranging from reliability to security.

One of THINKstrategies’ most recent clients, Exoprise, recently conducted a survey which found plenty of interest in Cloud-based email alternatives, but an equal amount of apprehension about the uncertainties regarding these offerings as well.

Exoprise has devised a Cloud-based tool which can help organizations evaluate their on-premise versus Cloud email alternatives by assessing current and projected usage patterns. It is offering free access to the assessment tool so IT and business decision-makers can determine if Microsoft 365 fit their needs.

Unlike in the case of Microsoft’s many ill-fated operating system adventures of the past which it was able to withstand because there was limited competition, a failure to jumpstart its Cloud offerings with Microsoft Office 365 will adversely impact its position in the market because of the growing success of Google Apps and other Cloud alternatives.

Therefore, you can expect Microsoft to put plenty of effort into making Office 365 a success to better position the company in the Cloud for the longhaul, even if it cannibalizes some of its traditional Office software revenue initially.

Last Friday, December 3, THINKstrategies rolled out a new Software-as-a-Service (SaaS)/Cloud Computing daily, online newspaper powered by Paper.li. This publication and the online service which creates it illustrate many of the exciting ingredients of the ‘Cloud’, some of the major implications and a few of the unanswered questions.

For the uninitiated, Paper.li is a relatively new, online service created by a privately-held startup, called SmallRivers, incorporated in Switzerland. It compiles links to web articles which have been tweeted or mentioned on Facebook regarding a particular set of user-designated subjects over a period of time (also user-configured) and displays them in a newspaper-style format.

I’ve long believed that Twitter out-performs Google as a search engine and alerting tool for the latest news and views on various topics of interest to me. Every day I’m amazed at how many articles and announcements I find via Twitter, which a Google search and my Google alerts fail to identify. Of course, it isn’t Twitter which is finding these items online, it is the people who tweet about them. It is the epitome of ‘crowdsourcing’, or more precisely ‘cloudsourcing’.

In the same way the iPod, iPhone and iPad have created vast universes of add-on products, Twitter has sparked a similar ‘cloud’-industry of new services attempting to capitalize on the explosive growth of daily tweets.

And, just as Twitter’s ultimate revenue-model was hard to recognize when it first rolled out, Paper.li’s potential revenue stream(s) is still taking shape. At the moment, it appears to be a classic freemium offer aimed at virally encouraging an ever-widening set of users to promote SmallRivers’ basic functionality in hopes that a sufficient subset will subscribe to its Pro custom development tool.

However, even the basic free version has an obvious adverstising appeal which has already gained some initial attention from potentially lucrative sponsors, such as Microsoft.

The bare-bones nature of the current version of Paper.li, along with the lack of revenue-sharing opportunities for users, has led to some mixed reviews in the blogosphere. However, my guess is that Paper.li is working feverishly to remedy these deficiencies to build on its early momentum.

A bigger question is what impact Paper.li will have on the traditional newspaper business, which is continues to struggle to pull out of a decade-long tailspin. Just as many newspapers are beginning to stabilize their revenues by fine-tuning their online businesses to counteract the devastating affect of Google’s onslaught and the dismal economy, Paper.li has created a new nightmare for these newspapers by empowering anyone to become an online newspaper publisher. It’s another example of the Web’s reverse-alchemy powers and its ability to flatten the competitive landscape of almost any industry.

I’m a perfect case in point of this phenomenon by not only launching THINKstrategies’ SaaS/Cloud Computing Daily, but throwing aside the Boston Globe as my homepage in favor of my own Paper.li page which contains far more relevant content to meet my needs and satisfy my interests.

The emergence of Paper.li renews many of the questions and concerns which have surrounded the impact of Google on traditional media. Has Google’s search engine and ancillary services undermined (i.e., stolen) traditional media or driven more traffic its way? Will Paper.li’s rapidly growing population of user-centric online publications steal away or attract more readers from traditional newspapers?

I welcome your perspectives on these questions and feedback about THINKstrategies’ SaaS/Cloud Computing Daily.

Yesterday, Spiceworks announced that its user base now exceeds one million IT professionals across nearly 200 countries. The company’s rapid growth has dispelled a number of industry myths and represents a prime example of how I’ve been suggesting the tech industry is being redefined.

Here’s a quick list of some of the myths busted by Spiceworks’ success,

• Ad-based, free services don’t work in the business-to-business (B2B) market,
• IT professionals are not willing to use ad-based, freemium services to satisfy their day-to-day management needs, and
• IT professionals are too concerned about the security issues associated with social networking to join an online community like Facebook.

