The Future of Enterprise Software

I attended what was billed as a smackdown between SAP and Salesforce recently called 'Great Debate: The Future of Enterprise Software'. The two belligerents were Hasso Plattner, co-founder of SAP, and Mark Benioff, founder of Salesforce.com. The session was enlightening, and held some interesting lessons for CIOs. Benioff pushed the notion of multi-tenancy hosted apps, and how getting critical updates immediately applied to every organization. According to him, the Salesforce.com offering, which has been extended to be a general purpose platform, should be the basis for everyones' apps going forward - including SAP. This is because Salesforce has such experience and insight about building highly-reliable, scalable infrastructure. Plattner, however, noted that SAP is hard at work creating an on-demand offering for those customers that choose to use SAP in that fashion.

SAP has 2,500 developers building the offering, and is planning to offer 2,100 APIs to enable companies to customize the product. This is necessary because their customers insist that an on-demand product be capable of offering the same level of functionality as the on-premise version. I felt that Benioff's statements seemed to have a lot of fluff. While he implied that they are building out a full set of enterprise functionalities. I don't understand how an end user can customize the product for their own purposes and still realize the benefits of multi-tenancy, including transparent upgrades. And whenever I hear someone maintain that I should build my infrastructure on their proprietary platform, I hear the phrase 'lock-in' somewhere in the back of my mind. Just because I don't have to install the software on my own servers doesn't mean that lock-in doesn't limit my freedom all the same.

Regarding Plattner's on-demand discussion, it's hard to not see Clayton Chrisensen's Innovator's Dilemma infusing their efforts. SAP has built an incredible business, providing the largest companies the ability to automate their operations with individually tweaked installations. As it creates its on-demand offering, the expectations of those customers molds the offering, forcing it to enable the same level of complexity and customization, no matter how poorly suited for an on-demand architecture. I mean, 2,500 developers? 2,100 interfaces? Overall, however, I was struck by the underlying assumption that enterprise software will continue to be expensive, complex, and sold by high-margin companies to locked-in lower margin companies. I did a study for a client once on Salesforce TCO and concluded that, while the payments are spread over a longer period of time, its total cost is equivalent to packaged alternatives. Interestingly, someone from the audience (from McKinsey!) queried Benioff about competitive threats from open source, citing SugarCRM. Benioff breezily dismissed SugarCRM, stating that it's an on-premise product, and the choice between it and Salesforce is a religious one - in other words, are you stuck with the old world view of hosting software yourself, or have you seen the light and are ready to move to SaaS?

This despite the fact that SugarCRM offers its product on-demand, and many service providers offer hosted versions of the open source version of SugarCRM. His haughty dismissal of SugarCRM reminded of the way Detroit used to respond to the Asian car manufacturers: "they're fine for people who want to drive cheap cars, but the market is looking for big American vehicles." Until they woke up one day and found that Asian manufacturers were eating their lunch. To my mind, the most relevant image of the smackdown wasn't Frazier vs. Ali. It brought to mind the scene from Jurassic park where the Raptor and T. Rex go at it: a fight to the finish between two killers of the past.