Software Safari - Premium Blog on Application Software

Those Questionable Charges on Sales Expense Reports

Careful When You Challenge a Software Salesperson's Expense Report

I saw this on YouTube and it certainly reminded me of a few conversations I had with my sales pros and why they thought their outrageous spending was justified: http://www.youtube.com/watch?v=0OTgb3KO7QM.

I clearly remember a sales pro taking an unqualified prospect to a 5-star dinner with wine in New York City. The two of them spent $1800+ on that meal. Of course, the restaurant choice and dinner idea were the prospect's idea. My sales 'pro' fell for this hook, line and sinker. Guess what. We didn't get the business. (Although, I sure gave this sales moron 'the business' for being so naive and so gullible.

Enjoy the video

Got a Service Component in Your Software Company?

                    Point of View Selling in Professional Services

On June 11 (1 pm EST), Brian Sommer from Vital Analysis will be leading a discussion on Selling Professional Services via a Point of View style. The web-based seminar is being hosted by PSA (professional services automation) vendor OpenAir. Registration information and call-in details can be found at: http://openair.com/WebinarTechVentiveJune8-08.html  .

Title: “Point of View & Other Selling Styles - Winning Sales Practices in Professional Services” 

If your services sales teams aren’t delivering the results you desire, maybe it’s the approach they use. Do they engage with the prospect or talk about your firm? Do they come back feeling they’ve validated critical client needs and can develop winning, relevant proposals? If not, attend this short but intense webinar by Brian Sommer. Brian was a long-time, successful Accenture partner who has trained thousands of sales professionals at leading software and consulting firms globally. He’ll discuss a selling style, Point of View selling, that’s far more deadly with CXOs than any other approach. In a tight economy, can you really afford to miss this? 

Briefly, Brian will use humor, facts, experience and more to discuss:

    - the four common styles of selling services and where these are most appropriate

    - how CXOs (not service professionals) define how a consultative sale should work

    - the key elements of a point of sale approach

    - what should/shouldn’t go into your sales decks

Decelerating ByDesign

                          The Caution Behind Business ByDesign

Coming into SAP's Sapphire conference this week, a number of bloggers, tech analysts and Wall Street researchers were looking for answers around recent decisions on SAP's Business ByDesign product line. Business ByDesign is a relatively new offering from SAP and represents a huge investment by SAP in the Software as a Service (SaaS) space. During a recent earnings call, SAP executives indicated a more cautious approach to the continuing rollout of this product line.

After three meetings today with senior SAP executives, there is now more clarity around SAP's recent moves. We spoke with Henning Kagermann (outgoing CEO), Leo Apotheker (incoming CEO) and others. What we learned was:

• The product is not performing to the cost expectations the company had set for it and, as such, was not operating at the level of TCO (total cost of ownership) that the firm needed for it to be a profitable solution. A high TCO is not something investors or Wall Street would appreciate.
• The root cause of the higher than expected TCO was apparently related to two major items. First, the version of NetWeaver (SAP's development and execution software stack) being used by the Business ByDesign solutions is out of date and needs to be updated to version 7.1 once it's completed. When that's accomplished, the solution should run more cost effectively.  Second, the upgrade process (e.g., the upgrade from Version 1.0 to 1.1) turns out to need more automation so that fewer errors are made and human intervention is reduced. Human intervention triggers added costs and introduces potential errors. This creates quality and cost problems.

SAP executives admitted that their new on-demand solution encountered challenges the company had previously never encountered. First, SaaS was an entirely new space. Second, the company couldn't fully 'leverage their 35 year experience' in application software as these customers were not the typical SAP customer and the solution would be used differently than its prior on-premise solutions. One SAP executive said they "thought they knew this market" but that wasn't exactly true. Lastly, their development staff was caught by surprise as the they did not have the same level of control with this product as they have had with other product lines.