Welcome, to Spiceworks — an ad-based, freemium service aimed at IT professionals which not only gives them access to a solid set of management tools, but also gives them the benefit of sharing information and insight with their peers through a Facebook-like online community.

Spiceworks hasn’t only built a strong customer base of IT users for its own management solutions, it has also created a marketplace for a widening array of hardware, software and service vendors seeking to sell to this powerful segment.

And, now that the company has built a critical mass of customers, it is harvesting the data generated by this community to not only document its significance but also deliver new forms of value to its users, such as benchmark statistics and industry best practices. This is an idea which I’ve been advocating for a while as you can read in my past column in Ecommerce Times.

As a result, Spiceworks is not only sitting on top of a growing population of customers, but also creating a club which its members feel proud to be a part of and are encouraging to grow. This is the ideal of building a community of net-promoters which has made Facebook such a success.

Spiceworks is applying these same principles to the IT industry and forcing traditional players to re-think their go-to-market strategies.

I’ve been predicting for over a year, that despite the rapid growth of the Software-as-a-Service (SaaS) market many aspiring best-of-breed vendors will not survive an industry shakeout or the short attention spans of their venture funding sources.

The latest case in point is Helpstream which discontinued operations this past month. I first reported on the company in 2008 when it originally launched as Pathworks Software and caught my attention because of the way it promised to leverage the Open Source pricing model and community building orientation.

In essence, Helpstream was one of the first SaaS companies in the helpdesk market to recognize the powerful potential of a social networking capability embedded into an enterprise app.

Since then, saleforce.com has picked up the baton and is very quickly demonstrating the tangible benefits which can be derived from merging a Facebook-like capability into its CRM/SFA solution with its Chatter offering.

All it takes is a couple of minutes watching a demo or talking to a current beta user to see how this ‘nice to have’ feature can quickly become a ‘must have’ functionality, just like many people discovered when instant messaging penetrated the workplace.

The net result is that Chatter is going to create new expectations among customers and set a new standard for software vendors about how enterprise applications are architected and designed. This is going to raise the bar and compound the challenges facing the established players.

Unfortunately, Helpstream won’t be able to capitalize on this exciting and disruptive market opportunity. Although it is rumored to have had about 50 customers and $1 million in revenues, and even won a Best of SaaS Showplace Award, Helpstream wasn’t growing fast enough to satisfy its backers and couldn’t secure another round of funding. A common end to a promising company.

In the same way that LucidEra was ahead of its time in the SaaS business intelligence (BI) sector and succumbed to a sad demise last year, Helpstream is the latest poster-child for the perils of today’s SaaS start-ups.

So, now various competitors like Parature are vying for Helpstream’s customers and other vendors are assessing Helpstream’s remaining assets to determine if they are worth acquiring.

Potential acquirers recognize that building a successful social networking capability internally is a long-shot. Even salesforce.com has made a series of unannounced acquisitions to create Chatter, including GroupSwim.

However, any vendor considering a big purchase in this space should pay attention to AOL’s ill-fated acquisition of Bebo two years ago which failed to match Facebook’s success and is now worth pennies on the dollar in a potential divestiture.

This week’s announcement that Microsoft and Intuit are linking their respective Platform-as-a-Service (PaaS) capabilities has attracted lots of attention and generated plenty of speculation. It is also the latest escalation of the PaaS wars I predicted would take center-stage this year.

Although Salesforce.com’s Force.com PaaS has gained the lion’s share of industry attention because of the company’s unparalleled marketing machine, I’ve felt that Intuit’s Partner Platform (IPP) represented a dark-horse in the PaaS race because of the vast installed base of small- and mid-sized businesses (SMBs) using Intuit’s QuickBooks and QuickBase, along with its powerful channel relationships.

I’ve also believed that Microsoft would make considerable progress in penetrating the cloud computing market this year, not because of the technical capabilities of its Azure PaaS, but because of its historical prowess in building a vast partner network of ISVs and developers.

With those thoughts in mind, here’s my take on the strategic business implications of this alliance,

