Heard Here and There
A friend who hires salespeople at a second-tier ERP
company says that he is getting resumes from
the following companies: Intentia, IFS, i2, and
PeopleSoft, but few or none from SAP and Oracle.
The only surprise here is PeopleSoft.
We heard from SAP after the last Short Take. Let's be
clear. mySAP.com is "the platform for the next-generation
product." That, SAP has succeeded in establishing.
The question is, "Is the 'platform' a technology
that you upgrade to and pay for, or is it a brand name?"
One generates lots of revenue. The other generates less.
The answer is quite simple. It's not a technology
that you need for any upgrade.
Only if you buy new Internet
applications from SAP, do you pay for mySAP.com seats.
Those seats are only the
incremental seats for the new application. If you
upgrade to R/3 Enterprise or just buy R/3 Enterprise,
there is no mySAP.com-based charge. (There are
cases where an upgrade of SD, for instance, may
involve paying for some mySAP.com CRM seats, but the
principle still holds.)
This has two, clear consequences. First, you're not going
to see companies upgrading to mySAP.com across the
enterprise unless they buy the (good, but slow-selling)
portal application. Second, the companies that did buy
large mySAP.com licenses under the impression that
they were buying an upgrade are not going to be
in the market for a while. Some companies are looking
at a years-long timeline just to get the portal in
worldwide.
It's hard to sort out all the layoff rumors. The
i2 layoff rumors are clearly true. It's also true
that Glovia (does anyone care?) lost its CEO. I can't
tell about the rumor that Siebel is laying off
20% or about the rumor that SAP is instituting a
furlough program, though one or two of the sources
have been reliable. Our very reliable
EC maintains that the Hasso-is-going rumor is true;
It's just a question of timing.
Everyone is looking for the magic macro-economic
indicator. Is it salespeople resumes? CIO budgets?
Something even more esoteric? Something less?
I'd like to point out that any such indicator is
NOT likely to be one that was reliable in the past.
The software market has changed structurally, and the
only reliable indicators are those that are meaningful
within the new structure.
Key elements of that change. A) Sales primarily
to installed base. B) Lack of belief in transformative
value of applications. C)Hence, lack of belief in
probability that applications will return high value
in a short period of time. D) Swing of the pendulum
back from growth as the most important corporate goal
to cost control as the most important goal and
the inability of the application companies to change
their value proposition accordingly.
Is PLM the next big growth area? It's a future. Nobody's getting
much traction today. PTC is losing money; MONE is selling new products
to existing customers; Dassault is also growing through new products.
The innovators are clearly interested in the area, but they're not
investing heavily yet.
Have to close with i2's earnings announcement. No surprises here.
Given how bad the news was, I thought Bill Beecher and Sanjiv performed
creditably. They're doing a lot, though still not enough. But I
am still positive about the upside potential.
Structurally, the company is clearly changing
the rules about how you run a niche software vendor.
Reduce your R&D costs by developing in India. Cut
the expensive facilities and people. Qualify ruthlessly.
(The reduction in stacks supported is a form of
qualification.) Use India (where there are
no copy protection laws) to develop customer
test beds. All good ideas.
At a valuation of two-plus times current cash (three times future
cash) and mature proven products, i2 doesn't have to do much to
look good. The products are worth money to people, and they are
the best products on the market. And remember, when Sanjiv says
that the penetration of these products is very, very low, he is
quite right.
Disappointments, too. Little willingness even to acknowledge two
key problems: i2's problematic reputation and the marketplace's
doubt about the incremental value of i2's products. I talk to people
who say, "The products may really be better, even much better,
but why pay the extra cost (in effort and time, if not in money)
when I can get the equivalent product from my ERP vendor?"
I think there are good answers to those questions, but Sanjiv gave
no indication that he thinks he needs to worry about providing the
answers. If I'm right, proof is needed. But proof from a company
that has always sold vision is particularly hard, not just because
people might not believe the proof, but also because the culture
is used to working without any need to prove anything.
The sourcing summary has been delayed for a couple of days. Sorry.
A more readable version of this report is at
www.b2banalysts.com/new/research/shorttakes/7172002.html. For
a full list of recent Short Takes, look at
www.b2banalysts.com/new/research/shorttakes/recent.html.
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