When I was learning to drive many, many years ago, I remember my dad telling me to pay attention to not only where the other driver’s eyes were looking but also to where their wheels were pointed. So it was with my search for SaaS at the recent Oracle OpenWorld event in San Francisco. Amid the hundreds of exhibitors and sessions, Cloud Computing in the form of SaaS based applications was being called out, acknowledged and exhibited. There were “campgrounds” of SaaS based applications exhibiting and the normal spread of CRM On Demand sessions. Clearly, Oracle senses the need to position itself as a supporter of Cloud Computing which requires them to encompass and embrace the growing proliferation of SaaS-based services and vendors. Like Levi Straus during the Gold Rush, who made his fortune supplying the miners with clothes and supplies, Oracle has the opportunity to provide the platform and infrastructure that can be a significant enabler in the Cloud Computing story.

But this blog is not about Cloud Computing, it’s about where Oracle is with SaaS-based applications. Certainly, they are continuing their efforts to build out their primary SaaS offering, CRM On Demand with new features and social networking capabilities. There were large banners in the exhibit areas for CRM On Demand and a section of the exhibit hall was dedicated to a few dozen SaaS add-on applications like Helpstream, Adaptive Planning and Eloqua. Oracle’s decision to allow a huge presence for one of their primary SaaS competitors, Salesforce.com, in the west convention hall was interesting. Even more interesting was the opportunity that was provided to Salesforce.com’s CEO, Marc Benioff, to present at an SRO executive session. Marc eloquently thanked Oracle for the opportunity to participate in OracleWorld, talked about the growth of Cloud Computing, their newest offering, Service Cloud 2 and gave away copies of his insightful new book “Behind the Cloud.” In comparison to the exhibits of SaaS vendors and the mega-exhibit of salesforce.com, Oracle’s SaaS offerings had a relatively small presence. No new SaaS offerings for key markets like Human Capital Management or Enterprise Performance Management.

So back to my original point, where is Oracle looking regarding SaaS but also, where are their wheels pointing? Gauging by my OracleWorld observations, Oracle definitely feels the need to acknowledge the proliferation of SaaS-based applications. In my opinion, allowing Salesforce.com to present and exhibit is a huge change in course regarding SaaS. Salesforce.com is Oracle’s biggest competitor in the Customer Relationship Management marketplace but they also are built on top of Oracle database technology. This is not a unique situation in the Oracle world of co-opetition. SAP, their biggest competitor in the enterprise resource management marketplace, is also built on top of Oracle database technology. SaaS is here to stay and though Oracle is not showing any signs of interest in building out its SaaS offerings, it is very interested in ensuring that its database, middleware technologies and possibly its expansive infrastructure are used in the SaaS gold rush. The question of why Oracle is not looking at SaaS as an application delivery vehicle but has its wheels pointed to supporting SaaS vendors and gets into a discussion of Oracle’s business priorities and culture.

Oracle’s business model is heavily dependent on maintenance and support revenue. At 22% of license revenue, this represents a significant portion of Oracle’s revenue and margin. Any significant move away from license sales and to SaaS will disrupt this model and the business culture that has been built upon it. A second factor to Oracle’s delay to move to SaaS-based applications can be found in their sales model. The SaaS sales model is significantly different than the license sales model. SaaS sales typically involve a higher volume of transactions at a lower total contract value. Because SaaS based applications are pay-as-you-go and require limited configuration to be production ready, not only is the software component of the total sale reduced, the consulting component of the total sale is reduced as well. Getting a massive sales organization like the one at Oracle to embrace a SaaS applications focus will be a time consuming, culturally altering and expensive proposition. This is not likely to happen soon.

