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Just say "no" to iPhones at work

We've already covered how the one thing that's helping prevent the iPhone from really taking off as a target platform for developers is the fact it's closed and only Apple can build applications for the device. That's not stopping developers from trying, though, or business managers from bringing them into the workplace and tasking tech teams with integrating their iPhones into the corporate IT infrastructure, according to Forrester. This is, of course, the nature of technology uptake in business from email to IM.  Forrester, though, has told IT departments to take a stand and say they won't support iPhones at work. The arguments against the iPhone are costs and technical constraints. These include expensive calling plans and lack of corporate discounts, being stuck with a single carrier - AT&T - and devices that can't be locked or encrypted to suit regulation such as Sarbanes Oxley.

NetSuite and SaaS: winter of discontent, now?

With Christmas coming, one thing is on most people's minds. On the minds of NetSuite chief executive Zach Nelson and NetSuite majority investor Larry Ellison is NetSuite's forthcoming IPO. The ondemand business software company disclosed details of its proposed offering this week, with a regulatory filing that it said will raise as much as $114m selling up to 7.13 million shares for $13 to $16. That range would put NetSuite's market capitalization at $773m to $952m. The timing is brave, given markets tend to slow down towards the close of the year, as Seeking Alpha notes: "Most technology companies do not dare to go public in late December, when the market for initial public offerings is usually as chilly as the weather. But the season isn't deterring NetSuite."

This year, though, it's not just the calendar that should be focusing the minds of Nelson and Ellison. Recent markets' instability should be causing concerns, along with the drying up of market liquidity in the wake of the recent subprime fallout. One of the last companies to go public this year was SuccessFactors, an ondemand workforce management specialist that posted a 32% gain in its November 20 debut and has been flat since. Also taking the shine off any IPO will be a report from MGI Research that questions the ability of ondemand players to ride out a potential recession. According to MGI, software-as-service (SaaS) vendors will see their license revenue growth and maintenance revenue growth impacted as much as traditional, onsite enterprise software companies.

"SaaS companies are able to grow within their installed base and capture revenues as their clients expand with the economy. In a declining economy, SaaS companies may take a triple hit as they will see their initial transaction sizes trimmed, upsell opportunities reduced or eliminated, and then there is a possibility that users will aim to reduce the number of subscribed seats," MGI said.

According to MGI, SaaS vendors are not equipped to survive because they have heavier support and infrastructure costs than traditional vendors. With the traditional model, users provide the first line of support. SaaS vendors, though, carry the full burden with an operations centre and host systems running behind the scene. Here's another problem for Nelson and Ellison to chew on: the high costs of sales, marketing and support needed to tap NetSuite's target small and medium business (SMB) customer set. Earlier this year (Download july_2_8_2007.pdf), NetSuite admitted its customers are difficult to reach using "broad" marketing campaigns, are price sensitive, and "lacking the staffing to benefit fully from our application suite's rich feature set."

For the last few years, we've been hearing how SaaS is the next evolution in enterprise software, because it changes the way software is delivered, priced and consumed. The last year has seen at least one SaaS vendor - Salesforce.com - start to take a more traditional approach to cracking enterprise accounts, by hiring an army of sales staff. The message is clear: there exists a set of factors that come with doing business in the enterprise market that cannot be changed, and that the newcomers in the SaaS sector must adapt to. The next question is for how long Wall St will continue to see SaaS as immune to these forces and how much longer their confidence in SaaS companies will translate into bubbly IPOs.

Security holes could sink Office "challenger"

2.0 darling Zoho has been leading something of a charmed life. The online word processing suite has been reported in glowing terms, because a: it provides an alternative to Microsoft's expensive Office suite, b: it's delivered as a service and c: it's considered harmless.

That final point is now in doubt, though, after journalist and blogger Tim Anderson reported Zoho users should beware of a bug in the system that lets them log in with their own credentials and then access another user's account. Zoho said it is urgently fixing the matter, but Anderson noted: "This is the kind of reason people cite for sticking with on-premise applications. I argue that data is often safer in the cloud, but this kind of incident makes you wonder."

Most press generally slept through this important news, though, and faithfully reported Zoho's latest development: the launch of its first offline word processor. Using a Zoho Google Gears extension for Firefox, users can edit documents in Zoho Writer when they don't have a live Internet connection. Zoho Writer has supported Gears since August, but until now, you've only been able to view documents when offline, and not make changes. There was even speculation over Zoho's ability to take a share of the small and mid sized business (SMB) market.

