Short the Global SIs

Global SIs Continue to Struggle with SaaS – Enterprise Executives Abandoning Accenture, Cap Gemini, & TCS

Chris Barbin

In January of 2007, we published an article, Services 2.0, which highlighted the shifting sands in deploying SaaS solutions such as Salesforce.com, Google Enterprise and Amazon Web Services. Two years later, Global SIs such as Accenture, Cap Gemini, TCS and others are still shackled by their dependence on old-school, on-premise partnerships with SAP, Oracle & Microsoft. While they may be paying lip service to cloud computing, most offer SaaS-based solutions at 2-3X the total cost necessary, are nowhere to be found in the relevant communities and developer ecosystems, and have few true SaaS enterprise reference customers to speak of.

In this down economy, we have seen a dramatic shift of enterprise customers looking to accelerate their SaaS & cloud computing initiatives--they have seen results from prior efforts and are eager to expand efforts to "do more for a lot less." Having served over 100 enterprise customers including Dolby Laboratories, Qualcomm, Harrah’s, Starbucks, Genentech, Plantronics, Japan Post and others, Appirio has seen a continued movement from simply replacing one or two on-premise apps with their SaaS alternatives, to enterprise-wide, C-level mandates. Here's some of the things we're hearing customers demand:

• "Eliminate 15% of our IT spend with SaaS"
  
• "Cut $100M in expenses by moving to the cloud"
  
• "Help us define a path to the server-less enterprise within 3-5 years"
  

When confronted with these mandates, the Global SIs that we see and hear competing for these deals seem flat-footed and ill-equipped, trying to meet these new challenges with dated on-premise technology and techniques. In the past 60 days alone we have witnessed 3 examples of this:

• Global SI #1: Quoted a basic SFA, Call Center and Partner Portal implementation for a $1B manufacturer @ nearly 3X the necessary amount. To justify its high cost of sales and hamstrung delivery model, the bid "added" unnecessary roles and services. They could not adapt to new rapid and iterative development methods - now a standard in SaaS development and deployment.
• Global SI #2: Quoted a global SFA requirements phase at 1.5X the necessary cost EVEN WITH A LOWER AVERAGE HOURLY RATE. Again, a dramatic misunderstanding of how to define requirements in a SaaS world, compounded by a lack of repeatable assets, IP and methodologies for SaaS deployments.
• Global SI #3: Quoted a PaaS initiative for an existing customer @ 2X its necessary amount. In this case, the quote was driven by a combination of exorbitant rates, a comfort level with an established client, an army of under-utilized resources already on-site, and a blatant misunderstanding of how to define, develop, deploy and support a PaaS initiative.
  

We see this list of examples growing every day, and it does not even include the dozens of customer relationships where enterprise executives are simply bypassing the Global SIs because of their bloated costs models, old school methods, multi-billion dollar partnerships with legacy vendors, or systemic lack of knowledge of cloud computing products and services. The discussion around "private clouds" is a perfect example-- Global SIs trying to teach an old data center new tricks.

More evidence? Search the discussion groups and forums for relevant case studies and success stories from these companies. While Accenture, Cap Gemini, TCS and others claim strategic partnerships and deep SaaS practices and expertise in cloud computing, the facts and relevant case studies prove otherwise. A few examples:

• A quick search in the Salesforce.com developer discussion forum for "Accenture" yields a grand total of 49 hits, "Cap Gemini" 30 hits and "TCS", 25 hits – for a total of 104 hits. The equivalent search for Appirio and our competitors yields well over 1,000 entries.
• The number of solutions offered by the Global SI community on Google Enterprise Solutions Marketplace – ZERO. When the TCO of the Google Enterprise solution is 1/10^th the TCO of Microsoft and/or Lotus Notes, is this any surprise?
• The number of enterprise SaaS success stories and testimonials on the Global SI’s websites – less than 10 based on our review. Appirio and our competitors have well over 200 true enterprise success stories.
  

