Tag Archives | Cloud Computing

Three Basic Mistakes That Can Derail Cloud Software Adoption

Cloud Computing Best Practices for Salesforce for Financial Services Industry

The great news for customers of a Software-as-a Service (SaaS) product is that the vendor is incentivized for your success, since you pay as you go. A good SaaS provider backs their product with a solid customer success program to make sure their customers use the product. That doesn’t mean customers will always be able to successfully use the product. Sometimes, lack of enthusiasm from the customers’ side can become a stubborn barrier to adoption.

I manage the Success Team at Navatar and I can proudly say that 95% of our clients are successfully on-boarded to our cloud platform. We see some common themes across the ones that don’t. Here are some of them:

1. Lack of leadership buy-in:

Change is difficult. If senior leadership is fully behind the rollout, they can generally push through the message to the entire team. We have seen scenarios in which adoption never occurred as it was not mandated. Most people continued to do their day-to-day tasks as a new product meant additional workload.

If senior leadership shows interest in the new product, everyone pays attention. It really works when management can set usage targets for employees. I have also seen quite a few of our customers give out usage awards, based on employee activity in the new system. The goal is for employees to recognize that the rollout is important to management.

Continue Reading →

Comments { 0 }

Is Cloud Computing Secure for Financial Services Industry?

Cloud Computing for Financial ServicesMy recent article for Seeking Alpha predicts a significant uptick in cloud adoption in financial services, thanks to the arrival of industry-focused cloud providers,  improving trust in cloud security, and a bunch of other factors.  Not everyone agrees. Dissenters argue that cloud security cannot be trusted.

Here is an excerpt from one of the comments on the article:

“As a communications programmer, I tell you that most customers have not fully realized the risks inherent in the current implementations of multi-tenant cloud computing. Those can be cleaned up eventually, but they CAN NOT BE CLEANED UP COST EFFECTIVELY. The encryption required means non-trivial CPU usage. So, you’re faced with either doing whatever you’re doing insecurely, or doing it with dedicated hardware. The multi-tenant, elastic model is simply broken from a security and efficiency perspective.”

This is a typical argument we hear from old school IT or legacy vendors such as Oracle. They tell you multitenancy is bad for you, either because they haven’t upgraded their skills (and are fighting to save their jobs) or because they want to sell you dedicated hardware.  CPU power is commoditized and getting cheaper every day, so the “non-trivial CPU usage” claim doesn’t hold water.

In fact, I realized that the case against cloud security now rests heavily on the recent hacking incidents, as some of these comments suggest:

“Target and others are just beginning to learn how difficult it is to do security correctly even on dedicated closed systems.”

“… the most critical data needs to be kept inhouse. The recent string of hacking cases against Target, Niemen-Marcus, and Michael’s should demonstrate that to everybody.”

Clearly, Target’s data was kept inhouse and secured by their internal IT.  Turned out that wasn’t the best security, after all.  Another person, who commented on the article, highlighted the irony:

“The irony here, regarding financial services organizations, is that they are breached constantly. I’ve had every major credit card I own compromised in the past 18 months. These banks also have more down time due to weather, outages, failed upgrades, etc than would never be accepted in the public cloud.

If you understand how public clouds like Amazon Web Services handle availability, you wouldn’t be concerned about outages. For an in house or on premise service to have the same type of capabilities related to availability is cost prohibitive. Banks are already severely wasteful with their data center resources.

The primary reasons banks haven’t moved to public cloud yet is more around Public Relations, sunk investments in under-utilized, owned infrastructure, and, well, complacency.”

Security arguments notwithstanding, Gartner asserts more than 60 percent of banks worldwide will process the majority of their transactions in the cloud by 2016.  Ovum claims capital markets will accelerate their adoption of cloud this year.  And Oracle’s CEO declares that its main rivals are no longer IBM and SAP, but instead they’re Amazon and Salesforce .

All of this suggests that despite the security concerns, the cloud is gathering momentum within the industry. If you are seeing a different trend, would love to hear from you.

Alok Misra

 

 

Comments { 1 }

Vertical Cloud Computing Providers Arrive for Financial Services Industry

Salesforce For Financial Services

Cloud Computing Predictions for 2014

The cloud’s main story so far has been one of horizontal providers, such as salesforce.com, Microsoft and Amazon, offering one-size-fits-all solutions.  While these providers had some success in the financial services sector, their products weren’t specialized enough to address the need of asset managers or bankers.

The advent of vertical SaaS providers is the topic of my latest article, Will 2014 be the Year of Vertical Clouds, written for Wired.  Even though they’re a young market today, expect to see a larger number of these vertical cloud providers getting scale and attention, in 2014.

In the days before the cloud, on-premise software providers that focused on selling into a vertical market were considered second-class citizens to the ‘big guns’ selling into the broader horizontal marketplace. However, with the advent of the SaaS model, the tables have turned,” according to Gordon Ritter of Emergence Capital.

Which is great news for the financial industry, since we will see vertical providers going very deep even in niche areas that which most people thought didn’t exist, or weren’t sizable enough.  For instance, Navatar provides products for corporate venture funds and corporate development groups, a market few software providers had historically paid any attention to.

As I have pointed out in the article, vertical cloud providers go deep to address the needs within their market – much deeper than a one-size-fits-all provider would. They act as a one-stop-shop for their customers. Navatar, for instance, provides wealth managers with CRM from salesforce.com, content sharing from Box, and data from custodians, portfolio management and reporting systems — all bundled into one offering. Not only do these solutions provide a competitive advantage for financial firms, but they also reduce spend on IT staff.

We may see a huge influx of vertical providers, and a lot of lame lemmings and road kill. A vertical cloud provider’s success will depend on their ability to fully address their market’s needs as opposed to offering a piecemeal solution or an easily replaceable solution. Equally important, their survival will depend on how well they support their customers (customers are becoming more aware of their increased clout in the cloud and getting more demanding and less forgiving).

But, we will surely see some great companies emerge. So far, the future looks promising.

Alok Misra

Comments { 3 }

Are You Using an Older Version of Salesforce.com’s Service?

The answer is - it isn’t possible.  ”No one’s ever on an old version of Salesforce.com because Salesforce.com is multitenant, that is everybody shares the same servers, so when those servers are upgraded, everybody’s upgraded.”

So naturally, when a perplexed customer asked me whether “Navatar runs on an older version of Salesforce,” I became very curious about what could have prompted that question.

