egoboss

Harvard Business Review | Investing in the IT That Makes a Competitive Difference

Studies of corporate performance reveal a growing link between certain kinds of technology investments and intensifying competitiveness.

by Andrew McAfee and Erik Brynjolfsson

It’s not just you. It really is getting harder to outpace the other guys. Our recent research finds that since the middle of the 1990s, which marked the mainstream adoption of the internet and commercial enterprise software, competition within the U.S. economy has accelerated to unprecedented levels. There are a number of possible reasons for this quickening, including M&A activity, the opening up of global markets, and companies’ continuing R&D efforts. However, we found that a central catalyst in this shift is the massive increase in the power of IT investments.

To better understand when and where IT confers competitive advantage in today’s economy, we studied all publicly traded U.S. companies in all industries from the 1960s through 2005, looking at relevant performance indicators from each (including sales, earnings, profitability, and market capitalization) and found some striking patterns: Since the mid-1990s, a new competitive dynamic has emerged—greater gaps between the leaders and laggards in an industry, more concentrated and winner-take-all markets, and more churn among rivals in a sector. Strikingly, this pattern closely matches the turbulent “creative destruction” mode of capitalism that was first predicted over 60 years ago by economist Joseph Schumpeter. This accelerated competition has coincided with a sharp increase in the quantity and quality of IT investments, as more organizations have moved to bolster (or altogether replace) their existing operating models using the internet and enterprise software. Tellingly, the changes in competitive dynamics are most apparent in precisely those sectors that have spent the most on information technology, even when we controlled for other factors.

This pattern is a familiar one in markets for digitized products like computer software and music. Those industries have long been dominated by both a winner-take-all dynamic and high turbulence, as each group of dominant innovators is threatened by succeeding waves of innovation. Consider how quickly Google supplanted Yahoo, which supplanted AltaVista and others that created the search engine market from nothing. Or the relative speed with which new recording artists can dominate sales in a category.

Most industries have historically been fairly immune from this kind of Schumpeterian competition. However, our findings show that the internet and enterprise IT are now accelerating competition within traditional industries in the broader U.S. economy. Why? Not because more products are becoming digital but because more processes are: Just as a digital photo or a web-search algorithm can be endlessly replicated quickly and accurately by copying the underlying bits, a company’s unique business processes can now be propagated with much higher fidelity across the organization by embedding it in enterprise information technology. As a result, an innovator with a better way of doing things can scale up with unprecedented speed to dominate an industry. In response, a rival can roll out further process innovations throughout its product lines and geographic markets to recapture market share. Winners can win big and fast, but not necessarily for very long.

CVS, Cisco, and Otis Elevator are among the many companies we’ve observed gaining a market edge by competing on technology-enabled processes—carefully examining their working methods, revamping them in interesting ways, and using readily available enterprise software and networking technologies to spread these process changes to far-flung locations so they’re executed the same way every time.

In the following pages, we’ll explore why the link between technology and competition has become much stronger and tighter since the mid-1990s, and we’ll clarify the roles that business leaders and enterprise technologies should play in this new environment. Competing at such high speeds isn’t easy, and not everyone will be able to keep up. The senior executives who do may realize not only greatly improved business processes but also higher market share and increased market value.

How Technology Has Changed Competition

The mid-1990s marked a clear discontinuity in competitive dynamics and the start of a period of innovation in corporate IT, when the internet and enterprise software applications—like enterprise resource management (ERP), customer relationship management (CRM), and enterprise content management (ECM)—became practical tools for business. Corporate investments in IT surged during this time—from about $3,500 spent per worker in 1994 to about $8,000 in 2005, according the U.S. Bureau of Economic Analysis (BEA). (See the exhibit “The IT Surge.”) At the same time, annual productivity growth in U.S. companies roughly doubled, after plodding along at about 1.4% for nearly 20 years. Much attention has been paid to the connection between productivity growth and the increase in IT investment. But hardly any has been directed to the nature of the link between IT and competitiveness. That’s why, with help from Harvard Business School researcher Michael Sorell and Feng Zhu, who’s now an assistant professor at USC, we set out two years ago to compare the increase in IT spending with various measures of competition, focusing on three quantifiable indicators: concentration, turbulence, and performance spread.

