Appirio - The CIO's Guide to On-Demand

Sequoia Capital Meeting: Our take on the economy and on-demand adoption

2008-10-09T16:29:00.000-07:00

Chris Barbin

There's a lot of talk today about a meeting held earlier this week at Sequoia Capital, Appirio's lead backer, with the CEOs of their portfolio companies. The headlines grab your attention: Sequoia has emergency meeting, Sequoia sounds the alarm, Sequoia says to cut expenses now. The meeting was held in confidence, but we thought we'd share our perspective on the condition of the economy, what it means for Appirio, and, most importantly, what it means for customers considering the adoption of on-demand.

Macro-economic conditions are critical for every business to consider. This is the time for the leader of any organization to take a somber look at their spending plans and chart a prudent path given the uncertainty in the economy. That's our approach at Appirio, and we recommend that all of our clients do the same.

What does this mean for the adoption of on-demand? While nothing is certain, we remain optimistic that very bad news for the traditional enterprise IT industry will be very good news for cloud computing, companies like Appirio, and customers who are adopting on-demand solutions.

Let's take a closer look at how the economic conditions are impacting one of the stalwarts of traditional enterprise software-- SAP. SAP announced this week that they experienced a "very sudden and unexpected drop in business activity" last month. The announcement led to a 12% decline in SAP's stock price. Here's how they explained the shortfall in revenue, and why we think things are different in on-demand:

SAP customers faced difficulty financing upfront license fees. On-demand customers, on the other hand, pay for their solution as they use it. They don’t need to finance a big up-front investment in a monolithic solution with an uncertain business benefit.
SAP customers balked at difficult-to-justify maintenance fees. On-demand customers, on the other hand, know what they are paying for — they see continual enhancements to their solutions without expensive upgrades or patches.
SAP only learned of this in the final days of the quarter. On-demand customers, on the other hand, don’t need to engage in the edge-of-the-cliff negotiations with their technology vendors at the end of the quarter. These vendors know that they will only keep their customers for as long as they are able to create value, and need to be working every day to keep their customers happy.

It's striking that the very things that make current economic conditions so difficult for traditional enterprise technology vendors will drive customers towards adopting on-demand. Does that mean that spending in on-demand technology is counter-cyclical? It’s too early to say. But we have compared cloud computing to the Toyota Prius — an automobile that gets more popular as economic conditions worsen and gas gets more expensive.

Let's take an example: One of our customers built a business case comparing Microsoft to Google Apps for communication and collaboration. When they added up what they were spending on hardware, software, and people for on-premise software, storage, and backup, the total came to almost $700 per year for each of their 10,000 users. Switching to Google Apps saved this company $12M a year. Clinging to Microsoft Exchange is an expensive luxury, one that's going to be increasingly hard for CIOs to justify.

The average company spends 4-6% of revenue on IT-- for a customer at $1B in revenue, that is $40M - 60M in annual IT expense. Organizations that 'cloud-source' their IT infrastructure to on-demand providers can reduce this to 2-3%... a 50% reduction. This model provides cash critical in a down economy, and also provides executives flexibility and innovation that on-premise vendors cannot.

Despite these benefits, today SaaS represents only $10 billion of the $100 billion spent on enterprise software and $1 trillion spent on enterprise technology. It's easy to imagine dramatic declines in these traditional markets while SaaS and PaaS continue their rapid pace of growth. We've always believed that it was just a matter of time before SaaS moved from 10% of the market to 70%...CIO concerns over TCO amidst economic uncertainty could certainly catalyze this shift.

So in the midst of all the headlines, here's our message to you, our partners and customers:

Appirio is committed to helping our customers weather this storm. You’ll hear us talking more about the cost savings possible by moving your IT infrastructure to the cloud, and the rapid ROI possible from our custom application development. Creating real business value for our customers using on-demand technology remains our first priority.

Appirio is committed (as are our investors) to continued investment in our mission to accelerate the adoption of on-demand in the enterprise. We believe that this is a great time to develop new products, launch new service offerings, and enter new markets-- stay tuned to hear more.

Cloud Computing - It Ain't Over Til It's Over

2008-10-01T12:25:00.000-07:00

Narinder Singh

Recently, a plethora of attempted clarifications (such as those seen in the Wall Street Journal and Information Week), confusion, and even an angry Larry Ellison rant in CNET News have weighted in on the latest hot topic, "what, exactly, is 'cloud computing?'" But the increasing volume level says more about the medium of the argument and the participants, than the it does about the topic's essence. Really, it's just insider talk among "thought leaders" and tech companies, which likely leaves Main St. CIOs scratching their heads.

Let's not focus on the semantic question of "what is cloud computing?" Instead, let's shift to "what your company should do." The wit and wisdom of Yogi Berra seems appropriate as a guide to help explain the causes of the perfect storm around cloud computing.

"The future ain't what it used to be"
Just a few years ago, many predicted the tech industry, and particularly business software, would go the way of the auto industry. A few gigantic players would survive, around which supplier ecosystems would develop. However, innovative providers discovered that if they ran all their customers' systems on a single multi-tenant instance, they could achieve huge advantages - hence the advent of on-demand, Software-as-a-Service (SaaS), and Platform-as-a-Service (PaaS). These providers were able to rapidly develop and innovate for their entire customer bases.

As this market matured, customers discovered that SaaS provided a better functional fit, it was faster to rollout, and it was generally more accepted by end users. Inevitably, if you spend more time on strategy, requirements, business process and adoption, while spending less time on hardware, operating system configuration, software installation and configuration, you end up with projects that better meet business needs.

The future of how businesses used technology was changed forever. Although this is now widely understood, we are still very early in terms of impact on IT and business. This set the stage for the current attention and debate surrounding "cloud computing."

