deal architect

The next 100 days

I hardly ever write political posts on this blog. This is an exception – somewhat.

For starters, I am middle of road politically. Right leaning economically as many small businesspeople are, left leaning socially. I tend to fall in line behind my C-in-C no matter which party they belong to. I will do the same whoever wins in November.

However, in writing my recent book about automation and jobs I have been deeply affected by all the pessimism about jobless futures. It has taken every fiber of optimism in my body to write Silicon Collar, which ended up as a positive book about how we need to relish having machines as our colleagues and peers.

In my research, I had plenty of opportunities to feel very good about our jobs/business economy. We filed tax returns with the IRS with total Adjusted Gross Income at nearly $ 9 trillion. Which means pre-adjustment, we have a large pie of $ 12 trillion to share. That’s just in the US – there are many other healthy job economies around the world.

Never before have we had so many choice in jobs. The Bureau of Labor Statistics classifies workers into one of 840 detailed occupations. CareerPlanners.com does an even more granular listing and lists 12,000 separate jobs. And they do not even include all the entrepreneurial, franchising and other gig economy opportunities we have. Never before have we had a chance to get second, third, later acts in our careers. Never before have so many technologies converged to make work safer, smarter and speedier. Yes, we may not have life time employment, plates for 25 years of service, or pensions but we have ended up with many other positive things in return.

As Warren Buffett said in his annual investor letter earlier this year “The babies being born in America today are the luckiest crop in history.”

And yet, I saw all kinds of pessimism and discontent about the economy. While the book takes on many academicians and analysts for irresponsibly creating this pessimism, our politicians are also to blame.  The UK has already paid a heavy price, the US may do so next.

They are nit picking on each other. They should be spending more time telling us how they will improve on the economy we have rather than writing it off.

Let’s all make them focus on that over the next 100 days. Trump and Clinton are both old school businessman and politician respectively. I want them to consult with Jeff Immelt, Tim Cook, Elon Musk, Mark Cuban, Colin Powell and others who are much more forward looking, globally savvy executives.

Fellow Americans, let’s keep them honest. Let’s use their rallies, their debates, their websites, Twitter and other social media to keep them focused on what’s important to us and our families. Enough of the pessimism and focus on each other! It’s an incredibly critical 100 days. 

Congratulations, NetSuite

Oracle is buying NetSuite for $ 9.3 billion.

I have long admired NetSuite. They are cloud pioneers going back nearly two decades. CEO Zach Nelson helped in countless ways when I wrote The New Polymath

I was hoping they would stay independent a bit longer. In May, after SuiteWorld where I saw their progress in High Tech, Retail and a few other verticals, I wrote “At this stage, I believe NetSuite has one of the most evolved industry strategies in the cloud application world.” In SAP Nation, I wrote about several 2-tier implementations that NetSuite was making a mark around. With 30,000 customers NetSuite already had a steady base, but I also saw it “breaking out” into many new markets.

Still, it is good to see NetSuite executives and staff rewarded. Oracle is picking up a fine asset. Positioned properly, it should supplement Oracle’s own, more horizontal, Fusion products. Is it too expensive an acquisition? I don’t think so - not in a world where LinkedIn was prized thrice as much.

I look forward to learning more from Oracle about the next chapter at NetSuite.

Zoho: what if the entire software industry ran like this?

Just about a decade ago, I ran a guest column from Sridhar Vembu which was striking in that he promised to invert the traditional software model which typically invests 10 to 15% of revenues in product, and 50 to 60% on sales and marketing.

He said “From the perspective of most software vendors, more than their product, their marketing and sales process is their key "value-add" - from a customer perspective we may as well call it the "value-padd".”

Sridhar had recently launched the  Zoho Office Suite, personal productivity tools in SaaS format, and you could have dismissed his words as those of another ambitious entrepreneur. Last week, his team had a chance to show off to a small group of analysts what they have quietly been developing and selling in the last decade, and the progress is impressive. No longer just an Office 2.0 player, it is a broad ranged ERP and CRM player with 30 modules, 20 million users  and a petabyte of customer data (BTW the entire presentation during the day used Zoho’s home grown tools).

More importantly, how they have done it is even more impressive.

