Software Business
Executive Report

August 27, 2007

Companies Rate Revenue Recognition Among Top Three Ongoing Control Risks

A recent survey by RevenueRecognition.com and IDC of senior financial executives from 578 companies, found that fewer than half are able to manage revenue reporting within their normal monthly close process. Delays of up to three weeks are caused by two factors: transactions are becoming more complex and revenue accounting data is not available in time. These problems are more pronounced at public companies — 57% reported making adjustments after the books were officially closed.

“This finding is symptomatic of companies not investing in revenue management processes in proportion to the complexity and importance of the problem,” said Gottfried Sehringer, executive editor of RevenueRecognition.com. “Other complex financial data is readily available from enterprise financial reporting systems, but revenue - the biggest and most visible number of all - slips through the cracks. To compensate, companies are using spreadsheets, in spite of the fact that they identified spreadsheet use as one of the top challenges to ensuring their revenue policies are being applied accurately and consistently.”

“The fact that complex transactions are the leading cause of delay in revenue reporting is a clear sign that underlying processes and systems have not kept up with changes in the business environment,” said Kathleen Wilhide, Research Director, GRC and BPM Solutions at IDC. “ Enterprise standards for revenue reporting processes have not evolved to the point of best practices, but they must because manual approaches cannot ensure the accuracy and availability of revenue data within the standard financial close timeline.”

The survey also found that revenue recognition is among the top three ongoing control risks for finance departments. Contract management was ranked number one and using spreadsheets was number two.

The full report, “Best Practices in Revenue Reporting,” is available online at www.RevenueRecognition.com

Five major discontinuities are combining and will force IT organizations to change long-standing practices for procuring and managing IT, according to Gartner, Inc. The intensity of these trends will grow through 2011, according to Gartner, Inc.

The five discontinuities include - Web 2.0, software as a service (SaaS), global-class computing, the consumerization of IT and open-source software. “The five major discontinuities have the potential to completely disrupt vendor business models, user deployment models, whole market segments and key user and vendor brand assumptions,” said Tom Austin, vice president and Gartner Fellow. “These emerging discontinuities reinforce each other, and their combined effect will prove far stronger than each individual trend. IT managers who oversee applications must incorporate these trends into their long-term planning.”

These five major intersecting discontinuities amplify each other and any one of them can upset the balance of power between users and their IT organization. When the five come together, they intensify each other’s dislocating impact and can cause major disruption that creates pain for some and opportunity for others.

SaaS is already empowering business units to act independently of corporate IT strategies. Global-class systems, built on tera-architectures (as in Google Apps), threaten to upset the careful balance of power between IBM and Microsoft in messaging, and more importantly, they introduce entirely new ways to implement and scale applications.

“Consumerization” and users’ clamor for IT organizations to be as responsive as Internet vendors are giving many IT departments headaches. Web 2.0 communities are bonding people in ways many people do not fully understand. Community members are doing business in ways that most enterprises had never even considered as they laid out their communications strategies. Open source is a hidden “secret” that enables many elements of the other four discontinuities to develop.

Gartner recommends five actions that can help IT managers take advantage of, rather than just react to, these five trends.

• Question Core Assumptions about the Role of the IT Organization — Once upon a time, it was the only source of IT. Now that users can often buy “what they need” from the Web, business executives must re-evaluate IT-related operating principles, guidelines, policies, practices and governance.
• Experiment with Free-form Environments — Create free-form searchable “personal Web pages” for users, along with folksonomies, tag clouds, navigation by tag or type of user, feeds, blogs and “wikis”. Companies need to provide free-form, open environments to facilitate productive social interactions and to allow patterns of behavior, interaction with the rest of the business ecosystem and new business models (and opportunities) to emerge and evolve over time.
• Help Users Innovate — Innovation speeds economic development. IT managers should apply this general rule to the enterprise by helping selected users interact in an open environment and thereby innovate. Allow them to exploit Web-based tools and share their experiences with other users.
• Segment Users — The IT organization needs to stop providing the same support to everyone. One size does not fit all. IT managers should segment users based on difference in roles, responsibilities, and information and application access requirements. The IT organization can increase workers’ effectiveness by giving them support that better fits their individual needs.
• Stop Trying to Provide Everything — The IT organization should admit that it can no longer compete with the Web in providing many personal and social tools. The IT organization should define what it is really good at, and for other activities, play the role of advisor and facilitator. It should no longer assume responsibility for supporting and managing all IT systems that workers use. Users must take personal responsibility for experimenting with new software and communities.

