THINK IT Services

The recent flurry of major vendor announcements regarding their new Cloud Computing initiatives, latest acquisitions and offerings clearly shows that the “Cloud Rush” is in high gear.

Here’s a quick list of the announcements which have caught my attention over the past few weeks in chronological order since HP unveiled its Cloud ‘vision’ last month, and my views regarding their significance,

• Cisco Announces Intent to Acquire newScale, 03/29/11  – Cisco Systems has been pushing into the ‘new data center’ environment for a while with its Unified Computing solutions. It acquired newScale to improve its provisioning capabilities to make it a more viable Cloud vendor for enterprise customers and service provider partners.
• Salesforce.com to Acquire Radian6, 03/30/11  - Now that Salesforce.com has succeeded in popularizing its Chatter social networking capabilities, it wants to give its customers the necessary tools to monitor, manage and measure the effectiveness of these new features.
• Intuit, Salesforce.com Announce Strategic Alliance, 04/01/11  -  Despite its investment in FinancialForce.com and support of numerous integration tools vendors that link salesforce.com’s CRM solution with QuickBooks, salesforce.com is seeking to strengthen its position in the SMB/SME market by building a closer working relationship with Intuit which is also working with Microsoft. Intuit is also trying to reinforce its position within the SaaS/Cloud ecosystem.
• SugarCRM Acquires iExtensions, the Market-Leading CRM for Lotus Notes, 04/05/11  – SugarCRM’s growth is further proof of the growing acceptance of Open Source solutions in the market. Its acquisition of iExtensions strengthens its ties with Lotus Notes which is a pivotal part of IBM’s SaaS/Cloud efforts. And, its growing relationship with IBM illustrates how SugarCRM hopes will gain an even greater foothold in mainstream businesses. Don’t be surprised if this alliance evolves into an acquisition in the months to come.
• SITA Launches Dedicated Air Transport Industry (ATI) Cloud, 04/06/11  – I’ve been saying for the past year that the SaaS/Cloud market is entering a third stage in its evolution, moving from broadly focused horizontal business and IT management apps to a new generation of industry-specific SaaS/Cloud solutions. This new stage is a clear indication that the SaaS/Cloud movement is gaining acceptance across nearly every industry and is now viewed as an important mechanism for reengineering the fundamental business processes within various sectors. SITA has been supporting the operating needs of the airline industry since 1949, and is among the latest industry-specific providers to launch a strategic initiative aimed at Cloud Computing.
• IBM Joins Forces With Over 45 Organizations to Launch Cloud Standards Customer Council for Open Cloud Computing, 04/07/11  - IBM has been aggressively pursuing Cloud opportunities since the concept first gained attention. It made an initial effort to spearhead the Cloud standards process which caused a lot of controversy because many people were suscipious of IBM’s motives at the time. Today’s announcement will generate a more positive response because it is supported by an impressive cross-section of enterprise organizations and Cloud vendors. It also recognizes and endorses the existing Cloud inititives of various standards bodies, the most recent of which was announced by the IEEE on Monday. IBM also rolled out another wave of Cloud products and services today that further expands its portfolio of hardware, software and service offerings, and puts additional pressure on its competitors.
• Dell Invests $1 Billion in Technology Solutions and Services to Help Customers Drive Business Results Today and in the Future, 04/07/11  – Dell is not about to let IBM, HP or Oracle outpace its own Cloud initiatives. The company tried to demonstrate today the magnitude of its efforts to develop and deliver Cloud solutions and services aimed at enterprises and end-users. Dell can tell a good Cloud story because of its long history of delivering automated systems and offering Ecommerce services. It has also done a surprisingly good job leveraging its Perot Systems professional services and systems integration services to create vertical market solutions. Click here to read my initial vision of Dell’s Cloud capabilities two years ago.

These announcements and initiatives illustrate the significance of the Cloud Computing phenomenon. They also show the scalability of the market opportunities, extending from SMBs/SMEs to major industries. And, they demonstrate how the Cloud is fundamentally changing the competitive landscape and customer expectations.

