The Cloud Wars – 2012
It seems, based on the last few acquisitions in enterprise software by three of the largest software vendors, that cloud computing has moved past its tipping point.
It seems, based on the last few acquisitions in enterprise software by three of the largest software vendors, that cloud computing has moved past its tipping point. The acquisitions, RightNow by Oracle, SuccessFactors by SAP and DemandTec by IBM, also paint a picture of how next year might play out for many cloud software vendors. With all of the large tech vendors scrambling to gain share and capabilities in cloud computing in a market ripe with choice cloud vendors in the under $300M range, acquisition is a natural path. It sounds a little humorous though, since most of these companies were hardily poking fun at these very same “targets” only a couple of years ago, but I suppose a recession and a major shift in software buying behavior have a way of convincing even the most stalwart opponents.
I thought it might be fun to do a bit of a pre-game assessment before we move into 2012. Let’s look at some of the current major vendors and their cloud efforts:
- Oracle – First and foremost Oracle is a major “arms dealer” for the cloud, public and private, at the database and middleware layers, and the Exa line of hardware. Beyond that though, Oracle has made some strong moves to put together a cloud portfolio. At the past Oracle OpenWorld user conference among a flurry of announcements Oracle executives outlined a robust public cloud offering that is now in beta and should be generally available over the next few months. The Oracle Public Cloud includes database as a service, platform as a service (Fusion middleware), Oracle Social Network (OSN, also now in beta), Fusion CRM, Fusion HCM and will include the acquired RightNow cloud customer service products as soon as the deal closes; and the remainder of the Fusion ERP suite sometime next year. In the RightNow acquisition it also gets the HiveLive community platform, which could also be offered through the Oracle Public Cloud, although since the deal hasn’t closed that level of detail isn’t available. Next year I’d expect Oracle, with its history of an aggressive acquisition strategy, to buy up a few more additions to its cloud portfolio across a broad cross section of applications, particularly around social capabilities and industry vertical solutions.
- Salesforce.com – Salesforce.com has both a strong CRM apps portfolio and a growing platform as a service offering. It has added quite a bit to its product portfolio over the last couple of years through acquisition including additions to its platform like Heroku, social products like Jigsaw (now data.com), Radian6 and DimDim, and task management solutions like ManyMoon. There are still many opportunities for Salesforce.com to grow its offerings of course, particularly in marketing automation and additional social capabilities like community management. UPDATE: I wasn’t finished with this post when Salesforce.com joined the fray by purchasing Rypple, a cloud HCM vendor, so I’ll add some comments on it as well. Rypple is focused on the talent management market but with more of a social approach and has a very good reputation and client list that includes Facebook, Jive Software, GetSatisfaction, Mozilla, Rackspace, and Spotify, among others. The company has a unique and modern approach to managing team performance that include some game mechanics along with a good dose of collaboration and a innovative mobile app. From what we know of the plan so far, the company will be re-launched as “SuccessForce” and will be a part of a new HCM business unit headed by former Oracle and SAP executive John Wookey, EVP of Advanced Applications. This is both an interesting move and a bold step to start building out a more complete set of enterprise applications by moving from CRM to add the fist component of a HCM suite. In addition there will be quite a bit of cross-pollination opportunities with existing Salesforce.com products including Chatter. One side note though, this puts Salesforce.com in direct competition with partner Workday. Workday had stayed away from CRM in its ERP suite of products, choosing to partner with Salesforce.com instead. One has to wonder if they might not be looking elsewhere for a CRM offering.
