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VentureBeat | Appirio - Third Round Funding Raises $10m

Appirio, a startup that integrates online business applications and platforms, has raised $10 million in a third round of funding.

The San Mateo, Calif. company developed three of the seven bestselling applications inSalesforce.com’s AppExchange, including the No. 1 app, which synchronizes users’ calendars in Salesforce and Google Apps. It also developed an application that integrates Facebook with Salesforce, allowing companies to recruit and market on the social network. And oh yeah, it provides various professional services to help companies move into cloud computing, too. Chief executive Chris Barbin says there are currently 2,500 companies using Appirio’s products, and that it has 150 enterprise consulting clients.

Tying everything together is Barbin’s goal to help businesses bring the many internet “clouds” together.

It seems a bit soon for Appirio to be raising more money, since it announced its first round little more than a year ago, and its second round in July. Barbin says the new funding will be spent in three broad areas: Building more products for the major web platforms, like Google’s App Engine; adding to its workforce; and developing partnerships with other companies. Appirio’s will also kick off operations in Japan, marking its first international expansion.

GGV Capital led the round with an investment of $8.2 million, and previous backer Sequoia Capital contributed $1.8 million. Appirio has raised $16.7 million in all.

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http://venturebeat.com/2009/02/25/appirio-raises-10m-to-bring-business-into-the-cloud/

The McKinsey Quarterly | The Corporate Impact of Web2.0 - Bigger than ERP?

Technologies known collectively as Web 2.0 have spread widely among consumers over the past five years. Social-networking Web sites, such as Facebook and MySpace, now attract more than 100 million visitors a month. As the popularity of Web 2.0 has grown, companies have noted the intense consumer engagement and creativity surrounding these technologies. Many organizations, keen to harness Web 2.0 internally, are experimenting with the tools or deploying them on a trial basis.

Over the past two years, McKinsey has studied more than 50 early adopters to garner insights into successful efforts to use Web 2.0 as a way of unlocking participation. We have surveyed, independently, a range of executives on Web 2.0 adoption. Our work suggests the challenges that lie ahead. To date, as many survey respondents are dissatisfied with their use of Web 2.0 technologies as are satisfied. Many of the dissenters cite impediments such as organizational structure, the inability of managers to understand the new levers of change, and a lack of understanding about how value is created using Web 2.0 tools. We have found that, unless a number of success factors are present, Web 2.0 efforts often fail to launch or to reach expected heights of usage. Executives who are suspicious or uncomfortable with perceived changes or risks often call off these efforts. Others fail because managers simply don’t know how to encourage the type of participation that will produce meaningful results.

Some historical perspective is useful. Web 2.0, the latest wave in corporate technology adoptions, could have a more far-reaching organizational impact than technologies adopted in the 1990s—such as enterprise resource planning (ERP), customer relationship management (CRM), and supply chain management (Exhibit 1). The latest Web tools have a strong bottom-up element and engage a broad base of workers. They also demand a mind-set different from that of earlier IT programs, which were instituted primarily by edicts from senior managers.

Web 2.0 covers a range of technologies. The most widely used are blogs, wikis, podcasts, information tagging, prediction markets, and social networks (Exhibit 2). New technologies constantly appear as the Internet continues to evolve. Of the companies we interviewed for our research, all were using at least one of these tools. What distinguishes them from previous technologies is the high degree of participation they require to be effective. Unlike ERP and CRM, where most users either simply process information in the form of reports or use the technology to execute transactions (such as issuing payments or entering customer orders), Web 2.0 technologies are interactive and require users to generate new information and content or to edit the work of other participants.

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http://www.mckinseyquarterly.com/Business_Technology/Application_Management/Six_ways_to_make_Web_20_work_2294

The Wall Street Journal | Oracle Goes on a Shopping Spree ...

While most American corporations pinch pennies, Oracle Corp. is quietly going on a shopping spree.

