First things first. Although all responsibility for this post is mine, I want to offer my sincere appreciation to Michael Krigsman (@mkrigsman on Twitter) for his suggestions on how I could write a better, more useful and balanced post and to Dennis Moore (@dbmoore on Twitter) for his insights (with which I agree entirely) about those situations for which true SaaS is not the right application architecture/deployment method/business model. I also want to note that this post applies strictly to HRM software being offered now (so with all due respect for legacy applications which may have been the bees knees in their time), which is my major focus, and may not be applicable universally to all other enterprise business domains.
Larry Ellison and I disagree, and not just about the America’s Cup being run where he’ll get great views from his San Francisco house. It seems that Mr. Ellison is not impressed with multi-tenancy as a core design principle of true SaaS. Nor is he impressed with his major competitors.
In my view, this is classic Ellison selling what he’s got no matter what’s best for his customers. Virtualization is quite useful if you’re hosting single tenant software as well as for data center resource management, but it doesn’t give you the most important benefits of true SaaS, of SaaS InFullBloom. What it does do is to impact TCO in ways that will help Oracle’s profit margins. Anyone want more hardware (sorry, now they’re called appliances)? How about some more RDBMS licenses?
But how easy is it to handle inheritance properly across tenants, e.g. for the type of embedded intelligence that makes data entry-style self service into self sufficiency, without true SaaS? How about aggregating data across tenants (obviously with all the relevant permissions) to create benchmarks or shared pools of candidates or job descriptions? What about the real cost (to include managing the risk of errors and rework) of applying upgrades across a virtualized versus a true SaaS architecture? And can you really keep everyone on the same release when some of them are implemented on-premise, some are being hosted by the vendor single tenant, and some are being hosted by the vendor multi-tenant (assuming that Oracle can ever get there with Fusion?)?
It’s entirely possible that Salesforce.com’s architecture needs refreshing (and is no doubt getting it) because of when they started building. It’s also possible to build badly designed but multi-tenant software, and there are certainly situations (e.g. you’re responsible for HRM of our covert operations teams) when true SaaS just isn’t the right answer, even for new applications. Realistically, we’re going to have a mix of true SaaS and everything but true SaaS for many, many years to come — just as we’ve still got flat files and COBOL at the heart of many applications (we’ll mention no names of where that old COBOL pops up in now Oracle products). But it’s Mr. Ellison’s opinion of true SaaS that’s the crock, not multi-tenancy. True SaaS is the best model for contemporary HRM software in all but a few extreme instances, and I believe that Mr. Ellison knows that even as he’s saying otherwise. Did I mention that SAP, Workday, most of the TM vendors, NetSuite, Salesforce, most of the consumer Web sites and many more agree with me?
Mr. Ellison is a brilliant businessman when it comes to making money for his investors and for himself. Furthermore, I think that Oracle has a large part of the IT community by their collective tender parts. And with his investment in NetSuite, he’s playing both sides against the middle, because NetSuite is true SaaS. But Mr. Ellison and his firm are never going to win the contest for most customer-focused, at least not among HR leaders. And just wait until you’ve digested their Fusion HCM price list!
What’s really sad is that the Fusion HCM team has done a very good job within the limits imposed upon them by Mr. Ellison’s business strategy. I believe they’ve pushed their fresh HRM thinking and product design efforts as far as they possibly could within the allowed technology stack and while preserving sufficient backward compatibility with their installed base to retain those maintenance streams well into the future. But without true SaaS, without the ability to keep everyone on the exact same code base, without the many other benefits that only accrue to their customers when a vendor delivers well-done true SaaS, I think Mr. Ellison’s America’s Cup entry has a better chance of beating its competitors than does Fusion HCM when it’s compared, all in on a “rip and replace” basis, to the emerging “fleet” of true SaaS HCM products.
And yes, in the interests of full disclosure, Oracle is not a client (although I did do work for them during Joel Summer’s respected tenure as head of the EBS HCM product line), I’m not on Larry’s most favored analyst/influencer list, and I don’t expect to be invited to watch the America’s Cup as his guest. I would also note that this post was not written as a result of any Oracle briefing and, therefore, was not subject to Oracle’s review.
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[…] Larry Ellison And I Disagree, And Not Just About The America’s Cup ( #Oracle) But without true SaaS, without the ability to keep everyone on the exact same code base, without the many other benefits that only accrue to their customers when a vendor delivers well-done true SaaS, I think Mr. Ellison’s America’s Cup entry has a better chance of beating its competitors than does Fusion HCM when it’s compared, all in on a “rip and replace” basis, to the emerging “fleet” of true SaaS HCM products. […]
Great insight to a deep issue.
Vendor Domination is bad for innovation
Innovation is vital for economic prosperity
BUT the corporate driver is profit = increase share price. Larry Ellison has played the game well if he had not achieved the “domination” some else would have done so – acquiring Oracle in the process? What he has also been quite clever at doing is “playing both sides against the middle”. He recognised that “disruptive innovation” and SaaS was/is that cannot come from dominant suppliers it is called the “innovators dilemma” “If they adopt or make new products that are simple to implement and easy to use, they will lose their massive streams of services revenue. Their sales models are based on selling big deals. A switch to simplicity will crater their businesses”
BUT what happens when the pressures from such articles written from positions of influence such as by Naomi? And she is not alone in UK Angela Eager of TechMarketView has described the powerful vendor ecosystems as “tumbling edifices”. Add to that some real step change innovation that could pose a serious threat to the massive investment (mainly by acquisition again driven by financial market pressures) and what happens next to the dominant vendors?
