David on IT Outsourcing in China: [news] "2004 State of Application Development"

Friday, August 13, 2004

Dateline: China

Special issues of journals and magazines are often quite good -- if you're into the subject matter. But the current issue of VARBusiness is absolutely SUPERB!! EVERY SYSTEMS INTEGRATOR SHOULD READ IT ASAP -- STOP WHAT YOU'RE DOING AND READ THIS ISSUE!! (Or, at the very least, read the excerpts which follow.) See http://tinyurl.com/6smzu . They even have the survey results to 36 questions ranging from change in project scope to preferred verticals. In this posting, I'm going to comment on excerpts from this issue. My comments are in blue. Bolded excerpted items are MY emphasis.

The lead article and cover story is titled, "The App-Dev Revolution." "Of the solution providers we surveyed, 72 percent say they currently develop custom applications or tailor packaged software for their customers. Nearly half (45 percent) of their 2003 revenues came from these app-dev projects, and nearly two-thirds of them expect the app-dev portion of total revenue to increase during the next 12 months." I view this as good news for China's SIs; from what I've observed, many SIs in China would be a good fit for SIs in the U.S. looking for partners to help lower their development costs. "By necessity, today's solution providers are becoming nimbler in the software work they do, designing and developing targeted projects like those that solve regulatory compliance demands, such as HIPAA, or crafting wireless applications that let doctors and nurses stay connected while they roam hospital halls." Have a niche; don't try to be everything to everyone. "Nine in 10 of survey respondents said their average app-dev projects are completed in less than a year now, with the smallest companies (those with less than $1 million in revenue) finishing up in the quickest time, three months, on average." Need for speed. "The need to get the job done faster for quick ROI might explain the growing popularity of Microsoft's .Net framework and tools. In our survey, 53 percent of VARs said they had developed a .Net application in the past 12 months, and 66 percent of them expect to do so in the coming 12 months." My Microsoft build-to-their-stack strategy. "Some of the hottest project areas they report this year include application integration, which 69 percent of VARs with between $10 million or more in revenue pinned as their busiest area. Other top development projects center around e-commerce applications, CRM, business-intelligence solutions, enterprisewide portals and ERP, ..." How many times have I said this?

"At the same time, VARs in significant numbers are tapping open-source tools and exploiting Web services and XML to help cut down on expensive software-integration work; in effect, acknowledging that application development needs to be more cost-conscious and, thus, take advantage of open standards and reusable components. Our survey found that 32 percent of VARs had developed applications on Linux in the past six months, while 46 percent of them said they plan to do so in the next six months. The other open-source technologies they are using today run the gamut from databases and development tools to application servers." I guess there's really an open source strategy. I come down hard on open source for one simple reason: I believe that SIs in China could get more sub-contracting business from a build-to-a-stack strategy. And building to the open source stack isn't building to a stack at all!! "As a business, it has many points of entry and areas of specialization. Our survey participants first arrived in the world of app dev in a variety of ways, from bidding on app-dev projects (45 percent) to partnering with more experienced developers and VARs (28 percent) to hiring more development personnel (31 percent)." For SIs in China, simply responding to end-user RFQs is kind of silly. Better to partner on a sub-contracting basis. "According to our State of Application Development survey, health care (36 percent), retail (31 percent) and manufacturing (30 percent) ranked as the most popular vertical industries for which respondents are building custom applications. Broken down further, among VARs with less than $1 million in total sales, retail scored highest, while health care topped the list of midrange to large solution providers." Because of regulatory issues, I'm not so keen on health care. I'd go with manufacturing followed by retail. My $ .02. "When it comes to partnering with the major platform vendors, Microsoft comes out the hands-on winner among ISVs and other development shops. A whopping 76 percent of developers in our survey favored the Microsoft camp. Their level of devotion was evenly divided among small, midsize and large VARs who partner with Microsoft to develop and deliver their application solutions. By contrast, the next closest vendor is IBM, with whom one in four VARs said they partner. Perhaps unsurprisingly, the IBM percentages were higher among the large VAR category (those with sales of $10 million or more), with 42 percent of their partners coming from that corporate demographic. Only 16 percent of smaller VARs partner with IBM, according to the survey. The same goes for Oracle: One-quarter of survey respondents reported partnering with the Redwood Shores, Calif.-based company, with 47 percent of them falling in the large VAR category. On the deployment side, half of the developers surveyed picked Windows Server 2003/.Net as the primary platform to deliver their applications, while IBM's WebSphere application server was the choice for 7 percent of respondents. BEA's WebLogic grabbed 4 percent, and Oracle's 9i application server 3 percent of those VARs who said they use these app servers as their primary deployment vehicle." Microsoft, Microsoft, Microsoft. Need I say more? See http://tinyurl.com/45z94 .