The IT Surge

In a concentrated or winner-take-all industry, just a few companies account for the bulk of the market share. For our study, we focused on the degree to which each industry became more or less concentrated over time. A sector is turbulent if the sales leaders in it are frequently leapfrogging one another in rank order. And finally the performance spread in an industry is large when the leaders and laggards differ greatly on standard performance measures such as return on assets, profit margins, and market capitalization per dollar of revenue—the kinds of numbers that matter a lot to senior managers and investors.

Continued (you may need to be a subscriber) ...

Investing in the IT That Makes a Competitive Difference

The Wall Street Journal | Oracle 4Q Net Up 27%, New License Sales Strong

Oracle Corp.'s (ORCL) fiscal fourth-quarter net income jumped 27% as sales of new software licenses rose by the same amount amid an end-of-year rush.

Chief Executive Larry Ellison said the company had exceeded its five-year plan by delivering earnings per share at a compound annual growth rate of more than 26%, compared with the goal of 20%.

Because most of Oracle's revenue is from selling software to other businesses, the Redwood Shores, Calif., software and database company is a bellwether of overall technology spending by businesses.

For the seasonally strong quarter ended May 31, Oracle reported net income of $2.04 billion, or 39 cents a share, up from $1.6 billion, or 31 cents a share, a year earlier. Excluding stock-based compensation, restructuring and acquisition-related costs, earnings rose to 47 cents a share from 37 cents.

Revenue climbed 24% to $7.24 billion.

Analysts noted that Oracle had comfortably exceeded forecasts, but some cautioned that the outlook for the first quarter of 2009 would be key.

Jeff Gaggin, of Avian Securities, said this was a "blowout" quarter, pointing in particular to strong new applications software license sales, a key measure of the health of the business.

He noted, though, that Oracle typically delivers a strong fourth quarter. "Most people were expecting a good quarter so it's not a total surprise," he said.

In March, Oracle predicted earnings of 43 cents to 44 cents a share and revenue growth of 14% to 18%.

The fiscal fourth quarter is typically Oracle's busiest, as salespeople scramble to close deals to secure end-of-year bonuses.

Revenue from new software licenses grew 27%. That number is a closely watched indicator of the health of corporate tech spending because it shows how much companies are allocating for new software.

Sales of new licenses for business applications - software used for such tasks as accounting and human resources - climbed 36%. That is another key growth metric because companies typically buy such software when they are embarking on new projects. In the third quarter, Oracle's new applications license sales grew a lower-than-expected 7%, sending the stock down sharply and raising concerns about the weak economy's effects on technology companies.

President Charles Phillips said Wednesday that "this is the third consecutive year we've taken applications market share from SAP." Oracle and rival SAP AG (SAP) dominate the business-software applications market, though a number of smaller players remain.

Oracle, which originally built its business on database software, has developed into a strong applications company in recent years, thanks in part to an acquisition spree, which has included companies such as PeopleSoft and Siebel Systems. In April, Oracle closed its $8.5 billion acquisition of BEA Systems Inc., a maker of middleware used to connect networks and programs.

Last week, the company announced price increases, which analysts predict will be in the range of 15% to 20%.

Oracle's shares were at $22.89, up 1.5%, in after-hours trading.

-By Kathy Shwiff, Dow Jones Newswires; 201-938-5975; Kathy.Shwiff@dowjones.com

(Jessica Hodgson contributed to this report.)

http://online.wsj.com/article/BT-CO-20080625-714740.html?mod=hps_us_my_companies

The Wall Street Journal | Insurers Abandon Legacy Systems for SAP and Service-Oriented Architecture

SAP AG (NYSE: SAP) today announced growing adoption among insurance companies of SAP's approach to service-oriented architecture (SOA). SAP customers, including The ATP Group, CLAL Insurance, Offentliche and Winterthur Group, are gaining operational efficiencies, faster time-to-market and improved customer service by running SAP software along with the business-driven blueprint of service-oriented architecture. The announcement was made at the SAP International Forum for Insurance, SAP's conference to address the challenges insurers face today, being held in Leipzig, Germany, June 10-11.

