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.

One of the most vexing challenges facing today’s IT and business decision-makers is how to integrate critical corporate data across a widening array of on-premise and on-demand systems and applications.

Many believe that the age-old data integration issues of the past have only been compounded by today’s rapidly expanding assortment of Cloud-based solutions which raise the expectation of easy end-user access from anywhere at any time.

While there are a growing number of application program interfaces (APIs), Web-based connectors and Cloud-oriented systems integrators that are reducing the difficulty of overcoming this integration issue, it still represents an important impediment that many organizations are reluctant to face.

Intuit announced a new program yesterday aimed at addressing the data integration issue. The Intuit Anywhere program promises to give software developers a new method of extracting QuickBooks data directly into their third-party applications, including web and mobile.

This new data export and integration capability is an extension of the Intuit Partner Platform (IPP). It utilizes a set of widgets and data services to permit customers to more easily take their data generated within QuickBooks and import it into the other Intuit-ecosystem apps which help them run their businesses.

In conjunction with its unveiling of the beta program which is aimed at testing and fine-tuning the Intuit Anywhere capability, the company also announced six new IPP partners that will be participating in the beta program:

• Bill.com 
• Concur 
• eBay 
• FreshBooks 
• Mavenlink 
• MethodCRM.com

Intuit has recently been more actively promoting the scale of its Cloud business, power of its platform, and reach of its alliance partners in the market, including Microsoft and Salesforce.com.

The new Intuit Anywhere program promises to make the data captured in its Quickbooks flagship product more ubiquitous which should strengthen Intuit’s position in the market.

Cisco Systems’ decision this past week to shut down its Flip video camera business generated plenty of attention because of its implications on multiple levels for the networking company and the IT industry. Here are a few of my perspectives on the meaning of this event and the lessons to be learned.

Cisco deserves credit for the boldness of its acquisition of Pure Digital, the maker of the Flip camera, in 2009 and its equally brave decision to walk away from the over $590 million investment (acquisition, development and marketing costs) in a two year span. It had hoped to use the Flip camera and other home entertainment products as catalysts for additional consumer demand for its network connectivity capabilities and its service providers’ transmission services. Although Cisco didn’t sell as many Flip cameras as it hoped, it certainly can be credited to contributing the rise in video transmission volume during the past two years and growing expectations for more video services going forward.

Few could anticipate that the popularity of simple and economical video camcorders would quickly be give way to a new generation of smartphones with built-in video recording capabilities in such a short time after Cisco’s Pure Digital acquisition. In the same way digital cameras were made nearly obsolete by embedded cameras within smartphones, the video camcorder is becoming a thing of the past as a result of a similar bundling process. It is truly amazing to consider how many formerly standalone functions of a decade ago are now merely assumed features of today’s cellphones.

The power of the smartphone has grown so strong that Cisco didn’t even publicly offer its scuttled Flip camera unit to a potential buyer. In hindsight, Cisco may have been better off buying a smartphone developer, like Motorola, rather than a videocam manufacturer to better compete in today’s increasingly competitive market.

Cisco made this move because it recognized that it had to refocus on its core networking business to fend off escalating challenges from Juniper Networks and a wave of new, offshore clone manufacturers who are threatening to commoditize its market.

But, Cisco’s mistake shouldn’t dissuade it, or others, from continuing to bridge the gap between the consumer and corporate worlds. The consumerization of IT continues to reshape the tech industry as ‘prosumers’ become more of the norm and the enpowered end-user weilds greater influence over IT corporate decision-maker. As more corporations encourage their end-users to work from home or the road, these end-users are making their own decisions about the network, storage and other IT gear, as well as the service providers, that will best support their needs.

Cisco succeeded in bridging the gap between enterprise and service provider (SP) markets in the 1990s when others like 3com and Lucent abandoned this dual market strategy. By selling to both, Cisco has persuaded xSPs that it was an essential supplier to their customers. The same value proposition holds in the consumer market which is increasingly an extension of the corporate world.

But, Cisco also recognized that it was at risk of attacking too many markets and allowing its core business to be undercut. Over 25 years ago, Novell’s demise made a series of acquisitions, including WordPerfect and Borland, to spread into new markets only to have its core business attacked by Microsoft, which led to its eventual demise.

Cisco’s failure to capitalize on the Flip camera is the most obvious example of the company’s recent acquisitions falling short of expectations. Cisco has also failed to leverage its WebEx acquisition to accelerate the adoption of its videoconferencing solutions and collaboration software. Now, WebEx is being threatened by a myriad of cheaper and easier to deploy web conferencing services.