1. Both companies are aggressively attempting to catch up to Salesforce.com’s Force.com PaaS initiatives both in terms of mindshare and marketshare. Both companies want to quickly expand their reach into the ISV/developer community to strengthen their competitive position in the PaaS market. (Disclosure: I’ve written a series of whitepapers on behalf of Salesforce.com regarding the Force.com capabilities.)
2. Both companies also want to demonstrate the ‘openness’ of their PaaS capabilities to offset the alliances which Salesforce.com has made with Amazon, Google and Facebook, and capitalize on accusations that Salesforce.com’s Force.com PaaS is limited because it is built on a ‘proprietary’ language.
3. Gaining greater market penetration via access to the other party’s installed base of customers and partners is a given, but capitalizing on their respective functional capabilities and channel relationships is important.
4. Intuit is primarily seeking to make its IPP more attractive to developers by expanding the functionality it can provide its PaaS users. Adding Microsoft’s development and collaboration tools, including the Business Productivity Online Suite (BPOS) which consists of SharePoint Online, Communications Online, Exchange Online, and Office Live Meeting gives developers greater functional capabilities to satisfy their customers’ needs.
5. Microsoft is primarily interested in adding the service management capabilities embedded in Intuit’s Partner Platform (IPP) which include service provisioning and monitoring, along with pay-as-you-go billing and pricing. Adding these capabilities makes Azure more relevant to developers from a business perspective.

While this alliance is squarely focused on small businesses, it could also appeal to the regional offices or small divisions of larger enterprises. It could also attract crossover opportunities in the consumer market, especially when you consider the growing influence of consumerization in the corporate world.

But, most importantly it could open new opportunities within traditional channels and create new channel opportunities for cloud services and vendors. Salesforce.com, Google, Amazon and Facebook have not made much progress penetrating the channel and will face serious challenges gaining the trust and confidence of traditional channel organizations who feel threatened by the cloud computing phenomenon. Intuit and Microsoft can leverage their established relationships with key channel companies to overcome their concerns.

This alliance is the most recent in Microsoft’s escalating efforts to regain its dominant position in the software market which has been quickly slipping away with the accelerated growth of SaaS and broader cloud computing services. Microsoft also announced earlier this month that it is teaming with HP in a three-year, $250 million initiative to develop and deliver a new generation of cloud-based solutions.

Conspiracy theorists will also point out that Microsoft announced last June that it is discontinuing its Money software service, which leaves a convenient gap for Intuit to fill with its QuickBooks solutions.

While ‘coopetition’ is not a new idea or business practice in the tech industry, this week’s Microsoft-Intuit alliance is certainly an important new test of the concept. Whether this proves to be a win-win relationship or simply a Machiavellian maneuver by these companies remains to be seen.

It is also important to note that this isn’t a mutually exclusive alliance. Microsoft is already working with Amazon, for instance. In fact, it will probably spark additional discussions and agreements with the other players by both parties.

As the new year and decade get underway, here are a few of the areas of the cloud computing market which I think will be important competitive battlefields for established and emerging players:

1. Collaboration Wars: Collaboration is the ‘killer app’ in the Software-as-a-Service (SaaS) segment of the cloud computing market. The rapid adoption of Google Apps has demonstrated the latent demand for these web-based solutions. Now, IBM is promoting the enterprise-class qualities of its LotusLive offering to win a share of the market. Cisco Systems is also intensifying its efforts to promote its collaboration solutions built around WebEx and Telepresence. I also think Microsoft will accept a greater level of cannibalization of its Office products to win a bigger share of the collaboration market with OfficeLive.
2. Business-Oriented Social Networks: These are closely linked to collaboration and have gained a tremendous amount of attention because of the explosive growth of Facebook and Twitter. Although many corporate executives are still uncertain about how to harness social networks, Salesforce.com’s introduction of Chatter at Dreamforce clearly shows that offering an enterprise-class solution can create a competitive advantage.
3. Platforms-as-a-Service Wars: Salesforce.com will continue to push its Force.com PaaS capabilities hard. And, Google App Engine will continue to be a popular development environment with start-ups and tech heads. But, I think Microsoft Azure will experience surprising success in 2010 because the company has a better understanding of how to work with third-party developers and is less likely to create channel conflicts because it would prefer not to develop and deliver its own SaaS solutions. There are also plenty of niche PaaS vendors who will be acquisition candidates in 2010.
4. Cloud Governance: HP, IBM and an assortment of niche players are capitalizing on the lack of unified management systems for cloud computing services. While price competition threatens to commoditize raw Infrastructure-as-a-Service (IaaS) offerings, management vendors that can help the IaaS providers and their customers monitor and control their cloud resources will gain a competitive advantage. HP and IBM are realigning their legacy management portfolios to address these needs. A proliferation of niche players are also seeking to win a share of the market, especially focused on single sign-on and access control.
5. IT and Service Management: IT professionals are learning about how SaaS-based management solutions can help them do their day-to-day jobs more cost-effectively. In response, a plethora of new web-based players are emerging and established players, such as BMC and CA, are shifting their attention toward SaaS-based solutions. Salesforce.com has also helped to bring greater attention to the ’service cloud’, where other SaaS companies like RightNow and Service-now.com are experiencing rising demand.
6. Communications-as-a-Service (CaaS): HP and Cisco Systems are on a collision course to compete for unified communications enablement opportunities among service providers and end-user organizations, large and small. Unified communications has been an ideal for over a decade, and now cost-effective, web-based solutions are becoming a reality. CaaS can also be a key enabler of end-to-end enterprise collaboration solutions.
7. eHealth and Energy Management: With the Obama administration promising to plow billions of dollars into modernizing healthcare systems and everyone trying to reduce the cost of their ‘carbon footprint’, these segments of the market are ripe for SaaSification. Brand-name corporations, as well as a new generation of web-based ventures, will ratchet up their efforts to win mindshare as well as marketshare offering cloud-oriented services to address these important issues.
8. Millennials and Generation Z: Companies positioning themselves for the longhaul are already trying to win the hearts and minds of our children. Apple has converted years of cultivation work within the classroom into a new generation of corporate workers who prefer Macs over PCs. Google is attempting to do the same by encouraging public school systems and universities to use its Apps. Although many kids use Microsoft’s Xbox, few have any allegiance to Microsoft Office and are adopting Google Apps. Other vendors will try to follow Apple and Google’s lead into the classroom.

