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Monday, February 28, 2005

SAP targets retail industry with acquisition of Retek

SAP is filling out its functionality for the retail sector with the acquisition of Retek, one of the top vendors of retail management software.

Although SAP does not typically do big acquisitions, it does go after point solutions to build up its technology (e.g. its acquisition of TopTier a few years ago), or, in the case of Retek, to round out its offerings for specific industries. In acquiring Retek, SAP gets products that are deep in retail industry functionality, such as merchandising, multi-channel retailing, retail supply chain management, and demand planning. It also adds more than 200 customers in more than 20 countries to its customer base, including some big name retailers such as Tesco, Best Buy, Gap Inc., Sainsbury's, and Selfridges.

What's really interesting, though, is how rich SAP's offer is. SAP is offering $496M in cash for Retek, which is 2.8 times Retek's 2004 revenue--a pretty rich valuation. As of this writing, Retek shares are up a whopping 40% on the announcement, which shows just how far SAP's offer is above the market price for Retek.

So, why is SAP willing to pay so much for Retek? I think this is yet another response of SAP to Oracle's acquisition of PeopleSoft. PeopleSoft has pretty good penetration of the retail industry, including a partnership with JDA, a direct competitor to Retek. I suppose SAP could have gone after JDA, but it would have risked a bidding war with Oracle. So, Retek became the target.

There's more information in a press release on SAP's web site.

Related posts
SAP slams Oracle's strategy as, Project Confusion
SAP to provide maintenance for PeopleSoft products
Microsoft and SAP: the merger that didn't happen

Friday, February 25, 2005

Getting data backup religion

Regular readers may have noticed that I haven't posted to the Spectator in about a week. But I have an excuse: the complete failure of the hard drive on my main machine--a Dell laptop. Dell was superb in replacing the hard drive. But then I found that the CD drive was also defective, making it impossible to rebuild the operating system until I got a warranty exchange on the CD drive as well. Working through these problems, while trying to get my regular job done, didn't leave me a lot of time to post to the Spectator.

That's the bad news. The good news is that I've been doing regular weekly backups, and the most recent backup was only two days old. So I was able to recover the machine with very little loss of data.

In over twenty years personal computing, this is the first time I've ever lost a hard drive. But without that backup, the results would have been disastrous: loss of personal, corporate, and client information that would have been impossible to recover. I can't even begin to imagine what I would have done if I hadn't had a recent backup.

When I tell this story, I get nearly the same response from everyone: a resolution to start doing regular backups. One associate was actually burning CDs within 15 minutes of hearing my story.

I wonder whether companies, especially small companies, realize how much they are at risk for the loss of valuable company data that exists only on the hard drive of some key employee.

So, if you're not already doing so, why not put a regular backup routine on your weekly calendar? When you need to use it, you'll be glad you have it.

And, if you are a CIO or CFO, why not review your corporate policy regarding responsibility for backup and recovery of desktop and laptop data. Then, especially in the case of laptop computers, do a pop quiz on how many key employees are actually following the policy.

Friday, February 18, 2005

Oracle to benchmark its customer support against SAP's

In a sign of how critical Oracle views its annual maintenance business, Oracle is conducting a benchmarking study to see how well its maintenance and support services stack up against SAP's. A solicitation has appeared on the OAUG web site:
The Oracle Applications Users Group (OAUG) and the Oracle Support organization are partnering to determine the effectiveness of how Oracle Support reaches end users — from the time a support contract is signed and the customer receives a welcome letter through to logging a service request and securing resolution. The OAUG and Oracle would like to interview customers that run Oracle and SAP products and are willing to share experiences about both support organizations. The ideal customer candidates should have experience with both support organizations.
If you want to participate, follow the link to get the email contacts.

This benchmarking study is another salvo in the battle between SAP and Oracle. It follows SAP's sharp comments last week, designating Oracle's product strategy as "Project Confusion," and Larry Ellison's veiled threats to SAP concerning SAP's acquisition of TomorrowNow, a PeopleSoft third-party support organization.