Mr. Austin said. “As a result, companies will embrace some powerful new ways of using IT to implement their business strategy.”

Contact www.gartner.com

Driving Toward Simplicity: Disruptive Market Changes Require a Clean Sheet Approach
By John Ciacchella and Ragu Gurumurthy
Principals, Technology Industry Practice
Deloitte Consulting

Much is said these days about how the end consumer is now driving the high-tech industry. For some software businesses, that’s proved to be something of a shock. After all, for the past 10 to 20 years, it’s really been a business user and enterprise-driven marketplace.

But, the software sector is experiencing quantum shifts among multiple dimensions. Usage is moving from simple, stand-alone computers to client-side devices like PDAs and cell phones—part virtual machines, part embedded devices. Architecture is moving to Web 2.0. Distribution is moving to software as service. And enterprise customers are acting like consumers by adopting software like Google Maps and browser tool bars directly from the Web, and posting and sharing information in forums and chat rooms. The boundary between enterprise customers and consumers is blurring, particularly as work outside a traditional office is becoming more ubiquitous thanks to the proliferation of mobile devices loaded with what had once been exclusively office applications. In short, the center of gravity for software companies has shifted.

This is causing tremendous disruption in everything from the product life cycle—think six to 12 months in the consumer world instead of three to five years in the enterprise world—to understanding just who the competition is, including global players. Indeed, emerging markets in China, India and elsewhere are not only shifting the competitive landscape, they’re also the fastest growing consumer markets. With a new landscape to deal with, software companies must fundamentally rethink their business, and develop new models and indicators. They need to invest in competitive knowledge that both reaches out to end markets and technologies and seeks leading indicators of early adoption and new product uses. Already, we’re seeing that the sources of innovation for the next generation of software capabilities, functionality and service models are being developed and tested in the consumer market. In search, an example is Google Client, for text messaging it’s AOL, for collaboration/content sharing it’s mySpace and for networking it’s Linkedin.

These changes are putting pressure on today’s software business models, driving increased complexity and risk when, ironically, it’s simplicity that’s called for to be effective. So, how do software companies address these changes and put in place the new business models they need? How do they deal with the complexity they now face across all the five “Ps” of a business model? We’ve identified some of the burgeoning trends in the industry and what strategists should be considering as they look ahead:

• Product/Offering: Focusing just on code will take you nowhere. With a move toward hardware/software integration, value is now created and captured among hardware-centric companies by embedding software. We see this trend in IBM’s, HP’s, EMC’s and Cisco’s software acquisitions. Among pure-play software companies, there’s a rush to provide simplicity in offerings with a complete solution set around a process or business application, not a complex set of features. It’s all about meeting the total customer need in a holistic sense, not patchwork pieces. Now you have to look at how your software is being applied and provide links, API’s and, in some cases, complete architectures that combine your software with others to provide a complete solution. On top of that, software companies need to consider how to simplify their offerings to create a complete service.
  
• Pricing/Licensing: Again, keeping it simple is the new rule. When it comes to customer relationship management applications, customers want results-based measures and simplified payment schemes. Offering usage-based price solutions allows customers to pay for value they receive. In the automotive world, the comparison would be to BMW whose leases today include all service while the car is under lease. The goal is to provide pay-as-you-use and all-inclusive payment schemes that ensure they can capture value without making it difficult for customers. This will require a complete rethink of how software is developed, delivered and maintained.
  
• Promotion: Broad-based marketing and selling software packages no longer works. Instead of offering a range of options and seeing what sticks, what’s required is deeper insight into what the customer is doing with the software to enable precise, targeted marketing and sales of total solutions. Recognize that customers want solutions to business processes; they aren’t merely interested in what the software can do.
  