HP’s new CEO, Leo Apotheker unveiled the company’s latest corporate strategy yesterday with plenty of fanfare, but little flourish.

The theme of his talk and HP’s new mantra is providing “connectivity” to the Cloud to move “Everyone On”.

While the picture he painted of this new world order and HP’s strategic response covered all the bases, there are still plenty of pieces which must come together in order to make it a reality.

Apotheker’s ‘vision’ was certainly well-conceived and his presentation was well-scripted. No one can argue with his view that,

“We see clearly a world in which the impact of cloud and connectivity is changing not only the user experience, but how individuals, small businesses and enterprises will consume, deploy and leverage information technology.”

I would also agree that ”HP is well positioned to be the trusted leader in addressing this opportunity.”  But, it faces plenty of problems capitalizing on this opportunity.

Apotheker’s four-point strategy to capture this opportunity includes:

1. “Extending its leadership in managing and optimizing today’s traditional environments;”
2. “Leveraging HP’s core strength in cloud to build and manage next-generation cloud-based architectures;”
3. “Being the trusted partner to customers by enabling the seamless transition to hybrid computing models; and”
4. “Defining and delivering the connected world from the consumer to the enterprise.”

That just about covers every angle of today’s rapidly evolving marketplace. And, HP has been inching in this direction for a while. It is not only the largest IT vendor, but also boasts a very loyal consumer, SMB, enterprise and channel following.

But, HP is also burdened with legacy products, both hardware and software, as well as cumbersome business processes. Many of its systems are too expensive. Nearly all of its software is too complex. And, too many of its business processes are too disjointed. So, attacking all of these market opportunities simultaneously in an cost-effective and profitable fashion isn’t going to be easy.

The good news is that Apotheker and HP recognize these issues and are promising to address them. Even more promising is Apotheker’s statement that they are not going to acquire more legacy systems and software to solve their problems. This will hopefully put to rest the persistent rumors that HP will acquire SAP.

Instead, HP needs to build and acquire new functional capabilities which will quickly automate its systems and SaaSify its software and services.

HP must carefully traverse the three segments of the Cloud Computing world — Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS).

While Apotheker suggested that HP must play in all three areas, I would suggest that it concentrate on SaaS and IaaS, and limit its PaaS efforts to inviting third-party developers to add onto its OpenView IT management suite via application program interfaces (APIs) which can enhance and accelerate the evolution of OpenView. I call this the “tugboat” strategy.

In order for HP to outduel IBM, I believe it must capitalize on its consumer market presence; focus on its IT management capabilities, and keep its corporate infighting to a minimum.

IBM gave away its PC business and has no handheld device or consumer market presence. It has put its software emphasis on cloud enablement rather than cloud management. Middleware is important, but so is controlling the chaos created by the Cloud. And, IBM continues to contend with political battles between its hardware, software and services divisions which not only retard its responsiveness to rapid market changes, but also compounds its costs as each group seeks to maximize its revenue streams.

HP is certainly suscepitable to the same organizational issues, but can counteract them by exploiting its channel relationships and consumer orientation.

While Dell can match HP on the consumer front, it is still playing catch-up at the enterprise level with its Perot Systems services and automated systems. And, it hasn’t been able to overcome its historic channel issues.

When Lou Gerstner took over IBM as it was coming apart at the seams and many called for its divestiture, he proclaimed that the company’s competitive advantage was its broadbased portfolio of hardware, software and services, and asserted it didn’t need a vision it needed to execute.

Apotheker also sees the benefit of a multidisciplinary corporate portfolio, but believes that it needs to be guided by a new vision to fuel its continued growth.

Converting a vision into execution doesn’t happen overnight. In fact, it will probably never be entirely fulfilled. Instead, HP will be measured by how quickly it can demonstrate it is making tangible progress in its efforts.

[Disclosure:HP, IBM, and Dell have all been THINKstrategies clients.}

Dell’s acquisition of Boomi today is the latest example of the tech industry’s herd mentality.

In the same way that Dell followed HP’s example when it purchased Perot Systems after HP acquired EDS, Dell is now copying IBM’s acquisition of Cast Iron Systems with its own move into the integration business.

