Michael Fauscette

SAP Leadership Shakeup: Leo Apotheker out, return to Co-CEO Structure

In a not so surprising announcement today SAP CEO Leo Apotheker has stepped down effectively immediately. For a few months now senior software analysts have somewhat quietly predicted just such a move, especially on the heels of a very poor performing year. The timing seems predictable too, as SAP just reported Q4 earnings. Announcing this now also gives the new management team time to get a coherent message together prior to Sapphire, SAP's user conference which will be held May 16-19 in Orlando, FL.

The new leadership team, headed by Co-CEO's Jim Hagemann Snabe, former head of product development, and Bill McDermott, former head of the field organization, both already executive board members. In addition Vishal Sikka, Chief Technology Officer joins the executive board and Hasso Plattner, Co-Founder of SAP and Chairman of the SAP Supervisory Board, will continue to play a role in advising the new leaders on technology and product development. There had been quite a bit of guessing / predicting as to what SAP might do to replace Leo; a company that has been criticized for some major points of its strategy over the last few years. One camp believed that SAP needed an infusion of "new" blood and would bring in someone from the outside while another held fast to the idea that what SAP needs is leaders with established organizational clout so that they could quickly get the SAP ship back on course. The choice is a reasonable one and brings together a strong engineering leader needed to get the R&D teams (SAP has always been seen as an engineering led company) quickly re-focused on moving forward (something Leo had been criticized for disrupting recently) and a customer / sales focused leader to keep the company focused on results. The changes come at a critical time for SAP as they finally bring out a new release of BusinessbyDesign that has been promised as ready for general consumption and as they release a series of enterprise cloud apps (here's my recent post on its cloud strategy). Both moves are promised this year and are seen as critical to get SAP back on track with its cloud initiative.

SAP and its new Co-CEO's face some difficult times as they try to get the company back on track and moving in some important new directions. By Sapphire they will need to make some definitive moves to show that company strategy is aligned, clear and making progress toward stated goals.

Socialytics

With the continued growth of both the pubic social web and private collaboration, communication and social business tools we are creating an explosion of social data. As businesses get more deeply involved in the social business movement and as software vendors create more and different social tools there is a compelling case for tools to help businesses make sense out of all this social data. I wrote about the idea of social analytics last year. This year in our IDC Top 10 Predictions we included a prediction about social analytics: "Business applications will undergo a fundamental transformation — fusing business applications with social/collaboration software and analytics into a new generation of "socialytic" apps, challenging current market leaders." Here's a simple model that shows the concept of socilaytic platforms / apps and how they might be applied:

Some characteristics of socialytic apps might include:

• Aggregate social data from public and private social data sources (user / company selectable)
• Real-time search and monitoring
• Social metrics dashboard
• Natural language processing (NLP) with linguistic analysis capabilities
• Visualization and simulation
• Social trending
• Human search
• User configurability

I'm sure there are lot's of other characteristics and use cases for socialytic platforms and apps that will emerge as more businesses start deploying social tools over the next few years. Once the analysis capabilities are in place, businesses will undoubtedly start to look at automating decisions and building / deploying automated decision architecture-based solutions to help social analysts focus on higher value interactions. A few vendors are offering socialytic apps but the market is far from crowded at this point. An upswing in demand as companies get deeper into their social business projects should drive market growth and the development of new and varied offerings to address emerging needs.

Concur Fusion 2010 - the Travel & Expense Cloud goes mobile

This week in Boca Raton, FL Concur users gathered to listen to company executives and partners talk about Concur's travel and expense management solutions and preview some new directions for the company. As with all user conferences the week saw a number of key announcements on product enhancements and new partnerships. In general I think Concur is leveraging some of the key technology and business trends that are starting to gain momentum and will be "hot" topics over the next few years. Concur itself is using some social business concepts in its product development processes, for example. For me, this was an exciting conference and I saw a company that is committed to listening to and delivering for its customers.

