It’s almost December, so I think it’s ok to begin the silliness. Here are five things that are 100% guaranteed to happen during 2007:

1. Meg Whitman leaves eBay.

2. Microsoft’s stock outperforms Google’s.

3. Oracle makes a major push into software-as-a-service for enterprise applications, buying up small providers and revamping its approach to software pricing.

4. A nonprofit, ad-free search engine is launched and, widely praised, quickly gains market share.

5. The blogosphere is roiled by a payola scandal.

And here’s a bonus, to make it an even half-dozen:

6. Dave Winer retires from the blogosphere, amid great fanfare, only to start blogging again two months later.

Aleks Krotoski built a laboratory in the virtual world of Second Life to do research for her doctoral thesis on social simulations. She slaved over the lab, she writes in an article in The Guardian: “I’d spent days lining up little planks of wood, straightening out the interactive books on the shelves and placing the windows just so.” But a software glitch destroyed all her handiwork in a millisecond: “Everything disappeared.”

A couple of days later, the CopyBot invaded Second Life, and Krotoski saw, in the reaction of the new merchant class, that something more than her little laboratory had disappeared from the virtual world:

The formerly libertarian landscape has been overrun by rampaging nouveau-capitalists. They want centralized governance and stern economic ruling. Everyone is a potential thief. Fingers are being pointed and, in some extreme cases, avatars are being attacked. The digital idyll has become a world of accusations, violence and bitter political dispute.

And so, once again, the real world comes crashing in. Sooner or later, most online communities reach this crisis point because the ideals of the founders are replaced by regulations demanded by the different types of people who interact in them. We shouldn’t be surprised; what we do when we interact online is replicate the social practices we are familiar with offline. Inspired by this milestone, I’m going to add a wing to my new lab. And inside will be a shrine to CopyBot, the little hack that transformed Second Life into a real world.

Lay a virtual rose on the shrine for me, Aleks.

Thomas Otter, a smart technology blogger who works for the corporate software giant SAP in Germany, finds himself baffled and befuddled these days. He can’t figure out what “software-as-a-service” means. “For ages,” he writes, rhetorically scratching his head, “I have been trying to figure out what SaaS is. I’m still no clearer, and I have read masses of posts, analyst reports [and] marketing materials.” Is the essence of SaaS, he wonders, “that it is hosted and that [it] is multitenant,” or “that it is hosted, multitenant, subscription based, uses AJAX , REST, RSS, is completely brand new … and knows the secret SaaS handshake”?

Methinks the good fellow doth protest too much.

If SAP needs a lesson in what SaaS is, it should take a look at what one of its competitors, Glovia, is doing. Glovia, which was acquired by Fujitsu in 2000, offers an enterprise resource planning (ERP) system tailored to the particular needs of manufacturing companies. Its basic, bread-and-butter product – used by about 1,000 companies – is a traditional enterprise application that, like SAP’s, is licensed to clients for a hefty fee. The clients are responsible for building or renting the infrastructure (servers, database, network, etc.) that the application runs on. It’s all very complicated, as enterprise software has to be (or so we’ve been taught) .

Last month, though, Glovia introduced a new version of its software, aimed at the many small and mid-sized manufacturers who find it hard to afford traditional, complex enterprise applications and all the related software, hardware, staff, and consultants required to install and run them. The new version, called GSInnovate, is provided as a single, all-in-one service, incorporating both the application and the infrastructure that runs it, which clients tap into over the Internet using a web browser. The software is simpler than the traditional version, having 22 modules rather than 70, but it’s still customizable through various process templates. The client pays a simple monthly fee for the service and can discontinue it at any time. There’s no license, no lock-in.

That’s what SaaS is.

Glovia recently announced that its SaaS service will run on the utility computing infrastructure operated by Deutsche Telekom’s T-Systems unit. It’s a modern, leading-edge software-as-a-service infrastructure: virtualized and multitenant. In other words, no pieces of hardware are dedicated to individual clients. Everything’s pooled together and shared, so it’s very efficient and it scales up and down easily. Next month, T-Systems will be officially opening a utility data center in Jacksonville, Florida, its first in the U.S., which I assume will handle a lot of Glovia’s needs.

What’s interesting is that SAP also has a close partnership with T-Systems’ utility arm. Many SAP clients, particularly in Europe, use T-Systems’ multitenant architecture to host their SAP applications. The difference is that SAP continues to keep the fee for the application separate from the fee for the infrastructure. It continues to force on its customers the cumbersome fragmentation inherent in the traditional model of business software – and the license that symbolizes and perpetuates that fragmentation.

That’s not what SaaS is.

The reason that Otter and SAP find it so hard to bring SaaS into clear focus probably has less to do with the nature of SaaS than with their own vision. They aren’t yet able to see beyond the license.

Bear Stearns analyst Spencer Wang gave a long and interesting presentation yesterday on the new economics of the media and entertainment business, called “The Long Tail: Why Aggregation & Context and Not (Necessarily) Content Are King in Entertainment.” A pdf of his presentation can be downloaded here. The presentation builds on the themes in Chris Anderson’s book, putting them into the context of a formal value-chain analysis.

Wang argues that both ends of the value chain – content creation and content distribution – are increasingly characterized by oversupply and hence weak profitability. Value, as a result, is migrating to the center of the value chain, where content aggregation and branding take place. The profit, in other words, is in packaging.

UPDATE: The full Bear Stearns report can be downloaded here.

Where’s Carnac the Magnificent when you need him?

Answer: $500 million.

Question: What do big media companies say they’re earning online?

Advertising Age’s Claire Atkinson has a funny, and slightly disturbing, article that describes how old-line media firms are all converging on a single number in estimating their Internet revenues. “While each of the main media companies defines digital slightly differently,” she writes, “everyone seems comfortable projecting the same revenue: about half a billion dollars.” NBC Universal? $500 million. News Corp.? $500 million. Viacom? $500 million. Disney? $500 million.