Besides trying to keep up with other ’systems’ vendors, Dell is also attempting to fortify its Cloud Computing capabilities which hinge on helping potential customers cost-effectively migrate and integrate data from various legacy applications and databases into a new set of cloud services.

Dell indicated at an analyst briefing in Boston last week that it wants to ‘move up the stack’ and build a platform which can help enterprises and independent software vendors (ISVs) develop and deliver applications. Dell can’t compete with the other major Platform-as-a-Service (PaaS) vendors — including Salesforce.com, Google and Microsoft — from a software development standpoint. But, it can challenge them and others, such as Amazon and IBM, from an Infrastructure-as-a-Service (IaaS) point of view.

Why Boomi?

Because it is small enough for Dell to digest easily to test the integration market opportunities and requirements. It is still assimilating Perot Systems into its operations and corporate culture, and may not have been ready to acquire a bigger player, like Informatica or Pervasive.

Why is Boomi selling at this time?

My sense is they were at risk of becoming a victim of their own success and their rapid growth was creating operational strains which would take significant new investment to offset. Rather than make this investment, Boomi’s investors and management team felt that the Dell deal would not only give them a solid ‘exit’ but also the corporate resources necessary to ‘cross the chasm’.

It will be interesting to see if Dell is able to do a better job assimilating and growing Boomi’s business than it has with some of its previous Software-as-a-Service (SaaS) acquisitions — Everdream, SilverBack Technologies and MessageOne.

By coincidence, I heard about today’s news while attending Pervasive Software’s IntegratioNEXTconference, down the road from Dell in Austin, TX. You can bet there were a lot of smiling faces among the Pervasive staff who expect Dell’s move to trigger additional integration vendor acquisitions. I’m sure Pervasive’s counterparts at Informatica, which is also hosting a partner conference this week, were equally excited about Dell’s move.

While speculation about a Boomi acquisition has been rising since the Cast Iron Systems purchase by IBM, Dell was not high on the list of potential suitors suggested by various industry observers, including myself. Instead, the clearer candidates seemed to be HP, SAP, Oracle, EMC or even Microsoft.

All these companies continue to be likely acquirers for the handful of remaining integration vendors, including Hubspan and SnapLogic, in addition to Pervasive and Informatica. Not to be overlooked as potential buyers are also Google and Cisco Systems.

When Oracle announced its intention to acquire Sun Microsystems in April 2009, CEO Larry Ellison proclaimed the acquisition, “transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems.”

Although he was not ready to use the term at the time, it didn’t take long for Oracle to refer to its combined capabilities as a Cloud Computing solution set, which it recently put on full display at its annual OpenWorld conference.

The event was also a coming out party for its new President, Mark Hurd, the high flying former HP CEO who departed in disgrace only a month earlier. Hurd’s appointment wasn’t hard to understand given his hardware experience at HP and NCR, and now gives Oracle’s move into the system business even more significance.

HP has retaliated by announcing the appointment of Leo Apotheker as its new CEO, along with Ray Lane as its non-executive chairman of the board. Apotheker comes to HP with extensive experience in the software industry, suggesting that the company is ready to counter Oracle’s move by escalating its own efforts in the enterprise software business.

But, Apotheker comes to HP with far less success as a software executive than Hurd achieved in his comparable time in the hardware business. Apotheker resigned as CEO of SAP AG in February after the company had fallen into a deep malaise of slow sales coupled with low customer satisfaction and employee morale.

Despite his dismal record, HP has swapped a successful hardware executive for an unsuccessful software executive.

Like nearly every other industry watcher, my friends at Triple-Tree and I didn’t see this coming when we generated our own list of potential candidates, although we were half-right in suggesting Ray Lane would be a good candidate for the top job at HP, but we didn’t necessarily mean the board chairmanship role.

Apotheker’s appointment is not only aimed at attacking Oracle’s rising threat on the systems side, but is also intended to fend off IBM’s continued push into the software business as well. Big Blue has been on a software buying spree and has done more than HP to position itself in the cloud. CA Technologies has also been acquiring an assortment of young software companies squarely focused on the cloud computing phenomenon. HP also has to reexamine its relationships with Cisco Systems and Microsoft because of their moves into the server and services businesses as well.

