I was finally able to listen to the Oracle Q2 call, and the picture looks pretty bad for Oracle, while looking much better for the rest of the enterprise software market, which is completely undeserving of the collateral damage that Wall Street visited on their share prices following the Oracle debacle.

The key takeaways were pretty damning. Applications license revenue fell, while technology revenue grew relatively anemically. Importantly, license revenues from vertical industry sales were clearly suffering, and the company clearly missed its own targets for selling Exadata and Exalogic by significant margin.

Most importantly, the damage from the Sun acquisition continued to be felt in the company’s overall margin performance: Safra Catz again made a vague promise about an eventual return to pre-Sun margins, but it was clear that a lot would have to improve over last quarter, as well as every quarter since the Sun acquisition, before those margins come back to lead the industry again. If they ever do.

Also important was the almost off-hand comment from Catz – “the quarter was not dependent on any large deals” – that indicated there was no single large wound that resulted in the bad quarter as much as a thousand  small cuts. Triaging the big wounds is easy, staunching the losses from many smaller ones is much much harder.

Other details of interest. CRM grew close to 20 percent, ERP “did very well”. But verticals “need better management.” Considering the two largest volume components of the Oracle enterprise portfolio – CRM and ERP, which I assume mostly consists of EBS – did well or very well, the laggards – verticals – must have done really poorly if the overall apps license revenue was negative. Sucked wind may be a polite way to look at it.

I attribute this in part to the complexity of deploying these products – all of which were acquired and all of which require serious hardwiring in order actually integrate them to the rest of the suite. This is the essential fallacy of the company’s “engineered for investors” strategy: buying all these pieces makes it hard on customers who actually have to pay the price of integrating them to their ERP systems of record – regardless of whether that ERP system is from Oracle or some other vendor. The increased approval times Catz cited as a reason for why many deals didn’t close in the quarter may have really been a sign of better due diligence on the part of prospective customers as to the real total cost of ownership of deploying Oracle’s un-integrated vertical applications.

Other noteworthy issues can be found in what wasn’t said. Not a word about Fusion Applications, which means that they were neither material to Q2 nor a strategically important component of how the company plans to dig itself out of this revenue hole. In fact, Larry didn’t mention any applications products as being part of the hoped-for recovery in the next quarter – every forward looking statement he made was about hardware, particularly Exadata and Exalogics.

This is Larry being consistent with his hardware obsession, but it really begs the issue of what will happen to what was once a market-leading enterprise software company that has now been diverted by its CEO’s hardware obsession.

It was perhaps telling that the miss for the quarter was most evident in applications but the company’s focus in the earnings call was mostly on how it would grow its way out of the problem with hardware sales. I can see no way for Oracle to fix its applications business by selling more hardware, and the more the company focuses on hardware the more it seems that applications are becoming an afterthought. This, in my mind, is what happened in Q2, and will continue to happen until Oracle figures out what business it really wants to be in. Clearly, based on the last few quarters, the hardware business isn’t working out quite as well as the company had hoped.

As an industry analyst, I’m used to be being slotted, even though my goal has always been to cover as broad a swath of the enterprise software market as possible, based on the assumption that customers and users need help understanding the full context behind their enterprise software decisions, and not just listen to a vendor pitch, write a check, and be done with it.

This goal is often anathema to how vendors organize their analyst relations functions, having historically followed the big analyst firms down the path of splitting the market into discrete analytical areas, mostly for the purpose of selling discrete analyst services. Thus, a general practitioner such as myself often must contend with multiple AR teams, often out of communication with one another, in the pursuit of full coverage for any vendor with a complex product portfolio.

Lately, this problem has grown in spades as vendors like Oracle have branched into hardware, vendors like Microsoft have started successfully blending its non-enterprise assets into enterprise product lines, and hardware stalwarts like HP have become erstwhile enterprise software vendors. With my holistic market view as the goal, as vendors evolve to provide a broader and broader portfolio of products for the customer, analysts who want to follow the customer’s perspective need to follow a broader swath of the vendors’ product portfolio as well.

Which, in most cases, turns out to be largely impossible, to the detriment of vendor and customer alike (and it ain’t so good for us general practitioners either.)

If I were (even) more cynical than I pretend to be, I would think the inability of most vendor AR teams to understand the need to cross-pollinate the analyst community with the full scope of the vendor’s product lines – or at least offer up the opportunity for analysts to try to understand the big picture – was deliberate, sort of a divide and conquer strategy intended to keep out any dangerous , holistic analysis that might reveal key dis-synergies in the strategy.

And if I were immodest I would claim that this total vendor coverage is easy and fits well with the capabilities and interests of most industry analysts and AR departments. As someone who tries to do this, I can assure you it’s hard, and at times damn near impossible.

But not completely impossible, and, in many ways, very possible indeed.  And very much needed, now more than ever.

The reasons are simple: if a customer wants to buy the very best software at the very best price and with the very best performance possible, how that software interacts with the rest of the IT stack is critical (this has been the rationale for my analyst coverage for years, and the basis of my strategy advisory practice as well.) And as more and more vendors are not only providing more and more of the stack, but are actually optimizing their enterprise software for their own stacks, advising the customer requires an understanding of how all the pieces fit together. Merely commenting on the capabilities of discrete pieces of enterprise software without understanding the rest of picture just doesn’t cut it anymore.

The other pieces – hardware, middleware, database, deployment options, development tools, advanced UI tools, etc. – aren’t just important, they are often key points of differentiation between vendors and provide key selection criteria for customers. Customers almost never implement in a greenfield manner, rather, their selections for new software are intertwined with their existing infrastructures and applications portfolios. Which means that just buying the very best ERP system won’t cut it if that system doesn’t interoperate with the customer’s existing software and hardware infrastructure. And, in more and more cases, whether its Oracle touting the synergies of its enterprise software running on its Exalogics systems, or Microsoft showcasing how its Kinect gaming interface can be used on the shop floor, understanding these interactions and how all these pieces interoperate are must-haves for any well-qualified decision-making process.

Which leaves us with a dilemma: how to make the analyst and the analyst relations role a better fit for the analytical requirements of the enterprise software market? The answer isn’t simple:  vendors with complex portfolios need to cultivate analysts who can understand that complexity, and provide them with a level of access intended to make sure the synergistic, holistic view is articulated and understood. This requires in many cases both a revamping of how AR thinks and acts as well as a similar reconsideration of how analysts look at individual companies.

These shifts are not always easy, for functional as well as political/cultural reasons: AR teams often reflect their respective product and solution marketing teams, which in turn means that changing the status quo means changing the structure of how products go to market, and even how products are developed (or acquired, depending on the vendor’s particular innovation strategy.) That makes this concept of total or holistic vendor coverage holy hell for anyone trying to make it happen, inside or outside a particular vendor.