Related posts
SAP slams Oracle's strategy as, Project Confusion
Ellison threatens SAP regarding PeopleSoft support
SAP to provide maintenance for PeopleSoft products

Wednesday, February 16, 2005

SAP slams Oracle's strategy as, Project Confusion

Sparks continue to fly this week between Oracle and SAP. The latest flame is from Leo Apotheker, SAP's president for global field operations:
Commenting on Oracle's product development roadmap whereby it aims to bring together the best from the Oracle, PeopleSoft, and JD Edwards application suites in a single product currently known as Fusion, he said: "I'm not sure if fusion is the right word, maybe it should be confusion. No one has succeeded in combining four code bases into one."
Apotheker compared Oracle's strategy to that of Microsoft, which plans to merge the code base for its four separate enterprise system offerings into one new product, code named Project Green. That effort has been delayed as Microsoft has found it a bigger job than it envisioned. SAP, no doubt, hopes that Oracle will face similar difficulties.

Apotheker also contrasted SAP's service oriented architecture, branded Netweaver, to what he called Oracle's "data centric view." A service-oriented architecture allows different software products to interoperate, based on open web services standards. Oracle has been slow to embrace such a view, encouraging customers to implement Oracle's E-Business Suite, over a single database instance, throughout the organization, making such interoperability unnecessary. Interestingly, just prior to its takeover by Oracle, PeopleSoft had embraced a service oriented architecture in its product roadmap. Those plans, of course, are now scuttled.

Computer Business Review has more on Apotheker's comments.

Related posts
Ellison outlines direction for PeopleSoft and JDE product lines
Microsoft slowing down Project Green
Oracle's new reseller strategy and speculation on the future of JDE
Microsoft to put enterprise applications on the auction block?
Microsoft eats more humble pie in enterprise software business
Pass the Kleenex (regarding SAP's complaint that Oracle's bid for PeopleSoft was leading to pricing pressure)

Tuesday, February 15, 2005

Microsoft to put enterprise applications on the auction block?

Josh Greenbaum is pointing me to his article in Datamation last week, where he speculates that Microsoft Business Solutions (MBS), the unit that sells Great Plains, Axapta, Navision, and Solomon, is doing so badly that Microsoft might want to actually unload it.
At a minimum there's a lot of egg on Redmond's face about this multibillion-dollar white elephant called MBS. It's the second-smallest business unit in the family -- only mobile devices is smaller -- and it's raking in the biggest losses. At least the losses slowed down a little last year: MBS only dropped $70 million in the second half of 2004, compared to a $193 million loss in the second half of 2003. Revenues are growing, though the year-to-year growth in the last quarter of 2004 was less that one-half of one percent.
Beyond the dismal financial results, Josh relates a string of bad news for Microsoft: the new version of Axapta looks to be a year behind schedule; the next generation rewrite of the four main applications, Project Green, has been delayed; Microsoft had no viable offer for PeopleSoft customers; and, there are conflicts and consolidation issues among its resellers. He concludes,
At a certain point one begins to feel sorry for the MBS gang. I'm sure they mean well, and I know from my contacts in Denmark that Axapta and Navision are great products. But one really has to wonder how long Microsoft will keep plugging away at something that is clearly outside its core competence. That's why I keep thinking they're going to sell the business and get back to their knitting.
Josh wonders whether Microsoft's threshold for pain is high enough to sustain itself through these tough times, or whether it will prefer to unload the entire business. I say that Microsoft sticks it out, because it needs the presence in the applications market to pull through sales of its operating systems, database, tools, and infrastructure technologies. Microsoft can afford to throw money at the product problems, which I think it will eventually overcome.

