I am a big fan of Joe Bentzel's approach to ISV growth & success, and his column today says it all!

Excerpted in Full:

OK. It’s a new year and what better way to start off the new year than to stay stuck in the past year.
Hence the First Annual Asymmetric Marketing Awards to those software and web players who most successfully:
a. Capitalized on the market momentum of an incumbent leader to grow their own business;
b. Engaged in cross-category market expansion, leveraging one asset into new markets; or
c. Grew their natural (customer-sanctioned) monopoly at the expense of their competitors.
So here’s my top 10 A-marketers for 2007, with me as the sole judge in the competition. (Seriously…What’s the point of having a marketing blog if you can’t pontificate?) I’m going to use the David Letterman model and start at the end of the list working forward to Number One.
10. EqualLogic: In 2007, Dell paid well north of a billion dollars for iSCSI innovator EqualLogic. While EqualLogic's public face to the world is that of a storage appliance provider, it is their focus on providing a seamless storage experience for Microsoft Exchange and SQL, and their focus on aligning with software superpowers that enabled their revenue growth and perceived leadership in iSCSI. Look for this trend of application-focused hardware, and hardware blended with software to grow in 2008.
9. Novell: In 2007, Novell began to benefit from their interoperability deal with Microsoft, including a revenue commitment of $240 million. This was smart asymmetric marketing on the part of Novell, i.e. to leverage the MS installed base to drive a Linux open source product into the market, and position themselves vis-à-vis Red Hat and others based on their interoperability with MS. While Novell as a company is still unprofitable, continuing down the asymmetric marketing path with Microsoft can only help them in their turnaround efforts.
8. Akamai: In 2007, Akamai's revenue for the first 3 quarters of the year exceeds 2006 revenue for all 4 quarters. They continue to practice asymmetric marketing by successfully attaching their application acceleration and edge network services to market creation initiatives of the software superpowers (MS Silverlight, Adobe Flash and SAP enterprise SOA) as well as to leading web properties (MySpace). Akamai is also one of the best examples of ‘Software plus services’ on the planet.
7. Facebook: By landing a $240 million equity investment from Microsoft, in addition to partnering with MS as their exclusive advertising partner, Facebook deserves to be among the top 10 asymmetric marketers of 2007. Their initiative to market their social networking site as a 'platform' for Web 2.0 developers is also a feather in their cap.
6: Salesforce.com: In 2007, Salesforce moved forward beyond the on-demand CRM category with it's PaaS (platform-as-a-service) offering, Force.com, and its initiative to create an army of 3rd party software developers. In addition SFDC began to aggressively partner with Google around the "Salesforce for Google AdWords" offering. With 2009 revenue forecasted at $1billion, Salesforce.com is clearly beginning to take more than a few plays from the Microsoft and Oracle superpower playbooks.
5. VMware: One of the most street-smart software companies in a long, long time, VMware has leveraged its relationships with EMC, Intel and other incumbent market leaders to grow a billion dollar plus software business, go public at a killer valuation, and emerge as a rising superpower in its own right. Virtualization is their ball to carry or fumble going forward, depending on how they handle the competitive challenges to come.
4. Adobe: The Acrobat natural monopolists broke through the 3 billion in annual revenue mark on the strength of their Creative Suite, proving that 12 years after the browser wars, it is possible to rise to and remain a software superpower in markets dominated by companies 15X their size. And their ever-expanding Flash ubiquity proves that they understand how to drive cross-category market momentum, a key indicator of superpower status.
3. Microsoft: In 2007, the original Redmondistas began to put some meat on their Software Plus Services vision, fought their way through the rolling Vista launch, launched new initiatives in Unified Communications, Security, Storage, Rich Internet Applications, Office Business Apps (OBAs) and more, while acquiring some assets to help their still-struggling online search and advertising war with Google. Their asymmetric marketing muscle across multiple categories enabled them to chalk up a killer Q1 2008 quarterly number. They remain Numero Uno in many, many categories (and my personal poster child for what asymmetric marketing is all about) but in the post-Gates era, they will have to ratchet up their game and re-invigorate their culture in an age of continuous superpower rivalry.
2. Oracle: Hats off to Larry Ellison. His high risk strategy of 37 acquisitions (including PeopleSoft & Siebel) over the past 3 years began to pay big dividends in 2007 relative to their head to head competition with SAP. In the words of Oracle President, Charles Phillips. “We like our growth strategy of expanding beyond ERP into high-end industry specific vertical software in contrast to SAP’s strategy of moving down market to sell ERP systems to small companies.” Cross-category expansion focused on strategic lock-in---An asymmetric marketing strategy for the ages.
1. Google: All’s NOT fair in the age of the software superpowers, so Steve Ballmer’s oft-quoted remark that search rival Google is a ‘one trick pony’, can be chalked up to brass knuckles combat PR. Unfortunately for my main man and Redmondista role model Steve B, Google’s ‘one trick’, i.e. ad-sponsored search, happens to be pretty freakin’ awesome. Hence Google’s selection to occupy the number one spot on the Redmondista Blog’s first annual asymmetric marketing awards. Throughout 2007, Google was clearly laying the foundation for tricks two, three and four with its Doubleclick acquisition, its YouTube video ubiquity, and partner/developer initiatives in social networking and mobile software designed to recruit an army of 3rd party developers to the Google standard. It remains to be seen whether Yahoo and/or Microsoft will develop a ‘category regime change’ strategy capable of toppling the Googleplexers in search before the cross-category juggernaut leaves the station. I keep giving them free hints but they don’t seem to paying attention. Oh well, so much for the value of free advice.
Apologies to all those who didn't make the 2007 list. Buying bulk quantities of my book and forcing your marketing and sales organization to apply the ideas contained therein may help you get ready for the 2008 awards.

Once again, the Research leadership team at Saugatuck puts out a VERY comprehensive view on SaaS strategic directions! As a long time subscriber, please take three minutes to sign-up for their Research Alerts!

Excerpted in FULL:

RESEARCH ALERT
RA-417
December 20, 2007
B. McNee, M. West, B. Guptill, M. Koenig
Entire contents © 2007 Saugatuck Technology. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden.

Key Trends in SaaS: 2008 and Beyond

What is Happening?

Software-as-a-Service is poised for continued strong growth over the next few years, as it moves well beyond its initial focus on providing low-cost and “fringe” islands of automation in the cloud, to richly configurable and customizable “core” business solutions leveraging next-gen workflow.
This extended year-end Research Alert highlights five key trends in SaaS for 2008 and beyond:

1. SaaS Marketplaces and Platforms Proliferate
2. SaaS Goes International
3. SaaS Merger & Acquisition Activity Explodes
4. Traditional ISVs Take Off Their Gloves – and Begin to do Battle
5. SaaS Development Platforms Evolve
Browse Related Research:
• Emerging Trends / Technologies
• IT Management
• Software-as-a-Service (SaaS)
• The IT Utility

As recent Saugatuck research has explored, SaaS is now entering Wave III of user adoption (see Note 1). Whereas Wave II focused on the emergence of SaaS Marketplaces and integrating SaaS applications and business services with on-premise data and applications – Wave III will be all about optimizing SaaS ecosystems, inter-enterprise collaboration and personalized and customizable workflow capabilities (see Strategic Perspective SaaS’ Third Wave: On the Road to Personalized Workflows, MKT-337, 18Apr07, and Research Alert SaaS Beyond the Tipping Point: Three Waves, Four Key Challenges, Five Planning Positions, RA-343, 03May07).

Why is it Happening?

The authors invite your comments and inquiries on this Research Alert. (Please contact Bill McNee at bill.mcnee@saugatech.com); Mike West, Bruce Guptill and Mark Koenig helped support the development of this RA.

As we look forward to the New Year, Saugatuck has identified five important trends for 2008 and beyond that it believes will help shape how the SaaS applications and business services sector will evolve – including changes to how vendors will increasingly go to market, as well as how customers will gain value from SaaS solutions.
Note 1 Three Waves of SaaS Evolution

Wave I: Early Adoption (‘01-‘06)

• Characterized by cost-effective software delivery (TCO, rapid deployment)
• Stand-alone apps, multi-tenancy, limited configurability
Wave II: Mainstream Adoption (’05-’10)
• Characterized by the growth of integrated business solutions – and integration of SaaS apps with on-premise apps and data
• SaaS Integration Platforms (SIPs), Business Marketplaces and SaaS ecosystems, early customization capabilities
Wave III: Ubiquitous Adoption (’08-’14)
• Characterized by the growth of workflow-enabled business transformation
• Optimized business and IT-targeted ecosystems, inter-enterprise collaboration, IT utility / SaaS infrast., personalized / customized workflow

1. SaaS Marketplaces and Platforms Proliferate

Although SaaS Marketplaces and Platforms began to emerge in 2005-2006 (to great hype and fanfare), early players such as Salesforce have yet to significantly monetize their investments in initiatives such as AppExchange thus far. Given this, many industry watchers (as well as AppExchange partners) have begun to question how real and important SaaS Marketplaces will be longer-term to the growth of the SaaS market.
With the onset of the Wave III, Saugatuck firmly believes that SaaS Platforms and Marketplaces will begin to proliferate – becoming a significant channel opportunity for vendors, as well as a key means by which users will gain access to SaaS solution capabilities.

No doubt other routes to market will also increasingly bear fruit, including a growing role for traditional VARs and SIs, as well as next-generation SaaS Integration Services Providers (e.g., Astadia, Bluewolf). And clearly there will be a growing appetite for solution suites packaged and sold direct by either a single provider, or via tightly integrated multi-vendor bundles positioned and sold by strategic partners. However, Saugatuck forecasts that by 2012, as much as 15 percent of total SaaS solution revenues will be accessed via SaaS Marketplaces.

During the past several years, SaaS Marketplaces and Platforms have evolved well beyond their initial capabilities, offering customization, integration, data pipes for BI or data sharing, data storage, content management, workflow, and development tools and APIs. In fact, we are starting to see specializations of SaaS Platforms that offer storage, raw compute power, and development and production environments in the cloud (such as Amazon's Elastic Compute Cloud or EC2 – and IBMs emerging 'blue cloud' initiative). Ecosystems have formed around these Platforms to enrich the value of their offerings, often through Marketplaces, always through the synergy of functionality brought together on the Platform.

Beyond the pure-play SaaS Master Brands who have emerged (e.g., Salesforce, Cisco/Webex), established Master Brands such as IBM, Microsoft, Oracle and SAP are now clearly deepening their SaaS commitments – as are upstart Master Brands such as Amazon (see above) and Google who are getting into the game with serious commitments of their own. Expect a variety of different styles and flavors – but most of all, expect SaaS Platforms and Marketplaces to be dominated by well financed vendors who are in it for the long haul. SaaS Platforms now express a wide range of capabilities that are driven by the business model of the Ecosystem and the needs and characteristics of the Marketplaces they enable: no two are or will be alike.

In that regard, we point the reader to a recently published Strategic Perspective (see On the Outskirts of Wave III: SaaS Platforms Proliferate in 2008, MKT-415, 18Dec07), where Saugatuck identifies and profiles six types of SaaS Ecosystems and Marketplaces forming around SaaS Platforms: Transaction Services, Collaboration Services, Corporate-Consumer Business Services, Aggregation-Distribution Services, SaaS Enablement/Infrastructure Services and IT infrastructure Services.