The next article is on open source. "Want a world-class database with all the bells and whistles for a fraction of what IBM or Oracle want? There's MySQL. How about a compelling alternative to WebSphere or WebLogic? Think JBoss. These are, obviously, the best-known examples of the second generation of open-source software companies following in the footsteps of Apache, Linux and other software initiatives, but there are far more alternatives than these. Consider Zope, a content-management system downloaded tens of thousands of times per month free of charge, according to Zope CEO Rob Page. Some believe Zope and applications built with Zope are better than the commercial alternative they threaten to put out of business, Documentum. Zope is also often used to help build additional open-source applications. One such example is Plone, an open-source information-management system. What began as a fledgling movement at the end of the past decade and later became known as building around the "LAMP stack" (LAMP is an acronym that stands for Linux, Apache, MySQL and PHP or Perl) has exploded to virtually all categories of software. That includes security, where SpamAssassin is battling spam and Symantec, too. Popular? Well, it has now become an Apache Software Foundation official project. The use of open source is so widespread that the percentage of solution providers who say they partner with MySQL nearly equals the percentage who say they partner with Oracle"23 percent to 25 percent, respectively." There are plenty of choices for those SIs willing to play the open source game. See http://tinyurl.com/4e3c7 .

"It's all about integration" follows. "There are many reasons for the surge in application-development projects (the recent slowdown in software spending notwithstanding). For one, many projects that were put on hold when the downturn hit a few years ago are now back in play. That includes enterprise-portal projects, supply-chain automation efforts, various e-commerce endeavors and the integration of disparate business systems." Choose carefully, however. Balance this data with other data. Right now, I see a lot more play with portals and EAI. "Indeed, the need for quality and timely information is a key driver of investments in application-integration initiatives and the implementation of database and business-intelligence software and portals. A healthy majority of solution providers say application integration is a key component of the IT solutions they are deploying for customers. According to our application-development survey, 60 percent say their projects involved integrating disparate applications and systems during the past 12 months." "Some customers are moving beyond enterprise-application integration to more standards-based services-oriented architectures (SOAs). SOAs are a key building block that CIOs are looking to build across their enterprises." Anyone who regularly reads any one of my three IT-related blogs knows that I'm gung-ho on SOAs. "Even if your customers are not looking for an SOA, integrating different systems is clearly the order of the day. To wit, even those partners that say enterprise portals or e-business applications account for the bulk of their business note that the integration component is key." Yes, integration, integration, integration. I'll be saying this next year, too. And the year after ... "Another way to stay on top of the competition is to participate in beta programs." Absolutely true -- and a good strategy, too. See http://tinyurl.com/6x2gg .

The next article is on utility computing versus packaged software. Again, if you read what I write, you know that I'm also gung-ho on utility computing. "According to VARBusiness' survey of application developers, more than 66 percent of the applications created currently reside with the customer, while 22 percent of applications deployed are hosted by the VAR. And a little more than 12 percent of applications developed are being hosted by a third party. Where services have made their biggest inroads as an alternative to software is in applications that help companies manage their customer and sales information." The article goes on to state that apps that are not mission-critical have the best chance in the utility computing space. Time will tell. Take note, however, that these are often the apps that will most likely be outsourced to partners in China. "Simply creating services from scratch and then shopping them around isn't the only way to break into this area. NewView Consulting is expanding its services business by starting with the client and working backward. The Porter, Ind.-based security consultant takes whatever technology clients have and develops services for them based on need." And focus on services businesses and .NET, too. "Most application developers agree that services revenue will continue to climb for the next year or two before they plateau, resulting in a 50-50 or 60-40 services-to-software mix for the typical developer. The reason for this is that while applications such as CRM are ideally suited to services-based delivery, there are still plenty of other applications that companies would prefer to keep in-house and that are often dependent on the whims of a particular company." Still, such a split shows a phenomenal rise in the importance of utility computing offerings. See http://tinyurl.com/54blv .

Next up: Microsoft wants you!! (Replace the image of Uncle Sam with the image of Bill Gates!!) Actually, the article isn't specifically about Microsoft. "Microsoft is rounding up as many partners as it can and is bolstering them with support to increase software sales. The attitude is: Here's our platform; go write and prosper. IBM's strategy, meanwhile, is strikingly different. While it, too, has created relationships with tens of thousands of ISVs over recent years, IBM prefers to handpick a relatively select group, numbering approximately 1,000, and develop a hand-holding sales and marketing approach with them in a follow-through, go-to-market strategy." Both are viable strategies, but NOT both at the same time!! "To be sure, the results of VARBusiness' 2004 State of Application Development survey indicates that Microsoft's strategy makes it the No. 1 go-to platform vendor among the 472 application developers participating in the survey. In fact, more than seven out of 10 (76 percent) said they were partnering with Microsoft to deliver custom applications for their clients. That number is nearly three times the percentage of application developers (26 percent) who said they were working with IBM ..." Percentages as follows: Microsoft, 76%; IBM, 26%; Oracle, 25%; MySQL, 23%; Red Hat, 17%; Sun, 16%; Novell, 11%; BEA, 9%. I said BOTH, NOT ALL. Think Microsoft and IBM. However, a Java strategy could be BOTH a Sun AND IBM strategy (and even a BEA strategy). See http://tinyurl.com/68grf .

There was another article I liked called, "How to Team With A Vendor," although it's not part of the app-dev special section per se. This posting is too long, so I'll either save it for later or now note that it has been urled. See http://www.furl.net/item.jsp?id=680282 . Also a kind of funny article on turning an Xbox into a Linux PC. See http://tinyurl.com/4mhn6 . See also http://www.xbox-linux.org .

Quick note: I'll be in SH and HZ most of next week, so I may not publish again until the week of the 23rd.

Cheers,

David Scott Lewis

President & Principal Analyst

IT E-Strategies, Inc.

Menlo Park, CA & Qingdao, China

e-mail: click on http://tinyurl.com/6xeue

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