Business software suite vendors such as Siebel, SAP and PeopleSoft have been the most obvious choice for companies looking to roll out an integrated enterprise-wide solution, but in recent months Web-native providers have begun to challenge the suite vendors' hegemony by offering solutions that are low-risk, low-cost, fast to implement and highly scalable.
Web Natives Are Restless
The important question for potential customers and the suite vendors themselves is whether Web-native suppliers really do offer an alternative to a full enterprise software implementation with all the associated risk, cost and time factors. If so, then what is the future for the big enterprise software houses?
|"When these Web-native apps are fully integrated with XML data feeds their value will really come out. That's the dream." |
Karen Moser, IDCGive us your feedback on the role of Web site hosting companies in the ASPnews Discussion Forum
Marc Benioff, CEO of San Francisco-based Web-native SFA software supplier Salesforce.com, also believes the future for the established software houses is bleak. "I think traditional software vendors are very vulnerable and will dissolve," he told ASPnews. "Client-server is no longer the dominant technology and customers are having very high failure rates and there's nothing to prevent this. We guarantee success enterprise software does not, and customers want low-risk solutions."
The two companies differ in their approaches in that while Salesforce.com's strategy is to broaden its offering until it ends up as a Web-native enterprise suite in itself, Salesnet intends to stick to what it regards as its area of core competence. "We think that Salesforce.com is making a horrible mistake by diversifying (away from SFA) and we think that it will be disastrous for them," Doyle says.
Regardless of the approach that Web native vendors take expanding to create Web-native suites or counting on the capability to create best-of-breed virtual suites with other vendors Web-native suppliers are beginning to shift their sights towards customers of ever-increasing size, challenging suite vendors in their home market of large enterprises in the process. If successful, this could be bad news for suite vendors. "We have won large customers such as MCI and Xerox, and the reason is that supplying software as a service is simply more efficient," Keith Raffel, founder and chairman of Mountain View, Calif.-based CRM supplier Upshot, told ASPnews.
Enterprises ISVs React (Sort of)
Is it really the end of the road for the conventional suite vendors? Siebel refused ASPnews' request for an interview and SAP was unable to reply in time before our deadline. However, Sanjay Katyal, vice president of PeopleSoft eCenter, the Pleasanton, Calif-based suite vendor's hosting service, thinks not.
By moving away from the client-server model and "Internet architecting" its PeopleSoft 8 product, it effectively competes on equal terms with Web-native software vendors, with some considerable advantages besides, he said. "What we are seeing at PeopleSoft is that companies are consolidating their business decisions and want to manage their IT portfolio more tightly, so what they buy and who they buy it from is important. If you are a small company you might buy Salesforce.com because you don't need anything else, but we offer a tightly integrated suite. Customers want pre-integration and not post buying integration. Ultimately it will not be the architecture of your offering that determines success or failure, but addressing customer needs, which comes down to the depth and breadth of your offering. In this respect Web-native vendors are at a disadvantage and they are going to have to find greater appeal." PeopleSoft is also marketing "lite" versions of its products to attack Web-native vendors on their home turf of small- and medium-sized businesses, Katyal told ASPnews.
Meeting in the Middle
The most likely scenario, according to Karen Moser, research manager with IDC's ASP and Application Management Services and Business Service Providers research programs, is that despite the bravado of both sides, both types of company will continue to exist for some time at least. "The Web native folks have a real advantage because they can be useful right away, but if you are serious about integrating a single view of your customers across all segments of your business then you are probably going to go with a company like Siebel," she said. "Having said that, the idea of one view of the customer is harder than you think and people are moving away from the big integration projects. Maybe companies are going to have to be satisfied with point solutions."
The idea of virtual suites connected by XML is not so farfetched, but probably won't be available imminently, Moser said. "When these Web-native apps are fully integrated with XML data feeds their value will really come out. That's the dream." If and when that happens, then perhaps the SAPs and the PeopleSofts and the Siebels of this world will be running scared.
But there is, of course, another possibility. Rather than re-architecting or rewriting their applications from the ground up, the established vendors could always get out their check books and start making acquisitions if Web-native applications really start to threaten their businesses.
If You Can't Beat, Buy 'em?
Just like the acquisition targets themselves, this would be low cost, low risk and quick. And the signs are that the Web-native vendors may be prettying themselves up for just this sort of beauty parade. "We have been approached in the past and I think there is a possibility that exactly this scenario will happen," says Salesnet's Mike Doyle. "That's what I would do in their situation. If I was them, I would approach us."
Do you have a comment or question about this article or the ASP industry in general? Speak out in the ASP Discussion Forum.