The software giant completed 10 acquisitions in the past year, ranging from a maker of insurance-policy-writing tools, to a designer of "plan-o-gram" software used by stores to maximize their use of shelf space. This month it bought mValent Inc., a tiny maker of software that helps configure other software.

These deals, whose terms haven't been reported previously, put Oracle in a small club of cash-rich companies bargain-hunting amid the worst economy in a generation. It's a buyer's market: As traditional sources of investment and cash get scarcer -- including, of course, paying customers -- even some companies with high-quality products have turned into desperate sellers.

Oracle Grows With Acquisitions

See what companies Oracle bought, when, for how much, and from whom.

"If I was in their shoes, I would ride it out" and try not to sell, says Sonny Singh, one of Oracle's chief deal makers, referring to companies that have seen their valuations tumble.

That's not always possible. mValent, which Oracle bought Feb. 4, makes a top-rated product, but last year many of its biggest customers got clobbered, including Lehman Brothers Holdings Inc. and Circuit City Stores Inc., both of which filed for bankruptcy-court protection.

Oracle, with sales of $22.4 billion in fiscal 2008, is the largest business-software maker in the world, dominating the market for industrial-strength databases that companies rely on to organize everything from inventories to payrolls. It also sells other software, including accounting and order-management -- but this is where it's weaker, trailing SAP AG of Germany, which leads the pack. Oracle's buying binge is key to its catch-up strategy.

Oracle hasn't escaped the slump. The Redwood Shores, Calif., company recently reported a 1% drop in net income, the first decline in three years. Oracle's stock price, currently $17.72 a share, is down 23% the past six months. Still, Oracle is sitting on a $7.4 billion pile of cash, the result of several years of more than 20% sales growth.

It's not the only company getting aggressive. Last week, Cisco Systems Inc., which makes computer-networking gear, issued $4 billion in debt to fund acquisitions. "Cash is king, queen, and the royal family" in a recession, said John Chambers, Cisco's chief executive, in a recent interview. Microsoft Corp. executive Chris Liddell said in a January conference call that buying opportunities have "probably never been better."

LARRY ELLISON

The binge has its drawbacks. In most cases, Oracle maintains separate sales teams for its individual products. Some customers say that makes it harder to get bulk discounts or negotiate on price.

Some former employees also say the acquisitions spawned confusion in-house as people got thrown together on new projects. "My manager would put me on projects that are totally irrelevant for my skill set," said one former consultant who joined Oracle when it bought PeopleSoft Inc. in 2004 The changes became so frequent, he says, he eventually stopped trying to remember the names of groups he was assigned to.

Oracle declined to comment on its sales approach or on in-house management.

The company first started buying during the last tech bust, in 2003, when its CEO, Larry Ellison, predicted tech companies would have to merge and diversify to survive. He followed that with a string of big acquisitions.

Oracle bought PeopleSoft, a maker of human-resources and financial software, for $10.3 billion, followed by Siebel Systems Inc. for $5.85 billion in 2005 and Hyperion Solutions Corp. for $3.3 billion 2007. Its last sizable purchase was BEA Systems Inc. for $8.5 billion in January 2008.

These big transactions quickly boosted Oracle's bottom line by cutting costs and bringing in new revenue. The flip side is that some analysts say Oracle must keep buying more to maintain its earnings growth. Analysts estimate that without more purchases, Oracle's growth could be in the single digits instead of around 20%.

The problem: There aren't very many big companies left to buy.

So in 2008, Oracle zeroed in on much smaller firms. Mr. Ellison's last 10 deals combined cost less than $750 million.

SONNY SINGH

The timing is good. Prices for small tech firms have fallen sharply. While publicly traded software makers are down more than 30% the past year, privately held firms dropped about 50%, according to people who buy and sell companies like these.

As companies run out of cash, "they are going to sell for whatever they can get," say Russ Crafton, an investment banker with Redwood Capital Group LLC, which advised mValent on its sale.