Strategic Planning Position(s):

• By 2012, 15 percent of SaaS solution revenue will be accessed through SaaS Marketplaces.
• By 2012, at least 75 percent of the revenue generated by SaaS Marketplaces will be driven by five or fewer SaaS Platform providers – who will both directly provide Marketplace services, as well as power vertical initiatives led by large and established business and consumer brands.

2. SaaS Goes International

Throughout the planning horizon, Saugatuck anticipates continued strong growth in customer demand across all application and solution segments, as well as across a variety of on demand infrastructure and IT management services. Similar to other leading industry and Wall Street analysts who track the SaaS market (i.e., IDC, CSFB), Saugatuck believes that worldwide SaaS revenues will exceed $20 billion by 2012 (up from approximately $6.5 billion in 2007), which translates into a 35 percent compound average growth (CAGR) over this time period.
What is important to recognize is that SaaS is now becoming an international phenomenon – driven by both local demand as well as large multi-nationals who are adopting SaaS business solutions on a global basis. While US SaaS adoption is clearly going “mainstream” (with deeper penetration by both SME and large enterprise accounts – and shifting from a “fringe” phenomenon to focusing increasingly on core business processes and systems of record) – Europe and Asia are only now beginning to experience the steep adoption ramp that the US has witnessed over the past two years.

In fact, Saugatuck research suggests that Europe is beginning to go through a very similar adoption profile that the US has – albeit with an 18 month lag. In fact, we anticipate very strong European growth for both US-based SaaS giants aggressively expanding into this region (e.g., Salesforce, OpSource) – as well regional and country-specific players who are seeing very strong growth (see SaaS Adoption in Europe: A Closer Look at Rapid Growth, MKT-349, 25May07). Similar to adoption in the US in the 2005-2007 timeframe, demand is being primarily driven by Wave I and II market attributes, although greater emphasis is being placed on issues of security and data privacy in Europe.
A great example of a fast growing regional European player is Stepstone, a UK-based provider of talent management solutions. One Wall Streeter that we recently spoke to described them as a cross between Monster.com and Taleo (who likewise is aggressively moving into this region).

Whereas average US market growth rates will likely slow into the 35-40 percent range for public company SaaS vendors in 2008, European market growth rates should exceed 60-70 percent next year. Springboard Research projects similarly strong SaaS growth in Asia through 2010.
Strategic Planning Position(s):

• By YE2008, greater than 55 percent of North American-based businesses will have deployed at least one SaaS application, with Western European close behind at greater than 40 percent .
• By 2012, 30 percent or more of all new business software will be deployed and delivered as SaaS.

3. SaaS Merger & Acquisition Activity Explodes

The tough housing market combined with high oil prices and sagging consumer confidence suggests that US GDP growth will likely slow to 1.5-2.0 percent in 2008. This environment should only benefit SaaS providers vis-à-vis traditional on-premise alternatives for companies making new investment decisions, as one of its core value propositions is a much more attractive up-front investment profile. This will likely also accelerate the necessity for ISVs to step up their SaaS transition strategies (see below).

A slowing US economy will also only reinforce the core enterprise software consolidation trend, with the “Big Four” (e.g., IBM, Microsoft, SAP, Oracle) and a host of mid-market aggregators (e.g., Infor, Epicor) likely to continue gobbling up unprofitable enterprise software assets. Where that leaves existing enterprise software customers can often be a huge question mark as it concerns ongoing investment spending to keep those assets current.
While worldwide economic growth will likely remain strong – especially in Asia – another important impact of the US slowdown may be fewer SaaS IPOs that come to market, which could have a significant impact on the balance of power in enterprise software. While the IPO window will likely remain open for the next two years, the quality and size of the companies that can exit via this method will likely change dramatically – with Wall Street increasingly looking to more traditional metrics and measurements (such as profitability) rather than exclusively focusing on top line revenue and cash flow growth.

In fact, we would anticipate that average public company SaaS valuations have a strong possibility of falling over the next 12-18 months, from 6-7 times trailing 12-months revenue toward a still high but more down-to-earth 4.5-5X ratio. If a narrower and higher-quality IPO market emerges later in 2008 and into 2009, combined with a valuation contraction scenario, Saugatuck would anticipate that a large number of venture-backed start-ups and emerging SaaS companies in the $5 million - $20 million range would be put up for sale by their venture backers over the next 12-18 months – and acquired by either SaaS pure-plays, ISVs hungry to enter the SaaS fray, and/or on-shore and off-shore IT services and BPO providers who are eager to leverage a SaaS model (e.g., Infosys, Wipro). We see this time period as an important one where next-generation horizontal and vertical franchises will be cemented.

We see no reason why the services arms of IBM, Accenture, EDS or CSC won’t ultimately play very big in SaaS as well, as they increasingly package up some of their intellectual capital. No doubt a serious feeding frenzy is about to unfold. No wonder NetSuite got out when it could (given its’ spending on sales and marketing, and profitability profile) – although we are mystified by the 15X trailing 12-month multiple that the recent NetSuite IPO commanded. The recent SuccessFactors IPO is another (even more surprising) example.

Strategic Planning Position(s):

• While SaaS-based start-ups will continue to get the lion’s share of new VC investment in the enterprise software space, 60 percent or more of SaaS firms funded prior to 2005 will either be acquired or go out of business by 2010.
• By 2012, all bets are off as it concerns traditional on-premise licensing schemas.

4. Traditional ISVs Take Off Their Gloves – and Attempt to do Battle

Saugatuck believes that 2008 will be the year that the traditional ISVs earnestly begin to fight back. Whether it is SAPs SME-targeted launch of its’ (SOA-based) Business ByDesign offering, or Lawson’s new Talent and Performance Management line-extension initiative – traditional application ISVs are on the march. Saugatuck believes that approximately 15-20 percent of application ISVs have already either begun new skunk works initiatives or gained access to SaaS assets and development experience through M&A activity. However, over the next 12-24 months we anticipate this number to rise dramatically, as a tougher economic climate will only exacerbate an already challenged on-premise and traditional perpetual license model.

To be successful, ISVs need to fully understand the journey that they will be on across five key dimensions – economic, technological, operational, organizational and cultural – as well as to take advantage of the many best practices that are available based on the hard-fought experience of early adopters (see ISVs Transitioning to SaaS: Common Threads and Best Practices, RA-402, 31Oct07).

Among the most important technological issues is the decision over how best to implement multi-tenancy, and whether to take a more evolutionary approach (by leveraging virtualization technologies from vendors such as Parallels or rPath), or whether to truly start from scratch in building new single-instance multi-tenant applications.
While almost all the same basic functionality can be delivered via either a virtualization or via a multi-tenant approach – in our opinion, most ISVs should view virtualization as merely an interim step along the journey to SaaS, rather than an end-game in itself (see Traditional ISV Transition to SaaS: Reinvent or Virtualize?, RA-413, 12Dec07). When starting from scratch, our experience in working with dozens of ISVs is that the most successful ISVs are those that target adjacent market opportunities, rather than trying to replicate existing on-premise application functionality in the cloud (unless it is with a substantially broader footprint, or with a dramatically updated business process workflow).

One of the biggest battlegrounds over the next three years will be among the large application and platform providers with large partner networks, who will do everything that they can to incent their partner networks to repurpose and re-architect their solutions using their development and integration tools, methodologies and roadmaps. Significant investment by firms such as Microsoft, IBM, SAP and Progress are already underway. If you are a vendor going down this path and you want or need the help – this is a good time to act, as creative deals are being structured NOW.

Strategic Planning Position(s):

• By 2010, 40 percent of traditional on-premise application ISVs will bring to market SaaS solution offerings, either via acquisition, development of new single-instance multi-tenant applications, or through virtualized (multi-tenant) versions of their traditional on-premise offerings.
• Less than half of the ISVs in transition will succeed – especially large multi-divisional publicly-traded vendors who have unique organizational, cultural, sales and marketing, and installed customer base (transition / cannibalization) challenges.

5. SaaS Development Platforms Evolve

Advantages of SaaS-based development include an ability to tap into worldwide base of developers, skills, tools, and technologies suited to specific applications, platforms, and communities. This represents somewhat of a shift for user enterprises in the traditional "build versus buy" debates. In fact, the powerful growth, presence and influence of SaaS within user enterprises are driving the growth of "build in a SaaS environment" – and shifting the argument well beyond the early configuration messaging prevalent over the past few years. The broad and easy availability of customizable SaaS will become a rising tide that lifts SaaS use along with customer and partner development within SaaS applications and ecosystems.

And the increasing presence of SaaS-based (but non-SaaS-vendor-focused) software development platforms will increase the pace of change in traditional software development and customization, especially when combined with open, standards-based technologies. Wide availability of open, standardized tools and technologies in subscription-based, on-demand environments will help streamline and reduce the costs of software development and customization. It will also foster use and growth of services-oriented architecture development strategies.
Finally, such SaaS development platforms help to promote "green IT". Fewer development resources are required and utilized within both user and vendor enterprises, with the collaborative nature of such environments helping to improve efficiencies. Fewer development resources working in a more efficient environment reduces staff sizes, reduces facilities needs, reduces overall resources used, overall and delivers positive "carbon footprint" impacts.
Strategic Planning Position(s):

• By YE2008, the number of user enterprises taking advantage of SaaS-based software development platforms, services and offerings will number in the tens of millions worldwide.
• By YE2008, SaaS-based development platforms will increasingly be found at the center of Open Source development communities; these development communities will create code that enterprise IT will subscribe to and mine for use in production systems.
• By YE2008, the convergence of service-oriented architecture (SOA), Open Source and SaaS will enable SaaS-based development platforms to attract developers across geographies, industries and company size to collaborate on not-for-profit skunk-works projects.

Phil Wainewright had a great post on the "horse-race" to transform from licensing-based revenue models to SaaS, and how to do SaaS RIGHT...

Excerpted in full:

SAP, Adobe, Microsoft: three monkeys take on SaaS

The challenge: transition from a business model where you earn revenues by selling perpetual software licenses to one based on monthly subscription payments. Not only that, but achieve the transition while continuing to report rising revenues and protecting your profitability. Can it be done? Steve Singh, CEO of Concur, has led his company through the transition and is doubtful any public company above $1 billion in annual revenues has a realistic chance of succeeding.

Three of the world’s largest software companies — SAP, Adobe and Microsoft — have other ideas. Instead of facing the painful disruption of replacing their existing products with SaaS alternatives, they plan to enter other markets with new SaaS offerings that don’t compete with those existing products. Once they’ve built up a separate revenue stream from subscription services in these new markets, the theory is that they’ll then have a cushion to lessen the pain of transitioning their conventionally licensed products to SaaS, should they need to later on.

There are three variations on this ‘SaaS containment’ strategy. Each has its own merits, but the flaw they all share is a determination to put off the evil moment of facing up to the impact of SaaS on their core business. So I’ve chosen to name them after the proverbial three wise monkeys who ‘See no SaaS’, ‘Hear no SaaS’ and ‘Speak no SaaS’.