Once struggling with aging information technology (IT) systems unable to keep pace with evolving customers demands, changing processes, and heated competition from traditional and non-traditional players entering the market, insurers around the world are now embracing business software from SAP built on SOA. By detaching the essential building blocks from what traditionally has been "hard-wired" software, an SOA strategy enables companies to reuse pieces of functionality, coupling them with other applications to flexibly compose new or differentiating business processes.

  SOA: Supporting Insurers' Many Business Challenges

Israel's leading insurance, pension and finance group, CLAL Insurance Company, faces the same challenges other insurers have in the industry. Unique to CLAL Insurance, however, is the need to comply with the rigorous government supervision of insurance companies in Israel that require insurers to closely monitor their claims. 

"With SOA from SAP, CLAL now has higher flexibility and development speed to meet the business requirements and easier maintenance of streamlined processes," said Ruslan Torgovetsky, SAP Claims Management Implementation Manager, CLAL Insurance. "Our goal with SOA is that, where possible, every interface will be implemented as a web service."

As companies retire their outdated systems, many are finding ways to extend the value of in-house software developments and investments in legacy applications. With the SAP NetWeaver(R) technology platform, insurers can reuse data and functionality in their existing legacy systems.

For example, the ATP Group was selected to carry out Denmark's government-issued maternity leave program, which covers 100 percent of Danish workers not covered under a private maternity leave program -- approximately 800,000 people. With six months to meet this government requirement, ATP decided that the organization needed to automate and streamline its administrative processes to comply with the mandate.

"We had been building applications from scratch," said Marianne Aarslev-Jensen, chief project manager, ATP. "But we are transitioning out of a mainframe environment and wanted a standard application that we could deploy quickly, without much customization."

Based on the SAP NetWeaver technology platform, ATP decided to support its maternity leave administration processes with the SAP(R) Insurance Collections and Disbursement and the SAP(R) Claims Management applications. Because the SAP applications have web services built-in, ATP was live in six months. With SAP applications, ATP can handle the maternity leave program for 800,000 employees with only six caseworkers. In addition, ATP now provides employers an external web portal where they can take advantage of self-service options.

To maintain its competitive edge, the leading insurance company in Switzerland, Winterthur Group, knew it had to revamp its IT infrastructure.

"We were facing challenges resulting from our heterogeneous, sometimes outdated systems, and the fact that structures and responsibilities were decentralized and not standardized," said Rolf Bischofberger, IT program director, Winterthur Group. "SOA with SAP is a real business process enabler. It allows us to implement new processes, new ways of collecting information and new ways of monitoring processes, ensuring optimum quality, control and transparency."

With changing expectations among consumers, the insurance industry itself also faced changes. Offentliche, an insurer particularly focused on its customers, knew they needed a better IT infrastructure to support new demands, as well as flexibly and quickly adapt to future changes.

"To please our customers and stay competitive, we looked into our business and realized that our current operations were too manual and inefficient," said Dennis Lidzba, managing director IT, Offentliche Insurance (Versicherung Braunschweig). "With service-oriented architecture from SAP, our operations are integrated across the organization. Our new infrastructure also enabled us to build streamlined connections with our third-party partners."

With SAP software, the insurer has efficient integrated solutions with the realized benefits of the reduction of frauds, claims payments and administrative costs through out-tasked claims handling.

  SAP's Commitment to the Insurance Industry

With the myriad of new possibilities that using SAP software on this business-driven IT architecture provides, insurers are abandoning legacy systems and automating diverse core processes that were once performed manually. SAP software is helping growing numbers of insurance companies streamline and unify their IT systems and business processes in order to improve operational efficiencies, reduce costs and better manage transaction volumes and large claims. By reusing or combining the functions of SAP applications, new processes can be added more flexibly and quickly to suit the specific demands of companies' service lines, business networks and customers.

