The news comes two months after SAP, Oracle’s chief rival in enterprise applications, snapped up SuccessFactors, a SaaS-based talent management (aka human resources management) company just down the road from Oracle’ s Redwood Shores, Calif. headquarters, for $3.4 billion. At that time, many wondered why Oracle hadn’t struck first.

Both Taleo and SuccessFactors deals are further proof that these legacy enterprise software players see the need to beef up both their cloud credentials and their vertical industry focus. The SaaS market is booming but the biggest opportunity is seen in applications that attack vertical niches and for which vendors can charge a price premium. (Taleo just reported a loss for its fourth quarter.)

Karl Ederle, Taleo’s VP of product strategies told me a few months ago that many big retailers, including A.C. Moore, use Taleo to scale up hiring for the holiday buying season, but the service handles the full range of recruiting, hiring,  and retaining employees. It is configurable for both salaried and hourly employees. One retailer used data Taleo had collected about hiring and its screening service to cut the hiring process down from eight to nine interviews per hire to less than three.

According to Oracle’s statement, the Oracle-Taleo  combo expect:

…to create a comprehensive cloud offering for organizations to manage their Human Resource operations and employee careers. The combination is expected to empower employees and managers to effectively manage careers throughout their entire employment, enable organizations to retain talent and optimize costs, and improve the employee experience through faster on boarding and better collaboration with team members via social media.

While Oracle CEO Larry Ellison has talked a big game — especially since Oracle OpenWorld last fall — about the public cloud, the company is seen lagging here. But Taleo does bring new customers and more of a SaaS focus in general to the company, which bought RightNow late last year for its SaaS-based CRM for mid-sized companies.

Photo courtesy of Flickr user Oracle_Photos_Screenshots

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Now the two companies are arch-rivals and are engaged in an increasingly bitter, seemingly personal battle, the latest skirmish of which saw a California Superior Court judge throw out a fraud claim Oracle lodged against HP. He also opened up court documents that don’t show either company in a particularly good light.

How did it all go so bad?

First, Oracle bought Sun for $7.4 billion in a deal completed in January 2010. That meant Oracle, for the first time was in the hardware business and its servers would compete with HP servers. That sealed the fate of the relationship going forward.

The public bad feeling erupted in August 2010 when HP canned Hurd as CEO, then hired former Oracle president Ray Lane (pictured above right) as chairman and Leo Apotheker, former CEO of SAP, as CEO. SAP is a huge rival to Oracle in enterprise apps and Lane left Oracle after a bumping heads with Oracle chairman Larry Ellison (pictured at right.) Things have just deteriorated ever since.

Here are some highlights (low lights) of the slap fight.

In a letter to the New York Times in August 2010, Ellison took aim at HP’s firing of Hurd:

The H.P. board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago … That decision nearly destroyed Apple and would have if Steve hadn’t come back and saved them.

This is a shameless attempt to force customers to spend a lot of money to move to a platform over time that gives customers no benefits  … Oracle made this decision to slow Sun SPARC market losses.

Ray Lane calls out Hurd in his letter to The New York Times in October, 2010.

The bottom line is: Mr. Hurd violated the trust of the Board by repeatedly lying to them in the course of an investigation into his conduct. He violated numerous elements of HP’s Standards of Business Conduct and he demonstrated a serious lack of integrity and judgment

After Apotheker announced HP plans to buy Autonomy — another enterprise software company — for $11.7 billion in August, Oracle couldn’t contain itself.

In a statement on September 28, 2011, Oracle said Autonomy had shopped itself to Oracle first and Oracle turned it down. When Autonomy CEO Mike Lynch denied that, Oracle said: “Either Mr. Lynch has a very poor memory or he’s lying.”

When there was further denial, Oracle put out another statement entitled “Another whopper from Autonomy CEO Mike Lynch” and helpfully published the PowerPoint slides it said he and banker Frank Quattrone brought to the meeting.  The presentation is here and here.

According to the statement:

Ably assisting Mike Lynch’s attempt to sell Autonomy to Oracle was Silicon Valley’s most famous shopper/seller of companies, the legendary investment banker Frank Quattrone.  After the sales pitch was over, Oracle refused to make an offer because Autonomy’s current market value of $6 billion was way too high.

The next chapter in this saga may be a trial on HP’s remaining claims against Oracle which should kick off in April, but stay tuned: anything can happen and usually does.

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To hear IBM and Microsoft tell it, their respective cloud strategies are coming up rosy. But given the lack of real numbers, it’s hard to tell if that’s the case. These two incumbent tech giants, which both hosted earnings calls last week, are under the microscope as they navigate the transition from client-server computing to the cloud services model pioneered by younger competitors like Amazon and Google.

IBM first. Last week, speaking on IBM’s fourth quarter and 2011 fiscal year earnings call, CFO Mark Loughridge  said the company tripled its cloud revenue year over year. That’s impressive as far as it goes — which isn’t very far. What IBM means by “cloud” remains murky, and no actual dollar amount was attached to this claim. (A transcript of the call is here.)

