Michael Fauscette

SAS Institute: In the perfect storm to build strategic alliances?

Welcome Steve White with this guest post. Steve is Program Director for IDC’s Software Solutions Alliances Leadership Council in my Software Business Solutions Group.

I had the opportunity to attend the SAS Institute’s analyst conference last week in Steamboat Springs, CO which was entitled ‘Inside Intelligence 2009’, a nice play on words representing their business analytics offerings. SAS is the largest privately owned software company in the world, with 2008 revenues at $2.26B and it was interesting to hear from their Execs as to their outlook in these challenging economic times.

Being in an analyst role, one tends to look for patterns and indicators, and I found it interesting to piece together the SAS picture into what seems to me could be a ‘perfect storm’ in terms of strategic partnering potential. There were four key areas that struck me as being positive signs of this opportunity

• SAS’s concerted move towards a more partner inclusive model
• SAS’s impressive heritage of vertically aligned product development
• Their customers’ keen advocacy of their solutions
• The underlying economy requiring greater customer ROI

The event started with a view from the top, from Dr. Jim Goodnight SAS’s CEO and founder. Jim used some of the SAS business analytics tools to share their business outlook. Using what one of the other analysts called a ‘flashboard’ rather than just a dashboard to present the figures, this showcased how SAS are looking at their business from all facets, and was a great insight into how their tools can really help bring critical information to business executives in a usable format. Rather being a tedious deep dive into the numbers, it felt like a brief and graphic summary of the key performance indicators of what is a very substantial business, wholly improved by the use of the technology.

Back to the partnering potential that I was working out with regards to SAS, their heritage has been as a direct to customer operation. However in the past 18 months to 2 years they have made a substantial investment in building out their strategic alliances. In that time their partner impacted revenue has grown 60%. They also shared the fact that, of their top 50 deals in the past year, 20 were partner impacted. A decisive indicator of their willingness to partner.

Another key indicator for me at the event, was the way SAS develop and manage their products. When you see their roadmap, you don’t just see version of each of the core products, you see vertically defined solutions, that are created from the ground up. Their DNA as a business is derived from deep understanding of their customers’ industries, so they develop their products on the SAS platform aligned to the industries of their customers. I’ll not delve into this in too much detail, as it’s not my core area, but you only have to look at their product & solutions offerings to see how they start with the industry first.

Day 1 of the event was rounded off with a customer panel. One great attribute of this particular customer panel was that it was not ‘over managed’ and even though there were some initial prepared questions for introductions, the panel was opened up to the analysts which is often a scary scenario. What I took from this panel were two key points:

• Firstly, the clients' love of the SAS technology and what it can do for their business. In talking to these clients during the breaks, they are extremely vested in the analytics capability that SAS brings to them, and SAS’s deep knowledge of their industries is a key driver of this.

• The second point was the fact that the Business/IT divide is still out there in the market. All 4 of the customers represented areas of their businesses that were outside of IT, in effect ‘power users’ of technology. In all instances they were working hard to align with their own corporate IT goals, but equally they were almost religiously bought into using the SAS tools that had got them to where they are today in terms of their business insights and were in some cases fighting IT to look at other vendors.

I found these conversations very powerful, in that the consumers of this technology value it so much, they would be willing to work outside of corporate guidelines.

These indicators drive me to believe that SAS really is in the perfect storm for building lasting alliances. The current economic environment actually magnifies this opportunity, as customers want to have better business information, and drive to faster ROI based on these analytics. I am interested to see how SAS’s strategic partnering progresses in the coming months and years. After all, what major SI or ISV would not want to partner with such a technology specialist who has such a deep understanding, and engagement with their customers? We shall see.

CAD/CAM/PLM Vendors, are you hiding or preparing for the next boom?

Welcome Sanjeev Pal with this guest post. Sanjeev is a Sr Analyst at IDC covering PLM, engineering software, EAM and project & portfolio management in my Software Business solutions group.

Its hard to disagree that the survival through the recession for most firms equates to lowering the spending, overall cost reduction and trimming the fat around the company. In other words, make cuts in every aspect of the business until the market turns around. In this blog, I will try to answer the question - What are the PLM/CAD/CAM providers doing to cope up with this recession. Is it a sound business strategy for the PLM companies including the digital manufacturing firms to invest in enhancing the existing technology & software in these hard economic times?

What measures have the digital/PLM software providers taken to survive the recession? Let us look briefly at each of the big provider.

Dassault - No formal announcement on reducing workforce, but unofficial consolidation that may have been a direct effect of recession.