But the problems in the reseller channel will be more difficult, because Microsoft is not entirely in control there. As I have pointed out in the past, the secret of enterprise system sales in the small and mid-market is the reseller channel, and there are simply not that many really good resellers out there. A month ago I would have said that Microsoft had a good shot at picking up some of the J.D. Edwards partners; but it now appears that, wisely, Oracle is going to strengthen the JDE channel, not eliminate it. So, Microsoft is going to have to continue to compete for resellers with Oracle, SAP, Lawson, Epicor, QAD, Infor, and every other vendor that is targeting the mid-market. It won't be easy.

Related posts
Is Microsoft dying?
Microsoft wants PeopleSoft customers but doesn't have much to offer
Microsoft eats more humble pie in enterprise software business
Microsoft: selling enterprise software is a "humbling experience"
Microsoft Longhorn cutbacks threaten Project Green
Microsoft Business Solutions is setting the stage for big-time channel conflict among resellers
Oracle's new reseller strategy and speculation on the future of JDE
Clash of the titans (regarding battle between SAP and Microsoft for resellers)

Monday, February 14, 2005

IT: strategic investment or cost of doing business?

The CEO of a small publicly traded company has launched an anonymous blog, the CEO Blogger, as an exercise to "see what this blogging phenomenon is really about." Good for him! His blog is only a couple of weeks old, but it's a great read.

Interestingly, the very first post after his introduction is entitled, "IT Propaganda," where he puts forth the view that much IT spending is unnecessary.
IT is not a profit center, it's a cost center. Once your IT department grows past the minimum size needed to maintain your company, additional money spent on IT is a loss. But IT is always trying to shake down extra unnecessary money in order to bleed away profits.
I think that last sentence is a bit over the top. Just as most functional heads try to get additional budget to do their jobs, so do IT managers. But to attribute such budgetary requests as a "shake down" motivated by a desire to "bleed away profits" of the corporation is just...well, it makes me think that this CEO has had some really bad experiences with his IT group. Or, he's just trying to be provocative.

Hyperbole aside, CEO Blogger has waded into an ongoing debate in the IT community concerning the role of information technology. Is information technology a strategic investment that should be leveraged to produce a competitive advantage? Or is it a utility that should be managed to lowest cost once minimal levels of service are established? The latter view was most recently put forth by Nicholas Carr, in a Harvard Business Review article entitled, "IT Doesn't Matter," which the staff of HBR voted the best article to appear in the magazine during 2003.

My view is that whether IT is a strategic investment or a utility cost depends on what the company needs information technology to do. If information technology is a key element of the firm's product, service, operations, or strategy, then IT should be viewed as a strategic investment. Firms such as Wal-mart, which uses information technology to drive costs out of the supply chain is a good example. Walmart, which one does not think of as a technology company, in fact is a leading force in adoption of new technologies, such as Internet-based EDI and RFID.

On the other hand, if information technology is not a key element, then it should be viewed as a cost of doing business, seeking to maintain acceptable levels of service with managed levels of risk, at the lowest cost.

Of course, there are several positions that a firm may take between these two ends of the spectrum. One may view IT as a strategic investment but still not be leading the charge for new technologies, as Walmart is doing. On the other hand, one may view IT as a cost of doing business yet still make significant investments in new systems as a platform for growth.

What's needed, then, is for management to step back and decide what are the objectives for information technology, how well do the current systems satisfy those needs, and what are the actions, resources, and spending needed for IT to meet those objectives--in other words, an IT strategy.

Related posts
IT decisions that are too important to leave to the IT department
Aligning IT, when there's not much to align to
Escaping the ROI trap
Wal-Mart launches RFID pilot, but will privacy concerns stall adoption?
Wal-mart still pushing its suppliers to Internet EDI

Sunday, February 13, 2005

Oracle's new reseller strategy and speculation on the future of JDE

Details are emerging on Oracle's new reseller program, which is of great interest to the 40 resellers of its combined products. Furthermore, it has important implications for the future of the J.D. Edwards products.

