The Grind

All too often, software projects are late, over budget, or end up with less functionality than first planned. If these were consumer products, most software development shops would probably find themselves under FTC scrutiny.

Despite the high-tech veneer, software development practices probably have more in common with 17th century English blacksmith shops. Forget the fancy tools, most software is still crafted by hand.

Production is closer to black art than science. Credit or blame developer culture. Comprised largely of former (or would-be) chess players, philosophers, and artists (OK, there are engineers and scientists too), the field has always valued creativity. Not surprisingly, when you get this kind of mix of people and priorities together, the results are often breakthrough, chaos, or something in between. Call that a mismatch with the intended market, because development of business software requires creativity tempered with discipline and consistency.

Not surprisingly, attempts to industrialize software development have typically fallen short. Approaches, ranging from CASE (Computer-Assisted Software Engineering) to Extreme Programming (XP) have been plagued by over reliance on pure top-down or bottom-up emphases.

For instance, component-based development (a form of CASE “lite”) aimed to streamline the process with development of modular software that could be reused. This approach fell apart for several reasons: components were too complex to build, developers and business analysts alike had difficulties forecasting future needs, while developers viewed reuse as attacks on their manhoods because it stifled creativity. Not surprisingly, when we studied Java development practices several years back, we found most developers dispensing with Enterprise Java Bean (EJB) components in favor of simpler, modular, but less reusable Java servlets.

In industry sectors with processes common enough to provide sufficiently broad markets for software vendors, packages replaced internal development. However, when a company buys a package, it becomes hostage to the marketing priorities and fortunes of its software vendor. (How would you feel if you were a PeopleSoft customer today?)

In markets too narrow for package providers, other approaches have emerged. For instance, we’ve recently heard about the notion of co-sourcing, where multiple companies in a sector cooperate on development of commodity software, such as for regulatory compliance.

And a few days ago, we caught an announcement from Unisys of a new “Business Blueprints” strategy that could provide yet another alternative. The blueprints are, in effect, general frameworks for business processes in sectors untouched by package vendors. Essentially a controlled development solution, Unisys boasts an efficient software development process that saves time and money through strict adoption of the Rational Unified Process (RUP) for ensuring that software code is driven by requirements, gets thorough testing, and is carefully controlled for changes that could blow the scope of a project.

While vendors always bend over backwards to make reference customers successful, we were impressed with Unisys’ successes at ING Barings, where it developed the first phase of an insurance policy management system. Using cost estimation tools, the Unisys team predicted costs of this multi-million dollar project within a few percentage points, using that uncanny accuracy to prevent scope creep.

It could be argued that such results are only possible through heroic measures. But, during a period when offshore development is competing for programmer’s livelihoods, maybe a little heroism wouldn’t hurt.

A Show of Pragmatism

It almost looks like a refreshing breath of sanity has infected Sun. At Java One this year, the tenor was more pragmatic than religious (maybe we’re jumping to conclusions — Scott won’t speak until the last day).

With Microsoft’s bundling of the Java runtime about to terminate, Sun signed up the two leading PC suppliers HP and Dell to embed it. As for problems validating all those smart phone Java programs, Sun signed agreements with Motorola, Nokia, Siemens, and Sony Ericsson for standardizing test protocols. And while they were at it, Sun got rival Intel to optimize Java on high-end mobile devices.

OK, Sun may have reverted to form in grumbling about the WS-I indirectly delaying release of J2EE 1.4, but people, lets be adults here. Does anybody really expect two large, membership-based organizations to march in lockstep?

At the conference, Sun announced a mission to triple the current Java developer base to 10 million through measures such as a new, simpler, higher-level declarative programming support in the next versions of J2SE and J2EE and beefed-up developer portals.

And to encourage consumers to download cool stuff from onto their smart phones, Sun wants to downplay the differences between the three editions of Java (J2ME, J2SE, and J2EE) to make everybody believe it’s all one Java. We’re just afraid that in so doing, they might confuse developers in the process.

Most of these initiatives will either cement Java’s existing presence or mitigate some of the gaps. For instance, Java has pretty much blasted .NET out of smart phones, with the new testing certification wisely removing an unnecessary obstacle to keeping it that way. Conversely, on the PC side, the agreements will have limited impact. Java on the client has never been as compelling as Java on the server, and even if Sun got every PC maker on board, the situation won’t change. Anyway, the Dell agreement is limited to Linux, meaning for now, HP is the only source (outside Sun) for Java Windows runtimes.

