to LooselyCoupled.com homepage
 
 Weekly emails: how to advanced search
 Glossary lookup:

 

Loosely Coupled weblog


Thursday, April 15, 2004

Living on maintenance

In just a few years' time, today's top enterprise software vendors could face a life of penury, living off shrinking maintenance revenues from a dwindling band of customer laggards. Their halcyon days are already past, and two big trends threaten to divorce them from their current market. A CNET News.com article, Is SAP's tap running dry? investigates SAP, but whatever applies to the market leader must clearly hold equally true for runners-up like PeopleSoft and Oracle.

  • Web services constitute the first threat, or more properly, the ability to assemble applications by linking together separate elements of software functionality using SOA. The article quotes Shai Agassi discussing NetWeaver as SAP's future salvation, but it's just as likely to become its nemesis: "Because NetWeaver is open," points out analyst Joshua Greenbaum, "there is no customer lock-in at all."
  • Software rental, as practised by the likes of salesforce.com, is billed as the other threat, although the term is a misnomer. If it were simply about changing the way customers pay for their software, SAP would have nothing to worry about at all. The true nature of the threat from online software providers is that what they rent out is not the software itself, but the functionality that it provides: they put business automation on tap. This goes to the heart of SAP's greatest vulnerability, identified in the article: "its customers' longstanding complaint: that SAP's software is difficult to upgrade and modify quickly."

CNET's analysis ends up concluding that SAP is probably more likely to be worried about the potential threat from Microsoft, which entered the business automation market a couple of years back after buying Great Plains and Navision. But these vendors were just as steeped in the same conventional model as SAP and its larger rivals. SAP, Oracle, Peoplesoft and the rest are all making the same mistake — watching each other instead of looking over their shoulders at the next-generation juggernaut that's roaring up behind them.

It always was thus when established market leaders have to cope with the challenge from new competitors who exploit disruptive technologies. They never realize the extent of the threat until its too late. Ask Cullinet, McCormack & Dodge and Management Science America. They were the giants of business software in the early 1980s. Never heard of them? Well, their customers ran off with the likes of SAP, and all that's left of them is a dwindling stream of maintenance revenues for Computer Associates and GEAC, who ultimately picked up the pieces. Can today's big names survive, or will they share a similar fate? The odds on the latter are stronger than you might imagine.

PS: A brief apology to regular readers for the dearth of postings recently. Our new monthly newsletter, Loosely Coupled digest, is about to debut (it should be available from tomorrow, we think), and meanwhile I've been dealing with some works at home prior to moving house at the end of May. The combination of factors has mounted up I'm afraid, so please accept my apologies for neglecting my blog while all this has been going on.

posted by Phil Wainewright 8:39 AM (GMT) | comments | link

Assembling on-demand services to automate business, commerce, and the sharing of knowledge

read an RSS feed from this weblog

current


archives

latest stories RSS source


Headline news RSS source


 
 


Copyright © 2002-2005, Procullux Media Ltd. All Rights Reserved.