Siemens PLM - No formal or informal announcement of consolidation.

Autodesk - 10% reduction in workforce (750 employees approx), other cost saving measures like hiring freeze etc, resulting in savings 130 million a year starting from 2010.

PTC - Started its first quarter with 5,264 employees, planned to work with 5,000 employees.

It has been proven time and again that manufacturing is the backbone of any healthy economy and the software supporting manufacturing processes- an essential element for achieving higher productivity. We should not forget that the present recession has been brought about by failure of the financial industry and not by decreased demand for manufacturing or failure of the manufacturing industry. On the contrary, manufacturing firms across the globe remain profitable and are still in stable to good financial health. Government’s increased focus on encouraging manufacturing will act as a catalyst to fire up the activity in manufacturing, with any slight up turn in economy.

I believe this is the right time for CAD/CAM/PLM vendors to invest in the future because: -

1. The importance of manufacturing to the well being of the economy is understood around the world.

2. Easy availability of over qualified labor.

3. Opportunity of acquiring small niche vendors.

4. Increased flexibility of vendors to form partnerships to increase their revenue stream.

5. Competition around the world has changed; Emerging markets of India and China are still growing.

6. The most important point - Waiting to invest in innovation and new channels until the market turns around means increased time to market , greater marketing costs (increased labor as well as operating costs in a boom) and probability of lower profits, there will always be someone ready to market their innovation.

In short, What are CAD/CAM/CAE/PLM vendors doing to position themselves? The answer seems to be not much!!!

Dassault , Siemens and Autodesk remain in overall good health and do indicate that they want to invest in small niche software providers. Cloud computing or the SaaS bug has bitten them , but has not been a revenue driver . I believe Cloud computing will definitely gain some traction in the small and medium business markets.

These vendors are expanding and developing the VAR, ARE, ISV channels with great interest. I am not sure if this channel expansion is being done to reduce their financial liability or increase their respective product penetration in the market. I see it more as a consequence of the recession than as a measure to increase the product penetration in the market or even product innovation that VARs can offer.

HP: Trail Blazing in SMB

Welcome Mira Perry with this guest post. Mira is a Sr Analyst in IDC's Software Sales Channels Program in my Software Business Solutions Group. Catch up with her on Twitter @miravperry.

  HP's new SMB Elite designation in PartnerONE is a novel and exciting effort to approach the SMB market. The announcement comes less than two months after HP named Meaghan Kelly as VP of SMB Channel Sales and Strategy. According to an HP spokesperson, the SMB Elite designation will be available May 1 "for partners who are really committed to the space, with demonstrated competency and revenue mix focused on SMB." HP's new designation gives partners many reasons to applaud. But will interested partners quickly move to embrace the new designation or fall short of meeting revenue and competency requirements?

Those who follow SMB channel initiatives will be tempted to compare HP's SMB Elite with Microsoft's Small Business Specialist Community (SBSC) program but the two programs differ remarkably from member benefits to entrance requirements and target audience. Time will tell whether one formula is more effective than the other.

Partners achieving the HP SMB Elite designation will enjoy the "holy trinity" of partner benefits including SMB customer leads, an account manager, and the marketable SMB Elite designation. Recent surveys place leads near the top of a partner's wish list, trumped only by an account manager/ inside salesperson who serves as the partner's single point of contact. In my years at Microsoft running their SBSC program, leads and a single point of contact continue to top the wish lists of SBSC members, many of whom also report joining SBSC for the implied credibility associated with the logo. Similar to Microsoft, secondary benefits for HP SMB Elite members include co-marketing funds, a partner locator, and SMB-relevant promotions. HP has "nailed" the benefits aspect of the designation which should generate a steady stream of partners interested in becoming SMB Elite.

I wonder whether all interested partners will qualify. Can the small reseller whose business is built on the SMB customer meet the threshold revenue requirements? Will this initiative single out only large partners, or worse, large partners paying lip service to the SMB market? An HP spokesperson assured me that "SMB is attainable by all partners, they just have to meet the requirements." In other words, HP is not playing a game of exclusion, but they do want validation of a partner's capability to service SMBs. It's a subtle difference.

HP does not make specific details about the entrance requirements available to the public, but they were willing to disclose that prospective SMB Elite designees must pass tests to attain certification requirements thereby proving competency in the space, and meet a revenue threshold. Because Elite is the top level of PartnerONE, it is safe to assume that these are not the entry-level type requirements of Microsoft's SBSC program.