Oracle is emerging as one of the few lifelines for small software makers. Private-equity investing in tech companies tumbled almost 80% last year, to $26.3 billion. Venture-capital investments are also dropping steeply, and initial public offerings of tech stocks are almost nonexistent.

Oracle "is the new IPO," declares Jon Fisher, who sold his own company, Bharosa Inc., to Oracle in 2007.

In some cases, Oracle's recent deals would barely count as a rounding error for the software giant. In October, for instance, Oracle bought Advanced Visual Technology Ltd. of St. Albans, England, maker of the "plan-o-gram" shelf-planning software, for around $5 million, according to a person familiar with the deal. The 30-person company was on such thin ice, it required a cash infusion just to get through the buyout talks, according to another person familiar with the transaction.

Oracle declined to discuss the terms of its deals.

AVT's revenue is a mere drop in the ocean of Oracle's annual sales. But the company hopes tiny products like these can help persuade retailers to buy big-ticket business-management packages later.

Mr. Ellison founded Oracle in 1977 and expanded it into one of the world's largest software makers. Oracle caters mainly to very big companies. A typical sale might involve millions of dollars of software, combined with recurring annual payments of about 20% of the sale price to cover tech support and software updates.

Mr. Ellison is now one of the richest men in the world. He declined to comment for this article.

But as recently as 2004 Oracle was still overwhelmingly reliant on database sales. That year, databases represented 83% of new sales. Other software generated just 17%. Oracle's acquisitions have already changed that ratio significantly. Today, databases and a related software category account for 68% of new sales and other software has grown to 32%.

Its expansion puts Oracle in direct competition with SAP, the German giant that rules the market for sophisticated, all-in-one software "suites" designed to manage everything from human resources to the general ledger.

Their strategies are very different. Whereas Oracle is building separate, a la carte lines aimed at individual industries, SAP offers a single, one-size-fits-all product that can be customized. And SAP does far fewer deals.

"We can grow double digits without buying anybody," says Bill McDermott, a top SAP executive. SAP's revenue grew 13% in 2008, although it grew only 8% in its December quarter as the recession deepened. Oracle's revenue for the most recent quarter grew just 6%.

Mr. McDermott dismisses Oracle's acquisitions as adding too much complexity for customers. Oracle declined to comment on SAP's characterization.

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http://online.wsj.com/article/SB123483057830695641.html

The Economist | Re-Visiting Business Process Re-Engineering

The idea of re-engineering was first propounded in an article in Harvard Business Review in July–August 1990 by Michael Hammer, then a professor of computer science at MIT. The method was popularly referred to as business process re-engineering (BPR), and was based on an examination of the way information technology was affecting business processes.

Michael Porter (see article) said:

The literature on re-engineering employs the term processes. Sometimes it is a synonym for activities. Sometimes it refers to activities or sets of activities that cut across organisational units. In any case, however, the essential notion is the same—both strategic and operational issues are best understood at the activity level.

BPR promised a novel approach to corporate change, and was described by its inventors as a “fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance such as cost, quality, service and speed”.

The technique involved analysing a company’s central processes and reassembling them in a more efficient fashion and in a way that rode roughshod over long-established (but frequently irrelevant) functional distinctions. Functional silos were often protective of information, for instance, and of their own position in the scheme of things. At best, this was inefficient. Slicing the silos into their different processes and re-assembling them in a less vertical fashion exposed excess fat and forced corporations to look at new ways to streamline themselves.

BPR’s originators, Hammer and James Champy, maintained that re-engineering had a wider significance than mere processes. It applied to all parts of an organisation, and it had a lofty purpose. “I think that this is the work of angels,” said Hammer in one of his more fanciful moments. “In a world where so many people are so deprived, it’s a sin to be so inefficient.”

Many commentators, however, saw re-engineering as a return to the mechanistic ideas of Frederick Winslow Taylor (see article). Others saw it as a shallow intellectual justification for downsizing (see article), a process of slimming down that was being forced on many corporations by developments in it.