When the customer revealed that a consulting firm had advised him about Navatar being on an older version, the mystery began to unfold.  Basically, consultants and systems integrators make money customizing software. Some of them don’t like Navatar’s pre-built software for financial firms (built on the Salesforce platform) since it reduces the hours they can bill to a customer. To steer the customer away from off-the-shelf products, they feed false information so they can make money re-inventing the wheel.

This happens often, since the cloud, still in its infancy, is a bit like the wild west. Fortune hunters, such as consultants fixated on their billable hours or software salespeople obsessed with their commissions, sometimes discover easy money by planting fear or simply distorting facts. … when that happens, it is the customer who often loses.

The customer loses because they walk away with the impression that reinventing the wheel is a better and easier option. They end up spending a phenomenal amount of time engaged in system implementation, instead of their core business – in addition to paying thousands of dollars for consulting and support services that are redundant or available for free in the cloud world (see my InformationWeek post:  How to Reduce IT Services Costs in the Cloud).  But their frustration really peaks when, even after all the spending and distraction, they never get a system that meets their needs. They are then left with two difficult options:

a) changing course – switching to a pre-built product, which requires writing off the time/money spent on system implementation (it also requires someone willing to acknowledge their mistake, which is probably a bigger challenge)

b) continuing the reinvention process – assuming, somehow, that they are close to the finish line and finding a different consultant with the hope they can somehow salvage their investment (which inevitably requires throwing more good money after bad).

How to avoid getting into this situation? Read on.

So, should I reinvent the wheel?

Even though there will always be con-artists, having choices isn’t a bad thing. Customers need to be aware of some simple facts that can lead to an informed decision, when they choose between buy versus build, a standard IT industry concept. Build refers to buying some generic software or platform and then using it to build the functionality you need – you also then need to continue maintaining and supporting whatever you build. Companies usually go the build route when they believe their business processes are so unique that they cannot fit any packaged product – some large companies also choose to build since they are heavily invested in their IT organizations that like building systems. A company will buy commercial off-the-shelf (COTS) software, instead of building, if they believe 75-80% of their needs can be met by it (read more about buy vs. build in this article). So, both buy and build are valid options, suited to different types of scenarios.

The cloud offers options between buy and build.  For instance, Salesforce provides a top notch cloud (and CRM) platform, which is sold directly by them as well as by other resellers and OEM partners, through AppExchange and other channels. You can find so many products on AppExchange that can provide you what you need – if not, you can also try to build it yourself using the Salesforce platform (or other cloud platforms). Not every product can be replicated using the build process, but given time and money, quite a few of them can.

When it comes to build, there are plenty of available statistics around the value provided by software development projects. According to Standish Group (Chaos Report), 68% of all software development projects are unsuccessful. Mercer Consulting’s Firoz Dosani claims 80% of technology projects actually cost more than they return. In the cloud, the build success percentages may be better – but so are the number of buy options available to you.

The statistics notwithstanding, if you choose to build in a cloud environment, you have to be ready to spend (at a minimum) the next 6-12 months working with consultants (or IT staff) – and then hope your investment will pay off. All this time you will be spending your time thinking about what your system should be doing, how it should be modified, how to generate reports, etc – and if you do get a system that does what you want, you will also need to figure out how to support and maintain it.

That said, if reinventing the wheel still seems tempting, it’s most probably due to one (or more) of these reasons below:

1.   You believe your business processes are very unique - you’re convinced, after careful analysis, that other businesses similar to yours operate in a very different way and no off-the-shelf product comes close to matching the way you do business.

2.   You have to deal with complex integrations - you have to integrate the new system to several of your internal systems, before it can provide any value.

3.   You are an IT person who loves to build - you are not scared of writing software or you find building to be a fun activity or you believe doing it yourself will make your job secure.

4.   You have assumed that building is very straightforward - you have been told that building is simply a matter of a few mouse-clicks, while enjoying a couple of beers – or a consultant has convinced you that building can save you a lot of money.

5.   You’re worried about the viability of the COTS provider - you like the off-the-shelf product but are concerned about the risks of the provider going out of business.

6.   Someone with credibility has badmouthed the buy option - this is exactly what happened in the example above.

If your reason is #1 or #2, you may not have much choice but to build - the best option then may be to hire a good consulting firm who can provide proper guidance. But remember – good consultants don’t reinvent wheels. Stay away from the type that I described in the example above and hire a firm that has credibility in your industry.

If your reason is #3, you may have made your decision already. Assuming that your job will remain secure in case the build project doesn’t deliver as expected, at least you’ll have fun doing what you love.

If your reason is #4, you will do yourself a huge favor by assessing the total cost of ownership (TCO) of what you are about to do, to understand what it would really take to build and maintain the system. You will need to understand the time and money involved in requirement gathering, building, modifying, training, supporting etc, over a period of time (there are several simple TCO models available). It won’t take you more than 30 minutes to understand the TCO, if you can spare that time.

If your reason is #5, you have to understand that in the cloud world you’re not really buying software – you’re only paying for a year’s usage, so your real risk isn’t that of losing your investment; the only risk is the additional cost of migrating to another system, which is usually lower than that of reinventing the wheel. Generally speaking, if the provider has been around for more than 3 years and has more than 100 customers, you should be on solid ground.

If your reason is #6, you can test the credibility of whoever advises you against buying, by asking them to put their assertions in an email. If you never see that email, you will know that they are not acting in your interest.

It’s really about TCO

When it comes to choosing a cloud-based product, there are a number of factors to be considered (which I will cover in a later post). At a minimum, the product fit and the total cost of ownership (TCO) are important. Most customers are able to assess whether a product fits their needs – it’s their inability to estimate TCO upfront is what steers them away from their core business, into the messy world of systems integration. It shouldn’t be that way.  As Robert X. Cringely observes:

Unless you are operating a software company, software should not be central to the way you view your business. It’s just a means to an end. And to be classed as truly successful, the means should be quietly efficient and as close to invisible as you can get.” 

Alok Misra

Comments { 0 }

Is Oracle’s Cloud Multitenant? Does It Matter?

Meg Bear of Oracle, who manages their Cloud Social Platform, hammered multitenancy in her post “Multitenancy and Other Useless Discussions,” on Oracle’s blog.  She says “multitenancy doesn’t matter … in the same way that your VHS player having progressive scan doesn’t matter.” Saying that I disagree with Meg would be an understatement. I casually responded to the post but the Oracle moderators didn’t approve my response (seems like they only allow their own marketing people to comment on their blogs), so let me try to provide a more cogent argument here.

When (prominent) people make claims such as this one, it may either be because they’re old school (and haven’t yet grasped the realities of the cloud) or they’re just making a self-serving statement. Since Oracle has historically taken a consistent stand against multitenancy (see my article O Multitenancy: Will Thy Survive Oracle), I would guess it’s the latter.