Adobe: ‘See no Saas’. The market leader in publishing, design and web development software has just launched the first of a family of services that will target a product segment Adobe doesn’t currently serve. Online word processor Buzzword, whose acquisition was announced this week, will head a portfolio of collaborative editing and publishing services for the office productivity market. It’s a bold plan, aimed at a market where Microsoft alone currently earns revenues of some $16 billion a year. As a containment strategy, it has some merit, because most of the functionality of office productivity is distinct from what Adobe’s existing products provide. But there’s still an overlap, and the more sophisticated the online services become (in order to appeal to an ever-larger proportion of the target market) then the more likely they are to start harming licence sales of the existing products. Eventually, Adobe will find itself conflicted by difficult choices as the functionality of the two product sets begins to converge: should it accelerate development of the online products in the expectation of future revenues or hold them back in order to protect existing licence sales?

SAP: ‘Hear no SaaS’. The world’s biggest business software vendor has chosen to create a SaaS offering that covers the same spread of functionality as its existing products, but targeted at a sector of the small to midsize business market that it doesn’t currently serve. Its plan is to achieve massive success for Business ByDesign within that target market, but with no seepage into its existing customer base in other segments of the market. SAP earns points for effort — Business ByDesign has an impressive all-new services architecture — but the strategy has one simple flaw. If the product’s good enough to take its target market by storm, it’s going to penetrate other segments too. If it’s not good enough to appeal to other segments, it’ll flop in its own target market. Either way, if you ask me, SAP can’t win.

Microsoft: ‘Speak no SaaS’. The world’s largest software vendor is pursuing a strategy of launching services that are complementary to its existing licensed products, while refraining from offering services that compete directly against any form of licensed on-premises software. It’s betting that most customers will prefer to stick with trusted, established products rather than switching to online alternatives, giving it plenty of time to build up revenues from those complementary services. Choosing not to offer direct on-line competition to its own products may seem like a head-in-the-sand strategy, but you can hardly blame Microsoft for seeking to buy time for its existing business model while it develops a services strategy. The problem is that, in providing online services for customers without putting the core products themselves online, Microsoft risks sending customers elsewhere in search of a more integrated user experience.

Some sources for the wise monkeys maxim cite a fourth member of the team, ‘Do no SaaS’. That would be Oracle.

I especially like & agree with the best-of-breed (heterogeneous) approach - single stack solutions are wrong for SO many reasons...Ron does a great summary!

What's NOT Killing SOA?

Document ID: ZAPFLASH-20071016 | Document Type: ZapFlash
By: Ronald Schmelzer
Posted: Oct. 16, 2007
What’s with all the doom and gloom? In the past few months, we’ve seen a rash of ZapFlashes, articles, blog posts, and podcasts talking about the downsides of Service-Oriented Architecture (SOA), and for good reason. Any trend that demands such a significant portion of executives’ and practitioners’ time and budget demands to be critically examined so that the good of all parties are being met. After all, very few people benefit from trends that are all hype and no substance. A proper debate shows that there are not only substantive reasons in favor of some approach, but also show the causes and reasons in opposition.

In the last ZapFlash, we talked about a host of reasons and the different players that are stifling SOA’s potential for success. On the flip side, over the past seven years of ZapThink’s existence, we provided numerous reasons that support the use and expansion of the role of SOA. First and foremost, the role of SOA is to provide an architectural approach that supports an organization’s ability to continuously change in the face of a heterogeneous environment. Certainly this concept has legs, as companies continue to struggle with the most fundamental of integration and change management issues. But if so many parties are working to thwart this basic value of SOA, what forces are working to make sure it succeeds?

Proper Scoping of SOA Projects
Most often, the single cause of failure for SOA is inappropriate scoping of the SOA project. Companies too often seek to make SOA an enterprisewide effort, even though the business case for that is typically not justified. The rationale goes that SOA is an aspect of Enterprise Architecture and therefore its scope is enterprisewide, or because it is so important and strategic, it must be implemented at an enterprisewide level. Other IT practitioners are simply used to implementing all of their major initiatives enterprisewide, so why should SOA be different? Because SOA is not a project or a technology – it is an approach, that’s why.

SOA is simply not appropriate for all problems, and even for problems that need to be solved enterprisewide, not all parts of the solution should be Service-oriented. A good enterprise architect knows how and when to apply SOA. Knowing when and how to apply SOA is 80% of the battle. Managing the Service lifecycle, including continuous quality, Service modeling, governance, and management is the rest. When companies seek to implement hundreds of unproven Services against a business case that is not justified using millions of dollars of untested technologies, they risk significant failure. And when those SOA projects fail to deliver as promised, do they blame their own efforts, the products they used, or their methods? Of course not. They rest the blame on SOA itself.

On the flip side, well-scoped SOA projects are often remarkably successful. Most case studies of SOA success relate to organizations fixating on a particular business problem, perhaps at even the departmental level, and solving that in a Service-oriented way. The champions of SOA know full well that success comes from focusing the solution on a particular problem and solving it well. “Think big, start small, succeed often” is the refrain of successful architects.

Enterprise Architecture Teams
Our previous ZapFlash lambasted individuals that simply had no credibility, training, or experience to call themselves enterprise architects. Where individuals fail, sometimes teams succeed. Indeed, the problem is that very few individuals have the skills to understand the business combined with the technical acumen necessary to understand how SOA best practices can drive business solutions. But, properly constructed enterprise architecture teams can have the best of all worlds. In most successful SOA projects, there exists a strong, multi-role, cross-organizational team that helps to provide all the perspectives needed to understand the full scope of enterprise architecture.

As we related in the parable about four blind men and the elephant, IT departments have necessarily grown into siloed organizations that have neither the skills nor resources to appropriately manage and view all aspects of the organization. While one way to get that visibility is to hire enterprise architect experts that have the necessary skills to see all parts of the business and technology, getting those resources will become an increasing challenge. Most firms can achieve the same effect simply by building cross-functional teams that include line of business representatives, application development, data modeling, process modeling, security, and network operations roles, just to name a few. While it is certainly preferable to have a knowledgeable EA individual on staff, sometimes the team is necessary. However, significant care must be taken to insure that political issues and design-by-committee effect doesn’t happen. Even EA Teams need to be guided by best practices and have validation and auditing, especially when there’s no single individual with EA expertise. A number of ZapFlashes talk about building the right EA team to make SOA a success.

Lines of Business Champions vs. Tech Insiders
ZapThink can trace many instances of SOA success to the fact that someone from the business has identified a specific need that can only be solved by one of SOA’s four points of ROI. Where business can see a solution, sometimes IT is blind. Too many times IT departments try to use the SOA hammer to approach every problem as a nail. Indeed, the symptom of ill-scoped SOA projects is partially caused by this inability (or inexperience) to utilize SOA properly. But more than simply letting the business determine the scope of a SOA solution, the business part of the organization is also less resistant to the concept of SOA and its speedy and successful implementation than IT.

As we detailed in our Finding the Real Barrier to SOA Adoption ZapFlash, the IT organization, more often than not, resists implementation of SOA even in the face of compelling business propositions. Technologists often get stuck in defensive positions regarding particular technological approaches (REST vs. Web Services anyone?). These arguments relate little, if at all, to the business problem at hand and tend to devolve into pedantic arguments of semantics. The truth of the matter is that any technology approach that can solve a business problem is valid, and probably will be displaced in favor of a better one in a few years anyways.

While technologists pride themselves in technological understanding, they are often the ones that get suckered into buying the Vendor-driven Architecture (VDA) story. While technologists understand little about the business, they can easily understand a technology story, which vendors tend to pitch. Business users already abstract technology in their thinking. In their mind, all technologies are alike as long as they meet the business needs, policies, costs, and timeframe. This makes line of business champions the most successful starting point for SOA. Where an LOB champions SOA, we see rapid success. Where the success of SOA depends on an IT-only champion, we see SOA projects stuck in the IT-political and technology-religious quagmire.

Technology Best-of-Breeds
The SOA vendor landscape is steadily creeping towards single-vendor suites and platforms. Oracle's potentially pending acquisition of BEA will only further cement in some customers minds that SOA infrastructure, many currently branded as ESBs, are best offered by large vendors as part of platform suites that address a wide range of SOA runtime issues. However, SOA does not necessarily favor this suite approach. Indeed, SOA thrives in an environment of heterogeneity and continuous change, and as such, proper architectures abstract technology implementations, which would mean that the value of a suite in a SOA is no greater or less than the value of best-of-breed components. One can also reason that unless an organization reigns in or prevents change, it is quite unlikely that any organization can ever solidify its implementation on a single vendor’s suite. Technology change, like business change, is continuous, and as such it makes little sense to solidify the architecture to a particular technology implementation. Yet, too many organizations let the vendors drive their architectural decisions.

Not all technology providers are pushing the VDA story that is so detrimental to the long-term success of SOA. Best-of-breed SOA infrastructural technologies aim to solve point problems such as simply providing reliable Service intermediary capabilities, policy enforcement, or metadata management. Such technologies and vendors are not in the business of trying to lock you into their suite and will correctly advise their customers that the success of the architecture is entirely the responsibility of the end user. Where companies treat technology suppliers as simply enablers and not as packaged “architecture” vendors, we see success. Where companies come to rely on vendors to solve their problems without requiring the customer to create and manage their own architecture, we see problems.

The ZapThink Take
Just because someone points out the downsides of something does not mean they no longer support it. Indeed, ZapThink has long championed the appropriate use of SOA to solve lingering business problems. In fact, ZapThink has long advocated a balanced approach to considering any technological trend, starting with our very first report – the Pros and Cons of XML. In the same fashion, we offer in this last set of ZapFlashes a Pros and Cons of SOA of sorts. Smart architects and business managers who seek to apply SOA to solve their problems should have a firm grasp as to when SOA will provide success and when it is being inappropriately shoe-horned. Such a grasp includes realistic assessments of the people, technologies, processes, and methods of the existing environment and proposed solution, and the drawbacks of any potential solution. Having such a balanced approach serves to further the likelihood of success with SOA, and doesn’t by any means kill the value of SOA itself.

I really enjoyed the ZapThink post this week on the "Elephant in the Room" that no-one wants to discuss as it relates to SOA :: Vendor Driven Architectures, or as ZapThink calls it, VDA!

It made me recall one of my favorite SOA goofs from the "Greg the Architect" series on SOA, where it is NOT a struggle to figure out which OEM is babbling their individual (and hysterical) SOA marketing pitches!

Excerpted in Full:

Avoid Vendor Driven Architecture (VDA)! / Podcast preview of London Event

When looking at the technology buying patterns in the world of SOA, there is one common thread. The Global 2000 and many government agencies purchase SOA technology from their existing vendors, no matter what their needs or requirements might be. I call these purchasing solutions "comfort technologies" since they consider the relationship with the vendor before the value of the technology itself. It's comforting to deal with the same company, people, and platform.

Moreover, many of the companies that work with "comfort technologies" allow the vendors to design and define their solution. I call these vendor-driven architectures, or VDAs, but they are always called a Bad Idea if you understand the core issues.

