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The fact that your client is basically a browser means that you don’t have a bunch of fat clients to manage and synchronize and update and all that kind of stuff.

That basically allows you to bring a strategic capability to users at a highly disruptive cost. “Disruptive,” here being the classic definition of Clayton Christiansen in “Innovator’s Dilemma,” and seeing what’s next. He describes it as a “good enough solution at a significantly lower—if not almost free—cost.”

MB: Yes. What we’re doing is intended to eventually disrupt the typical development process of systems integrators building large-scale data warehousing systems and doing custom-designed data schemas and so forth.

Value-chain optimization

MM: In the spirit of value-chain optimization, the idea of giving tools—not just tools, but capabilities—to the people who understand the data and who can effect an operational or a tactical decision in real time as they run their business… can you provide a couple of forward-looking comments? Or what I call “future proofs,” in terms of how you see this rolling out or evolving over the next 2 or 3 years?

MB: Well, I can certainly tell you that the sophistication of these applications will be growing. I’d say over the last 10 years—certainly 6 or 7 years ago—there was a lot of talk about data mining systems, for example. But every data mining system I saw was a tool for an analyst to use.

I think this kind of advanced analytic technology is going to show up for the end users, and it’s going to be a feature of a product. It’s not going to be data mining. It’s going to show up in a way that’s meaningful to a business decision maker—as more data for them to look at and take action upon. It’s not going to be packaged as some sort of fancy data analysis tool.

I think that is certainly what our focus would be on—leveraging that kind of technology. Customers do want the capabilities that kind of technology can bring, but they don’t want it packaged for use just by data analysts.

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Transportation logistics at Welch’s

MM: In the case of Welch’s, you talked about what again?

MB: That one was transportation logistics. Trucking, basically. They have to ship their goods on trucks from their plants to their customers’ warehouses. It’s a somewhat complex world out there in trucking. You have some customers that handle customer pick-up and drive their own truck to your factory. Other times, you have to schedule and hire trucks from a variety of carriers that deliver your products to the market.

Optimizing shipments for consumer packaged goods companies, like Welch’s, can save a lot of money… A meaningful fraction of their revenue is spent on transportation costs. Companies can optimize that by assuring your trailers’ utilization is high, or by comparing accessorial charges which are the extra charges like fuel surcharges, costs for unloading of goods by the driver at customer locations, trailer storage, and so forth.

They can optimize these across carriers to see if any carrier’s charges are out of line by analyzing shipment patterns to see where load-leveling may be out of balance. By having carriers report actual time of delivery to your customers through a Web-based tool, you can analyze on-time delivery performance, and company to have the capabilities of larger competitors at a fraction of the cost through these SaaS Web-based solutions.

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Cycle times

MM: Isn’t another dimension of supply-chain theory or supply-chain strategy, cycle time and defect rate? How quickly things move through? And how many times I have a defect or a rework at various parts?

MB: Clearly a focus on product quality and rapid processes—manufacturing and replenishment cycle times—are foundational capabilities today. Companies often lack visibility, quality and cycle time metrics across the organization. These metrics are often not visible to senior management, suppliers, and other key stakeholders in a company. The data may be buried in a Manufacturing Execution System (MES) or an isolated system that tracks quality, perhaps even on a spreadsheet. One of our solutions targets quality and operations reporting, and it can make these metrics or dashboards visible to all interested parties.

Consider managing inventories across the extended supply chain—from suppliers, through one’s own supply chain through to your customers’ inventory levels. The largest players have developed sophisticated systems to have visibility of inventory across the channel or extended supply chain. The options for the mid-sized players are much more limited and often they have not been able to afford these systems. However, Web-based SaaS BI solutions, such as Oco’s offerings, now level the playing field and make these capabilities available to mid-sized companies.

MM: In your presentation at SaaScon, you had used an example of—I believe it was—Welch’s, as I recall?

MB: Yes. Welch’s is one of our customers.

MM: You were describing the notion of a vertical business intelligence and the notion of a horizontal business intelligence. Then you coined a new term called, “diagonal,” business intelligence. Could you just give us a quick reprise of vertical-horizontal and then the new neologism of “diagonal?”

Diagonal Business Intelligence

MB: Yes. Sure. This is the business school concept—vertical and horizontal markets.

A horizontal market is a solution designed for a specific business function or application area—such as a business intelligence software product. A horizontal market is one that can be used across industries (or across several industries).

MM: Databases. Web content management systems.

MB: That’s right.

In many cases, HR packages, for example. They’re not particularly industry-specialized. . They don’t have any inherent industry-specific requirements built into them.

Now, in many cases, in order to use them effectively, a company that purchases one of these packages has to build in or configure in that domain knowledge or best practices themselves.

