The commercial computing, software and services industries have existed for half a century or so each. It might be interesting to review how their pricing and delivery models have evolved over time.
1960s and 1970s
Modern IT is commonly dated from the introduction of the IBM 360 mainframe in 1964-5. But even before then, there was a growing industry in what we’d now call outsourced services, specifically in payroll processing; major players included Automatic Data Processing (ADP), the company that gave us Senator Frank Lautenberg, and a variety of banks. This was (and to this day remains) a comprehensive service, priced by unit of work (e.g., number of payroll checks cut).
IBM mainframes, which quickly came to dominate the market, were in the 1960s and 70s commonly rented. IBM software that ran on them was hence typically priced on a rental/subscription basis as well. The independent packaged software companies, however, often preferred to get paid up front,* and hence sold perpetual licenses to their software. Annual maintenance fees for the licensed software started in the range of 10% of the perpetual license or even less, but migrated up to today’s 20-22% range.
|Categories: Analytics, Application software, ASK Computer Systems, Computer Associates, Computer services, Cullinet, EDS, IBM, MSA, Oracle||4 Comments|
Recently I expressed doubts about Actian’s DBMS-conglomerate growth strategy. For context, perhaps I should review other DBMS vendors’ acquisition strategies in the past. Some — quite a few — worked out well; others — including many too minor to list — did not.
In the pre-relational days, it was common practice to buy products that hadn’t succeeded yet, and grow with them. Often these were programs written at enterprises, rather than third-party packages. Most of Cullinet’s product line, including its flagship DBMS IDMS, was came into the company that way. ADR, if memory serves, acquired the tiny vendor who created DATACOM/DB.
Then things slowed down. A Canadian insurance company oddly bought Computer Corporation of America, to utter non-success. (At least I got an investment banking finder’s fee on the deal.) Computer Associates, which did brilliantly in acquiring computer operations software, had a much rockier time with DBMS. It acquired Cullinet, Applied Data Research, and ASK/Ingres — among others — and didn’t have much growth or other joy with any of them.
Indeed, Ingres has been acquired three times, and hasn’t accomplished much for any of the acquirers (ASK, Computer Associates, Actian).
I used to think that Oracle’s acquisition of RDB provided key pieces of what became Oracle’s own extensibility technology. Andy Mendelsohn, however, disputed this vehemently — at least by his standards of vehemence — and his sources are better than mine. Rather, I now believe as I wrote in 2011:
… while Oracle’s track record with standalone DBMS acquisitions is admirable (DEC RDB, MySQL, etc.), Oracle’s track record of integrating DBMS acquisitions into the Oracle product itself is not so good. (Express? Essbase? The text product line? None of that has gone particularly well.)
Experiences were similar for some other relational DBMS pioneers. Read more
|Categories: Applied Data Research, ASK Computer Systems, Computer Associates, Cullinet, Database management systems, IBM, Informix, Ingres, Microsoft, Oracle, Sybase, Teradata||1 Comment|
The single company whose history people most often ask me about is Oracle. That makes sense — Oracle is a hugely important company, which I’ve known for almost all of its 30-year commercial life. And of course, this being the week of Oracle OpenWorld, Oracle is top-of-mind.
Let’s start with a breezy overview, setting the stage for more detailed posts to follow. As I see it, there have been four eras at Oracle, which between them reflect just about every tech company management theory I can think of.
Startup: This period comprised initial development, custom contract with the US military (CIA, I think, even though the demo database was always naval), and initial product release. This is the one phase of Oracle’s history I didn’t witness personally. But it seems to have been pretty much a story of “build a minimum viable product for a great vision, and hustle until somebody buys it.”
Hypergrowth: Roughly speaking, Oracle grew 100% per year on its way from $5 million in revenue to $1 billion. This period formed much of the basis for Geoffrey Moore’s famous “Crossing the Chasm” series of books. In line with Moore’s later observations, Oracle’s priorities in this period were: Read more
I recently wrote a long post on the premise that enterprise analytic applications are not like the other (operational) kind. That begs the question(s): What are operational enterprise applications like?
Historically, the essence of enterprise applications has been data management — they capture business information, then show it to you. User interfaces are typically straightforward in the UI technology of the era — forms, reports, menus, and the like. The hard part of building enterprise applications is getting the data structures right. That was all true in the 1970s; it’s all still true today.
Indeed, for many years, the essence of an application software acquisition was the database design. Maintenance streams were often unimportant; code would get thrown out and rewritten. But the application’s specific database structure would be adapted into an extension to the acquirer’s own.
Examples that come to mind from the pre-relational era include: Read more
|Categories: Application software, Cullinet, McCormack & Dodge, MSA, Pre-relational era, SAP||1 Comment|
This post is part of a short series on the history of analytics, covering:
- Historical notes on analytics — the pre-computer era
- Historical notes on analytic terminology (this post)
- Historical notes on analytics — departmental adoption
Discussions of the history of analytic technology are complicated by the broad variety of product category names that have been used over the decades. So let me collect here in one place some notes on how (and when) various terms have been used, specifically:
- Management information systems
- Decision support (systems)
- Report writer
- Fourth-generation language
- Executive information system
- Business intelligence
- OLAP (OnLine Analytic Processing)
I blogged a little last year about the rewards and challenges of combining professional services and software in a mature company’s business model. My main example was Oracle. But other examples from Oracle’s history might have been equally instructive. For example:
- Oracle started out doing what amounted to custom development for government (military/intelligence) clients.