On the partner front Concur had two major announcements. The first was a deepening of its previous relationship with American Express. Concur's T&E management solution is the solution of choice for AMEX and the AMEX sales force is coming up to speed over the last year and continuing for the next few years, so that they can sell Concur's solutions into the AMEX customer base. Over time this has the potential to drive an increasing share of Concur's new business. The second announcement is the intent to tightly integrate Concur's solutions with Amadeus, a global travel industry technology and solution provider. This integration, slated for release later this year, includes making Amadeus distribution technology available in Concur Clickbook Travel and pulling travel booking from Amadeus eTravel Management back into Concur Expense. With Amadeus strong presence in Europe this partnership should help increase Concur's footprint there while giving Amadeus a stronger presence in the US market.

Concur is investing heavily in providing mobile travel solutions on three platforms, iPhone, Blackberry and Windows Mobile. The mobile app is an extension of the decktop travel and expense management solution and provides the capability to view and manage itineraries, book rental cars, hotels, dining reservation and taxi's, enter expenses and manage / review expense reports. There's even the capability to capture receipt images and send them along with expense reports. The mobile functionality is extended by incorporating other 3rd party functionality for things taxis (RideCharge), an approach that could open up all sorts of services to the mobile user. The move to mobile for Concur is interesting for another reason, it is a new focus (or I should say adds new focus) as in the past the focus customers for Concur were the travel managers and the expense department. Adding focus on the end traveler adds a lot of value to the user base, IMHO and is the right strategy in an environment that is starting to shift focus to the individual (or as I've said before, as the people become the platform). This is a first version of the mobile app and there is a lot of interesting things on the roadmap as Concur moves forward, things like leveraging location awareness for a variety of functions (from finding hotels, restaurants, etc. to automating milage reporting on expenses), integrating social networks, and adding Android support.

As icing on the Concur cake, they also reported FY2010 Q1 earnings this week. They had a strong quarter with 16% year over year growth with total revenue reaching $67.7M.

#OracleSun

I spent most of yesterday at the Oracle Conference Center listening to Oracle and Sun Exec's talk about the go-forward plans for the new company post-close of the acquisition the day before. As you might imagine the plans are fairly detailed, especially given the amount of time they had to develop them as they waited for the glacially slow decision from the EU to bless the deal. I won't go through every detail that we learned on the product plans, you can do that in greater detail yourself next week when they post the Sun-Oracle product plans on Oracle.com. What I will do is give you a quick overview of the basic strategy and share some observations. I will say that if you follow Oracle as closely as I do the general strategy should be no surprise, as it looks very similar to the process and approach that they have used on all of their major acquisitions. Also the announcements made yesterday are completely consistent to what was said by all of the Oracle exec's at the announcement of the deal, in subsequent conversations that I had with Oracle Co-President Charles Phillips and Oracle CTO Edward Screven, and in all of the public statements that CEO Larry Ellison has made since.

Here are a few observations:

• All of the Sun product lines will continue under the new company and the hardware will be branded Sun - Oracle.
• The new company will focus on two strategies, produce best of breed products individually that they will also offer in complete integrated stacks or "pre-integrated solutions" containing hardware, database, OS, middleware and applications (something I'd maybe call an appliance, although they seem to object to the term).
• The open source products will all be continued, managed under separate business units (as agreed with the EU) and will include continued investment (yes, including mySQL, which I think is a great competitive move against Microsoft SQLServer).
• Oracle plans to get Sun to profitability in the first quarter of the merged company. There are several initiatives that will aid this, the reduction of redundant process and personnel, major supply chain renovations and simplifications, reduction of total number of SKU's and general improvements in operational efficiencies.
• Oracle plans to take the top 4,000 global Sun accounts direct and will approach the hardware business by adding an overlay hardware sales team, much like they have done with other speciality product lines. The channel and the rest of the channel accounts will be integrated into the Oracle Partner Network framework according to the regular Oracle acquisition check-list.
• Oracle will hire 2,000 new engineers and sales personnel, roughly twice the number of Sun employees that will be laid off.
• Oracle will raise its R&D investment to $4.3B, an increase of $1.5B over 2009.

