: Friend or Foe?"> Ive seen Oracle and IBM really cozying up a lot lately. What are your thoughts there in terms of IBMs pretty significant development efforts with Siebel? McDermott: What you say is true. And I think its a marriage of convenience in the sense that IBM has a lot riding on its consulting business. So why not help Oracle sell PeopleSoft or JDE or Siebel, or even for that matter Oracle. The issue right now is because our win rate is so high, and because Oracle is performing so poorly and losing so much market-share if they aggregate too many resources there, theyre not going to be generating revenue.What does it mean to you when you have IBM pretty firmly in your camp, and also a burgeoning co-development relationship with Microsoft? McDermott: It basically says to the customer that were open. Were partner-friendly. We understand that our partners have database businesses. We support IBMs DB2; we support Microsofts SQL Server. Reluctantly, we support Oracle. I also think this partnership with Microsoft is special. A, because its an outstanding companytheyre well managed and have tremendous resourcesand also because this product called Mendocino will grow our businesses substantially. I was surprised by the potential for what can come out of Mendocino. Where else do you see this co-development relationship going? McDermott: I see the relationship getting stronger by the minute. Mendocino has a very strong roadmap for both companieswere both committed to a long-term relationship on that roadmap. We also know that the interoperability of Microsoft Office and SAP applications is what customers want. SAP reorganizes and expands in midmarket. Click here to read more. If we both line up, its Microsoft and SAP versus the other guy over in Redwood Shores. And we all know what is the story there. And IBM, you look at the on-demand strategy, you look at the DB2 component of the relationship and consulting services, they can do very, very well on the SAP eco system and they know that. Lets touch on the partner network building out around NetWeaver. Are those partner applications going to be available through SAP on demand? McDermott: Were focusing on CRM on demand right now. Were very happy to have partners jumping on our platform, innovating, but right now were containing the on-demand model to CRM. Fair enough. I ask because Im wondering whether you plan to take a [Salesforce.com] AppExchange approach to providing on-demand software? Stutz: If you really think about, companies who want to run their business, do you really want to trust it to a third-party hosted application running outside your firewall? The reality is its great for the small and midsized business market, but when you get outside the SMB market you really have to think twice. This is your business. Can you afford to lose control of your business, and not have your own IT people respond when your systems go down and actually having no control whatsoever? I think its a tough sell. I dont think anything outside of a small business is willing to take that risk. What is the difference between what youre doing with the isolated tenancy model for on demand, and the single tenancy model? Youre basically providing a single instance of an application to each customer, right? A: Stutz: But its the same version. And its all being done at the same time. So its really the best of both worlds. Its really a combination of the best of multitenancy, which allows companies to quickly push new functionality out to customers and at the same time you have an isolated environment, so if there is something like a brown out, youre not affected by that. In normal multitenancy you are. In a true single tenancy environment, customers can do whatever they want. Theres no rulesrun whatever version you want. Youre pretty much on your own. And thats sort of the old hosted model. But for us, in listening to customers, they want functionality quickly. And we want to be able to do that, but still keep things that are really important like security, performance, reliability, so [customers] know their systems are separated. Thats the benefit of isolated tenancy. You still get the push model, but with everything else. As far as service level agreements, is that a non-issue with isolated tenancy? Stutz: Its not even an issue at all. Next Page: The difficulty of 99.999 percent uptime.
So more and more, its flipping the switch back towards SAP, because thats who is winning in the market. IBM is a smart company. If they can make money with Oracle, theyll make money with Oracle. But theyll make money with us. When you win the software deal, all other things follow. You can see by Oracles decline in market-share, theyre not winning. So more and more, IBMs going to move in favor of SAP. The other thing is Oracles core business is in trouble.