Cisco hopes to refocus its resources on selling its Unified Computing products which promise to transform the way data centers operate to meet the growing demand for Cloud Computing services. But, Cisco’s push in this direction has only helped to galvanize HP’s efforts to strengthen its own server and system sales. Ironically, despite its own leadership problems HP continues to benefit from its growing presence in the consumer market. Meanwhile, not only is Cisco trying to determine how to gain a foothold in this market, but IBM is probably lamenting its decision to relinguish its PC business which removed it from the consumer market as well.

So, Cisco’s move doesn’t mean that there isn’t a synergy to be found between the consumer and corporate worlds. It just means that you need to focus on the right set of products and services to exploit.

The extraordinary success of Amazon Web Services’ (AWS) Infrastructure-as-a-Service (IaaS) solutions has prompted nearly every major hardware and software vendor to offer their own IaaS, Software-as-a-Service (SaaS) or Platform-as-a-Service (PaaS) solutions as well. This has put tremendous pressure on traditional hosting companies, communications service providers (CSPs), and Value-Added Resellers (VARs) to respond with their own offerings in this increasingly competitive marketplace.

This week, I had the opportunity to participate in a full-day analyst briefing and attend the kickoff session of Parallels’ 2011 Partner Summit. [Disclosure: Parallels paid my travel expenses to attend the event.] This year’s Summit built on the momentum of last year’s conference by unveiling numerous enhancements to its portfolio of Cloud enablement solutions, including:

• Parallels Automation for Cloud Infrastructure
• Hosted PBX
• Microsoft System Center Hyper-V Cloud
• Microsoft Office 365 Syndication

Parallels also promised to make an increased investment in its Application Packaging Standardization (APS) Program to permit greater portability of Cloud services.

What I especially liked about this year’s event was the way Parallels’ management team attempted to alleviate some of the anxieties among its partners and potential customers about the increasingly competitive Cloud marketplace by emphasizing the tremendous opportunities in the SMB segment and identifying industry best practices that can win hosters, CSPs and VARs success.

While the Cloud Computing market is evolving quickly, mainstream adoption of Cloud services among small- and mid-sized businesses (SMBs) is still embryonic. Parallels is attempting to accelerate the growth of this segement of the market, and help hosting companies, CSPs and VARs capitalize on this tremendous market opportunity with its Cloud enablement products and channel support programs. It is also expanding its role as a Cloud “broker” by recruiting  more Software-as-a-Service (SaaS) to participate in its service catalog.

The company also announced a leadership change with  Birger Steen assuming the CEO position and the company’s founder, Serguei Beloussov, retaining his positions of Executive Chairman of the Board and Chief Architect. Steen brings extensive business experience and strong Microsoft relationships which the company hopes will help it grow from approximately $100 million in revenue to $1 billion over the next five years.

An acquisition by Microsoft might come before it reaches this milestone. The company’s concerted efforts to align itself with Microsoft include many of this year’s product enhancements; moving its headquarters to Renton, WA; and adding other former Microsoft executives to its leadership team such as John Zanni, Vice President of Marketing and Alliances, who was formerly GM of Microsoft’s Worldwide Software + Services Industry, Communications Sector business unit.

A clear measure of Parallels’ growing presence in the Cloud enablement business was the larger number of attendees and sponsors it was able to attract to this year’s Summit. The energy and enthusiasm at the event also demonstrated the strong allegiance which Parallels’ partners feel toward the company.

With few vendors able to offer a comparable portfolio of Cloud enablement tools to hosting companies, CSPs and VARs, Parallels has an opportunity to grow quickly as its partners attempt to keep pace with the tremendous growth of the Cloud Computing marketplace.

The year of the Cloud has come to a climax at Salesforce.com’s Dreamforce conference in San Francisco where over 30,000 registrants converged to celebrate the rapidly expanding world of ‘on-demand’ solutions and collaboration tools.

Salesforce.com used the event to beat back the recent efforts of Oracle and Microsoft to gain a share of the Cloud Computing market with a new round of initiatives aimed at building on its phenomenal momentum and success.

The two most significant announcements on Day One were Salesforce.com’s offer of free Chatter accounts across its customer base along with a public version of the social networking service in February, and a new Database.com offering as a spin out of its Force.com Platform-as-a-Service (PaaS).

Day Two began with the news that Salesforce.com plans to acquire the Open Source oriented, Ruby-based application development platform, Heroku, for $212 million in cash. Salesforce.com and BMC Software also announced that they are joining together to offer RemedyForce, a new Cloud-based IT service management and support offering built on Force.com. Salesforce.com also unveiled SiteForce, a new and improved version of its website design tool which was introduced previously.

Talking About Chatter

A year ago, Dreamforce attendees responded to the unveiling of Chatter with a lot of apprehension about why they should permit a Facebook-like social networking tool into their organizations. In response to this lukewarm reception, Salesforce.com put its marketing engine to work to overcome this hesitancy and has generated growing customer acceptance. 

