Ronan Bradley
Software AG and a dramatic example of SOA success in government
When I hear from a vendor about massive reductions in processing time or cost savings associated with the use of its products, I must confess to getting deeply suspicious.
This is because when I dig a little deeper, the trumpeted project often turns out to be little more than a proof-of-concept or otherwise small scale solution. Therefore, I was surprised to hear just such a claim when I recently spoke with Dr Peter Kurpick, Chief Product Officer of Software AG, about their SOA straegy and the business strategy and that the system in question was in fact a very significant one (the announcement of which I somehow missed earlier this year).
The project for UKvisas (the national agency responsible for issuing visitor visas) integrates multiple information sources to quickly filter out individuals who should be denied entry to the UK for various reasons. (Using SOA to integrate multiple data sources owned by multiple agencies is a SOA-pattern which I have come across in a number of projects.)
In this case, the implementation (built on Software AG’s products) has reduced processing times from over 2 days to less than 30 minutes. It is an excellent example of how government is successfully using SOA to target specific and high value problems: As well as hugely reducing the processing time, there is also a very tangible benefit as each deportation (in effect a failure to screen out the visitor at time of entry) costs £11,000 .
What is encouraging is that governments seem to be learning from its mistakes of a few years back when it spent 100s of millions on integration projects that fell apart. This project appears to suggest that the UK government has both understood how to use SOA to extract very measurable benefits and how to focus on specific business objectives instead of getting lost in never ending programmes which can never deliver. To do this requires sophistication about how SOA should be adopted by your organisation and the central role of SOA governance (both key themes of Software AG’s SOA strategy).
It is also a good example of how SOA (as well as BPM) can provide as much benefit from reduction in the risk of error as it does from efficiency improvement. This is important for anybody wishing to justify an investment in SOA: Unlike SOA benefits such as agility or even reuse which are hard to measure and can have a long lead time to pay-back, the value of reducing errors can be calculated easily as error rates are often already tracked in organisations and the cost of recovery from an error is often very significant.
Ronan
Viable open source business models emerge
The problem with Open Source has always been to my mind that the myth of Open Source slowed down the development of mature business models.
The myth is that OSS is an almost altruistic endeavour when end-users cooperate to produce the software projects they require. In this myth, the vendor role is one of coordination, packaging and support for which the end-users willingly pay maintenance and support fees.
Unfortunately, this virtuous circle was the exception rather than the rule when it came to enterprise OSS: Most Open source projects rely almost entirely on vendors for code contributions and vendors have found it hard to get the maintenance fees from users who struggle to justify paying for something perceived as free. This has made the path of any business following this model extremely difficult.
Therefore, I have been pleased to see that the myth is beginning to dissipate and what has been happening behind the scenes emerge. The451, who have an excellent blog focused on the enterprise Open Source space, have recently published a report which is interesting because it rings true to my experience when it says:
The majority of open source vendors utilize some form of commercial licensing to distribute, or generate revenue from, open source software.
And
Ad hoc support services are used by nearly 70% of the vendors assessed, but represent the primary revenue stream for fewer than 8% of open-source-related vendors.
and
Most vendors generating revenue from open source software are reliant on direct sales staff to bring in the largest proportion of revenue.
The cynics among us might say that this is starting to sound very like the closed source model that OSS was meant to kill. However that would still be a little unfair – OSS is still different but maybe not as different from a commercial perspective as originally advertised.
Ronan
Now its IONA’s turn to be acquired – by Software AG?
IONA has just announced that it has received an unsolicited offer to be acquired by an unnamed company.
Over the last week there has been speculation that Software AG is the mysterious buyer. Software AG buying would make some sense in that it is inline with its vision of building a major integration company through acquisition. IONA does have an excellent customer base and an interesting SOA OSS play. On the downside, IONA main business comes from the declining CORBA market and there would also be major overlaps on its closed source SOA side with the already crowded Software AG catalog post its WebMethods acquisition.
However, alternative buyers are less obvious as it is a company in the middle of a difficult transition – attempting to replace its rapidly decreasing CORBA revenue stream with lower than expected growth in its open and closed source SOA product lines. Which means that I am putting my money on Software AG being the acquirer.
Ronan
p.s. It is beginning to feel like this is becoming a finance blog – rest assured with only Tibco left out there, the current merger wave is bound to come to an end!
Workday buys Cape Clear – Where did the ESB market go?
Surprising news today – Cape Clear, the Irish ESB vendor, has been bought for an undisclosed sum by the Workday, SaaS start-up providing a range of enterprise applications.