"If you can’t imitate him, don’t copy him"
Cloud computing confusion is sometimes sown intentionally - because of vendor envy for missing the buzz. Large on-premise companies know they have missed the "news cycle" for something that has the powerful combination of hype and reality on its side. So they try to re-spin existing terms in order to re-assert their leadership, leading to interesting tricks like Larry Ellison, Oracle's CEO, cleverly deriding the term "cloud computing" as overused, while simultaneously wrapping the Oracle seal around it.

"Our similarities are different"
While on-premise laggards attempts at catch up fuel their interest in the cloud, successful SaaS companies have an equally compelling, but very different rationale for promoting "cloud computing." They know they have a winning value proposition, but, relatively speaking, a small part of the market dialogue. They fear a repeat of the past - where SAP, Oracle, IBM and Microsoft hijack leadership around an important market trend (see the browser, java, B2B/SOA, open source) that they've been living and breathing for years.

So in a classic judo turn, they also promote "cloud computing." But they turn it into a powerful weapon by using it as the theme that connects business software with mainstream consumer Internet disruptions like Google, Yahoo, Amazon and Facebook. Suddenly, they have a way to further differentiate themselves from their laggard on-premise competitors, with a future tied to the Internet.

Happily, this spin has the added benefit of being true (which is always a plus!). The consumer Internet has conclusively shown the power of collaboration. Now businesses want to be unshackled from the constraints of legacy software that was designed to be physically and emotionally closed.

"You can observe a lot by watching"

With both the laggards and innovators supporting buzz creation around "cloud computing" the race is on. Will clarity or confusion rule the day? Businesses are looking at cloud computing (which for today we'll assume to be a superset of all SaaS, PaaS, and on-demand solutions) as a way of doing things that had never been done beyond their four (virtual) walls. Unfortunately, too many vendors are simply trying to tie the movement back to their past strengths so that any change is incremental.

Our advice to all organizations and their CIOs is simple:

1. Use the cloud computing hype to discuss broader related changes in your organization. The business press is saying that "business must think differently about IT." This is a real chance to focus broader discussions around cloud computing into the very real, concrete benefits of SaaS/PaaS/etc.. Appirio launched Business Model Prototyping to jump on this opportunity. We think companies can use SaaS/PaaS and other learning from the consumer Internet to dramatically reshape their businesses.

2. Start with the concrete. The "cloud computing" discussion makes for good blogging, but it's not directly helping your business or feeding your kids. Real impact comes from translating the trend into action. Do this with projects that prove quick value or clear measurable milestones in a slightly longer journey, and highlight a sharp contrast with the old way of doing things.

3. Force vendors to be specific and timely. We'll be seeing lots of vendors starting to parade their products and services under the banner of cloud computing. We'll see more arguments over what cloud computing is, and how to understand it. Customers cut through the hype by forcing vendors to be specific in how they will help, where they will help, and on what timeline. Force discussions around initiatives that have a quick time to benefit and very clear milestones. Protect your company from being a victim of hype with low hopes for success. As Yogi Berra supposedly once said, "If you don’t know where you’re going, chances are you will end up somewhere else."

What's Different About Appirio's Google Apps Bootcamp?

2008-09-23T11:58:00.000-07:00

Its one week before Appirio's free Google Apps Bootcamp, a little experiment we're doing with our partners at Google to hone in on the most effective way to get companies up and running on Google Apps.

Why are we calling an event over breakfast at the W a "bootcamp"? Mostly to distinguish it from the vendor-sponsored events that we've all been to, and all think are a waste of time.
Here's what's going to be different:

Traditional marketing event	Appirio's Bootcamp Approach
1 day event: You come, have some bad coffee, listen to the presentations, go home-- end of event.	Ongoing experience: You're experience will start right after registration when we invite you to the Bootcamp wiki (powered by Google Sites, of course). And your experience will continue on the wiki afterwards as you continue to engage in the community and content.
Goal is a big sales: Wear your budget on your sleeve, because that's how you're going to get the attention of the vendors and get your questions answered	Goal is a pilot: It may sound corny, but we really do think that Google Apps sells itself once an organization starts using it. So our goal is for you to take that first step: pick a part of the portfolio and a part of your organization to get started
Meant to woo buyers: Wear your title on your sleeve, because if you can't sign a PO, you wont get much attention.	Meant to build advocates: Google Apps makes its way into the enterprise from multiple angles-- our goal is to turn people who are interested in this technology into advocates who are empowered to make Google Apps a reality in their organization, regardless of their title.
Presentation of features: Long presentations by product marketing teams eager to differentiate their new offering from what they showed you last year.	Experience of the offering: You'll be using Google Apps directly throughout the event, and hearing the good AND the bad of real world deployments directly from customers.
Eyes on blackberry: Show up, tune out, and eying your blackberry. No reason to stay engaged.	Hands on keyboard: We can't achieve the above if you're sitting back in your seat. So you'll be expected to bring your laptop, get on the wireless, and participate. Google Apps will be powering our entire event, so participation equals education.

Will it work? We're not sure-- but we invite you to come and join the experience. If you'll be in San Francisco on the morning of October 1, join us for breakfast at the W and participate in our "bootcamp" for Google Apps... a non-traditional approach to build advocates for a non-traditional offering.

Reserve your spot now for this free event

Date: October 1, 2008
Location: W Hotel (map)
Time: 8:30am - 11:00am
Cost: Free!

Sign up by Wednesday September 24 and receive free access to a follow-on webinar....

The "Grand Old Party" Gets the New Way of Computing

2008-09-06T04:43:00.000-07:00

Mike OBrien

While Appirio will remain decidedly bipartisan for the foreseeable future, we got caught up in the energy and excitement of the Republican National Convention (RNC) this week in Minneapolis-St. Paul.

