Regular
readers know I think highly of Brent
Thill and his team who cover enterprise software research at Citigroup.
One of the ways Brent differentiates himself is through a regular series of
conference calls with different industry folks.
This week's chat was
particularly enjoyable as he was joined by AMR Research's dynamic duo of
Bruce
Richardson and Jim
"Shep" Shepherd.
The call ended up being a 90-minute discussion on the state of the
enterprise software market heading into 2007. While I don't always agree
with Bruce and Shep [and they often disagree with each other], they are
influential, experienced and knowledgeable industry observers.
Here
are some of the talking points from the call...
...On IT spending in 2007
Overall, AMR expects IT spending to slow down in '07 to the 3%-5% range,
down considerably from what we've seen in recent years. However, software
spending trends appear healthier, with CIOs indicating plans to increase
spending on ERP by 12%, for example. In addition to healthy demand for ERP,
they expect a rebound in BI spending after a down 2006.
...On having one throat to choke
Bruce believes it continues to be tough for small, private
companies to sustainably close business . It’s not hard to get an audience with
buyers, but tough for them to get over the finish line.
...On SOA "hype"
Bruce and Shep both indicated that despite a lot of hype from vendors, they
aren't seeing a strong indicator of near term interest in big SOA
projects. Bruce cautioned that SAP and Oracle need to do a better job at
articulating the value proposition of their new SOA-based platforms, because
many customers remain unclear about how the technical aspects of the new platform
really benefit them in terms of improving business process.
...On SaaS
Shep cautioned that "SaaS isn't having anywhere near the impact in the
market it's having in the press." He acknowledged that
Salesforce.com is having a major impact, but no other vendor is really on the
enterprise radar.
...On Vista
Bruce and Shep were somewhat divided on the impact of Vista and Office 2007
relative to its impact on 2007 spending plans. Bruce believes they represent
the first "we have to have that" products from Microsoft in a long
time and uptake could surprise people out of the gates. Shep is taking a more
conventional view, that it will be an important cycle but probably not material
enough to negatively impact spending elsewhere until 2008/2009.
...On "buy vs. build"
Brent questioned whether we could on the cusp of seeing enterprises move
back toward the custom build side of the ledger away from a multi-decade trend
toward buying packaged applications. Shep reminded everyone that large
enterprise CIOs are skeptical about new technologies, SOA included. He
indicated that custom building makes little sense when there are packaged
applications to address most needs. Bruce disagreed with Shep and suggested
that innovative companies aren't waiting around for ERP vendors to drive
innovation.
...On Web Services and SOA from the software development angle
Bruce brought up Workday
as an example of software developers leveraging Web Services. With relatively
few developers they've been able to launch a competitive SaaS-based HR suite.
Overall, the very early indications are that SOA/Web Services apps are a)
easier to write, b) provider higher quality code, c) faster to write and
compile and d) easier to maintain and deploy.
TO BE CONTINUED...
Note: At the time of this writing I, and/or funds I maintain discretionary
control over, maintained long equity positions in CRM, MSFT and SAP. We did not
maintain a position, long or short, in ORCL. We also may, at times, carry
derivative options on underlying positions as a hedge.
sap oracle orcl brent thill bruce
richardson jim shepherd
2007 irregulars erp salesforce.com
crm amr software irregulars erp woodrow
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