People can report all the new features and speculate as much as they like over Zoho's potential market share. Small problems like this, though, can, and will, turn users off the service. The next question is: is this a one-off or just the tip of the iceberg for Zoho? It's now incumbent on Zoho not just to button down this hole but to be seen to conduct due diligence on its code to make sure there are no further problems. This is the kind of problem that can, and will, come back to haunt Zoho.

Keeping Ellison in hotdogs

  Larry Ellison's Hot Dog 
  Originally uploaded by Sam Spade's San Francisco.

Someone, maybe Gartner, should tell Oracle about price pressure. Oracle's president and chief financial officer Safra Catz has committed Oracle to surpassing her boss, Larry Ellison's, target from several years back for annual earnings growth target of 20%. "Twenty percent? That's for pikers. We've been growing 26%," Catz said, according to Reuters. "We are going for 20 (percent). If we shoot ahead of it in any year, it is just the way it is. We are not slowing down and don't expect us to."

You don't grow like that when your core product, the database, is slowing down after 30-odd years, which would explain Oracle's aggressive acquisition policy. Oracle is surrounding the database with other products, like applications. Re-assuringly for Oracle, the next 90 days should see increased spending by customers on its products, according to the latest ChangeWave Research poll of 1,780 individuals involved in IT spending in their organization. Eighteen percent plan to increase spending during the next three months, with spending on Oracle increasing by five percent since ChangeWave's last survey in July, spending on SAP remaining flat and Microsoft dropping by five percent.

More than 26% are currently using Oracle's Customer Relationship Management (CRM), while SAP is down two percentage points to 17%, Microsoft is unchanged at 16% and Salesforce.com is down four points to 15%, meaning there's a tight battle for second place in the CRM market. Oracle and Microsoft are showing momentum in ERP, meanwhile. SAP still leads all vendors with 38%, down eight points, with Oracle second on three percent, an increase of two points, and Microsoft up 15 points to 29%.

ChangeWave predicts a "royal battle" in virtualization following this month's launch of the Oracle VM virtualization software. Fortunately, and in contrast to the launch of Unbreakable Linux Network against Red Hat a year ago, saner heads are making the calls on Wall St these days. Despite Oracle talking big on Oracle VM at its OpenWorld event, Citigroup's Brent Thill noted Oracle had offered no customer references "leaving us not concerned about VMware...with 20,000 plus proven references, high-switching costs and long-term contracts." That said, Thill noted that Ellison and Catz "communicated a positive tone about its ability to deliver sustainable growth in various economic environments."

Much has been said about the price pressure big vendors will experience from game-changing concepts such as Software as a Service (SaaS). Gartner was at it again this week, telling InfoWorld's Ephraim Schwartz SaaS will force incumbents to offer more flexible terms. Change doesn't seem to be in Oracle's game plan, though. If you want a clear idea of how Oracle is thinking you had only to sit in on Ellison's OpenWorld keynote where he gave a resounding "no" when asked by one hapless audience member whether Oracle VM would see Oracle lowering its prices.

Oracle "getting it right" with virtualization for Red Hat?

One year after Oracle had Wall St panting over the death of Red Hat with the launch of its Unbreakable Linux Network (ULN) - providing its own support for Red Hat's Linux - chief executive Larry Ellison mounted the ramparts to defend a strategy that's clearly not gone quite according to his plans or Wall St's expectations.

Despite a claimed 1,500 customers, it seems Red Hat users have not been switching just because Oracle can claim to fix bugs in Red Hat Linux better than Red Hat can fix bugs in its Linux. According to Ellison, Oracle's spent the past year "getting the service right and offering right" and not really pushing it. "Going into the second year we will have sales with support and engineering, and we will grow faster," Ellison said.

Clearly, simply undercutting Red Hat’s price has not worked out. As I wrote at the time, it was a dangerous ploy of Oracle’s to focus on price given its own expense. Also, it seems, Oracle needs to do more to convince Red Hat customers to switch then simply offering fixes.

Customers were not likely to switch on price but might by more inclined to move based on value of the total package. Next year, Oracle hopes to add more value with the Oracle VM server virtualization software, announced at OpenWorld. With VM "[we will] differentiate ourselves from Red Hat", Ellison said.

Oracle VM is scheduled for availability through free download on November 14, with the supported edition priced $499 per year for two CPUs and $999 per year for unlimited CPUs. Will this do the trick for Oracle?

