deal architect

2022 will be MASSIVELY different!

Welcome back. Hope you had a relaxing break and are ready for a hectic, very different 2022.

Actually, “very different year” has been our annual guiding principle and reflects Deal Architect’s business model. Every year our revenue stream varies and we have learned to be flexible. Let me explain that first, then my belief why 2022 will be truly different.

Deal Architect will turn 18 this year. Back in 2004, I wrote our mission statement:

“We are a boutique advisory firm and content provider which believes in massive leverage. We use our intellectual property in small teams for disproportionate payback for our clients. Our focus is not just IT – we will also focus on energy, health, space and other STEM areas. Our consulting and research are symbiotic - our consulting clients benefit from our research, and our readers benefit from the practical, field feedback from our clients"

The mission has not changed much at all. The blend of our advice and content has, however, changed dramatically.

Our advisory work tends to be ahead of the curve. We started advising clients on India and other talent sourcing. In reverse, we started to tell some of them to rebalance that by the end of the decade given the quality and inflation issues we were seeing. We started helping clients with cloud computing and SaaS evaluations as early as 2005. Now, we are helping clients rethink business processes to reflect massive changes in every vertical industry sector and take advantage of a wide range of digital and automation technologies from robotics to wearables to machine learning. BTW, you don’t hear much about our advisory work. Some of our clients show up in book case studies or in some of our videos but I would never violate their trust - leave it up to them to share what they are comfortable publicly sharing.

Our content has similarly gone through significant change. We started off with two blogs – New Florence and Deal Architect. They have since cataloged nearly 13,000 entries in IT, but also in energy, food, space, travel and many other dimensions. We have published 7 books. Increasingly, we are helping narrate books for C level executives, even considering non-fiction. Hey, if John Grisham could make attorneys exciting, surely someone can do that to tech industry analysts, no? 2 years ago we started videos in the Burning Platform and Analyst Cam series. We have already recorded over 200 episodes.

Both for advisory and content we rely heavily on partnerships with other professionals. For each book, I have leveraged a transcriptionist, an editor and a design wiz. Most of our advisory projects are similarly with other small, highly driven teams.  

We are always being asked to evolve our services and content. We have considered launching a “lite advisory” service – by the day or even by the hour. Content wise - people have asked me how about a podcast? How about a Substack newsletter? 

All worthwhile, but to me it always comes down to form v substance. Each new delivery format takes time away from the substance. And substance wise, this year will be massively different. Here are some of our guiding principles for 2022

• Rebalancing of private and public sector

Going back to days of Keynes, government deficit spending has frequently revved economies out of recessions and other crises. But nothing like the pandemic has seen. In the US alone, our national debt in 2020 and 2021 increased over $6 trillion. That is unhealthy and addictive. Worse, it has given our politicians and bureaucrats almost autocratic power. I see a course correction and a lot more energy back in the private sector. In 2020, I ran a video series where I interviewed C- level execs. It was called “Acrobatics during the Crisis”. We expect to similarly catalog in 2022 private sector heroics and consult with them as they reshape broken supply chains, rebalance their work forces and rethink processes for a changed world.

• Upheaval in most industries

Every industry learned to do something very different during the pandemic. Telemedicine in healthcare, distance learning in higher ed, micro-fulfillment in retail, last mile delivery in food service, virtual open houses in real estate among them. These will get baked into the business fabric for these industries. Climate change is having a similar impact – the circular economy has become a design principle in product design. Digital transformations are allowing for new business models like servitization in many industrial sectors. It is a hugely exciting or frightening time, but no industry will escape untouched. 

• Ascendancy of customer service

One of the biggest casualties of the pandemic has been customer service. I have coined the terms “COVID copout” and “Brexit BS” for some of the excuses we have all experienced. It is universal - in our travels, at auto dealers, at financial institutions, at dining establishments. Here is my reaction – for the next couple of years, businesses which can provide consistent. predictable service while managing price inflation will ABSOLUTELY gain competitive advantage.

• Man-machine rethink

Five years ago I wrote Silicon Collar. The book looked at how automation – machine learning, robotics, unmanned autonomous vehicles, white collar bots, and exoskeletons – was changing the nature of work in over 50 settings – in accounting firms, on the basketball court, in banks, in the oil patch, in R&D labs, on shop floors, in the warehouse and many more. The conclusion “we are no longer white, blue or brown collar workers – we are all Silicon Collar workers since technology is reshaping all our workplaces”. The man- machine balance shifted significantly during the pandemic. People are also talking about the “great resignation”. I am also seeing the “great migration” and the “great retirement” as tens of thousands relocate to my home state, Florida. Many are technically not retiring but starting new careers. And like our quarterback, Tom Brady who at 44 continues to break the laws of aging, are inspiring others to extend their careers, and are attracting surround talent along with their own moves. Companies have long ignored age as a dimension in their diversity goals. I expect that to get rethought.   