MM: In fact, they really instantiate a database or tool with a digital business model. Or at least the logic of their business model.

MB: That’s right. And there is substantial cost involved in doing that. .

Vertical applications involve solutions that are really specialized to particular industries. In the retail industry, you might have size assortment planning for clothing. It’s absolutely specific. Not just for retailers, but for clothing retailers.

Or in the financial services area, a really good example is anti-money-laundering kinds of activities. These things are very specialized to a particular industry and add tremendous value. But the number of places that you can sell such a software product is a lot smaller than one of these horizontal solutions that you can sell across many industries.

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SaaS 2.0

MB: I want to come back to a point about SaaS deployment that is germane to where we were just going—which is security. Because once you go to these SaaS 2.0 kinds of applications, you are talking about your enterprise data being sent over to another provider that’s going to give you information services of some kind. You have to place a fair amount of trust in that party.

I’ll tell you an interesting thing. We—as a SaaS vendor, of course—want to be able to use our infrastructure in the most efficient and scalable way we can, in providing services to those customers. That allows us to add new customers at quite a low cost, and provide a higher quality of service to them.

A lot of customers have adopted the mentality of, “Well, okay. I’ll let you have my data, but you’d better give me my own private server.” It’s because they have this sense that it will be more secure somehow. In fact, I’ve been trying to convince people that, in fact, it is less secure.

I tell people at this point: “Why would you want have a private server if you’re interested in security?” You’re going to put it on a special separately handled box just for you instead of putting it on the proven secure infrastructure that we’re taking care of carefully for all our customers to make sure it’s secure every day.

MM: Mike, the other thing, too—if you’re dealing with regulated industry—whether it’s FDA or DOT or whatever… Dealing with regulated industries, as a SaaS provider, you have to meet such a high threshold in terms of transparency and IT governance –oftentimes, higher than the user organization has in its own IT operations.

MB: Yes. That’s right. This cuts both ways. If you’re a large enterprise, you might be very concerned about a SaaS company being able to live up to those kinds of security standards. If you’re a small enterprise or small business—an SMB business—a SaaS vendor, as an aggregator of responsibilities for data processing for multiple customers, is very likely to have a high-quality infrastructure. Higher than what an SMB company can afford to do.

There’s a SaaS vendor for the credit card fraud detection space, for example. It of course has built a system to meet the highest industry standards of credit card processing for data security and so forth. It said one of the great things is that other companies feel its solution is more secure than they themselves are.

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50,000 function points for what?

MM: I’d like to address one issue, there, Mike. As a CTO of a SaaS company, I’m sure you’ll have some things to say about this.

When I look at an enterprise application—whether it’s a supply-chain management system or ERP system—generally most of these enterprise applications have anywhere from 20,000 to 50,000 function points in them. Would you concur?

MB: Yes. Very large and complex systems.

MM: Very robust. Okay. Then when we look at the deployment of those systems, the core user of those systems barely uses 200 of the function points.

MB: Correct.

MM: Then if you look at what 95% of the value is that most users generate from that system, it boils down to maybe 20 to 50 function points.

MB: I would agree.

MM: If you’ve got 50,000 function points and 50 are delivering 95% of the value, what do you call the other 49,950 function points?

MB: Well, some of them are legacy — right? They’re there because of the way you got to what you’re selling today.

MM: What do you call it in economic terms?

MB: Low leverage. That’s what I’d call it.

MM: I would call it, “massive overhead.” Massive costs.

MB: Yes. But I wouldn’t even blame it on the function points, interestingly enough. To me, if you have a functional aspect of your system and it’s debugged and documented and so forth, then the cost of continuing to deliver that function in a new version of your product is not that high.

MM: But you know that when you come up with a new module or a new extension of it, oftentimes that’s the source of the bug. A previously well-behaved documented debugged piece of code all of a sudden becomes the errant citizen in the new release.

MB: Well, I would say that that’s true because of the…

MM: Bad architecture?

No. Not necessarily even because of bad architecture. One of the reasons I work in a SaaS company is because I could no longer see a need for multi-platform packaged software any more.

MM: Exactly.

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Game changer

MM: SaaS represents another development—almost a second or third wave development of the Web. The idea then is that you don’t have to install software or train a whole IT service management staff for managing and provisioning a service. But you can simply go to a provider such as Oco to get a capability that might’ve cost 5 or 10 million dollars for a hundredth or thousandth of that.

MB: Yes. It really changes the game tremendously. There’s been a lot of argument over, “What really is SaaS?” People have various definitions of it—some broader and some narrower. My definition of it is pretty simple.

SaaS is a service you utilize instead of buying software. It’s defined by what you don’t have to do. You don’t have to buy, learn, modify, install, and maintain software.