One of the faults of the idea, which the creators themselves acknowledged, was that re-engineering became something that managers were only too happy to impose on others but not on themselves. Champy’s follow-up book was pointedly called “Reengineering Management”. “If their jobs and styles are left largely intact, managers will eventually undermine the very structure of their rebuilt enterprises,” he wrote with considerable foresight in 1994.

BPR followed a favoured route for popular management ideas: from a university academic’s research, via a management consultancy’s marketing (Champy was the boss of CSC, a management consulting firm) and a best-selling book, into (briefly) a perceived panacea for all companies’ ills. It was helped by the fact that the book’s authors (Hammer in particular) were eminently quotable.

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http://www.economist.com/business/management/displayStory.cfm?story_id=13130298&source=hptextfeature

The Wall Street Journal | SAP - Web-Based Business Agility Via Business Suite 7

As it responds to the economic slump, SAP AG plans to imitate the Web-based software makers that have been chipping away at its business.

The German software company will introduce Wednesday a new version of its flagship business package that lets customers pay for and use just the pieces they really need. Companies could, for example, get new payroll software without changing the inventory database. The new software, called Business Suite 7, also eliminates the need to do onerous upgrades.

It is a strategy that takes a page from the book of makers of "on demand" software, such as Salesforce.com Inc., which have flourished in recent years as businesses have sought simple, low-cost software that doesn't require teams of technicians.

Usually, SAP's big corporate customers buy a software suite that can do all their back-office functions including payroll, inventory and billing. Every few years customers must do a systemwide upgrade to get new features and tools, a costly process that takes several months.

SAP hopes that making the package less expensive and easier to use will attract buyers. But the product release comes as a gloomy economy has left companies reluctant to spend on technology. In addition, the new approach means SAP will generate revenue through smaller, more frequent deals, instead of getting a big licensing fee for a software suite from each customer.

The new product is important to SAP. Spending on information technology is expected to drop 3% this year to $1.66 trillion, according to Forrester Research Inc. That would mark a reversal after seven years of growth.

SAP and its main rivals, Oracle Corp. and Microsoft Corp., have already seen revenues slump as businesses put the brakes on spending. All three are laying off workers, with 3,000 departures at SAP.

"The Business Suite is a key test for SAP to show that it can reduce the total cost of owning and running its systems," said R. "Ray" Wang, an analyst at Forrester Research. The advent of Web-based software "is putting tremendous pressure on conventional software companies like SAP to become more nimble, more innovative and cheaper."

Salesforce.com, which sells business software over the Internet, saw its revenue rise 48% to $787.2 million in the nine months ended Oct. 31. Its products can be activated immediately, paid for on a monthly subscription and don't require any hardware or periodic upgrades.

"These are tough times for any company that's selling big-ticket software," said Bruce Francis, vice president of corporate strategy for Salesforce.com. "It's obvious that the industry is moving toward [Web-based tools] and the current environment just shines a spotlight on this."

With its new approach SAP will generate revenue step by step, said Jim Snabe, who headed the product's development. First-time customers will be allowed to try out parts of the software suite gradually and pay as they go.

Instead of signing big contracts with upfront payments for a suite, SAP will likely sign smaller deals but in higher volume. "This changes our sales approach," Mr. Snabe said. "We have to continuously prove ourselves to our customers now."

SAP said it was too early to know exactly how the new product and pricing strategy will affect its revenue but said the launch was factored into its forecast of "flat or slightly down" revenue growth this year. The company had revenue of €11.57 billion ($14.86 billion) in 2008.

One of the Business Suite's main improvements is that customers can get new features without doing a systemwide upgrade. Mr. Snabe and his team of engineers found a technical solution to the dilemma of onerous upgrades. Each time the engineers created a new feature, they charted its exact location in the software code, and identified how the change then rippled through the rest of the code. Such detailed knowledge of the program's inner workings was new: Usually software engineers don't know exactly how each new feature will change a program's whole code.