But first, some background. Oracle held a big partner meeting at the Moscone Center in San Francisco on January 29-31, and here's the bottom line, based on discussions with several individuals who were there: Oracle is building a reseller channel for its E-Business Suite and wants to strengthen the existing reseller channel for the JDE products. There will be no resellers for the PeopleSoft products, and Oracle's direct sales force is being discouraged from selling them, except in a few specific industries.

Key elements of Oracle's reseller strategy
Oracle does not seem to have made any public announcements about this yet, and might choose not to do so. Nevertheless, here's what I've been able to piece together:
  1. Oracle has signed up 16 channel partners that are allowed today to sell Oracle's E-Business Suite to companies up to $75M in annual sales. Starting June 1, the bar will be raised to $100M. These resellers are authorized for specific geographic territories, which avoids conflict between resellers.


  2. The 24 JDE partners that PeopleSoft kept on board will continue to be allowed to sell the JD Edwards products (Enterprise One and World), to companies under $100M in annual revenue, which was the bar that they've always operated under. However, on June 1, that bar will be raised to $500M. Unlike the Oracle resellers, the JDE resellers are not restricted by geography, meaning they can hunt for new JDE business anywhere. A few of these partners are also authorized to sell Oracle's E-Business Suite in certain territories to companies under $100M.


  3. Interestingly, the Oracle direct sales force is not allowed to sell the JDE products, except in a few industries where JDE has particular strength over Oracle, such as homebuilders. Otherwise, only the resellers are allowed to rep those products. So, if you are a company over $500M in revenue, you won't be able to buy JDE products, unless you are in a few selected industries.


  4. The local Oracle direct sales force will be compensated on JDE partner sales, however, which will help mitigate the problem of competition between Oracle's direct sales force and the JDE partners.


  5. PeopleSoft, prior to the JDE acquisition, did not have a reseller channel, and Oracle does not intend to create one. So, if companies want to buy PeopleSoft applications, they will have to go direct to Oracle. However, Oracle has previously announced that it will steer new prospects away from PeopleSoft applications in favor of Oracle's E-Business Suite. Oracle is now making a few exceptions to this policy, in industries where PeopleSoft is particularly strong, such as higher education.


  6. For JDE Enterprise One customers that are not running on Oracle technology (i.e. those running on Microsoft SQL Server, or IBM's iSeries), Oracle wants the resellers to "nudge" them toward Oracle's database and middleware. No surprise here, and I predicted this would be a key objective in Oracle's acquisition of PeopleSoft.

As a side note, individuals who were in the partner meeting were surprised by Oracle's evaluation of its product strengths versus those of PeopleSoft and JDE. For example, Oracle initially indicated that its own HR applications were as good as PeopleSoft's, and that Oracle's offerings for the engineering and construction industry were as good as JDE's. The partners, many of whom have deep real world implementation experience, scoffed at both assertions. One source told me, however, that Oracle's position seemed to soften toward the end of the partner meeting, indicating that they are working things out as they go along.

Assessment of Oracle's reseller approach
Oracle is notorious for poor channel relationships, changing partners and strategies at the drop of a hat. It was just a few years ago, after all, that Oracle had partners reselling its applications to small and mid-sized businesses. Around 1999, Oracle suddenly decided to switch back to a direct selling model and put many of those resellers out of business or forced them to find something else to sell. Now it has decided that resellers are the way to go: a six year pendulum swing. To be fair, Oracle indicated in the partner meeting that it is aware of its poor reputation for partner relationships and wants to do better in the future.

On the other hand, if Oracle can build and maintain the channel relationships that it has, I think it has a winning strategy in place. I especially like the fact that they are moving the bar up to $500M for the JDE partners. The JDE partners were always chafing under the $100M limit, which left the better deals for Edwards's direct sales force. Moving the bar up to $500M gives the resellers a lot of room to work. Too bad Oracle is not doing the same for its E-Business Suite resellers.