"In offering integrated solutions that serve as flexible business process platforms for insurance IT, SAP marks another milestone in its long-standing commitment to insurance carriers worldwide," said Leo Schneider, senior vice president, IBU Insurance, SAP AG. "With SAP solutions, insurers are able to build their platforms on a stable core of enterprise management solutions as well as insurance-specific applications."

http://online.wsj.com/article/PR-CO-20080610-901039.html?mod=wsjcrmain

ReadWriteWeb | Enterprise2.0 ... 48% of Bank Customers Want Web 2.0 Gadgets

WorkLight, a startup that offers enterprise 2.0 products, recently did a survey among Facebook users to find out their willingness to use Web 2.0 tools for secure banking. The survey was conducted among 1000 Facebook users between the ages of 18-34. The fact that the survey was conducted among Facebook users gives it a bias towards tech-savvy people. However there are some surprising findings.

The results:

• 27% of respondents said they are willing to switch banks in order to use secure Web 2.0 gadgets to manage personal finances; 73% would not.
• Nearly half of respondents (48%) said they would use secure gadgets for personal banking if their bank offered it
• Men are more open to use these new tools than women (55% to 45% respectively)
• The older age group - 25-34 - are more open to using Banking 2.0 tools

The fact that the 25-35 age group is more willing to try banking 2.0 than 18-24 years old was a little surprising - although neither group is "old" when you go outside of Facebook. To drill down more into the age group stats: 53% of 25-34 year olds said they would take advantage of a web 2.0 banking service, compared to 45% for the 18-24 year olds. Moreover, 33% of 25-34 year olds would consider switching to another bank that offered Web 2.0 gadgets for online banking -- it was just 21% among 18-24 year olds.

The key stat comparison I think is that nearly half would use web 2.0 tools if offered by their current bank, but only 27% would consider switching to another bank because of it. 27% (over 1 in 4) is relatively high, but again I think we need to bear in mind that these are Facebook users. So this tells me that web 2.0 is currently viewed as a 'nice to have' feature by banking consumers, but it is by no means an 'essential' product worth switching banks over. Still, banks would do well to to take notice of what their users want, especially the tech savvy ones.

Security is going to be a big part of any potential 'banking 2.0' product. Web 2.0 products to date haven't been known for their security - it's difficult to focus on that when social networking and sharing is such a major component of web 2.0 products. WorkLight says that it aims to adhere to a bank's "strictest security requirements". And let's be honest, Worklight is going to need 100% validation of security from the banks in order to be taken seriously by consumers. If I'm going to use a web 2.0 product for banking, then I want a guarantee from my bank that it's secure. A guarantee from Worklight alone won't cut it.

Having said that, Worklight's banking solutions look promising and it's another great example of web 2.0 going mainstream in 'the real world' (you know, the land where Twitter and FreindFeed are merely cute toys that geeks play with).

WorkLight is a pretty well funded company based in Israel. It recently took in a series B round of funding totaling $12 million led by Pitango Venture Capital, Israel's largest VC. It previously had taken $5.1m in funding when it was founded in 2006. It's main focus is consumerizing web 2.0 apps for the enterprise - such as iGoogle, MS Live, Netvibes, and Facebook. With the banking widgets, it appears to be headed into products that bring web 2.0 to the mainstream consumer world; which we think is an area with a lot of promise.

http://www.readwriteweb.com/archives/survey_48_of_bank_customers_wa.php

VentureBeat | Iceberg - More DIY Enterprise Software

We’ve written about companies like Weebly and SynthaSite which want to give the average Joes the tools to create their own good looking websites without hiring a designer or writing a line of CSS or HTML. But this trend is extending.

Enter a range of startups that offer Do It Yourself software services for businesses including Coghead, LongJump, most recently a just-launched product called Iceberg made by a two-man Irish company called Fractis.

The vision that these companies share is simple: If someone can comprehend a business process, they should be able to turn that logic into a useful software offering without the labor, costs, and limitations of customized code. Building a powerful, custom CRM system (including customizing versions of software-as-a-service market leader Salesforce) is a time-consuming and expensive process that carries a fair amount of risk that the software will not work according to plan.

Like its competitors, Iceberg has developed visual drag-and-drop interfaces that simplify the processes of building enterprise apps and make them easy to share. But Iceberg stands apart in a few ways: both Coghead and LongJump are hosted, which means those companies maintain the apps on their servers and “rent” you subcription rights to them. While Iceberg offers that option, it also lets you host your app yourself and even sell it to others under your own name.