But I’m convinced more and more that this is a necessary evil that must be confronted, assuming the goal of educating and informing customers so that they make the right choices is the goal of the vendors’ market communications. Unless that misplaced cynicism noted above is actually justified…

Over the ten years in which Microsoft has struggled to find a place for its Dynamics enterprise software products inside the company, the question of whether Microsoft should jettison the business  unit altogether has surfaced more than once. And on the face of it, it’s hard not to ask the question. Despite the annoying secrecy that Microsoft maintains about the revenues of its Dynamics products, it’s pretty obvious that the original goal of “10 years and $10 billion” in revenues is off by something resembling an order of magnitude.

And yet, the two-day analyst summit hosted by Microsoft just before Thanksgiving week made it abundantly clear that Dynamics isn’t a so-so success for Microsoft: the company’s enterprise software portfolio, in particular AX and CRM, has become the lodestar for virtually every important piece of technology produced across Microsoft’s vast technology empire.

More importantly, Dynamics is increasingly the place where the cross-company synergies that have eluded this famously siloed company are now becoming reality. And those emerging synergies bring with them the potential to dramatically alter Microsoft’s overall competitive profile in the enterprise and that critical point of convergence between the enterprise and the consumer that very few companies, Microsoft being perhaps the most advanced, are in a position to truly take advantage of.

The idea of the Dynamics lodestar came to me about one hour into the analyst briefings, when Dynamics exec Michael Park, in an off-hand remark, referred to some forthcoming capability in Windows 8 that would significantly improve Microsoft’s mobile enterprise offerings, as though we Dynamics followers already knew all about it (which many of us we didn’t, highlighting the fact that covering enterprise software, whether it’s from Microsoft, Oracle, Salesforce, IBM, HP, or SAP, is more and more an exercise in covering everything that Microsoft does.)

Kirill Tartarinov, the head of the Dynamics group, had already mentioned Windows 8, as well as Kinect as a user interface device for the enterprise, in his opening remarks, and we were soon to hear one of the first mentions of Skype in a Microsoft briefing since the deal was finalized, also in the context of enterprise functionality.  As the morning wore on the list of Microsoft products that were being woven into the company’s enterprise software strategy grew to become nothing less than a what’s what of virtually the entire Microsoft top-tier  technology palette.

Here’s a list I compiled during the day of the different pieces of the Microsoft product set that are finding some of their most important use cases alongside Microsoft Dynamics:

• Azure and the cloud, including Office 365
• SQL Server
• Visual Studio and .NET
• Windows 8, especially mobile
• Kinect
• Lync and Skype
• Business Intelligence
• Sharepoint
• Bing

I’m not even sure that covers all the possible products and synergies, but it’s a good start. When you weave these different offerings into AX and Dynamics CRM in particular, the result is an impressive array of new and innovative functionality that gives Microsoft a strong standing in the enterprise. In a separate post I’ll highlight some of the synergies between Dynamics and the rest of the Microsoft portfolio, suffice to say for now that combining these assets and making them core parts of the overall Microsoft enterprise offering makes for an impressive portfolio.

What’s also impressive is how these capabilities sync up with the Dynamics’ plans to harness a direct sales force and consulting team in order to take on the large enterprise market. This is, of course, absolutely essential for tackling the large enterprise market. Without having some degree of direct responsibility for project success – either as a prime, or more likely, as a sub-contractor – Microsoft can’t hope to compete in this space against SAP and Oracle.

With this direct sales-plus-services team now ramping up, Microsoft will have some great assets to bring to the large enterprise table:  A portfolio of well-integrated products that support traditional ERP and DBMS functionality, as well as on-demand/SaaS CRM, mobility, cloud-computing, new user experiences like full-motion gesture control (Kinect), integrated communications, collaboration, analytics, search and mapping, office productivity, and applications development . As many of these products are already market leaders in their respective domains, the new Dynamics direct sales and services team is starting from a definite position of strengths.

The result is that Microsoft will soon become a factor in the large enterprise market in ways that could seriously realign the market in coming years. And that’s before we get to the consumer/enterprise bridge that Microsoft can now form.

This consumer/enterprise opportunity is one that Microsoft has a distinct advantage in realizing. Only Hewlett-Packard has an equally impressive position in both sides of this opportunity, now that it has chosen to keep the PC group in-house. Apple is coming in quickly on the heels of the iPad and iPhone, and Google, if it could ever figure out how to deal with security and enterprise-class service, may one day break out of its consumerist focus and make a real play for the enterprise. But all the other erstwhile Microsoft competitors – IBM, Oracle, SAP, Salesforce.com, and many others – have no legitimate presence in the consumer side of the market.

This leaves Microsoft with a pretty big runway for dominating this convergence. Assuming it can keep up with a consumer tech market that is looking for Facebook like social connectivity and Amazon-like simplicity, in an iPad-like user experience – and that’s not a small assumption, though Bing, Kinect, and Windows 8 should help in that regard – Microsoft could emerge as the essential marriage broker between the enterprise and the consumer in a way that will be the envy of the market.

For now, this  position is aspirational, and it may take at least two years before we can judge how well the Dynamics direct sales effort is working and how well the synergies between the larger Microsoft portfolio are productized and brought  to market. But in terms of potential energy, Microsoft Dynamics is an up and coming market leader.

They may have missed the goal of $10 billion in the first ten years, but I would expect that it won’t take them anywhere near ten years to reach that goal now.  And that’s not including what Dynamics should be able to do to boost the revenues of the rest of Microsoft’s business units.  Playing the role of proving ground for new technology, particularly in the high-margin enterprise space, isn’t just good for Dynamics, it’s good for Microsoft too.

As the enterprise software market parses the news that SuccessFactors will become SuccessFactors, an SAP company, the question of how well SAP manages its M&A strategy is coming to the fore.

SAP has been buying small and large companies for a while, and though nowhere near as avaricious as Oracle or IBM, there are now three big buys – BusinessObjects, Sybase, and SuccessFactors – and countless smaller ones – most recently Right Hemisphere and Crossgate – to look at in judging how well SAP is doing in the M&A business.

The short answer of how well is easy: not well enough. That’s not to say that SAP is screwing up (though the early days of the BusinessObjects acquisition were hardly smooth sailing), but it does say that SAP needs to have a better-oiled M&A strategy to match the well-oiled technology and go-to-market strategy it is trying to build with these acquisitions.

The current case in point is mobile: The acquisition of Sybase was announced over 18 months ago, eons ago in the tech world, and SAP’s mobile strategy is still fragmented. There are some great gems amidst the fragments, and the SAP Mobile Apps store is a good starting point for understanding (not using, the apps aren’t available yet) where SAP is going. But it seems that every time I turn around there’s another mobile app from another group at SAP that is not necessarily connected to a pan-SAP strategy.

While this fragmentation is hardly a disaster, it does speak to the larger question of what happens when SAP buys a big technology company. One can argue whether Sybase was good buy, and whether Sybase Unwired Platform and Afaria are the be-all and end-all of mobile enterprise platforms, but it should go without saying that spending upwards of $6 billion on Sybase, not to mention the extraordinary executive time and effort that had to go into that deal, should put an end to internal fragmentation. Instead, it’s clear that a unified, singular mobility strategy is still pending.