However, there may be problems with Oracle and JDE resellers competing with one another for the same deal. Our consulting firm, Strativa, often short-lists both Oracle and JDE in the same deal, and based on Oracle's apparent interest in selling JDE, we'll continue to do so. But I wonder what Oracle will do in cases where there is an Oracle reseller and a JDE reseller quoting on the same deal. Hopefully, they will let them both chase the deal and let the buyer decide who wins.

Speculation on the future of the JDE products
Putting all of these points together, it's hard to avoid the conclusion that Oracle is making it easy for prospects under $500M to buy either Oracle's E-Business Suite, or the JDE products (Enterprise One and World). But it won't be easy to buy PeopleSoft's Enterprise product. It's not clear why Oracle is treating the PeopleSoft products differently from the JDE products, but here's one possibility: Oracle wants to preserve its option to sell off the JDE products sometime in the future.

Oracle clearly wants to move as many of the PeopleSoft and JDE clients as possible to Oracle's E-Business Suite. Failing that, Oracle would like to "nudge" them to run those applications over Oracle technology. Failing that, Oracle would like them to upgrade to Project Fusion when it is available. Failing that, Oracle will continue to support the PeopleSoft and JDE products until 2013.

However, maybe at some point, Oracle decides that those JDE customers that are not willing to get with the program are worth more to someone else. This would be especially true with the older JDE World product, which runs exclusively on IBM's iSeries platform. At that point, Oracle might decide it would be better for everyone involved for Oracle to sell off the JDE products and the remaining customer base for them.

Now, if Oracle does decide to sell off the JDE business in the future, it will fetch a much better price if there is a robust reseller channel in place. This might explain why Oracle is building the reseller channel for JDE but not for PeopleSoft.

Further bolstering my speculation is the fact that Oracle is reviving use of the J.D. Edwards name, reversing PeopleSoft's move to brand the JDE products as PeopleSoft. Once again, Oracle appears to be preserving a separate identity for the JDE products, which would be important if in fact Oracle ever decides to spin off these products.

If any readers have additional information or corrections regarding what I have outlined in this message, please feel free to leave a comment on this post or email me privately.

Related posts
Oracle to steer new customers away from PeopleSoft products
Oracle: no plan to spin off JDE product lines
Ellison outlines direction for PeopleSoft and JDE product lines
Oracle, IBM, Microsoft battle for technology infrastructure of PeopleSoft customers
IBM is a loser in Oracle/PeopleSoft deal

Friday, February 11, 2005

Is Microsoft dying?

Michael Malone has a provocative article, suggesting that Microsoft may be in the early stages of decline.
Great, healthy companies not only dominate the market, but share of mind. Look at Apple these days. But when was the last time you thought about Microsoft, except in frustration or anger? The company just announced a powerful new search engine, designed to take on Google -- but did anybody notice? Meanwhile, [the] open systems world -- created largely in response to Microsoft's heavy-handed hegemony -- is slowly carving away market share from Gates & Co.: Linux and Firefox hold the world's imagination these days, not Windows and Explorer. The only thing Microsoft seems busy at these days is patching and plugging holes.
It's not easy to dismiss Malone's analysis. He's been covering the high-tech industry for more than 20 years, most recently as editor-at-large of Forbes ASAP magazine and earlier at the San Joe Mercury-News. He has written for the Wall Street Journal, The Economist, Fortune, and the New York Times. He has hosted two national TV shows on PBS, and he's written a dozen books.

He continues,
There are other clues as well. Microsoft has always had trouble with stand-alone applications, but in its core business it has been as relentless as the Borg. Now the company seems to have trouble executing even the one task that should take precedence over everything else: getting "Longhorn," its Windows replacement, to market. Longhorn is now two years late. That would be disastrous for a beloved product like the Macintosh, but for a product that is universally reviled as a necessary, but foul-tasting, medicine, this verges on criminal insanity. Or, more likely, organizational paralysis.
It's probably a stretch to say that Microsoft is dying, or that it will cease to be a major force in information technology. Still, it's hard to disagree with Malone's observations:
Does anyone out there love MSN? I doubt it; it seems to share AOL's fate of being disliked but not hated enough to change your e-mail account. And do college kids still dream of going to work at MS? Five years ago it was a source of pride to go to work for the Evil Empire -- now, who cares? It's just Motorola with wetter winters.
Read Malone's whole article on ABC News.

