Silicon Valley Watcher - reporting on the business of technology and media

M.R. Rangaswami has done an excellent job with his Software 2000 series of conferences in helping Software As A Service become a mainstream technology. Now he has turned his attentions to Cloud Computing.

I caught up with M.R. during lunch at Cloud Summit, a new annual conference looking at the business opportunities in Cloud Computing for users, developers, and investors.

YouTube, Google and Blip.tv
Highlights of the conference can be found here:
Looking for the Silver Lining - Business Opportunities in Cloud Computing

I have to admit to mixed feelings about going to Wednesday's Citrix Online Salon Dinner at the Carnelian Room on top of the Bank of America building in downtown San Francisco. It's the place where I proposed to my ex-wife. But I do love my kids and the views are spectacular so the awkward feelings were momentary.

Citrix Online is known for its large user base among small and medium businesses (SMBs) with its GoToMy/PC/Meeting/Webinar services. I'm always interested in software as a service companies (SAAS), especially these days where there appears to be a bit of a backlash against SAAS companies among larger companies, and also in these troubled economic times when it is easy to cut out monthly service expenses.

Brett Caine, GM of the Online Services Division says he hasn't seen any SAAS backlash or economic effects primarily because most of his clients are small businesses and the services save them money.

The salon was moderated by Gene Marks, introduced as an SMB expert. He did a fine job of engaging people especially key Citrix Online customers such as: Trust for Public Land; Cruise West; Western Independent Bankers; and MJC SF. Plus there was a bunch of media from BusinessWeek, Bloomberg, Harry McCracken and others.

Here are some notes from our dinner discussion:

- Few people like to use the video portion of GoToMyMeeting. Some people dress up before they take part in a video meeting. [Maybe there is an opportunity for a real-time avatar for those too shy or too vain?]

- I asked Mr Caine how does Citrix get its message to small business owners who are famously so busy running their companies that they don't have time to try out new services? "We try to get them outside of work, through TV spots, through radio when they are stuck in traffic and could do that meeting remotely."

- There is a history of "renegade products and services making their way into organizations such as the PC, handheld organizer," pointed out Harry McCracken. I asked "what is today's renegade product?" The iPhone was the consensus.

- One of the customers said Citrix helps in meetings across 16 different time zones. He said that in China his employees like to be social, they like to do things together, and eat together. I proposed a new product for Citrix: GoToMyDinnerParty.

- Citrix people underlined the carbon saving element of online meetings and there was some discussion about why more companies weren't adopting such an obvious green technology. My view is that businesses aren't in the business of saving carbon. They are in business to make business, they will be green if they can, but what they want more than anything is a more efficient way of doing business.

The moderated salon went on well into coffee and desert which was a shame because there was little opportunity to speak with my dining companions. But overall it was a pleasant event.

I'm hearing from a reliable source that Salesforce.com has approached Oracle to gauge if there is any interest in a sale at $75 a share. That would be almost a 50 per cent premium over Friday's close of $50.87.

The deal would make sense:

-It would provide Oracle with a strong brand in online apps and a strong transition road map to cloud computing and a software as a service business model.

-Salesforce would benefit from Oracle's dominant position in enterprise IT markets, which would help in convincing corporations that Salesforce is a scalable and viable enterprise solution.

-Marc Benioff, CEO of Salesforce would make a good successor to replace 63 year old Larry Ellison, CEO of Oracle, when he retires says Matthew Greeley, CEO of BrightIdea.com. Mr Benioff is used to work at Oracle. When he left Oracle in 1999, Mr Ellison provided seed funding for Salesforce and also served on its board of directors.

-Mr Benioff needs a new challenge, he appears to be losing interest in Salesforce, or at least reducing his financial interest in his company at a rapid daily rate. He has been selling 10,000 Salesforce shares every single day since 21 August 2007. Before then, he sold 20,000 shares every day since 14 November 2006. Prior to that date, Mr Benioff sold thousands of shares every day in variable amounts since 31 July 2006.

[Please see: Insider Trades - Marc Benioff - Yahoo! Finance.]

-An Oracle acquisition of Salesforce would strengthen its strategic position against SAP, the top enterprise application software company. SAP has been slow in figuring out its online strategy, even naming its initiative has been challenging to the company.

UPDATED: Larry Ellison will have to buy Salesforce at some point anyway. Netsuite cannot be scaled to the size of Salesforce in this decade, maybe in the next. The two businesses could be easily integrated, that's the beauty of online software, it's all standards based.

Buying CRM now at a 50 per cent premium would be a good deal for ORCL. MSFT is going to have to cough up much more than the 62 per cent premium it initially offered for YHOO...

And Salesforce is to Oracle, as Yahoo is to Microsoft, in terms of future direction and strategic positioning.

This week the Office 2.0 conference is in town, at the swank St. Regis. Interesting panels (video is coming) and interesting conversations in the corridors, marks of a good event.

My quick takeaway is that there is not enough there, there. At the end of the day, we are not talking about rip and replace. Corporations won't be ditching and switching. The Office 2.0 market is not about supplanting the MSFT budgets within organizations but the incremental additional markets.

It is about bridging that digital divide within corporations, between the PC equipped knowledge workers, and the ones that don't warrant the expense of their own PC and MSFT licenses. This is a business opportunity that won't make the next Google or anywhere near. In fact, Google Apps already has the pole position because Google Apps are good enough, (and will get better) plus GOOG can offer scalability.

Nice but do you scale?

When comparing Office 2.0 apps, corporations will disregard features and user interfaces in favor of scalability. GOOG can say, "we run the largest computing platform on this planet, we can swallow 100K new users in a single day--and still offer 99.9 per cent uptime."

Which Office 2.0 company can compete against GOOG's spin? Zoho.com might (but more on that later.)

Is the future of the entire software as a service (SaaS) market going to be determined ultimately by how scalable is your software service? Because Google will win that argument every time. Watch out Salesforce, and a bunch more.

The Paris Hilton effect

But the performance of the Google cloud will be determined by the Paris Hilton effect. A run on GOOG servers searching the latest celebrity gossip could put a crimp in your Google Apps performance, and it would come out of the blue.

But so what? Google Apps in the enterprise is for your workers that don't merit their own PC and Microsoft Office apps. A slowdown or downtime won't sink your business. Which brings me back to this question: Will success in Enterprise 2.0 be ultimately be determined by who has the most scalable platform? Has Google already won?

Here is some Office 2.0 covergae from Dan Farber at ZDNet: Bringing Enterprise 2.0 to Morgan Stanley Office 2.0: The future of work