We were invited to St. Paul to work with RNC's IT team, managing IT systems supporting the convention and serving 4,000 delegates. However, our story starts back in February, when the team at Google tapped us to implement Google Apps for 500 convention staffers.

This was a thrilling assignment for Appirio. Even the "grand old party" recognized the value of using on-demand IT solutions, which we didn't necessarily expect, since their presidential candidate, John McCain, was on the record describing himself as a computer novice. But they saw that software-as-a-service (SaaS) would lower costs and dramatically increase their efficiency. Believe us, there are still plenty of big-company executives who aren't as open to this truth.

Here's where things get interesting. After getting started on the Google Apps rollout, RNC asked Appirio if we could build their delegate registration system. Their concept was a SQLServer database, along with a web server for data entry, reporting, administration, and dashboards. It took us all of 2 seconds to say "no way." We just don't do on-premise software anymore for these kinds of data-driven applications - it makes no sense.

Instead we pitched the idea of building the registration system on Salesforce.com's Force.com platform. It didn't take long to sell RNC on the obvious benefits.

In a few days, Appirio built a fully functional prototype. RNC loved it. RNC CIO Max Everett told us it was light years better than anything they had used in the past, eliminating the need to re-key information and consolidate data from multiple excel spreadsheets and various sources. (They actually used to distribute an 8-page questionnaire in a Word document to delegates.)

Better yet, Force.com gave every RNC staff member immediate access to powerful reporting and analytical capabilities on registered delegate data - the issues they cared about, the committees they wanted to volunteer for, their requests and suggestions.

The RNC was different this year. Staffers used their GOP-branded GMail accounts, shared Google Calendars for event coordination, and mined their delegate registration database in Salesforce.com. Pretty cool, huh? As far as Appirio could tell, things went pretty smoothly!

Lawson CEO: "Traditional software is like cocaine — you're hooked"

2008-08-28T00:57:00.000-07:00

Ryan Nichols
In a mind-numbing interview with ZDnet, Harry Debes, CEO of ERP vendor Lawson Software, demonstrates why the traditional enterprise software market is overdue for disruption. Debes' remarks show how little care and understanding legacy on-premise vendors have for their customers, and how poorly suited they are to help businesses address today's challenges. Is this really how traditional software executives view their customers?

Ordinarily, we'd ignore the musings of an executive whose company has destroyed massive shareholder value over the last 7 years - Lawson shares have lost nearly half their value since its IPO. But Debes' lack of awareness of the trends surrounding his market and the reality of what customers experience rivals that of telegraph executives trying to understand the implications of phones. Actually, Debes' cluelessness more brings to mind the infamous image of those cigarette CEOs telling the U.S. Congress that their products don't harm customers.

So here they are - Exhibits A, B, C, D, E, and F for why we founded Appirio, straight from the mouth of Lawson CEO Harry Debes:

"It isn't about locking people in. People lock themselves in. Traditional software is like cocaine — you're hooked. It's too difficult and expensive to switch providers once you've invested in one. If it were easier to jump ship, a lot of people would've hit the eject button on SAP a long time ago." In a moment of candor, the best comparison to on-premise software the Lawson CEO can think of is cocaine. Enough said. We'd laugh, until we'd remember what a painful drain this is on the productivity of real customers. The notion of lock-in was a central theme of why Appirio's first blog entry back in 2006 argued that every company must have an on-demand strategy.

"Getting signed up as a SaaS customer is fast, but getting out is just as fast." Switching costs are lower for SaaS applications. This key feature has fueled the massive customer interest in SaaS. But the biggest application switching costs have more to do with business change than what you're paying the vendor. Companies adapt their business processes based on what their software can do. The idea that SaaS vendors will see their customers switch month-to-month, chasing lower prices, is ridiculous. Vendors keep customers by demonstrating value. This may be a foreign concept to Debes, but the cornerstone of stable relationships in any field, business or personal, is mutual benefit to both parties - not addiction.

The reality is that Salesforce.com has much higher than average customer retention: 94% of its customers say they'd refer the company to a colleague, 74% of its customers say they have already done so. These figures are twice what most on-premise software vendors are seeing. SaaS solutions tend to be good because they have to be, to keep customers. On premise software can afford to treat customers as addicts - at least for the short-term, until the customers kick the habit for good.

"The success of Salesforce.com, in my opinion, has to do with their product being good, not because it's SaaS."

Salesforce.com is good BECAUSE it's SaaS. You can't separate the two! Consider the plight of a beleaguered Lawson product manager, trying to figure out how to improve the product. Invite a few customers into a lab and watch them work? Spend a day at a customer's office asking questions? Maybe they can peruse error reports "phoned home" by software to headquarters. The product manager then struggles to translate this anecodotal feedback into requirements, and plan the next release - which likely isn't for a year or two, since massive upgrade costs mean customers can't handle more frequent updates.

This process is a key bottleneck to the rate of innovation for on-premise software. It's nearly impossible to know if certain changes will make the product better or worse. The result - bloatware, as product managers add features based on what's going to look good on a feature sheet, without really knowing what customers will actually use.

Now look at the happy life of a SaaS product manager. After launching a new feature, they get immediate, direct feedback on real-life usage patterns. They see what works and what doesn't. They can even launch two versions of a feature to see which works better. Their development teams can fix problems instantly, without having to issue patches or service packs. In reality, early users of Salesforce.com would have had a hard time calling it a "good" CRM package when it was first released. But today, it is great. The rapid rate of improvement is a direct result of the SaaS model.

"SaaS is just a financing option for the customer... This is something I've lived through three times: first it was called 'service bureaux', then 'application service providers', now 'SaaS'. But it's pretty much the same thing." Sorry, Mr. Debes, but you're wrong. SaaS is far more than a "financing option," and it's fundamentally different from the models that preceded it.