A more likely strategy for Oracle to pursue if they want to become a leader in SaaS based services would be to focus on the small or medium size business market with a dedicated and independent sales team selling SaaS based applications and not try to convert their existing base of global 2000 enterprise customers. Given the investment by Oracle’s CEO, Larry Ellison, in Netsuite, I am tempted to think of them as an experiment to test a new SMB sales model for Oracle. I suspect that part of the reason that Oracle allowed such a significant presence for Salesforce.com at Oracle OpenWorld is that they do not see them as a significant competitive threat to their installed base and need for them to continue their success to help drive the growing need for platform as a service and infrastructure as a service technology, a market that Oracle is definitely interested in. Of course, Oracle could use their merger and acquisition machine to quickly become the leading provider of SaaS based applications. There are definitely candidates out there other than salesforce.com that could help Oracle accomplish that.

Oracle OpenWorld as usual was an interesting window into the thinking and direction of Oracle. Regardless of the rhetoric that we have heard from Oracle about SaaS, as evidenced by the presence of SaaS on the exhibit floor and Marc Benioff’s presentation, Oracle is positioning to be a player in this market … someway, somehow.

This week’s Smart SaaS blogger is Gary Damiano.
He can be reached on LinkedIn or at gedamiano@gmail.com.

Company:         Responsys

Started:             1998

Located:            San Bruno, California

Geography:       Global

Market:             Business to Consumer Marketing Automation

Products:          Responsys Interact

Key Customers:   Continental Airlines, Corel, Carlson Hotels, E-Loan, RSA and Salesforce.com

Website:            Responsys

Recent News:

Responsys Wins Prestigious OMMA Award for Creative Excellence

Responsys Expands Email Marketing Program for Continental Airlines

Responsys Continues Strong Growth in First Half of 2009

Responsys Revolutionizes Data-driven Marketing with Industry’s First Self-Service Data Integration Solution

I asked John Berkley, Vice President of Product Marketing at Responsys a few questions about his business and his view of the SaaS market in 2009.

Did you start out as a Software-as-a-Service company?

Responsys was founded in 1998 and there have been many chapters of the company’s history. The current chapter is about five years old, when the current management team arrived. Responsys has always been a SaaS company, and it is core to our business strategy. We live and breath SaaS and our future roadmap is all based on SaaS.

The current chapter of Responsys is all based on building out our platform and managing all the data that we store for our customers.  Our strategy is to enable sophisticated, high-impact marketing campaigns for our clients.  Our biggest verticals are travel, technology and retail - although we serve a number of others as well.  Responsys is ideal for these types of firms who require automation of very complex processes; importing/exporting of data, business rules, personalization, analysis all related to managing sophisticated marketing campaigns.

Why do your customers buy from Responsys?

Our customers appreciate Responsys’ ability to handle the marketing campaign complexity required for huge product catalogs, directed at thousands or millions of customers. For these types of promotions, granular personalization and targeting is critical for the campaigns’ success. We also automate all aspects of the marketing workflow, like the transfer of data and meaningful analytics, this helps to make our customers much more efficient.

We make our customers more efficient, so that they can do more sophisticated marketing campaigns, all without having to expend additional effort. Email programs can also be used to build loyalty using strong, targeted content. Doing more with less is important in this current economic climate and email is an affordable, interactive channel.

Good email marketing campaigns have very high ROI because it is measurable. For our customers, most who are business-to-consumer (B2C) companies, they can track the actual campaign results directly to increased revenues. This tracking can be handled either inside of Responsys or with their preferred Customer Relationship Management (CRM) system.

The Responsys platform provides an ideal solution for global organizations and their marketing needs. We have offices in London, Singapore and Sydney to provide local support to our regional customers.

What do you see as the key trend emerging in the SaaS industry?

For industry pioneering SaaS companies like Salesforce and Omniture, the big trend has been the demands placed on their SaaS applications by larger customers - more complexity, data intensive, and transactional.

Over the past ten years SaaS firms have had to address these enterprise challenges and now there is no longer major barriers that SaaS solutions can’t handle. There is an increasing range of SaaS solutions that can now handle the most challenging back office requirements, what some people are now calling ‘SaaS-Heavy’.