HP has also been engaged in an escalating battle with Dell, most recently in its fight-to-the-finish bidding war for 3PAR while it was CEO-less. In addition to competing in the server market, both companies have also deepened their services capabilities by acquiring EDS and Perot Systems respectively. I’ve questioned these moves because they are focused on the old world of IT outsourcing rather than the new world of cloud computing.

But, Apotheker’s appointment also raises serious questions about why senior executives within HP continue to be passed over for the CEO job as outsiders seem to come and go. My guess is that some of these executives will be jumping ship shortly, leaving Apotheker with the additional challenge/opportunity of building a new leadership team.

So, can Apotheker transform HP into a software-driven company? More specifically, can he transform HP’s current software business into a competitive player in the Software-as-a-Service (SaaS) market? And, can he combine HP’s software, hardware and service capabilities to create a viable cloud computing portfolio which can compete on an even broader battlefield?

If the past is any indication, the odds are against him. However, anyone who is familiar with the controversy which surrounded Bill Belichick’s hiring as the New England Patriots’ head coach in 2000 knows that he arrived with plenty of skeptics because he had failed dismally in his only other head coaching experience. Yet, he proved the skeptics wrong by leading the Patriots to three Super Bowl titles in his first five years and has continued to be a contender for the better part of the past five years as well.

Maybe Apotheker can pull off a similar surprise at HP. But, he’ll be facing far greater challenges and failure could have far greater consequences.

Some are already suggesting that one of Apotheker’s first moves should be to acquire SAP, which boasts an attractive installed base of customers who currently rely heavily on IBM systems to power SAP’s enterprise applications. Acquiring SAP would enable HP to square off against Oracle and dislodge IBM from many of these accounts. But, it could also burden HP with an aging set of on-premise applications and the same set of disgruntled customers who were happy to see Apotheker leave SAP before. (I’d be more comfortable seeing HP acquire Symantec, which would fill its security and storage management void, and would fit better into HP’s product portfolio, channel strategy and corporate culture.)

Companies often make bold moves to serve as a catalyst for change. This is certainly the intent of Apotheker’s hiring. However, HP’s board better be sure they found the right guy before they compound their past mistakes by trying to become an enterprise application vendor as well. It wasn’t too long ago that Carly Fiorina was in the midst of a series of highly publicized internal battles trying to prove the logic of her proposed acquisitons of Compaq and PwC.

The Compaq acquisition, in addition to EDS, has made HP the biggest company in the tech sector. But, they haven’t made it a leader in the rapidly evolving Cloud Computing market which is transforming the tech industry.

Apotheker refused to comment about Oracle’s strategies in response to a question during his introductory press conference, but acknowledged that the technology industry is in the midst of a very disruptive transition period as demand for cloud computing services explodes. His ultimate challenge will be transforming HP into a company which can capitalize on this extraordinary opportunity.

There have been a series of acquisitions over the past few weeks which clearly illustrate how the competitive landscape in the tech industry and beyond is being fundamentally changed by the rapidly evolving cloud computing phenomenon.

The two most recent examples came this week. The first was CA Technologies’ acquisition of 4Base Technology, a virtualization and cloud infrastructure consulting firm, which CA plans to use as a cornerstone of its expanded cloud computing professional services capabilities. This is the latest in a series of acquisitions which CA has made to transform the company from a software-only to a multi-dimensional corporate portfolio which personifies its new CA Technologies company name. CA’s transformation echos the moves of other players seeking to become one-stop shops for hardware, software and services. The most significant of these was Oracle’s acquisition of Sun Microsystems.

Intel made an even more dramatic acquisition this week with its announced plans to purchase McAfee. This acquisition moves Intel into the Softwae-as-a-Service (SaaS) based security solutions market by embedding security software functionality into a chip. Paul Otellini, Intel’s President and CEO, put the acquisition into perspective by stating in the company’s announcement, 

“In the past, energy-efficient performance and connectivity have defined computing requirements. Looking forward, security will join those as a third pillar of what people demand from all computing experiences.”

