Halo30k

3 Comments

    • ON: Sun Jan 20th 16:25 PM
      Commented on:
      NetSuite: Not as Well Positioned as Larger Players
      The issue is the size of the installed base, there has never been this large of a base converting to a complete new architecture vs. adding to the architecture (mainframe ports to client server databases then adding transaction monitors).

      I said that SAP didn't invent BPEL which is what you mentioned. I would focus on the fact that it is not in SAP or Oracle's short term incentives to port to the platforms as this will cost them $10's of billions over the next decade.

      SAP's $300m in revenue in 1992 is only 2% of today's revenue which is almost 98% client server/internet bolt on. Of there $300m of revenue they were not a ERP that sold in the US market as less then 100 of there customers were US based for R/2. They are really a R/3 client server internet bolt on wave 2 ERP company. They have only built Basis (TP monitor) and Netweaver (Web App Server). These are low end solutions that couldn't be sold as stand alone products to non-SAP customers. How is SAP going to build the other 10 peices of middleware ware that make real SOA/Web Services/RIA/Flex/AjAX... Source/BPEL/Business Intel, Middleware technologies.

      How would you port 60,000 customers with 10 major releases. SAP has a database with 75k tables, 100k + views, millions of line of ABAP code, 10,000 Basis RPC's, This is all hard coded architcture that looks like mainframe based development vs. modern development MVC (model view controller) moduler development. Oracle is just a bad as they have 30 apps or more that have nothing in common.

      Microsoft will spend 5 more years rewriting their apps in .Net which by 2013 will be ready for a new development platform and be behind from the start. Sage & Infor will merge to form the mid market SME Oracle. I see SaaS as another entry in this pile. With that its the only one Enterprise application investors have to invest in with high returns as the legacy market gets reinstalled. Netsuite is one of 10-20 that will make early market cap returns as $100-200billion of equity over the next 36 months. I did buy in the mid 30's and have no problem with that as I see it a $100 stock in the next 36 months. Thats enough return for me.
      View article »
    • ON: Tue Jan 15th 10:57 AM
      Commented on:
      NetSuite: Not as Well Positioned as Larger Players
      Dennis,

      My .03

      First a quick issue with your comment on BPEL

      check out

      en.wikipedia.org/wiki/...

      SAP was not involved at all they had a SAP custom workflow (another issue another day)

      SAP was a mainframe ERP company focused on Germany and German centric Euro mid sized firms with less then 2000 customers in late 80's . Its hard to compare them back in 1980-92 with market leadership of MSA (Management Science America), M & D (McCormack & Dodge), Walker, D & B, etc..I agree they made the "jump" to Client server ERP that was their push to sell in the US on on the back of the "BPR" Management consulting hype of the early 1990's remember Tom Peters/ Hammer etc.. I count them as a full ERP for Fortune 1000 / invented Global 5000. I look at SAP as the salesforce.com of its era. JDE has taken a 20 year path to being client server and until PeopleSoft and then Oracle has bought them it might of taken another 10 years to get the client server done. The real issue is the way the World product is designed around the old DB2/400 kernel. It has taken the development team 10 years to fully port it to SQL Server and now Oracle in the last few years. The tech stack is poor buy late 90's standards much less late 2000's. They also have never broken out of the AS/400 mindset of sales. Firms that use 400's/ iSeries now there are over 750k 400's / iSeries servers out in the world. JDE has about 4000 -customers (10k+ servers) of the 750k installed base. To say they made the jump is a not quite correct. Most (75+%) of the Enterprise (client server version of JDE) are to old world customers. And PeopleSoft is the final one I see their attempt at being a real internet ERP is going to be the most interesting but in the end is Oracle going to allow its #2 (in terms of how Oracle Mgmt feels) ERP (Oracle EBS is their baby) beat its #1? I cannot see how these firms can take the leap (SAP has 60k customers with 500k+ modules and Oracle has 45k customers with 250k+ modules) to internet ERP on demand. I see four major reasons. The capital costs alone $10'sb + ( billions in infrastructure for data centers, the billions in redevelopment, billions in services & support, billions in marketing/sales/partne... VAR/SI -ecosystems) over 10 years + etc.. the second reason is the lack of management model/ talent/ governance, the third reason is the sales/licensing how do you convert and monetize the customer base the last reason is the simple one will customers wait ( which is my thesis for why the prior wave failures occur for leaders) customer don't want to wait 3-5-10 yrs for you to convert to something they can buy now and work for 3-5+ years to fix.

      I also see a economic cycle connection (these massive transformations are linked to post slowdown automation in large companies that cut/fire/trim staff and have to rescale as their operations grow out slowdowns) look at 1982-90 wave 1 ERP, 1993-2001 wave 2 ERP, I would say also that wave 3 has been going on from 2005 in the form of trying the major vendors but by 09 most are too costly and slow (to create value) .

