TWIS#13- This Week in SaaS – SAP CEO Resigns, Google Announces Buzz, Microsoft Profit Analysed

You’ll be please to know, as my wife predicted, my bout of man flu passed quickly and I’ve spent most of this week preparing for today’s Rackspace SaaS and the Cloud event. I’ll post the slides and hopefully a video next week- How to optimise your SaaS Revenue Streams. If you missed Lincolns webinar this week- the slides are here

So the big news this week has been that the SAP CEO “resigned” and been replaced by co-CEO’s

Jeff Kaplan said it better than anyone:

The significance of this event was clearly underlined by the role SAP’s Co-Founder and Chairman of the Supervisory Board, Hasso Plattner, played as the primary company spokesperson during a corporate conference call this morning.

During the call, Plattner made an emotional defense of the company’s strategies and tactics in response to rising criticism in the face of SAP’s financial struggles. Plattner used the occasion to dispute claims that SAP isn’t moving fast enough to respond to changes in the market by proclaiming that SAP is well on its way to becoming a “multiple product company”. He gave Apotheker credit for “turning around” BusinessByDesign and said the rollout of the v2.5 of the on-demand solution is “close”.

The reality is that BusinessByDesign has only had isolated success in a handful of deployments in the field, and its scalability from a technological and go-to-market point of view is yet to be proven.

The truth is that BusinessByDesign’s lack of success is a reflection of SAP’s lack of commitment to the solution and an overall SaaS strategy.

The company’s leadership has never fully acknowledged the fundamental changes disrupting the software industry as a result of rapidly changing customer preferences and competitive pressures. For example, various SAP leaders in the past have suggested that BusinessByDesign would primarily serve as an ‘on-ramp’ to its on-premise customers rather than a solid standalone solution. This half-hearted approach not only turned off prospective customers, it didn’t incent its own staff to make a concerted effort to develop and deliver a competitive solution. (Emphasis Ed.)

Jeff is spot on. I’ve been and met the SAP team in the UK, and they are well behind the curve in understanding what it takes to make a successful SaaS product. Customer Acquisition in SaaS is hard enough as it is, without your own organisation shooting you in the foot.

Vinnie Mirchandani wrote a great follow up post- Enterprise Software is Entirely Bereft of Soul in which he said:

But the reality is the customer has been forgotten in enterprise software, not just at SAP. It’s about squeezing as much out of old technology as possible. As I wrote earlier in the week. “I wish the other bigger vendors had the cajones to acknowledge they similarly mostly live off profits from software 15- 20 years old, from consultants which implement that old software and provide services from data centers which were designed during the Cold War.”

Leo was expected to do more of the same in his new role as CEO. So, he did – unbelievably pushing maintenance price hikes in the middle of the deep recession. For all his talk about taking on the partners who have piled 5 to 10X costs on top of SAP’s own expensive solutions, he really could not – they were part of the “field” he created.

SAP needed someone to dismantle that “old field” as the market transitions away from the big, honking upfront license and implementation and operating cost model. It is screaming for soul and innovation. Instead they rewarded Leo. Surely, they did not expect him to choke his own baby?

A clear example of an organisation failing to manage to sustain an innovation culture in a large corporate.

An organisation that clearly isn’t having this problem is Google.

Two massive product announcements this week; Google Buzz and Google Fiber.

Google Buzz is a new way to start conversations about the things you find interesting. It’s built right into Gmail, so you don’t have to peck out an entirely new set of friends from scratch — it just works. If you think about it, there’s always been a big social network underlying Gmail. Buzz brings this network to the surface by automatically setting you up to follow the people you email and chat with the most. We focused on building an easy-to-use sharing experience that richly integrates photos, videos and links, and makes it easy to share publicly or privately (so you don’t have to use different tools to share with different audiences). Plus, Buzz integrates tightly with your existing Gmail inbox, so you’re sure to see the stuff that matters most as it happens in real time.

We’re rolling out Buzz to all Gmail accounts over the next few days, so if you don’t see it in your account yet, check back soon. We also plan to make Google Buzz available to businesses and schools using Google Apps, with added features for sharing within organizations.

On your phone, Google Buzz is much more than just a small screen version of the desktop experience. Mobile devices add an important component to sharing: location. Posts tagged with geographical information have an extra dimension of context — the answer to the question “where were you when you shared this?” can communicate so much. And when viewed in aggregate, the posts about a particular location can paint an extremely rich picture of that place. Check out the Mobile Blog for more info about all of the ways to use Buzz on your phone, from a new mobile web app to a Buzz layer in Google Maps for mobile.

We’ve relied on other services’ openness in order to build Buzz (you can connect Flickr and Twitter from Buzz in Gmail), and Buzz itself is not designed to be a closed system. Our goal is to make Buzz a fully open and distributed platform for conversations. We’re building on a suite of open protocols to create a complete read/write developer API, and we invite developers to join us on Google Code to see what is available today and to learn more about how to participate.