Roche Pharma, the pharmaceutical unit of Switzerland's Roche Holding AG, uses SAP software for human-resources planning and clinical-trials management, among other tasks. Roche did four full upgrades in the previous year, requiring a team of 15 technicians, said Jennifer Allerton, chief information officer of Roche Pharma.

Ms. Allerton was attracted by the prospect of getting rid of upgrades. "Upgrades are expensive, annoying and they provide no business value," Ms. Allerton said. "With the new Business Suite, we won't have to [do them] anymore."

Roche Pharma declined to say how much it expects to save from switching to SAP's new product.

http://online.wsj.com/article/SB123369737470844941.html?mod=rss_whats_news_technology

InfoWorld | Oracle buys mValent to Enhance Enterprise Manager Platform

Oracle is acquiring application configuration management vendor mValent, with the goal of enhancing the Oracle Enterprise Manager platform, Oracle said this week.

Terms of the deal were not disclosed.

[ Oracle has made many acquisitions in recent years; the biggest was its acquisition of BEA, and its PeopleSoft buy was a major one as well. ]

MValent technology is expected to enhance Enterprise Manager application management software with extensive capabilities for managing applications across IT environments, Oracle said. Customers are expected to benefit from increased operational productivity through automation, enhanced audit, and governance as well as improved application runtime, according to Oracle's brief statement on the acquisition.

"Effective application configuration management is increasingly important as businesses look to improve operating efficiencies," said Richard Sarwal, senior vice president for Oracle Applications and Systems Management, in Oracle's statement. "With the addition of mValent, Oracle expects to be able to address this need by providing customers with the ability to collect, compare and reconcile deep configuration information of complex systems."

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http://www.infoworld.com/article/09/02/05/Oracle_buys_mValent_1.html

The Wall Street Journal | SAP to Cut 3,000 Jobs as Revenue Growth Slows

Business-software company SAP AG reported Wednesday a 13% rise in net profit for the fourth quarter but said it would cut jobs to cope with the economic downturn.

SAP said it would lay off 3,000 people in 2009, or nearly 6% of its global work force. It is the first time the company, based in Walldorf, Germany, has resorted to job reductions since it was founded in 1972. The move comes after other cost-cutting measures, such as a travel ban, were enacted last year.

AFP/Getty Images

A man stands in front of the SAP stand at the Hanover CeBIT fair.

The company also said that Gregory Tomb, president and chief executive of SAP's North American unit, will take a leave of absence for personal reasons. Rob Enslin, the unit's chief operating officer, will succeed him as president.

SAP's U.S. competitors Oracle Corp. and Microsoft Corp. also announced layoffs in recent weeks, showing how big technology companies are being buffeted by the downturn.

Aided by cost-cutting, SAP's net profit increased to €850 million ($1.12 billion) in the quarter ended Dec. 31, from €752 million a year earlier. Revenue also held up in the fourth quarter, rising 8% to €3.49 billion, as clients continued to update systems for back-office tasks such as inventory management, billing and human resources.

Still, this revenue growth was a long way from the double-digit rates SAP has posted in previous years. SAP has been telling clients that its software can help them be more efficient and save money in the long run. But the global economic slowdown has made it much harder to persuade companies to spend on business software. "Many companies in the world are focused on short-term cash preservation, so they are reluctant to spend on technology," co-Chief Executive Leo Apotheker said in an interview.

In addition, he said, the credit crunch is making it harder for companies to finance investment in information-technology projects. "Our smaller customers are being hit especially hard by the credit crunch," he said.

LEO APOTHEKER

SAP is trying to alleviate such problems by negotiating longer payment plans with clients on a case-by-case basis and also by helping small companies get loans, Mr. Apotheker said.

Demand for business software started deteriorating in the third quarter of last year and also flagged in the fourth quarter. Growth in IT spending generally correlates directly with rises in gross domestic product: When GDP grows, so does IT spending, and vice-versa.