• Place/Distribution: Much has been made already about Internet delivery of software and upgrades as well as software as a service (SaaS). However, most software companies are now stuck with supporting multiple delivery models—legacy, network and SaaS based. Continuing to support multiple delivery models is stressing cost and adding complexity, forcing many companies to question when to end the legacy models and make the switch. Over the next 12 to 24 months, we envision companies pursuing a multi-part distribution strategy, incorporating OEMs, two-tier channels, on-line and direct sales force. The key is in developing an optimal channel mix, based on the type of application and the end-customer segment.
  
• Partnership: Many software companies began their own consulting and integration service organizations to capture the services margin and value they saw their integration partners taking. No surprise about the conflict that created. Now as we move toward total solutions and industry specialization, these software service practices simply can’t keep up. The same integration partners who were bypassed are now required to deliver the total solutions and industry and business process expertise software companies lack and can’t possibly develop across the board. Software companies need to rebuild and restructure these integrator relationships and go back to architecting the solutions and developing the software.

All software companies need to revisit these five Ps as they relate to their future business model and make the key decisions needed to both shift to the new market dynamics and simplify their business. Too many today are straddling the fence between their legacy model and business and emerging new business. At some point soon, they’ve got to cut the cord to the past. While that is certainly a tremendous challenge, it just won’t do to re-engineer a little here and there. The segue from the past to this new solution-centric landscape basically requires a clean sheet approach. And while there’s no one, sure-fire way to achieve this, asking some critical questions about your company, your customers and your competition will put you on the path to making the key decisions required and crafting your new business model.

John Ciacchella’s 20-plus year career as a technology advisor combines his considerable tenure in management consulting with eight-plus years of direct industry experience in the semiconductor and electronics industry, where he held key positions in marketing, R&D, and manufacturing. He holds two patents in semiconductor processing technology. At Deloitte Consulting, Mr. Ciacchella is a principal in the Strategy and Operations practice and leads Deloitte Consulting's Technology Industry practice.

Ragu Gurumurthy is a principal at Deloitte Consulting LLP where he is responsible for client engagements involving the development and implementation of customized global, technology, and restructuring strategies for improved operational effectiveness, sales and delivery capabilities, and evolving growth. With more than 17 years of experience, Mr. Gurumurthy has advised companies in the telecommunications, technology, hedge fund, and private equity industries on issues ranging from overall strategy, merger planning and investment, to market penetration strategy and operational improvement.

Manhattan Associates Taps Kineticsware As First Master VAR in the Americas

Global supply chain solutions leader Manhattan Associates, Inc. has invited Kineticsware, a global software company and Microsoft Certified partner, to join the company’s exclusive Master VAR program in the Americas. Inclusion in the by-invitation-only program gives a Master VAR access to Manhattan Associates’ market-leading supply chain solutions and strong global organization of services professionals. Based on joint success in the US and Kineticsware’s expertise and international presence, Kineticsware will also work with Manhattan Associates in multiple geographies including Europe, the Middle East and Africa (EMEA).

Kineticsware’s deep domain knowledge in distribution, experience in the mid-market, Microsoft Dynamics AX capabilities, and specialty in consumer packaged goods (CPG) were key factors in the company’s invitation to the new Master VAR program. By participating in this program, Kineticsware will gain access to more sophisticated selling tools and broader software revenue opportunities.

“Manhattan Associates created the new designation of Master VAR to support our aggressive go-to-market approach in the Americas. As the first Master VAR, Kineticsware will set the pace for the channel partners that join the program over time,” said Jeff Mitchell, executive vice president, Manhattan Associates. “The relationship with Kineticsware will enable Manhattan Associates to extend our reach into supplemental markets and geographies.”

This Master VAR program is a natural extension of Kineticsware’s own Partner Program, which uses a two-tiered approach to allow its own partners to successfully market the Manhattan Associates, Microsoft Dynamics, and Kineticsware Industry Solutions through training, demand generation, sales and implementation support programs. By partnering with Kineticsware, a company will have the opportunity to successfully promote industry-lead solutions in key markets around the world with a world-class service and support infrastructure.

Contact www.kineticsware.com
Contact www.manh.com

HP has completed its acquisition of Neoware Inc., a provider of thin client computing and virtualization solutions, at a fully diluted, enterprise value (net of cash) basis of approximately $214 million.

With the acquisition of King of Prussia, Pa.-based Neoware, HP plans to use the best of both companies’ technologies to create thin clients that are easier to deploy, more secure and more affordable. The deal will also extend HP’s regional sales reach.