As much as it was wrong to write off Red Hat, it is premature to think ULN will fail. Oracle does have time on it side to build the base. Again, though, much will depend on value of the package.

To that end, Oracle seems unable to separate its VM fact from marketing fiction, a fact that will again raise false expectations over the potential for Oracle’s service to deliver. 

It was telling that Oracle claimed VM is faster than "the existing leader server virtualization product." Oracle didn't name names, but that's basically VMware, folks. Ellison claimed Wednesday Oracle would provide benchmark numbers to back its claims, but as of Friday, those figures were not available. An Oracle spokesperson told InfoWorld the numbers will be available "soon" but could not provide an exact date. Brian Byun, VMware's vice president of global partners and solutions, also told InfoWorld that - in the absence of hard numbers - Oracle's claims amount to marketing spin. "When VMware launches a product and makes claims, we publish the full data," he said. The VM Server product will come with a Web-based management tool about which little has been announced, other than the fact that it's supposed to be easy to use.

Google's gPhone coalition of the willing

Google's PR team surely has the easiest gig in town. Thanks to its size and success, anything that comes from the Googleplex is considered news and is guaranteed automatic, wall-to-wall coverage. 

Two years back it was each and every minor update to Gmail, last year it was how Google Docs & Spreadsheets would challenge Microsoft Office. Last week, OpenSocial would revolutionize social networks and online computing.

This week, it's the turn of the non-existent gPhone. It turned out that, after months of expectations, Google wasn't in fact building a device and isn't close to announcing anything new. Far be it from Google to set the record straight; it's far more advantageous to let the rumors and half-baked, speculative reporting inflate the stock to even more ludicrous highs - Google is now America's most valuable company.

What the "phone" finally turned out to be was, in fact, a software package backed by an alliance of partners - the Open Handset Alliance.

So what of this alliance? The Economist provided a helpful summary that captured the alliance's value and its prospects:

"Google's new alliance includes some big names. But Samsung, the number three handset-maker, always joins everything; Motorola, the number two, is in trouble and could do with a helping hand from Google; the same is true of Sprint, an American wireless operator. The heavyweights-Nokia, Vodafone, AT&T, Verizon Wireless, not to mention Apple and Microsoft-are conspicuous by their absence."

In short, the alliance is a coalition of the wiling without the clout of the World's, or America's, biggest and most important mobile and software companies.

That's not to say there isn't a chance of success or that change isn't needed. God knows, the US wireless business needs a disruptive influence. Tony Baer of OnStrategies pointed to this from the WSJ's Walt Mossberg on what the internet would be like today if the phone companies had had their way, and of the opportunities awaiting a new entrant.

"Suppose you own a Dell computer, and you decide to replace it with a Sony. You don't have to get the permission of your Internet service provider to do so, or even tell the provider about it. You can just pack up the old machine and set up the new one...

"This is the way digital capitalism should work, and, in the case of the mass-market personal-computer industry, and the modern Internet, it has created one of the greatest technological revolutions in human history, as well as one of the greatest spurts of wealth creation and of consumer empowerment....

"So, it's intolerable that the same country that produced all this has trapped its citizens in a backward, stifling system when it comes to the next great technology platform, the cellphone."

Despite the pent-up market demand, there's nothing to suggest a Google-style open mobile market can - or will - materialize without those industry leaders on board.

It will come down to commitment from Google to convince the leaders to join. I'd imagine Google has already approached them and has been rebuffed. After all, what's in it for them? Unless, and until, Google's coalition of the willing gets everyone to sign on, the Open Handset Alliance will be just another set of mobile phone specs in an already confused and fragmented landscape.

OpenSocial reality check

Unless you were living under a rock, you couldn't have escaped the pre-release (not final launch, as some have suggested) of Google's OpenSocial if you'd wanted to. Seems Google really is the new Microsoft: each and every action regarded as news and reported accordingly, living off its own rapidly expanding, self-sustaining and self-justifying energy. OpenSocial is everything, apparently: a Facebook killer, an enabler of Enterprise 2.0, a means of connecting different social networks.

People are buying in because Google is the internet's biggest search engine and therefore must have the power to change everything. Funny, that's what they used to say about Microsoft, too.

Here are some dimensions to OpenSocial that got overlooked, and that put both OpenSocial and social networks into context.

• While Google is great at announcing things, and letting others run with the hype, Google lacks the attention span to follow through. Enterprise products being a case in point.

• OpenSocial is more important to Google than anyone else: Computer Business Review highlights Maka-Maka, a project to make Google's own applications work together and with its own "Big in Brazil but nowhere else" Okrut social network.