Economies of scale: The TCO benefits of SaaS go beyond the initial pricing model. There are real cost profile differences between a customer versus a vendor owning IT infrastructure. The benefits scale as SaaS grows. Google offers an online productivity suite for free, because the incremental cost to Google is near zero. Microsoft couldn't change this equation even if it gave Exchange and Sharepoint away for free, because a customer would still have to invest in the infrastructure required to run these on-premise applications.
Multi-tenancy: The ASP "hosting" model was based on single tenancy - a separate copy of the server for each customer. By contrast, putting all customers onto the same code base gives the vendor economies of scale and allows them to deliver rapid innovation because they build on a single platform. Traditional software vendors wrestle with the nightmare of managing, enhancing, and testing multiple versions of their software, then porting everything to various hardware and OS stacks. Multi-tenancy virtually eliminates the single biggest cost to the customer in all of enterprise software - the dreaded upgrade. Salesforce.com and Google have released dozens of major releases without ever forcing their customer to re-implement, re-test or re-set their business processes.

"When the sunk costs have been fully depreciated, customers effectively run the software for free." Yeah, right. This is a shocking lie - unless Debes and on-premise software companies want to stop collecting maintenance payments from customers. Tell on-premise customers who have had their maintenance fees raised without warning, or had a running product suddenly characterized as "end of life" because their vendor was hungry for an upgrade, that they're running software for "free." The even greater cost is the lack of business flexibility these rigid systems empart on their customers.

"People will realise the hype about SaaS companies has been overblown within the next two years....then, the rest of the SaaS industry will collapse. The hype is based on one company in the software industry having modest success... People are stupid."

So customers like Flextronics (200,000 SaaS users), Japan Post (45,000 SaaS users), and Wachovia (55,000 SaaS users) are stupid?

McKinsey reports that three-quarters of software buyers say they are "favorably disposed to adopting SaaS platforms" for software development and deployment, and that they will dedicate 19% of their total software budget to applications delivered as services this year. Are they stupid?

How about Silicon Valley venture capitalists? When's the last time you've seen them fund an on-premise software company? Are they all stupid?

Let's reflect for a moment on who is actually "stupid." Over the past five years, Salesforce.com shareholders have tripled their money, while Lawson shareholders have watched their shares under-perform the market. After reading Mr. Debes' interview, many may come to their senses and bring in a CEO who doesn't see himself as a cocaine dealer. After Debes remarks, the most interesting open question is who will file the first lawsuit, his shareholders or his customers...

3 Reasons We're Excited About Office 2.0

2008-08-15T10:02:00.000-07:00

Ryan Nichols
Why are we so excited about this year's Office 2.0 conference ?

First is the theme: Enterprise Adoption. Using online tools to "get things done" is a topic that all of us at Appirio have always been passionate about personally-- we run our day-to-day lives on Salesforce and Google Apps, and most of cringe every time we have to install any piece of on-premise software on our laptops. But while the personal value proposition of Office 2.0 solutions is clear, we're still at the early stages of seeing enterprise adoption of these tools. And that is a topic that interests us professionally: there is massive opportunity in accelerating the adoption of these tools in sizeable organizations-- that's the premise on which Appirio was founded.

Second are the sponsors: In addition to the usual suspects (e.g., salesforce.com, Google), you'll see some new faces at this year's conference. Consider Salesforce and Intacct-- two companies not traditionally associated with personal productivity solutions. The fact that they are interested in Office 2.0 is a clue to why this year's theme is enterprise adoption. We've blogged before about the power of bring together solutions for businesses with solutions for business people, and talked about why this is so difficult using on-premise software. Office 2.0 solutions are increasingly being used to achieve the holy grail of enterprise computing-- getting the right information to the right people at the right time to drive the right actions. When the tools that people love to use to get their work done can display business information relevant to the task at hand, the business value proposition of Office 2.0 will be clear. Appirio is excited to help make this happen-- this is why we are proud to be a Silver Sponsor of this year's event.

The final reason we're so excited about this year's Office 2.0 event is the tone with which Ismael throws the entire production together. No paper. No desktop software. Non-traditional pricing. Centered on demos instead of slides. Rapid cycle between idea and execution. Ismael practices what we are all preaching, and the impact is clear-- a fresh, innovative conference.

So meet us there: the people will be fantastic, the content will be compelling, and Appirio will have some exciting news to share. The conference is September 3-5, at the St. Regis Hotel in San Francisco. Sign up here as a guest of Appirio and get $300 off the registration cost.

Cloud Computing: Hummer or Prius?

2008-07-29T09:11:00.000-07:00

Ryan Nichols

Last week we noticed a similarity in news headlines from two very different industries - automobiles and software.

In the auto industry, U.S. gas prices remain near all-time highs, and car buyers are nervous about economic conditions. The result is a dramatic shift among buyers to emerging technologies. The market for large SUVs is hurting, while the market for smaller, lighter cars and especially electric hybrids is booming. Domestic automakers are scrambling to retool their existing SUV factories to smaller vehicles, and Toyota is poised to overtake GM as the leading global car maker.

In the technology industry, we face a similar situation. CIOs are certainly nervous about economic times. And the costs of operating traditional, on-premise enterprise software is rising. Buyers are reeling from the recent Oracle and SAP price increases (does this move remind anyone else of OPEC?).

So why is Goldman Sachs telling us that CIOs plan almost no investment in cloud computing in 2009? Isn’t this the equivalent of reacting to a gas price increase by postponing your purchase of a Prius, and driving your Hummer for awhile longer?

Goldman based its findings on a set of survey results which the blogosphere has dissected over the past few days. The common theme is that CIOs don’t get it. Billy Marshall of rPath argues on Sandhill.com that CIOs are often the last to know about investments in new technologies. James Staten at Forrester has a similar take, saying CIOs aren’t the target for cloud computing anyway. Todd Ogasawara at O'Reilly claims CIOs simply don’t understand the value proposition of cloud computing.

