Eat or Be Eaten

Just before dinner last night, we sat down with several colleagues in a highly informal but on-the-record chat with Ilog CEO Pierre Haren on the first day of Ilog Dialog 2008. Although he phrased it differently, a term he called “Movement Wars,” the message he conveyed was a familiar, but poignant one given the current state of the software market. Coming just ahead of a 3-course meal at a luxurious Palm Springs resort, our takeaway is that to survive in the business, you must eat, move, or get devoured.

It was an appropriate follow up to an interview we conducted with Haren last fall on how western technology companies can thrive in Asia that was published in CBRonline.

The obvious examples he was pointing to included Microsoft, and to a lesser extent, SAP and Oracle. He mentioned that in the typical lifecycle of a software vendor, first you get about a handful of successful references; then you try replicating it into a solution and if you succeed, you get to about 20 – 30 successful accounts. That’s the time you have to either start thinking of specializing your solution for vertical sectors or other specialized sectors of the market, or you must change your role and move on.

He gave the example of optimization, a market where Ilog has played an OEM role with players like i2, but is now starting to push its own independent brand. It was initially a custom development market, then i2 commercialized it. And once it became a billion dollar market, SAP and Oracle acted as “bottom fishers” in pushing i2 (which was busily shooting itself in the abdomen anyway) back into a corner where it barely breathes.

Haren then recalled a talk delivered by Steve Ballmer in front of an audience of French software vendors. With vivid memory, he noted the number of bodyguards that surrounded Ballmer, who is not exactly physically diminutive in physical stature himself. “What were they worrying about? That some disgruntled customer who discovered a bug in Excel would go knife him?”

Ballmer’s message was, in effect, if a market gets big enough, that Microsoft would move in (“crush you” was Haren’s, but probably not Ballmer’s term) and that you as software vendor, would have to cultivate some niche and deepen it to survive once Microsoft gets in your face.

This of course comes on the heels of Ilog’s recent announcement of a new set of offerings that natively tie in with the forthcoming BizTalk Server “6” (eventually to be officially branded 2008 or 2009), Office 2007, and the latest version of the .NET framework. Echoing words that we heard from Ballmer himself at Sand Hill Group’s Software 2007 conference last spring, it’s the vision of Office Business Applications, of which the best known example the joint Microsoft/SAP Duet offering.

While knocking the previous BizTalk 2006 as “crap” (this was a candid discussion), he claimed that with BizTalk 2008 and the emerging Oslo initiative, that Microsoft is going to get enterprise apps, and specifically, BPM, right this time. Of course to anyone who’s watched Microsoft over the years, the pattern is familiar: they get it down by version 3.0.

And, while nobody (yours truly included) likes the prospect of having to move onto yet another new Office file format (Office 97, anybody???), Haren pointed out that this time it’s different. “With XML, added to the new file format, you can turn Word into a generic GUI for any business application with elements that are updated in real-time. You have a form that you fill with structured elements, where you can imbed rules.”

Of course, the idea of a dynamic document took us back to the old Interleaf notion of “Active Documents,” where with millions of dollars of custom programming, your documents too could be populated live by Oracle databases. That was back in 1994, but this being 2008, and the fact that there’s XML, it should hopefully be a bit cheaper on this go round – that is if you don’t mind the hassles of conversion or coexistence with the new .docx file format.

(By the way, while we’re on the topic of Microsoft file formats, frequent blogger and developer Joel Spolsky last week gave a great explanation on while those Office file formats are so bloated.)

But back to the saga of the African Veld. Just as Ilog gets cozy as an early member of Microsoft’s Business Process Alliance, it too must think about moving on, because at some point, Microsoft is likely to do to business rules what it previously did with OLAP.

Of course, in the grand scheme of things, Haren believes that Google is the first challenger to emerge that might make a tidy meal of Microsoft itself. Not of course, that that is anything we haven’t heard before, except for the fact that it follows in the same breath his grand expectations for Microsoft as enterprise applications platform. (And, as a recent post from Josh Greenbaum confirmed, Google itself still doesn’t get the enterprise apps market.)

When we asked Haren about how he can be so bullish and cautious, he explained that in the next wave of the market, success on the enterprise side may not be enough to keep a company from becoming history.

Are SAP and Oracle listening?