So, first let me just say it bluntly. If you’re buying a product which is labeled “cloud” but is not multitenant, you’re simply buying on-premise software. It may still be good software but it is not cloud software. The entire concept of the cloud is based on sharing resources, which is accomplished through multitenancy. My InformationWeek article, “Why Multitenancy Matters in the Cloud,” highlights why a buyer should care about multitenancy.

You cannot compare multitenancy in the cloud to a feature in a VHS player. An apt comparison would be with the concept of an assembly line in manufacturing. What Henry Ford, with the assembly line, gave to the world was a radically efficient way of producing vehicles. The other automakers at that time, who didn’t switch to this model, claimed that it didn’t matter to the car buyer how the operations of a car manufacturing plant were structured, as long as the car had all the desired features (technically, they were correct). In due course, however, each of the automakers was either forced to switch to the assembly line or go out of business, because of all the reasons now apparent to everyone.

Marc Benioff and salesforce.com demonstrated to the world what multitenancy can do – they did to software what Henry Ford did to manufacturing (or Steve Jobs did to mobile computing). If their tremendous success isn’t evidence, wait for a few more years to witness the gradual demise of the traditional software delivery model (that doesn’t mean the traditional vendors won’t fight tooth and nail to convince the world that the cloud and multitenancy don’t matter).

In fact, multitenancy operates at several levels in the cloud world. Salesforce is multitenant and Navatar, another layer of cloud software used by financial firms, which sits on top of Salesforce, is also multitenant. Which means that as and when either Salesforce or Navatar improves, all customers automatically benefit. As more customers sign up, they share the cost, so both Salesforce and Navatar benefit.

So getting back to the Oracle platform, Meg does say that it is also multitenant, but according to her, what really matters is business value, not multitenancy. That’s stating the obvious – of course, no product (even it is a photocopier) can survive if it doesn’t deliver business value. But why the stand against multitenancy?

As, I wrote in my InformationWeek article, “Those who say multitenancy isn’t necessary to making the cloud model work are typically companies that have long made money from on-premise software and don’t want to cannibalize their existing revenues. They might offer a subscription for their single-tenant application, but this could simply be the software license, maintenance, and hosting fees divided into monthly payments which almost certainly would be much higher than a comparable multi-tenant application.”

That may be one explanation – Oracle may prefer to install boxes at every client site, so naturally, they find multitenancy to be a thorn in their side. Another explanantion, as David Linthicum offers in his Infoworld post, “The Silly Debate About Multitenancy,” is that vendors often “find that building multitenant architectures is a much bigger nut to crack than they thought.”  Either way, Linthicum agrees, there should be no debate here: “Cloud computing, both private and public, requires the concept of multitenancy. The traditional providers are welcome in the cloud as long as they can provide multitenancy. If you can’t do it, then don’t try to argue that it’s not needed. Get to work!

As Denis Pombriant observes, IT is over.  As a buyer of a cloud product be aware: If you’re buying a cloud product that isn’t multitenant, you’re buying it from someone who really wants to sell you boxes or consulting or something else – there is a high probability that that product won’t survive the next few years.

Alok Misra

Comments { 1 }

Navatar Bringing Cloud Computing for Investment Banking & Asset Management to Latin America

Alternative Latin Investor highlights Navatar’s role in bringing the cloud to the capital markets and investment banking world in Latin America, in a recent article.

“Foreign market leaders such as Fidessa, Direct Edge and Navatar are challenging local providers in the race to meet the booming region’s needs,” says the article.

Read the full article here. It goes on to say:

One subsector of the industry in particular is pioneering a new paradigm of easy distribution: cloud computing. One of the leaders in cloud computing for global investment is Navatar, a New York based firm. Their first product line came out 3 years ago, and in the last year sales have more than doubled, giving the company a name recognition that has attracted major international financial firms. The hardware and software with which they serve their clients is hosted by the cloud computing host Salesforce.com.

The major financial firms they are referring to, are names such as PNC and Jefferies. In Latin America, we have customers such as Banco Lafise, a prominent bank. One big reason they like our products is that they never have to go to their IT departments or hire consultants. As the article quotes me:

“Our products are very tailored to the type of asset class,” Alok Misra explains, “But they are also out-of-the-box, so companies don’t have to spend so much on IT and maintenance – it’s all included at no additional cost.”

Another key reason for our success globally is Navatar Deal Connect, the free marketplace for middle market deals – if you’re a dealmaker in Latin America, there is no better way to build relationships in America and Europe – without spending a penny.

Stay tuned for more developments in this exciting region.

Alok Misra.

 

Comments { 3 }

Webinar – Salesforce CRM Meets Deal Sourcing for Private Equity Funds

Don’t miss this webinar, Deal Sourcing meets Salesforce CRM, to learn how Navatar Deal Connect, integrated with Salesforce, is redefining how private equity operations are managed.

Navatar Deal Connect is the free online marketplace for middle market transactions, used by thousands of dealmakers worldwide. Salesforce CRM helps manage fundraising, investor relations, deal sourcing, deals, portfolio and much more.

Register here.  In this webinar, you will learn how these two critical tools now work together, so you can:

  • Build private connections and interact confidentially on relevant transaction opportunities worldwide, and have those connections and deals be delivered right to your Salesforce CRM
  • Use Salesforce, fully pre-built, for automating investor relations, deal management, deal sourcing, portfolio management as well as secure investor reporting – without paying any extras
  • Quickly benefit with little to no investment, so you can save your precious time and money instead of spending it on subscriptions or software development/maintenance

Register for the webinar here.  Also, feel free to post your thoughts after the webinar.

Alok Misra

 

Comments { 1 }

Webinar – How Cloud Computing & Salesforce.com are Setting New Rules for Private Equity

Do not miss this recently recorded and well attended webinar, “The New Rules for Private Equity Firms” with Martin Stein, one of my favorite speakers.

With a more competitive private equity environment, it’s often challenging for smaller firms to match the resources and reach of larger firms. Whether it’s getting the right deal flow, building better LP relationships or managing portfolio companies, smaller firms have had to work much harder.

However, this is changing – cloud computing and social media are leveling the playing field. In this webinar, Martin Stein of Blackford Capital, a private equity pioneer, outlines how smaller private equity firms are becoming equally important players in the private marketplace.

In this live session with Ketan Khandkar, Martin explores the answers to these important questions:

- What smaller firms need to do to differentiate themselves in today’s markets?
- How cloud and social media will transform intermediary/LP relationships and deal flow?
- How cloud computing is providing competitive advantage as well as eliminating IT costs?