The problem, writes Atkinson, “is figuring out what is being counted as digital revenue. Is it video advertising? ITunes-download fees? Banner ads? Social-networking sites? Wireless? Online sales of ringtones and Bill O’Reilly coffee mugs? All are thrown onto the same line, leaving observers to wonder just which parts of the business are growing the fastest.” And which parts are smaller than they might seem.

Atkinson also picks apart the estimates for online advertising sales, showing that a fairly small portion is going to the media companies. Of the approximately $16 billion being spent on online ads this year, about $10.4 billion is going into the pockets of Google, Yahoo, eBay, AOL, and MSN. That leaves just $5.6 billion to be split among all the remaining players, including the entire long tail of web sites.

Traditional media companies face the same challenge as traditional software companies: How do we maintain our sales and profits in a world in which “free” is becoming the expected and default price? Moving your content online and attracting eyeballs are, it turns out, the easy parts. Making money is, still, where it gets hard.

As for Carnac, he continues to ply his trade – less lucratively, one assumes – in the online afterlife.

Large companies appear to be jumping en masse onto the software-as-a-service bandwagon, according to a new survey of CIOs by management consultants McKinsey & Company. The survey found that 61% of North American companies with sales over $1 billion plan to adopt one or more SaaS applications over the next year, a dramatic increase from the 38% who were planning to install SaaS apps in 2005.

Although the full survey results haven’t been made public yet, I got a preview of the findings last week from two leaders of the study, Kishore Kanakamedala and Abhijit Dubey. McKinsey, they told me, regularly surveys a panel of CIOs and other senior IT executives from big companies in the United States and Canada to track their plans and priorities. The companies included in the surveys are chosen from a cross-section of industries that mirrors the makeup of the overall U.S. and Canadian economies. The most recent survey was completed a few weeks ago; the prior one was completed in Summer 2005.

Kanakamedala and Dubey see several factors driving the rapid increase in the adoption of SaaS. Some of the factors are economic. CIOs, they said, are coming to see SaaS as offering lower up-front costs, lower total ownership costs, and faster implementation than traditional licensed software. That substantially increases the likelihood a new application will provide an attractive return on investment.

Also propelling the trend is a desire for greater vendor accountability. CIOs, explained the consultants, have long been frustrated at their inability to get clearly defined service commitments from software vendors. Because the vendors don’t own the infrastructure their applications run on, they’ve been able to avoid accountability for the performance of their software. But with SaaS, there’s no such accountability gap. Because SaaS vendors are responsible for the infrastructure as well as the application, they have nowhere to hide should something go wrong. Buyers get an unambiguous, single point of accountability for performance – a big plus, in the eyes of CIOs.

The most popular SaaS business applications, according to the McKinsey study, are for human-resource management, billing and order entry, and sales management. Those were also the most popular in the 2005 survey.

The embrace of SaaS, say Kanakamedala and Dubey, is part of a broader shift in the way big-company CIOs think about information technology. CIOs are rapidly abandoning the assumption that they should own and control their entire IT architecture. Instead, they’re embracing the idea of a “hybrid architecture” that combines components maintained internally with components hosted or otherwise supplied by outsiders. This model, say the consultants, promises to bring greater efficiency as well as greater flexibility – for both IT and the business in general.

Bill Thompson, in a fire-breathing essay at The Register, offers a passionate technical critique of what he calls “the Web 2.0 fantasy,” arguing that the “snakeoil” of “Ajaxified” interfaces and “apparently open APIs” threatens to distract developers and engineers from the real work of creating “distributed systems, scalable solutions and a network architecture that will support the needs and aspirations of the next five billion users.”

“Web 2.0 marks the dictatorship of the presentation layer,” he writes, “a triumph of appearance over architecture that any good computer scientist should immediately dismiss as unsustainable.” He continues:

Ajax is touted as the answer for developers who want to offer users a richer client experience without having to go the trouble of writing a real application, but if the long term goal is to turn the network from a series of tubes connecting clients and servers into a distributed computing environment then we cannot rely on Javascript and XML since they do not offer the stability, scalability or effective resource discovery that we need. There is a massive difference between rewriting Web pages on the fly with Javascript and reengineering the network to support message passing between distributed objects, a difference that too many Web 2.0 advocates seem willing to ignore.

He sees “a real danger that continued investment in Web 2.0 companies will turn [Tim] O’Reilly’s dream into our nightmare. If that happens then the oligarchy who benefit most from the stale socializing of Flickr and YouTube will have held back the transition to distributed systems.”

Thompson ends his essay on a weird, through-the-looking-glass note of techno-utopian yearning: “If we sort out our interfaces and interactions we may even be able to put our heads into the screen, be part of the metaverse, enter cyberspace and interact fully and equally with agents, people, sims and any other machine- or human-generated intelligence.” That sounds pretty nightmarish itself. Nevertheless, Thompson’s critique of the reigning Web 2.0 ideology deserves a close reading and, one hopes, will spark some constructive debate.

UPDATE: Shelley Powers says Thompson is all wet, writing of his article, “I can only see this as yet another cheap marketing ploy attached to Web 2.0.” Adds Dan Farber: “A little focus on the presentation layer isn’t holding up the march to the metaverse. A few more cranks of Moore’s Law and the natural evolution of the Internet will be enough to overcome any ‘damage’ done by Web 2.0.” But Sadagopan says Thompson is “spot on that there is a massive difference between rewriting Web pages on the fly with Javascript and reengineering the network to support message passing between distributed objects, a difference that too many Web 2.0 advocates seem willing to ignore.”