deal architect

Clouds: The “HOT” seat

People still roll their eyes when they hear Marc Benioff talk about “the end of software”. The reality of course is, it took guts and vision for his company to relinquish an existing, established industry sector definition and create a “polymath” which also invested in data centers and application management - across tech sectors that siloed analysts are only now beginning to understand after a decade. You have to give similar credit to other cloud pioneers like NetSuite, Workday and others

Ray Wang and Chirag Mehta advise vendors in 2011 to “Embrace (the cloud), don't wait, don’t even hesitate”: They ask “Which is worse; cannibalizing your margins or not having margins to cannibalize? Faster time to market and greater customer satisfaction will pay off. The move to cloud ensures a seat at the table for the next generation of computing.”

Their message is especially true for vendors in three traditional tech sectors – Hardware, Outsourcing and Telecom. They will make up the HOT seat next year. The reality is Hardware vendors – HP, IBM, Dell, Sun, Cisco. EMC still want it both ways – and keep pushing private clouds and “virtualization is good enough” to customers and their ability to become sole source infrastructure providers to public clouds. Even as they read the cloud research from over 1,000 organizations recently complied by HfS Research and The Outsourcing Unit at the London School of Economics outsourcers like Cap Gemini, CSC, Accenture, TCS, Wipro (and IBM, HP again) will fight to renew existing data center and application management contracts while also posing as honest “brokers” as customers decide between private and public options. Telecoms like Verizon and Deutsche Telecom will continue to push their multi-year, early cancellation business models on customers and not the variable pricing models clouds increasingly dictate. Nokia, RIM etc will have to become comfortable with their emerging clouds as not just partner ecosystem incubators, but also mobile development platforms for their customers.

Each of them has incredible assets – existing customer relationships and the huge investment capacity clouds call for. Each of them also has an incredible liability – the inability to articulate “It is the end of our sector as we have known it”. 

More New Florence

Innovation posts in last few weeks

RC Helicopters – still a favorite Christmas toy

Popular Science – best of what’s new 2010

PrimeSense: The magic behind the Kinect

Next-Gen Tire Monitoring Sensors

A Golden Age for Auto consumers

Acupuncture 2.0

Happy holidays!

to all my readers…

I have so much to be thankful for …my recovery continues well and I have been overwhelmed by the good wishes from so many of you.

Here’s wishing each of you gets some rest, time with family and friends, and a healthy and successful 2011.

Infor: “We didn’t start the fire”

This offer from Infor to earn referral fees for anonymously introducing them to potential customers has many industry analysts and influencers agape. It offends their sense of independence and the “anonymous” part goes against their desire for more transparency in technology markets.

In some ways, it is an astute move by Infor. The reality is if an influencer forwards a lead it is very likely to be “live” – the customer is likely close to a purchasing decision. In contrast, sales folks harvest leads that are up and down the sales funnel. 

Also, Infor could argue “independence” is a dying quality in the influencer market. I mean plenty of firms which did software evaluations in the early 90s had aligned themselves with SAP and Oracle by the end of the decade because the integration fees were far more lucrative than the evaluation fees. Debates rage every few months on the independence of analyst firms as they increasingly depend on vendor revenues while claiming to be buyer-centric. Like Billy Joel, Infor could argue they did not “start the fire”.

In other ways, the move is naive. What is to stop competitors from doing something similar and raising the stakes?

The other is an assumption that influencers can mesmerize customers into buying what they whisper in their ears. In a close call that may work, but Infor has to invest in products that can get it close. Just because Infor calls its products “world class business software” does not make them competitive in a rapidly changing market which wants to see mobile, social, cloud, predictive, sensory and other functionality and very different price points.

So here’s a novel idea – how about Infor invest in products that  get influencers really excited? Or even better gets customer prospects really excited. It may find 15% to influencers a redundant move.

Update:  Got this email from Terry Stickler, Senior Director, Corporate Communications at Infor "Effective today, December 24, the referral program as defined in the e-mail that you received from Infor has been terminated and all referral program initiatives are under review by the new Infor management team.  Updates and a revised referral program will be provided in early January."

“Cash Cow Disease”

Ron Burk has a provocative post about Microsoft and Google at Silicon Alley Insider. He says they both suffer from “cash cow disease” which he defines as

“Cash cow disease arises when a public company has a small number of products that generate the lion's share of profits, but lacks the discipline to return those profits to the shareholders.”