What's most disturbing is that this situation seems to be an emerging buying pattern. Architects make the "SOA deal" with a vendor in hopes that some magical technology will emerge from the box that will suddenly make their existing, poorly-defined and designed architecture, agile, loosely coupled, and return quickly on the investment. Won't happen without the work, and there is no magic technology that can enable SOA. After all, SOA is architecture, not technology.

In the long run this means failed SOA initiatives where the blame is put on the concept, or perhaps on the product, but never the architecture or the architect, where and when the work needed to get done. We've made similar mistakes over the years and are paying the price right now. We have some risk here that history could be repeating itself, if we're not careful.

The influence of the larger SOA vendors is very much a force in the market today, and should be considered with some common sense advice that may not be what you want to hear. Indeed, this approach is more complex, but ultimately it is the right thing to do. The first step is learning to recognized VDA, and don't let it kill your SOA before it has a chance to do some good. There is too much at risk.

Moving Out of Your Comfort Zone
So, why are organizations looking toward their "comfort vendors" and "comfort technologies"? It's a matter of the path of least resistance and a lack of education.

It's a path of least resistance because the relationship is already established, and you don't have to go through the hassle of getting to know new players, or many new players. Thus, it's easier to purchase the latest SOA stack from good old Bob than it is to go through the detailed requirements, analysis, and design that is really required to build an effective SOA.

To the education issues, many who purchase the technology don't understand the first thing about SOA, nor their own requirements and business drivers for that matter. Needed is an effective knowledge transfer project to understand the basics of the process of building a SOA. This includes the process of figuring out your own requirements, which encompasses a semantic-level, service-level, and process-level understanding of the problem domain or enterprise. Then, and only then, should you begin pinging vendors, including your comfort vendors, about technology that may work best for you. In many cases, it will be a collection of technology from many vendors. For sure, not comfortable, but necessary.

Of course beyond the issues of always leveraging the same "comfort vendors" is the issue of vendors actually creating the architecture for the enterprise. This is wrong at so many levels it's difficult to know where to start. However, it's a huge issue out there as the millions of marketing dollars spent by the larger SOA vendors are having their effect. There are three major areas of concern:

First, vendors who drive "SOA certification" programs. While they are sold as an objective SOA education, the end result is another mechanism to both get into deals and lead their students to the promised land of their SOA technology stack. Not that this is a trick by the vendors; it's not. They are merely acting in their best interest, but in many cases, it may not be in yours. Indeed, by not considering other approaches or other technologies, your SOA solution could easily be sub-optimal, thus limit or eliminate the return on the investment, and may need replacing sooner than you would like.

Second, technology vendors who actually define, design, and build your SOA. The issue here is the fact that you will typically end up with that vendor's SOA stack. Thus, you miss opportunities for efficiencies that may come from other technology because it's not in the best interest of the vendor who's building your SOA to consider them. Again, not that the vendors are doing something wrong; they are just acting in their own interest which is always to sell their technology. Also, it matters not if this is a separate service arm of the vendors; the loyalties are there nonetheless.

Third, SOA vendors that sell "one stop shopping" for SOA. The "super SOA stack" approach is getting played a lot, driven by a large number of marketing dollars from those vendors. However, it's rarely the optimal solution for your requirements. Indeed, architects are not doing their job by simply pointing at a vendor and saying yes. They must have a complete understanding of their own needs, tactical and strategic, before defining the proper solution. Then and only then, can they select the technology that is optimal for the requirements. Seems logical, but the most common pattern is to either purchase the technology today and then figure out what it is and how it fits later. SOA is something you do, not something you buy, thus the real value is within the process of getting to your solution. All SOA initiatives are different. Different business requirements, different ways of driving business processes, managing services, and thus very different technology solutions. Sorry, no "one stop shopping."

The Right Path
So, if your vendor does not define your SOA, and you need to look at many technologies beyond your comfort vendors, what's an architect to do? It's really a matter of finding the right set of steps that are right for you, engage objective outside experts when needed, and, most of all, take complete responsibility for the architecture.

This means understanding your own business drivers, or the business reasons for building the SOA. Define just what success will be, the proper amount of investment, strategic considerations around the growth of the business, and committed resources for the execution toward SOA.

Next comes the hard work of figuring out your own issues and requirements, including a complete and detailed understanding of the data present in the problem domain or enterprise, as well as an inventory of candidate services, and a fully decomposed understanding of the major business processes.

From there you move on to service design and development, creating a SOA governance model for your architecture, as well as a complete systemic security plan. Once all of that is complete, you are finally ready to begin defining your requirements for the technology, perhaps using data points from some proof of concept work done earlier.

There is much more detail to the process of defining, designing, and building SOA than we can put forth in this ZapFlash. However, it's clear that this process is not trivial, and certainly not something that should be handed over to technology vendors who will almost certainly take a technology-oriented approach. Instead, it's about the business issues of the technology. Missing that point could cost you millions over the year in lost productivity and lack of agility, considering the increased risk that your architecture is likely to be sub-optimal.

The ZapThink Take
The core problem with VDA is that the vendor is not a disinterested third party. They are there to sell technology. So, no matter what your requirements are, their technology will meet the need. Chances are, your requirements are not given proper consideration and, chances are just as likely that the technology solution is not optimal for your problem domain or enterprise. Moreover, you'll probably pay too much for the VDA SOA solution versus a best-of-breed approach.

Don't fall into this trap. While vendors are good people who want to make you successful, they are not responsible -- nor should they be -- for your core SOA. They are brought into the mix only after you understand your own issues, and only after you have considered all possible technology solutions. While they may know a lot about SOA, it's in the context of their own stuff, so don't be fooled that you're getting objective advice. This caveat includes certification courses offered by vendors. Drive your own needs, and leverage independent, outside assistance to validate your work, or help you through the process.

You may find that the "comfort technology" is the proper technology. The odds are just as likely that you will not. Our fear is that many companies and government agencies are not going through the proper steps to insure that their solution will provide maximum value. In the end, it's all about the bottom line.

ZapThink :: Research - Avoid Vendor Driven Architecture (VDA)! / Podcast preview of London Event

McKinsey Consulting has lot's of innovative thinking under their roof -- this thought leadership piece is VERY entertaining as well!

Exceperted in FULL:

Building the civilized workplace

Nasty people don't just make others feel miserable; they create economic problems for their companies.

Robert Sutton

2007 Number 2

Lars Dalgaard is CEO and cofounder of SuccessFactors, one of the world’s fastest-growing software companies—and the fastest with revenues over $30 million. Dalgaard recently listed some milestones that his California-based company passed in its first seven years:

• the use of its software by more than two million employees at over 1,200 companies around the world
• the use of its software by employees speaking 18 languages in 156 countries
• growth three times that of the company’s nearest competitor
• enthusiastic recommendations of the product by nearly all customers
• dramatically low employee turnover
• employing no jerks

That’s right—no jerks—although the word SuccessFactors really uses (except on its Web site) is a mild obscenity that starts with the letter A and sort of rhymes with “castle.” All the employees SuccessFactors hires agree in writing to 14 “rules of engagement.” Rule 14 starts out, “I will be a good person to work with—not territorial, not be a jerk.” One of Dalgaard’s founding principles is that “our organization will consist only of people who absolutely love what we do, with a white-hot passion. We will have utmost respect for the individual in a collaborative, egalitarian, and meritocratic environment—no blind copying, no politics, no parochialism, no silos, no games—just being good!”

Dalgaard is emphatic about applying this rule at SuccessFactors because part of its mission is to help companies focus more on performance and less on politics. Employees aren’t expected to be perfect, but when they lose their cool or belittle colleagues, inadvertently or not, they are expected to repent. Dalgaard himself is not above the rule—he explained to me that, given the pressures of running a rapidly growing business, he too occasionally “blows it” at meetings. At times, he has apologized to all 400-plus people in his company, not just to the people at the meeting in question, because “word about my behavior would get out.”

As Dalgaard suggests, there is a business case against tolerating nasty and demeaning people. Companies that put up with jerks not only can have more difficulty recruiting and retaining the best and brightest talent but are also prone to higher client churn, damaged reputations, and diminished investor confidence. Innovation and creativity may suffer, and cooperation could be impaired, both within and outside the organization—no small matter in an increasingly networked world.

The problem is more widespread than you might think. Research in the United Kingdom and the United States suggests that jerk-infested workplaces are common: a 2000 study by Loraleigh Keashly and Karen Jagatic¹ found that 27 percent of the workers in a representative sample of 700 Michigan residents experienced mistreatment by someone in the workplace. Some occupations, such as medical ones, are especially bad. A 2003 study² of 461 nurses found that in the month before it was conducted, 91 percent had experienced verbal abuse, defined as mistreatment that left them feeling attacked, devalued, or humiliated. Physicians were the most frequent abusers.

There is good news and bad news about workplace jerks. The bad news is that abuse is widespread and the human and financial toll is high. The good news is that leaders can take steps to build workplaces where demeaning behavior isn’t tolerated and nasty people are shown the door.

How workplace jerks do their dirty work

Researchers who write about psychological abuse in the workplace define it as “the sustained display of hostile verbal and nonverbal behavior, excluding physical contact.” At least for me, that definition doesn’t quite capture the emotional wallop these creeps pack. The workplace jerk definition I use is this: do people feel oppressed, humiliated, de-energized, or belittled after talking to an alleged jerk? In particular, do they feel worse about themselves?

Workplace jerks do their dirty work in all sorts of ways; I’ve listed 12 common ones—the dirty dozen—to illustrate the range of these subtle and not-so-subtle moves, which can include physical contact (Exhibit 1). Researchers who study workplace abuse and bullying have identified scores of others. I suspect you can add many more that you’ve seen, personally experienced—or committed.

Lists like these are useful but leave a sterilized view of how workplace jerks act and the damage they inflict. Stories, often painful ones, are necessary to understand how workplace bullies demean and de-energize people. Consider the story of this victim of multiple humiliations:

“Billy,” he said, standing in the doorway so that everyone in the central area could see and hear us clearly. “Billy, this is not adequate, really not at all.” As he spoke he crumpled the papers that he held. My work. One by one he crumpled the papers, holding them out as if they were something dirty and dropping them inside my office as everyone watched. Then he said loudly, “Garbage in, garbage out.” I started to speak, but he cut me off. “You give me the garbage, now you clean it up.” I did. Through the doorway I could see people looking away because they were embarrassed for me. They didn’t want to see what was in front of them: a 36-year-old man in a three-piece suit stooping before his boss to pick up crumpled pieces of paper.³

The damage done

The human damage done by that kind of encounter is well documented—especially the harm that superiors do to their subordinates. Bennett Tepper studied abusive supervision in a representative study of 712 employees in a midwestern city.⁴ He asked them if their bosses had engaged in abusive behavior, including ridicule, put-downs, and the silent treatment—demeaning acts that drive people out of organizations and sap the effectiveness of those who remain. A six-month follow-up found that employees with abusive supervisors quit their jobs at accelerated rates. Those still trapped felt less committed to their employers and experienced less satisfaction from work and life, as well as heightened anxiety, depression, and burnout. Dozens of other studies have uncovered similar findings; the victims report reduced levels of job satisfaction, productivity, concentration, and mental and physical health.