We saw a similar effect with the BusinessObjects acquisition: fragmentation, competing product lines, and internal struggles over product and technology strategy. It’s easy to forgive SAP the chaos of the early years of that acquisition, considering its indisputable strength in BI and analytics today, but it was a pretty messy process that took, in my opinion, too long to sort out.

Part of what’s going on is the bi-polarity of the world of SAP. There’s more than continents and oceans that divide SAP’s Waldorf and SAP’s Palo Alto offices. The cultural gap between the two poles, however smoothed over by moving personnel back and forth and having both the CMO and CTO sitting in Palo Alto, is still vast and complex. This bipolarity pits different design, development, and business culture factors against one another in a global battle that is won as much by attrition as it is by the pure merit of one or another choice.

Into this complexity SAP overlays a consensus management process, with an executive board, a supervisory board, and teams of executives all over the world  weighing in on key decisions. At times this works extremely well, but all too often it yields a surplus of cooks and a potentially spoiled broth: Without the command and control structure of, say an Apple or an IBM, SAP sometimes has trouble matching the dictatorship of the markets with the dictates SAP needs to thrive.

Into this complexity SAP is now buying SuccessFactors. And sorting out the fragmentation in SAP’s HRMS strategy makes sorting out a mobility strategy look easy. As ably pointed out by the grande dame of HRMS, Naomi Bloom. SAP is sitting on a virtual hairball of HRMS code bases and products. Adding SuccessFactors to the tune of $3.4 billion should put the onus on SAP to figure out this mess and drive a unified strategy into the market. Will it be able to do so?

My concern doesn’t come with the SuccessFactors acquisition itself – this is a great choice for SAP, one that is desperately needed both in terms of what it means for SAP’s HRMS strategy as much as for its on-demand strategy. My concern comes with the suffix “an SAP company.” This works extremely well from a personnel standpoint, and is consistent with SAP’s culture, but, with the teething problems of BusinessObjects, and to a lesser extent Sybase, in mind, will keeping SuccessFactors independent be the right way to go? I’m not advocating the slash and burn strategies pioneered by Computer Associates and continued by Oracle, but I am a little wary of friendly acquisitions when the result is too much friendliness and not enough acquisition.

Why does SAP need this kind of unification so badly? After all, as I just said, BusinessObjects has helped make SAP a top BI and analytics company. The answer is simple: Oracle. SAP is fighting Oracle’s “engineered for investors” strategy by putting forth a more cohesive, better integrated, and therefore more cost-effective platform+applications strategy. One of the key value-adds that SAP can offer is a more integrated stack, better rationalized across the different pieces of its portfolio, that lies in sharp contrast to the dis-integrated, heterogeneous offerings and big integration price tag in the  Oracle applications strategy.

The point is simple: The more SAP makes these big acquisitions, the more it must ensure that this key point of differentiation is protected. This is less imperative in mobility, which is by definition new and different enough that any expectation of deep, built-in code-base integration is low. But HRMS is a very different, and if SAP is going to use SuccessFactors to beat Workday, Oracle Fusion, and Oracle PeopleSoft in the SAP core customer base, it’s going to have to build that integrated strategy quickly and convincingly.

Can SAP do this? I wish I was more confident that it could. I trust that the different market imperative for HRMS – and the enormous opportunity that SuccessFactors presents – can sharpen the company’s resolution and help quiet the internal politics, but it won’t necessarily be easy. Time is of the essence here – Workday is definitely on a role, and the PeopleSoft market is full of customers for whom an upgrade will in reality require a full re-implementation, and for whom non-Oracle SaaS opportunities are making the shortlist – and SAP has the chance to truly be in the right place at the right time with SuccessFactors.

But only if SAP can get this acquisition right, and get it right the first time…

I spent an extremely entertaining and informative day with Kinaxis at their user conference last month, and it struck me how much supply chain management seems to be stuck in the past, even as it increasingly occupies one of the hottest of hot seats in the corporate world, and even as companies like Kinaxis strive to bring the supply chain into the future.

And if you don’t think supply chain management is in the hot seat, ask the world’s disk drive makers about what’s happening in Thailand, or the Japanese automotive manufacturers about what happened with this year’s earthquake and tsunami. Or Boeing and their many delays and problems getting the Dreamliner out the door. In the globally interconnected economy, it’s the supply chain that rules.

Not that Kinaxis is guilty of living in the past – though it’s been decades since I heard a vendor talk about the virtues of a hierarchical database. Au contraire. It’s the rest of the supply chain market that seems to be relying on older business and technology models, to the detriment of the big enterprise software companies and to the benefit of best of breed vendors like Kinaxis.

This living in the past problem was evident at multiple points during the day, most obviously when it came time for Kinaxis’ customers to stand up and tell their stories. As is common at a best of breed vendor show, the customer stories were replete with references to the SAP and Oracle software that these customers still use, even though the core strategic supply chain functionality they were touting that day belonged to Kinaxis.

What every user story boiled down to was the following formula: my company still uses [insert big enterprise suite], but for this core function [insert S&OP,  demand-driven planning, outsourced supplier management, advanced supply chain analytics], we’re going with Kinaxis.

And every justification for going with Kinaxis contained a similar formula.  While [insert big enterprise suite] is still my system of record, it’s too [slow, ignorant of how to manage outsourced supplier, not good enough for S&OP] and we couldn’t wait around for them to [add the functionality I need, make it cost effective, make their user experience more user-friendly, put the resources into my company to make sure my needs are being met].  And so Kinaxis’ supply chain best of breed story goes.

What’s amazing about these stories to me is that I heard a similar set of stories – including some of the same customers and suite vendors – when I attended an E2open conference three years ago. And when I toured Silicon Valley’s top manufacturers in 2005 as part of a supply chain research project, stories such as these were the order of the day at every company I visited. In a recent visit to E2open, one of its executives reminisced about discussing these issues when he was Oracle in 2000.

What’s up with that?

Part of the problem is clearly the rapidity with which business models are changing.  And the breadth of what constitutes supply chain management keeps shifting as more stakeholders become involved and more data becomes available to do more complex analysis and build more comprehensive supply chain plans.

Even new product introductions are changing: One of Kinaxis’ customers is Barnes and Noble, which introduced its Nook reader in 2009 to great fanfare. There were two problems with this NPI for Barnes and Noble: the first was that the company is a novice at manufacturing supply chains, being a book distributor doesn’t really prepare a company to be a consumer product manufacturer. The second, most importantly, was that the Nook is part of an entirely new wave of tablets tied to a retail distribution company, not a traditional consumer electronics company: how could Barnes and Noble do supply chain planning the old, rear-view-mirror way when there is little or no comparable product on which to base a demand plan for the Nook?

So Barnes and Noble signed up for a new point-of-sale-based, demand-driven supply chain run by  Kinaxis software. Turns out this is a bit of a gamble, as Kinaxis has never tried to wire up over 10,000 POS systems, and Kinaxis’ pricing structure for its software wasn’t designed for this volume of end points either (let’s just say at list price, 10,000 POS systems would have made this one of the most expensive supply chain management implementations ever – safe to say Kinaxis and Barnes and Noble managed to come to an agreement on a more reasonable price.)