Business ByDesign has been an expensive development exercise for SAP. One source indicated some 2000 persons were involved in the creation of the product. While further development efforts are being scaled back, this has more to do with a planned development deceleration and a need to wait for the NetWeaver architecture to be implemented. In creating the product, one executive commented that the company made hundreds or thousands of assumptions (e.g., how quickly customer deals would occur, what response rate is needed for acceptable performance, the targeted TCO, etc.) and some of these assumptions now require a rethink.

Bottom line for Business ByDemand is that:

• sales will continue in six countries: France, US, UK, China, Germany and India but not beyond these for now
• the company will continue to focus its TCO reduction efforts on cutting the cost of hot-patching, hosting, upgrading and on-going operations. Moving their hosting centers to low-cost countries (for a labor arbitrage) is not being considered for now.
• the $149/user cost figure is being held. TCO will be reduced while customer cost will not be increased.
• adjustments by SAP should take 12-18 months to complete

SAP - Earnings, Competition & Business ByDesign

                       SAP - A Rethink Just Before Sapphire

For the last few weeks, I've heard unpleasant rumors about SAP. Because I don't spread rumors, I haven't helped the spread of same. However, the recent earnings report raised a number of concerns just prior to next week's SAPPHIRE conference.

This bombshell was in the investor documents provided to shareholders today:

"Small and Midsize Enterprises and SAP Business ByDesign
SAP’s small and midsize enterprise (SME) business continued to perform well in the first quarter of 2008 as the Company added more than 1,570 new SME customers (excluding customers from Business Objects) in the quarter, representing a 28% increase compared to the first quarter of 2007. A principal component of the SME strategy is SAP’s breakthrough innovative new solution, SAP Business ByDesign. Since last September’s announcement of SAP Business ByDesign, the Company has been working closely with early customers and partners to validate and fine-tune the solution. As a result of this process, SAP has elected to modify the rollout strategy for SAP Business ByDesign to ensure a more focused and controlled ramp-up process. The new rollout strategy includes the following:

• For 2008, go-to-market efforts for SAP Business ByDesign will focus on six countries, where all the current productive early customers are based and which represent a large amount of the worldwide volume market opportunity. Additional country rollouts will be executed in 2009.
• It is expected to take around 12 months to 18 months longer than the original 2010 target to reach the SAP Business ByDesign $1 billion revenue and 10,000 customer potential.
• However, the Company will use SAP Business ByDesign innovations and technologies for the existing solutions and this will contribute significantly to the overall revenues of SAP in 2010.
• Also, the Company will engage with significantly less than 1,000 customers in 2008.

In light of the modified rollout strategy, SAP will reduce its accelerated investments around SAP Business ByDesign in 2008 by approximately €100 million, which is expected to result in additional operating margin expansion in 2008 as noted in the “Business Outlook” section of this release. Furthermore, beginning in 2009 there will be no further accelerated investments. The expected expenses related to SAP Business ByDesign will be funded out of SAP’s normal operational business.

SAP maintains its full confidence in the product, the market opportunity and the associated business model of SAP Business ByDesign, as the Company continues to move toward volume readiness in 2008. " (Source: http://www.sap.com/about/investor/press.epx?pressID=9406)

SAP Business ByDesign has consistently been the most discussed product line within the Enterprise Irregulars whenever SAP products are discussed. Significant issues have been raised previously about:

• the channel program needed to sell this product. Was this channel economically attractive to providers?
• the ability to sell this product line. Do partners or SAP have the materials, collateral, training, etc. to effectively identify prospects and close deals? Can these be done profitably?
• the 50-100 customer per blade limitation
• the long-term strategy for the product. Would Business ByDesign become the future product platform for SAP? Would this eventually replace other product lines?

While Business ByDesign is a robust solution that SAP had consistently maintained would remain a SMB product, their announcement today would imply that parts of the solution may be utilized in other SAP products.