Nasty interactions have a far bigger impact on the mood of people who experience them than positive interactions do. Recent research shows just how much. Theresa Glomb, Charles Hulin, and Andrew Miner did a clever study⁵ in which 41 employees of a manufacturing plant in the Midwest carried palm-size computers for two to three weeks. At four random intervals throughout the workday, each employee had to report any recent interaction with a supervisor or a coworker and whether it was positive or negative, as well as their current mood. The researchers found that negative interactions affected the moods of these employees five times more strongly than positive ones.

All these factors suggest an effect on costs. One reader of a short article I wrote on workplace jerks⁶ felt that more companies would be convinced if they estimated “the total cost of jerks,” or TCJ (Exhibit 2). If you want to develop a rough estimate of your company’s TCJ, take a look at my list of possible costs and attach your best monetary estimate to each, as well as to any other factors you regard as relevant. This exercise can help you face up to the damage that jerks do to your organization. When I told a Silicon Valley executive about the TCJ method, he replied that it was more than a concept at his company. Management had calculated the extra costs generated by a star salesperson—the assistants he burned through, the overtime costs, the legal costs, his anger-management training, and so on —and found that the extra cost of this one jerk for one year was $160,000.

Finally, if word leaks out that your organization is led by mean-spirited jerks, the damage to its reputation can drive away potential employees and shake investor confidence. Neal Patterson, the CEO of Cerner, learned this lesson in 2001 when he sent an e-mail intended for just the top 400 people in this health care software company. Patterson complained that few employees were working full 40-hour weeks and that “as managers—you either do not know what your employees are doing; or you do not care.” Patterson said that he wanted to see the employee parking lot “substantially full” from 7:30 AM to 6:30 PM weekdays and “half full” on Saturdays. If that didn’t happen, he would take harsh measures. “You have two weeks,” he warned. “Tick, tock.”⁷ Patterson’s e-mail was leaked on the Internet, provoking harsh criticism from management experts, including my Stanford colleague Jeffrey Pfeffer, who described it as “the corporate equivalent of whips and ropes and chains.” Pfeffer went a bit overboard for my taste. But investors weren’t pleased either: the company’s stock value plummeted by 22 percent in three days. Patterson handled the aftermath well: he sent an apology to his employees and admitted that he wished he had never sent the e-mail. The share price did bounce back. Patterson learned the hard way that when CEOs come across as bullies, they can scare their investors as well as their underlings.

Enforcing the no-jerks rule

Executives who are committed to building a civilized workplace don’t just take haphazard action against one jerk at a time; they use a set of integrated work practices to battle the problem.

At the workplaces that enforce the no-jerks rule most vehemently and effectively, an employee’s performance and treatment of others aren’t seen as separate things. Phrases like “talented jerk,” “brilliant bastard,” or “a bully and a superstar” are oxymorons. Jerks are dealt with immediately: they quickly realize (or are told) that they have blown it, apologize, reflect on their nastiness, ask for forgiveness, and work to change their ways. Repeat offenders aren’t ignored or forgiven again and again—they change or depart.

Five intertwined practices are useful for enforcing the no-jerks rule.

Make the rule public by what you say and, especially, do

Plante & Moran, a company on Fortune’s “100 Best Places to Work” list for nine years in a row, proclaims its rule openly: “The goal is a 'jerk-free’ workforce at this accounting firm,” and “the staff is encouraged to live by the Golden Rule.” At Barclays Capital, COO Rich Ricci says that “we have a no-jerk rule around here,” especially in selecting senior executives. BusinessWeek explains what this means for the employees of Barclays Capital: “Hotshots who alienate colleagues are told to change or leave.”⁸

Talking about the rules is just the first step; the real test happens when someone acts like a jerk. If people don’t feel comfortable blowing the whistle on the offender, your company will both be seen as hypocritical and fill up with jerks, so don’t adopt the rule unless you mean it. SuccessFactors shows how to back talk with action. Consider this post on the company’s public blog site by company employee Max Goldman:

My own personal experience with [the no-jerks rule] is very simple. Once, my boss was being a jerk. I told him so. Instead of getting mad, he accepted the comment and we moved on. Later, he thanked me for telling him. My boss thanked me for calling him a jerk. Let me repeat that. My boss thanked me for calling him a jerk. Calling the behavior what it was helped everyone work better together and get more done. Can you do that at your company?

Weave the rule into hiring and firing policies

Consider how the Seattle law firm Perkins Coie, which earned a spot on Fortune’s “100 Best Places to Work” list in 2007 for the fourth year in a row, applies the rule during job interviews. Partners Bob Giles and Mike Reynvaan were once tempted to hire a rainmaker from another firm but realized that doing so would violate the rule. As they put it, “We looked at each other and said, 'What a jerk.’ Only we didn’t use that word.”⁹

Similarly, Southwest Airlines has always emphasized that people are “hired and fired for attitude.” Herb Kelleher, the company’s cofounder and former CEO, shows how this works: “One of our pilot applicants was very nasty to one of our receptionists, and we immediately rejected him. You can’t treat people that way and be the kind of leader we want.”¹⁰ As Ann Rhoades, a former Southwest vice president, told me, “We don’t do it to our people; they don’t deserve it. People who work for us don’t have to take the abuse.”

Teach people how to fight

The no-jerks rule doesn’t mean turning your organization into a paradise for conflict-averse wimps. People in the best groups and organizations know how to fight. Intel, the world’s largest semiconductor maker, gives all full-time employees training in the “constructive confrontation” that is a hallmark of the company’s culture. Leaders and corporate trainers emphasize that bad things happen when the bullies win using personal attacks, disrespect, and intimidation. When that happens, only the loudest and strongest voices get heard; there is no diversity of views; communication is poor, tension high, and productivity low; and people first resign themselves to living with the nastiness—and then resign from the company.

To paraphrase a primary theme in Karl Weick’s classic book, The Social Psychology of Organizing,¹¹ this approach means learning to “argue as if you are right and to listen as if you are wrong.” That is what Intel tries to teach through lectures, role-playing, and, most essentially, through observing the way managers and leaders fight—and when. The company’s motto is “disagree and then commit,” because second-guessing, complaining, and arguing after a decision is made sap effort and attention and thus make it unclear whether the decision went wrong because it was a bad idea or because it was a good idea implemented with insufficient energy and commitment.

Apply the rule to customers and clients too

Organizations that are serious about enforcing the no-jerks rule apply it not just to employees but also to customers, clients, students, and everyone else who might be encountered at work. They do so because their people don’t deserve the abuse, customers (or taxpayers) don’t pay to endure or witness demeaning jerks, and persistent nastiness that is left unchecked can create a culture of contempt infecting everyone it touches.

The late Joe Gold—the founder of Gold’s Gym, which now has more than 550 locations in 43 countries—applied a variation of the no-jerks rule to customers. He didn’t mince words: “To keep it simple you run your gym like you run your house. Keep it clean and in good running order. No jerks allowed, members pay on time, and if they give you any crap, throw them out.” Gold applied the rule to customers from the time he opened his first gym, a block from Muscle Beach, in Venice, California, where early customers included Arnold Schwarzenegger.

Manage the little moments

Putting the right practices and policies in place is useless if they don’t set the stage for civilized conversations and interactions. People must treat the person in front of them, right now, in the right way, and they must feel safe to point out when their peers and superiors blow it. The power of efforts to work on “the little moments” can be seen in an organizational change at the US Department of Veterans Affairs. To reduce the bullying of employees, psychological abuse, and aggression at 11 sites with more than 7,000 people, each site appointed an action team of managers and union members that developed a customized intervention process. But there were key similarities among all of the sites: employees learned about the damage that aggression causes, used role-playing exercises to get into the shoes of bullies and victims, and learned to reflect before and after they interacted with other people. Action team members and site leaders also made a public commitment to model civilized behavior themselves. At one site, for example, managers and employees worked to eliminate seemingly small slights such as glaring, interruptions, and treating people as if they were invisible—small things that had escalated into big problems.

The results included less overtime (saving taxpayers’ money) and sick leave, fewer complaints from employees, and shorter waiting times for the veterans who were the patients at the 11 sites. A comparison of surveys undertaken before and after these interventions, which started in mid-2001, found a substantial decrease, across the 11 sites, in 32 of 60 kinds of bullying—things like glaring, swearing, the silent treatment, obscene gestures, yelling and shouting, physical threats and assaults, vicious gossip, and sexist and racist remarks.

Being a jerk is contagious

The most important single principle for building a workplace free of jerks, or to avoid acting like one yourself, is to view being a jerk as a kind of contagious disease. Once disdain, anger, and contempt are ignited, they spread like wildfire. Researcher Elaine Hatfield calls this tendency “emotional contagion”:¹² if you display contempt, others (even spectators) will respond in much the same way, creating a vicious circle that can turn everyone in the vicinity into a mean-spirited monster just like you. Experiments by Leigh Thompson and Cameron Anderson, as they told the New York Times,¹³ show that when even compassionate people join a group with a leader who is “high energy, aggressive, mean, the classic bully type,” they are “temporarily transformed into carbon copies of the alpha dogs.” Being around people who look angry makes you feel angry too. Hatfield and her colleagues sum up this emotional-contagion research with an Arabic proverb: “A wise man associating with the vicious becomes an idiot.”

A swarm of jerks creates a civility vacuum, sucking the warmth and kindness out of everyone who enters and replacing them with coldness and contempt. As we have seen, organizations can screen out and reform these contagious jerks and, if those efforts fail, expel them before the infection spreads. But treating nastiness as a contagious disease also suggests some useful self-management techniques.

Consider some wise advice that I heard from the late Bill Lazier, a successful executive who spent the last 20 years of his career teaching business and entrepreneurship at Stanford. Bill gave this advice to our students: when you get a job offer or an invitation to join a team, take a close look at the people you will work with, successful or not. If your potential colleagues are self-centered, nasty, narrow minded, or unethical, he warned, you have little chance of turning them into better human beings or of transforming the workplace into a healthy one, even in a tiny company. In fact, the odds are that you will turn into a jerk as well.

About the Author

Robert Sutton, professor of management science and engineering at Stanford University, is cofounder of its Hasso Plattner Institute of Design. This article is adapted from his book The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn’t, New York: Warner Business Books, 2007.

As the handful of my readers know, I am a big fan of Phil Lay at TCG-Advisors, and rarely pass up the chance to post his GREAT newsletter, Under the Buzz. This month's issue is especially relevant to my focus on SaaS, as Phil does an amazing job of breaking down the hype & making an objective assessment of the value-proposition of SaaS for SME & SMB organizations, particularly in how he RE-define's the acronymn SaaS!

Excerpted in full:

Under the Buzz

Commentary on Business Strategy Issues for
Executives in Enterprise Systems & Software Companies
May 22, 2007 - Vol. 8, Number 2

Under the Buzz is an email "viewsletter" authored by Philip Lay, managing director at TCG Advisors, a Silicon Valley-based firm that helps to catalyze the innovation and transformation efforts of executive teams in systems and software companies. This journal is published periodically and delivered free to subscribers via email. It is also posted on TCG Advisors' website, http://www.tcg-advisors.com/Library/utb/utb.htm, back issues are also available.