Iceberg also seems to have more going on under the hood. A look at Coghead’s featured application page reflects the kind of apps Coghead has enabled people to build: A basic project management tool that enables task assignment and automated notifications; a simple CRM that does basic pipeline management, and a handful of more sophisticated creations, including a “Marketing Lucidity Lead Model” that helps B2B marketers keep track of their leads and deal flows across their organizations.

In contrast, a basic Iceberg project management tool offers everything that Coghead’s does and adds in access permissions (so Jane’s team can see the whole project but Bob’s can only see their own tasks), an automated scheduling process with sophisticated exception rules (so if Bob doesn’t complete his task in a set amount of time, it immediately gets bumped over to Jane — unless it’s Christmas). Iceberg could in theory use the Facebook API to find and extract a prospect’s interests before getting him on the phone.

The implications are substantial. if these tools work and evolve as promised, they could render the need for custom enterprise coding and all of the engineers who specialize in it obsolete. Also, Byrne points out, “Iceberg and technologies like it could do for software and applications what MP3 did for music. Before MP3, it was a lot harder to rip off and share music. Software is very much the same thing. When you are able to clone applications infinitely faster than they were made, who owns them? What would the equivalent of the DMCA, whoever that might be, say about you cloning a really popular web application and releasing a copy of it the next day?”

http://venturebeat.com/2008/05/08/icebergs-war-on-software-could-it-really-clone-salesforcecom-in-two-weeks/

SAP INFO | SAP and Microsoft Join Together for SOA in Financial Markets

WALLDORF, Germany and REDMOND, Wash. - April 30, 2008 - SAP AG (NYSE: SAP), together with Microsoft, today announced a significant milestone in its mission to help banks establish a service-oriented architecture (SOA) for their business operations. SAP and Microsoft, along with other founding members, have created the Banking Industry Architecture Network (BIAN). The goal of BIAN is to help banks ease the transition to an SOA by gathering together a community of industry leading players and global banks who will openly share domain and technical expertise to apply SOA principles and methodologies. In employing these principles, banks globally will be able to better respond to changing customer needs and reduce risk and cost of re-engineering legacy systems towards a more flexible operational environment.

Based on the foundation of the Industry Value Network (IVN) for Banks created by SAP, seventeen founding members have launched BIAN; AXON, Callataÿ & Wouters, Credit Suisse, Deutsche Bank, Finanz IT, ifb group, ING, Microsoft, Deutsche Postbank, SAP, Standard Bank, Steria, SunGard, SWIFT, Syskoplan, Temenos and Zürcher Kantonalbank. The announcement was made at a signing ceremony, where members gathered for the official launch of the BIAN association.

While IT infrastructure is seen as a key component to a bank’s operations, outdated and incompatible legacy systems are increasingly becoming a hindrance in tightly linked, global financial markets. As an association, BIAN members will work within the industry to enable a non-disruptive, step-by-step evolution toward SOA. It will work to create a blueprint to help banks more flexibly use software to run core banking processes and achieve better interoperability among their IT systems allowing them to reduce risk and costs while improving overall operations. The open forum will offer a wide adoption of industry enterprise services and will globally enable banks to easily utilize the results of this collaborative effort.

A goal of BIAN is to define and encourage the development and implementation of standardized services, which will help banks in their daily operations by creating operational efficiencies and allowing them to focus on growth, time-to-market and the increasing demands from their customers. Financial institutions, software vendors and service providers, along with technology partners, are invited to join the association and play a collaborative role with other industry leaders in the definition, building and implementation of next-generation banking platforms.

“Being an active member of the Industry Value Network of Banks, Credit Suisse sees the creation of this association as significant milestone for not only ourselves, but for the industry as a whole,” said Claus Hagen, head of Integration Architecture, Credit Suisse. "The association will create an open environment of members that begins with an idea and takes it all the way through to execution.”

“Microsoft is pleased to play a lead role in helping define the roadmap for a more flexible approach across the banking industry,” said Koen Van den Brande, worldwide industry manager for core banking at Microsoft. “A common view of the functional scope of ‘banking enterprise services’ is needed to build a next generation of agile banking platforms. This SOA- based approach is designed to enable our largest customers to implement more flexible banking solutions based on a new generation of banking technologies from our partners.”