• Further content fragmentation

For my blogs, I have always read a portfolio of magazines and watched a wide range of non-political video channels. The pandemic and climate change focus has got us addicted to lots of COVID and weather and energy related news. I am seeing lots of citizens question government propaganda, media bias and social media censorship. The old Watergate “follow the money” guidance is alive and well when it comes to trust about information.  As a result, information fragmentation has massively accelerated - I have been amazed how many fringe platforms and media personalities have gained market share.  The good news is I tend to depend more on primary research and balance out a wide range of information sources. The more the merrier.

Long and short, I believe 2022 is the true start of a brand new decade after a couple of aberrant years. As Brady likes to scream “Let’s Go” and  that is now part of his new Hertz endorsements.

Burning Platform: Acronyms, Buzzwords and Customer Realities

In the 56th episode of Burning Platform, we host Jon Reed, a co-founder of Diginomica.

He is a fellow Enterprise Irregular who blogs and videocasts on enterprise trends. One of his most popular, regular features is Enterprise Hits and Misses. He is incisive, snarky, funny all at once.

We start off dissecting a Gartner slide from their recent Symposium, a list of 12 of what they call "Top Strategic Technology Trends for 2022" like Hyperautomation.  We use that as a launching pad for a discussion on what we think customers are looking for after the turmoil of the last 18 months. Jon makes a great point - he wishes he could see Gartner's hype cycle around each of their 12 trends.

We discuss the need for application/business process vision in addition to architectural evolution, and the need for OT (operational technology, especially industry specific) in addition to an IT focus.

We also discuss virtual events in the industry. Jon has been particularly forceful in pushing for an evolution in that format.

We also bring into the conversation a fellow analyst, Ray Wang and his new book, Digital Giants. Ray had presented about it in the Analyst Cam series here. 

It is a peek into conversations that us market watchers often have when we are away from tech vendors and buyers. Actually both of us are pretty well behaved - we can be far snarkier when there is no camera in sight:)

Thinking outside the Magic Quadrant

First an apology, I could have it titled this post as well with the Forrester Wave or the IDC MarketScape.

Next a mea culpa, I unleashed a few MQs during my tenure at Gartner in the 90s. However, in the years since I have become much more aware of the disconnect between tech buyers and vendors about the value of such tools.

When I was at Gartner, its revenues came largely from buyers. In the run up to Y2K, my colleagues and I did thousands of calls with buyers actively making ERP decisions. Coming up with the MQs - the leaders, challengers - was pretty easy with that market driven data. We did not have a composite win/loss analysis but we could make some pretty educated guesses about market share and momentum.

In today’s much more fragmented IT marketplace, especially since analyst revenues have become more vendor centric it must be so much more difficult. Analysts have to poll vendors for what we used to gather from market signals. You hear vendors whisper in frustration at how much effort it requires on their part.

The bigger issue is how buyers use MQs or Waves. It is just the tip of a spear. It is used to come up with a short list of vendors to evaluate. Detailed RFPs, demos, site visits, reference calls, lengthy negotiations are far more influential in the final decision. Nearly 15 years ago, I wrote about the ‘1,000 points of influence’. With growth of social media, the influence points have only grown. In composite, they help buyers derive their personalized "Interactive MQ".

Also, once they have decided on a vendor, most buyers don’t pay much attention to that MQ category till their next purchase - that could be a couple of decades. Oh, if a vendor drops precipitously from the Leader to the Niche quadrant, they would be concerned, but such moves tend to be glacial.

Vendors, in contrast, get their microscopes out to measure how much they moved from one MQ to the next. It’s fodder for press releases. I especially enjoy the Triple Crown announcements. “We are a leader in Analyst A, B and C’s tools.” I want to ask them - and how many buyer steps above did that eliminate?

MQs and similar tools also tend to reinforce silos in analyst firms. That can drive what I have described as Addressable Market Myopia 

There is a whole community of very committed Analyst Relations folks at vendors. Ignoring MQs would be suicidal, but does so much talent need to be invested every year on the MQ/MarketScape process?

Some of them will ask me what would you do differently. I am happy to help them think outside the box - ok, the square - in how to directly help their sales colleagues in their pursuits. How to help their companies think about and present their products differently and much more creatively. How to look around the corner - the analyst intermediary.  

No press release needed.

ERP - Generation Next

I read Jon Reed's  Diginomica interview with Rondy Ng, Senior Vice President, Applications Development at Oracle. He cites some very large cloud ERP customers - Bank of America/Merrill Lynch, FedEx, Kroger and Albertsons. Encouragingly, he also cites plenty of global coverage. Good to see that traction.

