No matter how you shuffle the IT Vendor deck, the same cards stay up top

As part of an ongoing partnership with the good people at The Rust Report, I had the following article published yesterday – as usual my aim was to question some of those things we take for granted, let me know what you think…

Recently I was reading one of those CXO surveys in ZDnet (http://www.zdnet.com/enterprise-tech-vendors-sizing-up-the-next-gen-field-7000035317/), using it to challenge my view of the IT marketplace.

These articles are often the same. You can take them with a pinch of salt, but there’s always a degree of useful insight. The articles’ main aim is to alarm you. This one was no different: “the most favored vendors are likely to be reshuffled in the next two to three years…IT leaders will have to make bets very carefully.”

However, ultimately I found that my existing view remains unshaken: The Big Four vendors of most relevance in the IT marketplace will continue to be Oracle, Microsoft, SAP and Google for the foreseeable future. Let me explain why…

The principle point of the article was about speed of innovation: “don’t get locked into a vendor that won’t be able to be an innovation partner” warns reputed journalist Larry Dignan. The premise being that the exciting and innovative companies to watch out for – such as Salesforce, Servicenow, Workday etc – could be the new IT giants of the tech world because they are innovating faster and leaving the incumbent players behind. But while this view is exciting and a compelling angle for the media, how realistic is it…really?

The Enterprise IT landscape changes actually quite slowly when you think about it. Salesforce is 15 years old this year and if you take the view that it was its founder Marc Benioff that innovated the cloud, then the process of cloud adoption in the Enterprise has been extremely slow – compared to, say, how quickly the consumer mobile phone market ‘turned on a dime’ in the middle of the last decade. In that time, both Microsoft and Oracle have built impressive cloud offerings that now rival pure-cloud players like Salesforce and Amazon in terms of revenue. While they might innovate slower, that doesn’t mean that The Big Four’s relevance is any less.

This image of CXO views of future vendor relevance is very interesting.

Source: ZDnet

With the exception of VMware and Cisco, the only vendors with a “more important” rating of 30 per cent or more are The Big Four: Oracle, Microsoft, Google and SAP! Furthermore, when you look at reasons for rating these vendors “more important” in the future, ‘dependability’ is second but ‘innovation’ is third at 51 per cent (relevance is first at 70 per cent). That is because IT buyers instinctively know that these players will always add value, even if they don’t yet know what that value will be. To this point, the article makes one solid message: “Think of your large vendors as a series of divisions that aren’t created equal. Some units may be worthwhile even as you resist the cross-sell and lock-in pitches.”

Oracle and Microsoft are excellent examples of this – The Big Four vendors have extremely innovative and nimble business units within them, competing aggressively with their colleagues for customer wallet-share. The large players have deep pockets and can afford to experiment. If they can’t innovate, they can acquire – as the rush of marketing automation software purchases in recent years has shown.

While these business units are less nimble because of horrendous behemoth-bureaucracy, they have two crucial advantages. They are protected from failure far more by cross-subsidies from the more established product lines; and they have access to gold-standard customer focus groups the smaller players can only dream of. Just look at what is happening now. The once nascent SaaS lines within Oracle now define the corporate strategy; HANA is driving much of SAP’s momentum, and Microsoft’s Cloud business has just delivered the new CEO! Moreover, while Google’s Cloud, search and apps products are most prominent, their emerging robotic, wearable and AI divisions will drive the agenda for the next decade.

But as a customer, take heed of Mr Dignan’s advice – your role in the success of these more innovative business units is an important one every time you sit down to renegotiate a deal on your traditional legacy systems and services. The Big Four will perpetually leverage their commercial advantages to stay crucially relevant at the innovative cutting edge; while at the same time continuing to deliver value at the legacy end of the spectrum too.

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The TCO of Cloud

This is an article I had published in October on The Rust Report

ImageWhile it is perfectly understandable that Larry Ellison missed his own Keynote at Openworld so he could watch his yacht do battle in the America’s Cup; what is harder to understand is that the entirety of the content – ultimately delivered by his chief engineer, Thomas Kurian – was about Cloud.

Cloud, after all, only represents between 3 and 10 per cent of Oracle’s overall revenue (depending on how you crunch the numbers).

It seems only five minutes ago that – quite rightly I think – Larry Ellison derided the IT industry for being “worse than the fashion industry” in its obsession with the Cloud.  But more telling perhaps was his comment that, “I’m not going to fight this thing”.

He certainly hasn’t and of late he has become more the “Sugar Daddy” of Cloud.  The original angel investor in Salesforce.com and Netsuite a few months ago announced Cloud-based deals with many of his competitors including Salesforce and Microsoft.  Larry is having a bet both ways.

But is Cloud all it has cracked up to be?  I want to talk in particular about applications delivered as-a-service, rather than merely “hosted” computing resources.  SaaS brought much needed nimbleness to the industry.  Deploying it is cheap, there’s no hardware to buy and the subscription model famously makes it easy to buy on a corporate credit card, circumventing roadblock IT departments.

However, as many companies are beginning to discover, Cloud isn’t the panacea it was once thought to be.  Did anyone do proper Total Cost of Ownership (TCO) studies?  What were once quite manageable self-contained deployments of CRM-on-demand, for instance, are now having to be deployed company-wide with a huge associated integration costs; not to mention the pain of harmonizing data models and user environments.  (Let’s not even get into the security and sovereignty issues!)

What does this cost in terms of consultancy hours, lost opportunity and the agony of internal political division?  How does this compare with the visible and predictable – albeit expensive – costs of existing legacy on-premise deployments?

Also, it isn’t just CRM now, with vendors like Workday or Marketo becoming so mainstream, and then established players like Adobe and SAP moving into this space; identity and access is a nightmare for most IT departments.  At least with on-premise the same IT people had a strategy.  Now there is a plethora of applications breaking out that those required to manage them didn’t even chose.

And SaaS vendors are now just as guilty of three-year license deals and a “good luck with that” attitude to roll-out success.

So perhaps it is too soon to write off the on-premise model – secure, predictable and reliable as it is.  Lets consider hybrid models more carefully and lets treat Cloud computing as an option, and not the promised land the industry would have us believe.  There is of course an important role for cloud and particularly SaaS, but the business case should be thought through more soberly and the parameters of that role should be more closely defined.

Because caught in a private moment, many Oracle executives will confess: “on-premise still keeps the lights on”.