Will it be Extinction for the Enterprise Software Model?

Pigs may get fat, but the hogs get slaughtered. That lesson pervades the evolution of business models, as competitors large and small have played a never-ending, topsy-turvy game of virtual cat and mouse. By Eric Kavanagh, TDWI

In bull markets, companies get aggressive, stretching into peripheral or even tangential territory; in bearish times, organizations often regroup, ceding gained revenue streams to the sharks.

Occasionally, the tumblers align just right to achieve a massive overhaul of the status quo – the proverbial perfect storm – as with the extinction of dinosaurs and consequent rise of mammalian life. In today’s tumultuous realm of enterprise software, land of the big-money deals, such clouds of darkening colors seem to be gathering: the service-oriented architecture, open-source software, appliances, software-as-a-service, and the ultimate democratization of delivery: web browsers.

Combined, these forces threaten to rewire the information industry, potentially short-circuiting the long-standing paradigm of goliaths governing the ‘big show’. Across the board, these innovations make information management more agile and affordable, the classic recipe for capital success. What will the future hold? Let’s see…

Dashboard democracy

In a recent TDWI Radio News interview, Computerworld executive editor Mitch Betts touted ‘dashboard democracy’ as a key factor in the rise of business intelligence (BI): “We think BI is definitely mainstream. In fact, maybe it’s been mainstream for a couple of years now. We call it dashboard democracy. What’s happening is that as the tools are easier to use, they’re put in the hands of thousands of regular workers sprinkled out throughout a company… So, as they spread around, it definitely becomes mainstream.”

Increasingly, a dashboard’s vehicle of choice is the web browser. By decoupling the delivery layer from the operating system, a range of efficiencies arises: the programming burden decreases significantly, even if versions are written for Firefox or other alternative browsers; usability increases due to the interface familiarity, because everyone knows their way around a browser window; and cost to the customer falls thanks in part to limited client-side software being required.

Such dashboards can be used for a whole host of purposes. In his book, Performance Dashboards: Measuring, Monitoring and Managing Your Business, TDWI’s director of research and services Wayne Eckerson outlined three general types of usage: strategic, operational and tactical. Add up the use cases for all three, and it’s obvious that there’s no end to the ways in which performance dashboards can facilitate the measurement, monitoring and management of organizations. After all, the dashboard format provides a highly intuitive interface for viewing complex developments and structures, far more user-friendly than any stack of paper. With benefits like that, you can rest assured this trend will continue.

Software-as-a-service

Often referred to as SaaS, the software-as-a-service model struck gold when Salesforce.com hit the big time – and that’s been several years hence. Since the turn of this century, Salesforce.com has evolved from a clever approach into a full-blown, enterprise-class concern, complete with a market value closing on US$5 billion. Starting at just US$65 per user/per month, this SaaS giant now boasts more than half-a-million users, 12 languages and nearly 25,000 discrete customers. And that’s just one SaaS stalwart.

When’s the last time you browsed an actual printed dictionary, instead of using dictionary.com or m-w.com? Ever used Google Maps, or Mapquest.com? How about Weather.com to see tomorrow’s temperature? Indeed, the SaaS model can hardly be overlooked. This past September, TDWI senior correspondent Stephen Swoyer covered Google’s announcement that it’s officially embroiled in the applications market. He quoted a trio of Gartner analysts who commented on the California-based giant:

“This announcement offers a glimpse of the scope of Google’s ambition of generating significant revenue from the enterprise sector to avoid relying solely on the consumer market,” wrote Gartner analysts Whit Andrews, David Gootzit, and Gene Phifer. “Its plan to provide applications such as e-mail, calendaring, instant messaging and voice chatting is a logical next step in the progression of deepening its relationship with users. Increasingly, Google has been placing its products and services directly in front of end users, without the intercession of IT departments.”

Then there’s Google Spreadsheets, an obvious shot across the Microsoft Excel bow. Continued the Gartner analysts: “We believe that Google has elected to offer communications applications first mainly because of their popularity. Also, Google's move will allow time for productivity applications based on word processors and spreadsheets to mature.”