Does this dialogue remind you of anything you've seen before...
Pointy Head to Asok: "Asok, I need you to create a Powerpoint presentation that will save our department from being eliminated."
Asok looks puzzled.
Pointy Head: "You must quantify the unquantifiable. And that can only be done by a process that I call lying."
Asok: "Lying is a process?"
Pointy Head: "It can be, if you use enough slides."

Scott Adams - On the power of Powerpoint, March 2007


Don't Forget the Other "SaaS" Offerings

For several years now vendors and industry pundits have been abuzz about Software as a Service (SaaS). I'm not sure the same can be said for customers and users, who have gradually started to adopt as they make sense of the various SaaS offerings and discover those that they believe provide value. But since when have vendors needed the blessing of customers before working themselves into a real frenzy about "disruptive business models" as well as "new delivery models" that customers are supposedly desperate for.
SaaS even has its self-annointed standard bearer today – Salesforce.com. Marc Benioff, the company's CEO is well-known for periodically proclaiming the "end of software" as we know it, by which he supposedly means any packaged software installed from a shrink-wrapped box, or professionally implemented "on premise." Benioff learned his rhetorical skills at Oracle, where "strategy" is considered a martial art more about identifying an enemy you want to kill than thinking about how to help customers solve problems, but to his credit he has built a leading business in the SaaS mold.
As marketed today, SaaS incorporates at least three new "delivery" features as compared with traditional software packages:

1. Accessed as an internet service rather than installed as a traditional software product, on the hard drive of a client and/or server computer system(*);
2. Acquired mainly via a fixed-term or variable-term rental contract, in exchange for a monthly or annual fee that needs to be renewed after the term expires, compared to a one-time license (shrink-wrapped products for consumers) or a perpetual license (complex products for enterprise customers);
3. Actualized via contract renewal rather than via purchase of upgrade (consumer license) or maintenance contract (enterprise licenses).

 Strictly speaking, SaaS comes in two different flavors, (a) internet-based and (b) managed software installations involving "normal" licensed on-premise software that the licensee company has contracted a third party to run for them offsite. This article is about the first flavor.

Besides having its resident "religious zealot" as well as a number of young, aggressive competitors such as RightNow, Employease, Xactly, and SugarCRM, this new approach has what many see as a natural target market ready for cultivating. In fact, in 2006 the SaaS market was starting to take off, evidenced by $4B in subscription revenues worldwide. IDC predicts that by 2009 SaaS will generate $11B in revenues, representing an impressive growth rate (CAGR) of 21%. The universe of customers that has been the first main target and adopter of SaaS applications is the same one that has always been poorly served by enterprise and consumer product vendors alike. It is the legions of SMB (Small & Medium Business) or SME (Small & Medium Enterprise) organizations who today represent a wide-ranging class of customer that is increasing its spending on IT solutions more than in the past due to the availability of easy-to-understand-and-use on-demand software at comfortably consumable monthly subscription rates.

This enormous group of medium-sized and smaller companies – plus, more importantly, thousands of parts of larger organizations such as company subsidiaries, regional offices, distribution centers, warehouses, gas stations, one-location stores, restaurants, hotels, medical and dental clinics, offices of local and state government agencies, schools, universities, and many others – has had a tough time being properly serviced by IT vendors until now. The reason is that, while they have always tended to have specific requirements and preferences sometimes resembling those of larger and more structured organizations, their budgets, resources, and appetite for IT spending have been much more aligned with those of individual consumers in the old days – and it doesn't take an Iranian nuclear scientist to know that such a contradiction (complex requirements but low budgets) doesn't make for a profitable existence for technology vendors.
With SaaS, vendors seem to have awakened to the possibility of achieving profitable growth because of the widespread availability of inexpensive – let alone, free – software tools, and the opportunity to market, sell, and support their offerings inexpensively via the internet.

However, producing a successful SaaS offering can be quite a challenge, especially for companies not designed for operationally excellent execution – which includes most existing on-premise software and systems vendors, as well as systems integration companies with software development pretensions. For one thing, on-demand software needs to have virtually bulletproof reliability and stability; for another, performance needs to be fast and predictable; a third factor is that it needs to be presented in the form of a complete enough solution to keep customers satisfied despite being standard and non-customized; lastly, the user interface must be truly "intuitive" for users.
But what about "the other SaaS?" Excuse the tepid wordplay, but I'm referring to "Service as a Service" and its close relative "Service as a (piece of) Software."

SaaS #2 – "Service as a Service"

Why has no one until recently been talking about the continuing need that customers have for services to accompany their SaaS investments? After all, complex problems in business and governmental organizations haven't disappeared, particularly those that require IT in some form or another. All the emphasis to date on the product delivered as a "service" (i.e., by subscription as opposed to a perpetual license plus maintenance) merely shows how little the software itself "matters" today as the be-all and end-all. And even if the price of the software portion of the overall "service" goes to zero, customers will still pay for actual services that help them to solve important business and other problems. The difference will be in the way that services are delivered.

Coinciding with the timing of my research for this article, I saw in a recent issue of the email newsletter SandHill.com an article titled "Services 2.0 – A New World for Systems Integrators." The author, Chris Barbin, is CEO of Appirio, a services company that provides strategy, implementation, and adoption services, as well as application development and integration services, aimed at helping companies to accelerate the adoption of on-demand solutions such as Salesforce.com. Like most of his staff, Barbin has a background in professional services for classic enterprise on-premise systems implementations.
Barbin describes some of the services that customers value highly beyond basic configuration, end-user training, and minor customizations, including the following:

􀂊 Domain expertise applied to helping customers know how to achieve business results from the on-demand application;
􀂊 Technical advice and training on how to use the software service most effectively;
􀂊 Customization to fit enterprise-specific requirements;
􀂊 Basic technical support and escalation management;
􀂊 Mashing up of business processes to integrate departmental or functional implementations of on-demand applications;
􀂊 Rationalization of on-premise packaged and custom applications;
􀂊 Migration from on-premise to on-demand computing and development platforms.

Some items on this list, such as "technical advice," "customization," "migration," might sound suspiciously like traditional professional services, but it's important to distinguish between what customers need from their vendors – i.e., high-value assistance in a number of areas – and how they are delivered. What is likely to no longer work is the conventional time and materials model of expensive "manual" services, now seen to be highly inefficient unless enabled by increasing use of automation. What must be made to work is to have virtually every service substantially automated and deliverable online once the service in question has been transformed from a custom, never-done-before, thing to a repeatable and relatively routine activity.

SaaS #3 – "Service as a (piece of) Software"

As these services become more repeatable and deliverable via low-touch automation, the third leg in the stool, "Service as a (piece of) Software," enters the scene. Increasingly, on-demand vendors are providing chat- or IM-based support dialoguing with users. Members of virtual commerce networks are immediately hooked up to their trading partners via the "operating platform" provided by a technology and services vendor that might have described itself as a software company in the old days, but instead has designed its business as full-time "commerce network enablement." For example, Four51, an emerging player in the print distribution business, performs exactly this function.

In this new environment every service that today is delivered via human interaction becomes increasingly automated, from trading strategy, to project planning, to systems design, to application customization, to user training, to implementation management, to problem detection and resolution, and so on.
In an upcoming issue of this journal we shall describe the growing phenomenon of Business Network Transformation that has been developing for over a decade and is now gathering steam. The on-demand "platform," aided by an overall re-architecture around modules of software and other "services" delivered through the internet, will in my view become the primary base for tech companies to contribute to the massive shift dictated by globalized competition. Virtually every organization in every industry, value chain or business ecosystem – from aerospace to waste management – is now faced with either applying or being subjected to transformational change in their traditional business, due to the impact of global competition and to the "democratization" of IT via the internet.

Over time, everything is likely to blend into a multiple "deliverable" in the form of one type of "service" or another, whether you are talking about more automated or more manual services. As this happens, vendors and customers alike will become less preoccupied with "business model" issues or with the distinction between on-demand and on-premise delivery vehicles – and more focused on solving their business problems with the most suitable tools on hand.
Under the Buzz offers commentary on enterprise software and systems business and management issues. The goal is to provide provocative and accurate insights into the latest events and thinking shaping this continually evolving technology sector. Under the Buzz also provides commentary on strategies for building sustainable competitive differentiation and maximizing market valuation.

©2007 - Philip Lay

Disclosure: From time to time, the author and/or his firm may hold investments in, or provide advisory services to, one or more companies cited in this viewsletter.

I have covered SandHill Partner Analysis often in the past, and would strongly assert that the Saugatuck Research Opinion excerpted below has comprehensively captured the risk-factors that all Enterprises implementing SOA need to address - I especially like the "Vendors must lend a hand" view.

In full: 

New customer research indicates that SOA adoption may be slower than expected. Vendors can capitalize by stepping up with expertise, governance and improved offerings.

By Bill McNee, Bruce Guptill and Mike West, Saugatuck Technology

Jan. 14, 2007

Print page

Services-oriented architecture (SOA) is a far greater challenge than most companies realized when they began to adopt and deploy SOA. Rework, failed projects, and immature technologies have characterized many early user enterprise SOA deployments. Moreover, users often confuse such typical project benefits as application integration with the true, longer-term benefits of SOA, such as more responsive and agile application architectures and reuse of services.
A core driver of these challenges is a lack of IT and SOA planning and governance among user business and IT management. The results for user enterprises include increased complexities and costs, and dramatically reduced SOA benefits. The results for vendors are too-often frustrated and disappointed customers.
In order to help deliver SOA success, today’s software companies need to accept the reality of current SOA deployments and capitalize on the opportunity to offer appropriate products, governance and expertise.
A Study of SOA Reality
Saugatuck recently concluded an extensive research program focusing specifically on user SOA adoption – including 40 interviews with CIOs and senior IT architects. Supplementing this research were 12 “deep dive” briefings with leading software and services vendors focused on SOA.
We have published the data, analysis, and our insights in a new 30-page research report, SOA Reality Check: Three Waves of Adoption through 2012 (SSR-305, 28Dec06), now available through Saugatuck’s website.
Our research clearly shows SOA experiencing slow, but steady, adoption among large and mid-sized enterprises – but that SOA is still in very early deployment cycles. The report findings on deployment include:

• Most firms deploying SOA are focused either on early-stage planning, and/or trial deployment around legacy application integration.
• Of the thirty-seven percent of executives interviewed who indicated they are currently in a limited or full production stage of SOA deployment, it should be noted that upon further discussion it became clear that many are merely managing a collection of web services, and have yet to make a strong commitment to SOA as a management discipline (as opposed to an integration technology).
• Implementers are taking a technology-led approach to SOA deployment – whereas research that Saugatuck conducted in early 2005 suggested that many early adopters were viewing SOA as needing to be a business-led initiative (see Strategic Perspective Managing the Speed Bumps on the Road to SOA, MKT-161, 31Mar05, as well as Research Alert SOA Adoption: Business Benefits Drive Strong Adoption, RA-206, 02Nov05).
• The key long-term driver of SOA adoption – cost reduction – outdistances all others by a two-to-one margin. Unlike such technology revolutions of the past as client/server and minicomputers, users are also citing “code reusability” and “business agility” as strong secondary drivers of SOA.