Much of the opening session of Dreamforce was focused on the practical benefits of Chatter in corporate environments through a series of demos of use-cases and customer success story testimonials. Salesforce.com also emphasized how Chatter bridges the old and new worlds of the business user by linking to Microsoft Outlook and mobile devices.

Salesforce.com announced Chatter Free to extend its reach further into organizations beyond the sales and marketing departments. This initiative will permit Salesforce.com users to invite others within their organizations to utilize Chatter, in the same way Facebook users can invite friends to join their social networks.

With less fanfare, but possibly of greater significance, Salesforce.com plans to also roll out a public Chatter.com service in February aimed at popularizing Salesforce.com’s social networking capability in the open market. Both these moves will broaden Chatter’s footprint within organizations and brand equity in the marketplace. These moves will also make the folks at Facebook rethink whether they should have pursued the corporate market rather than relinquishing it to Salesforce.com. It will also get the attention of SuccessFactors which has been proclaiming that its Business Execution Software solution has a greater installed base of end-users than Salesforce.com.

Fortifying Force.com

Salesforce.com isn’t just seeking to permeate the enterprises via Chatter. It also wants to convince the developer world, both independent software vendors (ISVs) and internal enterprise developers, that Force.com is a credible PaaS for a new generation of enterprise-class, Cloud-based, mobile apps.

In its typical style, Salesforce.com unveiled Database.com as a new capability even though it is actually a part of Force.com which has been unbundled to create a new standalone offering and point of entry to Salesforce.com’s PaaS environment.

The standalone Database.com capabilities are being offered to respond to the changing way in which applications and databases are being architected in a more pluralistic fashion in the Cloud. The goal of Database.com is to democraticize database development, and give Salesforce.com’s customers and partners another reason to expand their use of its applications and PaaS. 

Salesforce.com has also been working hard to fend off competitive claims and developer concerns that its Force.com PaaS is too proprietary. It made a strong move in this direction with its alliance with VMware earlier this year, which produced VMforce.

Salesforce.com’s acquisition of Heroku reinforces this point, quickly giving Salesforce.com a strong foothold in the Open Source/Ruby application development environment, and immediate access to the rapidly growing Heroku developer community.

Heroku is considered by many to be the top Ruby platform in the Cloud market. The company has experienced 50% growth in application development activity in the past few weeks alone according to its Founder/CEO during his keynote presentation. Heroku will maintain its brand and become Salesforce.com’s seventh Cloud offering.

The Heroku acquisition and Database.com are geared to the new world of social, mobile apps. They are also intended to offset Microsoft’s aggressive efforts to gain customer and partner acceptance of its Azure PaaS, and undercut Oracle’s ‘false cloud’ offerings which it calls “Cloud-in-a-Box”. The Heroku acquisition is also a dramatic contrast to SAP’s purchase of Sybase, with Heroku representing the rapidly growing world of Cloud-based applications and Sybase viewed as an old-world development vendor attempting to recreate itself around mobile apps.

As Salesforce.com’s executives strongly stated during an industry analyst/press briefing, the message which the company is trying to convey to the market with this acquisition is that Force.com will be open and that Salesforce.com is going to be a platform company. A number of enterprise customers confirmed the importance of Salesforce.com’s PaaS efforts in their decisions to select the company as a strategic vendor.

SaaSifying IT Management

Salesforce.com’s announcement of RemedyForce in conjunction with BMC is significant for a number of reasons.

It is the company’s first attempt to provide a solution aimed specifically at the IT organization which is increasingly embracing SaaS-based alternatives to traditional IT management software. I’ve been telling clients and others about that the SaaSification of IT management and why this trend in the Cloud Computing market eliminates another barrier to greater customer adoption.

It is also the first time Salesforce.com has teamed with another company to launch one of its product-lines, or “Clouds”. This represents an important endorsement for BMC, as well as a risk for Salesforce.com. Teaming with an established ISV is an interesting choice for Salesforce.com. Like every established ISV which has attempted to add a SaaS component to its portfolio, it hasn’t been an easy road for BMC. But, the company has a highly committed CEO and has built a SaaS solution on Force.com which is gaining customer acceptance in the market.

This alliance puts Salesforce.com in the peculiar position of depending on a partner for the success of one of its product-lines. It also renews questions and concerns among its other partners about who gets preferential treatment within Salesforce.com’s ecosystem and why.

Closing Thoughts

One of the lingering complaints about Salesforce.com’s solutions is their premium price. Marc Benioff even joked about this point in his opening remarks at Dreamforce and got a hearty laugh from the audience. In an attempt to capitalize on this issue, Microsoft has launced a marketing campaign offering $200/user rebates  to Salesforce.com customers who jump ship in favor of Microsoft’s Dynamics CRM Online.  Benioff made light of Microsoft’s PR ploy by bringing the actor/model who is pictured in the Microsoft ads on stage during the Day Two morning keynote session and successfully convincing him to come back to Salesforce.com.