“The integration of Neoware will enable us to offer the industry’s broadest portfolio of remote client solutions that deliver the most secure, reliable and easily managed computing infrastructure available today,” said Kevin Frost, vice president, Business Desktops, Personal Systems Group, HP. “Our top priority is to ensure that Neoware and HP deliver uncompromised product and business continuity to our combined customers.“

Prior to the acquisition, HP was the worldwide leader in each of the Microsoft Windows® XPe, Windows CE and Linux thin client categories. Acquiring Neoware is expected to boost HP’s thin-client business in the areas of Linux software, client virtualization and customization capabilities.

Under the terms of the merger agreement, Neoware stockholders will receive $16.25 for each share of Neoware stock that they held at the closing of the acquisition and the company will be integrated into the Business Desktop unit of HP’s Personal Systems Group.

Contact www.hp.com

Adobe Systems Incorporated has signed a definitive agreement to acquire Virtual Ubiquity and its ground-breaking online word processor, Buzzword. The acquisition furthers Adobe's commitment to foster a vibrant ecosystem for rich Internet application (RIA) development that delivers breakthrough experiences built on Adobe AIR. Separately, Adobe added a new file sharing service to its current online document services. Codenamed “Share,” the beta service will make it easier than ever for people to share, publish and organize documents online.

“For over a decade, Adobe Acrobat software and PDF have been the standard way people share and collaborate on high value documents across platforms, with perfect fidelity. Buzzword will build on that leadership and enable fundamental improvements in how people collaborate on documents,” said David Mendels, senior vice president, Business Productivity Business Unit at Adobe. “At the same time, it is an exciting showcase of the power of Adobe’s RIA technology that raises the bar for the quality of experience people should expect in their applications.”

Buzzword, an elegant online word processor, enables individuals to work together to create high quality, page perfect documents. Because it was built with Adobe Flex software and runs in the Adobe Flash Player, Buzzword enables greater document quality, outstanding typography, page layout controls, and robust support for integrated graphics, regardless of the browser or device. The application also will run on Adobe AIR, offering users a hybrid online/offline experience and the ability to work with both hosted and local documents. The powerful collaboration capabilities in Buzzword enable multiple authors to edit and comment on documents from anywhere, at anytime, while document creators can set permissions that virtually eliminate version control chaos.

To access Buzzword beta software, http://www.adobe.com/go/buzzwordfaq.

BMC Software has acquired privately held Emprisa Networks, a leader in smart network compliance, change and configuration management and automation solutions.

The acquisition of Emprisa Networks will extend BMC’s leading Business Service Management (BSM) and service automation technologies to address complex, multi-vendor network infrastructures, allowing customers to reduce operational costs and improve service response times through advanced network change and configuration automation.

“Critical IT infrastructures now extend well beyond the data center. With the acquisition of Emprisa Networks, BMC extends its service automation strategy to help customers reach IT automation and efficiency goals across the entire infrastructure- inside the data center and out,” said Jim Grant, senior vice president and general manager of BMC’s Enterprise Service Management business unit. “Managing change across the network is critical for service availability and provisioning. With this acquisition, BMC offers the only platform independent, multi-vendor network configuration automation solution.”

Emprisa’s E-NetAware was designed from the ground up to complement customers’ ITIL, BSM and other IT service management initiatives. Tightly integrating with traditional network configuration management capabilities, advanced security change management features improve levels of infrastructure security across multi-vendor networks.

As a BMC Technology Alliance and BMC MarketZone partner, Emprisa Networks solutions are already fully integrated with BMC’s industry leading Atrium Configuration Management Database (CMDB) and BMC Change Management System, allowing customers to instantly reap the benefits of the union.

Contact www.bmc.com
Contact www.emprisanetworks.com

OpSource and Visual Mining, a premier provider of business performance management solutions, have partnered to bring powerful analytic capabilities to Web application companies and software-as-a-service (SaaS) providers who use OpSource On-Demand for Web application delivery. Visual Mining’s NetCharts On-Demand, Partner Edition performance dashboard platform powers OpSource Analytics, which provides on-demand companies with a comprehensive and integrated real-time view of the business and operational health of their software.

