Software Trends Update
November 13, 2007
Kris Tuttle, Director of Research
Dennis Byron, Senior Analyst

Agenda
• Web 20 performance update and changes
• Key technology themes
• A closer look at SaaS, Open Source and SOA
• Impact on major software suppliers
• Stock commentary
• Q&A

Research 2.0 Introduction
• Initiated new coverage in April of 2005.
• Added first employee July of 2006.
• Expanded operations May-August 2007.
• Exceeded 400 subscription clients in Sept.
• Adding advisory services November 2007.
• Several new coverage categories in beta.

Experience Bias
Micro-computing (Pre-80’s and IBM)
Artificial Intelligence (Carnegie-Mellon and IBM)
Software (Carnegie-Mellon and IBM)
Equity Sales and Finance (S.G. Warburg)
Business (IBM, NYU)
Software Stocks (SoundView)
Research (Research 2.0)
Private Investor/Advisor (Good Data Corporation, Rathpeacon Management LLC, alfabetmeta-
modeling AG, Cape Clear Software, Azure Ventures)

Web 20 Performance

Web 20 Update
• New Changes
– Added Cisco and Trimble
• WebEx and Navteq acquired
– Added Citrix and Research in Motion
• WebSense and SanDisk removed
• More groups coming:
– Existing: Cloud, SaaS, BI, Binding Problem
– New: BioIT, ResourceTech

Web 20 Outlook
• Google and Apple won’t own the world.
– Lack of feature/function and support.
– Most mashups today are only prototyping.
• Microsoft better positioned than most think.
– 99% of existing commercial base won’t move.
– More integration and refreshed product pipeline.
• Virtualization marks a change in architecture.
– VMware leads now but like Veritas, BEA, Sybase.
– Less appreciated may be Citrix, Equinix, Akamai.
– Still-private players like PlateSpin fill important gaps.
– Large players like IBM, Microsoft and Oracle have deep
resources and product plans.

Investors and “killer applications”
• History:
– mainframes, personal computers, mini-computers, networking
– relational database, BI 1.0
– 32-bit Windows
– IT services
• Almost:
– object-oriented programming (Rational, IONA, Nextstep)
– EAI, Y2K
– Application servers (BEA), Web 1.0 (Netscape, Yahoo)
• Today:
– Disruptive technologies and forces have contributed to a
recognition that “cloud computing” is the right model.

Cloud Software Architecture
• Bind and be bound - discoverable, arbitrary
• Call or be called - no hierarchy
• Transparency - clear functions and methods
• Context aware - maximum advantage
• Sub-second response time - adoption
Underlying infrastructure changes often require new
architectures and pave the way for new tools, services
and content.

New Opportunities
• Cloud Computing
– Virtualization
– Binding Problem
– Data/BI
– Open Source
– Hosted Services/Content Delivery
– Processing/Network Convergence
• Enterprise Software Trends
– Software as a Service (SaaS)
– Service-oriented Architecture (SOA)
– Open Source Software (OSS)

Looking at SaaS, OSS and SOA.
• Trends as a construction metaphor:
– SaaS: one way to sell the building
– OSS: one type of construction supply
– SOA: one form of blueprint
• Not interdependent but highly interrelated.
• Also related to other trends like virtualization.

SOA, SaaS and OSS revenue forecasts
New
Perpetual-
Perpetual
License-
License
based
Upgrades/
Business
Add-ons
OSS Subscriptions
SaaS (including
rentals, monetization
Into advertising)
Other Maintenance
10% of license revenue flow to have OSS software built in

Software Fundamentals Still Matter
• Functionality
• Value proposition vis-à-vis SOA, OSS and
SaaS
• Audience (IT, departmental, C-level)
• Channel
• What will disrupt them?
– Current market structure
– Leaders, shares
• Positioning vs. each other, Amazon, etc.

How the majors interrelate
Supplier Analysis L-T Implication
value > sum of parts Can “own” business market
Microsoft
No longer a technology Doesn’t compare
IBM play
Likely to settle in a a Think of Intel, Cisco,
Oracle technology provider Adobe
Spread too thin Acquisition highly likely
SAP unless nixed by EU
Still one-trick pony but Can “own” consumer
Google damn great trick market

Reactions to SOA
Supplier Analysis L-T Implication
Not a message but Not relevant to L-T strategy
Microsoft technically savvy
Key software group story Doesn’t compare
IBM not aimed at IT
New guy will drive Fusion With DB, could be leading
Oracle to services SOA enabler
Needs a much better 1000 third-party services =
SAP channel strategy a new game
Not a message but Not relevant to L-T strategy
Google technically savvy

Reactions to OSS
Supplier Analysis L-T Implication
Joined the choir… …muting the choir’s
Microsoft volume
Already an OSS leader …doesn’t compare against
IBM but… the others.
Nibbling around the Will embrace when they
Oracle edges have to
Nibbling around the Not relevant to strategy
SAP edges
An effective PR message Not relevant to strategy
Google vs. Microsoft
Have a clear objective Looking to be the pure play
Red Hat since 11/7/2007 and market leader

Reactions to SaaS
Supplier Analysis L-T Implication
Tied to channel rebuilding Move to business services
Microsoft
Not relevant to strategy Doesn’t compare
IBM
Struggling and distracted Doesn’t matter (except for
Oracle NetSuite?)
Only way to meet user- If successful, SAP could be
SAP count objectives an acquiror
Revenue? Everything and nothing
Google (KT)
Hard to get beyond CRM To be acquired or to?
Salesforce

Conclusions
• Infrastructure retooling and new applications will continue to be
a major growth area in technology.
– Cloud Computing architectures.
– SaaS, OSS and SOA are elements.
– Enterprise needs addressed slowly.
• Some names are underappreciated.
– Microsoft: Far better positioned than investors realize.
– Akamai: Unique content distribution ability, price fears aside.
– Citrix: has virtualization angle like VMW without the valuation.
– EMC: Storage is crticial. Along with S/W portfolio will get acquired.
– Brocade: While servers get consolidated SAN usage accelerates.

Resources & Questions
Kris Tuttle (kris@research2zero.com)
Dennis Byron (dennis.byron@resarch2zero.com)
www.research2zero.com
www.research2zero.com/blog