When we launched Appirio just over 2 years ago, we suspected that the Global SIs would "get it" in 2-3 years, have significant assets, teams and relationships in the world of SaaS -- luckily, we are being proven wrong. Our new forecast, we have at least 2 more years. Or, perhaps Global SIs won’t ever be able to disrupt their traditional business, and the new Services 2.0 players will continue to outbid, out-deploy and out-innovate. If we are missing something and there is evidence of real SaaS growth at the Global SIs – we’d love to hear from you.

UPDATE, 3/11/09: We were flattered to receive a request from Accenture to remove their copyrighted image of Tiger Woods from this post. We are more than happy to comply-- we replaced it with this creative commons image.

UPDATE 2, 3/11/09: After the above, we received another request to remove Tiger's image altogether (from his people). We certainly never mean to cause the commotion, just to point out that Global SIs are focused on the wrong things, and they are lacking in getting behind something that genuinely is better for the customer.

Are you In? Unshackling Your Aspirations.

Narinder Singh



Certain points in time provide a special opportunity to reflect and aspire to be better. For many of us, this comes with each new year - as we make resolutions to improve some part of our lives or who we are. As a nation, inaugurations provide a similar chance. In these moments, the collective consciousness of a country can define their resolutions for the future.

The Starbucks I'm In campaign has a simple idea, "What if we all did something". Leveraging an incredible brand with reach into nearly every community; partnering with voices for change like the Hands On Network, Service Nation (and even Oprah !); and doing more than just talking about corporate responsibility - the I'm in campaign can play a powerful role in placing service into the collective psyche of a nation.

Pledging five hours of time to giving back and celebrating the commitment with a free cup of coffee is a simple first step. Undoubtedly those hours can have a substantial impact on the world around us. But the ripple of change caused in each person who participates is the real trojan horse of this strategy. How many of us have said, "Helping out at the food bank / hospital / children's center / halfway house / community organization gave me a better sense of what's really important in life?" Giving back can change how we interact with our family, neighbors, co-workers and broader society. Inspiring us to do this collectively can make the question "How are you helping?" as ingrained in our common sense of what's normal as asking a person about their job, home, hobbies, place of worship or favorite sports team. That's the big idea that can start with a simple pledge.

Appirio was fortunate enough to be a part of Starbucks' vision by helping them use Force.com to tap into this collective voice. The press release describes what we built and the site itself provides a window into the details.

Yet what is most powerful about this story is how the cloud helped unshackle the creative minds at Starbucks from the legacy constraints of technology. Brilliant teams of people at Starbucks and the Salesforce.com Foundation thought about how connecting people could help them with their lofty vision. Their first, second or third thoughts were not on the mundane details of how to scale hardware/software/networks to accomplish this. They didn't have the luxury of reinventing an architecture for integration. They did not have the option of being constrained to a waterfall approach that would expect the "requirements" be defined at the onset of the process. Instead "Building on the Cloud" with Force.com let them focus on the user experience and allowed one creative idea to build on another throughout the process.

We have written before that the future of how people in a business work together will be defined by understanding how people collaborate when they're not working. A connected world requires that technology be built in a way that allows information, processes and ideas to be shared and collectively improved. Facebook, Google, Amazon, Wikipedia, Twitter, YouTube and others have led the way in proving the power of the collective. Salesforce.com, Google Enterprise and other dedicated pure SaaS vendors bring that same vision to businesses. No longer can organizations settle for systems that are designed to be physically and emotionally closed. The opportunity to bring together your people, your partners, your customers...is just too important to constrain. We hope everyone will be inspired by I'm In. Most importantly to instill a sense of giving back into our collective consciousness, but also as an inspiration for how the cloud can help companies dramatically change their own futures.

We're In, are you ?

2009 Prediction - Rise and Fall of the Private Cloud

#6 in our series of 2009 predictions

2008 Recap

2008 saw massive hype around the concept of a “private cloud,” roughly defined as a adopting the technology and practices from public cloud providers for a single company behind the firewall. “Private clouds are the future of corporate IT” declared Gartner. “Private Clouds Take Shape,” gushed InformationWeek, citing the funding of companies like Elastra and Parascale. “Get off my cloud” said eWeek, questioning the security of public cloud environments compared to private clouds.