Escalating cloud computing battles in these areas will also fuel additional acquisitions by established players seeking to accelerate the rollout of new services and penetration of new markets. Oracle and Cisco have been active acquirers for years. Salesforce.com will likely make additional acquisitions and continue to be a target of acquisition speculation as well.

I also think SAP will make a substantive SaaS/cloud acquisition in 2010, in an attempt to overcome some of the internal obstacles which have prevented it from successfully rolling out its BusinessByDesign solution. An acquisition could also offset the growing success NetSuite has had nimbling away at the SAP customer base.

Let me know if there are other important competitive battlefields I missed.

Platforms have been proliferating and it is not surprising that there are already signs we may be on the cusp of a shakeout.

Today’s platform players range from start-ups, like Bungee Labs, to Software-as-a-Service (SaaS) and cloud computing movement standard-bearers, Salesforce.com and Google with Force.com and Google App Engine respectively.

This has created a somewhat confusing array of players and platform alternatives which have been divided into various segments.

This week’s announcement about Salesforce.com’s new “Service Cloud” illustrates the way SaaS vendors are leveraging platforms to redefine their business in order to extend their market reach and strengthen their position in the marketplace.

SpringCM is heading down this same path with its new platform which enables independent developers and resellers to build applications or more easily integrate to SpringCM’s electronic content management (ECM) capabilities.

Platforms enable these vendors to convert their internal technologies into development and delivery mechanisms which can be resold to third-parties.

In Salesforce.com’s case, this means reselling the development code which underlies its core customer relationship management (CRM) and salesforce automation (SFA) application, along with the service delivery infrastructure which supports it. It also means that it can recast its business to include web hosting and customer service.

In the case of Amazon, it is repackaging and repositioning its vast data centers and eCommerce capabilities into on-demand development and storage facilities, as well as a distribution mechanism.

Vendors can also use a strong customer base as the basis of a platform strategy. For Facebook and MySpace, their vast user populations provide developers a ready-made channel to market.

Intuit is seeking to leverage its vast user base and powerful brand equity to attract third-party developers to its new Partner Platform, formerly the QuickBase Development Environment.

IBM, Oracle and Progress Software are promoting a combination of database systems and middleware capabilities to position themselves as platform players.

Adobe has also become a key player because of the pivotal role of its development tools and growing assortment of applications. Of course, Microsoft is trying to play catch up by promising its own development platform, Azure.

Here’s a quick list of the essential ingredients which a platform player has to have in place in order to win a meaningful share of the market,

• Easy to use, ’standards’ oriented development code
• Reliable and secure development environment
• Automated and flexible procurement capabilities
• Name recognition and brand equity
• Customer base and channels to market
• Developer/Partner network

Put together, these assets can create a powerful competitive advantage.  However, if a platform player can’t offer a combination of these attributes they have little hope of survival.

An example of the rising risks facing the weaker of the players is the recent rumor on VentureWire that Coghead is in talks to sell itself to an unidentified buyer after failing to secure Series C funding.

Software vendors, enterprise developers and IT/business decision-makers will need to take a closer look at the long-term financial viability and other business assets of their platform suppliers, in addition to their technical capabilities.

This raises questions about the future of the Cogheads of the world. But, it also suggests that relatively new entrants in the platform market, like Intuit and Apple, could become strong players.

How many of us saw Amazon being a leading platform player and major force in the SaaS/cloud computing market 2-3 years ago?