Net profit for the full year 2008 fell 1.6% to €1.89 billion, from €1.92 billion a year earlier. Total revenue increased 14% to €11.6 billion in 2008 from €10.2 billion in 2007. SAP issued a profit warning in October and began a program of cost-cutting. Those measures seemed to have paid off with the higher profit in the fourth quarter.

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"It looks like SAP delivered more cost savings than expected," said UniCredit analyst Knut Woller.

Mr. Woller has a "buy" rating on the shares, with a target price of €33. Investors responded favorably to SAP's results, sending the stock up 5.3% to €27.60 a share Wednesday on the Frankfurt Stock Exchange.

SAP has declined to make revenue forecasts for 2009 given the uncertain economic environment. Forrester Research Inc. predicts global purchases of IT goods and services will decline 3% to $1.66 trillion.

By cutting 3,000 workers from its global work force of 51,500, SAP plans to save €300 million to €350 million a year starting in 2010.

Such cutbacks show how SAP must "focus in the short term on managing our costs so as to preserve the company from harm," Mr. Apotheker said. But he said SAP must also find ways to come out of this crisis stronger through new products or business models.

A key product launch will come next week when SAP is to introduce its new Business Suite 7, which bundles all of SAP's main products into one offering. Mr. Apotheker acknowledges it is a difficult time to launch such a product, but he said SAP must keep innovating to attract customers. "Opportunities are plentiful even in a downturn," he said.

—Ben Worthen contributed to this article.

Write to Leila Abboud at leila.abboud@wsj.com and Archibald Preuschat atarchibald.preuschat@dowjones.com

http://online.wsj.com/article/SB123307400818019993.html

CIO Magazine | What the Airlines Can Teach You About IT and Business Strategy

Sometimes it's hard to tell that a business model is broken. Then events startle you to clarity. For instance: The same week in 2007 that Airbus delivered the largest passenger plane ever built (four jet engines, 471 seats), the trade magazine Airfinance Journal, citing the industry's cry for fuel efficiency, hailed the "return of the turboprop," an airplane invented in the 1930s that uses a gas turbine to turn a propeller.

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Other times, the revelation comes in numbers. Ten years ago, a barrel of oil was about $16 and flying planes was lucrative. U.S. airlines together made $5.3 billion in 1999, which would be the industry's most successful year ever. Collective net earnings dropped by nearly half to $2.5 billion the following year, leading to five years of losses that began as the dotcom economy burst. Then came the 9/11 terrorist attacks, which grounded planes for three days and scared customers away from the skies for months, even years. Oil, meanwhile, climbed to all-time highs, eviscerating any hope of airline profits. The industry was profitable in 2006 and 2007, but now we're in an economic death spiral that touches virtually all industries in many countries around the world. When the airlines close the books on 2008, they are expected to lose up to $10 billion—twice as much as they made ten years ago.

"You just kind of shake your head," says Carter Stewart, managing director at Trans World Consulting, an airline consulting firm in London. After nine years, several shotgun mergers and a $15 billion federal bailout in 2001, the industry is no better off, he says. There are too many planes flying too many places, producing high demand for expensive jet fuel and, some say, an unwinnable competition. Customers routinely complain that they can't get the flights they want when and where they want them.

So the airlines are trying new tactics, such as cutting flights, hedging fuel costs and offering passengers amenities such asin-flight Wi-Fi. Plus, the so-called "unbundled services model" has some airlines selling everything from pillows to luggage space to meal deals.

But these tactics require technology support—and in few industries is the business model as baked into the IT as in the airlines, says Stewart, who formerly directed project management offices at American Airlines, TWA and London-based Silverjet. Who hasn't stood in front of an agent at the airport, listened to her clack on an unseen keyboard for several minutes—no mouse, no touch screen—only to hear, "I'm sorry, the system won't let me do that"?

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http://www.cio.com/article/476124/What_the_Airlines_Can_Teach_You_About_IT_and_Business_Strategy?source=home_ts

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