Behind these changes involving Business ByDesign are some hard economic facts:

• the effect of the falling dollar vis-a-vis the Euro has adversely affected SAP's earnings
• a review of their headcount showed that the company added a lot of positions in their North American operations. Specifically, the addition of Business Objects personnel has added materially to their ranks. Whether by design (no pun intended) or not, the company has grown the ranks of its Sales & Marketing, General & Administrative and Infrastructure headcount by 20-30%. (see attached graphic or follow link to full SAP presentation: http://www.sap.com/about/investor/reports/quarterlyreport/2008/pdf/Q1_2008_E_final2.pdf)   

The added effect of more personnel, slower sales of Business ByDesign and other factors caused total revenue to go up 14% while operating expenses increased 22%.

Going into SAPPHIRE, SAP management should expect questions such as:

• Will SAP embark on layoffs, especially in North American non-client facing personnel?
• What progress has SAP made in developing its Business ByDesign channel program?
• Has SAP improved the economics for channel partners for its Business ByDesign product?
• Will SAP share with us details involving the technical difficulties they are examining in the Business ByDesign product line?

On balance, the bulk of the earnings announcement was positive but not surprising. The company posted continued growth and new customer gains. The company continued to gain market share. However, the difficulties with Business ByDesign should cause investors to question whether this company can effectively take the SMB space as confidently as they have pursued large enterprises.

For those who caught Marc Benioff and Hasso Plattner at the Churchill event, Marc teased Dr. Plattner about building SAP on the Force.com platform. Today, that might look like a better on-demand/SaaS strategy afterall.   

Never Let a Good Buzz Word Go Unfilled

                                  Multi-Tenancy and Dynamics

                (Multi-Tenancy - the Latest Victim of Over Hyping)

Today, there was an interesting story speculating on the degree (or lack thereof) of multi-tenancy support for the Microsoft  Dynamics CRM solution  (see: http://www.thestandard.com/news/2008/04/22/microsoft-multi-tenancy-claims-dynamics-crm-doubt)

After attending a couple dozen vendor briefings the last year, I've heard claims of:

• multi-tenancy
• super-tenancy (an alleged higher level of multi-tenancy)
• full multi-tenancy
• pragmatic multi-tenancy
• and, my favorite, "SaaS tenancy"

Buyers of technology beware. No one seems to know exactly what multi-tenancy really is (at least from a product marketing perspective). My BS meter is on full alert now when it comes to multi-tenancy. One major vendor claims to have three product lines with identical product architecture stacks; however, only one of these supports multi-tenancy. That's not a problem except that the claim of identical stack components isn't really true. If it were, this vendor could run its other product lines as SaaS solutions. It can't.

Marketing and Reality are often two concepts that cannot co-exist in the technology space. Sure, there are those rare occasions when a vendor actually says what they do and its true. But, I'm getting the feeling that this occurs only after the product catches up to the hype. Multi-tenancy may be a ways off for that to happen for now. 

More on the Softscape - SuccessFactors Litigation

                      Softscape Lines Up Top Flight Counsel

SoftScape has lined up Taylor & Co. to defend them in the case recently filed by SuccessFactors. The two attorneys from Taylor & Co. on this case will be Steve Taylor and Jessica Grant. Mr. Taylor achieved some measure of fame in HR circles with his successful defense of PeopleSoft in a theft of trade secrets trial in the early 90s.

In that trial, two competing HR software firms alleged that newcomer, PeopleSoft, had infringed on proprietary intellectual property. In the spirit of full disclosure, I was personally subpoenaed for that case although I did not get deposed or offer testimony. That case was quickly dismissed as the Federal judge on that case did not find that the infringements were at all material or unique. In that case, plaintiffs alleged that a screen requesting 14 data elements like name, address, zip code and social security number were a unique, defensible HR intellectual property creation. I agreed with the judge that those 'unique' features were obvious and common to just about any payroll or HR system. PeopleSoft prevailed and their sales exploded immediately after the case was ended.

Softscape needs a solid litigator and it appears that they've made a good choice (see: http://www.tcolaw.com/aboutus.html) . If they get the case heard in Federal court with a sharp judge, that could help them, too.

No one can handicap the case right now as the discovery process is far from complete. Like in sports and war, a good defense is as important as a good offense. Lining up solid defense attorneys is a good move on Softscape's part. If this case is all about the bad acts of a rogue employee, both parties could save a lot of money and reach a quick settlement fast. The attorney fees will be steep. If it's a bigger matter, it will become the HR software story of the year.   

