deal architect

The Technology Industry needs Bill Deanes and James Franklins

‘Tis the season to make forecasts, so let me invoke Bill Deane and James Franklin

Bill Deane has quite a track record predicting who will make it in the annual Baseball Hall of Fame balloting. He presents his credentials here

This is my 33rd year predicting Hall of Fame elections.  I think the acid test of prognostication performance lies in guessing the fate of men who finish within 10% either way of being elected (i.e., who receive between 65-85% of the vote).  Among such candidates, I have gone 50-12 (.806) in correctly predicting who would or would not make it over the years.  I was one of the few who correctly, publicly forecast the 2013 shutout.

James Franklin, presided over the National Hurricane Center which I profiled in The New Polymath, and which has this track record:

The track forecast error in the 1980s, 48 hours out, was 225 nautical miles. Today, that error is a little less than 100 nautical miles.

and it subjects its forecasts to annual public audits.

Now let’s look at the IT industry. We have spent trillions in business intelligence, forecasting and Big Data tools and have you seen many customers or vendors brag about specific track records? And how many allow for a publicly shared audit?

Yes, that includes my alma mater, Gartner. Sure they say they self-audit their forecasts – how about a public audit?

BTW, baseball fans check out Deane’s 2014 HOF forecast. Not afraid to stick his neck out. And yes, open to all kinds of public audit.

In Search of Digital Excellence

When Karl-Heinz Streibich, CEO of Software AG invited me to help with his book The Digital Enterprise: The Moves and Motives of the Digital Leaders, he invoked Tom Peters and his best seller In Search of Excellence. Karl-Heinz said we need to profile innovation using a wide range of technologies across business processes in many industries and many countries.

I think we did pretty well.

Major contributions in the book come from C-level executives and thought leaders in the following chapters:

Create Smarter Products
Nissan Motor Co., Ltd, Japan 
Echo Entertainment Group Ltd., Australia

Make Your Services Agile
MAPFRE S.A., Spain 
DB Systel GmbH, Germany 
Städel Museum, Germany

Evolve Your Business Models Beyond Products and Services
Hubert Burda Media Holding, Germany
Qualcomm, Inc, USA

Invent New Go-to-Market Models
Coca-Cola Enterprises, USA
TUI InfoTec GmbH, Germany

Outpace Your Industry and Your Competition
Deutsche Telekom AG T-Systems, Germany

Rethink Speed
Standard Chartered PLC, Singapore
BBVA S.A., Spain

Digitize Your Factory
DFKI GmbH, Germany
Siemens AG, Germany

Transform Your Value Chain
General Electric, USA

Reconsider Your Physical Assets
Statoil ASA, Norway

See Human Capital in a New Light
Accenture, Germany

Take Another Look at Interfaces
Daimler AG, Germany

Scrutinize Analytics
Allianz Group, Germany

Think Over Constraints, Think about Sharing
DATEV eG, Germany

Go Over Risk Scenarios
Technische Universität Darmstadt, Germany

Reexamine Your Stakeholders
acatech, Germany

This book project itself ended up as a “Digital Enterprise.” When Tom Peters wrote his classic in the 80s that inspired Karl-Heinz and countless other executives, he traveled extensively around the world to interview the subjects he profiled. In contrast, the Software AG team of editors, graphic designers, project managers, and translators who worked on this book leveraged a variety of widely available collaboration infrastructure. The interviews that appear in the book reflect hours of cross-border VoIP calls, and they were captured on a Zoom digital recorder and backed up in the Google Cloud. The graphics leveraged the Adobe Creative Suite. The book itself involved product of plenty of digital creativity and collaboration.

Pre-order your copy of this 400 page collection dripping with digital excellence at Amazon here.

SaaS as legacy?

Rob Desisto, my former Gartner colleague, observes

This means there is no ability for a SaaS customer to pay for what they use, something we commonly see with infrastructure as a service or in many lower end consumer or SOHO applications.  This was supposed to be one of the foundational tenants of SaaS but has rarely been offered because SaaS vendors want large contract lock in.

Rob is correct – fixed costs are a dirty term in IT. And I starting to see some customers ask SaaS vendors to apply CMM Level 5 and Six Sigma continuous improvement concepts as they did on multi-year offshore support contracts.

But here is where Rob has a “forest v trees” problem. For most enterprises the payback is still X times higher to optimize IBM data center, SAP maintenance, Verizon MPLS or Infosys application management spend than it is to beat down Salesforce or Workday spend. In fact moving spend to cloud vendors is often the best path to those savings.

So frankly, Rob’s colleagues in those areas should be calling those vendors “legacy dinosaurs” and advising customers how to optimize that spend.

Finally, talking of fixed costs, spend with Gartner falls in to that bucket. Gartner’s salespeople are incented on a metric called Net Contract Value Increase or NCVI – which from a customer’s POV equals a steadily increasing fixed cost.

Optimizing that spend is also pretty good payback.