An IBM spokesman said the cloud number counts revenue related to the work it does building private clouds for customers, including software and hardware; delivering public cloud services (Smart Cloud Enterprise); and industry-specific cloud services (Smarter Commerce). Beyond that, the company doesn’t break cloud revenue out.

Here’s what IBM has said about cloud: Last March, IBM’s then-CEO Sam Palmisano said the company expects to log $7 billion in Software-as-a-Service (SaaS) related revenue by 2015.  Then in November, IBM Software SVP Steve Mills told InformationWeek that his unit was making “hundreds of millions of dollars” in SaaS revenue. (Such SaaS revenue is one indicator of a company’s cloud business.) As InformationWeek’s John Foley pointed out, while that figure was fuzzy, at least it was something. He wrote:

Until now, IBM hasn’t shared any numbers on its cloud computing revenues, other than to provide a forecast of where it hopes to arrive: $7 billion by 2015. Where that number stands right now has been anyone’s guess.

IBM has come up with internal metrics to count “cloud computing” sales from all the various hardware, software and services units, Mills said. But it has not shared those metrics with anyone outside Armonk. On its call last week, IBM added no more clarity around its cloud revenue figures or where cloud revenue actually comes from.

Microsoft cloud metrics also fuzzy

Microsoft executives offered vaguely encouraging comments on the state of its cloud business on the company’s second quarter earnings call on Thursday.

Office 365, Microsoft’s hosted Office and SharePoint offering, is leading the charge. On the call, CFO Peter Klein cited more than 100,000 Microsoft online services customers as an example of Microsoft’s cloud traction, but since Microsoft said there were 100,000 customers when Office 365 launched last June, this does not seem such a big deal. If there has been big momentum there in the past six months, this would have been a good time to say so. (A transcript of the call can be found here.)

Klein also touted double-digit revenue growth in the company’s business applications group, but that’s a big bucket. It includes on-premises Office and  SharePoint as well as their SaaS counterparts, so it’s unclear how much of that growth can be attributed to cloud. Similarly, Azure is lumped into Microsoft’s overall server and tools group, which saw an overall 11 percent growth year-over-year but which also includes the company’s bustling SQL Server, Systems Center, and Windows Server businesses.

To be sure, Microsoft remains in investment mode with Azure; very few of Microsoft’s own products run on Azure as of yet, but the goal is for them all to be hosted on the Azure platform at some point in the future. The question is when.

To be fair to these incumbents, not every customer wants to put all its work in the cloud, so vendors like Microsoft that offer a deployment choice have a leg up there. But it’s clear that cloud deployment is the fast-moving train.

Cloud or smoke-and-mirrors?

IBM and Microsoft are hardly alone in this tough transition. SAP and Oracle, the top-two powers in enterprise software, are similarly focused on moving to cloud without dinging their existing on-premises software businesses. They’re doing this both through acquisition — SAP recently bought SuccessFactors and Oracle most recently bought RightNow —  and internal development.

Just how well IBM, Microsoft and other legacy tech giants do transitioning from an on-premises software business to a cloud model or balancing the two — will not only determine how they fare against cloud companies like Salesforce.com, NetSuite, Workday, and Google, but how well they’ll do in general as more technology purchases shift to an on-demand model.

Photo courtesy of Flickr user peggyhr

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SAP is the leader in enterprise resource planning (ERP): the software brains behind most companies’ inventory and accounting systems. But in the tough transition from client-server to cloud computing, SAP lost its way. It launched a subscription-based Business ByDesign ERP offering in 2007, boldly predicting it would attract 10,000 customers and contribute €1 billion in revenue by 2010. It came in just a little bit short — only 100 companies signed up.

Since then, SAP re-launched Business ByDesign and set a target of 1,000 customers for this year. Last fall, it said it was on its way to that goal.  Last month, it ponied up $3.4 billion to buy SuccessFactors, which offers SaaS-based human resources capabilities. That purchase came just weeks after SAP co-CEOs Jim Hagemann Snabe and Bill McDermott (pictured) pledged to push SAP into new markets – by acquisition if need be.

SAP’s preliminary numbers were pretty flashy, especially coming after Oracle announced disappointing earnings. For its fourth quarter ending Dec. 31, SAP software revenue rose 16 percent to €1.74 billion ($2.2 billion USD) compared to €1.51 billion for the year-ago period. Its full-year software revenue was up 22 percent to €3.97 billion from €3.27 billion for the 2010 fiscal year.

But, cloud-related revenue makes up a tiny portion of those earnings, by all accounts. Subscription revenue — one measure of cloudy SaaS implementations — accounts for about €120 million out of  the company’s overall revenue of €14.2 billion, according to Ray Wang, principal analyst of Constellation Research. But he and others expect that mix to change.