There is significant reason to believe, however, that SOA will not reach its full potential to transform businesses. To do so, users will have to find ways to overcome three key inhibitors to SOA adoption:

• Upfront cost. Funding the upfront investment required for enterprise-wide SOA deployment is a key concern and potential inhibitor to SOA adoption.
• Resource sharing and allocation. Sharing computing resources will require a change in the way line-of-business managers view, and use, IT, as well as in the way IT itself is managed.
• SOA Governance. Users recognize the importance of SOA Governance as a success factor, but are not yet doing too much about it.

Saugatuck has summarized the impact of these drivers and inhibitors in Figure 1 below, which shows a typical SOA adoption framework constructed around three “waves” of activity. The timing and duration of each wave varies by user enterprise, but the waves themselves are clearly evident in each enterprise examined by Saugatuck to date.

Figure 1: Three Waves of SOA Adoption

Source: Saugatuck Technology Inc.

The net result of this three-wave trend is that SOA adoption is best accomplished through a series of planned and governed escalating activities, each of which yields technology, knowledge and skills that enable further progress, and new challenges in ascending to the next wave. Success in SOA passes through the gate of governance.

Vendors Must Lend a Hand

User and vendor executives alike must understand that implementing SOA is not like throwing a switch. It must be staged to enable enterprise learning across dimensions of technology, operations and management.

• New methodologies, standards and coding conventions – even those still evolving – must be acquired and quality-assured.
• Re-use, and cross-department design based upon re-use, must become a core development practice, reinforced by well-managed directories and centers of excellence.
• Business units must collaborate among themselves and with IT in order to assure that project management and funding will support this evolving architectural program.
• Senior executive champions must lend ongoing support for a program that is bound to hit more than a few snags.

As Microsoft suceeds in educating its global Enterprise customers (and slowly improving licensing) on the benefits of SharePoint Portal Server (now MOSS, with Shared Service Providers for 2007), it has begun to resemble a middleware-like abstraction model, significantly improving end-user client access to core systems & legacy business process applications. Besides the fact that Microsoft's new "middleware" will fast require IT-Governance, operations management, business-requirements & change-management, and adherance to policy & standards compliance, MOSS will ALSO have to align with traditional middleware disciplines - and to educate those who missed SharePoints' transition into middleware, Bill English had a great post near the end of 2006, that described the evolutions & transformations that have transpired...a great summary point of view, that lays out MOSS's future....   

Excerpted in full...

IBF, BDC and LOBi

The success of any organization is the smart use of the information to which the organization has access, whether or not they know this information is available.  Unfortunately, traditional networking technologies have provided the foundation for dispersing both the creation and hosting of mission critical information without providing methods to aggregate and organize this information.

Microsoft's first stab at organizing disconnected data islands was the Information Bridge Framework (IBF).  The goal was to make the right information available to the right people at the right time so they can make the right decisions.  This “right time, right info, right people, right decision” has become a cliche' that many of us have heard, yet it does help us understand what needs to take place.

Note that having information at your fingertips does not ensure that you'll be successful.  Brilliant people have had the right information at their fingertips and yet made massively wrong decisions based on that information.  Instead, what we need to understand is that there is an information process that we all live in that goes something like this:  data -->information-->knowledge-->understanding.  The latter two cannot be achieved through software.  The highest service that software can provide is the aggregation and organization of data that melds into information.  Thereafter, humans must take the information, invest time and energy into understanding that information, then make good decisions based on that information.  Knowledge and understanding are human efforts.  When working with the SharePoint technologies, don't assume the software will take your client or organization into a state of understanding.  SharePoint cannot do this.  No software can.

The IBF was built to bridge the gap (hence the name) between the larger, back-end systems that were used to create and host large amounts of mission-critical information and the desktop applications, such as Word or Excel, that users who consumed this information used on a daily basis.  It was during the IBF era when Microsoft coined the term Information Worker, to help us conceptualize their thinking about the desktop user.  IOW, the desktop user was not merely a person using a few Microsoft applications, but was often a person who needed important information at the right time to make significant decisions based on that information.

The IBF contained both server and client components.  Among the client components, the more important two were an administration tool and hyperlink support (such as smart tags and hyperlinks that invoked the ibf protocol handler).  There was also a Metadata Designer to help design the metadata needed for the connections to the information.

The IBF worked with Office 2003 and InfoPath 2003.  With the advent of Microsoft Office SharePoint Server 2007, the IBF was updated and then baked into the product and called the Business Data Catalog.  The BDC is Microsoft’s strategic integration technology, and they plan to expand BDC further. By using the BDC, an organization can accomplish the following objectives:

· Reduce or eliminate the code required to access Line-of-Business (LOB) systems.

· Achieve deeper integration of data into places where a user works.

· Centralize deployment of data source definitions. An organization typically will not define all the data it uses, only the most important data in the BDC.

· Reduce latency to data, because once a data source is defined in the BDC it will be immediately available on the Web farm.

· Centralize data security auditing and connections.

· Perform structured data searches.

The BDC is a shared service in Office SharePoint Server 2007 and uses ADO.NET, OLEDB, or ODBC drivers to connect to practically all popular databases, and it can also use Web services to connect to business applications that support that method of retrieving data. The data is presented in a list or web part using SharePoint Server 2007.

LOBi (Line of Business Interoperability) is the next generation of the BDC and Microsoft announced LOBi (pronounced “lobby”) at TechEd 2006 in Boston. LOBi for SharePoint Server is a future set of capabilities that will work together with Microsoft Office client applications and Office SharePoint Server 2007. Note that the focus on LOBi will be on Interoperability, not just presentation and massaging off information we pull out of a LOB system.

Be on the lookout for LOBi content and product information in the coming months from Microsoft. While the BDC will be very useful for the foreseeable future, I think we’ll be learning that the tools provided with LOBi will be even more useful.

Bill English
Mindsharp

Another VERY compelling SOA arguement from Saugatuck - excerpted in full:

What Is Happening? Services-oriented architecture (SOA) is a far greater challenge than most companies realized when they began to adopt and deploy SOA. Rework, failed projects, and immature technologies have characterized many early user enterprise SOA deployments. Moreover, users often confuse such typical project benefits as application integration with the true, longer-term benefits of SOA, such as more responsive and agile application architectures and reuse of services. A core driver of these challenges is a lack of IT and SOA planning and governance among user business and IT management. The results for user enterprises include increased complexities and costs, and dramatically reduced SOA benefits. The results for vendors are too-often frustrated and disappointed customers.

Why Is This Happening? Saugatuck recently concluded an extensive research program focusing specifically on user SOA adoption -- including 40 interviews with CIOs and senior IT architects. Supplementing this research were 12 deep dive briefings with leading software and services vendors focused on SOA (see Note 1). We have published the data, analysis, and our insights in a new 30-page research report, SOA Reality Check: Three Waves of Adoption through 2012 (SSR-305, 28Dec06), now available through Saugatuck's website.

Our research clearly shows SOA experiencing slow, but steady, adoption among large and mid-sized enterprises -- but that SOA is still in very early deployment cycles. The report findings on deployment include:

• Most firms deploying SOA are focused either on early-stage planning, and/or trial deployment around legacy application integration.

• Of the thirty-seven percent of executives interviewed who indicated they are currently in a limited or full production stage of SOA deployment, it should be noted that upon further discussion it became clear that many are merely managing a collection of web services, and have yet to make a strong commitment to SOA as a management discipline (as opposed to an integration technology).

• Implementers are taking a technology-led approach to SOA deployment -- whereas research that Saugatuck conducted in early 2005 suggested that many early adopters were viewing SOA as needing to be a business-led initiative (see Strategic Perspective "Managing the Speed Bumps on the Road to SOA", MKT-161, 31Mar05, as well as Research Alert "SOA Adoption: Business Benefits Drive Strong Adoption" RA-206, 02Nov05).

• The key long-term driver of SOA adoption -- cost reduction -- outdistances all others by a two-to-one margin. Unlike such technology revolutions of the past as client/server and minicomputers, users are also citing "code reusability" and "business agility" as strong secondary drivers of SOA.

There is significant reason to believe, however, that SOA will not reach its full potential to transform businesses. To do so, users will have to find ways to overcome three key inhibitors to SOA adoption:

• Upfront cost. Funding the upfront investment required for enterprise-wide SOA deployment is a key concern and potential inhibitor to SOA adoption.

• Resource sharing and allocation. Sharing computing resources will require a change in the way line-of-business managers view, and use, IT, as well as in the way IT itself is managed.

• SOA Governance. Users recognize the importance of SOA Governance as a success factor, but are not yet doing too much about it.

Saugatuck has summarized the impact of these drivers and inhibitors in Figure 1 below, which shows a typical SOA adoption framework constructed around three "waves" of activity. The timing and duration of each wave varies by user enterprise, but the waves themselves are clearly evident in each enterprise examined by Saugatuck to date.

Figure 1: Three Waves of SOA Adoption

Source: Saugatuck Technology Inc.

The net result of this three-wave trend is that SOA adoption is best accomplished through a series of planned and governed escalating activities, each of which yields technology, knowledge and skills that enable further progress, and new challenges in ascending to the next wave. Success in SOA passes through the gate of governance.

Market Impact:  User and vendor executives alike must understand that implementing Services-oriented Architecture is not like throwing a switch. It must be staged to enable enterprise learning across dimensions of technology, operations and management.

New methodologies, standards and coding conventions -- even those still evolving -- must be acquired and quality-assured. Re-use, and cross-department design based upon re-use, must become a core development practice, reinforced by well-managed directories and centers of excellence. Business units must collaborate among themselves and with IT in order to assure that project management and funding will support this evolving architectural program. Senior executive champions must lend ongoing support for a program that is bound to hit more than a few snags.

Few user enterprises are ready to accomplish all of the above -- hence the relative lack of strategic SOA deployments noted in our research. But these conditions do present significant -- multi-billion-dollar -- opportunities for SOA vendors and IT services providers. Those that can best develop and deploy SOA expertise -- from planning through implementation to best management and governance consulting -- will be the long-term market winners.

Note 1

About The Study

Saugatuck's new 30-page Strategic Research Report "SOA Reality Check: Three Waves of Adoption" is based on two major waves of research conducted from July through December 2006.

With significant marketplace hype concerning SOA as a leading industry driver, the report provides a realistic assessment of SOA deployment today, as well as a scenario for how SOA adoption will evolve through 2012. In addition, it details the key business drivers of, and inhibitors to, user adoption of SOA -- and how each can be overcome -- along with key lessons learned and best practices from those in the trenches working to make SOA a reality and a success.

In addition to the 40 users who were interviewed, key vendors who participated in the deep dive briefings included BEA, BT, EDS, HP, IBM, Microsoft, Progress / Sonic, SAP, SOA Software, SUN Micro, TIBCO & Unisys.

To find out more about the research report -- go to http://www.saugatech.com/305order.htm

Saugatuck Technology Research released an Enterprise trend report today, illustrating a growing adoption trend that represents a "business driven" approach to mission-critical systems, that abstracts the Operating System to the back-burner - a great report.