Related posts
Microsoft eats more humble pie in enterprise software business
Microsoft: selling enterprise software is a "humbling experience"
Microsoft Longhorn cutbacks threaten Project Green

Saturday, February 05, 2005

High software maintenance fees and what to do about them

There's an interesting side note to Oracle's takeover of PeopleSoft: it turned out that PeopleSoft's software maintenance business was even more profitable than Oracle realized. Once Oracle found out how much money PeopleSoft was making on its recurring maintenance business, it justified a sweetened offer that closed the deal.

If you're a corporate buyer of software, you might want to take a look at what you're paying for software maintenance.

What is software maintenance?
Maintenance fees pay for two services from the vendor to the customer. First, they pay for ongoing product development that provides new product features, regulatory updates (e.g. tax table updates), and bug fixes. (That's right. You pay for the software, and then you pay the vendor to fix defects in it.) Second, maintenance fees pay for phone and Web-based support for times when you need help with the system.

One little secret of the software industry: the maintenance business is really profitable for vendors. It's somewhat analogous to the situation when you shop for a big screen TV at Circuit City. You may be impressed with the terrific bargain you're getting on the sales price. But when you go to sign the deal, there's a lot of pressure for you to sign up for the extended warranty--where the store, and the salesman, make most or all of their profit. Buying enterprise software is similar, with the key difference being that you don't really have the option to forgo the maintenance contract.

I've long thought that software buyers are too focused on the up front license price and not paying attention to how much they are paying on the back end--in software maintenance fees. Buyers forget that when they pay a dollar for a software license, they pay that dollar once. But when they pay a dollar on software maintenance fees, they pay that dollar again and again, year after year, as long as they stay on maintenance. Over the life of the system, most customers pay far more in maintenance fees than they ever pay in up front license fees.

Software vendors understand this, and as new sales continue to be hard to come by, they are turning their attention to increasing revenues from their maintenance business.

Vendor tactics
Vendors are working to increase maintenance revenue in two ways. First, they are increasing maintenance fees directly. A few years ago, 15-18% of the software license fee was a typical benchmark. Now, I'm seeing vendors quoting 20% or even more. It might not sound like much, but run the numbers out three or four years and see the impact. On a $500,000 license deal, a five percent difference in maintenance fees is $125,000 over five years. That's like a price increase of 25% (not factoring in the cost of money, of course).

Second, vendors are tightening enforcement of existing agreements. In the past, vendors might not aggressively pursue customers that exceeded user counts, which usually form the basis for software pricing. Today, it's no more Mr. Nice Guy. Vendors are enforcing their contractual rights to audit customer usage of the software and are charging customers license fees for additional seats, plus the maintenance fees on those seats.

Balance of power
Why are vendors squeezing customers? First, it's a sign that, although we're not returning to the heyday of tech spending in the 1990s, business is improving. Vendors are finding that they don't need to make as many concessions as they have in the past. And, as we just saw, the easiest way to increase revenue is through maintenance fees.

But more significantly, vendors are increasing maintenance revenue because they can. Implementing an enterprise-wide system is a huge undertaking for most companies. Few customers are going to select a new system and go through the pain, risk, and expense of another implementation just because they are paying a bit more in maintenance fees than they had planned on. Customers are a captive audience--to a point.

My feeling is that if vendors continue along this path, there's going to be a backlash. There's a limit to what the market will bear, and I think some vendors are starting to reach that limit. A study by AMR last year found that because of maintenance policies, 22% of customers are considering switching vendors, 21% intend to stop taking upgrades, and 12% will discontinue paying maintenance.