• OpenSocial poses a potential risk to server-side security and your online personal data.

• Google is not the only company developing programs and offering APIs to developers. Other social networking companies and "Web 1.0" giants like Amazon and eBay have been doing it for years.

• The OpenSocial partners don't have enough marketshare to make much difference to anyone.

• Developers, like everyone else, like to get paid for what they do. Most social networks use AJAX or LAMP. The real money in 2008 will go to developers with skills in Java and .NET, not AJAX and LAMP, as organizations fight to hire skilled programmers.

• Facebook, which everyone supposes Google is chasing, is a faddish phenomena - a diverting plot device - that's important only to high-school kids, VCs and Silicon Valley types.

Holiday notice

Take2 is taking a short break, and will return on October 31.

Strategic reset needed for Microsoft

"Maybe we were a little ambitious to think that we would need to make Windows XP available for only a year after the release of Windows Vista," so said Microsoft's corporate vice president of Windows product management Mike Nash after he got the unpleasant task of fronting up Microsoft's announcement that - faced with the disappointing uptake of Windows Vista - Microsoft is giving OEMs and retailers an additional six months to sell its predecessor Windows XP. The older operating system was due to be yanked from retail shelves and OEMs on January 30, 2008, a year after Windows Vista's debut.

Ambitious? Yeah, I'd say ambitious. Before launch, Microsoft claimed Windows Vista was the company's biggest operating system in 10 years and would outsell Windows XP by a ratio of 2:1. It had the IDC surveys to prove it. It was clear before launch that Microsoft was talking up the market, a fact since born out by sales data and quarterly results in line with Microsoft’s regular performance.

Rather than get the engine that drives Microsoft’s business running properly, the company continues to follow in Google’s footsteps by entering new markets. Live Search has got a long way to go: about 37% of Web searchers sometimes use Live Search, but only about 11% of all searches are done on the site, according to Microsoft, who - inevitably - sees this as an "opportunity." The Live Search user performs 15 searches on the site per month, compared to 55 for Google. On Monday, Microsoft announced a beta for Office Live Workspace, a Web-based feature of Microsoft Office that provides limited capability for people to access and share their documents online.

Microsoft is pouring billions into search in the hope it can inflate anemic market share. On Office, Microsoft is giving away features from one of its most lucrative franchises to compete with a Google service - Docs and Speadsheets – that’s yet to make money, and is light years behind Office in terms of functionality and integration. To that functionality and integration, add the stability of Office and the Microsoft business compared to Google - Microsoft’s key differentiator against Google.

Rather than explore this, though, Microsoft has decided to chase Google while engaging in some marketing naval gazing to "clarify" what exactly it means when it talks of “Live” services and “Online” services.

It's little wonder that partners at Microsoft’s recent Worldwide partner conference walked away stunned into silence over what Microsoft was pitching them, or that investors are beginning to call on Microsoft’s management to stop fiddling and take fresh stock of priorities and strategic direction.

Memo to Red Hat: don't be too Linuxy

There's good news and bad news for Red Hat. The good: Red Hat is a strong Linux performer. The bad: Red Hat is a strong Linux performer. What? Red Hat has reported a 64% increase in net income to $18.2m, with a 28% jump in revenue to $127.3m. Linux subscriptions drove growth, coming in at $109.2m, a 29 per cent increase. Huzzah! Or not.

The week earlier, Credit Suisse analyst Jason Maynard expressed his dissatisfication that - more than year after buying JBoss - Red Hat remains overly wedded on Linux and has not capitalized on JBoss in its sales. Growth from JBoss was always going to be a challenge, as the company had struggled to generate revenue and operated at a loss. Red Hat is re-organizing as a result to become less Linuxy.

Maynard also knocked the Red Hat Exchange (RHX), launched this year as a place to post applications certified to Red Hat's Linux, and designed to help Red Hat open up new revenue streams. Maynard is disappointed at RHX's lack of uptake. He's not the only one. 

It's a lesson to other enterprise vendors that also believe market places and exchanges are the route to growth. The difficulties highlight the need for those building such ecosystems to develop both a compelling value proposition for potential partners and the need to get out there and actually sell the marketplace, rather than relying on the wisdom of crowds, which rests on the Bull Durham philosophy of "build it and they shall come."

Going hand in hand with this, is the need for any aspiring ecosystem maker to reach out beyond the same gene pool of open source application providers that's currently being courted by everyone else.