What is your outlook for 2009?

This has been a good year for Responsys. Clients are moving more budgets into the email marketing automation because it is a cost-effective way to promote their brands and increase revenues. Our pipeline going forward is strong and we feel like we in a good position in the right market. We have a proven solution, which is valuable no matter what the economy looks like and even more in demand during a down market. Tighter economic times have focused our customers on real value, which is definitely good for us.

Thank you to John Berkeley and Raksha Varma for contributing to this profile.

Wednesday October 14th

During Larry Ellison’s keynote yesterday afternoon, his last topic was probably the most anticipated of the Oracle Open World conference - availability of the new Oracle Fusion Applications.

The day before, Thomas Kurian who is responsible of all of Oracle’s product development, spent his nearly 2 hours of keynote time discussing all the capablities of the Fusion middleware platform, but not a word about applications.  The new Oracle Fusion platform release, 11g, has incorporated many of the leading capabilities of BEA and other acquired assets to create a robust, open standards framework for application development and management.

But What about the New Oracle Fusion apps?

Was the re-write of  PeopleSoft, JD Edwards, Hyperion, Siebel, Retek such a big project that Oracle was only comfortable previewing mashups with some business intelligence mixed in?

Oracle does have a lot on their plate right now, considering they are in the midst of acquiring Sun Microsystems and trying to integrate the $50B worth of acquired assets from the last few years, and continuing to innovate their core database and infrastructure products.  No one was going to be surprised if there was little or no news about the new and improved Fusion applications until next year.  Then Larry made what I would consider a market changing announcement.

The Rope-a-Dope

Much like Muhammad Ali’s famed fight with Joe Frazer, where he hung out on the ropes and let Frazer beat on him until he was worn out and then Ali came out and knocked Frazer out - this Oracle Fusion Application announcement might be a knockout for many software companies.   Here’s why…

1. Oracle will continue to enhance and support their acquired application products (PeopleSoft, JDE, Siebel and Hyperion) for the next decade.  (At least customers can feel like they are getting something for their 20% annual maintenance payments)

2. Customers will not be forced to move to the new Fusion products until they are ready.  This co-existence strategy will allow customers to move when they are ready or stay and add new Fusion capabilities.

3. There will be two types of Fusion applications;  Replacement applications that would be functional equivilants to existing applications, and completely new applications, like Talent Management that are not fully represented by anything currently available in the Oracle application portfolio.

These are the Oracle Fusion application families that will be initially made available:

• Financial Management
• Human Capital Management
• Sales and Marketing
• Supply Chain Management
• Project Portfolio Management
• Procurement
• Government Risk and Compliance

Specific new Oracle Fusion applications that were mentioned include:

4. All of the Oracle Fusion applications are based on open standards - using a Service Oriented Architecture (SOA), they will allow for tight integration with all Oracle products and open integration with 3rd party products.  Using the SOA that Oracle Fusion provides, it will be possible to re-configure components from Oracle and other software companies to create personalized workflows and mashup applications.

5. The ‘native’ Oracle Fusion applications have a newly redesigned User Interface that is based on a business intelligence metaphor.  Oracle’s approach is that many of these applications are used to detect and manage business exceptions, and they will be leveraging their BI product experience in creating this new UI.  Here are some screen shots of the new Oracle Fusion UI.

6. Oracle will offer multiple deployment options for their Fusion applications.  This announcement said that all products will be available for installation on premise but they will also be Software-as-a-Service-ready.  There was nothing further said about the SaaS delivery capability during the keynote.

7. All the Oracle Fusion applications are ‘code complete’, and being currently tested by what appeared to be dozens of customers.  Some of the firms that were listed on the slides included Kraft, Chevron, Nokia, McAfee, LG, Hewlett Packard, Dell, Cummins and ING.  The Oracle Fusion products are scheduled for general availability release sometime in 2010.

Good News for Oracle Customers?