While the shortsightedness of some CIOs is a contributing factor, we think that the thought leaders in cloud computing shoulder some of the blame. We all get so excited about the potential of cloud computing that it sometimes sounds futuristic, as if it were like some spaceship that will provide commuter service to the moon, instead of like a reliable Prius, perfect for your daily commute. The name “cloud computing” itself, with its fanciful tones, contributes to this "unreal" perception.

The reality is simple. "Cloud computing" is just a big name for business solutions and IT services that are delivered over the Internet, providing more flexibility and scalability at a dramatically lower cost. This is a proven technology with a clear ROI, especially when deployed with a pragmatic eye towards business impact. In the last 15 years consumer technologies have experienced unparalleled advancements all at a diminishing costs. In the same period, enterprise software (e.g. SAP, Oracle, IBM, Microsoft) have failed to deliver innovation and relied on their own lack of flexibility - i.e. high switching costs - to actually increase the cost for ever diminishing returns.

Appirio's customers include CIOs who understand that uncertain economic conditions, and on-premise software price increases, make 2009 a year to increase investment in cloud computing. We hope and predict that many more will follow suit.

Appirio backed by Sequoia Capital: What changes, what doesn’t.

2008-07-18T10:16:00.000-07:00

Chris Barbin

In our first blog post as a Sequoia-backed company (news leaked today, press release coming Monday), we thought we’d answer a question we’ve been asking ourselves: What changes about Appirio? What doesn’t?

We have more to say about what doesn’t change than about what does. Sequoia’s backing is an endorsement of some unconventional core beliefs that we’ve been talking about (and blogging about) for months-- convictions about our market's potential, our business model, and our value proposition that absolutely won't change as a result of this announcement. What will change, however, is what you can expect from Appirio: more partners, more products, more talent, and of course more customer success.

What doesn’t change: Day-to-day life here at Appirio won’t change much. We continue to be focused on making our customers successful, developing innovative product and service offerings, forming deeper relationships with our partners, and finding and empowering great people. But we’re doing these things with new external validation about some of the core beliefs that make Appirio unique:

Web platforms will enable the creation of important companies. Sequoia thinks big-- they measure success by the % of NASDAQ’s total market cap represented by Sequoia backed companies. We’ve blogged before about why we think web platforms have the potential to disrupt $1 trillion of IT spending—it’s great to have Sequoia’s endorsement of this vision.
Products and services are complementary when powered by web platforms. Conventional wisdom holds that technology companies need to choose whether they are going to focus on products or services, and that VCs won’t invest in businesses that think professional services are important. We believe that this was true with on-premise software, but that the availability of web platforms makes a truly hybrid business model not only possible, but advantageous in successfully turning innovation into customer success, and customer success into further innovation.
Focus on customer success matters. Appirio doesn’t have the portfolio of complex patents or the single product “big idea” that venture capitalists typically look for. What we do have is an unique approach and an outstanding team dedicated to making customers successful and driving product innovation in the rapidly growing market for on-demand solutions. This is what Sequoia found unique, and the core of what they are investing in.

What will change: So while it is mostly business as usual here at Appirio, you will notice a couple of changes in how we talk about and grow our business—Sequoia’s backing has empowered us to "think even bigger" about Appirio. While we’ll have a lot more to say about each of these topics over the next couple of months, we wanted to provide some hints of what new to expect from Appirio:

More Partners: To date Appirio has been very focused on our partnership with Google and Salesforce, and we continue to believe that these two companies offer the most compelling web platforms on the market. But there’s much more to cloud computing than web platforms, and we’re excited to be exploring application and technology partnerships with some of the most innovative and successful companies in these parts of our industry. Stay tuned for more announcements in this area.
More Products: Appirio’s product portfolio has been tremendously successful to date at introducing companies of all sizes to us and the potential to “connect the cloud.” We want to lower the barriers to trying these solutions, broaden the available market for their deployment, and use them to introduce even more companies to Appirio. At the same time, we’re enhancing our offerings to solve pain points we see at our customers every day, building the type of enterprise-class solutions around which we hope to build a big business.
More Talent: Appirio has been successful thanks to a team willing to do things well outside their job description to get the job done. Now we’re looking to bring in some outstanding people to focus on what’s going to take our business to the next level: engineers looking to do amazing things with Google and Salesforce, consultants willing to do what it takes to make a customer successful, customer advocates looking to build community around our solutions, and marketing gurus with innovative ideas for how to get the word out about Appirio virally.

What does this mean for you? Everyone can get involved and help accelerate the adoption of on-demand: you can schedule a talk with a client manager, take a trial of one of our products, look into joining our team, or even just contribute an idea. It may be business as usual at Appirio, that’s anything but usual in the traditional world of enterprise software. We know on-demand will unleash a wave of productivity that will drive our industry for years to come and look forward to playing a major part in that transformation.

Microsoft to Partners: We Still Don't Get SaaS

2008-07-09T19:40:00.000-07:00

Chris Barbin

The on-premise titans trying to transition to on-demand face considerable challenges, well-documented in this blog and elsewhere. One of the most significant mistakes companies make trying to transition is pursuing a "hybrid" strategy. We've watched SAP and Oracle stumble into all sorts of problems trying to seek the middle ground, and now it seems Microsoft wants to join the party. Recently we were invited to listen to Microsoft's new CRM pitch , designed to recruit existing Salesforce.com partners. The pitch centers on a benign-sounding notion, the "power of choice" (see screenshot at left). Microsoft's lack of a choice (on-premise vs. SaaS) is the core issue. Choice when used in the context of technology architecture typically points to a vendor with a conflicted or transitional strategy. They're not quite ready to make the full commitment, so they spread their attention, development, marketing, and operations resources across fundamentally different paradigms.