The other reason the supply chain management status quo seems stuck in the past is that really transformative supply chain management is as much a business process journey as it is a software journey. That’s hard, very hard, and even harder in companies that don’t understand how strategic their supply chain needs to be. In my wanderings about the supply chain world I have often been amazed at how good enough keeps being good enough, despite the fact that at a corporate competition level good enough is usually the domain of losers and also rans. This fact alone often relegates true supply chain transformation to those renegades and rogues that dare think out of the box. And lucky for them, there’s products like Kinaxis RapidResponse that allows these transformers to do their thing and still keep the big ERP suite advocates in their jobs too.

The good enough syndrome turns out to be a major conundrum for any big enterprise software vendor. Becoming an entrenched interest at a customer site often leads to – or is a leading indicator of – a good enough mentality that helps maintain incumbency at the cost of innovation. This makes it hard for the SAPs and Oracles of the world to be identified as the innovators among their core, entrenched user communities, and it makes it easy for a Kinaxis to appeal to those who don’t mind upsetting the good enough, entrenched thinkers and driving a little innovation into the enterprise.

One more comment about Kinaxis that bears mentioning: their user conference was downright fun, and they managed more than once to make supply chain leadership funny. Yes, as in LOL funny. Hats off to Bill Dubois in particular for playing the role of talk show host and stand up (really sit-down) comic so well that I had to wonder why he ever left Broadway or whatever the Canadian equivalent would be to become the Pied Piper of supply chain geekdom. Okay, maybe I’m impressed for the wrong reasons, but a company that is comfortable enough with its products and customers to make it fun and funny has a lot going for it. That was a best of breed show if I ever saw one.

Providing cloud-based storage seems so commodity-like, and so hard to defend as a unique differentiator, that it would seem that Box.net, despite the dynamic vigor of the company and its CEO, Aaron Levie, couldn’t really make a go of it in the market. After all, some very very big companies, like Microsoft, Google, and Amazon, are competing in this space. And don’t forget Box.net’s many small-fry competitors, including Dropbox, among others. You’d think that with these kinds of enemies, how the heck can Box.net find enough customer and investor love to keep the flame alive.

That’s before I went to Box’s user conference a few weeks ago, where several important reasons why Box.net might stand a chance came to the fore. And that was before I started keeping track of all the times Box.net came up in conversations about social/collaborative software, And before I  actually started using the free Box.net account that came with my HP Touchpad.

Suddenly, Box.net’s real opportunities started to make a whole lot of sense.

The first inkling that Box .net was doing something right came when I ran into some folks from SAP at the conference. These weren’t your tire-kicking market-researchers, or even someone from the partnership organization. These were the investor types, the guys you send over to do the due diligence before you put your money down. And it was clear they were there to do a deal and follow the footsteps of Salesforce.com and investor Marc Andreessen, among others,  in buying a piece of the Box. That the company has raised $162 million so far is far from the only reason to pay attention to it (unfortunately, the amount of money a company raises is not highly correlated with success), but when you see SAP Ventures and Salesforce.com putting their money where the mouths are (or want to be) it’s definitely food for thought.

The other indication that Box.net has legs came from presentations and casual conversations with its customers, who were fairly gushing about the company’s value to their organizations. Having used Box.net  now for a few weeks, I can agree that it’s a great productivity tool (despite a little glitch I’m having with Office 2010 on my desktop PC). There’s a nice app for my new iPhone, my Touchpad, my iPad, and, on my laptop, the Office 2010 integration makes it pretty easy to move documents from the cloud to my devices and back again.

But is that really enough to make Box.net worth whatever multiple of $162 million is needed to make back its investor’s money? The answer is simple: no.

What Box.net needs – and fear not, dear investors, I’m pretty sure Levie gets this– is an understanding of the meta-opportunities that add value on top of what is otherwise a cloud-based version of good-old sneakernet. Those meta-opportunities come from three major areas, in my opinion:

The Social/Collaborative Box.  Using Box.net as an adjunct to social and collaborative software is one of those no-brainers that was dissected in great detail at the conference. And outside the conference as well. I’ve been keeping a running tally of the times I see and hear Box in the context of some other vendor’s social or collaborative offering, and so far Box is batting 1000. A recent briefing with SAP about Streamwork included a Box reference, and my favorite social/collaborative start-up, Sococo, can make use of Box.net as part of its amazing visual communications/collaboration environment. There’s Box.net  and Chatter. The list seems endless.

The Analytical Box. We’re only just starting to crack the nut on how to use metadata for business advantage, and the folks at Box.net  seem to grok the fact that data about how data are used could be an extremely valuable asset for businesses trying to improve anything from customer satisfaction to data governance and risk management. There’s a lot we don’t know about how data really get used, and by putting the data in the cloud, Box.net can use the cloud to collect every aspect of data usage, and use that data for some interesting analysis. Analytical services on top of Box.net could prove to be as valuable as the company’s original content sharing raison-d’etre.

The Innovative Box. This is where the real challenge – and opportunity – lie. If Box.net is to rise above the noise and make good on all those millions from it investors it will have to be in the forefront of defining a new set of processes and functions around content collaboration that weren’t ever possible before. This is a corollary to what I call the SaaS 2.0 imperative. It’s not enough to just flip an established process from on-premise to the cloud, a la Salesforce.com. In order for Box.net to really make its mark, it has to be on the forefront of defining and bringing to market the things we only dreamed of doing – or never even dreamed we could dream of – that are now possible with the functionality that Box.net can provide.

Using Box.net in a social/collaborative context is a good place for the company to begin to define this opportunity to the market. That’s why I like the marriage of Sococo and Box: Sococo creates virtual workspaces for collaboration where collaborators can show up – online, using their avatar – and, in addition to communicating and working with one another, they can participate in the creation, editing, and development of documents and other content. One of Sococo’s fascinating capabilities is the abiliyy to create task-specific virtual rooms, that are open only fellow-collaborators by permission. This effectively adds context to the documents that are being used in the virtual room, and that context, especially when combined with workflow and other collaborative tools, takes the commodity-level concept of clolud-based storage up a notch or two.

As the innovation opportunities grow – and the above example is merely one iota amongst the many possible scenarios for using Box.net in a value-added process – the key to Box.net’s continued success will be similar to what every innovative must do in order for innovation to be adopted: proscribe the ways in which the new capabilities can be used. This is true for almost any truly innovative product, but especially true in areas where collaboration and analytics are part of the process: it turns out that there are enormous cultural gaps in the business community’s understanding of how to collaborate and how to analyze, and every truly innovative collaboration or analytical tool needs to include methods and other proscriptive help or, no matter how cool a tool it is, real world users just won’t get what to do with it .

Cloud-based storage is a useful, but  hardly sufficient business case for the success of Box.net. Value-added services are where Box has to go, and it’s clear that there’s an entire class of new innovative applications and services waited to be created on the back of their core capability. It’s going to fun watching what Box.net does next…..

