Tag Archives: SaaS

IBM Needs to Learn the “Other” Software Business

A recent IBM briefing for Saugatuck helped to clarify the breadth and depth of IBM’s Cloud / SaaS portfolio, business strategy, approach, and results. We came away with two key net takeaways:

I.         IBM certainly has a broad, deep, useful, and valuable SaaS portfolio. Almost quietly, it’s long-standing positioning as a provider of software, but not applications, has shifted. Mostly through SaaS acquisitions, IBM today is a very significant and competitive business applications provider. One big example: the $1.3 billion acquisition of HCM / Talent Management SaaS provider Kenexa in 2012 (see Forbes article).

According to our recent briefing, IBM’s SaaS portfolio now includes over 120 busienss applications – across a range of functional roles (e.g., customer service, finance, human resources, marketing, procurement, sales) and solution categories (e.g., advanced analytics, BPaaS, Smarter Cities, Watson). By our estimates, IBM is already realizing more than $1B in annual revenues from this portfolio, and we expect Big Blue to at least double their current SaaS revenues within the next 18 months as this portfolio continues to grow (by acquisition and internal development) reach 150-200 by YE2015.

II.         But given the acquired nature of much of that portfolio, IBM still faces substantial needs for, and challenges in, organization, coordination, integration, and go-to-market approaches for the assembled Continue reading

Architecture’s Role in Enabling Innovation – Cloud Business Applications Panel (CBS2013)

On September 25, 2013, Saugatuck held its 3rd annual Cloud Business Summit at the Westin Times Square in New York City.  As with prior Summits, our event brought together more than 100 large-enterprise CIOs, CTOs and senior business and finance leaders – to explore how they can and are realizing value from the Cloud. This year’s conference theme was “Rethinking Business Innovation.

In this featured panel, Saugatuck Technology VP and Distinguished Analyst Mike West is joined by Rick Lloyd, Director Technology Strategy and Planning at Pitney Bowes, Jason Prater, VP Development at Plex Systems, Mark Nittler, Vice President Enterprise Strategy at Workday, and Vikram Nair, formerly CIO at Pfizer Animal Health, focusing in on the impact that the API Economy is having on IT architecture and providing best practice guidance on how best to navigate for the future.

In transition to the Boundary-free Enterprise™, as mobile, social and advanced analytics become part of how we do business, opportunity arises for Continue reading

The Rise of Systems Management-as-a-Service

Adoption of Cloud offerings is expanding rapidly. Based on on-going discussions with Cloud users, Saugatuck has identified that the focus of IT organizations is evolving while they are learning “rules-of-thumb” about ongoing operations of Cloud-based workloads. Together there is a likely evolution of customer requirements related to Cloud. Saugatuck recently published a Strategic Perspective which projects a shift in the focus of IT organizations when adopting and using Cloud-based offerings through three overlapping phases:

  • Phase 1: Conventional – Infrastructure deployment.
  • Phase 2: Growing – Infrastructure optimization.
  • Phase 3: Emerging – Support and Delivery Services. Continue reading

Managing Risk While Leveraging the Cloud – CFO/CIO Panel (CBS2013)

On September 25, 2013, Saugatuck held its 3rd annual Cloud Business Summit at the Westin Times Square in New York City.  As with prior Summits, our event brought together more than 100 large-enterprise CIOs, CTOs and senior business and finance leaders – to explore how they can and are realizing value from the Cloud. This year’s conference theme was “Rethinking Business Innovation.

In this featured panel, Saugatuck Technology founder and CEO Bill McNee is joined by Vinay Mehra, CFO at WGBH, Ed Beesley, CIO at SGS, and Gary Lynch, Managing Director and Global Practice Leader at Marsh to discuss how and where the Office of the CFO is embracing the Cloud, as well as how it is managing the risks associated with Cloud becoming ubiquitous across the enterprise.