2009 Prediction

Here’s the rub: Private clouds are just an expensive data center with a fancy name. We predict that 2009 will represent the rise and fall of this over-hyped concept. Of course, virtualization, service-oriented architectures, and open standards are all great things for every company operating a data center to consider. But all this talk about “private clouds” is a distraction from the real news: the vast majority of companies shouldn’t need to worry about operating any sort of data center anymore, cloud-like or not.

The idea that somehow companies can use “private cloud” technology to offer their employees web services similar to Google, Amazon, or salesforce.com will lead to massive disappointment. Here’s why:

• Private clouds are sub-scale: There’s a reason why most innovative cloud computing providers have their roots in powering consumer web technology—that’s where the numbers are. Very few corporate data centers will see anything close to the type of volume seen by these vendors. And volume drives cost—the world has yet to see a truly “at scale” data center.
  
• You can’t teach an old dog new tricks: What do you get when you move legacy applications as-is to a new and improved data center? Marginal improvements on your legacy applications. There’s only so much you can achieve without truly re-platforming your applications to a cloud infrastructure… you can’t teach an old dog new tricks. Now that’s not entirely fair…. You can certainly teach an old dog to be better behaved. But it’s still an old dog.
  
• On-premise does not equal secure: the biggest driver towards private clouds has been fear, uncertainty, and doubt about security. For many, it just feels more secure to have your data in a data center that you control. But is it? Unless your company spends more money and energy thinking about security than Amazon, Google, and Salesforce, the answer is probably “no.” (Read Craig Balding walk through “7 Technical Security Benefits of Cloud Computing”)
  
• There’s no secret sauce: There’s no simple set of tricks that an operator of a data center can borrow from Amazon or Google. These companies make their living operating the world’s largest data centers. They are constantly optimizing how they operate based on real-time performance feedback from millions of transactions. (check out this presentation from Jeff Barr and Peter Coffee at the Architecture and Integration Summit). Can other operators of data centers learn something from this experience? Of course. But the rate of innovation will never be the same—private data centers will always be many, many steps behind the cloud.
  

There’s also something very suspicious in all this discussion of private clouds…. private clouds are advocated mainly by companies who make their money from selling or operating data centers, and risk losing their shirts as real cloud computing drives more and more computing onto shared infrastructure. I understand why these companies are reluctant to embrace true cloud computing: Imagine being the junior partner in IBM Global Services pitching a client to develop an application on Amazon, Google, or Salesforce. Not only are you taking money out of the pocket of your colleagues in hardware and software….. you are also taking money out of the pocket of your colleagues in professional services, since integration and app development are so much easier using on-demand platforms.

That’s not to say that there’s no place for the technology behind private clouds. In certain cases where it simply isn’t an option to utilize a public cloud, this technology can have a significant impact. But those use cases are few and far between, and the benefits to be achieved are insignificant relative to the benefits of moving to a public cloud. Here’s who should be thinking about private clouds:

• Cloud Providers: This is an easy one… companies that plan on being in the business of providing cloud computing capabilities to others need to think about how to effective provide their own cloud. But we’d argue that very few companies actually need to be in this business (e.g., we believe most on-demand BI vendors should be running on public cloud infrastructure).
  
• Highly regulated industries: Government regulation will always lag behind commercial application of technology. There will inevitably be instances where nervous politicians or policy makers write up requirements that can only be met through a private cloud.
  
• Companies in the process of moving to a public cloud: Of course, no company of any significant size can move its IT infrastructure to the cloud all at once. In fact, Appirio specializes in helping companies figure out what the right first step is away from their on-premise infrastructure. For the IT infrastructure that hasn’t yet moved, it definitely makes sense to think about how to use “private cloud” technology. But that means the private cloud is a temporary stop-gap, not the “future of enterprise IT.”
  

Implications for customers.
Of course any customer with a data center should be thinking about how to use the technologies behind “private clouds” to improve their efficiency. But this should be a minor element of your long-term IT strategy. The most important thing any IT department can do in 2009 is chart out a thoughtful plan to migrate significant portions of your IT infrastructure to the public cloud. Don’t let “private clouds” be a distraction from that goal.