This is a significant event on a number of axes:
While the ESB as a term has grown in popularity, the new vendors touting ESBs have not grown at the same rate. My former home, PolarLake, has repositioned itself to take advantage of a specific niche (Reference Data Distribution in financial services). Now, Cape Clear has disappeared from the ’traditional’ enterprise middleware market to become part of a SaaS play. Other vendors continue to win ESB business of course, but it is fair to say that none have broken out into the major league as might have been expected 5 years ago when ESBs first appeared.
This is in fact more general than the ESB market alone: No middleware vendor of scale has emerged in recent years. Instead, across the board the smaller middleware vendors are being squeezed between the industry giants with comprehensive software stacks and service arms on the one hand and OSS projects on the other. The reason for the squeeze is also three fold:
-
The increasing reluctance of end-users to take a chance on a smaller vendor: The extremes of OSS or industry giants seem less risky.
-
Consolidation in key industries such as financial services and telecommunications (key markets for new middleware vendors in the past) has reduced the number of potential customers and hence increased the competition in those markets.
-
The increasing sophistication of the industry giants in dealing with new entrants: A smaller vendor must face a wide variety of onslaughts from aggressive sales tactics such as the giving away of expensive software to the promotion of OSS projects allied with service delivery capabilities.
While both the concerns about vendor viability and the sales tactics used by the giants are entirely legitimate, one wonders about the impact on the overall rate of innovation in the IT industry. The disappearance of Cape Clear must cause specific pain for existing enterprise customers now concerned about the future of the products upon which they depend. However, one must wonder more generally what the impact longer term of the hardening of the markets against new innovators will be on all enterprise users.
Ronan
Why Oracle should buy Tibco next
Only a few months ago, I said that Tibco would not be bought…
…and stated:
“With Tibco, there is no obvious buyer (as Oracle was with BEA) nor is there a neat fit into one of the majors (as BusinessObjects was with SAP). Of the 4 listed by the “Analysts” quoted above, only IBM would make any sense. And Oracle, except that it is busy trying to eat BEA.”
I now wish to recant and disagree with Steve’s view that HP will get the prize. Now that Oracle has BEA, the next obvious target for it is Tibco and it should move quickly before IBM steps in. Here are my reasons:
- Tibco has the only big league competition to IBM’s WebSphere-MQ in the message oriented middleware space. It is used widely in the largest financial services companies, telcos and beyond. With Tibco combined with Oracle’s database etc and BEA’s application server, Oracle would have the fire-power to take on IBM’s hold in these accounts.
- Tibco has developed its BusinessWorks integration product which plays in the SOA/EDA/BPM space. This is one of the best development tools I have seen in this space as well as being mature. Combined with Oracle’s and BEA’s reach, BusinessWorks could deliver in the SOA marketplace in a way that it can’t with a standalone Tibco.
- It would only cost $1.4bn (plus a bit of course). 
.
And finally what both Oracle and IBM have shown is that in this market there is no such thing as buying a company too soon – if you don’t buy, somebody else will.
Ronan
p.s. I don’t have shares in Tibco.
Tight times ahead for software industy will favor innovation
As it comes to the end of 2007, the dreaded market outlook surveys are starting to appear (Don’t worry we will be putting out our own 08 predictions in the near future!).
According to IDC reported in Information Week, 2008 will show lower growth in IT spending than in 07. In particular, there will be a lower rate of growth in the US (3%-4% compared to 6.6% this year).
InformationWeek’s coverage highlights an interesting prediction: SaaS vendors may suffer more if the downturn is prolonged than license vendors as their fixed costs (infrastructure and support) are proportionately higher. This may appear to be an ironic twist on the supposed resilience of the SaaS business model. The downside of renewal business is that people may not renew or more likely downsize their commitment. If SaaS companies do suffer, I suspect that it will be more to do with maturity than an underlying weakness in the model: Recent SaaS entrants will need to get used to the business cycle and cut costs accordingly.
The article also reports the prediction of continued above average growth for Oracle. I suspect that the other giants will also do well in 2008 as smaller vendors get squeezed between an increasing tendency among procurement to consolidate on a handfull of vendors and the downward pressure on software license pricing in general. Start-ups in particular will be under pressure as there is likely to be a reduction in spending among the large banks resulting from the sub-prime issue and this is a sector that has traditionally fostered start-ups. However, this sectoral tightening will simply reinforce the trend among start-ups to focus on the telcos and the government sector.
Surprisingly finally after all that doom and gloom, I am not actually pessimistic about the impact of a spending slow down if one occurs. Tightened markets can also favor innovation over financial firepower: As some customers become more interested in finding something different to get an increased return, those vendors who actually have something new and are capable of putting up with increased sales cycles will continue to sell and thus will be well placed when markets expand again.
Ronan
Jitterbit kick-starts an OSS solution marketplace
An article in ebizq alerted me to Jitterbit’s just launched “Trading Post” for integration-specific solutions.