The NetCharts On-Demand, Partner Edition performance dashboard platform provides a SaaS application framework that enables developers to integrate user-customizable dashboards and scorecards with any application. NetCharts On-Demand saves developers countless hours with policy-based administration, flexible configuration, and enhanced performance and scalability, reducing the time and effort required to manage performance dashboards. In addition to OpSource Analytics, NetCharts On-Demand powers performance dashboards for Salesforce users with Visual Mining’s NetCharts On-Demand, salesforce.com Edition.

Contact www.visualmining.com
Contact www.opsource.net

Rackspace’s acquisition of Webmail.us highlights the company’s investment to transform traditional IT functions into consumable services via the web. As more and more enterprises transition from purchasing in-house IT assets to leveraging service providers, Rackspace plans to offer a suite of hosted IT services that are more reliable and provide better value than traditional IT. Rackspace has already made a seamless expansion into the mail industry, which it views as the first step in giving businesses a chance to solve a persistent and growing challenge with a better solution.

"Web-delivered business-class services remove the IT administration burden from companies that lack large IT staffs and/or want to concentrate more fully on their core business functions,” says Melanie Posey, research director, IDC. "Hosting companies that meet this need and expand their portfolios to include key on-demand functionality such as managed messaging can differentiate themselves from competitors. Rackspace’s acquisition of Webmail.us illustrates the company’s commitment to innovating in the hosted services market and responding to customer demand.”

Rackspace and Webmail.us will join forces to create innovative new products focused on enterprise-class mail functionality. The companies have previously collaborated to offer Rackspace’s current Global Messaging Portfolio, including Noteworthy Managed Mail. The Webmail.us company headquarters will continue to be based in Blacksburg, Va. Contact www.rackspace.com

Macrovision Corporation has entered into a corporate purchasing agreement with Lockheed Martin covering FLEXnet Manager, for managing the licensing usage of Lockheed Martin’s engineering software products. FLEXnet Manager delivers industry leading capabilities for managing, tracking and streamlining license management practices.

Lockheed Martin Corporation signed a Master License Agreement for FLEXnet Manager to be used throughout the enterprise. By using FLEXnet Manager as part of a centralized licensing pool, the potential exists to save license costs by managing license capacity across multiple locations. Additionally, the ability to share and retrieve licensing data in real-time means the procurement and customer service processes can be improved, which brings greater satisfaction to customers.

Lockheed Martin also implemented Macrovision’s AdminStudio and Workflow Manager offerings for command control and distributed patch management. With FLEXnet Manager’s ability to manage, track and streamline license management process, business units are able to ensure their software users have access to the licenses they need to complete projects. FLEXnet Manager is an automated licensing solution that is designed to eliminate the need for manual administration and monitor each business unit’s license usage so purchases, renewals and software maintenance are based on actual need rather than estimates.

Contact www.macrovision.com

Jamcracker’s recently announced IT@yourservice enables telecom and IT services providers to bundle desktop installation and configuration support for on-demand applications provided through the Jamcracker Services Delivery Network (JSDN). IT@yourservice is provided by e4e Inc, a global outsourced services provider.

"The allure and advantages of Software as a Service is its ability to eliminate the management overhead associated with traditionally deployed software applications," said Bill McNee, president and CEO of Saugatuck Technology, a business and market strategy consulting firm. "Making desktop support available as an additional service through the Jamcracker Services Delivery Network enables carriers and resellers to offer their customers closed-loop and self managing software services that do not require any care or feeding."

To eliminate all onsite set-up associated with the initial deployment of JSDN supplied applications, Jamcracker's certified IT consultants handle every aspect of the installation process remotely through a secure Internet connection. Jamcracker IT@yourservice initially supports the following JSDN applications:

• Email: includes installing, upgrading, and configuring Microsoft Exchange, Zimbra, or other email services – as well as migrating users' messages from existing email accounts.
• Remote Access and VPN: includes installing, upgrading and configuring VPN clients.
• Anti-Malware Protection: includes installing, upgrading, and configuring anti-malware client, removal of existing virus software, and updating desktop security policies.
• Online Data Backup: error-free installation and configuration of back-up and disaster recovery solutions.