For Oracle customers this probably represents good news because now they have many more choices.  Assuming what we heard is accurate, customers now know that they won’t be forced to move to a new product platform any time in the near future and this should mitigate some risks associated with their legacy products.

It also allows customers to move to Oracle Fusion at their own pace and mix and match capabilities to meet their business needs.  Because the Oracle Fusion middleware infrastructure is based on open standards, it will enable customers to integrate more capabilities from Oracle and other Independent Software Vendors (ISV’s).

Another benefit is that since the Oracle Fusion technology is based on Java, it should be easier to locate development talent to build and maintain on their platform, which should lower costs and risks.

The one note of caution is that we were only shown short demos and screenshots of these products.  The devil is in the details and customers will need to get a lot more information before committing to a future Oracle Fusion course of action.

What Does this Mean for ISVs?

If you are either an Oracle Partner or ISV, this is probably mixed news for you.

The good news is that there is still a lot of work to be done to bring all of these new products to market.  Oracle is just now beta testing the applications with customers and it will probably take them 6 to 12 months to roll them all out.    If your company offers applications that are not on the list of Oracle Fusion products, you are probably safe for now, and depending on how Oracle structures its partner program going forward, there may be co-existence opportunities with the Fusion platform.  Even Larry admitted that they don’t anticipate customers deploying a wall-to-wall Fusion strategy and that they will need to work with 3rd party solution providers.

The bad news is that Oracle really did rewrite all of these applications on Fusion.   This is a huge project (6,000 tables, 6,500 objects, 20,000 views and 10,000 workflows) and  they wouldn’t have made these investments if they weren’t planning on dominating the market.  With their announced decade-long support policy and no forced migration, this might freeze the market for new applications for the next 6 to 12 months as customers adopt a wait-and-see approach until there is more clarity around Fusion.  One thing is clear, the new Oracle Fusion applications will be more challenging to compete with than the older on-premise, legacy solutions that Oracle is offering today.

ISV’s should start building strategies and game plans with an active Oracle competing in the SaaS and Cloud markets as well.  Although there were not a lot of details around the SaaS-readiness of Fusion, now is definitely the time to develop a legitimate SaaS set of offerings (if you don’t have them already) because going into 2010, SaaS will become a must-have for all software companies that want to thrive and survive on a going-forward basis.

The industry has been pounding on Oracle for the last few years about the availability of their new Fusion applications and now they are coming off the ropes,  now let’s see what happens next.

Here are what some other leading reporters and bloggers thought of yesterday’s announcement:

Software Insider’s Point of View - R “Ray” Wang - Oracle Formerly Announces Fusion Apps

Forrester Research - Paul Hamerman - Oracle Finally Takes the Covers Off Fusion Applications

BusinessWeek - Aaron Ricadela - Oracle’s Ellison: Fusion Will Dawn in 2010

The Enterprise System Spectator - Frank Scavo - Oracle’s Roadmap for Fusion Apps

Seeking Alpha - Tony Baer, Ovum - Oracle’s Fusion Apps finally come out from behind the OpenWorld curtin

InfoWorld - Chris Kanaracus - Oracle’s long-awaited Fusion Applications to launch in 2010

Gartner - Jim Holincheck - Oracle Fusion Apps Announced

Tell us what you think about Fusion and what it means to the market…

Monday October 12th

It has been several years since I went to my last Oracle User Group meeting, prior to them buying PeopleSoft, Siebel and BEA.  Here are my thoughts around the first day:

The Keynote

Charles Phillips and Safra Catz kicked things off and were helpful in shaping how Oracle is planning on not only rolling out Fusion but also how Sun will fit into their strategy.  Unlike other firms like CA or Infor who just purchase software firms and milk them for the maintenance dollars, Oracle is spending $3B a year on research and development.  They are trying to fit all of these acquired pieces together for their customers, to making them easier to install and purchase.  The analogy of buying a car piece by piece is one that is often used by firms that are looking to provide a tightly integrated ecosystem.  I am not sure if this is really what customers are interested in buying because it really creates a classic vendor ‘lock-in’ scenario.