The other interesting thread that was clearly present throughout every executive presentation is Oracle's commitment to high quality support. Jergen Rottler, EVP of Oracle Customer Services also presented and reassured Sun customers that Oracle would integrate and rapidly increase the level of customer service (BTW, historically in other acquisitions this is the case. They have developed a very sophisticated process of integrating acquired company support organizations, which I guess is no surprise after 60 acquisitions in 5 years).   

Overall it was a very up beat and positive day. The new company and strategy is promising but as always the true test is in the ongoing execution of the strategy, something Oracle has proven to have as a core competency.

Cloud meets social meets gov contracting, Deltek launches govWin

Last week Deltek launched govWin, a community platform including a CRM app for gov contractors that is built on the recently acquired community platform mySBX. mySBX provided the existing community of 7000+ gov contractors from small independents to large mega-contractors like Lockheed Martin an environment where they can list opportunities, find partners, place resources and collaborate on gov contracting. With the launch of govWin Deltek leverages the strength of the existing community and adds significant additional value by adding a SaaS based CRM solution for gov contractors that is tailored for gov contracting business processes and will help streamline the biz dev and customer management process.

This announcement is important on several fronts. Deltek is a leader in providing solutions for gov contractors, AEC and professional services firms but has traditionally only offered the solutions in an on premise (or partner hosted) model. This move into cloud based apps starts to capitalize on the strong growth trend we are seeing overall in cloud apps and specifically in the project based solutions market which I predict will outpace the general software apps market this year. The solution is also the first community based platform for gov contractors and facilitates peer to peer networking, a practice that our research shows as a key practice for driving business growth. govWin also provides community members with useful content based on best practices and the ability to increase the effectiveness of business dev efforts.

Some Predictions for 2010

2009 is thankfully behind us and its time to turn our attention to 2010 in ernest. Every year at this time teams of analysts all over IDC get together and produce top ten predictions documents in their coverage areas. My group, Software Business Solutions is no exception, we're putting the finishing touches on our document this weekend. I have a joint breakfast briefing with Henry Morris and Steve Hendrick this Tuesday, 1/26 to highlight predictions from the 3 major WW IDC software groups. Contributing to the predictions from my group: Mary Wardley, Albert Pang, Amy Konary, Robert Mahowald, Sanjeev Pal, Darren Bibby, Steve White, Virginia Agee, Mira Perry and Caroline Dangson.

I'm not going to share the whole document in this post, if you want that you'll have to check it out on the IDC site (should be up in a week or so), but I do want to share the predictions that we came up with this year. From a trends perspective the predictions theme is the "new normal" and they fell into a few buckets; social business, mobile, next gen apps / cloud and lasting change. Here are our predictions:

1. The social business movement gains momentum through the cultural shift that is enabled by social enabled applications that are formed from the intersection of collaboration, content, search, communities, CRM and the current web 2.0 tools like blogs, wiki’s, microblogs, etc. with 50%+ of the Fortune 500 initiating social business projects this year.

2. Software vendors, recognizing that "one size does not fit all" with partner programs, will move to an a-la-carte benefit structure versus a long list of perks with diluted value.

3. The great divide will come to an end between horizontal and vertical applications for the enterprise.

4. As a fundamental part of the Social Business transformation businesses shift their focus from technology and process to people, who in effect become the new enterprise platform.

5. Cloud infrastructure computing moves squarely into the mainstream as a significant number of the Fortune 1000 companies adopt the utility computing model demonstrated by moving a portion of their “sandbox” apps into production on public clouds.

6. In response to a productivity spike, VARs, SIs and ISVs will turn in force to contracting (virtual staffing) and partnering. Vendor programs will adapt to support these new models.

7. "There's an app for that": Mobile becomes the new enterprise desktop with more than 50% of US workers accessing applications via a mobile device.

8. The 'new normal' will give rise to increased end-user buying power causing extreme pressure on existing vendors to mold offerings and giving opportunity to aggressive suppliers.

9. A software industry shift toward subscription models will result in a nearly $7B decline in WW new license revenues in 2010.

10. Cloudsourcing becomes a major alternative for companies looking to outsource non-core business processes (software-in-a-service).

So there you have it, what other predictions did we miss for enterprise applications and their vendors and partners?