What is deemed a choice actually represents a company trying to provide two conflicted models. Would you expect the company who sold you a backyard well to be able to offer a water utility? Would you expect the company who sold you a diesel generator to be able to offer you the benefits of a utility company? Nick Carr did a good job exploding the general myth of "choice" as an alternative to "progress" in The Big Switch, where he extends the electricity analogy to the current age of IT technologies.

We recently blogged, and were quoted in eWeek, saying that companies like Microsoft build "physically and emotionally closed solutions." This makes them unable to meet the challenges of tomorrow's enterprises.

A sign of this and that a company doesn't get SaaS is when it positions on-demand as a transition path to on-premise. This usually means:

They are trying to not completely freak out their sales and management teams with the notion that their SaaS offering will cannibalize their traditional software.
Their SaaS feature set is way behind their current on-premise product.
They don't want a customer to think they made the wrong choice in selecting their on-premise product last year.
They still don't get what SaaS means for their products, sales, operations and culture.

Microsoft was so brazen as to promote a financial incentive for partners who help customers move from on-demand to on-premise. Microsoft evidently considers this customer ripoff to be an "Opportunity for Success" for its partners (see second screenshot).

Again, the analogy to other utilities is useful: if a company tried to sell you the benefits of their electric or water grid as a "transition" to a bigger and better backyard well and generator, you'd have reason to question their commitment and ability to deliver the promised utility.

What could be more illustrative of this than Microsoft's attempts to put thin web front ends on on-premise solutions? Look at the screenshot below. This solution is really nothing more than diesel generator hooked up to a electric grid and pretending to be a utility (although this solution is apparently good enough for some other companies 'committed' to on-demand). At best this type of solutions is a stop gap measure; more likely, it demonstrates a lack of understanding for what is required to deliver SaaS to tomorrow's enterprise.

Who is “fit” to provide enterprise apps?

2008-07-03T22:35:00.000-07:00

Narinder Singh

The SaaS blogosphere has been abuzz these last couple of days discussing Sergey Solyanik’s assessment that Google’s culture is “not fit” for enterprise apps. We’ll say up front that Appirio runs our internal communication and collaboration using Google Apps, and have helped customers big and small do the same. We have been highly impressed with the quality, reliability, and rate of innovation in these tools, admire and respect the culture that created them, and have no hesitation calling them “enterprise ready.”

But we think that with all this talk about Google’s corporate culture, people are missing the real point—the culture of today’s traditional on-premise technology vendors is no longer “enterprise ready.”

Let me explain-- we believe that there is a cultural mismatch between the needs of today’s businesses and the cultures of traditional on-premise technology providers:

Today’s business needs agility, the culture of enterprise technology is anything but. As the global pace of change accelerates, business leaders need their IT staff and SI/ISV partners to be saying a lot more “yes” and a lot less “no.” It is no longer acceptable for an IT partner to make vague promises about a release 3 years out. When a CIO asked Hasso Plattner at the Churchill Club’s SaaS debate when he should move to SAP’s SaaS solutions, he was told to check back in “5 years, at least.” Is that what it means to have an “enterprise ready” culture?

Today’s business needs openness, the culture of enterprise technology is anything but. Traditional enterprise vendors have in their very DNA the idea that openness is dangerous to their business models. Businesses in all industries have accepted the notion of core vs. context—you focus on what you are good at and rely on seamless connections with a network of partners to provide the rest of your solution. Ironically, traditional enterprise software is one of the last industries to embrace this change. One of Hasso Plattner’s key lessons from SAP’s ill-fated experiment with SaaS is that “what is inside the system has to have a coverage level which is close to 100 percent,” he says. Openness will be there in name only—the intention is that everything you need is inside the system. Such a system has never existed, and never will. Is this what it means to have an “enterprise ready” culture?

So what does it mean to have an “enterprise-ready” culture? Of course, every traditional enterprise vendor wants to be agile and open, and many have made admirable strides in that direction, including SAP through its Developer Community and eSOA initiatives. And there is much more required to deliver enterprise solutions than agility and openness. There are the table stakes of reliability, security, and having a solution that meets a real business need. But today’s business requires IT partners with a culture that can do both-- be deeply rooted in agility and openness while delivering reliability, security, and business value. We think that Google and salesforce.com, the leaders in on-demand, have achieved this goal: Salesforce offers both trust.salesforce.com AND ideas.salesforce.com. Google offers highly innovative applications that scale like no traditional enterprise application will ever be able to.

But whether or not you agree with us that Google’s corporate culture is “enterprise ready," the real point is that its traditional on-premise competitors are most certainly not.

Google and salesforce.com - Like Peanut Butter and Jelly

2008-06-23T04:22:00.000-07:00

Jason Ouellette

Today, salesforce.com and Google announced a new toolkit to link Force.com applications to Google Apps. Now, Appirio already has five commercial applications that connect Google Apps and Salesforce.com. That's more than any other vendor, and three of our apps - Calendar Sync, CRM Dashboards, and Doc Search - rank in the top ten of all AppExchange downloads.

In the "old world" of on-premise software, this new toolkit might be viewed as a threat to Appirio's product portfolio. If any developer can now easily link up Salesforce.com and Google Apps, who needs Appirio's products?

In truth, though, we think it's great. Appirio was involved in early usage and validation of the new toolkit. We embedded it into a cool new Visualforce demo that will be shown in the keynote address of today's Tour De Force event in Santa Clara, and augmented our current product offerings with it. Our viewpoint is that basic connectivity does not, by itself, hold intrinsic value, but it's an essential ingredient in creating value.

My former employer, webMethods, made hundreds of millions of dollars essentially by connecting SAP and other ERP systems to one another, sitting on top of the basic connectivity provided by the vendors. By providing this toolkit, salesforce.com and Google will make it easier for innovators to build new and powerful business scenarios that weren't possible before.