I agree with the first part, not the second. He takes the view of many on and around Wall Street that R&D/diversification investments are a poor use of money, and that investors, not managers should decide what to do with profits in the form of dividends

If Intel had heeded his advice they would never have invested billions in 386 and later chips. If Apple had, they would never have taken the risk on launching iTunes, iPhone or iPad. If Plantronics had, it would still be praying for NASA budgets to be growing, not transitioning as it did into call center markets in the 80s, home/small offices in the 90s, mobile/Bluetooth markets in 00s, and now Unified Communications (there is a nice case study on them in my book).

The key in each case above is they diversified well, which Microsoft has not done consistently in many sectors.  Ron cites many recent Microsoft  initiatives  in the mobile market. Yes, some of them are head-scratching but he neglects to mention that Microsoft had a healthy mobile market share 3 years – and arguably a dominant share in some Asian markets with partners like HTC. There is no reason Apple and Google should have gained so much momentum in that sector and for Microsoft to languish as much.

Similarly you could argue Google could be charging for and delivering better customer support around many of its diversifications – turning them into real businesses rather than its tentative, always-in-beta approach.

My other issue with the “cash cow” view is that markets follow linear paths. It creates a condescending view that consumers are dumb and will tolerate high margins for ever – even, though many of those consumers are corporations with their own analysts and negotiators. Or that high margins fail to attract competition. That “abnormal profits” can continue for ever no matter what we learned in economics in school. That Intel was naive to “eat its own children”

So, I would amend Ron’s second part of the definition to …”but lacks the discipline to itself cannibalize the cash cow business and smartly and seriously diversify into other markets”

Why tech advertising needs fine print

Maybe I have been watching more TV recently, but tech vendors seem to be spending plenty on TV advertising – and I keep thinking as with pharmaceuticals, they need to spend at least 15 seconds on fine print.

Like Verizon with its 4G LTE commercial below. The ad shows a man at a rural location. The fine print would go “highly unlikely even our 3G coverage works today in this man’s shed. And if our 4G rollout mirrors our 3G rollout and that of our esteemed competitors this past decade it is likely most of the US will not have 4G even by 2020”

 

In the same spirit I would like IBM to qualify its many Smart Planet commercials like the one below with “We have done 2 (or other realistic number) hospital projects like this one in Toronto around the world.  Also, the diagnostics technology came from XXXX and the graphics technology came from XXXX – IBM primarily provided the integration services. And, by the way, we have xx professionals with such project experience out of our global staff of 400,000 IBMers.”

Not just picking on Verizon and IBM. there are plenty of AT&T, HP, Cisco and other commercials that could use similar language. And when Oracle gets ready to run its ads on cloud computing, the 15 seconds may not be enough :)

Peer Praise amidst Peer Pressure

I should have blogged about this when I wrote about the Workday session in August. The fact that co-founder Aneel Bhusri went out of his way to praise Marc Benioff of salesforce.com on several occasions during the day. Aneel is no slouch – he was a very competent lieutenant to founder Dave Duffield when PeopleSoft was doing its meteoric journey in the 90s. Over the last decade, as an investor at Greylock he has an enviable record even as other investors have lost interest in enterprise technology. He has led Workday through the tricky phases of early growth in an early SaaS market. He knows well in the next phase investors and analysts will use salesforce as a benchmark to measure Workday. Yet, he repeatedly praised Marc that day in front of the many influencers in that session. In our hyper-competitive tech world filled with petty jealousies, most peer executive praise is grudging, if at all.

To his own credit, while Marc can be bitterly critical of competitor companies, he is generally nice to executives there. So he mocks Oracle every chance he gets but is usually nice to Larry Ellison himself. And he is particularly nice to executives in consumer tech. Every speech praises a Steve Jobs or Mark Zuckerberg. He is quoted in my book

“ We stand on the shoulders of giants like Jerry Yang [founder of Yahoo!], Pierre Omidyar [of eBay], Jeff Bezos [of Amazon], and Biz Stone [of Twitter].”

I should have blogged about it again last week when I saw Aneel briefly at Dreamforce and he was again lavish in his praise of Marc. Again, there was no need to be, and it was genuine.

Well, Aneel has done it again and praises Marc and salesforce this time on his own blog.  The least I can do is point it out and hope we see more of such generosity from other tech executives in the new year.  

NetSuite: The quiet momentum

In the last week, you have read plenty about salesforce and its Dreamforce event and SAP and its influencer event.

NetSuite had a small gathering for a few of us in town for those big events. And while that event got little ink, frankly it deserves plenty for momentum at the company. NetSuite has managed to convert 500 Sage customers over the last few months. 