"Requiring customers to handle installation and upgrades for on-demand applications like e-mail and security can be tricky, while deploying technical staff to each site is both costly and inefficient," said Steve Crawford, vice president of marketing for Jamcracker. "Jamcracker IT@yourservice offerings were created to provide a hands-off experience for customers and an additional revenue stream for our service provider partners."

Contact www.jamcracker.com

Aspect Software, Inc. has launched PerformanceEdge, a contact center optimization suite that synchronizes workforce management, recording and quality management, performance management, campaign management, and coaching and eLearning to holistically improve business performance. By bringing critical performance optimization functionality together, PerformanceEdge enables businesses to control costs, enhance service levels and align contact center performance with strategic company goals.

“Both inbound and outbound focused contact centers are struggling to meet the growing demands of the consumer and the business due to a number of factors, including increasing transaction volumes, limited insight into real-time events, siloed systems requiring manual report compilation and too many technologies that don’t support business process initiatives,” said Bob Kelly, vice president, PerformanceEdge Group at Aspect Software. “Now, for the first time, with PerformanceEdge, managers are able to tap into historical data, evaluate real-time intelligence and plan future scenarios to gain a complete, end-to-end view of contact center performance and, with the benefit of that information, take immediate action in the face of changing business conditions.”

PerformanceEdge offers existing integrations to all leading automatic call distributors (ACDs) and predictive dialers, including those from Avaya, Cisco, Nortel, as well as Aspect Software.  The solution also includes integrations to customer relationship management (CRM) systems and other back office solutions allowing organizations to leverage a complete range of information about their company-customer interactions. PerformanceEdge consolidates data on agent performance, response times, average handle times, call recordings and campaign metrics, empowering managers to make decisions that lead to better operational efficiency and agent effectiveness with optimal resources.

Contact www.aspect.com

Software Business 2007
October 2-3
Santa Clara, Calif. - Registration Deadline is Friday, August 31

Join Microsoft, Wipro, SAP, LucidEra, Brainshark, Progress, Clickstream, Socialtext, Kineticsware and over more for the leading strategy and training event for software and SaaS companies. Over 50 keynotes and breakouts on SaaS, Financing, Sales, Product Development, Marketing and Executive Strategy, plus workshops & bootcamps. Register before August 31 and teams of three or more pay $595 per registration. Single registrations pay $795. Also save on workshop registration prices. Go to http://www.softwarebusinessonline.com/sb_conf07_reg.php

September 6-8 -- Rich Web Experience, San Jose, Calif. Contact www.richwebexperience.com

September 16-19 -- Dreamforce 2007, San Francisco, Calif. Contact www.salesforce.com

September 24-26 – DEMOfall07, San Diego, Calif. Contact www.demo.com

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October 2-3 – Software Business 2007, Santa Clara, Calif. Contact www.softwarebusinessonline.com Software Business Will Have an Editor At This Show

Software Business 2007
October 2-3
Santa Clara, Calif.

Software Business 2007 will be held October 2-3 at the Hyatt Regency in Santa Clara , Calif.   The annual conference focuses on current strategic business, financial and technology issues and growth opportunities facing top executives of software companies. It is a two-day conference serving owners, chief executives, presidents, vice presidents and division or department directors of leading and fast-growing software companies located throughout North America who are conducting business domestically and worldwide.

The sixth annual conference returns to Silicon Valley for the first time in four years. It will offer speakers from leading software companies and deliver the industry's most informative sessions through four tracks of sessions. Additionally, the conference will offer full- and half-day workshops on Monday, October 1.

Don’t miss the leading business technology event. Interop brings together IT and business leaders to see all of the latest technologies in action. Visit more than 125 exhibitors, attend 100+ sessions, and check out live demos of practical business solutions. Whether you need to evaluate a product, solve a challenge, or just stay ahead of the curve, Interop will help you move your business forward. www.interop.com

CTIA WIRELESS I.T. & Entertainment 2007
October 23-25, 2007
San Francisco, CA USA
 
CTIA WIRELESS I.T. & Entertainment focuses on integrating wireless data technologies into the enterprise and vertical business markets such as healthcare, government, automotive, retail etc. Additionally, the show reflects the explosive growth in wireless entertainment-encompassing everything from music downloads to digital cameras to interactive games. One Show. Two Personalities. This is wireless redefined. Register now at www.ctia.org/wirelessIT

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