Look around the enterprise space and what do you see? Business Objects, SAS Institute and Informatica have all announced SaaS offerings. Hyperion’s chief strategy officer, the one-and-only Howard Dresner who coined the term “business intelligence,” recently agreed to speak on a panel at the Economist Enterprise Software Forum, to discuss: “Enterprise Software Business Models and the Impact of SaaS.” Then there’s Cognos, who sports this quote on its Web site: “SaaS will be a pervasive application business model over the next four years, and Cognos is already at the forefront of this evolution through its strong relationships and partner deployments,” said Jennifer Francis, vice president of market development, Cognos.

Appliances

The wave of lower-cost innovations doesn’t stop with software. Even the hardware game sees shifting sands these days. Just a few short years ago, a company called Netezza entered the data warehousing fray with a compelling value proposition: a tightly bundled hardware-software box designed for the express purpose of maximizing throughput and minimizing cost. Now, with a reported 200 employees and 70 customers, Netezza is more than an annoying upstart to industry stalwarts.

Dautaupia CEO Foster Hinshaw, the former whiz kid of Netezza, explains the model: “A data warehouse appliance removes the complexity of the [technology] stack. If you think about the IT shop, you have all these specialists and experts who know how to interconnect a lot of black boxes and make it magical. What a data warehousing appliance is,” he says flatly, “is a toaster. And really, if you want to make toast, just make a toaster. Get rid of all the experts. Make it simple, easy to use, and that’s what a data warehouse appliance is.

“One can now build the largest databases in the world,” continues the outspoken Hinshaw, “and put them up and running in under 20 minutes. So all that expertise it used to take to interconnect a lot of IT, all that black magic of IT, now disappears, and we can concentrate on [how] that data is useful for us, to understand our customers, our network, our supply chain. And so it really becomes an enabling technology that we have today, and that’s what’s so exciting, and why it’s made such an impact in the last few years.”

For a good gauge of how hot the appliance market is getting, just look at the companies now entering that fray. In the last year, DATAllegro has grown from neophyte to player, notching numerous solid projects – including an 86-terabyte warehouse for American powerhouse Sears. Even operational BI pioneer Celequest offers a catchy appliance called LAVA. Then there’s the Sun Microsystems-backed Greenplum, plus newbie Calpont and others. At TDWI’s World Conference in Orlando this November, representatives of industry titan Teradata, a division of NCR, sported buttons challenging their image as highly expensive. Obviously, something is happening.

Open-source movement

Did you know that TiVo runs on Linux? Yes, TiVo. According to some estimates, roughly a third of the computers in Latin America do, too – that from a 2004 BBC article about Brazil’s love for the open-source operating system. And why wouldn’t they? Technically, Linux is free, and that’s a strong sales pitch in parts of the world where poverty still prevails. And there’s a certain cachet to the robustness of a system that can be checked and validated by a community of anyone-interested.

For small and midsized businesses, Linux appears to have quite a foothold – according to an Info-Tech Research Group survey published on Microsoft’s website. Some 1400 IT professionals were interviewed, with the following results:

• Microsoft dominates the mid-sized marketplace. With 75 percent penetration for Windows and 65 percent penetration for Windows Server 2003, Microsoft is the clear winner for mid-sized companies.
• Most mid-sized enterprises are simply not interested in Linux. 48 percent of survey respondents indicated that they are not interested in Linux, and another 15 percent are not sure. Only 10 percent plan to evaluate Linux within the next three years.
• Only 27 percent of mid-sized companies currently have Linux installed.

Only 27 percent? If just half of those who said they’re planning to consider Linux actually install it, that’ll make one-third of the SMB companies polled – a market share that’s smaller than a juggernaut, but surely bigger than a breadbasket.

In the world of BI, the open-source movement is certainly strong; though it’s perhaps not the altruistic Utopia evangelized by Linux lovers. TDWI’s Eckerson recently commented that open-source BI seems to rely somewhat heavily on a freebie bait system designed to encourage the purchase of ‘add-on’ functionality – as well as support and professional services, of course.