To fully appreciate HP's initiative, it is essential to set aside pre-conceptions based on Microsoft's SBSC model which was developed as a 'small businesses working with other small businesses' stepping stone for Microsoft's non-managed partners to become certified. HP's strategy is different. For HP, "size of the partner doesn’t matter, what matters is their customer focus." Yet HP appears to be targeting partners who have established themselves as the best of the best, the Elite tier, to service their small business customers. In most circumstances, this will be a vastly different partner group than Microsoft's target. Of course the first year of Microsoft's program was dominated by Gold-level partners who continue to share SBSC membership with partners at the Registered and Certified levels. Sometimes partners belie even the best strategies.

Faced with hurdles, however, smaller partners may choose to ignore incentives to join HP's new SMB designation despite tempting benefits if they expect that they can maintain their current customers. While revenue targets can pose an obvious challenge for some smaller resellers, exams, surprisingly, can be similarly problematic. I have encountered small partners whose unwillingness to sit for an exam can not be mitigated with any amount of free exam prep, free exam vouchers, or even $200 gift cards. It is extremely difficult to pull a person who bills on an hourly basis away from work to prep for and take an exam.

At the end of the day though, it's about increasing customer satisfaction by helping customers find a partner who understands and will service their unique business needs. Creating market value and credibility for the designation necessitates that partners demonstrate competence in SMB-related technologies. The exam requirement is essential for the protection of the customer, despite anticipated partner protests.

Where HP has more flexibility is in the revenue requirements. Ideally, HP will unveil revenue requirements attainable by an optimal mix of partners: from the large resellers with countless capabilities to the fellow small or mid-size business with a local presence, an understanding of the SMB experience, and a willingness to service, even prioritize, smaller deals. By betting on the growth potential of small partners, HP will still be able to recognize the SMB investments of larger partner organizations while offering customers a range of SMB experts to meet their needs.

Despite the anticipated challenges associated with the launch of any new initiative, the SMB Elite designation in PartnerONE is a commendable initiative from HP. Partners will applaud the benefits associated with SMB Elite and customers will appreciate the vetting and validation offered by the designation. And, if the initiative is attainable by the variety of small and large partners servicing the SMB market, the company can anticipate even more accolades for their investment in SMB.

Citrix and IBM, an open and closed case

Welcome Darren Bibby with this guest post. Darren is IDC's Program Director for Software Partner, Channels and Alliances in my Software Business Solutions Group. Catch up with him on Twitter @darrenbibby.

It's been an interesting two weeks in the realm of partner strategy changes. We've seen both sides of the 'open versus controlled distribution' coin. On February 18, IBM announced that it was closing product distribution only to partners that became certified in each of its 14 product groups, save for some products that will remain in open distribution. This past week, Citrix announced that it was opening up product distribution to more partners. Where Citrix was before its announcement is where IBM will be after their controlled distribution initiative takes effect in October 2009.

At any other time, Citrix's announcement may have been simply lauded for its attempt to simplify a program in a time of increasingly complex partner programs. But with the IBM announcement still fresh, the desire to compare initiatives is just too strong to ignore.

Citrix used to mandate that a partner couldn't resell a product if it wasn't certified to sell it. Now, except for the XenApp line, any partner can sell any product, even if the partner is still working on certifications. As of October 1, 2009, for many of IBM's key products, a partner will now have to be certified to be able to resell a product.

Citrix seems to be making their decision for several reasons. Program simplification is obviously one key objective. The previous model proved to be complex at times and added friction to getting business done. In addition, Citrix has been acquiring companies and technologies, and its product portfolio has been morphing at a rapid pace. Policing its controlled distribution was becoming more and more difficult.

Allowing more partners, new and established, to sell more products is certainly a worthwhile outcome to Citrix's program changes. While encouraging certification, Citrix doesn't want it to be a barrier to selling.

It seems that managing a high number of exception requests of partners wanting to sell products they were not allowed to was another reason to open up distribution. This brings up the question of how many exception requests IBM will be getting, despite having a 'no exceptions' rule.   

But IBM is making a bold move with its announcement, proclaiming that the future of its partner strategy is about its most value-added partners - something that Citrix can't claim with its own announcement. IBM realized that open distribution has meant a lowered street price for its software, and competition from volume resellers is discouraging value added partners to say the least. IBM's controlled distribution announcement is a major victory for hard working, truly value-added partners everywhere. My question is how this fantastic concept will play out in the real world. The probability of a good number of exception requests from partners is high in my mind.