It is a truism as more vendors offer product in a tech sector, more customers get comfortable and deal flow accelerates. In 2011, we should see plenty of  finance and accounting SaaS momentum as SAP, Workday, FinancialForce.com and others finally release/accelerate their own products. Over the last few years CRM and HR functionality has seen most SaaS activity – the finance segment if it follows past cycles should be much larger. And NetSuite should have plenty of references and longevity in accounts to parlay.

Additionally, there is still the Sage motherlode to mine. Amazingly, Sage has 6.2 million customers according to its website.  So, the 500 that moved to NetSuite could turn into many, many more.

No big bands or politicians at the event, but as we look back on the trajectory of cloud computing a few years from now, the NetSuite event may well turn out to be a key milestone.

A twinge of sympathy for Microsoft

Mighty Microsoft shared real estate outside the Dreamforce conference with tiny SugarCRM. But while Sugar had a amusing team of Christmas carollers, Microsoft had an intimidating team of Segways that the thousands of attendees went out of their way to avoid. Ironically, the Segways blared “I didn’t get Forced” while forcing their way through the crowds. At least, Oracle for a change was subtle with just a boring old billboard. See photos of all three here

But it was the messages inside the conference that made me worry about Microsoft. Marc Benioff mocked Oracle’s “false cloud”in his keynote. He was not directly harsh on Microsoft – he did not need to be. As salesforce showcased the impressive customer embrace of Chatter over the last year, there was plenty of talk about the “death of email” and Outlook . The Gillmor Gang has a nice discussion on the subject here.  There were plenty of Apple, Android, RIM mobile devices on display throughout the conference but nothing with Microsoft 7. As people discussed the recently announced database.com, there were comparisons to SQL Azure.

salesforce has moved the conversation to Cloud 2 – the social, mobile cloud. The Segways should have had the Microsoft response to that. Instead, they were pitching what Marc Benioff calls Cloud 1 – first generation CRM (with potentially better economics). Microsoft should have done that at Dreamforce 3 years ago. Now they are trying to catch up at the speed and popularity of Segways plowing through a crowd. 

Denis Pombriant POV on the boomeranged MS and Oracle marketing at the conference

Marc Benioff’s “Rainbow Coalition”

The tech industry loves to brag about “openness”. Indeed ‘open” may be the most abused tech marketing term over the last couple of decades. So, when I first heard Marc Benioff, CEO of salesforce.com talk a few years ago about how they were “democratizing technology” I was cynical. To me it was a nuanced and political version of “open”.

But as I researched for my book chapter on salesforce.com, I saw several signs of openness  - like its trust site which showcases performance metrics for all, including competitors, to see. How many vendors, even years after salesforce started that site, openly showcase their operational metrics?

Last year’s Dreamforce conference brought to me other glimpses of what Marc means by “technological democracy”.  Some of the observations I captured in the book:

“During a customer panel at salesforce.com ’ s Dreamforce conference in November 2009, at one end of the table sat a ball of color — D.A., of the indie band Chester French, with his bob of red hair and purple trousers. At the other end was Joe Drouin, CIO of Kelly Services, which places 650,000 contract staff around the world, in a dark suit and white shirt. Quite a contrast in size of customer and dress code. That ’s Benioff ’ s democracy in action.

In a keynote presentation, Benioff plays master of ceremonies and gives equal time to Appirio, a next - generation systems integrator we describe in Chapter 18 , and to Accenture, which is 1,000 times bigger. He gives time to Vetrazzo, a start - up that makes countertops from recycled glass, and to Lawson, the second - largest convenience store chain in Japan (behind 7 - Eleven). He gives bloggers front - row seats during his keynote speech ahead of industry analysts and technology media. He high – fives onstage with left - leaning San Francisco mayor Gavin Newsom and hugs General Colin Powell, the former U.S. Secretary of State.”

Last week’s Dreamforce gave me even more glimpses of that openness. The entertainment represented three varied musical genres – Stevie Wonder, Will.I.Am and Neil Young. Bill Clinton and Colin Powell provided political contrasts.

But it was the technology on display which accented the “openness”. Marc playfully showcased iphones and Blackberries and Android devices and iPads during his keynote to emphasize growing device openness. Last year’s Java initiative with VMWare and this week’s Ruby diversification with the Heroku acquisition emphasize growing development language choices.

The launch of database.com during the conference, while self-serving to salesforce, was greeted as one of the most important conference announcements by several CIOs/end-users I talked to. Choices beyond Oracle, IBM and Microsoft in the database world surely qualify as “open” to them.  Anshu Sharma nicely summarizes the language/platform/device openness in his blog post here

Apologies to Rev. Jesse Jackson, but Marc Benioff’s rainbow socks during his keynote only reminded me we have a new rainbow coalition. And a new ringleader.