With offerings from Jaspersoft, Actuate’s BIRT and the up-and-coming Pentaho, the field of players is growing steadily – and since the bait consists of the free stuff, a likely market dynamic will see the circle of free functionality widening slowly but surely over the next few years.

Service-oriented architecture

And which BI vendor hasn’t been talking about the service-oriented architecture these days? Business Objects XI, Hyperion System 9 and Cognos 8 all boast service-oriented underpinnings, and even Microstrategy makes the following bold statement on their site: “MicroStrategy Intelligence Server is the industry's first and only business intelligence server to provide all five styles of BI on a single, unified architecture using a services-oriented architecture (SOA).”

Talk to long-time enterprise consultants and they’ll add a few grains of salt to the sugarcoated vendor messages. John Ladely is a principal with Navigant Consulting, and speaks from experience about the latest architectural talk:

“There is certainly an academic understanding of SOA out there,” he said. “There is certainly a bunch of CIOs that would really like that. But the truth is – and maybe this is the edgy part – the truth is, that’s always been there. We’ve always wanted a cohesive, low-coupled solution in IT, from the very first days of learning how to program. The concept isn’t new. I think the span and the scale of it is. So it’s a desired end state. Most vendors will talk to it because it’s kind of the academic hype that’s going there. But it’s not being done very well by just about anybody; because it’s very hard to do.”

Of course, market forces have a funny way of driving innovation. Thanks to an array of improvements in hardware, software and methodologies, the discipline of customer data integration (CDI) seems to be gaining traction. Jill Dyche, founding partner of Baseline Consulting and a recent TDWI Keynoter, evangelizes CDI as the long-awaited fruition of customer relationship management (CRM).

Dyche says that SOA is the optimal platform for delivering the real-time, high-quality customer-relationship data that’s necessary to make CDI a reality. Central to this vision is the ability to loosely couple a customer’s ‘golden record’ to operational systems, but tightly couple data cleansing to the CDI hub – all the while being able to deliver that clean data to the front lines of an organization within moments. As more companies realize the magic of CDI (increased sales, decreased customer dissatisfaction, improved efficiencies), investment in this space will undoubtedly increase, greasing the tracks for SOA adoption.

The big threat for colossal enterprise software vendors involves the redundancy of functionality that exists in every organization. Especially in a world increasingly dominated by mergers and acquisitions, this redundancy presents a cost-cutting opportunity that won’t be overlooked. Furthermore, in a loosely coupled architecture, ripping and replacing bits and pieces of functionality becomes much easier; at least theoretically. Combined with the pricing pressure wrought by open-source and SaaS – especially the latter’s effect on software licensing models – this loosely coupled paradigm seems to exhibit the barometric pressure associated with an imminent downpour.

Possible pasts

10 years from now, we can reflect on what the 2005-2015 BI era delivered to insight-hungry professionals globally. Here are some possible pasts we might find ourselves analyzing come 2016:

• The mega-vendors saw the tsunami coming and effectively prepared for the deluge by swiftly switching their business models to focus heavily on services and support; shedding the cumbersome if once-lucrative per-seat licensing models that kept them rolling in wealth for so long.
• A new league of mega-vendors leveraged their Web-based brand equity and massive market capitalization to encroach on the traditional application kings, shifting dramatically the centers of power in the ever-growing industry of information management.
• An open-source revolution dawned as professionals worldwide recognized, embedded and expanded free and otherwise inexpensive pieces of functionality, achieving the long-sought, loosely coupled vision for information architectures.

That final option may sound too good to be true – which means it probably is – but with prices everywhere dropping precipitously, the door opens ever wider for the nearly infinite market of small and mid-sized businesses. As web browsers deliver ever more dashboards embedded with all manner of information management tools, and as decreasingly expensive number-crunching boxes proliferate, the gross number of end users in this field of decision-support will increase exponentially. And as the market furiously feeds on itself, it’s hard to imagine a trajectory that does not gravitate ever closer to the pinnacle of possibility: BI for the masses.

Eric Kavanagh is Web Editor for TDWI, an educational institute that provides news, training, research and certification in the growing field of information management.