So is there a theoretical 'best of both worlds' scenario here? Maybe. IBM could possibly learn from Citrix's strategy to make a program where it highly incents partners to certify, but still allows them to resell if they're not certified, even if at a meager discount. This might fix many of IBM's potential cases for exception, such as a VAR who is certified to sell two products, but not a third. And the extra margin and benefits of certification would still motivate partners to gain the skills needed for a great customer experience.

Using social tools for more effective partner programs

With all the talk about using social media in the enterprise it's no surprise that there's a growing interest in applying social media tools, processes and concepts to partner programs. This past week at the IDC Directions Conference in San Jose, CA I gave a presentation on to a full room (it was at 8:00 AM so I was pretty impressed at the level of interest). The audience was very engaged, asked lots of questions and even stuck around after to continue the conversation. In recent discussions about e2.0 (and in this post) I have established my definition of e2.0 and how I think it can impact and transform businesses so I won't go back through that material here. There are several places in enterprises where e2.0 initiatives can provide significant impact and value including internal collaboration, customers, supply chain, design chain and partners (all types ranging from alliance and OEM to VARs).

There are two broad uses for social initiatives in partner programs that are starting to emerge. The first is the use by companies to increase engagement, community and collaboration in its own partner ecosystem. Examples of these types of program elements range from the use of 3D virtual worlds like Second Life (and private label networks) for vendor : partner collaboration and partner to partner (P2P) networking to collaboration tools like mix.oracle.com and to search engine optimization (SEO) assistance for partners by vendors like IBM and Microsoft to increase partner visibility. P2P networking is of particular interest these days as both vendors and partners look for ways to increase wallet share in a tough economic climate. Surveys by IDC and other organizations have shown that partners who participate in P2P networks by building and selling joint solutions grow faster than partners who "go it alone".

The second type of initiative is an extension of the first idea down through the ecosystem, with programs that enable the partners to engage more effectively with their customers, increase local presence and a create an increased sense of community. These programs can use various social tools like blogs, communities (LinkedIn groups, private communities, Facebook fan pages, etc.), microblogging tools (like Twitter), Wiki's, etc. to help partners reach out and create closer relationships with their customers. Dassault Solidworks, for example, has a blogging program that started as a corporate program reaching out to customers and is now being extended to partners with everything from content and training to actual blog hosting. Several vendors provide syndicated content to partner websites including collateral, demos, product information, video and webcasts. IBM and Sun have these types of programs which benefit the partner by relieving them from investing in content creation and benefit the vendor by providing standardized content that is always consistent with the vendors' messaging. One of the more interesting initiatives is a recent new program from SAP called Ecohub that combines a partner solution catalog with a community site for customers. The site uses "wisdom of crowds" processes to allow customers to rate / comment on partner solutions. SAP incorporates a full "discover" - "evaluate" - "buy" process in the site to enable customers to find, buy and deploy the "best" partner solutions.

We're clearly in the early days of the application of web 2.0 concepts to partner programs but the interest is there and many vendors are jumping in with one or more initiatives this year. I believe the pace of adoption will accelerate as vendors and partners struggle to find successful ways to grow during the current recession. Vendors will need to grow their relationship with their partners and even more importantly enable partners to create and extend their relationships with end customers.

The New Challenges and Opportunities Associated with Combining New Media with 'Old' Media

Welcome Mary Wardley with this guest post. Mary is IDC's vice president of CRM and Applications research in my Software Business Solutions Group. Catch up with her on Twitter @mwardley.

First, let me say, I love being in the technology industry. I've been with IDC a long time and the primary reason is that it NEVER gets old. Sometimes I wish it would get old so that I got some down time but I think in the end that would be boring. There are new technologies being introduced daily and with these new technologies there is a waterfall impact on consumers, suppliers, organizations structures – you name it. Case in point for this blog input is the impact of new media on existing infrastructure solutions in terms of customer data. Social media technologies are generating vast amounts of new data in 140 character strings. How do you mold your business processes to include this input? How much of these streams of unstructured data do you have to save, or archive for future use?

This week, HubSpot, a Boston-based company of 'inbound marketing software' posted an interesting video interview with Brad Blake, the governor of Massachusetts' director of interactive media. The governor is using the web and social media to communicate with constituents and to build support for his agenda. What started as a combination of using RSS fees, Twitter and blogs has developed into a full commitment to go to where the constituents are to engage in dialog, and to provide accessibility and transparency. In addition to using the aforementioned technologies the office posts on YouTube and Flicker. The Governor's office realized that a lot of the information that they thought was readily available just wasn't being found by the constituents. The Twitter channel in particular has allowed them to get direct feedback from the constituents. HubSpot in particular used a Tweat to get Governor Patrick to stop by their office to see what they were doing when they learned he was going to be in the building. He did stop by. Talk about access and availability.