Banking Industry Architecture Network Creating and Building Enterprise Services for Banks
One of the key challenges for SOA in banking lies in the semantic definition of services that will provide a more flexible and modularized IT landscape. In 2005, SAP and its banking advisory board began the journey to address this challenge by creating the industry value network (IVN) group for Banks. The IVN banking group, comprised of 37 financial services institutions and software providers, was tasked with combining their own experiences with expertise from SAP to define important SOA services and create the blueprint for a successful transition from today’s tightly coupled IT landscape.

Recently formed as an association according to German law, BIAN has an open intellectual property policy, which helps ensure that the specifications that emerge from this collaboration can be implemented on a variety of technology platforms. BIAN members will work closely with:

• Standards bodies: BIAN will strive wherever possible to encourage the adoption of standards already in existence, while working collaboratively with standards bodies for the benefit of the industry as a whole.
• Global banks: BIAN will work with banks worldwide on the definition of enterprise services that maps closely to banks’ in-house target architectures for next-generation SOA and business process management-based banking platforms.
• Software vendors and systems integrators: BIAN will work with leading independent software vendors and systems integrators worldwide who want to build and implement enterprise services for banks to use with their in-house and software vendors’ platforms.

“Driving the IVN group for banks for the last two years has been a very exciting initiative, through which SAP has been able to work more closely with the banking industry to lead the efforts of standardizing enterprise services and creating a path where our customers can transition their business operations into a more flexible and agile IT environment,” said Thomas Balgheim, senior vice president, global banking line of business, SAP. “Through the success of the IVN, its members and SAP have turned their goal of forming a new industry association into a reality. This will enable members to create a truly open community.”

Microsoft and its partners have long collaborated to advance the business of banking and financial services. Together, they develop technologies designed to enable financial institutions across the global to run their IT systems and applications more effectively and efficiently, allowing staff to better leverage technology to drive business success. This is reflected in Microsoft’s approach with BIAN and via this history and acumen, Microsoft is happy to help shape the future for banking around the important work that BIAN will deliver. BIAN will utilize the existing value from the IVN group for banks which resulted from its collaboration between SAP and leading banks worldwide. Through the identification of customer pain points, critical services and a path to standardize the adoption of the service-oriented architecture (SOA) framework, BIAN will help to accelerate product development under one consistent business language.

The IVN group for banks had created an SOA taxonomy, developed a service landscape and identified the strategic and organizational building blocks that banks require for a successful transition to SOA. This successful collaboration has evolved into a global community comprised of 130 participants representing 37 financial services institutions and software providers.

About Microsoft in Financial Services
Microsoft’s Financial Services group helps financial firms leverage technology to amplify the impact their people can deliver to drive business success. We help our customers in banking, capital markets and securities, and insurance achieve four business outcomes: develop relationships, drive innovation, improve operations and build connections. To do this, we focus our products and technologies, and our work with leading solutions, services and hardware partners, on key areas where we believe we and our partners can deliver exceptional value; those areas include advisor platforms, channel renewal, core banking, insurance value chain, investment management, risk management, and compliance and payments. More information can be found at http://www.microsoft.com/financialservices.

Next Major Events:
SAPPHIRE® 2008 Orlando and SAPPHIRE® 2008 Berlin
More than 15,000 customers, partners and technical experts are convening at SAPPHIRE 2008 to discover how SAP and its thriving partner ecosystem are delivering IT solutions that create value beyond the four walls of the enterprise, to create “business beyond boundaries.” SAP’s premier educational and networking event, SAPPHIRE is the one occasion where senior executives, business managers, and decision-makers can come together every year to explore how innovative business solutions foster long-term, profitable growth. SAPPHIRE® 2008 is being held in Orlando, Florida, May 4-7, and in Berlin, Germany, May 19-21, 2008. For more information, please visit www.sap.com/sapphire.

http://www.sap.com/about/press/press.epx?PressID=9405

The Wall Street Journal | From .Net to Live Mesh - Microsoft and The SaaS Cloud

Cloud-gazing is no longer the pastime of the poetic or the idle. Big tech companies are thinking about clouds, too.

The notion of doing computing "in the cloud" has been kicking around ever since the Internet grew up. Like many technology buzz words, this one can be as elementary or as complicated as a marketing department wants to make it.