These moves come on the heels of a series of other acquisitions over the past few months aimed at repositioning various technology and business services vendors seeking to capitalize on the burgeoning cloud computing market.

Less newsworthy, but equally intriguing have been the following acquisitions:

• ADP’s acquisition of Cobalt, a digital marketing services vendor, in July. This acquisition was the latest example of ADP’s efforts to offer a widening array of business and information services to make itself a more strategic, single-source of a full lifecycle of business services, such as marketing solutions.
• IBM followed ADP’s example by acquiring Unica,a marketing software solutions vendor, early this month augmenting its middleware and infrastructure enablement capabilities. IBM clearly stated its goals regarding the Unica acquisition in its announcement,

“Assembling transformational capabilities to help clients create…relevant cross-channel brand experience to promote customer loyalty and satisfaction…This acquisition along with IBM’s recent acquisitions of Sterling Commerce and Coremetrics will enhance IBM’s ability to support customers increasing demands in this growing market.”

• Salesforce.com’s acquisition of Jigsaw earlier this year was also aimed at redefining the company’s capabilities and helping to reposition it in the market.  Jigsaw’s online lead generation database will feed essential data into Salesforce.com’s SaaS-based customer relationship management (CRM) solution, making it easier for the company’s users to satisfy their needs. Jigsaw also provides analytics regarding the productivity of users’ sales efforts. As a result, Salesforce.com is able to now transform itself from a SaaS company to a business or information service provider offering Data-as-a-Service (DaaS).

The commonality of all of these acquisitions is not only that they extend the scope of the companies’ corporate portfolios, but that they do it by adding SaaS capabilities to their delivery methodologies.

These are just some of the ways various technology and software companies are transforming their businesses through acquisitions to capitalize on and  better target today’s quickly growing cloud computing opportunities. They also open a Pandora’s Box of ancillary organizational and go-to-market challenges for the acquiring companies.

Mark Hurd’s sudden resignation as HP’s CEO has opened a floodgate of speculation regarding who the company will select to succeed him.

Because his departure wasn’t anticipated, there are no clear-cut internal candidates. And, because Hurd himself was a surprise selection for the post in 2006, it is possible that another little-known industry executive may be tapped again for the position this time around.

So, this creates a wonderful opportunity for anyone with a passing interest in HP’s future, and the future of the technology industry as a whole, to throw a few names in the hat.

The HP CEO position is particularly intriguing in part because it has grown to become the largest IT vendor in the industry through a series of acquisitions of Compaq, EDS and others. More importantly, HP like the rest of the IT industry is at a pivotal crossroads brought on by the disruptive forces surrounding cloud computing, globalization, the consumerization of IT, mobility and the economy.

As a consequence, HP and every other established technology (and software) company has to re-think their corporate strategies, redesign their products and services, and restructure their go-to-market tactics.

For HP, this means realigning its hardware, software and service capabilities to more effectively leverage the ‘cloud’ so it can more effectively responding to customers’ rapidly changing requirements and expectations, and compete in an increasingly competitive marketplace.

I was first prompted to think about potential HP CEO candidates immediately after Hurd’s resignation when I was asked by a top-flight headhunter for my quick suggestions and came up with the following names off the top of my head:

• Joe Tucci, EMC’s CEO who has transformed the company from a hardware-centric to a software-driven business model and pulled off a similar feat at Wang Computer where he moved the company from hardware to services. EMC and HP’s corporate capabilities and challenges have many similarities.
• John Chambers, Cisco Systems’ CEO who has successfully transformed the company from a corporate network infrastructure vendor into a multidimensional technology supplier to everyone from major service providers to small office/home office (SOHO) workers. Under Chambers’ leadership, Cisco has withstood every economic and competitive challenge, and is now moving into the data center where HP has made much of its living.
• Marc Benioff, Salesforce.com’s CEO who has transformed the software industry by leading the Software-as-a-Service (SaaS) charge and evangelizing about the added business benefits of moving to a broader array of cloud computing alternatives. If Salesforce.com isn’t going to be acquired by Oracle and Benioff made CEO under Larry Ellison, he would be a great candidate to push HP’s legacy software business into the new world of SaaS and its hardware business into the cloud.
• Steve Mills, IBM’s Software Czar, who has used an aggressive acquisition strategy to recast the company into a powerful middleware vendor within a similar set of hardware, software and service businesses which HP possesses. As a result of his success with the software division, Mills was recently given responsibility for managing IBM’s IBM hardware, storage, and operating systems businesses. But, Mills is also facing a mandatory retirement barrier to further advancement and could put his experience to good use at HP.