Practical tips
If you are concerned about high software maintenance costs, there are several steps you can take to keep costs in line.

If you have not yet purchased the system, understand that your negotiating power will never be greater than before you sign on the dotted line. Maintenance fees as a percent of the license cost are not cast in stone. Everything is negotiable. For example, ask for a lower percentage. Ask for maintenance fees to be based on the discounted price of the software, not the list price. Ask for maintenance fees to be locked in, not allowing the vendor to increase fees from year to year.

Furthermore, don't buy software you don't need, even if the vendor offers a tremendous discount on additional modules. There's no free lunch. If the vendor is charging maintenance fees based on the list price of those modules, you'll likely be paying for software that you won't implement. If you think you'll implement it later, buy it later. That will encourage the vendor to be sure you're successful with the modules that you do buy.

If you are already a customer, your negotiating power may be diminished, but you still have options. First, check whether you are using all of the modules you purchased. If not, consider canceling maintenance on the modules you aren't using. Second, look hard at whether you are using all of the user seats that you originally purchased. Vendors will tell you if you exceed your user count but probably won't let you know if you have excess seats. Finally, if you plan on buying additional software from the same vendor, see whether you can negotiate a better deal on your existing modules in exchange for buying additional modules.

If your vendor is still not showing flexibility, consider whether more hardball tactics are warranted. Third party maintenance and service providers, offering lower fees, are one alternative. Canceling maintenance ("going naked") for older or less critical systems might be another alternative, especially if you seldom use the help desk and are not planning to upgrade in the future.

Then there's always the nuclear option: looking to other software providers. For some applications, open source software might be an alternative, with maintenance either provided in-house or through a third party.

Computerworld has more on trends in software maintenance. CFO magazine has further analysis of what vendors are doing to squeeze more revenues from existing customers.

Related posts
Customers pushing back against enterprise software maintenance fees
Software customers learn to just say no
Customers pushing back against Microsoft licensing program
Customers to Microsoft Licensing 6: thanks, but no thanks
SAP to provide maintenance for PeopleSoft products
Microsoft Software Assurance: no bang for big bucks
Software buyers turn cheap

Friday, February 04, 2005

World's largest Linux migration reaches milestone

Computerworld reports that the German national railway, Deutsche Bahn, has successfully moved all of its 55,000 Lotus Notes users to Linux. This is the first major milestone of an ambitious program to move the entire company to Linux.
The company has already shifted its vital train timetabling system from HP Non-Stop to Linux. Next, it will move various SAP systems, including sales support, from Unix to Linux. And by the end of the year, all remaining critical systems such as databases, application servers, Web servers, mail servers and network infrastructure will be running on Linux, the company said.
If Deutsche Bahn is successful in migrating these remaining systems, it will be another piece of evidence that Linux is capable of doing the heavy lifting in enterprise systems. Companies that want to take control of their total cost of IT should pay attention to the experience at Deutsche Bahn.

Related posts
Software buyers turn cheap
Microsoft-sponsored study on Win2K vs Linux is NOT all good news for Microsoft
Business case for Linux is seen at Boscov's
Wall Street an early adopter of Linux for the enterprise

Wednesday, February 02, 2005

Microsoft eats more humble pie in enterprise software business

Eight months ago, Microsoft VP Orlando Ayala testified during the Oracle antitrust trial that selling enterprise software had turned out to be a "humbling experience" for Microsoft. The latest news out of Redmond indicates that Microsoft is still learning from that experience.

In the quarterly earnings call last week, CFO John Conners said that Microsoft Business Solutions (its ERP business unit) lost $29 million in the most recent quarter, compared to a loss of $139 million a year ago. The unit has never been profitable since its start four years ago.

There's more. Microsoft has also quietly indicated that the release date for a major upgrade of its Axapta ERP system, V4.0, will be deferred until 2006. Microsoft's stated reason is to add more functionality and integration with Microsoft technology, such as Biztalk, SQL server, and Sharepoint.