That so many tech heads are in the clouds was evidenced by Microsoft's announcement last week of a project that had been in the works for several years. Microsoft, like many other companies, sees clouds as a salvation from the problems happening down here on terra firma. There's a chance, though, that as Joni Mitchell sang, they really don't know clouds at all. Most simply, "in the cloud" describes something that happens on the Web. If you regularly copy your most important files to an online storage provider, you are backing up your files "in the cloud." A standard schematic diagram of a technology setup shows two computers in a room connected to each other, drawn as two boxes with a line between them. When the Internet arrived, those lines started to blur. If you were showing the connection between an East and West Coast sales office, for example, you'd have two boxes, but with a big puffy cloud between them. Saying the offices were linked "in the cloud" was a shorthand for saying the connection somehow happened "out there," but that you didn't really know or particularly care about the specifics, because those specifics didn't really matter. The job was getting done. As more things started happening in the cloud, tech companies, naturally, began trying to elbow their way into the cloud business. A lot of this was for big companies. Individual users had Google with its online application programs, Apple and its online file-sharing service for Mac users, and social networks like MySpace and Facebook that have been opening their networks to outside developers.

All of these developments represent a challenge for Microsoft, which got to where it is by providing desktop software like Windows and Office. The company's most recent response to that challenge came last week, in the form of Live Mesh, a huge engineering effort several years in the making from a squadron of Redmond, Wash., programmers headed up by Ray Ozzie. He's the former Lotus developer, who is now Microsoft's chief software architect charged with forging cloudy new directions.

For individual computer users, Microsoft says that Live Mesh, when it opens to the public later in the year, will be a way to access files from multiple computers, to share them with colleagues and to exchange messages about them. Later on, says the company, Live Mesh will also sync the information from cellphones and other devices.

You might well say, "Big whoop." File syncing and message exchanging are the sorts of features offered by any number of garage-shop Web 2.0 companies over the past few years. One would expect Microsoft simply to build those capabilities into Windows and get on with something more interesting.

To be fair, there is more to Live Mesh. It's also designed to be a complete software tool kit that outside programmers can use to write their own cloud applications, making it akin to an operating system that lives online.

This is what is called in the tech world a platform. Then again, cynics might say that software companies build platforms when they have run out of ideas for applications.

In Microsoft's case, the company has a history of introducing overengineered, somewhat nebulous products that never really go anywhere. It's .Net strategy from the early 1990s was supposed to transform the personal-computing experience, much as Live Mesh is supposed to today.

But .Net ended up being essentially a revision of Microsoft's family of programming language -- useful for developers, to be sure, but a development that civilians can be forgiven for not noticing took place.

Like anyone else, I'd be happy to use Live Mesh once it's available if it solves a real problem, such as syncing phones and computers, better than anyone. But the thing about clouds is that they are ethereal, have blurry edges and are constantly changing. Computer users like the cloud, aka the Internet, because it provides choices that would never be possible from a single company.

The Web is the ultimate antidote to Windows-style technology lock-in. For that reason, it's not any tech giant but boutique outfits that often provide popular online programming systems, such as the widely used Ruby on Rails.

That is a problem not only for Microsoft, but for all big tech companies, because all of them are trying to turn the cloud into an extension of one sort of monopoly or near-monopoly: Microsoft with Windows, Google with search, the social networks with their command of time and eyeballs. They dream of users entering their clouds and never leaving, a case of heads being too much in the clouds for their own good.

http://online.wsj.com/article/SB120952063210255067.html?mod=hps_us_my_companies

TechCrunch | Rearden Commerce - Salesforce.com for the Enterprise?

Rearden Commerce won’t confirm this one way or the other, but we’ve heard from numerous sources that the Silicon Valley company raised $100 million last week. Existing invesotrs Oak Investment Partners, Foundation Capital and American Express all participated, as well as new investor Chase Capital.

We first wrote about Rearden Commerce a year ago with a long review of the service. The company, which was founded in 1999, has now raised $200 million in its drive to marry big enterprise customers to a wide array of services - hotel, airline, restaurants, rental cars, shipping, event tickets, and parking - via customized portals. The service acts very much like a personal assistant. Set your profile up with the types of restaurants you like, whether you like aisle or window seats, and your preferred car provider, and Rearden will book all aspects of your trip for you.