Insofar as I characterized Oracle Open World as a communications disaster in my last blog post, I think it’s fair to explain why I feel this way and what it means for Oracle and the market.

Oracle Open World is singularly the worst customer event I attend every year, a forced march so large and unwieldy that I and most people I know who attend – customers and influencers alike – end up trying at best to endure the event, much less benefit from it. And yet we must attend, as it is for the most part the only time in the year that Oracle will actually try to engage in a meaningful dialogue with both influencers like myself, and, indirectly and directly, with its customers and prospects. Because once the gates close and the drawbridge is drawn up on Open World, Oracle goes back to being a very closed world indeed.

Oracle has always been about controlling the message, something all companies try to do one way or another. But over the years, as the lawyers have risen in power and the company’s acquisition strategy has made a virtue out of bafflingly complex fiscal reporting, Oracle has more and more turned its communications strategy towards the goal of limiting, not expanding, the flow of information from the company to the market, and controlling those who try to cut through the PR and get to the meat of the issues surrounding the company.

This is Oracle’s prerogative, though it comes with an implied arrogance – we are so right in what we do that there is no need for any real scrutiny – and a decidedly anti-customer tilt – trust us, we’re on your side – that is belied by many of the company’s strategies. And that control has its consequences for any company – customer, partner, and competitor – that is making huge strategic bets on Oracle and needs, make that deserves, to know that those bets are based on facts, not something else.

The Open World communications disaster begins with two time-honored traditions at Oracle: The first is that Open World is the only major forum by which Oracle engages with influencers every year. Whereas most of the enterprise software market holds multiple user conferences, tech conferences, partner conferences, analyst summits, and press events, Oracle basically bottles up an entire year’s worth of new products and strategies into a five day window in October.

Into this extremely short window must fall all the aspirations of anyone looking for an understanding of this massive and increasingly important company’s products and strategy, and hoping for a dialogue and some critical thinking to boot. Sure, I am told that Oracle has thousands of events every year around the world, but those are tightly controlled, very select sales and marketing events that are all about lead generation and absolutely not about truly informing the market of what Oracle is up to. (Though, as I write these sentences, the notion that Open World is not a tightly controlled, very select sales and marketing event is starting to seem a little absurd.)

Nonetheless, Open World actually does sort of aspire to dialogue and to opening up the company to some critical thinking, despite the limits of its massive scale and the company’s focus on controlling access and information.  Of course, the fact that Open World occurs once a year and in such a short time frame makes it impossible for anyone – customer or influencer – to truly see and hear everything they’ve been yearning to know for the last twelve months.

And that’s before the second tradition, the Larry Ellison Effect, takes over.

The Larry Ellison Effect takes this once-a-year event and makes it an even bigger disaster through a peculiar twist of executive fiat: Larry likes to bat both first and last at Open World, and that means that while some opening remarks and a couple of announcements get made Sunday night (Sunday night–  Ugh) at the start of the conference, a huge chunk of the really juicy announcements don’t get made until the conference is virtually over: Wed. afternoon this year, 70 hours after Open World began.

This effectively kills any chance for a dialogue about whatever Larry wants to announce. This year it was the company’s cloud strategy, exactly the kind of complex, important announcement that could really benefit from a few days of follow-up briefings, conversations, and, yes, critical thinking. With the announcement on Wed. afternoon, and with not much left of the conference and many attendees already brain dead from the previous three days chasing the Oracle story, Oracle’s cloud strategy was left to be merely pondered, instead of actually understood.

(To their credit, the communications team tried to fix this problem by sending out an email at 3:40 PM on Wed. – right as Larry’s keynote was getting underway – that Thomas Kurian would be available at 5 PM that evening for a deep dive on cloud strategy. Needless to say, with that kind of advanced notice, many influencers, myself included, couldn’t make it.)

The applications team has recently been the major victim of the Larry Effect, as hardware announcements – remember, Oracle’s investors need the company to sell a lot of hardware – have dominated the Sunday night keynote. This means that the apps gang has to sit on its hands and basically say nothing about the most important announcements of the conference, waiting for Larry to deign to deliver their key messages. It makes for an almost comical interchange between otherwise intelligent and capable Oracle execs who have been forced to play dumb and dumber about key issues and strategies for fear of stepping on Larry’s toes.

But wait, there’s more – or less, really. Oracle also makes no bones about Open World being a sales event – point noted – and that means that there are virtually no meetings between influencers and executives, at least not by the standards of the industry: The four or so events Oracle’s competitors hold each year include multiple opportunities to put influencers in front of the execs and get the dialogue going. In doing so, most of Oracle’s competitors believe – or at least pay lip service to – the notion that they learn from the dialogue as much as the influencers. Oracle, with so much to learn, thinks otherwise.

The real question that I keep trying to figure out is whether this is all deliberate – as in, Oracle’s top leadership really doesn’t want to have this dialogue – or whether it’s more just a matter of style. As I ponder the question I am reminded of how Tom Siebel used to conduct his eponymous company’s quarterly financial calls. Rather than discuss meaningful strategy and other useful information, Tom would quickly dive into a level of financial minutia that could put a triple black belt accountant to sleep. Tables, charts, data points, all analyzed in excruciating detail. Minute after minute, on and on he would drone, until time was up and there really wasn’t anything anyone wanted to know other than how to get off the phone.

Could this be the real purpose of Open World: listen to the story we want to tell and don’t expect us to leave time or energy for dialogue? Take the information we want to give you and to hell with the information you think you need to know? This certainly has been the underpinning of the analyst program that I used to be part (I’m now a blogger, according to Oracle, analysts apparently work for big firms that sell Oracle lots of research and over which Oracle feels it has some leverage as a result.) My “handler” at the 2010 Open World said exactly that to me when I dared deviate from the program she put together for “me” in order to try to find out what I had come there to learn.

Regardless, I think that it’s indisputable that the result of this lacuna is a dearth of information and openness about the company’s products and strategy, a company that sits on top of a massive ecosystem of customers and partners who, as I said earlier, need to know a lot more about the Oracle than the company is willing to discuss. Too bad for all concerned. While Oracle seems to get richer by the minute no matter what it does, Oracle’s customers and the market at large are made all the more poorer by what is clearly a deliberate  communications disaster.

I spent much of last week sorting through the absolutely overwhelming communications disaster called Oracle Open World in search of some clarity on Oracle’s vision for its customers, and have come to the following conclusion: Oracle’s applications customer strategy just isn’t about making things better for its customers.

The problem with the Oracle of today is that the focus of a group of the some of the best technology minds in the industry has been hijacked to fulfill a vision that is skewed more towards fulfilling the promise of a decade-old merger and acquisition strategy than it is towards making customers both successful and happy. And the vision comes with a built-in irony that has me convinced that the customer comes second at Oracle, second to the shareholders whose addiction to Oracle’s margins has driven the executive team at Oracle to consider investors, not actual companies that consume its software, as the real customers.

