My greatest impression of the "Generally Accepted Accounting Principles" is that they are no help in planning or making predictions. Although it has been a while since I read an accounting text book, I seem to recall statements of assumptions like: "There will be no war"; "inflation will be moderate"; "there will be no recession." Of course, that’s not reality, and in my opinion, if such are your assumptions at the get go, then all you are really doing is failure-proofing your work. Later on, you can look rather sage when you say, "Don’t blame me. Remember the assumptions." Whatever.
I think 2006 will be a great year full of surprises and opportunities. Here are some of the things I won’t be surprised to see happen.
Revenue is on the agenda again, and this time we really mean it. I think 2005 was a bit of a false spring for many software companies. Although many enterprises moved to take advantage of new revenue opportunities, those actions did not filter down to emerging companies with the ideas and technologies the big guys need to achieve their vision. In fact, articles I read suggested that many companies were shying away from emerging companies, fearing the risk. But risk is the tails side of the coin, with innovation being heads. You need one, and you accept and find ways to mitigate the other. We didn’t see enough of that in 2005, but in 2006 we should see a lot more.
There are lots of new applications and application types that have been around in embryonic form for the last few years that will support this theme, and many will surge into the limelight in 2006. Those companies that help enterprises to better understand their customers will do well. There are two reasons for this: the need to develop greater customer loyalty and the need to reduce the risk and cost of product development through co-innovation. Companies like Communispace come to mind here. Also, Rearden Commerce breaks the mold in that it is all about cost avoidance not revenue, but its solution is so innovative that it will draw a lot of attention and revenue. Most interesting is that Rearden’s platform is its secret sauce—the currently hot application is only one of many potential solutions—and the company hasn’t even begun to promote it.
Oracle will be an increasingly interesting company to watch. The acquisitions of 2005 (Peoplesoft) and early 2006 (Siebel) will continue to occupy the company’s attention, including considering what to do about integrating some or all of the redundant technologies. I wonder if the board will continue to see value in these redundant acquisitions and if the market will be patient with their costs. Oracle needs to begin delivering on its vision of the future, a tall order but one of its own making.
SAP will continue to play tortoise to Oracle’s hare. While Oracle has made a lot of news recently with acquisitions, including that of Siebel set to conclude early in 2006, SAP has continued to make plans and products. To mix metaphors, SAP is in the catbird seat in enterprise software. I say that, because, although many of its customers are also Oracle’s, SAP has delivered the more highly valued business applications. So it can afford to be somewhat laconic as it focuses on what’s next. SAP has also been quietly absorbing some of Siebel’s best and brightest, as the San Mateo, California, brain drain continued through 2005. Look for some inspired thinking from SAP on the future of enterprise software as well as new products and services for the company’s huge installed customer base.
On-demand is the new darling. Salesforce.com’s revenue growth has been in the 80 percent range year over year, and that will attract a swarm of new believers. The stock will swell. So is the revolution over? Yes and no. On-demand enterprise applications continue to proliferate, and on-demand is now a safe bet. So yes, that part of the revolution is over. But that part will look like the appetizer soon as the whole ecosystem vision continues to gain steam. Salesforce.com has put Oracle and Microsoft in its sights with Appforce and Appexchange and the salesforce.com partner ecosystem. CEO Marc Benioff is playing David to their Goliath and, frankly, I like his chances. In 2006, salesforce.com needs to convince major enterprise software buyers of its vision of federated computing on a grand scale. That’s something it’s had some experience and success with before.
So that’s some of what I think will happen. I could say more, but the one assumption I had when I started was the amount of your attention I could take up. And I think I’ve reached it.