Jitterbit claims to the “World’s most popular Open Source integration platform” – which surprised me as I had not heard of them before.
The idea of setting up sites to enable the selling of software components is hardly new (although rarely successful) and of course sharing is precisely what an OSS community is supposed to be about. What is more interesting about the “Trading Post” idea is that
- It focuses on solutions: i.e. not just source code for the bits of the puzzle but also the patterns and knowledge essential to deliverying the complete solution. And directs potential users to the services provided by “Trading Post” providers who can help to deliver the solution and
- It focuses on both application specific solutions (such as JD Edwards) and industry specific solutions. Again moving the emphasis away from raw technology towards problem solving.
- It provides an interesting revenue opportunity for OSS service providers/vendors who often struggle to drive revenue from support/maintenance alone. This is because it crisply defines the value they (as Trading Post providers) can give around specific solutions.
While just launched, it is already ‘pre-stocked’ with 50 solutions which demonstrates a certain amount of apparent momentum. Perhaps it is a model other OSS vendors should take a look at…
Ronan
Building a realistic business case for OSS
Some proponents of Open Source Software can be their own worst enemies in the efforts to distance themselves from the traditional software license based vendor.
For instance I read in a recent article that two of the benefits of OSS were:
“Never again will you fear the BSA (Business Software Alliance, not the Boy Scouts!) knocking on your door wanting to perform a software audit. The BSA even takes out advertisements on Google search pages for and up to $200,000 reward a disgruntled ex-employee can receive for reporting your company to the BSA! That’s quite a powerful motivator.”
And
“In the world of Open Source Software, if you can’t wait on someone else’s schedule for a new feature, then you add that feature yourself. What? You don’t have programmers on staff? You can always outsource to a programming company and have them do it for you.”
To translate OSS is really great because you won’t get nailed for breach of licensing agreements and you can always write your own software. Not exactly compelling arguments for any business case!
While there really are arguments for ”going OSS”, most firms will not take such a strategic move. In most cases, OSS is used to solve specific problems – just like any other piece of software – not change the world. And the business case covers the same territory as for closed source: a combination of technical evaluation and assessment of cost and business risk. The second point is challenging only in that we are less familiar with evaluating OSS in this way – and isn’t helped by over enthusiastic promoters of the OSS religon.
Ronan
Putting the suit on Social Computing
I have previously written about the application of Web2.0 technologies to enterprise problems at a general level.
In the past, I have taken the view that the Web2.0 technologies may be of interest, but the enterprise application of the ‘social computing’ side of Web2.0 was still very immature: the general value of collaboration was clear but how it would be implemented and which pressing business problems it addressed were not. This lack of maturity was reinforced by fighting talk from some Enterprise 2.0 proponents about changing the way enterprises work by up-ending hierarchies and claiming that when the “facebook generation” moves into the workforce all will be changed.
However, I think that the concept is now maturing as can be seen from announcements from both BEA and more recently Progress around what BEA calls Enterprise Social Computing and Progress calls Socially Oriented Architectures. What is promising is that both announcements focus on the application of social computing (and it’s ability to enable fluid communication and information sharing) to solve business problems. In the case of ESC (an acronyn to make any tech marketeer smile), the application is to the area of process improvement. As my colleague, Steve Craggs explains in his new insight on ESC and SOA (which is free to download at the moment!):
“If a company can understand a little more about how employees are solving their day-to-day work-related problems, it should become possible to establish best practices or carry out training to improve employee performance. The traditional approach to solving this problem is to engage an external business process re-engineering expert. However, these experts are both expensive and disruptive. In many cases, the best practice expertise is already there—it is just that it is un-communicated, locked in the heads of one or more expert employees.”
And of course, it isn’t a huge leap to realize that SOA is a fertile place to start using such an approach – as this requires a high degree of communications across organizational boundaries and involves tech-friendly staff more likely to adopt new concepts like ESC.
Ronan
Chasing SOA unicorns
I spotted an amusing analogy for the evolution of SOA programmes…
…by Neal Ford in his blog: The perfect SOA is like a unicorn – a mythical beast – in the real world, we struggle to change our enterprise architectures from donkeys to horses. To quote Neal:
“most company’s enterprise architecture looks more like a broken-down donkey. The SOA experiment is to see how close you can get to a unicorn before you run out of money. Maybe you’ll get to Shetland pony and stop. Or perhaps you’ll make it all the way to a thoroughbred racehorse. There are even a few that’ll create unicorns, but they are exceedingly rare.”
Of course, there is nothing wrong with striving to create a unicorn – with the realistic expectation that your SOA will end up with something a lot better than a donkey but probably without a horn.
Ronan
p.s. Myth experts will recall that unicorns can only be captured by the pure of heart. Perhaps that is where the problem lies with SOA as well…