Larry’s vision is to tightly assemble all the technology components a customer might need; horizontal and industry applications, middleware, databases, infrastructure and, after the Sun deal is approved, they can offer hardware too.  This type of vertically integrated strategy seems to work beautifully for Apple and their consumer-oriented iPhone but will this approach be as widely adopted by Global 2000 organizations with very complex requirements?

The other surprise to me was that there was no announcement of any ‘native’ Oracle Fusion applications. Many of us were hoping that there will be more news about Oracle Fusion application delivery dates, but maybe something will be announced over the next few days.  I believe that when the very smart development people at Oracle started working through the plan to rewrite JD Edwards, Siebel, PeopleSoft, Hyperion, Retek, etc…. Maybe taking a phased approach over 5-10 years might be more realistic than rewriting all the products into a new suite all at once.  That is probably why we saw all of the application ‘mash-up’ demonstrations using Fusion this morning.   This Fusion middleware mashup approach is the near term future for Oracle application customers.

This was only Day One, so stay tuned.

Here are some other general observations from Day One.

Open World Positives

• I was really impressed with the size of the event with more than 35,000 attendees, even in a recession.  The show appeared to be well organized and all of the keynote sessions that I saw were well executed and informative.  So Judy Sim, Oracle’s CMO, should be given a lot credit for her team’s efforts.

• Most of the customers that I interacted with appeared to be interested and engaged.

• The partner pavilion (trade-show) was completely filled out and appeared to be well attended.

• The Oracle Fusion middleware and Oracle Business Intelligence solutions were full featured and had  many new enhancements.  The little 5-minute demos were helpful and gave the audience a quick look at each product.

• I was pleasantly surprised to see the number of global customers and many provided public testimonials.

• I liked the tables (with power-strips) that were set up for analysts and bloggers for all of the Keynote sessions.

While speaking at a recent meeting of the Silicon Valley Product Development Management Association, PDMA, I was struck by the uncertainty and confusion around the definition and implications of Cloud Computing. A quick poll of the audience, about 40 software professionals, confirmed my observation that Cloud Computing, though widely recognized, is not understood consistently.

Wikipedia defines Cloud Computing as “an example of computing in which dynamically scalable and often virtualized resources are provided as a service over the Internet.” The ‘Cloud’ can also be defined in terms of computing layers.

The first layer is Software-as-a-Service (SaaS) or the actual end-user Cloud-based applications that people access and use. The next layer is Platform as a Service (PaaS) where to development tools, utilities and middleware live to support the SaaS based applications. PaaS is not the realm of the end-user but rather the developer. The final layer is Infrastructure as a Service (IaaS), the physical layer of the Cloud where the hardware, plumbing, brick and mortar of the Cloud exists. This definition of the Cloud is a clean and simple way of explaining a fairly complex ballet that happens in a heartbeat every minute of every day all around the world with very successful and widely used applications like Salesforce.com, SuccessFactors, Netsuite and Xactly.

A different way of defining the Cloud is in terms of attributes. In my opinion, the Cloud can be defined through these attributes: Transparency, Elasticity, Affordability and Permissiveness.

The Cloud is Transparent
Transparency is an interesting concept when it comes to the Cloud as it works at multiple levels. Location transparency of the hard and soft resources needed to drive Cloud based applications is at the core of this concept. The end-user does not need to know the actual location of the resources they are using. The developer has a set of Cloud-based services or application program interfaces, often referred to as API’s, to link to the needed resources. A single application can access resources like data or even application components from multiple locations. In relational algebra terms, it’s a many-to-many concept … many users sharing many resources from many locations.