• Zoho uses a “pull” sales model which allows them to keep sales and marketing costs at a fraction of what many competitors need. Granted they are selling more to the SMB market but the savings are dramatic. Additionally, they are using partners to verticalize. Over the course of the day, they had 3 partners present their customized CRM aimed at insurance brokers, travel operators and solar panel installers. They claim 1,200 partners around the world which help generate a quarter of their CRM revenues.
• Zoho has a highly optimized development engine. They provided several examples of R&D staff at competitors compared to what they needed. In some cases, they need less than 5% of the headcount. Across their 30 products, they have 100 small development teams. Other than firewalls, switches and routers the infrastructure is open source. They invest heavily in scaling up Postgres rather than use Oracle on EMC gear.
• The recruiting and employee development model is dramatically different. Average tenure of employee is 10 years. 146 out of 150 managers have never worked anywhere else. Most executives we met wear several hats. None of their business cards have titles. They waste very little time in team meetings. 20% of their engineers do not have degrees. Focus on promise more than formal education helps Zoho recruit in India against the giant outsourcing firms where the majority of his development is done. In a side conversation, Sridhar told me he expects to increase developer productivity even more dramatically in the near future.
• The model is self-funded. Sridhar can point to many VC funded competitors who he says end up with a high cost/high-margin addiction which is deadly in the long-run. He points out Microsoft, Amazon and a few other very successful companies have largely been funded from cash flow. 

I could go on but I will run an interview with Sridhar over the next couple of weeks about the strikingly different ways he has built the company.

Over and over, throughout the day, I kept asking myself what if the rest of the software and outsourcing industry were to adopt some of his principles. Contrast not just to other VC funded software competitors, but also to most Indian outsourcers who have lost what made them attractive – continuous improvement and productivity that their CMM Level 5 certifications promised.

How different would the world look?

Silicon Collar: Excerpts

As I have done with previous books, I will excerpt about 10% of Silicon Collar over the next several weeks in prep for the book release early September. Amazon is taking advance orders for the Kindle version here. 

On New Florence, I will excerpt from the 50+ settings - in accounting firms, on the basketball court, in banks, on the battlefront, in digital agencies, in the oil patch, in R&D labs, on shop floors, in wineries, in the warehouse and many more how automation – machine learning, robotics, unmanned autonomous vehicles, white collar bots, exoskeletons etc. – is changing the nature of work. That’s the “machines as our colleagues” angle of the book

On Deal Architect, I will excerpt the historical angle of the book. That looks at automation over decades - in the grocery industry, in the automobile industry, in knowledge work, in the US Postal Service among other sectors. I found "evolution, not revolution" and use that to confront the pessimism about jobless futures coming out of academics, analysts and politicians.

In the meantime, here is the Table of Contents. Enjoy the excerpts.

Inforum update

I spent a couple of days at Infor’s user conference in New York this week. I did a podcast with Jon Reed of Diginomica about the event, and have included excerpts from that conversation and added some other thoughts below.

JR: You've been covering this company for a long time. What do you think?

VM: Let's approach it two ways. One is, how is Infor different from some of the other ERP players like SAP, Oracle, and so on? Then, where are they on their journey, the vision they painted?

If you look at Infor and compare them to SAP, Oracle, or even the cloud players, they have 3 or 4 very significant differentiators.  One is they're into a number of verticals that others either don't seem interested in or just haven't played in. Infor is interested in retail, interested in healthcare, interested in hospitality, services. Not just manufacturing or distribution type markets (during the conference I had breakouts with Infor execs from retail/distribution and from manufacturing verticals. The customers in the audience and who were on stage included a wide array of industries and geographies like Albuquerque Public Schools, CERN, First Transit, Hackensack UMC, Kirin Breweries, Sanford Health, Travis Perkins, Whole Foods and Zahid Industries)

A second one is, when you look at cloud infrastructure, 4 years ago they decided, "Why are we putting money into a data center? Why don't we go with Amazon Web Services?" So that's been a significant differentiator for them. As Charles Pjillips, the CEO said a few years ago, "Friends don't let friends build data centers." He's taken some of the money that he would have put towards the infrastructure and plowed it back into application functionality.

