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Old pal, Chris Kanaracus (who covers enterprise software and general technology breaking news for The IDG News Service) has a story in InfoWorld yesterday which is very interesting in that it describes the current dynamics of the enterprise software business.
Just to convolute things, the article is about a recent report from Forrester Research, which describes the lackluster adoption of Oracle Fusion Applications. I get the impression that Forrester is telling a cautionary tale and getting ready to, um, “put out the fire and call in the dogs” where Fusion is concerned. But, really, what were they or anyone else expecting? Take a look at the opening paragraphs:
“Oracle spent years developing its next-generation Fusion Applications and finally put them into general availability nearly a year-and-a-half ago, but some new evidence suggests that it’s been less than successful at enticing customers to move up.
Two-thirds of 139 Oracle applications customers surveyed by Forrester Research said they had no plans to implement Fusion Applications, while another 24 percent said they didn’t know whether they would, according to a new report out this week.
The article goes to great lengths to document how customers are more or less standing pat on their existing systems and waiting for someone else to make the next move.
Well, what did we expect?
The thesis of the report (which I have not seen) seems to be that customers are not flocking to the new, new thing and that therefore Oracle messed up — must be marketing’s fault (Louie, round up the usual suspects.). Much the same critique could be levied on SAP but I am not going there right now because most of what I have to say applies there too.
Rather than being some aberration, this is exactly what you’d expect in a mature market. Think of it from the customer’s side. The old saw that companies spend money for only two reasons — to make more of it or to save it — applies here. Existing customers have the older model of the non-Fusion Oracle applications and they are installed, running and paid for.
So?
In the recession that we’re still dealing with there are many ways to save money, notably by not hiring or laying off workers, that don’t involve spending new bucks to replace what’s already working. There are also precious few ways to make new money and the record corporate earnings gushed over in the financial press stem largely from penny-pinching — layoffs, reduced head count and not investing in the future, which is exactly what Oracle is facing in its customer base. But this is typical mature market behavior even in the best of times. In order to get someone to buy the new thing, your new offering has to be much, much better than what’s already in the barn or nothing happens. So, no matter what Oracle does to promote Fusion, it’s facing an uphill climb.
We don’t have to dwell on the mature market though and the Forrester Report unintentionally shines a bright light on why it’s so important to innovate not just within a product cycle but way beyond it. Our pathological obsession with quarterly results makes it very hard to get out of the box and go beyond the product cycle but that’s what the idea of Blue Ocean Strategy is all about. Dell is a great proof point for this given its recent effort to go private.
Another great example, if you’re not tired of hearing about it, is Salesforce.com. They’re not in the replacement business except for replacing Oracle and SAP legacy systems with their cloud offerings. More to the point, Salesforce has an elongating history of Blue Ocean thinking, of not simply trying to replace old functionality with new stuff that does the same thing but a bit cheaper.
Salesforce still has issues with market adoption of its newer offerings. But notably, customers are trying to figure out how to best apply them, which is very different from whether or not the new items can pay for themselves with cost savings. When companies discuss Salesforce’s Blue Ocean products they’re having very different discussions about what the future holds and how they will encounter it.
So while I don’t think the Oracle Fusion news is very remarkable, I do think it’s time for them and just about every other enterprise software company to do the same — to think about the future and build a bold vision. Their last bold visions are now aging products, today’s legacy systems. Time to saddle up.
(Cross-posted @ Beagle Research, LLC)
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Great observations Denis, but I am not sure how this relates to blue ocean strategy. The notion there is you look at ways of expanding the pie rather than competing for the same pie (which oftentimes results in a race to the bottom and industry commoditization). The example I like best is Soutwest Airlines who attracted new air travelers that previous took other modes of point-to-point transportation (car, bus, etc.).
While Salesforce has been tremendously innovative in terms of their business and delivery model, I am not sure the customer benefits are that significant as compared to Siebel and others before them. They won in terms of ROI because the TCO of on-premise solutions is substantially higher since those solutions required upfront services, infrastructure, etc, We will see if this remains true as subscription costs equal/exceed their perpetual license equivalents over time.
True enough but you miss the whole social aspect, that’s what is Blue Ocean, not the delivery model. Or, rather, the delivery model was Blue once but like any innovation it faded into commoditization. The innovation and the disruption now is social and Salesforce is doing more in social than just about anybody. The comparison is between salesforce and social and the once innovative delivery model. Next week in NYC Benioff will explain all.
Yes. My guess is social is going to shift and be part of a bigger story around creating an outstanding customer experience and driving customer loyalty (using Apple is the defacto standard): http://enterprisingthoughts.org/2013/02/25/why-the-social-enterprise-didnt-hunt/