Don't mix apples and oranges when looking at enterprise software market

Over at zoho.com, Sridhar has posted up some interesting discussion points about what makes suppliers tick in the enterprise software market.  I think his intention was simply to illustrate how Zoho has a chance against Google Apps and Microsoft Live (and that may be true for other reasons). But the investment research mixes too many apples and oranges. As a result, just to really mix metaphors, the Zoho post looks at the enterprise software market from the wrong end of the telescope, a common investment research issue. Investors need to look at the enterprise software market from the user viewpoint, not the shareholders'.

The heart of the Zoho analysis is that profit per employee for the suppliers listed range as follows: Google (GOOG)-$214,000, Microsoft (MSFT)-$194,000, ebay (EBAY)-$103,000, Adobe (ADBE)-$103,000, Oracle (ORCL)-$66,000, SAP (SAP)-$54,000 (not sure what exchange rate was used), Intuit (INTU)-$54,000, Yahoo (YHOO)-$46,000, salesforce.com (CRM)-$7,000. His point is that all of these companies are in different businesses.  He's right but not because of profit per employee.

Apples and oranges: Yahoo and ebay are not in the software business. It's not fair to compare CRM's SaaS-loaded (i.e., slower but steadier) revenue ramp with those like SAP and Oracle that have traditionally received most of their revenue frontloaded (but would like to go SaaS). It's not fair to compare Google's revenue model with the classic enterprise software guys but if you want to try, take out Google's TAC. Microsoft's revenue stream should really be divided into its four major business units to be compared separately with SAP/Oracle in one perspective, Adobe/Intuit in another, etc. And Adobe and Intuit are simply providing technology. (For more on the taxonomy that divides IT-related suppliers among technology providers, IT-based services providers and business/consumer services providers that use IT, see deliverables available on Research 2.0.)

Wrong perspective: But the bigger issue is that some of these companies are crossing into each other's territories not based on near-term profit motives but based on target market. 

• Google is coming at productivity software so it can provide one-stop services for its already large individual-oriented base (will take enterprise/business IT as a bonus)
• Microsoft is coming at Search to try to win that battle among its enterprise base (will take the individuals as a bonus)
• The other heritage enterprise software guys are quickly becoming simply techology providers ripe for acquisition. For example: 
  1. Google should buy Intuit
  2. Oracle should buy CRM and reacquire NetSuite (N) to become stronger in SaaS (or Oracle should state that it wants to be a technology provider such as Cisco (CSCO) or Intel (INTL))
  3. IBM (IBM) or someone should buy SAP

I suppose ebay could buy Yahoo but since they are not in the enterprise software business and I have totally avoided writing one word about Yahoo for these many excruciating months, I quit right here.