All joking aside, Salesforce.com’s premium prices hasn’t slowed its tremendous growth and hurt customer satisfaction/retention rates, or diminished the enthusiasm of the customers and partners attending Dreamforce this year.

The buzz and activity at Dreamforce 2010 is not only a clear indication of the Salesforce.com’s growing success, but also an impressive illustration of the widening movement to the Cloud.

[Disclosure: Salesforce.com paid for my hotel accommodations during my attendance at Dreamforce.]

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.

Yesterday’s announcement that Ray Ozzie is retiring from Microsoft is newsworthy because he has been at the heart of the company’s efforts to keep pace with the rapidly evolving Software-as-a-Service (SaaS) and broader Cloud Computing movement.

Ozzie joined Microsoft when his company, Groove Networks, was acquired in 2005. Groove was an independent software vendor (ISV) trying to commercialize the groupware ideas which Ozzie had pioneered with Lotus Notes.

Around the same time as the acquisition, Bill Gates warned Microsoft’s employees of the far-reaching implications of the coming “Internet Tidal Wave” in an infamous internal memo which quickly became public and stated,

“This coming ’services wave’ will be very disruptive…Services designed to scale to tens or hundreds of millions will dramatically change the nature and cost of solutions deliverable to enterprises or small businesses.”

Ozzie issued his own memo warning about the “The Internet Services Disruption” shortly after he arrived at Microsoft in October, 2005, in which he stated,

“Computing and communications technologies have dramatically and progressively improved to enable the viability of a services-based model.”

Although Microsoft never fully implemented a set of collaborative solutions like Lotus Notes beyond its Sharepoint and Exchange capabilities, Ozzie was named one of the company’s three CTOs and eventually became Chief Software Architect after Gates retired from his day-to-day responsibilities. In this role, Ozzie assumed responsibility for leading Microsoft into the SaaS/Cloud world.

Over the past year, Microsoft has replaced its self-serving “Software Plus Service” mantra with a new “All-In” attitude about SaaS and the Cloud Computing, and rolled out its own Platform-as-a-Service (PaaS), called Azure. After being the brunt of industry jokes, it is beginning to regain its momentum in the software industry as a result of these moves.

So, why is Ray Ozzie leaving now that his vision is beginning to become a reality?

Since Ballmer and Ozzie aren’t offering a clear explanation, we can only speculate that Microsoft is still has a long way to go to achieving Ozzie’s vision and he doesn’t have enough energy to see it through. Or, the company isn’t really on the path to success and Ozzie is tired of trying to push it in the right direction.

Of course, it could also be a case of Ozzie simply looking to enjoy more time with his family, or recognizing that it is time for someone else to take the helm of Microsoft’s SaaS/Cloud efforts. But, these intentions and the name(s) of a successor are usually included in an announcement of this nature. This wasn’t the case in yesterday’s announcement.

Either way, it will be interesting to see where Microsoft goes from here and if its SaaS/Cloud Computing efforts are derailed by Ozzie’s departure.

NetSuite has unveiled a great video to promote its new Hairball Institute for Business and associated Award program aimed at curing “Software Hairball Syndrome” (SHS).

The video is a fun and effective way to bring attention to the fundamental flaws of pulling together an enterprise resource planning (ERP) system, including the endless integration, customization and support issues.

However, NetSuite’s video and award program takes aim primarily at applications focused on the individual piece-parts of an ERP system in the small- and mid-size business (SMB) segment of the market, specifically inventory and project management represented by Microsoft Great Plains and Project, financials illustrated by Intuit QuickBooks, and eCommerce exemplified by Websphere. It also can’t help itself and includes its sibling rival, Salesforce.com, as a ’standalone’ CRM solution vendor.

Yet, the real culprits of this syndrome are the bigger players–SAP and Oracle–along with a myriad of like-minded legacy software vendors. Unless NetSuite has another video and award program up its sleeve, it has missed an opportunity to squarely attack the source of SHS.

This is unfortunate because NetSuite has attributed much its recent success to the inroads it has made penetrating the regional offices and other business units within large-scale organizations who were either fed up with their legacy enterprise applications or unwilling to go down the on-premise app path.

Unlike Salesforce.com which has always been very clear through simple and straightforward messaging about the on-premise vendors who it is seeking to displace, NetSuite too often obsures its message about its primary competitors while trying to set itself apart from other SaaS vendors, and undercuts its effectiveness.

But, this is a nuance which does not seriously diminish the terrific job NetSuite has done with its latest marketing program. Instead, the video and award program should strengthen its position in the market, and help the rest of the SaaS/Cloud Computing community articulate the shortcomings of traditional software.

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.

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.