Let’s start with the irony: Oracle is selling a vision of an integrated hardware stack that is magnificent in its simplicity: everything from the silicon to storage to networking are all “engineered” to work together. I wouldn’t be surprised if the electrons inside their boxes are also engineered by Oracle. If they could gain some sort of system-level efficiency by altering the laws of physics, they probably would do that too.

Contrast that with the software side of Oracle’s product line, and the irony arrives by the bucket load. Oracle’s applications strategy is the antithesis of integrated , in reality a hairball of products and underlying technologies, data models and deployment models, that could have only been “engineered” by an M&A strategist. Any real engineer would be crucified for pretending this software strategy makes sense for the customer looking for an integrated applications environment.

Four (or five, depending on how you count it) main product lines, each with its own code base. And literally dozens of other products, acquired with the goal of improving shareholder value, most of which also came with their own proprietary software or data models. Hundreds of business processes, many overlapping and redundant from one product to the next. And a big, hairy-chested middleware “suite” – Fusion Middleware – that is itself a conglomeration of technologies – a little Java here, some BEA and BPEL there, some MDM, some analytics , some DBMS technology, the more the merrier, all jammed into a one-size-fits-no-one morass of integration options. To simplify things, they also have an integration system called AIA that is used infrequently for the very reason that it’s an expensive, complex, technically challenging, and hard to cost-justify Tower of Babel erected to a false deity, the Oracle integrated software stack.

Compounding the irony is that, despite Larry’s insistence – could he be that out of touch with his customers that he believes this? – that integrating his software stack is easy, the reality is that integration is hard, expense, and, most ironic of all, the responsibility of the customer, not Oracle. There is no magic bullet, no easy-to-configure wizard, for the majority of the integration that Oracle customers require to run their businesses on Oracle software. Nope, it’s all about custom development, using expensive development resources. Sure, there are more and more “integrations” being built by Oracle, and more all the time. And as long as time is not of the essence, one day Oracle will have filled out the massive matrix of integrations required to link hundreds of key business processes across dozens of often overlapping applications. One day.

In the meantime, the customer has to wire this hairball up. And, having talked to many customers about this issue, the conclusion I came to is that Oracle’s investors are missing a big part of the problem they have helped to create. Because, in the long term, as long as customers are not using AIA to solve this problem systematically, the total cost of ownership of the investor-driven software model Oracle has foisted on the market will remain excessive,  and render Oracle vulnerable to a lot of smarter, and more agile, and better rationalized competitors.

The irony of the roll-your-own integration conundrum on the software side is how much of a non-starter it would be on the hardware side. Imagine having to solder the connections in your rack systems, splice the cables to your storage systems, write your own network protocols – kind of reminds me of the state of the art when I started in this business in the 1980s. And here we are, thirty years later, and Oracle’s customers have been pulling out the soldering irons and user manuals in order to realize their vendor’s integrated software stack vision.

It’s amazing how pervasive the problem is, and how out of touch Oracle seems to be about it. Even customers who were hand-picked by the Oracle communications team to talk to the influencers at Open World had war stories about this problem. One customer I spoke with was told by Oracle that Agile PLM would plug right into a process manufacturing instance of eBusiness Suite, and two years later this happy customer (Stockholm Syndrome, anyone?) was still fighting Oracle’s integration battle inside his company, at his expense. Another customer shared a similar story about Siebel CRM and eBusiness Suite, another about PeopleSoft and Siebel. And so it goes in the engineered-for-investors Oracle stack.

This disconnect, this dystopic vision, becomes even more ironic when you add Fusion Apps to the mix. Here’s a new suite that has to be sold in parts to customers using other, older parts of the Oracle product mix because selling it as a suite would expose its severe limitations in terms of industry-specific functionality. With integration as the starting point, you’d think Oracle would engineer the integration between Fusion Apps and the key products in the suite to be a no-brainer for the customers. Wrong. Coders, start your engines: Oracle Fusion Apps require the customer to do the majority of the integration work in order to make the products work with the rest of the Oracle stack. Sure, they are building the integration points – there are 10 or 15 available today as Fusion goes GA – but how that piecemeal approach to the core requirement of integration helps control customer costs and deliver customer value is beyond me.

I’m not even sure it delivers customer value either. Interestingly, I spent much of Open World button-holing applications customers and asking them if they were planning on upgrading to the Exadata/logic/lytics strategy. The answer was universal – not now. When I asked them why, it was because they couldn’t see the value in such a migration, not when they were up to their eyeballs upgrading and integrating their apps. And when I asked them when they might consider such a move, the answer boiled down to the following: when Oracle gives me a clear ROI strategy for migrating that I can take to the board. And when I asked Oracle for evidence of this strategy, the answer was simple, there is none.

One Oracle exec whom I asked did discuss an ROI strategy, but his answer was basically about the ROI for Oracle. (Sound bite: running on Exadata lowers Oracle’s support costs. Translation: investors get even better margins.) And while I was promised that this ROI strategy would be revealed to me when it was available, I’m not holding my breath.

Because in the end Oracle’s roll-up the best of breed strategy has never been about better TCO for the customers. It’s been about optimizing the sales opportunity for Oracle’s incredibly effective sales machine, while bringing smaller, inefficient software companies under the razor-sharp cost-cutting eye of Safra Catz. There is certainly a fair amount of consideration about customer choice in the strategy as well – they have many truly best of breed apps in the portfolio – but that has increasingly fallen prey to the requirement for delivering more red meat – in the form of profit margins – to an extremely avaricious investor community hell-bent on looking out for number one.

That hunt for profit margins is now all the more acute because of the strain that the Sun acquisition has put on those margins. Safra Catz is now on the record for two quarters promising that the company will soon get back to its former, pre-Sun, margin glory, with little specific guidance on when that will actually happen. Hence the real focus of Open World, which was one big, fat commercial for Exa-everything. Sure, there were plenty of keynotes about things like clouds and apps, but there was no mistaking what Larry was really selling: engineered hardware  systems. And there is no mistaking the almost frantic urgency in the subtext to that message: we won’t make good on our promise to Wall Street if the customers don’t start buying more hardware.

The shame of it all is that the applications team and their products, the above notwithstanding, are some of the best of the best. The core products continue to evolve nicely, Fusion Apps like Distributed Order Orchestration and Talent Management are pretty cool. I even like what Larry is saying about the cloud and multi-tenancy (it’s not the be-all and end-all of cloud computing, despite the orthodoxy of the much of the SaaS market). But the way that Oracle has now slotted its applications strategy into the larger investor strategy, and effectively forced customers, particularly apps customers, to bear the financial and complexity burdens of a strategy designed primarily for the investors, is more than a shame.

Where does this all lead? There are definitely apps customers who could benefit from engineered systems, but I think a more agnostic, customer-choice hardware model fits the needs of modern businesses best. Meanwhile, Oracle’s acquisition of best of breed vendors will run into a more rapidly shifting mobility-based user experience revolution that is already under way, and already making new user experiences like those in Fusion Apps look old and tired by comparison.