The real milestone at GM

Congratulations to Mary Barra, the new CEO at GM.

While everyone talks about the first female leader in a male dominated industry, the other milestone is she reflects the ascendancy of engineers and technicians in auto world. The car, more than ever before, is a technological marvel with autonomous, electrical fuel, steering by wire, heads up and haptic UI. It is a world where Ford thrives on analytics.

Her electrical engineering education and supply chain and product development experience prepares her well for this new world.

This simple  quote from her a few weeks ago summarizes the new world of software and sensors that defines a car: "It's the person who programs the Sonic windshield wiper who says, 'Hmm, why don't I turn this on when the rain sensor for the windshield senses it's raining, when the person puts it in reverse?'"

GM’s other executives reflect the new world. New CIO Randy Mott has been insourcing more as the company beefs up its technology talent. Bob Lutz, the recent CEO summarized the focus back to engineering in his book “Car Guys v Bean Counters”

It is a fiercely competitive industry and GM continues to have an image problem as making boxy, unsexy cars. Just don’t tell Automotive Magazine which named the 2014 Corvette the latest in its annual selections which last year honored the Tesla Model S.

Ms Barra has a strong base to build on!

One Microsoft

If you have ever been to the Egyptian Museum in Cairo, you alternate in awe at the antiquities on display, in wonder at what else is hidden away in the storerooms and in dismay at the areas where number of 120,000 items are seemingly just strewn about. 

In many ways, that is Microsoft.

I am increasingly seeing Microsoft pull together pieces from its vast collection into coherent bundles. So, take the new XBox One which leverages Win 8, Kinect, Skype, Azure, SkyDrive, Hyper V, Bing and other Microsoft assets. During the analyst event a few weeks ago, they told us how they brought together Retail software, with Nokia Lumias and with other functionality developed by cloud partner Avanade for a POS solution in the sky for Delta. They told us how they were packaging for digital agencies their marketing apps along with access to their media properties. Expect to see more such plays, especially as they target specific industries.

They are also providing a road map for other diverse companies like HP and Cisco to have their units work better among themselves.

Of course, few companies have the rich diversity Microsoft does. At the analyst event, they classified their competencies as

• Operating System
• High Value Apps
• Hardware/Nokia
• Cloud Services
• Machine Learning
• Natural UI
• Consumer/Enterprise (comfort with both)

Like the Egyptian museum I suspect from time to time we will see disorganized messes, and some areas which remain hidden in the Microsoft storeroom.  But where they get the One Microsoft strategy humming,  competitors better watch out.

Ford: Analytics is Job 1

Analytics has replaced Quality as Job 1 and no wonder CEO Alan Mullaly has been rumored as a Microsoft CEO candidate

As Ford rolls out the 6th generation of its iconic Ford Mustang,  Computerworld reports

"Historically, you didn't want to share bad news at Ford," says John Ginder, manager of system analytics and environmental sciences and a 22-year Ford veteran. "What Alan brought to the company is a mindset that we would no longer operate on anecdotal evidence. I've seen that explode in the past five or six years. Our CFO and COO are huge proponents. Today, it's all about having a data-driven perspective."

Indeed, data and analytics permeate every business move that Ford makes, from forecasting the price of commodities to figuring out what consumers want, what the company will build, where it should source parts and how to power its lineup of cars and trucks.

Crunching data behind the scenes are some 200 big data and analytics experts from a broad spectrum of disciplines. They work in what Ford calls analytics centers of excellence, which are found in various units of the $134 billion company, including marketing, research, credit services and others.”

An era of great “un-consolidation”

During my fireside chat at the HfS Blueprint event this week I pointed out the proliferation of outsourcing options in the last few years – digital agencies, mobile ecosystems around Apple and Android, a variety of cloud IaaS providers, crowdsourced analytics among others.

I followed a debate on Twitter which defended SAP’s growing emphasis on platforms as “application opportunities have matured”. And I go just because SAP is not interested, does not stop  banks from leveraging CEP, auto insurance companies telematics, retailers newer POS solutions, manufacturers agile robotics and additive printing. It does not stop marketers from evaluating new social listening tools, logistics folks from newer OR tools. I have never seen a phase where new application categories are emerging at such a rapid rate.

Preparing for year end tax planning I review the business and personal telecom spend – Brighthouse. Boingo, GoGo, Google Voice, Sprint, Skype, Vonage now make up the majority of the dollars. Verizon and AT&T are small players.  

Every meeting I go to these days, I see notes being taken on tablets, Ultrabooks, smartphones, and nice sketchbooks. The Dells and Blackberrys which defined meetings a few years ago is a memory.

Looking back, it is a remarkable turn of events after the move of so many customers to single source ERP, corporate standard laptops and supplier consolidation starting in the 90s, and the vendor M&A activities of the last decade.