After years of deploying high-payback but tactical Cloud solutions in areas such as Tax and Cash Management, Saugatuck research indicates the beginning of a substantial and rapid move by Finance groups to embrace Cloud for core accounting functions and operations over the next three years. This panel discusses Continue reading

IT Takes the Lead With SaaS / Cloud Going Mainstream

What is Happening?

During IBM’s Connect user conference in Orlando this week, the company released the results of its latest global user survey regarding adoption and use of Cloud-based software-as-a-service (SaaS). IBM classed each of the 879 IT and LOB survey participants into one of three enterprise user profiles: Pacesetters (self-characterized as having relatively high rate and pace of SaaS adoption), Challengers (self-characterized as having significant, but not widespread adoption and use of SaaS), and Chasers (self-characterized as having relatively low rates and paces of SaaS adoption and use).

While IBM has begun using the survey results overall to help position and promote SaaS as enabling powerful competitive advantages, Saugatuck sees some key aspects of the survey data as more important – and as critical elements in understanding why some firms are more advanced and successful users of SaaS (and other Cloud-based IT).

The key aspects noted: the most aggressive adopters and beneficiaries of SaaS / Cloud share some important characteristics regarding the function and relationship of IT and LOB leaders. IBM’s data and findings complement and support a position that Saugatuck has long espoused, to wit: the role(s) and attitudes/approaches of IT leaders and groups would change as SaaS / Cloud becomes more mainstream, and as it becomes more important to business success. Continue reading

While Still Early, Cloud-based Manufacturing Beginning to Come of Age

Earlier today, Saugatuck had a good call with Jason Blessing, the new CEO at Plex Systems, who joined the company in early 2013. Saugatuck has been tracking Plex for more than 5 years – as we have long viewed it as an innovator in Cloud-based business software targeting primarily discrete manufacturing. While the firm has a strong heritage in the auto sector, we were pleased to hear that Jason has several new initiatives underway to help it not only strengthen the core but broaden the firm’s focus to appeal to other manufacturing sectors as well.

Jason was previously part of the leadership team at Taleo, which was acquired by Oracle in mid-2012. He brings to the job some very strong (and relevant) product and general management leadership skills, given his experience is creating, growing and scaling a Cloud-based apps business. As he explained in the call, in June 2012 the firm was acquired by Francisco Partners (from Apax), a San Fran based PE player. In December, an additional $30 million infusion was made by Accel Partners.

Built from the shop-floor up, and primarily targeting mid-range discrete manufacturers, Plex has grown nicely from the low $20 million range (when we first met them years ago) to greater than $50 million in revenues as of YE2012. Blessing shared that he thought the business could grow 20 percent in 2013, but accelerate to a faster pace in 2014 and beyond given the new investments that are now being made (with the new capital infusions). The four investment areas he emphasized included:

  • Product: 2013 R&D investments to bolster and strengthen its core auto-centric backbone.
  • Industry: 2013 R&D investments to create new and unique industry versions for the Food & Beverage sector (which will be a great “process” industry proof-point), and for Aerospace & Defense.
  • Geo: Assess/evaluate how best to serve customers internationally – potentially with new office infrastructure vs. just having local talent in country – specifically in Europe (Germany), Asia (China) and Latin America (Brazil).
  • Sales & Marketing: 2013 investments to create greater brand awareness, and put significantly more feet on the street (sales) – specifically plans to double the size of the sales force by YE2013.

With the investments currently underway, we see little reason not to assume that Plex can join the club of $100 million + size Cloud business software players within three years – potentially leading to an IPO before long. The issue is how quickly customer demand for Cloud-based business software will begin to more broadly accelerate in the manufacturing / logistics / transportation segments – as these are massively sized markets, with significant opportunity once the knee in the curve is achieved.

While early and sustained Cloud customer adoption has focused in the CRM and Collaboration/Social spaces (Phase I), and more recently for upper-mid and large enterprises in the HCM space (Phase II) – Saugatuck believes that we are just now witnessing the beginnings of the third and fourth Phases of Cloud business solution demand – focused respectfully on the Finance function, and around discrete / process manufacturing (see 1131RA – The 3rd Wave – The Emergent, Impactful Era of Cloud Financial Apps) – that will likely play out over the balance of the decade.