I followed up with Brad Blake to find out what they did with all this great input coming in from the constituents. As Brad pointed out in his interview one of the challenges is getting the information integrated into your existing processes. The office has a constituent services office that currently collects and quantifies the feedback that comes into the governor's office via phone, email etc. This group is now watching Twitter and including that in the feedback. It's all given to the governor to review in a total format but then some individual examples are provided. The office is working to integrate the same with the blog feedback but is finding it trick to quantify and qualify the information.

This to the broad challenge that organizations face. There is no denying that the engagement with the customer (or student, or constituent etc.) yields tremendous insight, however, how do you get the information to the right person, in the right format, with the correct interpretation and then what do you do with it long term? So far the governor's office has a manual process for getting the governor the insight, and the blog information is being saved and archived. Primarily because the blog software doesn't save the data over time so the office backs it up. The office is currently relying on Twitter to maintain the history.   

This is not a new problem, we saw it before when we put up the Web site and customers starting sending emails and expecting a response. Thus Automated Email Response software and the contact center got another channel. Here, however, there are many more social media channels than the customer sending an email to a central inbox. This looks like an opportunity waiting to happen to me. The content management applications providers no doubt are way ahead of me on the storage element but what we need to figure out is how to leverage this information into the business process around how we handle the customer. This is going to require new skills, a passion for the technology and medium, and new resources. So, in the end it isn't just about new and old media its about old and new processes, old and new people, old and new resources. It's a general re-thinking.

Now, I'm not saying this is an overnight event. We need the organizations to get out there and experiment so they know what to push applications suppliers for in term of functionality. If you ask end-user organizations what they need, they won't really know yet. They aren't deeply into it enough yet to know. Supplier who wait to be asked and wait to be directed by customers will get left behind. Start with what the governor's office needs to fix that process. They have effectively begun to communicate and engage with their constituents. They've done the hard part, they got the ball rolling and its building up speed and data. What can applications suppliers do to help coordinate, use, store and leverage that information?

Oracle CRM On Demand, offering customer choice

Last week I had the opportunity to chat with Oracle Sr Vice President, CRM Applications Anthony Lye about the new release of the Oracle CRM On Demand product. For quite a while I have thought that Oracle's flexible approach in both deployment and licensing models was a win for customers. This new release reenforces the flexibility message as well as offering some new features that should be of interest for customers and prospects.  

What do I mean by flexibility? First there's choice of consumption model, on demand, on premise or both (using Oracle Application Integration Architecture). Then there's flexibility inside of the on demand choice, customers can deploy in single tenant (dedicated infrastructure) or multi-tenant (shared infrastructure) while still taking advantage of the subscription licensing approach. Oracle also has taken a different approach than most other SaaS vendors by pre-building custom objects and allowing an unlimited number of custom objects that allow customers to customize the on demand CRM software as well as configure or extend (by building custom apps or functions on a PaaS solution). This allows users to deploy custom business processes and integrate easier with other systems to increase productivity while still allowing Oracle to easily manage and upgrade the on demand app. So with Oracle CRM On Demand you can customize, configure or extend your SaaS solution.

As far as a new releases go, Oracle has added several new or updated solutions to the product portfolio. For the CRM On Demand R16 Oracle added three new industry solutions, Insurance, Wealth Management and Life Sciences; more core CRM functionality including integrated call center and enhanced analytics; more language support; a single tenant version; and more pre-built custom objects. On the interoperability front Oracle released AIA integration between CRM On Demand and the JD Edwards Enterprise One solution. Productivity enhancements included the release of Oracle Self-Service E-billing On Demand and Oracle Sales Library which is an answer to salesforce.com's CRM Content solution and incorporates many Web 2.0-like features to increase sales effectiveness by providing the best content to sales personnel. On the partner management side there is a PRM On Demand release as well as fully integrated Oracle Deal Management On Demand for partner deal reg and management.

Oracle is clearly focused on competing directly with salesforce.com and in this release, beyond the above listed enhancements and new apps, the pricing model for the new CRM On Demand Single Tenant Standard Edition demonstrates this fact. Instead of pricing the solution in what is a fairly "normal" approach among SaaS Apps vendors of a base price for core functionality and an add on price for each advanced feature set, Oracle offers its solution in a single per user per month price. This provides a healthy cost savings for customers that use more than the core CRM features (most enterprise customers, for example).