View the webinar here. Also, feel free to post your comments and ideas.

Alok Misra

Comments { 2 }

Will India Produce Indigenous Cloud Computing Providers?

The interest level around cloud computing is already on the rise in India. Several global and local software players have been going all out to get attention, by making the one pitch that everyone wants to hear – lower TCO.  However, it still hasn’t resulted in very high sales numbers for these providers.

There may be several reasons for low cloud sales, but I think one of the most important one is pricing. Take any popular desktop software like Microsoft Office or Symantec Antivirus: it always has a different price for the India market which, typically, may be 40-50 percent lower than its price in western markets. Cloud computing services such as Google Apps, Microsoft Azure and Amazon EC2, offer no regional pricing for India. In fact, most of these are priced in US dollars. They also, mostly, accept only credit card payments. In fact, Microsoft recently started accepting Indian rupee cheques for their online services, but only for larger customers.

When it comes to TCO, Indian firms have a different formula for software/hardware depreciation as well as IT manpower costs. Cloud pricing turns out to be too high for them. Moreover, paying thousands of dollars through credit cards is not something that most Indian companies are comfortable with.

So can the cloud pricing ever get lower for Indian markets? For on premise software, offering lower pricing for Indian markets may be easier. All they have to do is to copy the software on a disc and sell it. The only costs are related to packaging and distribution. In the cloud, there are added infrastructure costs that the cloud provider has to bear for every seat sold. If a cloud vendor is maintaining mirrored multitenant infrastructure, with data centers in several continents, there may be no easy way to lower pricing for one country (or one tenant).

What if the cloud vendor’s infrastructure was completely located in India? A homegrown cloud vendor would, arguably, be able to provide better pricing to Indian customers. We would then have CRM, ERP and all kinds of other SaaS solutions made in India, hosted in India and priced for India.

That sounds great but it also assumes that customers (Indian companies) of these SaaS solutions wouldn’t have to do any business internationally. With global customer bases and supply chains, nowadays, is that really possible? As Indian companies try to compete in the global arena, would they really want to use software that takes them in the opposite direction?

So, Indian clouds may be able to solve the pricing issue but may fall short in other areas. However, they may still be able to play an important role getting the global players to drop their prices.

Of course, in addition to pricing, there are other significant barriers, such as the absence of a cloud ecosystem, high speed connectivity and the general lack of awareness. However, as with most things, if the economics works out, everything else will follow.

What do you think?

Amit Chaudhary

Comments { 6 }

How Social Networking May Impact Private Equity Deal Sourcing?

Nicholas Donato explores how technology and social networking are influencing the way private equity funds operate, in his well-written article for the PEI Fund Administration & Technology Compendium, titled:

The fund of tomorrow … today

One of the questions that the article raises is whether social networking can change the way deals are sourced, in a people business like private equity? Here is an excerpt from the article:

….. Navatar is also rolling out a free cloud service to connect GPs with M&A bankers and other industry contacts to form an online community where deals can be collaborated. Navatar’s social networking site for private equity professionals works by having buyout shops create an online profile describing the types of deals they target alongside their contact information. Bankers, business owners and other sources of deal flow can then access profiles that match their capital seeking enterprises.

The free cloud service, that Nicholas refers to, is Navatar Deal Connect, scheduled for a beta launch in late August. The article goes on to say:

At the moment GPs don’t rely on portals for originating transactions, sources say. Private equity is after all a people business, points out Philipe Bucher, chief financial officer of Adveq. But similar to the evolution of social networking sites, who’s to say one portal won’t feed off its own success to morph into a dominant internet presence, a feat Facebook accomplished after eclipsing rival sites such as hi5 and MySpace. One can imagine a GP in the future sourcing deals from the comfort of an armchair, jokes Bucher when asked whether portals have the potential to be a significant source of deal flow down the line.

Will GPs ever get comfortable with the idea of sourcing deals from an armchair? I’ve never been a GP in a private equity firm, so I’m not sure I have the credentials to answer that (although that doesn’t stop me from babbling about how deal sourcing is about to change). I can tell you, though, that during the early days of Linkedin, most of us who were sourcing consulting business for Deloitte (that’s what I did back then) scoffed at the idea of getting a Linkedin account – of course, most of my management consulting buddies (Deloitte partners) have had a (dramatic) change of heart on this issue.

OK, I’m biased, but what would it take for a social networking portal to bring about this change, in your opinion?

Alok Misra

Comments { 4 }

Podcast with Sunny Vanderbeck – Navatar Private Equity CRM (Cloud)

Sunny-Vanderbeck
We’re pleased to bring you this podcast with Sunny Vanderbeck , Managing Partner of middle market private equity firm Satori Capital, a customer of Navatar Private Equity. Sunny talks with us about how cloud computing has helped his firm manage the complexities of private equity fund raising as well as a pipeline with more than 900 deals.

Sunny Vanderbeck’s bio:

Sunny Vanderbeck has a track record of high achievement in all of his endeavors, including as an entrepreneur, CEO, investor, board member, and military leader. Prior to co-founding Satori Capital, Mr. Vanderbeck co-founded and served as Chief Executive Officer of Data Return, a leading provider of managed services and utility computing. As CEO for eleven years, Mr. Vanderbeck led the company through all phases of growth and transformation. The company sustained 40% quarter-over-quarter growth and reached $50 million in revenue after only three years.

more>>

Vanderback Net Castversion1   Hide Player | Play in Popup | Download


Comments { 4 }

Parker Harris Discusses Early Days of Salesforce.com

Cloud computing is the white-hot topic in information technology and salesforce.com is the leader in enterprise cloud computing. It’s incredible to consider, especially since when we started in 1999, the term cloud computing wasn’t even used. We didn’t have much in those early days: just a rented apartment as an office, a server stored in a closet, and a small group of developers (sleep deprived and living on beef jerky). What we did have, though, made up for what we lacked. We were motivated by a vision to change the software industry, and we had a simple idea about how to make it more democratic.

Businesses drastically needed more efficient and economical enterprise software, and once customers were experiencing success with our CRM application, we realized that we could achieve something even more significant. What if we made our platform available to let others build their own cloud apps? The idea to offer our platform as a service was also a way to resolve our own problem: customers were demanding more apps, and we couldn’t build everything ourselves. But – more importantly, and something that as an engineer I could truly appreciate – it offered an opportunity to change the landscape for anyone who created applications.