My friends, Chris Hoffmann and Scott Donahue at TripleTree, where I am a senior advisor, suggested that we put our heads together to broaden the candidate list. Here’s what we came up with:

• Michael Capellas- He has successfully stepped into even tougher situations at Compaq (now part of HP) and MCI/Worldcom, and is well respected in the tech industry and beyond.
• Bill Campbell - Current Intuit Chairman and former CEO, but more importantly he has been a key advisor at Google and Apple, and is also very well respected in the tech industry.
• Kevin Johnson- Former rising star at Microsoft now running Juniper Networks who understands HP’s products and channels.
• Anne Livermore- Runs HP’s Enterprise unit which brings together its hardware, software and services businesses. He’s been passed over many times but might be the safest best as an inside pick.
• John Thompson- Former CEO, and current Chairman of Symantec, recognized the importance of moving to SaaS but couldn’t overcome channel resistance.
• Meg Whitman - If the Governor thing fizzles…she’s a proven, capable leader who will be looking to prove herself again.
• Ray Lane- Ran Oracle as President, then became an early proponent of the virtues of SaaS as a top-tier VC.
• Charles Philips- Has been driving Oracle’s acquisition strategy and runnng a major portion of its operations. He’s just beginning to learn about the hardware business as a result of the Sun acquisition, but he’s a quick study and forward-minded.
• Jon Rubinstein - Ex-Palm, Ex-Apple…might be too much of an engineer but interesting match for HP. Understand mobility which is where the world is heading, and can help HP fully exploit its Palm acquisition.
• Ed Whitacre- Just announced his resignation from GM where he quicklygot the behemoth back on track with no prior industry experience. Before that, he also pulled together SBC and AT&T, and could bring HP’s far-reaching assets together. He’s in his early 60’s, so it might be a stretch to see him as a long-term CEO at HP. However, he could bring stability until HP cultivates a new leader for the longhaul.   
• Diane Greene- Former CEO of VMware revolutionized IT with virtualization, a key component in HP’s future. Might be too techie, but certainly understands the opportunities and challenges.
• Shantanu Narayen - Well respected, but not well known CEO of Adobe which is a key player in the web development world which is driving cloud services.
• Vivek Paul- CEO of Wipro, known as a visionary in outsourcing, now in private equity, with the global experience which will be essential going forward.

If these industry stalwarts seem too mundane, here are a few frivolous ideas to think about for fun:

• Brett Favre – nominated by my Minneapolis-based friends at TripleTree who worship the indecisive quarterback as a brilliant turnaround artist.
• Joe Montana – my football oriented alternative because of better winning record and Bay Area roots.
• Simon Cowell – he is a tough-minded task-master with time on his hands since he left American Idol.
• Oprah Winfrey – knows how to build businesses and a worldwide following, and might be willing to put aside her upcoming year of long goodbyes as she departs her syndicated talk show.
• Tony Blair- the consummate negotiator who would be a perfect candidate to address the myriad of channel issues which will arise if HP adopts an aggressive SaaS/cloud computing strategy.

As you can see, Mark Hurd’s resignation has given us a great way to while away the dog-days of August with various ideas. I hope this gives you plenty of food for thought for the weekend and welcome your suggestions as well.

For the past two weeks, I’ve been debating whether to respond to a commentary in InfoWorld by Neil McAllister which asked, “Is the SaaS Experiment Finally Over?”