- SAP – SAP has, over the last year or so, talked a lot about the cloud. In fact its now one of their three big focus topics along with mobile and in-memory. Over the last two days at an analyst summit held in Boston and streamed live, SAP’s cloud strategy became somewhat more clear. I talked about their history with cloud as well as the acquisition of SuccessFactors in this post. Since that post and after the summit, I have some more information, that might help clarify its position even more. In addition to the mid-market focused ERP product Business byDesign, SAP stated that it is also moving Business One, its small business solution, to the cloud. From a platform perspective my earlier statements seem to be true. The byDesign ABAP platform with its SDK is the platform for building business apps but there is also a Java based platform that should, when available, make extension to the apps much easier to support (Java and Ruby skills being much more plentiful). The Line of Business On Demand apps currently available are Sales, Sourcing, Career, Travel, SAP EHS, and Carbon Impact. The term On Demand, by the way, as you will notice, is still used by SAP and means SaaS by its definition. These LOB apps are, with one exception, built on the byDesign platform, with Sourcing, an acquired product, still on the Frictionless platform. It seems likely that the Career OD product will be shelved after the SuccessFactors acquisition closes early next year. The future underpinnings for the platforms will be HANA in-memory based. I say future because currently HANA is only used for business intelligence but, according to SAP, will be used with all apps eventually once they are rewritten to take advantage of the technology. From a roadmap / timeline perspective I’m still a little unclear when things will be available but in fairness I haven’t finished reviewing all of the deep dive breakout sessions that were not live streamed. It seems to me that the LOB apps, which are focused on a small subset of functions, will continue to rollout as more are added, and perhaps will be enhanced through additional acquisition like SuccessFactors. The eventual replacement for the enterprise Business Suite though, must be several years away from release. From a cloud go to market perspective SAP, during a GTM session yesterday, laid out some clear plans for next year. First, of course, the SMB focused Business One and some of the Business byDesign sales (about 80%) are going through SAP’s existing channels. In addition SAP is fielding a dedicated cloud sales force that should number around 500. Selling with overlay sales teams is not a simple matter of course, but there was discussion of double comp and at least the admission that the cultural change will take some time.
- Microsoft – From a cloud perspective Microsoft has focused on its infrastructure and platform offerings called Azure. Those products seem to be progressing slowly but solidly. From an apps perspective though, Microsoft really only has a cloud offering with its CRM product and the new Office 365 product line. The rest of the Dynamics enterprise products can be purchased hosted by a partner but for the most part that’s it. Of course last year it did make one major cloud acquisition, Skype, but so far that’s really it. I think it is very possible that Microsoft might decide to get on the cloud acquisition band wagon next year, but so far, they haven’t really shown any interest. Perhaps the feeding frenzy that I think is coming will shake them into action? I also think there’s a very good possibility that Microsoft does some acquisitions in the social tools space, once it sees that while Sharepoint is a good back end to some social solutions, it’s not really enough without a solid social front end. The cloud feeding frenzy will likely extend to social vendors next year as well.
- IBM – IBM continues to be a very acquisitive company, completing 21 in the last two years, several of which were cloud based. IBM is another “arms dealer” to the cloud as well as an infrastructure and platform vendor. It seems clear that IBM intends to continue to acquire and will look for interesting cloud vendors, particularly associated with two of its largest initiatives commerce (like the recent DemandTec acquisition) and social business. In commerce look for expansion in multi-channel commerce including mobile and social commerce. The IBM social business initiative is centered in the Lotus brands including Connections, Notes, SameTime, etc. Currently the social initiatives are mostly focused on internal and partner collaboration and communication but there’s no reason to think that IBM won’t get more aggressive on the customer side of social. Currently IBM partners with SugarCRM but there are a lot of opportunities for growth and even collaboration with the IBM commerce team.
- Workday – Now some might argue that an emerging vendor like Workday belongs on the target list, but for several reasons I think they’d be wrong. Not the least of those reasons is the management team, mostly all ex-members of the original founding crew of PeopleSoft, and their drive to build something unique again in the enterprise apps space. This drive, coupled with deep pockets and a very rich contact database will go a long way in keeping them independent and growing. Will they get more acquisitive next year. I suppose it’s possible, although so far it has only added some very specific, needed technical IP. The Workday product suite, as far as ERP goes, is mostly complete, although certainly some of those apps are not as mature, but will evolve rapidly in functionality due to its agile development process and fast release cycles. With partner Salesforce.com now moving into direct competition with Workday though, I suppose all bets are off on how Workday will handle itself now on the CRM front.
- Google – Google is a wildcard in the enterprise, to put it mildly. It certainly has plenty of cash and at times dabbles in the enterprise, although mostly it seems those dabbles are aimed at Microsoft. Currently Google is making inroads in email and productivity but it’s not inconceivable that they could decide to move in some other directions. What that might be though, is anyone’s guess at this point.
- Facebook – I debated putting it on the list, but considering the weight of Facebook, its growing pile of cash and potentially a monster IPO next year, you never know. I personally think that Facebook is looking to become some sort of commerce platform, so they might look to make some acquisitions there although most likely they would partner with some of the large commerce back end providers like Oracle and IBM, to fill out the social commerce part of the platform. Other than that, I’m not sure.
Any of the remaining pure play cloud application companies might prove attractive acquisition targets, and as you can see above there’s no lack of acquisitive companies with money to spend and appetite to grow quickly in cloud. I’ll have to put together a post soon looking at that side of the equation. Will be an exciting year next year anyway…
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