- Even when Oracle said it had productized its software, the stuff didn’t work very well without services to get it running.
- Oracle and Ingres both got a huge fraction of their early revenue* from deals to port their software to various brands of hardware.** That’s a lot like professional services.
- Oracle’s huge Tools Group grew out of professional services, if I have the story straight. Indeed, its first product was written by later long-time group chief Sohaib Abbasi when he was a consultant.
Something (I’ll drop in a link when allowed) made me recall the story of Software AG and the USSR. Apparently, the USSR attempted to acquire a lot of Western technology, including ADABAS. Software AG of North America cooperated with the Feds to try to catch the Soviet agent in indictable technological espionage — but then, with its usual flamboyance, ran ads bragging about the event. The writeup of all this I found when searching was some subsequent Congressional testimony.
This was all slightly before my time — I only entered the industry and met Software AG in 1981. So does anybody else out there recall more of the story than I do?
I started drafting this post along with others around the time of my parents’ deaths, then put it aside. However, I have been informed that my father’s old colleague Alton Doody has cancer himself, and if we are ever to get his input, it would be best to solicit it REALLY SOON. So I’m finishing this up now as best I can.
Here’s the part I know from my own memories as
- The son of a Management Horizons employee (namely my Dad).
- A software industry stock analyst (in particular, one who followed Informatics General).
My father moved to the Columbus area in 1973 to join Management Horizons, a consulting firm serving retailers. Management Horizons had its own spin-out already, a time-sharing company called Management Horizons Data Services (MHDS), with which it still shared a building on what is now Old Henderson Road in Upper Arlington. And, this being a world full of coincidences, MHDS is very on-topic for the primary focus of this blog (software industry history).
MHDS’ main business was a full suite of what we might now call ERP for distributors and/or retailers. That never amounted to much. But its secondary business was an electronic interchange for direct placement of orders, called Ordernet. Ordernet turned into Sterling Commerce, a > $1/2 billion company that has been acquired for >$1 billion more than once.
The chain of events, roughly, is: Read more
|Categories: Application software, Companies and products, Computer services, Pre-relational era||9 Comments|
Oracle pretty much doubled revenue every year until it got around the $1 billion level. Then things got tougher, industry-standard revenue recognition scandals not excepted. At one point there were only three buildings on the Oracle campus, with large portions of them eerily empty. But the ship righted itself, best exemplified by three transitions:
- Mature financial management arrived in the person of Jeff Henley.
- A serious commitment to product quality emerged, often credited to the late Bob Koii.
- Mike Fields* brought enterprise-class adult supervision to Oracle’s US field operations.
Political battles still raged at Oracle — Mike Fields vs. Craig Conway, Terry Garnett vs. Jerry Baker, and later on Mark Benioff vs. pretty much everybody. But the company was ready to move to next level. Read more
Roland Bouman reminded us on Twitter of an old post I did on another blog about Ingres history, the guts of which was:
Ingres and Oracle were developed around the same time, in rapidly-growing startup companies. Ingres generally was the better-featured product, moving a little earlier than Oracle into application development tools, distributed databases, etc., whereas Oracle seems to be ahead on the most important attributes, such as SQL compatibility — Oracle always used IBM’s suggested standard of SQL, while Ingres at first used the arguably superior Quel from the INGRES research project. Oracle eventually pulled ahead on superior/more aggressive sales and marketing.
Then in the 1990s, Ingres just missed the DBMS architecture boat. Oracle, Informix, Microsoft, and IBM all came out with completely new products, based respectively on Oracle + Rdb, Informix + a joint Ingres/Sequent research project, Sybase, and mainframe DB2. Ingres’s analogous effort basically floundered, in no small part because they made the pound-wise, penny-foolish decision to walk away from a joint venture research product they’d undertaken with innovative minicomputer vendor Sequent in the Portland, OR area.
Computer Associates bought Ingres in mid-1994, and immediately brought me in to do a detailed strategic evaluation. (Charles Wang telephoned the day the acquisition closed, in one of the more surprising phone calls I’ve ever gotten, but I digress … Anyhow, the relevant NDA agreements, legal and moral alike, have long since expired.) There was nothing terribly wrong with the product, but unfortunately there was nothing terribly right either. Aggressive investment — e.g., to get fully competitive in parallelism and object/relational functionality, the two biggest competitive differentiators in those days — would have been no guarantee of renewed market success.
Notwithstanding the economic question marks, CA surprised me with its enthusiasm for taking on these technical challenges. But another problem reared its head — almost all the core developers left the company. (If you weren’t willing to sign a noncompete agreement that was utterly ridiculous in those days, at least in the hot Northern California market, you couldn’t keep your job post-merger.) And so, like almost all CA acquisitions outside of the system management/security/data center areas, Ingres fell further and further behind the competition.
Some of the same information made it into my post here on Ingres history later the same year, but for some reason not all did.