Temporary Restraining Order - Softscape / SuccessFactors

Latest News -

U.S. Judge Claudia Wilken granted SuccessFactors its motion for a temporary restraining order (TRO)against Softscape. Specifically, the court ordered Softscape to:

• not distribute the PowerPoint deck in question
• not access SuccessFactors' websites or other intellectual property
• not make statements that purportedly come from another

The court further ordered Softscape to post a $10,000 bond. The court also granted permission to issue subpeonas to Verizon and Comcast. Those subpeonas will help identify who either sent the PowerPoint deck to SuccessFactor prospects or who logged into SuccessFactor webinars.

My assessment:

The judge issued an appropriate TRO. The impact on Softscape, so far, is minimal but when the participants are identified, it could get problematic for those involved. SuccessFactors gets what it most needs: the end of the distribution of this document and a pile of sympathetic publicity.

At this juncture, the case will now go through a protracted discovery process followed by additional court room time for the civil case. When the discovery process is completed, it will be interesting to see if criminal charges are possible. Those could arise if SuccessFactors' web site or other intellectual property was illegally viewed with stolen passwords or other acts.

For now, the talent management/human resources software space will go back to being a relatively calm space. It will get more interesting again once the discovery facts come to light. Who wins in this deal? No one really except the lawyers. Who'll pay is clear: Softscape and certain Softscape employees. Softscape will need to distance itself from rogue employee behavior, if that's indeed what happened. It will need to double down on its PR activities and become a more humble, chastened and repentant firm. That's okay and software buyers are actually a forgiving lot. They've forgiven a lot worse:

• CEOs who blew most of their investors' capital on elaborate Vegas parties instead of product development;
• CEOs convicted of crimes;
• Products with over 10,000 bugs
• Products that were late, by years, to market
• Loss of key company founders

Both companies need to move past this quickly and get prospects focused on the real matters at hand: talent management and HR problems in today's business economy. This dust-up should not become more important than solving their customers real business problems.

To read the judge's opinion see: http://www.softscape.com/pdf/doc/TRO_Decision080313.pdf     

Softscape - SuccessFactors Dustup - Continued

                                  When Software Sales Go Awry

                        What Software Buyers Should Guard Against

When you read the court filing by SuccessFactors (see:  http://www.successfactors.com/docs/complaint.pdf ), you see some activities that software sales and marketing professionals should avoid at all costs. Likewise, there are instructional points for software buyers, too.

Reading the complaint and those launched from other plaintiffs in unrelated spats, I decided to craft a generalized point sheet for both buyers and sellers of technology.

For Software Sellers:

• Never produce competitive analysis materials with the intellectual property of competitors included. This means that unauthorized use of logos, trademarks and screen shots are off limits. Remember, you don't need internal documents to be pretty to be effective. But, if you include other firm's intellectual property, can you make sure it never, ever, leaves your firm? Many people naively think they can but all it takes is one misguided employee, disgruntled employee or upset prospect to tank your business.
• Never use artifice to discover the capabilities of a competitor's offerings. Don't register for competitors' webinars and other marketing events posing as someone else. Don't make unauthorized screen shots of competitors' products. Always remember that its their intellectual property not yours.
• Never use pilfered passwords or hack a competitors' system. I know these things are candy to the wrong employee but this type of behavior must be harshly dealt with and never permitted.
• Never try to pass off your competitive assessment as the work of another or especially that of a direct competitor
• Never hire a third party to do competitive assessment work you know to be illegal or unethical.
• Never ask a third party to use subterfuge (e.g., pretend to be developing a market research report) to gain access to third party data.
• Never tell bald-face lies. If you know it is untrue, don't publish it.
• Never share any internal competitive assessments with any prospect. One of them will betray you. That is an absolute truth. Worse, once a document leaves your firm's domain, it takes on a life of its own.
• Train your sales and marketing team to never develop rogue sales enablement documents.