The Cloud is Elastic
It provides a flexible environment that can grow or contract for an application based on varying loads of users and data. From the end-user perspective, this happens auto-magically and does not require the end-user or operator to make overt decisions or actions to scale or procure resources to meet their applications needs. Behind this application flexibility is the Cloud at work - shared applications accessing multiple data sources in multiple locations quickly, securely and consistently.

The Cloud is Affordable
It’s the economics of scale realized through utility computing model. The collective buying power of the masses applied to application computing. Applications are pay-as-you-go because the user does not have to pre-purchase dedicated physical computing resources, because the Cloud can scale to their ever-changing requirements. The domination of on-premise, license software models is being challenged by the subscription services model, which is driving application software companies towards an inevitable business and cultural change.

The Cloud is Permissive
It is in essence an environment that can include and involve multiple resources, standards and methodologies. Whether it be .Net or JAVA, Windows Azure or ORACLE, Force.com or Etelos, Boomi or web services APIs, there is no one technology or computing standard that rules the Cloud. Developers can select from a wide range of resources to build SaaS applications through the Cloud. Granted that there are companies like Oracle or Salesforce.com who claim leadership of the Cloud but the reality is that the attributes of the Cloud make it highly unlikely that any one vendor will dominate it in the short term.

When it comes to Cloud Computing, there is no consistent definition. I believe that the attributes that I have described help to further describe and differentiate Cloud Computing but the words from Judy Collin’s song “Both Sides Now” still ring in my ears…

“I’ve looked at clouds from both sides now
From up and down and still somehow
It’s cloud’s illusions I recall
I really don’t know clouds at all”

We still have a lot to learn about Cloud Computing. Talking to the members of the Northern California chapter of the PDMA was enlightening and intriguing. The great questions that were asked and high interest levels tell me that acceptance of Cloud Computing is growing rapidly. There’s still a long road ahead in terms of broad marketplace adoption. The attributes of transparency, elasticity, affordability and permissiveness are in tune with a growing marketplace need for a new generation of applications that operate in and through the Cloud.

This week’s Smart SaaS blogger is Gary Damiano.
He can be reached on LinkedIn or at gedamiano@gmail.com.

Company:             Genius.com

Started:                 2004

Located:               San Mateo, California

Geography:          Global

Market:                Marketing Automation

Products:             Genius Pro and Genius Enterprise

Key Customers:  Aruba Networks, BT, Intuit, Jigsaw, Miller Heiman, PivotLink, WebEx Cisco

Website:               Genius.com

Recent News:

Genius.com Adds Website Analytics Capabilities to Genius Enterprise Marketing Automation Solution

“Crossing the Chasm” Author Geoffrey Moore Headlines American Marketing Association Webinar: Ensuring Highest Marketing Return from Provocation-based Selling Techniques.

Genius.com adds Software Veteran as EVP of Sales; Announces Record Quarterly Revenues Reflecting Continued High Demand for Email Marketing and Marketing Automation Solutions

Genius.com Launches Definitive Resource Destination for B2B Sales and Marketing Professionals

I asked David Satterwhite, an EVP at Genius a few questions about his business and his view of the SaaS market in 2009.

Did you start out as a Software-as-a-Service company?

Founders David Thompson, Genius.com’s CEO and Scott Mercy, both came out of WebEx and really understand the SaaS business model. They started the company because they had a better way of managing sales and marketing collaboration. So they started the company based on what they had learned at WebEx and built a native SaaS platform. Just like Salesforce.com, it scales and can handle large volumes of email. So the company can definitely leverage a ‘land and expand’ type of SaaS business strategy.

Our CTO and co-founder, Robert Seidl, founded PageMill, the visual website editor, and he really understands how to make the complex, really simple. The Genius.com platform quickly determines who are the best and most qualified opportunities and delivers them to the appropriate sales rep, quickly. Our user interface is really easy to use and very inviting. We have some new capabilities that we are patenting related to being able to track leads and activities at various social media sites, which is exciting.

Why do your customers buy from Genius.com?