With just a few lines of code - six, to be precise - we were able to bring Google calendar data onto a custom Visualforce page (view demo).

We're seeing lots of steps towards integrating the cloud. Salesforce orgs can now connect to one another, via S2S, announced earlier this year. Appirio connected salesforce.com with Amazon S3 via our Appirio Cloud Storage product. In the on-premise world, ubiquitous connectivity really wasn't possible. But in the SaaS world, on the Internet, information can be connected in a scalable way, allowing even small ISVs to create commercial-grade innovative solutions. We hope other vendors' SaaS platforms, either directly or through partners like Appirio, will bake in basic connectivity to one another. This lets us focus on solving problems that have vexed developers in the enterprise for years.

The rapidly increasing web of links among major SaaS vendors is starting to create a business-specific version of the "World Wide Computer" Nick Carr talks about in The Big Switch. If all of your business applications, living in the cloud, could freely collaborate, their collective intelligence would begin to outstrip what any single system could deliver.

Adobe Embraces the Cloud - Hazy Days Ahead for Microsoft?

2008-06-03T20:16:00.000-07:00

Narinder Singh

Yesterday Adobe announced Acrobat.com - a new set of collaborative apps available online that allow users to create and share documents and PDFs, host web meetings and much more. The announcement received significant attention from the press and bloggers, and highlights the degree to which Microsoft's office monopoly is being attacked. A number of excellent articles discuss what's available in Acrobat.com, but we'd like to focus on a couple related questions that CIOs may have in this area.

Microsoft may be lagging on collaboration features, but won't they eventually get there? Shouldn't I just wait?

We have, in this blog, often highlighted the fundamental challenges facing on-premise vendors attempting to create Internet-based SaaS solutions. They face two basic constraints. First is the pricing model. It's hard to put out an offering that competes with existing products and costs only a fraction of what you're currently charging. Google Apps are free (for enterprise domain support, users pay $50/seat/year). Acrobat.com is also free in limited use. Microsoft can't simply lower its prices this dramatically without throwing its investors into a tizzy. Even if Microsoft could provide its on-premise Windows + Office licenses at this price point, the overall solution - including hardware, other applications and labor - would still cost companies many times what an Internet-based solution does.

This seriously limits Microsoft's options, and leads to the second major constraint: On-premise solutions are physically and emotionally closed systems. This is a subject I discussed during a media roundtable last week at the Google I/O developer conference.

Microsoft products have been architected for over 20 years around the notion of a single user working on a document. This makes them incompatible with the shared multi-tenant approach of salesforce.com, Google, and others. When the Internet boom arrived, Microsoft was slow to get it, they just added a few basic capabilities to allow documents to be sent back and forth between individual silos (even the original version of Bill Gates's 1995 book "The Road Ahead" barely even mentioned the web ). The later introduction of Sharepoint was a way to work around the constraints of this approach, but it's a far cry from Internet-style collaboration. On the Internet, everything starts with sharing, working together, and exchanging information. Google Apps, and now Acrobat.com, revolve around those principles. Adobe didn't simply add a "share" button to its on-premise applications and declare victory.

Using Office to improve how people work together in your organization is like asking an emotionally closed person to facilitate a session on open communication. Microsoft would have to basically become a different person (or undergo a lifetime of therapy) to drive new improvements to collaboration in an enterprise.

Google Apps and Acrobat.com sound like similar concepts. Do I need to wait for one to win or can I use both together?

win or can I use both together?

While Adobe and Google Apps have some overlap (e.g. document support), most of their capabilities are distinct (Google Mail and Calendar, Adobe Connect Now for web meetings) and generally complementary. Even if they had substantially more overlap, we believe choice is ultimately good for the customer. It helps prevents Microsoft-style monopoly pricing and gives customers more options to meet varying business needs.

Overlap does not mean they are mutually exclusive either. Cloud-based products are inherently more open and allow for deeper connections between solutions. For example, Appirio Contact Sync for Salesforce and Google Apps was built on two cloud solutions - Google and salesforce.com - keeping contacts in both applications updated and in sync. This gives customers more flexibility in where they store contacts without needing to enter duplicate data. Companies like Appirio, are helping customers to get more benefit out of one platform, say Google or Adobe, while allowing seamless interaction with other SaaS solutions.

In the web world, customers shouldn't have to decide the equivalent of the Beta vs. VHS standard wars (or for those more current Blueray vs. HD-DVD). Because of the open nature of "the cloud", solutions can be more easily integrated. This means vendors no longer have to figure out every future permutation to maintain an integrated solution. Those who try to will never move quickly enough to keep up with what customers need. Instead vendors can focus on the core qualities of their SaaS applications, such as their primary functional value, open APIs, multi-tenancy, open business practices, and how they maintain the highest rate of innovation. This preserves future options and allows vendors (and their customers) to benefit from the innovations of the larger ecosystem.

Adobe, with its launch of Acrobat.com, may one day represent a case study on how a large on-premise business can transform itself. By using their core assets and applying them to a new market, Adobe has the opportunity to fully embrace the future of cloud computing. If they remain true to this vision, they will provide customers with more reputable choices in the cloud, and will further relegate the old guard of on-premise software to playing catch up.

Connecting the Cloud, One Contact at a Time

2008-05-29T22:04:00.000-07:00

Ryan Nichols

Most businesses ultimately depend on personal connections. Business people would be lost if they couldn’t connect everyday with the contacts in their address book. And businesses wouldn’t function without the rich web of connections among their employees, partners, suppliers, and customers. But your company’s contact database is almost certainly incomplete. Despite periodic reminders from management to “scan those business cards” and “import those contacts,” most people can't find the time to maintain this information unless they are forced to, regardless of the benefits to the company. Your personal address book is also incomplete. Sure, you may have a rich virtual rolodex of names, mobile phones, and email addresses, but you can't see how this person is related to your business right now.

