BOSTON — It’s a stretch to call 2011 a truly transformative year for enterprise software, given all the old warts that remain, from large-scale IT project failures to creaky legacy systems that will take years and great expense to replace with the latest-and-greatest.
But a series of significant events nonetheless took place, that will have a lasting impact on the industry in years to come. Here’s a look at some of the biggest turning points.
SAP buys SuccessFactors, Oracle buys RightNow, both accept cloud reality
Collectively, SAP and Oracle spent nearly US$5 billion this year to acquire software vendors based in the cloud.
Each sought different types of technologies, with SAP’s purchase of SuccessFactors boosting its human-resources software offerings as well as general cloud know-how, and Oracle’s RightNow buy giving it an array of customer-support capabilities.
But the deals have a common thread, marking a sea change for the traditional on-premise software world, said analyst Ray Wang, CEO of Constellation Research. “[It] signals the realization that cloud deployment will be the predominant approach.”
Oracle delivers Fusion Applications
It took a while, but Oracle finally managed to deliver the first wave of its next-generation Fusion Applications, and its launch strategy also showed how cloud computing has influenced the enterprise software market.
The company has taken pains to stress that Fusion Applications can be deployed in a highly modular fashion, with no need to remove existing systems, and at a time of customers’ choosing. Users will also be able to run the software both on-premises and in cloud form, although some of the details of the latter remain to be made public.
Oracle’s strategy is partly a nod to reality, since few customers will rush to rip and replace their core ERP (enterprise resource planning) systems with new software, and Oracle also wants to ensure early users are successful. But its message of easier, more flexible consumption for Fusion is straight from the cloud-vendor playbook.
Workday goes after large enterprises and succeeds
While its revenue is still small compared to the likes of Oracle and SAP, you had better believe that SaaS (software as a service) vendor Workday’s continuing ability to land global agreements with companies such as Flextronics and Kimberly-Clark has prompted some chatter in Redwood Shores and Walldorf.
Workday announced the Kimberly-Clark deal in December. The consumer goods company is launching a global rollout of Workday’s HCM (human capital management) software that will serve 57,000 workers.
While large companies have used SaaS in areas such as CRM (customer relationship management), human resources functionality lies closer to the core of ERP. It remains to be seen whether Workday manages to replace Oracle or SAP financials software with its own financials offering in large enterprises, but that’s certainly its intent, as well as a threat to incumbents.
SAP’s decision to buy SuccessFactors reflects this dynamic and can be seen as a defensive move. Over the years, SuccessFactors has landed even bigger deals than Workday for its HCM offerings, including a 420,000-seat pact with Siemens. Now SAP will look to upsell the rest of its ample portfolio into the SuccessFactors installed base.
SaaS ERP gains more ground
A series of announcements made last year are set to significantly increase the options for on-demand ERP next year and beyond.
In April, Microsoft announced that all four of its Dynamics ERP suites would be offered on its Azure cloud service. Microsoft “planting a flag in SaaS ERP validates players already in the field,” such as NetSuite and SAP’s Business ByDesign, said China Martens, an analyst at Forrester Research.
Salesforce.com also edged into ERP this year through partnerships with Infor and Workday, which built upon its previous collaboration with Unit 4 Agresso on FinancialForce.com, an accounting service.
Infor buys Lawson, venture firm grabs Epicor and Activant as ERP rollup continues
Infor’s move in March to buy Lawson Software for roughly $2 billion “is a significant story in ERP because Infor is looking to step up as a third major competitor to Oracle and SAP,” said Forrester Research Vice President Paul Hamerman. “A third key enterprise apps competitor has been missing since Oracle acquired PeopleSoft.”
The purchase made Infor the third-largest ERP vendor after SAP and Oracle, and came not long after the appointment of CEO Charles Phillips, a former co-president of Oracle who was known for his role in that company’s long run of acquisitions.
So far, Infor has shown no indication it plans to compete with Oracle and SAP for large enterprise customers.
Infor may end up closer rivals with the entity created by private equity firm Apax Partners’ $2 billion purchase in April of ERP vendors Epicor and Activant.
SAP’s HANA database sparks in-memory computing buzz
Whether or not SAP’s HANA in-memory database lives up to the hype in the field, it may be difficult for any software vendor to go without some type of in-memory flag to wave moving forward.
HANA, which became generally available in June, places information to be processed in RAM instead of reading it off of traditional disks, providing what SAP has called a dramatic performance boost. In various public statements, the company has made it clear that the long-term goal is for HANA to replace other databases, especially rival Oracle’s offering, that are now running its applications, including the flagship Business Suite.
Meanwhile, Oracle CEO Larry Ellison at one time mocked SAP’s in-memory ambitions, but the company intends to ship its own in-memory powered appliance, Exalytics, later this year.
IBM and Microsoft, both formidable database vendors in their own right, also have various in-memory capabilities, and it will be interesting to see how prominently they are positioned as the year goes on.
Salesforce.com, Oracle and SAP get ‘social’ religion
Those growing weary of the hype over enterprise social networking should gird themselves for much more.
This year, Salesforce.com rolled out a major vision for “social enterprises,” wherein companies connect to public social networks like Twitter, build out private social networks and then give their core enterprise applications some social flair.
Its competitors are responding. At the OpenWorld conference in October, Oracle announced the Oracle Social Network.
Other significant moves in social collaboration by ERP vendors included Workday’s partnership with Salesforce.com over the latter’s Chatter service as well as SAP’s reseller agreement with social analytics vendor NetBase and efforts to create a bigger ecosystem around its StreamWork application, said Forrester’s Martens.
While no single story stands out as definitive, altogether they should “set the stage for ERP vendors to make a bigger social collaboration statement in 2012 and beyond,” Martens said.
The third-party maintenance question remains unanswered
Martens also noted a significant story that didn’t happen in 2011: Namely the emergence of clear ground rules for the third-party software maintenance market. Oracle famously sued SAP over actions by its former subsidiary TomorrowNow, which provided lower-cost support for Oracle applications. The case resulted in a $1.3 billion judgment in November 2010 for Oracle, but that was later overturned by a judge and no final conclusion to the dispute seems imminent.