There were some positive signs outside of SAP’s legacy ERP business.  SAP’s HANA in-memory database and analytics appliance, available since July, outperformed expectations. The company expected €100 million from HANA this year, but the actual number will be about €160 million. The company also said the €100 million it reaped from mobile solutions came in over target. Those mobile solutions derive from SAP’s $5.8 billion buyout of Sybase two years ago.

In its cloud efforts, SAP is obviously focused on Oracle, its chief rival for enterprise software dollars, but Oracle is only one piece of the competitive puzzle. Perhaps a bigger issue are the new-age cloud companies that are also attacking enterprise applications, like NetSuite which offers cloud-based ERP applications. And Workday, the brainchild of PeopleSoft founder David Duffield, which offers a range of SaaS-based human resources capabilities. These companies, unlike SAP, don’t have to worry about cannibalizing an on-premises software business.

Workday, which is reportedly eyeing an IPO, isn’t some small-but-feisty startup. In October, it snagged $85 million in new VC funding, bringing total capital raised to an impressive $250 million, according to All Things D.

In other words, while the latest numbers look rosy for SAP, the company still has to navigate this tricky mix of on-premises and cloud-based services and outmaneuver both legacy and new-look competitors before it can put its cloud mis-steps behind it.

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A cadre of tech companies led by IBM, and including CA Technologies, Cisco, Citrix, EMC, NetApp, Red Hat, and SAP  – is throwing its weight behind a proposed standard to ensure applications can move between clouds.

The group, under the auspices of the venerable OASIS standards body (responsible for such standards as WS-Security and the OpenDocument Format), takes aim at one of the chief concerns enterprises have about cloud computing: a fear that a given cloud is like a roach motel in that they can check their apps in, but checking them out may be a whole other matter.

The proposed Topology and Orchestration Specification for Cloud Applications (or TOSCA) promises a sort of cloud nirvana: the ability to move applications across private and public clouds that use different vendor technologies without worrying about upsetting security and compliance safeguards they’ve already taken.

While legacy IT vendors are well represented on TOSCA, it’s interesting to see who’s not there — Amazon, Rackspace and Microsoft — for example. Amazon and Rackspace are the two largest cloud Infrastructure-as-a-Service players and Microsoft has poured resources into its Azure platform as a service. Oracle, another major legacy IT player that’s trying to transition into the cloud, is also missing from the list.

“The first thing to note is the players. The tech companies that were truly innovative in delivering cloud computing services aren’t here,” said Carl Brooks, cloud analyst for Tier1 Research, a division of 451 Research. “That’s telling because it shows that this kind of interoperability effort isn’t about actually meeting customer demand, it’s about positioning and making a statement.”

Brooks added, that application portability is nevertheless a worthy goal, and one that most companies will require.

Paul Lipton, the CA VP who co-chairs the TOSCA Committee, said legacy IT players have a lot of experience dealing with interoperability issues but that all companies are welcome to participate in the effort. As for Amazon’s MIA status? “You’d have to ask Amazon why they’re not here,” he said.

IDC analyst Mary Johnston Turner said application portability is critical, and this group is starting to address it. “A lot of what goes on now with cloud is really siloed: an app here, an app there. We all talk about the hybrid cloud, but without application portability it won’t happen because it’s really hard to actually move workloads around.”

The presence of these legacy enterprise players in TOSCA is important, she said, because these companies support many core, mission-critical production systems and at least they are on the same page about this effort.

It’s smart for this group to focus their collective energy on the cloud application portability problem. Users increasingly expect, and will inevitably demand their applications run on whatever cloud they want. Still, unless and until some of the major, newer cloud powers sign on, it’s unclear what traction TOSCA will get.

Photo courtesy of Flickr user theaucitron

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The value of companies in the HCM (aka human resources management) space is clearly on the rise. Two weeks ago, SAP bulked up its own HCM stable with the acquisition of SuccessFactors for a whopping $3.4 billion in cash.

John Wookey, a respected industry veteran, will lead the new Salesforce.com business unit. Wookey led Oracle’s tricky effort to stitch together its applications strategy after Oracle acquired PeopleSoft, Siebel Systems and other enterprise software companies. After Oracle, Wookey joined SAP where he directed the ERP giant’s SaaS push. Wookey joined Salesforce.com  in November, six months after leaving SAP.

Rypple’s Software-as-a-Service offering aims to help teams work better together and help management better recruit and train employees, help  them set goals and recognize their contributions.

Salesforce.com CEO Marc Benioff has not been coy about his desire to fill in any and all gaps in Salesforce.com’s business services offerings. The company, which started out offering CRM and sales force automation capabilities, has expanded into  a range of business applications — both  homegrown and acquired. It has also added a full-fledged platform as a service with its Heroku acquisition.

His goal is to be no less than the SaaS-based equivalent of Microsoft, which was the gold standard of office productivity applications and tools in the pre-cloud era.

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