MM: I think that the analysts have all kind of gotten together and shared some basic definitions of SaaS V1 or 1.0—which was a point solution that wasn’t really set up to interoperate. It might pass data, but it wasn’t really set up to interoperate with other SaaS applications or installed on-premise applications.

MB: I think people talk about the SaaS 1.0 versus the future of SaaS. It’s true that the first wave of SaaS introduced applications like Salesforce.com. Some people would even put applications like Webex into that category. I don’t. The alternative to using Webex is not buying a software package. The alternative to using Webex is getting on an airplane to go give a customer presentation.

MM: I think the Go To Meeting Citrix people would probably argue with that, but that’s okay.

MB: I mean the alternative to these online demo and meeting systems — Webex or the other services like it—is if you don’t want to use one of those, you can’t buy a package that solves the bridging problem between you and whomever you need to give a demo to. I suppose you could host such a thing on your own corporate website, but I don’t recall many people doing that in the days before Webex.

In any case, the point is that these applications didn’t involve integration. We have moved into an era you can call SaaS 2.0, if you want, where the applications are starting to involve the core activities or functions that businesses do, such as business intelligence or ERP and so forth.

So yes, there certainly is a qualitative shift, there. But some of the industry people who I have some disagreement with would say, “It’s not SaaS if you can’t download it yourself,” or, “It’s not SaaS if it doesn’t have self-installation and free trial.”

They basically are narrowing the definition in ways that I don’t believe are required. As far as I’m concerned, if an alternative to a solution requires that you have to buy software and install and maintain it, then it fits the category of SaaS.

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Webification of BI

MM: Then in history of business intelligence, the Web came along—and some things began to change. Could you quickly reprise us in terms of what changed how as a function of the Web, in the space of business intelligence?

MB: The Web changes everything. The Web changes some things directly and some things indirectly. One of the interesting forces in the database world and the data processing world is that the Web introduced a whole new realm of data to be handled.

The whole world of e-commerce introduced a need to understand e-commerce marketing, and to understand click-streams and how people were using the Internet and so forth. That created a number of new opportunities for people to try to process and understand the wealth of data, and to understand the customer behavior.

The companies that successfully handled Internet advertising have become the masters of this—Google and so forth. That’s the way that the Internet raised the stakes on this kind of marketing.

There’s also the absolutely direct benefit that the Web introduced—a new way to get information to people—in a way that is really much more appealing.

You’re able to get rid of many of the hassles and costs associated with software installation, if you can just give people a website to visit to get the information they’re looking for. People really like this model. It has all of the graphical capabilities that they’ve become accustomed to with their Office and installed desktop software.

That is an immediate thing that people latch on to: “Can’t I just have this on a web page, please?” Of course there is no reason that they can’t. There are a lot of companies like Oco making that happen now.

The Web also changes the way that the service, the calculations, and the data preparation can all be handled. Now, and throughout the history of data warehousing—going back to the mid-’90s, there was an awful lot of outsourced data warehousing. Lots of companies outsourced their data warehousing to big companies like Acxiom that specialized in data warehouse hosting, particularly for target marketing and related applications.

The Internet basically makes this idea a lot more attractive to companies—and in particular, attractive to companies with smaller budgets. It’s not just the big companies that can consider leveraging database and business intelligence technology, but in fact, everybody now can.

People are reluctant in some cases, because they fear, “Oh, gee, my precious data is going outside of my firewall.” But once people are satisfied that their data’s going to be handled securely, there are tremendous advantages.

One data-warehousing consultant I know said it pretty well, “All companies outsource the way their money is handled. That’s certainly precious to them. Why not data?”

MM: I think it’s because there’s a career track associated with it.

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Professional background

MM: Let’s start with an introduction.

MB: My name is Mike Beckerle. Let me explain a little bit about my background. I joined in January of 2008. As the CTO, I’m responsible for product development of new products and technologies and the strategic direction for existing products.

I joined Oco from IBM, where I was involved in large-scale computing. The core of my experience comes from spending much of my career in developing large-scale parallel processing for commercial data processing workloads. The result of this work is now the core part of the IBM information server product. I was responsible for much of the scalability of that product.

I joined Oco because it was a very good fit with my background, and my experience is very relevant to Oco’s strategic direction. For example, during the dot-com era, I was involved in “SaaS,” at a startup called Fact City, although it wasn’t called that at the time. We did something that was fundamentally SaaS and quite similar to Oco’s solution in taking data in disparate forms and using it to construct a high-volume Web-accessed data service.

I decided that putting scalable commercial data processing and SaaS together would provide a great value proposition for the marketplace. I was thinking about launching this type of solution, and discovered that there was already a company doing it — Oco.