Imagine you’re writing a casual email to reconnect with a former colleague—who happens to be in the midst of making a big purchase with another department in your company. What if you had this sort of business context at your fingertips whenever you communicated?

Now imagine that your company’s sales reps knew about this connection as they were putting together their proposal. You would have been happy to make an introduction—if they’d only known to ask.

Appirio Contact Sync for Salesforce and Google Apps

Today, we’re excited to announce Appirio Contact Sync for Salesforce and Google Apps. This offering extends our portfolio of solutions that connect the leaders in on-demand - Salesforce.com and Google - allowing users to easily synchronize calendars, collaborate on marketing campaigns, find and embed documents, and create and share customized CRM dashboards.

As with our other offerings, we’re starting with simple synchronization—you choose which of your contacts you want to share, and how you want them synchronized between your Google and Salesforce address books. This is a valuable start. Today, your Google email account automatically stores the email address of everyone you’ve ever written to, but knows nothing about their companis or roles. Your Salesforce.com contacts are detailed, but you’re missing hundreds of critical business connections. Synchronizing the two solves a real pain point that we hear from our customers today.

Contacts in Context
Sync is just the beginning. Appirio's vision is to bring the business context from all of a company’s on-demand enterprise applications into the productivity tools and social networks that individuals use as they work. We want "Solutions for Business" + "Solutions for People" to finally create "Solutions for Business People."

Contacts is the center of that vision, and sync between Google Apps and Salesforce is a great place to start. Enjoy the offering!

Now that’s a Big PaaS Market

2008-05-22T12:03:00.000-07:00

Ryan Nichols

Prominent industry observers such as Dion Hinchcliffe, Phil Wainewright, and McKinsey have been busy lately discussing the rapidly evolving “platform as a service” offerings from companies such as salesforce.com, Amazon, and Google. One frequently heard sentiment is that nobody can build a “big” business using someone else’s platform.

We don't buy this argument. Lots of big businesses have been built using the platform capabilities of others. To extend the standard analogy comparing on-demand technology platforms to the electric grid, lots of great companies have been built without building their own "power plants." The Oracle database platform provides another set of examples. There's no reason for this to change. Plenty of great businesses will be built throughout the technology value chain, including platform providers, tools providers, and platform consumers that deliver business value directly to the customer.

This begs the question: How big is the market for solutions based upon on-demand platforms? Is the pie big enough to build great companies on a slice of it?

Size Matters

The SaaS market as it is currently defined is just the starting point. Still composed largely of point solutions for CRM and HR, SaaS represents $5-$12B in spending today, depending on which analyst you believe. It's just starting to penetrate the full business application market, a $50-100B market that includes ERP solutions. More great businesses will built in the market for SaaS applications, and some of these companies will build their offering using the capabilities of a platform delivered as a service.

Even the $50-100B market for business applications, however, fails to capture the full market for platform as a service. The larger market to be disrupted by platform as a service is the business “solutions” market, composed of the software and services that companies consume to develop customized solutions. This market is 3-4 times larger than the market for business applications — generally estimated by analysts at $200-300B.

In our experience, custom development using a platform as a service offers a higher degree of customizability, at up to an order of magnitude lower cost. The fact is that on-premise platforms are lousy for custom development. Once you’ve developed to a platform, you can't take advantage of future platform capabilities without expensive customizations and rewrites. This kind of wasted effort has fueled the growth an entire industry.

But platform as a service disrupts not just the $200-300B market for software and services, but also the market for hardware and infrastructure. These markets are seeing a dramatic concentration in their buying base, and some competition or substitution from companies they never would have expected, such as Google using its own hardware spec in its data centers. All told, platform as a service stands has the potential to disrupt $1 trillion of IT spending.

Shrinkage

The opportunity is large, and real. But on-demand solutions are enormously disruptive, and we have no expectation that any of these IT markets will stay the same bloated size that they are today. We look forward to seeing the current $300B industry that’s generating a nice living for on-premise product and service vendors, and watching it transform into a $100B on-demand industry that delivers more value for customers. We’re willing to help make that happen (and take some profit from the transformation) while on-premise competitors are economically motivated to resist changes to the status quo. See our postings on how this dynamic affects on-premise software and service providers for more.

Expansion in a New Dimension

While the traditional market for business applications and solutions is shrinking, we anticipate that on-demand platforms will open new areas of growth. The inflexibility of on-premise software has severely limited where it can be applied, as we argued in our recent posting on “business solutions meet business people.” Most workers remain woefully undersupported by IT. Many companies haven’t figured out how to support knowledge workers beyond issuing them a copy of Microsoft Office. McKinsey notes that the IT investment in supporting “tacit interactions” - a form of knowledge work - lag IT investment in supporting transactional and transformation work by $30,000 per employee.

The opportunity to solve this problem is enormous. There are 500 million licensed users of Office and Notes globally. These users are the information workers who are making decisions that require access to enterprise data. The global workforce is composed of about three billion people. Every one of them makes some sort of work decision every day that would benefit from additional information. The true consumerization of IT connects every worker to every relevant piece of information needed to get the job done. Serving the full enterprise workforce using on-premise IT is simply too costly, so as a result, companies have gotten by with poor communication and incomplete information. That equation changes with PaaS. Google provides free communication and information services to millions of consumers. These services are higher quality than most of us use at work. With PaaS, those capabilities can now be used as part of a business solution. The recently announced integration points between salesforce.com and Google Apps are just the starting point-- we anticipate entirely new ways to "connect the cloud" by bringing the capabilities of every business solution to every business person.

The opportunity to serve the entire business workforce has arrived -- and that's certainly a big enough opportunity to build a company around.