JR: You've been a critic of certain ERP vendors that have perhaps overspent on data centers.

VM: And not gotten much for it as a result because they are poorly run and are undersized and so on.

Another way Infor is different is, they have a number of human services that they proudly show off. They've got the Hook & Loop digital agency. (the conference highlighted Hook and Loop Digital which I had written about earlier) It could be a design agency that any customer could hire if they need to. They have a Value Engineering team that does a very sophisticated analysis of payback. They have a group in Cambridge who are Data Wizards. Every software company needs some talent, but they always try to hide the human aspect. But Infor has been reasonably visible about a lot of their human services.

Which leads me to my fourth point. If you walk around the show floor here, you don't see Accenture, you don't see too much IBM, you don't see the big outsourcers here. That's another big difference here. With my SAP Nation thinking, I like vendors that don't surround themselves with too much off the labor intensive model. So, those are 4 things where I think Infor stands out from some of the others.

JR: There's a perception of Infor as sort of a holding company for ERP graveyard products. Infor actually has way more even than Oracle that are under its umbrella somehow. Is that now an unfair stereotype?

VM: That's a good segue to my second point and about progress toward their vision. I think it's still a fair stereotype because close to a hundred thousand customers, most of which are still under legacy brands like Baan or Syteline in ERP and Epiphany in CRM

JR: Names you haven't heard in years, right?

VM: You can look at it as half full or half empty, right? Those are all customers waiting to be migrated or those are customers that are just brain dead. I'd think those customers are waiting for easier migration. So Infor announced at this event, a deal with BackOffice Associates. They specialize in moving on-premise customers to the cloud.

Now does Infor have everything ready in the cloud? No, but they're thinking through a lot of those issues better than I think other legacy vendors that have a significant on-premise customer base.

JR: Their next generation product is known as CloudSuite. It can get a little confusing because they throw their CloudSuite label around a little bit. But before this conference, they announced a general availability of financials and supply chain. Which is big, right? Now I asked Charles Phillips yesterday how many customers. He was a little careful about his answer, but that's legit because it's a new product. Where do you think they should be? How will you chart their progress from here?

VM; I think they need to accelerate both of their product availability in the cloud and migration of their legacy customers. One of the themes from this event in talking to other analysts is, there are very few references.  They haven't really migrated a large percentage of their customers. That is a challenge. That is something they need to tackle.

JR: You think migration tools are a key part of it? Making it easier?

VM: First making sure the product is ready. And then the migration. They have so many different initiatives going on and so many different verticals that the risk they have is they're making too many announcements and not enough product availability and not enough references.

JR: What I think you find a lot of times with these next gen releases is that the classic, sort of large enterprise customer is not the first one to move, right? Like a lot of times it's edge cases, smaller shops. We did a interview earlier today with a public services company, basically a water company in California. 150 employees. They had made the move to financial so they hadn't gone live yet, so not a classic ERP customer, right? What was interesting was just kind of pressing him on functionality gaps and hearing that he's pretty happy with the functionality he was finding in the financials. This is a Lawson user. Now Lawson is run in Cobol, so it's ... The backside of Lawson is a little archaic, but the functionality is pretty deep in the financials area there. When you hear something like that, it makes you think that they may be further along in that regard than you might expect as far as the depth of functionality.

VM: But that's just one ... You're looking at a horizontal product on financials. I'm hearing from Infor about their Whole Foods driven retail merchandising strategy. I'm hearing from others at Infor about their hospitality strategy. I'm hearing from others about their healthcare. They have a lot of irons in the fire and the risk is these are all announcements at this point, or onesie-twosies in terms of customers. They need to do a better job prioritizing 7-8 of those initiatives and driving them home.

JR: Right. When you can bring people on stage who are essentially winning in their industry, that helps. Is the product there though? I'm not convinced the product is completely there in some of those areas.

VM: Yeah, like when Whole Foods is fairly well along and they have 2 or 3 other big brand customers. That's going to position them very well in the retail and grocery sector.

JR: When they started talking about digital transformation, my bullshit detector went off. That's only because every show I've been to this year, you name it, that's sort of the griddle cakes that are being pushed on stage, right? Yet, a lot of this is real, right? Like this is not just a marketing fantasy. What is your take on that part?