But, I couldn’t hold back any longer when one of the many online publications where I’m a contributor, eBizQ, posed the question in a more provocative fashion, “Is SaaS Dead?”

I couldn’t bring myself to respond to McAllister’s column when it was first published because his argument was so ludicrous. He alluded to a variety of past SaaS and cloud vendor service outages to raise concerns about the overall viability of these rapidly expanding markets. And he used a series of Gartnerisms to warn against developer migration to the SaaS model.  

Yet, McAllister ignores the pervasive failures of traditional on-premise software which has inspired organizations of all sizes to explore and increasingly adopt SaaS alternatives to better meet their corporate needs.

The truth is that Gartner has been wrong about SaaS since the beginning. Even today, it has failed to fully recognize the current rate of SaaS adoption because they only talk to their traditional IT clients who are still trying to resist today’s trends because they see them as a threat to their jobs.

For instance, I reported earlier this year about Pacific Crest’s CIO survey which found that they expect to spend approximately 30% of their software budgets on SaaS in 2010, while Gartner is still predicting that organizations will only spend 25% of their budgets on SaaS by 2012.

Gartner also refuses to recognize the growing array of customer success stories which clearly illustrate the tangible and measurable business benefits being generated by SaaS and the broader cloud computing services.

Meanwhile, THINKstrategies has been recognizing SaaS and cloud computing providers nearly every week for the past year and a half which are delivering these business benefits worldwide through our Best of SaaS Showplace (BoSS) and Cloud Computing Business Value Award programs.

Rather than acknowledge the benefits of SaaS, and other cloud computing services, Gartner prefers to publish endless warnings which simply propose commonsense vendor selection and management principles.

The fact is that the SaaS ‘experiment’ is definitely over. It is now a mainstream movement.

Just take a look at the growth of Salesforce.com and SuccessFactors. Or, check out how NetSuite and Workday are encroaching on SAP. Listen to CIOs who are frustrated with being in the server business and want to shift into the services business.

And, pay attention to the major moves which the ‘legacy’ hardware and software players–led by IBM, HP, Microsoft, Oracle and SAP–are taking to transform and even cannibalize their traditional business to respond to rapidly escalating customer demands for change.

Yes, the SaaS experiment is over. It is now for real.

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.

I’ve been suggesting for years that the IT system management (ITSM) market is ripe for a new generation of Software-as-a-Service (SaaS) solutions, and a widening array of emerging players are finally fulfilling my vision.

Up until recently, IT departments have been plagued by the same frustrations which permeated most large-scale enterprises contending with overly complex, cumbersome and costly business applications.

In the case of the business units, it was trying to implement and maintain enterprise applications, such as CRM or ERP, which drove them crazy and in the direction of SaaS alternatives from companies like Salesforce.com and NetSuite.

Now, IT organizations are starting to migrate away from the ITSM platforms offered by IBM, HP, BMC and CA in favor of SaaS-based alternatives from Service.now and others.

Why are IT departments moving in this direction? For the same reasons as their business unit counterparts,

• Frustration with the costs and complexities of traditional, on-premise ITSM has reached a breaking point.
• In today’s tough economic environment, IT departments have to do more with less and can’t afford the inefficiencies associated with legacy ITSM.
• Traditional ITSM wasn’t designed with today’s highly dispersed workplaces, mobility and cloud computing resources in mind.
• Technological advancements are making today’s SaaS-based ITSM solutions more viable alternatives to legacy systems.

So, just like in the broader business environment, there is a ‘perfect storm’ of economic, technological and attitudinal forces which are driving IT professionals to adopt various SaaS ITSM solutions.

My latest commentary in Ecommerce Times discusses these drivers further.

But, it is worth noting that between the time I submitted this column to the online publication and when it was posted the following industry announcements and SaaS-based ITSM vendors crossed my radar,

• CA announced its intention to acquire Nimsoft after previously announcing that it would acquire 3Tera.
• Citrix acquired Paglo to strengthen its SaaS-based GoToManage capabilities.
• AccelOps is rolling out enhancements to its integrated datacenter monitoring and ITSM software.
• ManageEngine continues to enhance its ITSM suite which sells for a fraction of the cost of legacy platforms.
• France-based, Staff&Line, is opening offices in the U.S. to offer its ITSM, IT asset management, configuration management database (CMDB) and automatic inventory capabilities here.