      Why will Salesforce/Netsuite/ Workday/ SugarCRM/ the other 10 etc.. do well in the next 5-10 yrs because they are the only game in town, the mega vendors are so slow and expensive and force you to retool and (then buy more of their software which forces you upgarde to their managment stack and then add the BI which only works if the SOA is in too) etc.. If all I want is a quick order entry module for a new distro center in a region or a quick HR module or CRM etc.. then SaaS is going to make sense. Even if it cost $5k a user if all I have to buy.
      View article »
    • ON: Fri Dec 21st 19:22 PM
      Commented on:
      NetSuite: Not as Well Positioned as Larger Players
      My .02 I disagree with the analysis. My background for 20+ years is ERP. First with Mainframe ERP for 3 yrs, next JD Edwards ERP AS/400 for 2 years then with Oracle financials client server ERP for 3 years last with PeopleSoft client /server then web for 10+ years. I've worked in the last 5 years with SOA/Web 2.0 and ERP as a bolt on to Oracle ERP apps (Oracle EBS, PeopleSoft, JDE, Siebel etc..)

      The SaaS market when it comes to ERP will follow the same 10-20 year lifecycle as the ERP client/server market or the legacy mainframe market. This is the 3rd wave of ERP in the last 25 years. The SaaS market for ERP is really the Internet ERP market. The client /Server vendors (Oracle, SAP, MicroSoft/etc..) never deployed a real internet ERP app. Just like the Legacy ERP could never deploy a real Client/Server app. The real issue to understand is the architecture is key not the app space. The architecture redevelopment cost is so high that companies like Oracle/SAP will never be able to sell a SaaS/Internet ERP app in large volumes because their technology/revenue/sal... comp model is based on licensing software not subscription.

      How does Oracle replace 40k clients who pay them $5bn a year in apps revenue and $3Bn a year in tech revenue? The transition would distroy the company. SAP is in the same boat. You can't forget that they each have 10k sales/marketing employees that work off a comp model of licensing software how do you move that pile of people to SaaS comp model? Oracle is taking a good strategy for them, its picking up tech/apps footprint. They have bought $30bn in software in last 3 years I expect another $30bn in the next 3 years until they run out of deals or have so much overlap as not making economic sense to buy vendors then they will have a revnue model based on support not net new software. This will allow them to get to $30-40Bn in revenue by 2012 but their SaaS revenue will only be defensive. Same with SAP they have bigger issues with SaaS as their app is still in the early client/server architecture with heavy use of batch technology this will make the redesign costs staggering.

      Plus with 60k customers who use SAP ERP twice as deep in their organizations as Oracle ( they use it for more supply chain- manufacturing, heavy industrial etc.- Oracle has always been weak) this will take foreever to switch to SaaS, it would be cheaper in 5 yrs to buy a SaaS ERP App for supply chain then it would be to redeploy SAP.

      I see this space as maturing over the next 5 years just like the client /server ERP market did from 1993-97. Oracle /SAP/Infor/Sage/MicroS... will all make plays in the space but they will be defensive moves to hold onto footprint to the SaaS ERP Apps players.

      The other point was with $100-200 million Netsuite will add 100 developers/enginneers in the US and 300 or so in India that should allow for a buildout of the application from 10-15 modules to 30-50 modules over the next 2 years. That will justify moving from $20k a year to $50-100k a year for existing customers it will also allow the first major Global 5000 enterprises to signon and start $1m+ a year deals. This will allow Workaday, SalesForce, etc.. to get more capital and the race is on.

      I see Netsuite and the other 5-10 players all becoming very successful in the next 5 years as their has been little inovation in ERP since the internet client was introduced in 1999. SaaS ERP Apps is a true architecture play based on SOA/Web Services/RIA/Flex/AjAX... Source/BPEL/Business Intel, Middleware technologies which allow for rapid process improvement/alignment/...

      The Client Server ERP wave was a windows/Browser - Relational Database innovation user experience wave, and the Legacy Mainframe ERP wave was all about Batch processing and Online Transaction Processing. Understanding this is critical in evaluating the business prospects for this space. The buyers install and use ERP for business improvement/ROI they always invest in the new market leaders to gain some small advantage during the early phase of a wave then the rest of the followers standardize as the compet advantage is lost once everyone uses it and we drop into the maintain phase of the wave for 5-10 years and the next wave begins.
      View article »
Loading...
Symbols:
Authors:
Quick Links:
Contribute an Article Become a Seeking Alpha Contributor

Transcripts

More Transcripts»