This is a war chest-type fundraising round, which can give them the runway they’ll need to get through any kind of downturn before the IPO window opens for them. They remain a lurking giant among hundreds of better known consumer startups. But this ““mashups service for adults” will be releasing more high profile consumer facing products in the near future. In a year or so, they may be as well known as Salesforce in the enterprise space.

http://www.techcrunch.com/2008/04/21/rearden-commerce-raises-100-million/

TechCrunch | Intuit Offers SaaS Enterprise Apps via QuickBase

Intuit wants in on the race to become the platform for enterprise apps in the cloud. It is opening up QuickBase to developers who want to build new hosted Web applications and businesses on top of it. QuickBase has been around for eight years and has amassed 250,000 users. At its core is an online database around which companies can create their own customized enterprise apps for things like project management or issue tracking. Now developers can join the QuickBase beta to develop their own enterprise apps on Intuit’s infrastructure. Intuit will host the apps, take care of the billing, and allow developers to charge whatever they want.

Intuit is joining a crowded field. Salesforce.com has its AppExchange and Force.com. Amazon has its Web services, including SimpleDB. Google just launched its App Engine. And startups like Coghead are also angling for position.

But Intuit already has a lot of small business customers that, in turn, can help it attract developers to its new platform. Bill Lucchini, the general manager of Quickbase tells me:

It is great to have a cool piece of technology, but we have to make sure that developers build successful businesses. Giving them the tools to get in front of our customers is strategy No. 1

He realizes that decent technology is just table stakes. Developers will get access to QuickBase via APIs to use as a foundation for their apps, and they also get hooks into QuickBooks, Intuit’s accounting software that is used by nearly 25 million individuals in 3.6 million businesses in the U.S. alone. Developers will be able to build apps using Adobe Flex and the open-source Eclipse development environment. For the technically-minded, here is a screencast that goes into more details.

Although the economics have yet to be fully worked out, Intuit plans to charge using a utility model similar to Amazon’s that goes up the mnore resources a developer’s app consumes. Says Lucchini:

We are trying to price these things where developers can charge $10 to $20 per user per month and make a profit. Small businesses are pretty price sensitive.

The Web platform wars are in full swing. Which platform will developers flock to for enterprise apps?

http://www.techcrunch.com/2008/04/16/watch-out-salesforce-intuit-opens-up-quickbase-to-developers/

The Wall Street Journal | Cloud (SaaS) Watching: Google and Salesforce.com

Two of the biggest names in online software will make their products work with one another, a move designed to make so-called cloud computing – where people access software over the Internet through a Web browser – more appealing to businesses.

For some reason clouds are the go-to metaphor for the Internet

Starting today, workers will be able to move information between Salesforce.com’s customer-management software and Google’s email, spreadsheets, calendar and other applications just by clicking a button. Previously, it was up to individuals to do this manually. Later this year, Salesforce.com will start selling and providing technical support for Google’s products.

Salesforce.com CEO Marc Benioff tells the Business Technology Blog that the agreement changes the balance of power in the business-computing world. We’re not willing to go that far. It’s another feature for Salesforce.com and it should boost sales somewhat for Google. But it does indicate that one of the looming challenges for online software may not be so challenging after all.

Businesses spend a lot of time and money making changes to the systems they’ve bought so that they can access the same data. You can’t do that with online software – the tech company manages the data and makes all the changes to the software. But Google and Salesforce have figured out how to share data between their systems nonetheless. A worker can access data stored by Salesforce through an application run by Google. Dave Girouard, the general manager of Google’s enterprise division, tells us it took a handful of developers a few months to make it so Salesforce’s and Google’s systems could exchange data.

If Google had bought Salesforce or if the two companies had announced that they were merging their systems into one giant system, it would have sent shockwaves through the business-software world. Today’s announcement isn’t as attention getting as that, but the long-term implications may prove to be important.

http://blogs.wsj.com/biztech/2008/04/14/cloud-watching-google-and-salesforcecom-band-together/?mod=WSJBlog?mod=hps_us_my_companies