IT Investment Research

Why Microsoft Rules Enterprise Software: Drag and Drop

IDC is out with a new report that explains the almost absolute dominance of Microsoft (MSFT) in the both the consumer and business information technology (IT) sector: Drag and drop. That term has nothing to do with moving a mouse or finger around a screen but refers to the aftermarket that Microsoft $60-billion-plus annual sales revenues drag with them and the drop in meaningful competitors with which Microsoft has to deal because of the drag.

It's truer of the business sector of course because -- despite PR, including even some of Microsoft's PR -- the business sector is Microsoft's sweet spot and heritage.  But it also applies to the consumer sector where Microsoft's ability to play both sides works perfectly with the way both sides -- consumer and business use of IT -- are melding as people work at home and 'facebook' at work. 

The IDC hard numbers are here. But the quick take is that Microsoft partners account for 30-to-40-something percent of the entire annual worldwide IT spend of a trillion and a half dollars: systems, software, services and telecom in IDCspeak (or at least in ancien IDCspeak). There is probably some double-counting with HP (HPQ), IBM and Oracle (ORCL) partners but there is also a lot of revenue flow among pure Microsoft partners to balance that out.

You look at these numbers and you see why IBM and HP exited the systems market (except for their decreasing proprietary cash cows) and sought status as an implicit or explicit Microsoft services partner. (Ironically, these numbers also illustrate why Oracle entered the systems business--because it didn't believe it could do what HP and IBM did.) You see why SAP tentatively choreographs its kabuki dance with Redmond. And why Intuit, unlike SAP, doesn't even pretend to chase another partner. You see why Agile, Borland, Cognos, Digital Insight, Frictionless... (I could run the table but you get the picture) are long gone. You see why Lawson (LAWS) and Epicor (EPIC) or being taken over and taken private despite Microsoft's weak ERP offering.

Despite all the lamentations of the open source zealots and Apple (APPL) bigots and the Googlers, the market has spoken. The open source zealots are anti-market (exaggeration for effect). Apple wants to keep all the money for itself.  And Google (GOOG) doesn't know what it wants to be when it grows up: an open source zealot, like Apple or like Microsoft.

(Truth in advertising: the IDC report was sponsored by Microsoft and I used to work for and still occasionally consult to IDC.)

-- Dennis Byron

Microsoft Sharepoint Gets Great Congressional Endorsement

They say great inventions are 99% perspiration and 1% inspiration.  The corollary to that is that great information technology (IT) marketing is 99% hard work and 1% "s**t luck."

I remember in the 1980s working at Data General with great PR and ad people to try to promote a new IT concept called "integrated office automation (OA)."  It was more than just word processing (WP), a concept that Wang "then owned." Because of Wang's prominence in that market, we didn't want to promote our product as just some super word processor. Integrated OA was better than that. It combined WP with this new thing called email as well as with calendaring (which no one then or now uses) and a few other bells and whistles. Shortly after launch, DG's particular OA product was interfaced with some bizarre little program called CompuCalc (whose co-author -- a former DG programmer --  then decided that these bizarre little programs called "spreadsheets" would probably run better on PCs). 

We were somewhat successful in our efforts between 1982 and 1985 in terms of sales but it was a slog.  Then in 1986 an obscure Marine Lieutenant Colonel named Oliver North got called before the U.S. Congress for doing some no-longer-remembered thing wrong and said "I know nothing." Unfortunately, everything he knew nothing about was preserved forever on the Reagan White House PROFS (the PRoffessional OFfice System from IBM) minicomputer and a battery of Congressmen mentioned PROFS about a zillion times that winter on TV. After that, all our great PR and ads meant nothing.  All we had to say was our OA product was like PROFS, only better.

Those good old days came flashing back to me this week when some poor lawyers from the U.S. Homeland Security bureaucracy got hauled before the U.S. House Oversight and Government Reform Committee because the lawyers weren't processing freedom-of-information open-government requests through the bureaucracy fast enough. The lawyers' excuse was that they couldn't get the approvals of the bosses fast enough... 

• "But" said the lawyers, "but don't worry we just put in a SharePoint system to solve the problem."
• "I know SharePoint," said the top Congressman, "I used to use it in the company I owned before I became a Congressman.  It's a great product."

Wow. I can just visualize the marketing meeting at Microsoft (MSFT) the next morning. 

• Can we use a Congressman in an ad? 
• Do we really want -- yawn -- to link to C-Span?
• Did our PAC contribute to his campaign?
• Is Homeland Security using a licensed copy?
• On and on.

Marketing people just live for the one or two mornings per career that go like that. Of course, the sales guys take the credit anyways.

 -- Dennis Byron

(Sidenote: Apparently Homeland Security didn't get the Obama administration memo that you can only do "open government" on open source.  They chose SharePoint over Drupal!!)

Oracle's "CY 2010 Results:" Which Oracle Are You Asking About?

It's time to look at the Oracle (ORCL) trailing 12 months revenue flow.  Based on Oracle's off-quarter and off-calendar fiscal reporting, the 12 months ending February 28 of any given year are the "Oracle months" that most look like a calendar year. And therefore mimic the calendar-year dynamics -- be it SAP's and IBM's December hockey stick or Microsoft's (MSFT) holiday-season sales.

These four companies make up 75% of the software market so that's all you need right.  Well yes and no.  There is nothing simple when it comes to Oracle comps.  Oracle's off-calendar and off-calendar nature is the least complicated thing to deal with. 

First, it's all those acquisitions that really screw things up.  Some investors want to see Oracle backcast (look in the Oracle 10-K proforma section but that's done only once a year), because that's most indicative of overall market dynamics.  Others want to see Oracle GAAP because that's most indicative of whether the financials are working out the way Safra said they would (they always do!).  And now an increasing number of investors want to see the big picture because -- hey -- maybe there is something to this "attack IBM" thing. 

Second, in other words it doesn't matter anymore that Oracle is number two or number three in the software market.  Oracle itself even mixes up its software revenue, counting some of its software in the two heritage "software" line items on its income statement (new, and updates/support), counting some of it in the "OnDemand" line item on its income statement (as has been true at least since the acquisition of Siebel), and now counting some software in the new (since March 2010) Hardware Systems Products line item.  The exact wording is:

"Our hardware systems products consist primarily of computer server(s) and storage product offerings and hardware-related software, including our (Sun Microsystems') Solaris operating system."

And of course there are a few of you who still want to see how what's left of BEA middleware is doing against IBM Websphere, and what's left of PeopleSoft ERP is doing against SAP R/3.

I hate to tell you this but if you're in the latter group, you're dinosaurs like me.

-- Dennis Byron