Update on the "local" wars

A few weeks ago I wrote a post on Google's (now failed) attempt to buy Yelp. In that post I pointed out a couple of reasons why I thought Yelp was falling behind services like FourSquare, Gowalla, etc. There were a few things that I thought made the newer services "better", context aware location based check-in that can be shared with your network on Facebook, Twitter, etc., the ability to tie your Yelp community to your existing community for the added trust that accompanies your established network and augmented reality. I talked about reaching local markets, something that Google and many others find very appealing and Yelp has done quite well, in this post on hyper-local. This last weekend Yelp announced the addition of a few new features on its iPhone app that completely closed the gap on the other apps that I had mentioned. Specifically Yelp added:

• A friend finder feature that let's you find your Facebook friends and friends in your iPhone address book. In effect tying Yelp to your trust networks.
• Check-ins. Now you can broadcast your location to your friends and share tips, info, etc. on Yelp, Facebook and Twitter. It includes push notifications and the ability to show check-ins as well as find near-by friends who have check-in. You can also attain "regular" status for businesses you visit regularly.
• Share via Facebook Connect and Twitter
• Updates to the augmented reality feature, Monocle, that adds check-ins and a map view to the reviews already available.
• Access to your Yelp profile from the iPhone.

All-in-all a very strong move by Yelp to address the issues that were starting to make them somewhat dated in the mobile local apps arena. I've just started using the new features so I'll update this after I have a higher comfort level with them.

Hyper-connected

I woke up this morning and did what I do most mornings, reached for my iPhone sitting next to my bed to start catching up on what I missed while I was sleeping. Let's see, a few Twitter DM's (handily sent to SMS) to answer, a few Facebook comments (SMS again) and mail, a couple of txt messages that didn't wake me up, notifications from Gowalla and FourSquare, a txt from Ribbit of a voice mail I missed last night...stumble into the kitchen for a Monster drink and then sit down at the MacBook to give Twitter a better look, check in on Facebook and flip through Netnewswire for interesting info to read and post to Twitter, work on a blog post idea, a quick check of email (ugh, a couple of hundred piled up since yesterday) and the day's started. After some breakfast I have to take my daughters to Barnes and Noble (I can't convince them to switch to a Kindle, my preferred always connected reading device) so throw iPhone in 1 pocket, Blackberry in the other...OK, yes I'm an extreme case but lets face it, more and more, we're connected to our networks all the time. In a recent IDC survey 40.3% of respondents reported using a smart phone at least 2 times per workday to connect to the Internet (source IDC Nov 2009, n=4710, US based). Two years ago in another US based survey of the ~32% of respondents that used the Internet on a mobile device they spent an average of 45 hours per week online, 38 stationary and 7 hours per week on the mobile (n=3176) (and I'm sure that number has gone up since 2008). According to Neilsen Online in 2008 roughly 72.5% of the total US population used the Internet (or 220,141,969 people) increasing to 74.1% in 2009 (227,719,000 people). That would make mobile users 70,445,430 people in 2008 and 91,770, 757 people in 2009. With the expansion of wifi, especially of free wifi, which is now getting very available even at 30K feet as more and more airlines add support, and the ability to connect extends almost everywhere.

As the general population becomes more mobile, as we become more and more connected through the social web and as the lines between business and personal get blurrier are we moving to a place where we are in fact, always connected. "Always" is relative of course, I mean, people do still disconnect at times, even the most connected of us run away for a short periods. It seems to me though, that the disconnected time gets less and less. Now I know that I'm affected but what I call the "edges" effect...people who live on the edges of the US in general, seem to be early adopters of technology (and no, I have no scientific or survey data to support this theory, just a lot of years observing that behavior). I remember during the Internet bubble using Webvan. I loved Webvan, you ordered groceries online and they showed up at your house; you could even save the shopping list and just reorder it each week (or whatever period you wanted)...fantastic really. Kozmo.com was another great one, you ordered just about anything from them and they'd deliver...videos, sandwiches, whatever you wanted. Order and their army of moped enabled delivery people mobilized to procure and deliver! I remember trying to explain these to friends and relatives in other parts of the country and mostly all I got were blank stares...I think my mom believed it was some sort of plot to get her to eat old produce or something. Lesson learned, what sounds good in San Francisco may not sound that way to the middle of the US. I've learned to use that as a sort of litmus of start up ideas, "what would they say about the idea in Cleveland, Kansas City or some other middle of the country city", just to see if its something that has a prayer of getting to any sort of widespread adoption.