Excerpted in full:

What Happened? Research conducted by Saugatuck Technology in December 2006 with research partner BusinessWeek Research Services (see note 1) indicates that, by YE 2009, approximately 25 percent of user enterprises can be expected to be running mission-critical business application workloads on Linux environments -- up from about 18 percent by YE 2007. By YE 2011, that figure will be greater than 45 percent (see figure 1 below).

Figure 1: User Expectations With Regard To Supporting Mission-critical Business Applications With A Linux environment (2007-2011)

Source: Saugatuck Technology Inc. with BusinessWeek Research Services (Dec. 2006)

Sample Size: N=133, 100% IT Directors, VPs, CIOs -- worldwide distribution

The data are especially impressive when looking at the expected growth in the number of companies moving beyond "proof of concept" by the end of the decade. From 2009-2011, users predict an 80 percent growth in the number of companies in "early or full deployment" of Linux for mission-critical application workloads, after a nearly 40 percent growth 2007-2009.

Why Did It Happen? By now it should be obvious to even the most casual industry observers that Linux operating systems -- and open source-based software in general -- have reached critical marketplace mass. Recent Linux deals and announcements by Oracle and Microsoft have only reinforced the "open source is enterprise-grade" message that IBM, Unisys and other "Master Brand" hardware, software and services vendors have been preaching for years. In short, open source, especially Linux, is becoming "legitimized" by the major vendors for enterprise environments, and user executives are more than happy to believe them.

Market Impact:  The implications of this latest data for user enterprise investment in new critical operating system and applications are huge. User executives are already planning their next generation operating environments, and almost half will be running mission-critical business application workloads on Linux by YE 2011. Microsoft's thawing toward Linux is now easier to understand when faced with such data -- even as Windows continues to grow as the other main server platform of choice.

But Saugatuck also sees some very important implications for other suppliers of infrastructure software and hardware (e.g., IBM, Microsoft, HP, Oracle, Sun), as well as the major applications vendors (e.g., SAP, Oracle). These Master Brands need to reposition themselves to thrive in the emerging world of mission-critical Linux. The accelerating growth trend indicated by previous Saugatuck research and reinforced by this latest data indicates that vendors should not merely plan to reposition themselves -- they should be doing so now.

Saugatuck also sees implications for emerging SaaS and other hosted services providers. A few are already taking advantage of Linux and other open source software to develop and deliver enterprise-critical software and other services at exceptional savings. One SaaS provider in Saugatuck's research claims savings of more than 70 percent in operating system license and maintenance fees alone by utilizing Linux, while enabling easier and less expensive expansion of systems and services due to the open, standardized nature of Linux. The business advantages are obvious -- but not yet being acted upon or realized by most large vendors, who remain tied to legacy, cash-cow operating systems.

Linux is not going to replace legacy operating systems and development environments overnight, or even by 2011. But the powerful trend of acceptance and legitimization of Linux for mission-critical environments indicates that a very large portion of the next generation will be built on Linux.

I've posted often on Phil Lay's insights on enterprise sotware adoption dynamics, and his views on the practical concerns that solution provides should ALWAYS take into account when executing commercially - this post in SandHill is a premium effort in this series of comprehensive & valuable concepts!

Excerpted in full...

Enterprise 2.0: Ready for Prime Time, or Not Yet?

Why this new wave won’t cross the chasm as soon as you may think.

By Philip Lay, TCG Advisors

Nov. 16, 2006

Echoing the phenomenon that is now commonly referred to as Web 2.0, "Enterprise 2.0" (E2.0) is a name that encapsulates long-held aspirational goals for business and government organizations that wish to become truly responsive to their customers and partners using the most leading-edge information technologies available today. Thus, concepts such as the "real-time" enterprise, as well as advanced "inter-enterprise collaboration", finally become more achievable, at least in theory. E2.0 is based on technologies such as open source software, utility computing (of which SaaS is perhaps the most concrete example today), and services oriented architecture (SOA), which in its earlier iteration in the late 90s was referred to as "web services". Furthermore, all three of these technologies are at different stages of evolution and market adoption.
Based on the above arguments, Enterprise 2.0 represents a wave composed of trends and technologies, rather than a single, purchasable technology or product category. Like all complex new waves -or "paradigms" - it's an odds-on certainty that Enterprise 2.0 will take at least another five to ten years to fully form. In all likelihood it will be adopted in parts by most customers, depending on the sequence in which individual components of this new class of offerings can form the basis of effective solutions to important business problems. My purpose here is to comment on the adoption dynamics impacting this phenomenon, since this is my special area of expertise.
In this article:

• So what is going on in enterprise organizations?
• The wave that is forming
• Why mainstream adoption will take a while
• What should customers do about Enterprise 2.0 today?

The wave that is forming
As mentioned earlier, Enterprise 2.0 is forming out of an earlier wave - Web 2.0 - that broke onto the beach in consumer markets during the past five years or so. From a mainly reading or browsing experience, using the web started to bring active and participative communities of vendors and customers together to exchange goods, services, and information. Amazon, eBay, and then Google were among the famous early precursors of this trend, followed more recently by sites such as mySpace, Del.icio.us, Wikipedia, and YouTube, recently snapped up by Google in an all-stock transaction. Recently, SaaS offerings using the internet as their computing platform - such as RightNow, Salesforce.com, and NetSuite - have made significant inroads into small and medium-sized businesses, as well as departments of major corporate organizations.
Of the three main pillars of Enterprise 2.0, including open source programming languages such as the interactive web application development tool Ajax (Asynchronous JavaScript & XML), the increasing number of SaaS offerings, and the highly anticipated appearance of hundreds of SOA application modules in the form of re-usable web services, the most challenging at this point is SOA. Among other adoption-related challenges, the proposed standards relative to vital components such as UDDI and other registries, plus repositories, WSDL, XML markup language, and other protocols expected to navigate between legacy and new applications, have yet to become widely accepted or broadly deployed.
Among other industry experts, Judith Hurwitz points out in a recent article entitled "SOA and Unintended Consequences", that one of the major promises of SOA is that it will allow customers to reuse their existing software assets by wrapping them into business services that they can use repeatedly to create new light-weight applications in order to serve their customers and partners more cost-effectively. As she says, this heralded change will transform the current packaged application that is the mainstay of the software business into a more "industrial" packaging combining the output of the various specialist participants.
As part of the gradual SOA adoption process, new groups will emerge to drive adoption and fulfill delivery requirements composite applications and re-usable services, including:

• Emerging SOA leaders among existing and startup software companies - undoubtedly, IBM, HP, SAP, Oracle, BEA, Tibco, webMethods, and others are making increasingly aggressive investments in this space. However, they are hampered by the sheer inertia of their "legacy" businesses or their relative lack of market development expertise in this area. Furthermore, it is too soon to know who the winner(s) will be - and this obstacle, more than any other, prevents most pragmatist customers from making decisions.
• Specialist application module developers will emerge inside the new value chain; like Benetton, that focuses on clothing design but doesn't manufacture clothes or own stores, software companies will no longer need to perform all or most of their development of new offerings or upgrades in-house, but instead will combine their specialized know-how to produce service modules that can be combined with other services available on the market.

Why mainstream adoption will take a while
Assuming you agree that Enterprise 2.0 - or, if you prefer, the concept of the real-time, inter-personal, proactive, truly customer-focused enterprise enabled by the best services-based software technologies available today - amounts to a pretty big deal, it follows that it will take a decade or so for the changes in business models and operating approaches to take shape. Earlier examples of waves that eventually fulfilled some of their earlier promise with pragmatist and conservative customers support this argument:

• ERP applications: Mid-seventies (as MRP I and MRP II) to early nineties
• Relational data base management systems: Late seventies to early nineties
• Unix as a business computing operating system: Late seventies to early nineties
• LANs & WANs: Early eighties to mid-nineties
• Data warehousing: Early eighties to mid-nineties
• The internet as a computing platform for enterprise applications: Early nineties to early 2000s

1. Open source is re-engineering the means of production (and ownership)
2. SaaS is re-engineering the relationship with the customer
3. SOA is re-engineering the software itself into independent services with defined interfaces that can be called to perform their task in a standard way

Together, these three critical elements will serve the needs of inter-enterprise computing as processes and modular applications that connect companies to their customers, partners, and suppliers, become increasingly prevalent. The enormous industry investment in the client-server stack of infrastructure, applications, and services will not be easily dislodged (look how the mainframe resisted despite the over-optimistic forecasts of client/server vendors in the early 90s), but what will happen is that new classes of computer application will rely increasingly on SOA-based composite systems going forward.

By way of a reminder, SOA carries the huge promise of separating users from the service implementations, so that services can run on various distributed platforms and be accessed across corporate networks, with maximum reuse. In order to achieve this potential, SOA has some demanding guiding requirements, including these:

• Reuse, granularity, modularity, composability, componentization, and interoperability
• Compliance to standards (both common and industry-specific)
• Services identification & categorization, provisioning & delivery, monitoring & tracking

In terms of innovation strategies, the default "strategy" of every product-focused vendor today - i.e., product innovation based mainly on feature/function improvements, with a nod when necessary to market requirements - will give way to a more nuanced, market-focused model. This is where application innovation and platform innovation will be key among other innovation approaches. Application innovation, as the name suggests, requires that vendors innovate by applying their product offering to solve an acute business problem pertaining to a specific vertical target market segment. Platforms require effective alliances between different types of participant in the tech value chain, widely accepted standards and protocols, and ubiquity, before they can be adopted. Generally, these three vectors occur at different speeds, and they require coalescence between at least one anchor player and a network of service providers. In contrast, product innovation generally requires a single dominant leader (the gorilla) to emerge before most customers jump on the bandwagon.
Assuming this view is correct, vendors will have to learn to operate in a more consistently collaborative manner so that they can join all the pieces together in order to be able to trust each other's services, and this is likely to take some time. Even more important than vendors becoming smarter in their market development strategies, however, is the reality that on the customers' side, inter-enterprise processes and applications will take time to assume their central place in the projects of major IT shops.
What should enterprise customers do about Enterprise 2.0 today?
If you are a bona-fide visionary customer with an appetite for a major custom project aimed at securing new competitive advantage for your organization based on an innovative or redesigned business process, you should move forward with a vendor that you can trust to manage the risks and enable you to realize the rewards of putting together the appropriate combination of open source tools, on-demand/on-premise software applications, and services-oriented architectures to provide you with the end-result you are targeting.
If, on the other hand, you are a pragmatist customer more comfortable with adopting new technologies when you can see how they can effectively address critical broken processes that jeopardize your company's success, you should wait until you see at least one vendor (or vendor/SI alliance) that has taken the trouble to produce a solution to your painful broken process that is available at a total implementation cost equal to a fraction of the cost you are suffering in lost business or spiraling costs.
If you are a more conservative customer who prefers to wait a while until most of your peers have adopted an Enterprise 2.0 solution with successful results, then you can probably watch this new movie being made for the next 5 years or more before you take the plunge.
Finally, if you are somewhat skeptical of the likelihood that Enterprise 2.0 will amount to more than a widely proselytized distraction, you can just keep on doing what you're doing with the technologies that you have more faith in, such as pencils, paper, calculators, and other basic tools of business.

I downloaded it and it took 4 minutes from begining to end to set up -- very simple!