Why enterprise software will never be the same

IDG News Service - It's a stretch to call 2011 a truly transformative year for enterprise software, given all the old warts that remain, from large-scale IT project failures to creaky legacy systems that will take years and great expense to replace with the latest-and-greatest.

But a series of significant events nonetheless took place, that will have a lasting impact on the industry in years to come. Here's a look at some of the biggest turning points.

SAP buys SuccessFactors, Oracle buys RightNow, both accept cloud reality

Collectively, SAP and Oracle spent nearly US$5 billion this year to acquire software vendors based in the cloud.

Each sought different types of technologies, with SAP's purchase of SuccessFactors boosting its human-resources software offerings as well as general cloud know-how, and Oracle's RightNow buy giving it an array of customer-support capabilities.

But the deals have a common thread, marking a sea change for the traditional on-premise software world, said analyst Ray Wang, CEO of Constellation Research. "[It] signals the realization that cloud deployment will be the predominant approach."

Oracle delivers Fusion Applications

It took a while, but Oracle finally managed to deliver the first wave of its next-generation Fusion Applications, and its launch strategy also showed how cloud computing has influenced the enterprise software market.

The company has taken pains to stress that Fusion Applications can be deployed in a highly modular fashion, with no need to remove existing systems, and at a time of customers' choosing. Users will also be able to run the software both on-premises and in cloud form, although some of the details of the latter remain to be made public.

Oracle's strategy is partly a nod to reality, since few customers will rush to rip and replace their core ERP (enterprise resource planning) systems with new software, and Oracle also wants to ensure early users are successful. But its message of easier, more flexible consumption for Fusion is straight from the cloud-vendor playbook.

Workday goes after large enterprises and succeeds

While its revenue is still small compared to the likes of Oracle and SAP, you had better believe that SaaS (software as a service) vendor Workday's continuing ability to land global agreements with companies such as Flextronics and Kimberly-Clark has prompted some chatter in Redwood Shores and Walldorf.

Workday announced the Kimberly-Clark deal in December. The consumer goods company is launching a global rollout of Workday's HCM (human capital management) software that will serve 57,000 workers.

While large companies have used SaaS in areas such as CRM (customer relationship management), human resources functionality lies closer to the core of ERP. It remains to be seen whether Workday manages to replace Oracle or SAP financials software with its own financials offering in large enterprises, but that's certainly its intent, as well as a threat to incumbents.