These are just a handful of the numerous companies targeting this market. THINKstrategies has over 150 companies listed in the HelpDesk, IT and Application Management categories of its SaaS Showplace. And, this is probably only half of the total number of companies targeting the ITSM market!

Just like in the overall market, these SaaS ITSM vendors are successfully penetrating large-scale enterprises as well as small- and mid-size businesses (SMBs). We’ve recognized many of these players with our Best of SaaS Showplace (BoSS) Awards.

And, the ITSM legacy vendors — IBM, HP, BMC, CA and others — are desperately trying to respond to this significant challenge in the same way as their enterprise application counterparts — Microsoft, Oracle, SAP and others — have done … with a combination of acquisitions, alliances, internal development and external PR.

It is for all these reasons that I identified ITSM as one of the key battlefields for 2010.

The resignation of Leo Apotheker as CEO of SAP has sparked significant speculation re: the issues which drove this decision and where SAP will go from here.

The significance of this event was clearly underlined by the role SAP’s Co-Founder and Chairman of the Supervisory Board, Hasso Plattner, played as the primary company spokesperson during a corporate conference call this morning.

During the call, Plattner made an emotional defense of the company’s strategies and tactics in response to rising criticism in the face of SAP’s financial struggles. Plattner used the occasion to dispute claims that SAP isn’t moving fast enough to respond to changes in the market by proclaiming that SAP is well on its way to becoming a “multiple product company”. He gave Apotheker credit for “turning around” BusinessByDesign and said the rollout of the v2.5 of the on-demand solution is “close”.

The reality is that BusinessByDesign has only had isolated success in a handful of deployments in the field, and its scalability from a technological and go-to-market point of view is yet to be proven.

The truth is that BusinessByDesign’s lack of success is a reflection of SAP’s lack of commitment to the solution and an overall SaaS strategy.

The company’s leadership has never fully acknowledged the fundamental changes disrupting the software industry as a result of rapidly changing customer preferences and competitive pressures. For example, various SAP leaders in the past have suggested that BusinessByDesign would primarily serve as an ‘on-ramp’ to its on-premise customers rather than a solid standalone solution. This half-hearted approach not only turned off prospective customers, it didn’t incent its own staff to make a concerted effort to develop and deliver a competitive solution.

But, SAP’s reluctance to accept these market realities may finally be giving way to a new awakening about the critical crossroads facing the company.

Although Plattner refused to specify the reasons for Apotheker’s resignation, he admitted that the company was facing growing dissatisfaction among customers in response to SAP’s decision to increase its maintenance fees and a recent employee survey also found growing disenchantment among its own staff. He also acknowledged that the cloud computing model poses a significant challenge for SAP’s underlying software architecture.

As a consequence, Plattner said ”we need to reestablish the trust inside and outside” and “in order to be profitable, SAP has to be a happy company…with happy customers and employees.”

The company has decided the best way to move in this direction is with a Co-CEO leadership structure. Plattner used Larry Ellison and Ray Lane at Oracle, and Bill Gates and Steve Ballmer at Microsoft as models for success, but failed to point out that in neither case did these duos operate as Co-CEOs.

I think the Co-CEO structure may only be a temporary move to stem the negative tide until a single leader can emerge from the current duo or a new CEO can be recruited from the outside to bring fresh leadership to the company.

Ideally, this person will be able to pull the company together under a strong unified strategy backed by a series of solid tactical moves in the same way Lou Gerstner did at IBM in the 90’s.

Whether a leader comes from outside the company or within, SAP’s only hope for success is a strong, long-term commitment to change. SAP’s painful journey down the SaaS path is just the most prominent example of the many reasons why established ISVs are suffering in today’s environment. A strong leader is necessary to withstand today’s challenges.

(Disclosure: I have done consulting work with various groups within SAP.)