As to programming simplification, we think the steps to add declarative support are useful, but on their own, they won’t solve the developer ease of use gap with Visual Basic. Outside Borland, nobody has cracked that challenge.

Java has survived in spite of Microsoft’s marketing muscle and Sun’s tactical missteps. Yes, like any maturing technology, some of the idealism — like write once, run anywhere — has worn off. But, although Java has forked when it comes to the nagging matter of deployment (BEA and IBM do things their way), it has hardly sapped Java’s appeal as a scalable integration platform.

You Wanna Piece of Me?

We never thought that the ERP business could get exciting, but all the intrigue around whether PeopleSoft will realize its grand plans or become roadkill could become a meaty target for some unemployed Hollywood screenwriter. Something along the lines of blood being thicker than water — with the prodigal son scorning the family and the father brooding for vindication (PeopleSoft CEO Craig Conway, like Tom Siebel and others, once worked for Larry Ellison). Which part should Joe Pesci play?

OK, we’re getting carried away. But as we’ve maintained, the flurry of M&A activity is hardly about the customer. In flat markets, it rarely ever is. Consider American Airlines’ strategy of ripping out seats in a down travel market to grab share. Now, fighting off bankruptcy, it’s putting those seats back in.

In the ERP space, there are too many players, with market leaders ill equipped to serve what little growth market is left: small-midsize businesses. So even if PeopleSoft’s customers aren’t necessarily thrilled with Oracle’s offer (it will mean yet another round of migration on the heels of their recent moves to web-centric PeopleSoft 8), Wall Street is ecstatic. Forget about PeopleSoft being a better fit with J.D. Edwards, Oracle will likely up its offer. Siebel, whose CRM pure-play strategy has maxxed out, should follow suit because they need PeopleSoft even more than Oracle.

All this market maneuvering raises yet a more basic issue: if ERP vendors are traded like pork bellies, does that vindicate the recent HBR thesis equating technology as commodity? Nope, this only means that the ERP segment is commodity. That’s shouldn’t be a shock, because having a superior back office is not a competitive differentiator unless your company is a service bureau that makes that its business. As the risk of repeating ourselves, technology remains unique because it can embed the intellectual property that differentiates an enterprise. If that’s becomes a commodity, then lets close down the Patent Office while we’re at it.

One Size Doesn’t Fit All

Another day, another deal. PeopleSoft’s announcement of the JD Edwards acquisition provides yet the latest example that, while bigger may not be necessarily better, it’s certainly a security blanket for shareholders.

Consolidation has been a fact of life in the overall economy in general, so why should software be any different? The PeopleSoft/JDE announcement occurred the same day as an FCC decision lifting ownership limits on television broadcasters.

The transaction itself — a stock swap acquiring shares at just under 20% premium — wasn’t much different from IBM’s Rational acquisition, the most recent major software deal. But the circumstances are different. While Rational was drifting when IBM came in (sales recovered afterward), JDE just came off a pretty decent year (if you don’t count the last quarter, when everybody’s sales tanked). Wall St. pretty much shrugged off the deal, with PeopleSoft shares declining a modest 8% — it’s clearly not taking on any sinking ships.

For now, JDE will remain a separate business unit. But even if it ever gets swallowed into the mother ship, JDE’s product will survive for one basic reason: when it comes to enterprise software, one size doesn’t fit all. Midmarket companies require simpler solutions than their global counterparts. Giants like SAP and PeopleSoft have stumbled in targeting midmarket companies because their software is just too darn complicated. That doesn’t necessarily rule out some technology commonality — both PeopleSoft and JDE have migrated to underlying component-based web architectures that could be converged. But asking JDE customers to migrate to PeopleSoft Lite would amount to a golden opportunity for Microsoft Great Plains and others to raid the installed base.

So why do the deal? Two words: size and breadth. PeopleSoft was #2 in the ERP market, while JDE was #5. Coming out of the deal, PeopleSoft becomes a bigger, fatter two. JDE gets access to deeper pockets competing with Microsoft. PeopleSoft gains faster entry to midmarkets, and as a bonus, deeper vertical functionality in sectors like discrete manufacturing, healthcare, and distribution. For customers, however, we think that the deal will make little difference.