VM: A customer who is embarking on a digital transformation journey, can go to a Cognizant or an Accenture to help them build that vision. Or they can go to a Ideo, a design firm and say, "Where do we start? New products or enhanced customer experience?" So there are different paths they can take. I think Infor's view is, "We have a digital agency called Hook & Loop. We have vertical expertise in so many areas. We've done a lot of value engineering work. We've got the building blocks. Come to us. Maybe we can show you how to embark on that." Now, they don't want to be a consulting firm. They'll qualify the prospects and see if they are interested in building with them, next generation solutions for that industry. That combination happens when a customer is very interested in a deep transformation, not just a "I want to do sentiment analysis and that's my definition of digital transformation." But a deep business model change, a smart product strategy and so on. Infor wants to position itself as "Think of us. Don't just go to McKinsey or Accenture because we've got some unique assets."

JR: I don't know, Vinnie, if I'm an Infor partner listening to this podcast, I wonder how I fit into this picture.

VM: You have to walk on the show floor and it's not like SapphireNow. There's Ciber, there's HCL. There just isn't that much big, big money around Infor. If you want the $ 50 million projects, keep doing business with SAP.

JR: There you go. The author of SAP Nation speaks up. Okay. You know, it's funny, I didn't think we were going to be able to avoid SAP on this podcast. Just to wrap the digital transformation piece because that was one of their major announcements was that they're going to be providing digital services through Hook & Loop. Do you feel that that theme resonates with customers? In other words, in this industry, is digital transformation more of a vendor creation or is it a reality for customers that they need help with?

VM: I think it varies by industry. Retail, for example, everyone is scared to death of Amazon. Digital is a clear burning platform. You go into insurance, maybe not quite as convinced about that. So it varies from industry to industry. Infor's challenges is, that is a very strategic project. A digital transformation gets boardroom level, CEO level, visibility. Would a CEO approve somebody saying, "I want to go use Infor rather than using McKinsey for the initial project." Or "I want to use Infor rather than Accenture." Good news is, Infor’s not looking for 5,000 of those projects. They're looking for 1 or 2 in every industry. I think they can be pretty well positioned.

JR: All right. Well, they say they're doing another Inforum in 14 months, so we'll check back and see. I'm looking forward to continuing this conversation.

Next Book: “Silicon Collar”

My new book is nearing the end of the editing process and is headed to the design agency. It should be released by middle of September.

Here’s a synopsis:

“Never before have people had such a broad choice of occupations – and the opportunity to try on so many employment hats over the course of a career. Never before have so many technologies converged that are making jobs safer, smarter, speedier, more interesting and more compelling.

And yet… while it should be a Golden Era for the workplace, there is extreme pessimism in many quarters about dystopian futures due to the supposed job-killing impact of an array of automation technologies: robots, drones, autonomous vehicles, white collar bots, 3-D printing, and many more.

Meanwhile, the job economy is dysfunctional, with millions of unfilled employment vacancies combined with a restless, fearful, even angry workforce.

Tackling this complex weave of forces, Mirchandani blends several distinct voices in this book – the innovation enthusiast, the industrial historian, and the policy analyst. Assembling a vast collection of voices, examples, and perspectives , he catalogs in detail over 50 jobs that are being transformed by technologies – spanning the gamut from handsomely compensated basketball players to much more modest garbage collectors.

He next turns historian and looks at automation over decades - in the grocery industry, in the automobile industry, in public accounting, in the US Postal Service among other sectors. He finds "evolution, not revolution" and uses that to confront the pessimism about jobs coming out of academia and politicians.

With his analyst hat he looks at how employers, regulators, unions, and workers have all confused the labor economy. He concludes we should not be worried about machines. We should be far more worried about man-made damage.

The end result is an optimistic read on the changing nature of work, a celebration of outstanding workers, and the machines which are making them even better.”

As with previous books, I will excerpting from the book on this and the New Florence blogs over the next several weeks.

Several readers told me they liked the format of my last book. They found it ideal for a cross-country or cross-ocean plane ride. This book is similarly fast paced. Hope you enjoy, but more importantly, I hope it helps you offset the doom and gloom that surrounds us.