Anyway, I'm rambling, back to the topic of hyper-connectivity. Individually we are more and more connected, both to the Internet and through the internet / social web to each other. That connectivity moves easily over to the business world. Businesses are interconnected to supply chain, partners, employees, customers and even competitors. This interdependence or ecosystem, has very different modes of interaction than independent people, businesses, etc. Independent organizations focus internally, interdependent organizations must focus externally. This is one of the fundamental changes that are creeping into businesses today and part of the foundation of the transition to a social business. Hyper-connectivity opens us up to more, different and better ways of interacting and collaborating. It also can strain old paradigms and stress old modes of interaction (maybe that falls in the "progress has its price" bucket). For me, adjusting to hyper-connectivity has not really required any effort but I suppose some of us will find the price too high.

Guest Post: VMware Marches Up the Stack with Zimbra Acquisition

This is a guest post from Robert Mahowald, (@saaspro) Research Director for IDC's SaaS and Cloud Services practice and Gary Chen, Research Manager for IDC's Enterprise Virtualization Software program.

On January 12th, 2010 VMware announced that it has entered into a definitive agreement to acquire all of the intellectual property and technology rights of Zimbra, maker of a collaboration suite (email, contacts, shared calendar, VoIP, and online document authoring), from Yahoo. As part of the deal, which we expect to close in Q1 of 2010, Yahoo retains the right to use some Zimbra technology as part of its hosted email platform. Yahoo snapped up Zimbra in mid-2007 for $350 million, but we estimate Yahoo let Zimbra go for about $100 million, a price that is a slight discount to Zimbra's estimated $105 million 2009 revenue. This acquisition builds on VMware's summer 2009 acquisition of SpringSource, an application development and runtime framework, which gave the VMware some platform-as-a-service (PaaS) capabilities. Now moving higher up the stack into applications, Zimbra will bring software-as-a-service (SaaS) capabilities to VMware's vCloud initiative. As VMWare continues to assemble a portfolio beyond its core business, its aim to reshape its position into a broader technology company is becoming clearer.

We estimates that since its launch in 2007 Zimbra has sold about 15 million paid seats of its Zimbra Collaboration Suite (ZCS), mostly through ISP and portal resellers, and its SaaS delivery, non-proprietary (works with clients like Microsoft Outlook, Apple desktop suite, and Thunderbird) posture, and low price point made it popular for small businesses and universities looking for inexpensive alternatives to Microsoft Exchange and IBM Lotus Notes. During its time inside Yahoo, Zimbra, with its focus on the small and micro-business segments, has had sluggish sales, and its drive into business markets has been far more low-key than Google’s aggressive push into the small and mid-tier buyer segments with Google Apps and Google Docs. But with Zimbra (and SpringSoft before it) VMware is not just blindly breaking into the applications segment, it is executing on a plan to acquire new capability and reshape itself in the eyes of its competitors and customers. Interesting dynamics to watch:

• Platform aspirations: like Salesforce.com, Microsoft, IBM, Intuit, Netsuite, Zoho, and a few others, VMware is starting to assemble the portfolio to deliver Cloud-based platform as a service (PaaS) functionality, with tools for test & development of new objects and applications, and built-in integration and APIs. These other vendors are using the platform tools as an anchor point for customers to build new applications and customizations, and to lure commercial SaaS vendors, and developers, to their platform, in addition to providing a few key applications as proof of concept, like Salesforce.com with its CRM and PRM apps. SpringSource brings the J2EE tools developer tools and Zimbra brings the applications to VMware's burgeoning play in this important new Cloud play.

• Open source leanings: Both SpringSource and Zimbra have open source roots. Zimbra has an open source edition and the server runs on Linux. Using open source removes much of the software licensing issues that arise in a dynamic cloud scenario, which has irked and confused many Microsoft customers.