“What step change” you ask? SaaS is successful because business are feed up with the old model which has left IT in a real mess as articulated in a recent article title sums it up “IT Today: Unsustainable, unhealthy and just plain screwed”. Software Technology is the real problem in context of use in business. If this was “fixed” the SaaS just becomes a payment model option.
George Colony, CEO of Forrester Research summed it up eloquently in an exchange I had with him “If we don’t get from IT to BT [Business Technology] we’re going to have more disasters like our present mortgage meltdown. Why? Because IT creates impenetrable systems that human beings can’t manage. BT is about human beings back in control.”
Now this may be a surprise for technical folk but understand that business logic has never changed since commerce started indeed business is actually quite “simple” – it is about people achieving outcomes individually and collectively and this makes any business? The technology to deliver I am sure is both complex and challenging. This does not change the fundamentals of business it is about people, internal and external to the organisation and IT is there to support and contribute to efficiency.
When you look at how people work irrespective of the required function there are relatively few work task types human and system including the user interface that address all business driven issues? So why repeatedly recode for every function in a business? Do we really need to rely on a vendor’s view to be imposed to run “my business”? What do coders know about business when I want a custom solution? I look at business and see people work together in relatively small groups so why are IT projects so big and expensive? In fact there is no such thing as “enterprise solutions” (other than in the pricing from vendors?) it is not how business works?
There just has to be a better way? Well there is and it has potential to be very disruptive. The above is written from deep experience with the scars to show but someone had to do it? Bill Gates no less described such capability as the “holy grail” and will change software development. See this for a thought provoking read from UK based innovator Procession that dares to challenge the dominant suppliers http://bitly.com/f7tcOm . The new alternative to COTS and custom coded solutions with build time dramatically reduced and in built agility in the software to support constant change. This is all too simple for an industry that has thrived on complexity and sadly IT failure?
Naomi,
You’ve hit a nerve that has long frustrated many an innovator, particularly in large tech companies that have a rigid business model with cash flow from legacy products, usually enabled by some form of lock-in. I am one of those frustrated innovators, but not from within the legacy companies, rather as an entrepreneur attempting to bring much needed improvement to IT and organizations. I have known many from within companies in this situation, however, and helped a few transition out to start new companies. That frustration is substantially behind the so-called miracle of Silicon Valley. Engineers seek liberty much like customers.
The dynamics surrounding related issues has changed, which is evidenced by the lack of innovation in organizations– where most innovation in computing could be found in early years — to consumer markets.
While I still get frustrated by the macro environment in the enterprise, I also recognize that apart from the consolidation enabled by governments that favors market dominance at times, which we can influence to some degree if so engaged, an enormous part of the problem is that so many customer cultures are very similar–whether government agencies, other industries, or competitors in the same industry that use the subject’s products. This speaks to the larger problem of apathy that thrives in the negative spiral often coined as an oligopoly in technology.
While I too often criticize macro destructive strategies, I don’t blame the boards of these companies for doing what they are legally bound to do in the U.S. anyway by their fiduciary responsibility. Rather, we should ask ourselves why those incentives exist and why markets don’t punish such behavior — it’s a form of regulatory failure– both in terms of functional government, but perhaps more importantly market failure. I blogged on market failure on the web not long ago here – SaaS is in part a form of regulatory dynamics at work in the form of technology innovation, but we all know that technology alone is quite limited as a regulator-many types-
http://kyield.wordpress.com/2010/11/17/regulatory-failure-on-the-web-consequences-and-solutions/
Sadly, I’ve seen a great deal of evidence in recent years that a fair number of the large companies and government agencies in similarly challenged environments favor the type of business strategy many of us disagree with, in behavior if not in words, which taken together is in my view the most powerful negative influence on our economy in the world today. It prevents essential creative destruction and innovation needed to support a dynamic economy– one that creates jobs, rewards risk takers and innovators, and incentivizes progress. Despite the happy talk, we’ve seen primarily the opposite in recent years, rewarding abusers and punishing problem solvers. Similar to a democracy that requires constant vigilance, this is what happens in markets when customers are not constantly vigilant, and when both fail at the same time we tend to see nasty things emerge like oligopolies, or even fascism.
I don’t see this as a political ideology either way, but rather I see ignorance in our culture — U.S. partisan politics relative to sustainable economics across most of our society. Apparently the vast majority are so far removed now from experiencing how functional markets work that we’ve lost a fair amount of knowledge in our culture on what the role of a customer is in a market economy. Tragic. 02-MM Thanks for the post.
Hi Naomi
Well, I think that pretty much guarantees you will not be getting a Christmas card from Larry!
There were two key parts that interested me.
True SaaS is a long way; totally agree so I tend to refer to certain scenarios as hybrid SaaS. Although I also think it is about business needs and choice that will drive the decision towards or away from true SaaS.
Prices. Let’s be honest, most if not all software vendors are all about the sale. Service is often a long way down the list of priorities so whilst I know Oracle are notorious for their pricing I think this is the case with pretty much all vendors but in particular those in the Enterprise market. I get client feedback around products being “similar” but support/service is always to let down. Not sure it is going to change much…..
Great post!
Peter
Peter, I think you’re right about the no “Christmas card from Larry.” But since I celebrate Chanukah, and he should do so, that’s okay. Re: vendor service after the sale, one of the very positive aspects of true SaaS from a customer perspective is that the relationship between vendor and customer is much more intimate and ongoing — and that’s a good thing. Does it solve all customer support problems? Definitely not. But it does shine a light on them, day in and day out, which I think/hope will motivate vendors to do a better to great job in this area. Thanks so much for your comment.