There was so much that was arduous about software development. (If you haven’t been there, trust me; I was one of those sleep-deprived developers.) There were the purchases: networking devices, storage systems, databases, app servers, data centers. Then we had to write the software and ensure it was fast, high quality, mobile and above all scaled for the Internet. There were technology issues to address, such as authentication and availability. It seemed as if the to-do list never ended…

Those are the words of Parker Harris, Cofounder, salesforce.com. They have been excerpted from Parker’s Foreword for my recent book, Thinking of Force.com as your Key to the Cloud Kingdom, co-authored by Ian Gotts.

To read the entire Foreword from Parker Harris, download a free book summary here:

http://navatargroup.com/book-force-com-as-your-key-to-the-cloud-kingdom.html

Alok Misra

Comments { 10 }

Salesforce.com ISV Mistakes #3 – Force.com As Your Key to the Cloud Kingdom

Customers never pay for upgrades

The startup had done really well in their first year. They started with $500k of seed money, and the talented technical team launched the first version of the workflow management cloud product, built on Force.com, in 8 months. Their CEO, well connected in the technology world, brought in the first sales. They had 10 customers with around 120 subscribers in just 4 months. Although they were only collecting $20 per subscriber each month, things seemed upbeat. After all, they had the product already and all they needed were more customers. They projected adding 1500 subscribers in the next two years. They hired two more salespeople and began ramping up the back office team as well.

The trouble began when their customers started coming to them asking for more features. It seemed that another salesforce.com partner had also launched a competing offering. The startup had to act fast. Their technical team worked with the customers, compiled a list of all new features/functions required and came back to the CEO with the game plan. The underlying object model and design of the product would have to be changed to accommodate the new features. It would take around 6 months to develop and roll out. However, the catch was that there was no way to roll out an upgrade to existing customers due to the changes in the object model. Each existing customer would have to be migrated to the new version. Each migration for a customer was expected to take 3-4 weeks and would cost around $20k. By the time the new release would be ready, they estimated they’d have 80 customers to migrate, and would therefore need a significant chunk of change to fund that.

Ever the salesman, the CEO assured the team he’d be able to get the customers to pay for the migration. He went and talked to two customers about the plan. They would be getting all the fabulous new features in 6 months however, they’d have to shell out a one-time $20k fee for the new features. The CEO wasn’t prepared for the response. Why do we have to pay these fees for the new features? Doesn’t Cloud Computing mean that we pay you a monthly fee and you figure out the rest?? was the response he received. It became clear to him, after the first few conversations, that the customers wouldn’t pay anything for the upgrade. This was an unanticipated cost which threatened to completely destroy their business plan.

The example above is extracted from my recent book, Thinking of Force.com as your Key to the Cloud Kingdom, co-authored by Ian Gotts. The book, featured in CIO Magazine’s “What We’re Reading?” List for March 1st, 2011, will help ISVs ask the right questions that are critical for commercial success in salesforce.com’s cloud.

Getting your financial model right is one of the biggest challenges. It’s very important to ask the right questions upfront, so you don’t get blind-sided.

Comments { 2 }

Salesforce.com Mistakes #2 – Force.com As Your Key to the Cloud Kingdom

Here’s another case study of a start-up that wanted to build a commercial cloud product. They haven’t been able to launch their product.

Unrealistic ROI expectation

We’ve estimated that we should be able to sell 50,000 to 70,000 subscribers in 3 years, asserted the CEO of a start-up that wanted to build a Force.com app for a vertical market. They assumed that, with 70,000 subscriptions at a price of $125 per month, they’d bring in over $100 million in revenue in their third year. Pretty aggressive!

Now let’s look at the CEO’s cost model. To build their product, they had hired a programmer with 5 years experience who had dabbled with Apex in a previous job. The programmer had convinced the CEO that he could launch the first version of the app if he received some help from a skilled company in developing the more complex pieces. Together, they estimated the total cost of launching the product at $150k. This included the programmer’s salary. They assumed that once they had a basic version, the programmer would be able to continue enhancing it.

The overall estimated cost was $500k per year against revenue of $100 million. Do you see a problem with this model?

The example above is not fiction, it is painfully true. It is extracted from my recent book, Thinking of … Force.com as your Key to the Cloud Kingdom, co-authored by Ian Gotts. The book, featured in CIO Magazine’s “What We’re Reading?” List for March 1st, 2011, will help ISVs ask the right questions that are critical for commercial success in salesforce.com’s cloud.

Getting your financial model right is one of the biggest challenges. The cost of building, maintaining, implementing, supporting, and upgrading all versions of your service will be much, much higher that you anticipate. You also need to be realistic about the number of subscriptions you will sell and the price and number of seats you will get.

The CEO, in the example, was right to get excited about the potential that cloud computing and Force.com offers. However, building a cloud app is not like winning the lottery. If you don’t ask the right questions up front to understand the cloud business model, you could be writing checks for years, without seeing any return.

Alok Misra

Comments { 5 }

Salesforce.com Mistakes #1 – Force.com As Your Key to the Cloud Kingdom

The following is a real case study of how an Independent Software Vendor (ISV) failed in their attempt to launch a cloud product.

Building a consulting practice instead of a cloud product

I hold you responsible for not telling me earlier that this would cost so much, yelled the EVP of Product Development at the consultants that were helping him launch a cloud offering on Force.com. He was right about the cost spinning out of control. However, he and his team never really paid attention to the advice they were given. As far as the EVP was concerned, his team had been in IT product development for years and had the business knowledge as well as the technical caliber to pull it off. He wanted complete internal ownership of the project – the consultants were just there to help with a few tricky items on the fringes, so their advice was largely ignored.

Things started heading south after the first two potential customers continued to demand more features in the product before they paid a cent. Then came the expectations related to performance and more advanced features. The expectations kept mounting. Within the next few months, a significant number of the product team members got involved in figuring out how to meet the rapidly escalating demands from the first set of buyers.

Mired in product features and attributes, the product team didn’t realize that they were getting into a consulting role with their potential customers but, that was also something they weren’t trained to do. They didn’t know how to manage the scope of work or customer expectations. They had no idea how to push back so they continued accepting all demands and suggestions, turning the product scope into a constantly moving target.

The EVP went to the CFO for more funding and the executive team was appalled. They had already spent upwards of $2 million and it seemed like a bottomless pit with no revenue in sight anywhere. The executives pulled the plug on the entire initiative.

The example above is not fiction, it is painfully true. This is one of many organizations that thought that making money in the cloud model was easy – they spent all the money & effort but still ended up with less than they started with. The case study is from my recent book, Thinking of … Force.com as your Key to the Cloud Kingdom, co-authored by Ian Gotts. The book, featured in “CIO Magazine’s “What We’re Reading?” List for March 1st, 2011“, will help ISVs ask the right questions that are critical for commercial success in salesforce.com’s cloud.