And in another sign of trouble, Conners said that some Microsoft ERP offerings would be moved to "maintenance mode." Although Conners refused to name the products that are being sidelined, it's a safe bet that Microsoft's Solomon product is one of them. Microsoft has already shuttered Solomon's headquarters and has outsourced product development and support to a third-party.

When Microsoft first entered the ERP space, with its acquisition of Great Plains, everyone predicted that Microsoft would quickly dominate the market. I recall a lot of commentary along the lines of, "Microsoft dominates every market that it goes after. Look at Netscape."

You don't hear that sort of talk much anymore, at least not concerning Microsoft's ERP offerings.

I do not mean to imply that Microsoft's enterprise software offerings are bad products. They are good products, and I continue to recommend them to clients. Because of Microsoft's commitment to this market, and its nearly unlimited resources, Microsoft products are generally a safe bet. I just don't think that Microsoft will dominate the business applications market the way it has dominated the market for desktop software.

Mary Jo Foley at Microsoft Watch has the scoop on the latest developments at Microsoft Business Solutions.

Related posts
Microsoft: selling enterprise software is a "humbling experience"
First look at Microsoft's Axapta ERP system
Is Microsoft upstaging Great Plains, Solomon, Navision, and Axapta with "Project Green"?
Microsoft Project Green details emerging
Yet another update on Project Green
Feedback regarding Microsoft's Project Green
Microsoft Longhorn cutbacks threaten Project Green

Tuesday, February 01, 2005

Ellison threatens SAP regarding PeopleSoft support

Just as I predicted, Oracle is hinting at legal action regarding SAP's move to provide annual maintenance and support for PeopleSoft customers, by means of its acquisition of third-party support provider TomorrowNow.

According to eWeek, Larry Ellison said at the Oracle Analyst Day in New York last week,
"SAP has every right to provide support for PeopleSoft applications as long as they don't violate our intellectual and contractual property rights," Ellison said, in measured tones. "It might make it awkward for them. That's our intellectual property, and they should be cautious."
As I pointed out last month, PeopleSoft maintenance revenue was the main driver in Oracle sweetening its bid for PeopleSoft. I don't expect Oracle to sit idly by and watch any of that revenue stream diverted from its coffers. Otherwise, the whole plan falls apart.

Watch for more sparks to fly.

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Help is on the way: software for SOX compliance

Corporate spending on Sarbanes-Oxley (SOX) so far hasn't been the gold mine that software vendors have been hoping for. Compliance has been largely a manual effort, as companies work to document and improve internal controls under SOX Section 404. A recent AMR survey estimates that only 28% of SOX compliance spending has been for technology. The rest is for manpower: internal headcount (42%) and external consulting (29%).

But the ratio of manpower to software may be starting to change. According to an article in CFO Magazine, software vendors have been refining their SOX compliance offerings to automate some of the tasks:

New versions of Sarbox software programs represent big improvements over earlier offerings. Certainly, recent releases from Axentis, Hummingbird, OpenPages, Virsa Systems, and Approva reflect a more realistic understanding of the burdens. Some of the programs compare a company's current controls to compliance best-practices, offering solutions on how to shore up weaknesses and better segregate duties. Others help managers document policies and procedures, creating electronic archives of those policies along the way. Several programs flag internal transactions that look suspicious.
Software is not going to completely automate Section 404 SOX compliance. Compliance will continue to be a huge manual effort. There's no substitute for manager's understanding of the business in assessing, designing, and implementing proper internal controls. But software can help.

Read the entire CFO article for more details.

Update: on a related note, Computerworld has a good article today on how SOX compliance programs are causing a shift in the role of the CIO, putting the IT group at least temporarily more closely associated with the CFO. For CIOs that have been struggling over the years to get out from under the management by the accounting function, it's not necessarily a good trend.

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Is Sarbanes-Oxley the new Y2K?
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