For Software Buyers:

• Realize that most technology vendors maintain 'negative' references for all of their major competitors. Any vendor of any size has some percentage of customers who have migrated away from their product. Many of these defections could be for very legitimate business reasons (e.g., vendor rationalization, merger, downsizing, etc.). Negative references, generally, are not at all valuable unless they make up a material (i.e., more than 20%) percentage of the competitor's install base.
• Never trust anonymous sources of competitive information. This analysis is rarely worth the paper it's written on.
• Particularly negative data must be viewed as skeptically as you would view overly complementary puffery. This information is so skewed/slanted to a particular point of view that you will need to put it into a more appropriate context to determine if it's even relevant for your firm. If it's not objective, it's problematic.
• Do your own reference checking. Nothing beats hearing straight from the horses mouth.
• Seek out unique references. Don't rely on anyone's pre-vetted list of contacts. Find Wall Street analysts, integrators, industry competitors/colleagues, etc.

Softscape - SuccessFactors Dustup

Bad Marketing or a Bad Legal Case?p>

Today, SuccessFactors (www.successfactors.com) filed suit against competitor Softscape. On the Success Factors web site, Success Factors alleges:

"SuccessFactors, Inc. (NASDAQ:SFSF), today announced that it has filed a lawsuit in the United States District Court for the Northern District of California (Case No. CV 08 1376 EDL) against Softscape, Inc., for False Advertising, Trademark Infringement, Computer Fraud and Abuse, Defamation, Trade Libel, Intentional Interference with Prospective Economic Relations, and Unfair Competition.

The suit arises from a presentation recently anonymously emailed to many of SuccessFactors' customers and prospects purporting to be authored by a former customer of SuccessFactors and containing numerous false, misleading and defamatory statements relating to SuccessFactors and its products and customer relationships.

SuccessFactors is seeking a court order prohibiting Softscape from distributing false and misleading information about SuccessFactors, using SuccessFactors' trademarks, accessing SuccessFactors' computer systems without authorization, and wrongfully interfering with or disrupting SuccessFactors' relationships with customers and prospective customers, and requiring it to issue corrective advertising advising every known recipient of the presentation and the public at large of its falsity."

Softscape has already responded and says this:

"The facts in this case will speak for themselves. This is a frivolous public relations tactic without merit or foundation, and we will defend all of the claims vigorously. The SEC maintains that publicly traded companies have the fiduciary obligation to their shareholders and the marketplace to disclose absolute facts. As a profitable and recognized category leader in the human capital management industry, our focus is not competitors. Our focus is on continuous product innovation and maintaining the highest customer satisfaction and retention rates."

Having been on the sidelines of a similar spat, this type of situation can arise when an overzealous sales person provides a "for internal use only" competitive analysis document to a client. The sales person hopes that this added info will clinch the deal for him/her. Unfortunately, someone on the prospect's side is partial to the other vendor and shares this confidential sales tool with the maligned vendor.

Should we read much into this spat? Probably not if it's an isolated case but SuccessFactors will want its pound of flesh. Let's watch it unfold.

(To read the complaint see: http://www.successfactors.com/docs/complaint.pdf )

When Bad Analogies Fail in Tech Marketing

                      Is Bad Marketing Returning to High Tech?

I got this ad in my email inbox this week. The intro copy grossed me out. (please double-click the graphic below)

Pre-Bubble, all manner of tech companies tried to out gross each other. Remember these eye openers?

Remember the rodents being fired from cannons?

I have files full of examples of much worse copy. One shows a small infant boy peeing into the air. Another has a row of urinals. You get the drift.

The IDC/Symantec ad from this week took me back a few years (and not in a good way). Let's hope this was a momentary aberration. I did think it intriguing that my spam filter positively identified this email as Spam as its subject matter was curiously similar to those messages pitching enhancements for less endowed humans.

Great marketing is not gross, insulting, embarrassing or demeaning. The problem is that it is so easy for marketers to appeal to a buyer's lowest, most basest or crudest levels. That's not Marketing, it's pandering.

Anyone got any other examples they'd like to share?