It’s important to ask these questions before before you go and spend too much money. It’s quite possible that after considering all the questions you may come up with the answer No. That’s a No to Cloud Computing, or No to Force.com, or Not now but possibly later. Any of these answers is fine.

What is important is that the decision has been made with due consideration.

Alok Misra

Comments { 5 }

Are You Wasting IT Services Dollars In Cloud Computing?

The premise for my latest InformationWeek article, How To Reduce IT Service Costs In The Cloud, is that companies are paying unnecessary consulting and support fees for cloud apps, increasing their total cost of ownership by upto 50%. Several commentators disagree – their main contention is that services will always be required in order to provide a better fit with a customers needs or to integrate with other systems.

They aren’t wrong. Application integration, for instance, does require services. However, the cost of both middleware products as well as supporting services has been lowered significantly since integration became available as a service (ask Informatica). You will notice a similar trend with professional services in the cloud – they cost much less than professional services for on-premise software. In fact, traditional systems integrators have not yet been super successful in the cloud, primarily because it’s not providing them as much services revenue as on-premise software has been.

My point is that quite a few (but not all) of the professional services in the cloud are either costing much less (most people would agree with that) or are not required (since they are either redundant or available for free).

Let’s understand why. Cloud is a new technology but, unlike other new technologies, it’s a game-changer which drastically alters the existing business models. The new model forces cloud providers to provide certain services for free, so that they can keep customers long-term (this wasn’t needed in the on-premise world), not because it’s some gimmick (in fact, since the cloud model is subscription-based there isn’t any room for gimmicks – sustained customer satisfaction is of paramount importance). Just the way Starbucks provides internet for free, in the hope you will buy their coffee (and scones, which I like), but if you don’t, you still get something (internet and a decent environment to use it) for nothing.

All this is great news for customers of cloud apps. They will be the ones to benefit most.

Now, does this mean that there will be no professional services needed and all systems integrators will eventually go out of business? Not at all. There will always be areas needing services. There may still be a lot more consulting services required, for instance, to sort through the mess created by a proliferation of niche cloud providers. Systems integrators that provide application support may have to start focusing on providing that support to cloud providers, instead of companies. In summary, if you are a provider of professional services, cloud computing will force you to rethink your portfolio, value proposition and target customer base … at a minimum.

Alok Misra

Comments { 1 }

Will Infosys and TCS be Indian Cloud Computing Winners in 2011?

I was reading this story in a newspaper today: Indian firms go missing on the big cloud stage-show . According to the article, all top Indian IT firms have had teams of engineers working on cloud offerings for two or more years, but are yet to achieve global recognition for their products.

It would be nave to assume that the Indian biggies would let a $48 Billion opportunity slip by them. So if they’re missing on the big stage, it isn’t because of lack of cloud engineering skills, it’s due to the commercial model. They probably feel the same as Tom Cruise in Jerry McGuire, demanding,  Show me the Money.

They’re still trying to figure out how to make money in this model. In the cloud, the deal sizes are typically very small. Depending on whether you’re selling products or services, it’s a very different model (See Products vs. Services in the Cloud). Also, most payments are made in hundreds/thousands (not millions) and delivery happens in hours/days/weeks (not years).

So the big Indian firms face two issues, when it comes to making money. Firstly, their size gets in the way, since they are very dependent on large commoditized services deals worth tens of millions of dollars each. Secondly, since the cloud offers their customers the ability to save money, those savings eat into the revenue these Indian firms can otherwise generate or, in other words, the cloud cannibalizes their services revenues.

Some firms, such as Infosys, have also begun pursuing a non-linear revenue model for reducing their reliance on project pricing based on heads involved in a project. However, I’m not sure if the non-linear model is targeted at getting a piece of the cloud pie.

To make money in the cloud, these firms would like the projects to grow in size as well as bring incremental revenue rather than eat into the current one. They will probably campaign against multitenancy. In other words, instead of them going to the cloud, they’d like the cloud to come to them.

It is therefore important to ask: who will be more successful in this marketplace for the foreseeable future? Smaller, nimbler companies without the hourly-billing baggage (see my post on Navatar Group) or the large legacy firms with big wallets.

Would love to hear your viewpoint.

Aurobindo Sarkar

Comments { 5 }

Is Multi-Tenancy Essential to Cloud Computing for Enterprise Customers?

Techno-Pulse started this debate, since a provider named Virtual Ark thinks otherwise. Here’s an excerpt from their CEO’s interview at Cloud Computing Journal:

Marty Gauvin: No, not at all. Virtual Ark can manage dedicated instances of the application for specific customer needs as if they were “one” application instance. In our view, the security, integration and performance requirements of our target market, large enterprise customers, are ill-suited to multi-tenant solutions. We think this is a key reason why SaaS has not been taken up more strongly by this market segment, and why many ISVs have not modified their applications to be multi-tenant. Virtual Ark sees this as an important differentiator in its value proposition.

Here was my response to this, at the Techo-Pulse site:

It may be hard to argue with Marty when he says large enterprise customers, are ill-suited to multi-tenant solutions. Large customers, usually, are too high-maintenance, both in terms of their unique requirements as well as their highly political environments. Had they been simple to deal with, consulting firms like Deloitte or PwC, that make most of their money from organizational complexities, would have gone out of business by now. No wonder, it’s hard for a vendor offering a multitenant solution to convince a large customer to buy.

So if you’re an ISV targeting large enterprise customers, an easier option may be not to be multitenant, so you can tailor for each customer’s unique needs. It’s a perfectly valid (and maybe lucrative) business model. The issue is that eventually you will turn into a services company or, in other words, most of your revenues will come from services (see my InformationWeek post Product Cloud Or Service Cloud? Know The Difference).

If you want to be a viable cloud vendor selling products (see my InformationWeek post Why Multitenancy Matters in the Cloud), you have no choice, your product must be multitenant in order to survive in the cloud world.

I think this debate about multitenancy will go on, as long as ISVs believe there are “quickie” routes to having a cloud product. I have covered this subject extensively in my new book : Force.com as your Key to the Cloud Kingdom.

However, Marty’s comments do raise other important questions: Is it possible to sell and maintain multitenant cloud products to large companies? Are there examples of companies doing that?

Would love to hear from you.

Alok Misra

Comments { 12 }

Navatar’s Financial Cloud Computing Now Supports Select Sector SPDRs Sales

We couldn’t be more excited about having Alps Fund Services join Navatar’s Mutual Fund Cloud. It is a major milestone in our mission to bring Cloud Computing to Wall Street.