And therein lies a big risk for Oracle’s investors and customers alike. SaaS and PaaS make it much easier to slot in best of breed than ever before, and new development environments make it easy to build new SaaS-based apps more quickly than ever before (Kenandy built its ERP apps using Salesforce’s APEX in months, not years.) Meanwhile, customers are under more and more pressure to genuinely lower costs in a demonstrable way, and that means more attention to TCO in software and hardware, even if their vendors try to hide the true cost of their systems and pretend that, as Oracle claims, it’s time for a hardware refresh because the vendor says so.

All this means that as Oracle is forced to carry this enormous legacy portfolio forward, and as its Fusion Apps continue to be hamstrung by a lack of vertical and geographical specificity, the risk that Safra won’t make good on her promise to Wall Street increases. Right now, Oracle’s case to its customers on the value of engineered systems looks too much like the case it’s making to Wall Street. Until that changes – if it can change – Oracle is headed down a path that at best lacks customer-centricity and at worst is genuinely customer hostile. Engineered systems can be useful, but only as long as they are engineered for the right reasons…..

Every once in a while we analysts have an epiphany that rings a bell on one side of the brain while shouting out a giant “duh” on the other. That’s part of the bipolarity of what we do: sometimes the most startling revelations are the ones you’ve seen a dozen times, until finally that bell goes off, even as you realize that you really should have had that revelation a few months earlier, if only you had been paying attention.

So it goes with my recent revelation about the mobile platform as the design center of the  enterprise. Because the more I think about it, the more I wish I had thought about it sooner. Now that the enterprise software market is well on the way to shifting the bulk of its efforts in this direction, there’s a big fat caveat emerging that could take a lot of the excitement out of the shift to the mobile metaphor: the potential for a market freeze as the growing expectations of mobile user experience nirvana come up against the  harsh reality of a paucity of apps that leverage this opportunity. Because, despite all the hype and promise, it’s going to take years for the enterprise software market to meet the expectations it is now so avidly sowing, at the risk of reaping the proverbial whirlwind instead.

My revelatory moment started with Workday asking the analysts at a recent summit to test-drive their new HR management iPad app. The app was way cool, and started the brain waves flowing. Next up was my stint judging the gamification Innojam at SAP’s TechEd. As my fellow judges and I watched the contestants show off their stuff, the contrast between the gamified interfaces – most of them built with a mobile platform in mind – and the “old” SAP screens was almost shocking. Then came the fact, as I reported from TechEd, that the mobile experience is the design metaphor for SAP going forward.

And the kicker came when I watched SAP CEO Bill McDermott, being interviewed on Jim Cramer’s Mad Money show,  pull out his iPad and show how a CEO like Bill can run a company like SAP.  Rinnnnggggggg….

It was a masterful performance by McDermott, and one that showcased how SAP’s thinking is ahead of the market (and me, duh.) But the combination of the above revelations also highlights an important conundrum: for whom does this ringing in my ear toll?

The conundrum for McDermott, and his counterparts across the industry, even newbies like Workday, is that this mobile metaphor – okay, let’s call it what it really is, the iPad metaphor – is so compelling, so visually and tactilely immersive, that it threatens to run away with market. Or at least the market’s expectations.

I have been doing a minor in user interface design during the last few years, and it’s amazing how quickly the iPad has made the huge investments in user experience guidelines by everyone in the enterprise space – Microsoft, Oracle, Salesforce.com, as well as SAP, Workday and others – look like yesterday’s green screen.  How do you keep them down on the desktop once they’ve seen Bill run his business on an iPad?

It’s true that there are many many things you can’t do on an iPad that you can do on a PC, but hey, that’s beside the point.  It’s the same as with that former enterprise software metaphor of the hour, Amazon: I can’t begin to tell you how many times the simplicity of the Amazon user experience has been touted as the defining user experience for the enterprise, despite the fact that Amazon’s user process has maybe seven sub processes (find, add to cart, ship, buy, return, report, review) while a real business process would typically have dozens. Try telling that to the user – especially a member of the up and coming iPad generation: sorry, wrong number, dude.

Which is why there’s not a small amount of danger in the expectations that McDermott, or Workday, or every other enterprise software company with a well-designed mobile app are setting for the market. If McDermott says that I can now run my company from my iPad, then by gum he better give me that software. And while it’s good that I, the CEO, can run my company this way, it would be even better if all my managers could run their divisions this way.

And pretty soon, the drum beat is demanding that SAP and its cohorts make it possible for every user in the entire company to run their show on an iPad. Whereupon something horrid happens: the enterprise software market stalls, waiting for the next best thing to be available,  in this case an across-the-board user experience that will take years for the market to deliver. It’s like declaring that a Y2K-like software refresh is around the corner, but it won’t be until Y2.5K that the industry can deliver a solution. Slam on the spending brakes.

Of course, it doesn’t have to be that way.  If expectations are set well, both for what is actually possible from a design point – as in, how far can the iPad metaphor go before it loses its user experience advantage – as well for what is a reasonable roadmap for moving the mobile metaphor across the industry, then perhaps the stall can be avoided.

But those expectations need to be set soon, because a drum beat is being heard across the industry that may threaten a lot of good companies and their products. That’s the problem with setting expectations too high. You never know when the mob that’s cheering you in the streets will suddenly start demanding your head.

SAP has spent several years and several billion dollars trying to formulate a strategy that propels it ahead of an unprecedented set of market forces, and this year’s TechEd helped set the stage for a 2012 that is poised to be the year SAP finally crosses the innovation Rubicon.

Of course, as students of history will tell you, crossing the Rubicon was only the beginning of the journey that made an emperor out of the general who led his army over the forbidden river. SAP faces a similar journey – the real test will be in seeing how well SAP can marshal its technology, field sales efforts, and partner ecosystem into a fighting force ready for historic conquest. By contrast, showcasing a growing palette of innovation – which SAP did in spades this week at TechEd – is the easy part.

Because more and more the battle SAP now engages is truly epic – at least in the otherwise mundane world of technology – precisely because of the massive bets the SAP board has laid on the table: as the sole standalone enterprise software giant, SAP is fighting perhaps its greatest battle against market perceptions that bundling hardware and services is the only way to reap the margins and profitability that Wall Street believes are required of successful technology companies.

Those market perceptions have seen Oracle and its hardware focus become the standard of excellence for the sector, despite massive questions about the role of innovation at Oracle. These perceptions have also lead HP to embrace software and services, and Dell to embrace services as an adjunct to their own respective innovation Rubicons.

Meanwhile, SAP has chosen to largely stick with its software-only strategy, though more and more its offering are requiring a level of services that are making the concept of out-of-the-box functionality even more mythological than ever. Importantly, SAP’s software-inter-pares focus has made it the company to watch as Oracle prepares for its OpenWorld user conference and gets ready for a quarterly results call that will put a bright spotlight on whether Oracle can make good on Safra Catz’s promise to get the company back to software-like margins now that Sun has been fully digested.