• Disruptive products: Customers are increasingly voting with their dollars for SaaS-based applications and Cloud infrastructure, for some workloads/ requirements, and both SpringSource and Zimbra took something mature (J2EE-based development, and email/collaboration respectively) and delivered it in a new way which responds to this change in sourcing.

If VMware is going to start selling applications, the choice of ubiquitous email, and Zimbra's suite of Web-native collaboration services, is a logical place to start. But it will take a richer set of applications before VMware can compete with Microsoft's online services, or IBM/Lotus (which scored a big customer win this week in selling its LotusLive suite to Panasonic), or Google (which has had substantial public wins lately, among both state and local government, and business buyers). If VMware is going to succeed with Zimbra or any application for that matter, it must demonstrate that these applications, presumably to be modified for cloud and virtualization, are going to run significantly better and differently than any old VM today. The emerging trend of having more awareness and coordination between the virtual infrastructure and an application is fairly new and the benefits unclear to many customers.

The Zimbra acquisition is clearly a fortifying move against the Microsoft offensive. Over 80% of VMware VMs are running Windows, so clearly Microsoft has the opportunity to begin stealing these VMs over to Hyper-V. VMware has been countering by expanding its value proposition beyond server virtualization, going to the cloud and into the platform and application layers of the stack. This may allow VMware to begin to wean customers off their Microsoft dependency around Windows, and applications such as Exchange. This is also critical as the client virtualization market begins to build. Desktops are even more Windows-reliant than the overall VM market, and loosening the tight bonds between Windows bundled with Hyper-V, and desktop applications, will be a key strategy. Several vendors have tried this and failed miserably in the past, in part because of the Microsoft enterprise licensing regime, and in part because only a handful of vendors can match Microsoft's depth in the IT stack. We expect that the two key market transitions (toward virtualization, and toward SaaS apps and Cloud-based utility consumption) have created an inflection point for vendors like VMware to capitalize, but it will be no easy task. In the meantime, VMware has been very careful to state that Exchange and other applications would continue to be prioritized and optimized to run on vSphere.

Many VMware partners will probably be concerned about VMware competing with them on applications, but we don't believe that the Zimbra acquisition represents a new situation they haven't faced before. Nearly all hypervisor vendors also sell operating systems and applications. Platform vendors over the years have learned to walk the line between promoting and encouraging development on their platform as well as supplying their own higher-level wares, and application partners have learned to play in this environment. One interesting synergy is with Cisco, a very tight partner of VMware as part of the "VCE" (VMware, Cisco, EMC) alliance. Cisco has been building its own collaboration platform, with assets such as WebEx, Jabber, and PostPath (whose value proposition is less about Cloud email and more about on-premise Exchange replacement), and Zimbra could integrate well into that collection.

VMware's acquisition of Zimbra acquisition may baffle many because the synergy between the virtual infrastructure layer and the application layer hasn't been fully defined, and it isn't clear that the combination will be a natural fit for customers, and there doesn't seem a natural overlap between VMware's larger customers, and the micro-to-midsized firms which are the primary users of Cloud apps today. But the potential synergy is there, and VMware will need to shine a light on it to raise awareness and demonstrate clear benefits if it is to succeed in the application space.

Guest Post: Back by Popular Demand, A Basic Maintenance Offering from SAP

This is a guest post from Amy Konary, Research Director for Software Pricing and Licensing at IDC (@mizkonary).

In January 2010, SAP announced that it would bring SAP Standard Support back, priced at 18%, which the company said in July 2008 that it would eventually eliminate. The last year and a half has demonstrated a couple of things.

• Today's customers have the power to push back on pricing and packaging decisions, and get results, even when really large vendors are involved.

• SAP listens to customers. There were moments, initially, when SAP seemed determined to plow forward with its Enterprise Support strategy regardless of what customers thought. In the end, however, it's clear that behind the scenes, SAP was listening with concern. The KPI program, while perhaps complex to implement and too new to show results, is a truly unique case of a vendor that is willing to put skin in the game when it comes to pricing and packaging decisions.

