This week, our Intacct Industry Insights conversation is with Thomas Wailgum, ASUGNews.com editorial director. ASUGNews.com is a news and analysis website for The Americas’ SAP Users’ Group (ASUG), an independent organization of 100,000 members that facilitates knowledge transfer among the community of SAP and SAP BusinessObjects customers through user education, professional networking and forums. Tom has more than 15 years of technology reporting, writing, and analysis experience including serving as senior editor for CIO.com and CIO magazine where he covered enterprise software.
Our conversation with Tom covered the choice between cloud and on-premises software, why companies like Microsoft and SAP have been slower to embrace the cloud, and whether or not smaller SaaS vendors are threatening the larger incumbents. Check out the highlights…
THOMAS WAILGUM: It’s funny, all you hear about today is why you should choose cloud, but nobody’s really talking about the fact that companies are still choosing on-premises options. In SAP’s last quarter they had more than $1.3B in new software licenses, which is astounding when you think about all the hype with the cloud! Their cloud revenue was $100M, which is somewhat paltry in comparison.
There is still a large contingent of companies investing in on-premises software, and I believe it’s a matter of control. CIOs, CEOs, and legal departments all want to know where their data is. With an on-premises system, they know where the servers and boxes are and they can go down and hug them whenever they want. Companies have huge application portfolios on-premises. Yet they are saying, let’s dip our toes into Salesforce or Workday or Intacct, so they are definitely evaluating and trying out the cloud. The spate of recent, public cloud outages also hasn't helped drive adoption – but let’s be honest, if I went into companies and looked at their uptime time, it's not perfect either. [Check out Intacct’s uptime statistics.]
INTACCT: Companies like SAP and Microsoft haven't transitioned to the cloud quickly or even profitably, as you have covered on your site. Why not?
TW: It does come down to demand from customers and the vendor revenue streams, especially their maintenance and support streams which are feeding the beast. It’s also not easy running a cloud business, people have learned. It takes patience, you have to invest in great sales teams and the right infrastructure, and you must have seriously deep pockets. Let's take Workday, the Belle of the Ball these days, which just did an IPO. They actually admitted that they had no idea when they would be profitable. Conversely, large vendors like SAP which have deep pockets, have an advantage. Still, it's a hard business to grow, because those big companies are so entrenched in their on-premises business. It's still much easier for a startup like Salesforce or Intacct to be successful in the cloud.
INTACCT: You have been covering business software and IT for many years, amid many changes in the industry and for CIOs and IT departments. What has remained constant?
TW: I went to an ASUG meeting in Arizona recently. There were all types of users at different levels, and it's fascinating because I think there is still a disconnect between business and IT on governance and prioritization. There is a new book out called the CIO Paradox. It's about the relationship between CIOs and the business, and it could have been written in 1992. It’s somewhat depressing that these issues still haven’t been resolved. And now, cloud vendors are often selling around IT, so you can make the case that the cloud is actually making all of this worse. IT gets irritated when they learn about these contracts after the fact and the business unit wants to integrate the cloud solution they signed up for with other enterprise apps. The other challenge is licensing, which is still extremely complex and customers hate it. With their newer innovations, SAP is trying to run an open platform, which hooks into cloud applications such as Salesforce, but there are licensing ramifications with that. So even with the cloud, customers are still getting some gotchas. [See how Intacct integrates with other best-in-class applications.]
INTACCT: With technology advances and the web, have small and medium businesses really closed the gap with their enterprise competitors?
TW: Mobility is going to do it. The infrastructure underneath has to be solid, but in a few years, a bigger portion of small and midsize companies will be able to run much of their business on a tablet. This will require having a bunch of different applications all integrated together, which is not easy yet, but it's going to happen. Companies are going to be thinking of "mobile first" when it comes to managing their business. Even SAP, which is known for its blue and gray screens, is taking a refreshed approach to apps with mobility in mind. SAP is also focusing on their rapid data processing application called HANA, and they are rolling it out for small companies in the cloud. For companies that are not tied down to legacy systems, these capabilities are going to be huge. Microsoft is still relevant today because of the enterprise, and if they can tie their core back-end systems to a tablet, it could really help a small or midsize business.
INTACCT: How scared are big companies like SAP and Oracle of their smaller, more nimble SaaS competitors?
TW: I think the freaking out happened a couple of years ago. When SAP rolled out Business ByDesign, it was not received very well. Once they came up with a new strategy and bought SuccessFactors, their situation has improved a bit. Largely though, the big companies are confident and not scared, and they are creating partnerships with companies like Amazon and other hosting partners to try to gain some traction in the SaaS market. The big vendors are beginning to open up their systems to connect with Web apps because they know that customers have heterogeneous environments and that's not going to change. Let’s not underestimate the fact that Oracle, SAP, and others have huge install bases and customers are already comfortable with them. It's an advantage to be the incumbent.
INTACCT: What is the coolest business software implementation that you have covered or read about lately?
TW: One cool project is happening inside Burberry, the luxury goods maker. They run SAP on the back-end and are “innovating,” according to the CEO, by deploying Salesforce on the side and doing mobile apps with SAP. The company's vision is to have salespeople on the floor with an iPad or some other tablet device, so they can identify a customer when they walk into the store. They know their history of buying activity and maybe what they're talking about on social media, and then they can synthesize all this data to offer personalized service to the customer. This could really work for the high-end consumer such as Burberry’s clientele.
INTACCT: But if someone did that to you when you walked in the door at Target, you'd probably run screaming for the door.
TW: Exactly. There's a fine line today between killer customer service and “Big Brother.”
INTACCT: Now, a couple final questions just for fun…
What's your secret ambition in life?
TW: To be independently wealthy, write books (that sell well) and travel the globe with my wife. (Score a hole-in-one, too.)
If you could snap your fingers and be any place in the world for an impromptu vacation, where would you be?
TW: St. John, in the US Virgin Islands.
Which celebrity figure, living or dead, would you like to take to lunch?
TW: I’ll give one of each – the living person would be Howard Stern, and the dead person would be Abraham Lincoln.
If you want to stay connected to Tom, you can follow him on Twitter (@twailgum) and read his posts on the ASUNews.com blog. You can also follow Intacct on all our social media channels, including Facebook, Twitter, and LinkedIn. You can also join the Intacct Cloud Accounting group on LinkedIn to network with other people interested in cloud financial applications.
Do you have interesting industry insights you’d like to share? Do you know someone else that we should interview? Send us your suggestions for consideration.
Previous Intacct Industry Insights Conversations:
- Charles Hylan
- Marc Rosenberg
- Wayne Schulz
- Mark Gillingham
- Isaac O'Bannon
- Dennis Howlett
- Randy Johnston
- Bob Anderson
- Doug Sleeter
- Vinnie Mirchandani
- Rick Telberg
- Erik Asgeirsson
- Marshal Kushniruk
- Alan Radding
- Rhianna Collier
- Frank Scavo
- Ben Kepes
- Kathy Yakal
- Darren Root
- Laurie McCabe
- Daniel Hood
- Jeff Kaplan
- Mike Vizard