The problem for Oracle is that SAP’s software strategy is making a lot of sense as an innovative wedge into the enterprise, one that has the potential for challenging the bundling and hardware-based low TCO strategy that is at the core of the Oracle way. SAP’s challenge is to prove that the advantages of its software innovation strategy provide a better long-term value than Oracle’s dual software rollup and Exa-twins strategy.

The potential advantages to SAP’s strategy were out in force at TechEd this year, from the gamification theme to the focus on mobility to the HANA drumbeat (actually drum and bugle corps is a better description) to the continual progress on cloud-based analytics. In conversations with customers and partners, it was clear that the top level message that SAP is innovating in areas that are near and dear to the market’s heart was being heard in all the right quarters.

The mobility and HANA stories were the most impressive to me. SAP has made it clear that its reading of the enterprise tea leaves have shown that the mobile experience is the design center for the enterprise of the future. I spent the first day at TechEd asking SAP execs of all stripes about this question, and the answer was consistent: if you are a customer or partner and want to develop a new enterprise app, your design starts with the mobile user experience. That app can use HANA, pull data from the Business Suite, and be as transactional or analytical as you would like, but if it doesn’t look good on an iPad, it’s back to the drawing board time.

This is not only consistent with where other market leaders and innovators are headed, but it also shows the recognition that even the most modern SAP Business Suite user experience pales in usability when compared to the standard mobile app: Which of course makes SAP’s Sybase investment make all the more sense. That was the observation number two from TechEd: the DNA strands from Sybase are more and more tightly interwoven with the core DNA of SAP, and the evolutionary advantages are starting to show.

Meanwhile, TechEd was HANA’s own Rubicon. SAP announced that the dream of HANA as an OLTP engine for the Business Suite was now within reach, and that the company was actively working to move several thousand SAP Business Warehouse customers off their Oracle RDBMS platforms and on to HANA. While many of these customers have to run the gauntlet of Oracle’s contract lawyers in order exit their license agreements without incurring huge penalties, SAP is busily preparing a business case for BW customers that will make it cost-effective for these customers to make the shift.

The prospect that SAP could be presenting these customers with a faster, better and cheaper way to run their data warehouses as compared to Oracle should rattle a few cages over at Oracle. And with HANA-ready apps and services, HANA as a platform play in the cloud, and other parts of the SAP in-memory strategy coming to fruition, it’s no wonder that SAP is touting HANA as the fastest growing pipeline for an SAP product in the company’s history (okay, so the bar might be set a little low, it’s still an impressive claim.)

This prospect of a major HANA pipeline – and that’s before SAP taps the multi-billion dollar BW replacement market – was a major reason for SAP’s success in its last quarter, a point emphasized by Bill McDermott when I spoke to him about the quarter in July. His other main point was in evidence at TechEd – the strategy of innovating largely around what SAP likes to call a “stable” core is one that is making tremendous sense for its customers. It was clear in every customer conversation I had that the notion of adding new functionality like HANA or new mobile or analytics apps on top of the Business Suite was making huge sense for these customers. This was the dual nature of every customer’s raison-d’etre a TechEd: keep an eye on what’s going to make the core easier and more efficient to run, while looking for the cool new apps that will make the business more competitive.

So the Rubicon has been crossed, what of the battle for the empire? The question really boils down to what the SAP board is willing to do about its innovation opportunity. The problem with SAP and innovation is twofold. The first is that the company has so much innovation going on in so many quarters that it risks drowning in the river instead of crossing it. This is of course a messaging problem for newly crowned CMO Jonathan Becher, who has the unenviable task of making sure SAP is consistently on message in the 24 industries and dozen or so major markets in which it wants to wear the innovator’s crown. This means places where SAP has been traditionally weak – like CRM and HRMS, both of which now have really nice new mobile apps in the quiver – as well as places SAP has been traditionally strong, like manufacturing and supply chain. It means taking the rest of SAP into the new markets, like mobility and financial services , that Sybase brings to the table. And it means distilling one of the more comprehensive and  complex innovation messages in the market into the SAP equivalent of IBM’s Smarter Planet, or Oracle’s Engineered for Innovation.

The second problem for the SAP board involves Oracle, and to a lesser extent IBM: how willing is the board, because in the end it’s their decision, to take on Oracle in aggressive fight for the growing pool of IT dollars that McDermott now sees as shifting towards innovation. That fight requires SAP to shift from its usual preference to play defense against Oracle to playing offense, and the stomach for this fight is the real question.

Take HANA and in-memory as the perfect example: It’s clear that Oracle will be making a major move against HANA at OpenWorld –they threw down the gauntlet here even before TechEd was over. If SAP plays its usual hand, and Oracle plays its usual hand, then Oracle will successfully steal the in-memory ball and start running for the goal line, red and yellow cards be damned, while SAP will put on a sincerely good chase. Rinse and repeat for mobile – it’s hard to imagine Oracle will let another OpenWorld go by without making some commitment to the mobility market. The only real question is what is SAP prepared to do about it.

SAP has the opportunity to fight Oracle on its home turf – SAP is, after all, now a database company too – as well as take the fight to new markets. This opportunity would involve blending a strong innovation message with a strong total cost of ownership message, and it would involve direct engagement with an aggressive and highly successful opponent. To do so might not guarantee success, but failing to do so would guarantee mediocrity, and further threaten SAP’s ability to make the case to its investors that the last standing enterprise software giant deserves to continue standing.

I have to close this TechEd rant with a note on gamification, which was one of the themes of TechEd and was the subject of an Innojam – a 30-hour coding quest – that resulted in a contest for the best gamified app (of which I had the honor to be one of the judges). SAP’s focus on gamification in the enterprise is another example of some fearless thinking with respect to innovation, but the results from the Innojam proved to me that any fear of gamification is completely unfounded.

First off, the 13 teams that made it into the final round were exemplified by an incredible energy and creativity – and excitement – that itself was innovative. The sparks in the room were palatable, and the different approaches to gamifying SAP were impressive. My own favorite – the “Do I Know You App” mentioned in the link above, which is an app that lets meeting attendees put names to faces and otherwise learn about the people with whom they are about to meet – didn’t win, but it exemplified a winning gamified “SAP” app in three important ways:

• The user experience was hip, mobile, entertaining, and in very sharp contrast to the traditional SAP look and feel, even the Business Suite at its most modern.
• The app was engaging and intrinsically as well as explicitly rewarding, and the explicit rewards of gamification enhanced the intrinsic reward of being able to have a more engaging meeting, even with people one has never met before.
• The app enhanced an important component of the kinds of people-centric business processes that SAP has to capture in order to reach its billion-user goal.

It’s easy to say that gamification is really way out there, and is something that SAP is doing just to look cool, even as it pulls on its suit and ties it tie and heads off to that staid and boring enterprise software world of yesteryear. The Innojam proved that if SAP wants to unleash gamification as one of its next waves of innovation, it will have yet another army to march across the Rubicon. Gamification may prove to be as strong an innovation play as SAP has ever made, and that’s saying a lot.