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There is a battle brewing in the business applications market, and its boiling down to two sides: on-premises versus on-demand software.
With Salesforce.com, the poster child for on-demand software, racking up a half-billion dollars in revenues for its fiscal 2007 third quarter, its clear the on-demand sector is gaining ground.
To better delineate its integration strategy—a key differentiator in the on-demand versus on-premises feud—Salesforce.com announced Nov. 27 ApexConnect, a family of tools designed to help users more easily integrate Salesforce.com applications with third-party applications.
The concept with ApexConnect is that any Salesforce.com application will maintain connections with legacy applications, Web services and other on-demand applications during (and after) an upgrade, given Salesforce.coms multitenant architecture and the ApexConnect tools.
The ApexConnect family of products includes a stable of about 25 preintegrated AppExchange partner integration offerings that link Salesforce.com to common back-office applications, as well as custom integrations with the Apex APIs (Apex is Salesforce.coms proprietary programming language; AppExchange is its integration and development platform).
ApexConnect also offers prebuilt integrations to SAP R/3 and Oracle 11i ERP (enterprise resource planning) applications, as well as to Microsoft Office and Outlook and IBM Lotus Notes. Finally, ApexConnect offers something called ConnectOut, an on-demand outbound messaging API that lets Salesforce.coms services talk to other applications.
The ApexConnect announcement is exactly the message Salesforce.com needs to articulate at this time, according to analysts. “We still see consistently on-premises throwing out integration and customization as big hurdles to software as a service,” said Rob Bois, an analyst with AMR Research, in Boston. “The big strategy from SAP and Oracle is to stave off customers from going off-premise for CRM [customer relationship management].”
The issue with going off-premise for on-demand CRM (or other functionality) is that users are stuck with the integration conundrum, according to Juergen Rottler, Oracles executive vice president of Oracle On Demand and Oracle Support Services.
“If youre Salesforce.com, youre in a tough spot. Youre a one-trick pony,” said Rottler, in Redwood Shores, Calif. “Their early success is almost turning against them. Customers are now looking at How do I [customize] all this customer information and integrate it? And they cant. Salesforce is scrambling to create this illusion of an application integration environment.”
John Snead, director of Beer Operations at the Karl Strauss Brewing Co., however, doesnt look at Salesforce.com as a one-trick pony. Rather, hes hoping to move more of his legacy applications to the AppExchange platform—things like reporting and aging desktop applications. A Microsoft Dynamics GP user, Snead turned to AppExchange partner Scribe Software to help him integrate his Salesforce CRM applications with his Dynamics GP ERP suite.
Not that he didnt look to Microsoft first. “Microsoft has their Integration Manager module that is a little behind the times,” said Snead, in San Diego. “There were some built-in aspects to the way it could connect to our sales orders, but we werent allowed to control the distribution [to our general ledger], which is important for us.”
Snead said Microsoft also has a higher-end integration tool that he looked at, but quickly realized that with limited IT resources, he didnt have the capacity to implement a bigger integration tool. “It would have taken a lot of development time, and we didnt have the resources to pay for a consultant,” said Snead. “Then Scribe came along, and their Dynamics [integration] module is built on the same technology platform as Salesforce. … We do a lot of customization on Salesforce, and we do integrate. And its real easy to link.”
The Quiet Giant
Snead, however, has no intentions of moving his entire back-end environment to an on-demand model. Rather, the goal is to move adjunct pieces of software to provide more agility.
Thats the tack “old model” companies such as Oracle, SAP and Microsoft are banking on—that customers will maintain their (expensive) on-premises ERP implementations and “add on” on-demand functionality.
While the “big three” ERP vendors are making stabs at on-demand offerings—SAP with its hybrid CRM, Microsoft with its Live initiatives and Oracle with Oracle On Demand—Oracle is far and away the sleeping giant in this crowd.
On the heels of Salesforce.coms announcement of its $500,000 revenue mark in November, Oracle released a statement that it has surpassed a milestone of more than 1.7 million on-demand users, representing more than 2,200 customers buying Oracles subscription-based solutions, managed applications or software managed services (compared with Salesforce.coms 27,100 customers and 556,000 users).
But even beyond its January 2006 acquisition of Siebel, Oracle was in the on-demand game. During the dot-com bust in the early part of the century, while others were fleeing the ASP (application service provider) model, Oracle hung in there, offering its E-Business Suite software as a service.
With the acquisitions of PeopleSoft and by default JD Edwards, Oracle expanded its portfolio of applications and technology available on demand.
And now the company is pumping a lot more resources into its on-demand offering, according to Rottler.
“Youll see us ramp up quite a bit—more advertising, more marketing, more sales,” he said. “Weve incorporated Siebel CRM OnDemand and [developed] three new releases. Weve rearchitected our entire underlying architecture to scale the business a lot faster. Weve made core investments … that require a pretty heavy investment in R&D and services that a lot of niche players cant really make.”
In addition to infrastructure investments in data centers (Oracle expects to partner a lot on this front), Linux and grid computing, Oracle plans to spend on new features at the application level—the company is developing Fusion CRM, based on Siebels technology. In the meantime it expects to announce in the next several weeks the next version of CRM On Demand that integrates Siebels technology with the Oracle E-Business Suite and JD Edwards suite.
Where Oracle differs from other on-demand players is in its definition of software as a service. Its not about multitenant software—the practice of putting each companys software installation on a shared architecture—or subscription licensing where users pay for software on a monthly basis. Its about whether or not Oracle takes the responsibility for hosting and upgrading a users software, according to Rottler.
“Its when we take operational ownership of our customers applications and there are service levels against that,” he said. “So we host, run [and] evolve the applications, and were a partner. Were still in charge.”
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