No doubt, Plex brings a wealth of broader ERP functional capability beyond its shop-floor manufacturing strengths. But our sense is that the firm is clearly focused on staying true to its manufacturing DNA, and mid- and upper-mid market target customer, so that it can remain a market leader as this sector heats up significantly in the coming years. Competition will be fierce, as traditional ERP giants SAP and Oracle reposition themselves for the Cloud, as will other on-prem players such as QAD, Epicor and Infor (among others). The players to especially watch, in our opinion, however, are the next-gen pure-Cloud players such as Rootstock, Kenandy and others – who while lacking in depth today, have the potential to catch up to Plex, given time and substantial investment – although this will not be a trivial catch-up.

Likewise, pure-Cloud players such as NetSuite will clearly want to play even bigger than they currently do in the manufacturing space over time, as this segment accelerates, as might juggernaut Workday – although they currently have their hands full managing the growth of their Financials and HCM businesses.

Interestingly, the route to larger enterprise manufacturers for Plex appears to be at the BU or divisional level, as companies explore a 2-tier ERP/manufacturing play. While most large enterprises are not prepared to give up their SAP R3 or Oracle corporate headquarters footprints, deploying Plex in a 2-tier ERP/manufacturing system architecture appears to be a very viable option for many companies, given the half dozen or so billion dollar (+) size accounts that Plex maintains.

This follows a similarly path that Netsuite has successfully used with their Financial suite, selling at the BU or divisional level as part of a 2-tier Financial roll-up – in accounts well-entrenched at corporate headquarters with SAP and Oracle financial footprints.

Saugatuck Research: Windows Azure Insight from ISVs and SIs

Saugatuck has studied the Windows Azure platform in depth over the past two years. This has included briefings by Microsoft as well as extensive interviews with ISVs and global systems integrators (SIs) that have migrated or built nearly 150 SaaS solutions on the Windows Azure platform.

Based on this research, Saugatuck has found that the Windows Azure platform provides migrating ISVs (and SIs deploying primarily for corporate customers) with a highly-productive, robust and cost-effective platform for enabling efficiency, effectiveness, and innovation in delivering SaaS solutions, as one ISV commented:

  • If you’re a Microsoft house on SQL server, you might as well move to Windows Azure. Make Windows Azure your target platform and don’t maintain two separate versions.”
  • Architecture is of profound importance. Good architecture brings agility and cost-effective quality solutions.

We note that in order to realize the benefits of the platform, architecture that understands the platform and its design constraints is considered essential. However, there are significant challenges in getting up to speed on Windows Azure as a platform and in learning how to work around design constraints that can cause delays and increase expenses, for example:

  • Deployment of packages and VM roles from on-premises development still a challenge despite improvements in Azure Development Services Portal. Evolving VM roles and SQL Azure feature set are possible workaround tools.
  • Because of no certainty of achieving certifications or their timing, interim workaround solutions recommended, e.g., hybrid data storage for on-premises storage of regulated data that cannot reside on platform.

Despite these design constraints, Saugatuck believes Windows Azure remains a viable platform to accelerate an ISV into SaaS and recommends ISV consider exploring a relationship with a Windows Azure SI partner to accelerate implementation, avoid wasted expense, and implement a long-term viable solution.

Note1: Ongoing Saugatuck subscription clients can access this premium research piece (1023MKT) by clicking here, and inputting your ID and password. Non-clients can purchase and download this premium research piece by clicking here.

Note 2: For more on Saugatuck’s assessment of Windows Azure, see companion Strategic Perspective 1016MKT 10 Things To Know About Windows Azure, 27 January 2012, or Lens360 blog post Microsoft Azure Update: Ten Things You Need to Know, 01 February 2012.