Now think how single ideas are causing panic and ripple effects in multiple industry sectors. The Google autonomous car is obviously being watched by other automakers. But it is forcing a rethink at insurance companies, urban planning (think of street lights when some cars are driverless, when others are not), city/county revenue planners (speeding fines become trickier when cars can be programmed to always comply with multiple speed zones). The Amazon drone delivery plans are forcing logistics companies to react, grocery stores to get serious about new competition, aviation and other government agencies to think about newer security challenges.

Welcome to the era of un-consolidation. Many IT and procurement executives and sourcing advisers will struggle with the transition, but the reality is incumbent talent and vendors did not think up these scenarios and that newer blood will serve them much better. 

Hackathons. Not exactly Hunger Games.

When I read this Alicia Liu post a couple of weeks ago, I liked her assessment of vendor sponsored hackathons

Corporate-sponsored hackathons are all-win for the sponsoring company. They get a big influx of fresh ideas, and developers working themselves to illness (not quite death, but a diet of soda and pizza, plus sleep deprivation and being sedentary for long periods is the definition of unhealthy), just to meet a crazy deadline.

But then she proceeds to describe her disappointment with the Salesforce Dreamforce Hackathon prize evaluation process and I had to ask what made her ignore her earlier insight. Salesforce continues to take heat and a second prize they announced is fueling even more scrutiny, but Alicia’s earlier assessment is spot on.

Developer events are feel-good, gentle competitions and really more of networking events, not the Hunger Games. A year or two later what people remember from them is Steve Ballmer’s (in)famous Developer’s prance or the amazing swag that defines Google I/O.

Want a reality check? Here’s Larry Dignan as an unofficial judge at an SAP Demo Jam

The bright side: There's alcohol in the back. Another bright side: If you stick around to the end (I have to) you could win an iPod touch. It's unclear whether it's a new one or not.

Oh no. There's an applause-o-meter. I kid you not. Crowd urged to stop drinking and keep it down to follow the presentations.

(Disclosure – I was seated next to Larry during that event and the snarky comments in that section were much worse)

The real Hunger Games happen in the iOS App store or in the Salesforce field where customers award their prizes. So much more enjoyable. And lucrative.

The danger of linear thinking

I am seeing clients come up to end of 3-5-7 year SaaS and outsourcing deals I and others helped them with. And I often hear things like “routine renewal” or “let’s re-bid with a slightly different group of vendors than we invited last time”. There is a sense of “steady state” in many of these scenarios which makes me uncomfortable.

I used the HfS Blueprint fireside chat this week to gently warn folks about the “calm before the storm”  - the storm as in 5 market disruptions we discussed during the session (slides included below)

I used 3 personal anecdotes from my international travels in the 80s

a) a visit to Berlin just before the Wall fell and almost losing my passport to the E. German bureaucracy

b) a trip to Paris with a Japanese colleague from PW and explaining to French customs the 3 large bagfuls of trinkets from Harrods would not stay in France but were gifts for his friends in Japan

c) a bus ride in Israel and being pelted by rocks as the first Palestinian intifadah started.

I told them I (and many US diplomats and economists) used linear assumptions  through the 90s – that E. Europe would continue to be a communist mess, that Japan would continue its economic march, that the Middle East protests would continue in relatively harmless ways. We were wrong on each and I am afraid many clients are going into their next phase of IT outsourcing with similar linear assumptions.

Ned May of HfS did a great job pushing and probing me on the disruptions. I will see if we can share a recording. In the meantime, download the slides we used.

BTW HfS brought together a really nice group of outsourcing buyer, vendor executives and advisors to the event in New York, now in its third year. Kudos to Phil Fersht and his team.

Download Vinnie Mirchandani BPS Presentation Final

So why did Amazon preannounce PrimeAir?

Jeff Bezos showed off to Charlie Rose on 60 Minutes the planned drone based home delivery while playing coy about availability. Om Malik and others speculate why the “pre-announcement”.

Here’s my version:

a) As its AWS competes more with IBM, it is learning more about “vaporware”

Seriously, several considerations

a) it is signaling to UPS, Fedex, other 3PLs, cost of shipping continues to be a deterrent to e-commerce. For years, Amazon has innovated postal injections and recently Sunday delivery with USPS to keep cost of shipping under control. That makes shipping a non-issue for customers and Amazon does not lose money on its annual Prime fee which promises two day delivery included.

b) to put pressure on the FAA to approve commercial use of drones in the next couple of years. Oil companies and others have lobbied for years use in monitoring of remote pipelines, but the FAA and the military have been skittish for security reasons about non-defense uses of drones especially in urban areas.

c) to convince consumers it is a serious about groceries and other fresh produce. It has been piloting same day delivery in some cities, but same hour really gets your attention.

d) to enjoy a massive PR blitz like Google has with its autonomous car. Google may never get to more than 1% market share in the competitive auto industry but automakers, car insurance companies, urban planners, government tax authorities are all energized by the possibility.

As Om says “shock and awe”… hopefully not the Rumsfeld kind, but as a disruption cataloger it is good to see audacious announcements shake up several incumbents across multiple industries.