ALPS Fund Services is a big name in the Mutual Fund industry. It distributes Select Sector SPDRs and provides a full services suite for open-end, closed-end, exchange traded and alternative investment funds. Combined with ALPS Distributors, Inc., ALPS Fund Services services more than $240 Billion in client assets.

What ALPS gains with Navatar is Mutual Fund CRM and sophisticated sales reporting with transaction data from transfer agents and brokers, all delivered through the Navatar Cloud for a low monthly fee.

Why Navatar? ALPS Portfolio Solutions and Select Sector SPDRs, Regional Sales Manager, Jeff Brainard says, “We found Navatar’s Mutual Fund Cloud for Salesforce to be the most complete out-of-the-box product for our industry.”

Thanks Jeff. We look forward to helping Alps achieve record sales!

Allan Siegert

Comments { 6 }

Will Accenture & HCL Cloud Computing Be Powered by Navatar?

In Indian high-tech companies, employee relationships often tend to be transactional and attrition numbers are typically very high especially during good times. When I joined Navatar a couple of months ago, to lead engineering for the Cloud Computing Excellence Center in NOIDA (India), I didn’t expect anything different. What surprised me, though, was the list of global system integrators that were aggressively approaching Navatar employees these integrators include Accenture, IBM, Wipro and HCL. Other global stalwarts such as Thomson Reuters, Barclays, Dell, Dupont, Pitney Bowes and Bank of America have also been recruiting Navatar talent in cloud technologies.

If we put the attrition issue (that I have to deal with) aside, the big positive in all this is that Navatar has become a trusted name not just for financial firms looking for SaaS solutions, but also companies seeking the most experienced and talented cloud resources.

As a recent addition to the Navatar team, here’s how I see it: When it comes to Force.com, we are considered one of the pioneers, after hundreds of deployments. We created one of the most complex commercial cloud products HandsOn Connect. Our thought leadership is reflected in our books (Force.com as Your Key to the Cloud Kingdom), whitepapers (Do’s and Don’ts of the transition to Cloud Computing), articles (Ten Common Mistakes Architects Make), webinars (Architecting Commercial Apps) and opinions (Why Multitenancy Matters in the Cloud). In addition to Force.com, we’re really into the cutting edge of cloud technologies such as Azure, Google Apps, as well as mobile platforms such as Android, when it comes to our engagements.

However, I believe what really sets us apart is that Navatar is truly a cloud product company. We are one of the top resellers of salesforce.com. In financial services, our Mutual Fund Cloud, M&A Cloud and Private Equity Cloud, dominate the market. Financial firms in more than 20 countries use the Navatar cloud service including firms such as Jefferies & Co, Carlyle Group and Guggenheim Partners. We pioneered the concept of cloud products where customers don’t pay anything for implementation or support services. And Navatar has done all of this without any outside capital and still stays cash-flow positive. We went through the recession without any downsizing or salary cuts.

The projects we execute and the products we develop are cutting-edge, and a hard act to follow. It is therefore not surprising that several of our alumni, that helped us start the NOIDA Cloud Computing Center, have expressed interest in returning. In addition, the good news is that talented engineers are beginning to reach out to us directly, as word about our success spreads.

As for me, retaining and expanding our extremely talented team is critical, as I begin the task of scaling a unique and proven cloud computing model. I must clearly outline what it means to work for a company with true cloud DNA. I have to help each of our current and prospective team members answer the question: Will I be better off getting a large brand name on my resume or becoming one of the leaders in the cloud computing revolution?

- Aurobindo Sarkar

Comments { 10 }

Navatar’s Mutual Fund CRM in Salesforce.com’s Cloud Highlighted by Money Management Executive Publication

Money Management Executive magazine highlights Navatar Mutual Fund Cloud in its latest Operations & Technology Special Edition. Navatar Mutual Fund Cloud now makes it possible for a wholesaler to get CRM, Sales Reporting, Transfer Agent Data and much more for a low monthly fee through salesforce.com’s cloud. A great example of multitenancy at its best.

Editorial Director Tom Steinert-Threlkeld says it is now possible to measure funds sales performance across various channels.
“Take Navatar. This is a buzzword-friendly service that works “in the cloud,” giving you access to tools for managing relationships with brokers, banks and financial advisers “on demand.” Alternately, you can consider it “software as a service,” running on top of a suite of services offered by Salesforce.com, which pioneered the concept of letting companies subscribe to online versions of computer programs which they didn’t have to install or maintain.

Navatar’s mutual funds add-on to Salesforce.com lets sales managers see aggregate sales data from different regions of the country or by broker-dealer firm or other overall measures. But it also breaks down sales to the transaction, so the performance of any individual rep can be tracked and evaluated.”

Navatar Mutual Fund Cloud is used by prominent firms such as Jefferies & Co., Guggenheim Partners, Alps Funds. It includes transfer agent data from DST, Sungard, Envision and others. It also includes intermediary feeds from Schwab, Fidelity, DST and others.

To learn more about Navatar Mutual Fund Cloud, visit:

http://sites.force.com/appexchange/listingDetail?listingId=a0N300000016cPkEAI

To read the full article, you can sign up for a free trial of this publication aimed at leaders in asset management http://www.mmexecutive.com/.

Comments { 2 }

O Multitenancy: Will Thy Survive Oracle?

It surely takes someone as influential (and smart) as Larry Ellison, to be able to dismiss multitenancy as a “horrible idea” (See article, Oracle’s CEO Holds Court on Salesforce, Fusion and More). Every customer being in the same database is a “horrible security model,” Mr. Ellison says. With the likes of Oracle strongly attacking it, will multitenancy die a premature death?

It is possible. After all, we’re all familiar with this story in the tech world – an upstart with a new technology starts stealing revenues from an established player, established player buys upstart, established player kills new technology and goes back to maintaining its dominance (Lauren Carlson of CRM Software Advice discusses some acquisition scenarios in her survey).

But before we start writing its epitaph, let’s consider this. Although salesforce.com introduced us to it, multitenancy isn’t a “product,” owned by one vendor – which makes it a little harder to be bought and killed. It isn’t just a cool architectural concept – customers reap real cost benefits because of multitenancy. Jefferies, for instance, would have to maintain 3 separate boxes to handle CRM, broker data and compliance for their mutual funds, versus the multitenant Navatar Mutual Fund Cloud, which helps them function without any boxes for a low monthly fee (for more on multitenancy’s benefits, see my Informationweek post Why Multitenancy Matters in the Cloud).

