You know what they say about the third time doing something. They say a lot and some of it is bound to be true even if it only means throwing away the high and low scores and dealing with what’s left like they do in Olympic diving competition. This is the third and final post on the Oracle-Salesforce announcements of this week, which I hope, will provide more light than heat. I reserve the right to discuss Oracle-Microsoft in similar detail though.
You know the basic outline at this point. Oracle and Salesforce have announced that they will work together on certain strategic issues especially integration to provide greater value for customers. Here are my considered thoughts having now heard from the CEOs of both companies.
- Integration is the key. With this announcement it appears a line has been drawn down the middle of the market. On one side is front office and on the other is the back, but we knew this already, didn’t we? The agreement to produce off the shelf integration that will solidify each company’s position in its respective marketplace and enable their front and back office products to instantly inter-operate and that sends specific signals to the market. Over the next nine years look to Oracle to spend less effort and investment in the front office. Siebel is getting old as is PeopleSoft and the Fusion approach is a slow burn. It will not surprise me if each side stays on the side of the fence it is building and produces front to back office solutions based on their integrations. For Oracle this would be an admission that their front office strategy won’t catch up. For Salesforce, it simply codifies what Marc Benioff has always said, that he doesn’t want to build ERP. Over time, look for each party to renew its innovation in its respective space. As I detail below, as a new paradigm comes into view there will be plenty of innovation on each side required — and that will only happen if they split the effort.
- Competition in the middleware and Linux part of the stack is simmering down. Oracle’s solutions in those areas are standardizing the industry and there isn’t a great deal of profit to chase there any more. Also, Oracle’s emerging dominance in cloud hardware with Exadata and related products militates for greater stack standardization.
- Oracle-Sun may be a big winner here as that unit’s Exadata storage system seems poised to become the de facto standard for public and private cloud data centers. The idea of public and private clouds no longer seems quite as foreign to Salesforce as CEO Benioff was touting his company’s decision to provide a separate instance of its system for the federal government. This decision is less about CRM than it is about application development, an area in which Salesforce has become one of the very dominant players.
- Security and related issues are becoming ultra important requiring new solutions. You can’t read the 2013 Verizon Data Breach Report without understanding the tremendous opportunity that the People’s Liberation Army Unit 61398 is providing companies like Oracle, Microsoft, and Salesforce. If we’re going to the cloud it has to offer better security than what we now have or all bets are off. Otherwise, the only good news might be your voodoo-like ability to order mooshi pork through your ERP system someday.
- Drop your tools, there’s something bigger on the way — get to work on it! Guys like Larry Ellison, Steve Balmer (of Microsoft) and Marc Benioff don’t come to these kinds of agreements without reason. The reason is a new paradigm which necessarily commoditizes conventional IT and even conventional cloud computing. It’s the Internet of Things or as Benioff (a board member of Cisco) said, the Internet of Everything. This is at once scary and hopeful. It’s scary to think of everyone and everything being connected to the network and hopeful that we will finally have the sophistication to optimize tiny processes that will, in aggregate make a huge difference as the planet races toward a human population of ten billion. We will reach a computer population that size long before the human population gets there.
That’s what I think everyone is suddenly gearing up for. President Obama gave a well received talk about the environment at Georgetown University this week. In it he told us that American business has always been able to innovate and engineer and provide the entrepreneurial boost we’ve needed to meet tomorrow’s challenges. Well, those challenges — especially energy and resource optimization and carbon abatement — are wrapped up in a new paradigm that is itself wrapped in the Internet of Things.
Paul Krugman’s column today in the New York Times expresses the latter half of it, the front half is where great value will be produced and huge profits stand to be made. On the back-end Krugman rightly predicts this will be a big economic stimulus that the global economy badly needs.
It’s rare that you can spot a paradigm emerging in real time. No one really understood what the steam engine or the industrial revolution it spawned meant when they happened. It took many decades to see the pattern emerge. Not this time. This week the future emerged; it’s been incubating for a long time and the future looks very interesting indeed.
(Cross-posted @ Beagle Research, LLC)