2009 Prediction: Google doubles down on the Enterprise

#3 in our series of 2009 predictions

2008 Recap

2008 was a fantastic year for Google's enterprise apps. They successfully made the transition from something small companies might dabble with to apps that large corporations rely on. In 2008, large corporations like Genentech and government organizations like DC government successfully made the transition to Google apps and became public advocates.

2008 was also a year of great innovation for the rest of Google's enterprise-relevant technology, with the introduction of their App Engine development platform, great new APIs like the visualization API and significant new features like adding video to Gtalk. Google also got serious about becoming part of the enterprise application ecosystem. They did this through integrations between Google Apps and Salesforce.com in April, and integration between App Engine and Force.com, late in the year.

2009 Prediction

We believe that 2008 was an inflection point in Google's adoption in the enterprise, particularly for mail and calendar. Google will double down on the enterprise in 2009 and see massive adoption. We believe this will be driven by 4 things.

Google continues to demonstrate commitment to the Enterprise
Google has publicly highlighted the enterprise as a strategic area in 2009. They have also made concrete moves to address enterprise needs, including obtaining SAS-70 certification, integrating with Enterprise class clouds like Salesforce and providing SLAs. We expect this to continue and accelerate in 2009 with expanded offline access, greater support for enterprise-class programming languages and more. Google's mission is to organize the world's information. Much of that information is generated as we all go about our daily jobs-- those who suggest that Google isn't serious about the enterprise have too narrow a view of their ambition.

Economic conditions drive evaluation of alternatives to Office/Exchange
Companies everywhere are re-evaluating their budget in the light of the stormy economy. In this environment, companies are scrutinizing all spend, particularly spending on non-strategic activities. Mail and Collaboration software, while necessary, require a disproportionate effort and cost for most IT departments. CIOs, who will be under pressure to do more with less, will be more open to evaluating alternatives to Exchange and Sharepoint. Forrester recently released a report titled "Should your email live in the cloud?" (More detail from RWW). The answer for nearly all companies was an unequivocal "YES."

Source: Forrester

Enterprise references establish Google as a viable alternative
Google adoption and endorsement by the Genentechs and DC Govts of the world are changing the way CIOs think about Google apps. They're no longer a curiosity but a viable alternative to Exchange. We've seen this shift over the course of the year in our own client base. Earlier in the year, questions were raised about about whether Google's corporate culture is really "enterprise ready." We stand by our assertion that it is the culture of traditional IT vendors that is no longer fit for the enterprise.... and predict that more and more of the world's largest companies will agree with us.

Google apps functionality leapfrogs Exchange
One of the barriers to Google apps adoption has been companies fearing that their users will have to adjust to a lower level of functionality because of the shift to Google apps. While this might've been true in the past, Google has not only closed the gap but actually provides a superior experience for core messaging. A few key advantages are large mailboxes (10s of Gigabytes per user), the ability to search all messages using Google's fantastic search capabilities, native iPhone/Blackberry access and integrated chat/video chat. And these features are available instantaneously: when Google introduced video chat, our clients started using it that same day. In an on-premise world, this would've required upgrades to each instance of the software before it was available to all users at the company.

Implications for Customers
Google apps are here to stay and are a viable, potentially superior alternative to Microsoft Office/Exchange. However, there are two important caveats. First, Google Apps, while sufficient for the needs of 80% of a company's business users, will likely not completely replace Microsoft Office, especially Excel and Powerpoint. Here at Appirio, we continue to use Office for a lot of our document creation, but then move documents to Google Apps to share, revise, and present (instead of using email and GoToMeeting).

Secondly, mail and calendar migration is non-trivial from both a technical perspective as well as organizationally. So, careful planning and a sequenced approach incorporating pilots are critical to success. We've held Google Apps "Bootcamps" to explore these issues, with speakers from companies like Genentech talking about their success (click here for a video).

What do you think?
Which of our predictions do you agree or disagree with? Please let us know by voting in our poll or commenting below.