Before we continue about the recent announcement, here is a little context to bring us up to date. In the past 5 years, vendors have modified the definition of maintenance dramatically. Many, including SAP, have moved away from the term maintenance altogether in favor of 'subscription and support'. Most now include major upgrades as well for customers that are current on maintenance. Higher levels of support and even training are provided. Prices have risen to support this.

The challenge is that in the customer's mind, the idea of "maintenance" is still meaningful. Their thinking has no evolved as quickly as vendor's have away from a basic maintenance and towards a more robust support offering with a heftier price tag. There is also a good deal of customer cynicism around the maintenance dollars that they spend and the value they receive from them. It is no secret that the maintenance revenue stream is highly profitable for vendors, and that for many vendors in mature markets it is becoming the most significant part of their business.

It is not surprising then, that customers reacted as they did to SAP's announcement in July 2008 that it would eliminate SAP's most basic level of support and migrate all customers to its new support offering, SAP Enterprise Support, priced at 22% of license fee. SAP faced considerable protest from customers facing declining budgets and tighter resources due to the economic conditions. The negative response centered around customer's resenting a price increase (albeit one that took place over time) when the customer did not perceive that they needed anything more than what they had. Poor economic conditions didn't help.

After considering the negative response to the initial announcement, SAP made efforts to improve communications with customers around the merits of Enterprise Support. In April 2009, SAP and SUGEN (SAP User Group Executive Network) reached an agreement on a defined set of key performance indicators (KPIs) that SAP is now using to measure the success of SAP Enterprise Support and justify the price tag.

In December of 2009, SAP presented initial results from a group of 56 customers that had adopted Enterprise Support that showed an aggregate 4% improvement across a number of categories and measurements including business continuity, business process performance and total cost of operations.

Which brings us up to the present time. Given the discourse around Enterprise Support, especially around the time it was first introduced, this most recent announcement will lead some to conclude that SAP's Enterprise Support strategy was flawed from the very beginning. However, it isn't so much the mechanics of Enterprise Support that were flawed as the way that SAP went about rolling it out. There are some lessons learned here about price increases and customer behavior that SAP learned the hard way, and that other vendors should make note of.

• Don't assume your customers will "get it"- SAP believed and still believes that the Enterprise Support strategy was developed with foremost consideration of the best interests of its customers. While this is probably true, SAP executives undoubtedly assumed in a sort of patrician way that it's customers would accept the strategy from the very beginning as in their best interests just because SAP said it was so.

• Involve customers from the beginning, and don't underestimate the importance of a communications strategy. When customers didn't "get it" from the beginning, SAP had to do a lot of back-peddling after the fact, which is much less efficient (and less customer relation damaging) than if it had been done up front. SAP and SUGEN's KPI strategy is great. How would customers have reacted differently to SAP's initial announcement if the KPI strategy had been in place from the very beginning?

• Make sure you are a master of managing social media. SAP's Enterprise Support offering was one of the first major pricing and packaging related announcements by a major vendor after the mainstream proliferation of Twitter and the Blogosphere. Containment is impossible. As a vendor, you can pre-brief and work to educate/influence a select number of content generators, but it is impossible to get to everyone with a Twitter account.

Another factor that figured prominently in early days of the rollout of SAP Enterprise Support was the economy. This is not something SAP could control. At the time of the initial announcement, in summer 2008, it was impossible to predict how bad things would be by the winter of 2009. Major initiatives like Enterprise Support take months and months to roll out. When it was finally clear how bad the world economy was going to get, the battleship had already been turned around. Turning things back again would take a long time. Almost a year.

Stepping back for a moment, IDC thinks that the convergence of maintenance and support will continue, which SAP's Enterprise Support epitomizes. Furthermore, while much was made of the customer discontent supporting the launch of Enterprise Support, in general applications maintenance customers continue to renew their services. Even in this tough economic environment, IDC's Summer 2009 AppStat survey of more than 1,000 applications customers found that only 11% plan on discontinuing maintenance in the near future.

However, the lessons learned from SAP's handling of the Enterprise Support roll-out show us that the balance of power in the software industry has truly shifted from vendors to customers. IDC expects this particular announcement will not be the only vendor compromise we see in 2010.