Multitenancy, however, has no shortage of enemies. Most legacy software vendors are beginning to lose money to smaller multitenant competitors. To protect their turf, these vendors jump into the cloud themselves but discover they don’t like the financial model (Oracle’s example discussed in my old post Oracle Cloud Computing and the CFO’s Dilemma). Their answer, then, is to have a cloud play without multitenancy?(yes, it’s possible if you can redefine what the cloud really stands for).

Even large systems integrators are no friends of multitenancy. As David Linthicum points out in his Infoworld post What cloud computing can and can’t do, consulting firms worry about losing the big bucks they otherwise make from enterprise architecture complexities. They don’t like to hear about any client efficiencies that may reduce their billable hours.

The question then is – with so many influential enemies, will multitenancy’s fate eventually turn out to be similar to Julius Caesar’s?

I don’t know. To survive, it will need many more customer ROI stories, more successful vendors as poster kids and a longer tail of cloud providers. Above all, it will need some influential champions with strong enough shoulders to carry the multitenancy flag.

As always, would love to hear your thoughts (you can read more about multitenancy in my new book Thinking of …Force.com as your key to the Cloud Kingdom, just reviewed by Sand Hill Group).

Alok Misra

Comments { 15 }

Are Free Salesforce Implementations for Real?

Is there such a thing as a free lunch??

After Navatar made the announcement for free services for Salesforce, here are a just a few of several questions I received:

How will you make money?”

Free – Ha Ha...”

Very interesting … still digesting what it means..”

The questions were genuine and?their underlying theme was clear – everyone seemed very?surprised since they didn’t think it was possible to provide any services free of cost. They were trying to figure out what the catch was.

There really is no catch. This is the way it is supposed to be in the cloud computing model. Cloud products are not physically installed for each customer the way on premise products are. True cloud products are multitenant and share databases, infrastructure and labor. Which means that the costs of implementing, maintaining, supporting and innovating can be shared too. That’s why, when you buy a cloud product you are supposed to get most services related to product implementation and support free of cost. It’s as simple as that.

All said and done, this is still a concept that will take some time to stomach – particularly, for folks that are like myself and have spent almost a couple of decades in the technology world, have long made a living implementing and maintaining software and have seen several fads come and go (I too spent years helping Deloitte and PwC make money on systems integration work). So their skepticism is understandable.

But there’s another category of doubters – those that have bought into the idea that implementing Salesforce for your business is simple enough to be accomplished with a few button clicks while playing poker. It’s often hard for them to see the value of what we offer (at least initially) since they are driven by the notion that it’s an easy DIY job. However, they typically realize after 6-12 months that the task of getting Salesforce to support their business, though not as daunting as plugging an oil well leak, can be extremely cumbersome and distracting.

So the answer is: No, we are not offering free lunches. Cost is one of the important advantages that Cloud Computing delivers – services costs are a big part of the TCO of software that the cloud promises to reduce. Real Cloud Product Companies will offer low cost subscriptions to useful, out-of-the-box (or, shall we say, out-of-the-cloud) products without charging customers for services – which is what we at Navatar are doing. The idea is that every Hedge Fund (or every Broker/Dealer or every Mutual Fund) doesn’t have to spend time and money doing the same thing just to implement and support software. Once customers see that value, they will be the real winners.

Alok Misra

Comments { 4 }

Private Equity CRM Capital Calls Functionality Will Improve Productivity

You asked we delivered. You don’t have to work long hours to manually calculate, create, print and deliver capital call notices any more. Navatar Private Equity now also automates capital call and distribution processes, eliminating all the time consuming manual work on your part.

Your Investor Relations team will not have to spend time preparing spreadsheets and performing complicated calculations. The pre-defined logic in the system computes the capital drawdown/distribution and fee allocations to various limited partners. The system also allows flexibility for exceptions – for example, the allocation for a limited partner can be overridden if their side letter states they don’t invest in certain countries or industries. The system also performs automatic rolls ups for each LP and fund, on various metrics, to help users manage the process efficiently.

The IR team will not have to manually create and mail capital call letters either. The Capital Calls functionality will, in a few easy steps, allow them to:

  • Set up custom capital call/distribution email templates using the fund’s logo and branding
  • Dynamically populate the capital call notice with relevant contacts, limited partner’s commitment and capital call/distribution information
  • Identify the contacts across limited partners to whom the capital call/distribution notices need to be sent based on the limited partner’s preferences
  • With a single click, email notices to all the relevant contacts across limited partners

We will continue to add more functionality to increase the productivity of your investor relations, fundraising and deal flow teams. If you weren’t aware, Navatar Private Equity CRM is built on salesforce.com’s cloud computing platform. Follow the link for a demo:

Demo of Navatar Private Equity

Shweta Kumar

Comments { 13 }

Cloud Computing Killed Siebel – Will You be Next?

Everyone knows how salesforce.com crushed Siebel a few years ago, to become the de facto standard in CRM. What started with a win in the On Demand CRM battlefield, has now revolutionized the delivery of software through cloud computing. Legacy software vendors under attack from newer cloud providers, are scrambling to protect their turf, like Siebel tried to do in the early part of the decade. However, most of these legacy vendors are fighting a losing battle.

Take the case of Netage, an established vendor that has been providing CRM to Financial Services. Netage will continue to lose deals to Navatar (read River Cities Capital Funds has selected Navatar’s Private Equity CRM over Netage Dynamo). The reason is simple: for a legacy vendor like Netage, winning the cost/value battle against a cloud provider like Navatar is next to impossible unless they can rethink their entire business model.

Legacy vendors typically give the cloud a try, as a defensive move – they launch a hosted offering, available through the internet to avoid losing business. They often try to save money by using all or some of their existing on-premise infrastructure and practice for their hosted offering (masked as a cloud offering), by avoiding the investment in a new technology infrastructure that supports multitenancy. However, the high cost of replicating and maintaining instances for each single tenant (or customer) eventually catches up with them, and their margins get lower as each new customer sucks up more resources (read Why Multitenancy Matters in the Cloud to learn more).

It isn’t just smaller companies – larger companies such as Oracle are faced with the same issue when it comes to competing with cloud providers (read Oracle Cloud Computing and the CFO?s Dilemma). But because of their size and scale, larger companies like Oracle have the ability to change the market demands/dynamics and fight the battle on a different turf.

The clock, in the meantime, is ticking for most other legacy software providers. If all they do is launch a cloud offering in addition to their on premise offering while maintaining the same business model, they will die soon. Their survival will depend on whether they can make a complete transition to the cloud world.

Comments { 46 }