This is absolutely genuis! They are leveraging the network effects created in email to generate social networks automatically. Possibly the best use of network effects I’ve seen to date. Jason Calacanis thinks so too:

4. Google Buzz auto generates your network–this is MUCH better process than Facebook’s.

I’ve already seen the effects in Google reader- one of my long term issues with RSS feeds is that I don’t know which posts are worth reading and what posts people I like/respect are reading. With Buzz, I’m getting some of that already.

And Buzz being SaaS- it’s coming to Google Apps soon- vindicating my move to Google Apps from Microsoft Exchange. When Google announces products, I browse to them immediately, when Microsoft announces them- someone else gets to install them on their own servers sometime in 2012… :p

Not content with challenging Facebook and Twitter this week, they’re going after the telco’s too, looking at becoming an ISP.

We’re planning to build and test ultra high-speed broadband networks in a small number of trial locations across the United States. We’ll deliver Internet speeds more than 100 times faster than what most Americans have access to today with 1 gigabit per second, fiber-to-the-home connections. We plan to offer service at a competitive price to at least 50,000 and potentially up to 500,000 people.

Before spending time in the USA this summer, I assumed things like Internet, Mobile Phones and Banks worked well in the US. It is the first world after all????

I was shocked to discover that Time Warner, AT&T and HSBC struggled to provide basic services that I take for granted in the UK…. IN NYC!!!

So, Google being Google, is shaking up two of them now- Banking next?

No, I think they’re going to keep going after Microsoft and Silicon Alley Insider agrees:

Microsoft is the largest, most profitable software company in the world.

And its profits are still being generated by the same engines that have driven Microsoft for years: Office, Windows, and its server division. (Meanwhile, its entertainment and devices division is only recently profitable again, and its online division is a money pit.)

This is why Google is increasingly focusing on disrupting Microsoft’s core businesses, including its Google Docs rival to Office; its Chrome OS rival to Windows; and now Google Buzz, an add-on to Gmail that some have compared most closely to Sharepoint, one of Microsoft’s enterprise tools

I was shocked to read that last fiscal year, Windows contributed 25% of Microsoft’s revenue and 53% of its operating profit. SAI went on to say in 10 ways Google is trying to kill Microsoft:

Why does this matter to Microsoft? Because it’s burned through billions of dollars over the last few years trying to be a big player on the Web, and it will have great hopes and expectations for its deal with Yahoo. And for Google, because search generates more than 90% of its revenue, and funds many of its unprofitable, maybe-Microsoft-killing projects, such as Google Apps, Chrome OS, and Android.

Nice.

Like I said before, Google doesn’t have an innovation culture problem…

Eric Norlin wrote a thought provoking post on API’s and their importance to SaaS:

You see, the goal of “the cloud” isn’t simply putting all of your stuff into some stored space for access. It’s connecting your “stuff” — your apps, data, networks, etc. The how, if, why, when and where of that connecting (you could call it, for lack of a better word, “glue”) is wholly dependent on the terms of service around APIs.

And some companies aren’t playing nicely apparently he says:

LinkedIn is famous in some circles (no names) for not playing so nice with their API. According to their terms, you can’t store anything other than a profile or ID –which is to say you can’t store the most powerful/useful thing about LinkedIn — the connections. Beyond that, their TOS says that you can’t use their API and “compete” (though it never defines what that is). And, to put the icing on top, they gain the right to “audit” you if you use their API

Nice. That’s not exactly a friendly, web2.0 play nicely with others way of doing things…. It feels like API’s are going to be one of the next battlegrounds. I think it would be good to have an API expert interview on TWIS one week- I was thinking Rick Nucci- what do you think? Any suggestions?

In other news:

• Twilio have announced SMS support on their dead simple telephone API service. No time to think about telephony like the present.
• Phil Waignright has done a great interview with Rick Nucci from Boomi on why your apps should be multi-tenant.
• If you’re going to rely on virality- you need to make your users look awesome in front of their friends according to Index EIR Henrik Werdelin.
• No, The iPad isn’t a nail gun- but it could be a computer for the masses- like the iMac- and it relies on the cloud for everything
• If you’re into the mobile space, or thinking about it- Admob has some great metrics available.
• Finally a decent browser for the iPhone? Only if Apple let’s it… Opera for iPhone Beta revealed
• Is Oracle ever so slowly shifting their position on cloud?
• Zynga talking about high scalability in apps with a lot of write: Scaling Farmville to 75 million users seamlessly…

If you’ve got any thoughts, questions, or comments- please don’t hesitate to get in touch- jp@justinpirie.com

Have a great weekend!

Justin