But what functionality have they deployed? I saw General Ledger mentioned a couple of times along with procurement and analytics. But no mention of manufacturing, logistics, banking/brokerage functionality, micro-fulfillment, or reverse logistics. I have heard Larry Ellison similarly use the ERP moniker in earnings calls and event keynotes, but never really discuss any operational functionality. Leads me to ask: Is that the new, shrunk definition of ERP - core financials and possibly human resources?

While I was pondering that, I found myself going down memory lane to 1995 when I joined Gartner. Gartner had coined the ERP term and they had made a conscious effort to bring in several new recruits with business process expertise. Tom Ryan, as part of the ILS service, brought warehouse management and broader logistics experience. Chris Jones, part of CIM, brought process manufacturing. As part of AAS, I brought financial and hr expertise from years at Price Waterhouse. There were several others who focused on PDM, MKT and other functional areas. We definitely contributed to a proliferation in TLAs but I know for a fact we drove vendors to sharpen their process breadth and depth.  Talking of TLAs, I had coined one - AMM - Addressable Market Myopia for vendors who were narrow in their functional reach, but did not dare propose it to Gartner censors :) 

When I left in 2000, I was confident Gartner would expand its ERP focus beyond manufacturing sectors. After all, in most western economies, nearly 3/4 of jobs were in the service sector. And each has unique books of record - insurance needs those around policies and claims, health care had unique clinical and compliance requirements and so on. The manufacturing sector itself was morphing significantly. The products are smarter with embedded software and sensors. The plant was becoming more autonomous. Asset management was no longer just about calculating depreciation for the CFO. It is about predictive maintenance, more sophisticated servicing via digital twins and augmented reality.

But Gartner has only inconsistently focused on this functional evolution. Many of the process experts they had hired in the 90s were gone by the end of the decade.  If anything, it swung back to its IT comfort zone and has emphasized the architectural aspects of cloud computing. And, almost on cue, many ERP vendors made transitioning to the cloud their major focus of the last couple of decades. Functionality and process expertise took a back seat. No wonder, some vendors are shrinking their definitions of ERP to suit their limited functionality. And CRM, EAM and other categories have encroached on spaces ERP vendors have neglected.

I sense a new generation of ERP coming. The pendulum is swinging from a technology focus to a functional focus. The pandemic has sharpened industry specific needs. Telemedicine in healthcare, distance learning in higher education, virtual open houses and digital mortgages in real estate are just some of the examples.

Just last week, I had several reminders of the functional evolution. Zoho gave me a pre-briefing on its updated Zoho One suite. It will officially be announced in a couple of weeks, but the suite has now grown to 45 applications. SAP has lined up 9 briefings for me across its verticals. I met with Mike Ettling, CEO of Unit4 and we discussed how his verticals are evolving. I was part of a virtual event on Servitization and heard how automotive, construction and many other sectors are increasingly moving to "everything as a service".     

Gartner coined the term ERP just prior to when I got there. But for a couple of decades companies had already been deploying MRP and MRP II functionality. We will similarly see a next generation. It may not even be called ERP - to shed the baggage the moniker has acquired with too many delayed and bloated projects.

But the market is definitely marching forward. One thing I am fairly certain of - the next gen of ERP will not suffer from AMM - Addressable Market Myopia.

Adding from a twitter thread with Jon

In fairness many other vendors have not evolved their functionality especially during the pandemic and with recent supply chain issues. Lots of brilliant architects but few process visionaries. Need both.

With brilliant architects but no process visionaries you would never get Amazon’s fulfillment center with chaos theory models, miles of conveyors and hundreds of robots. You would deliver the old process model.

Marc Benioff's bet on 'Trusted Enterprises"

Marc Benioff, CEO of Salesforce, used his keynote at Dreamforce to point out that we are "in a trust crisis". He coined a new term, Trustblazers, building on the successful Trailblazer community around the company. He showcased several of his customers as examples of "trusted enterprises" and promised “We want to have a playbook for this new trusted enterprise. It‘s got to start with trust. It has to.”

Watch the rerun here

To me, Marc and his team definitely have the credibility to talk about "trusted enterprises".  As far back as 2010, I wrote "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?"

When Marc talks diversity and inclusion, I see it in his executives like Tony Prophet, Neeracha Taychakhoonavudh and Jujhar Singh. Not only are they competent, they are modest enough like Tony is in the interview linked to say, they themselves have a long way to go.  I hear it in the words of Tyler Prince when he describes how he has also pushed a focus on diversity in the ecosystem around Salesforce.

He has credibility as customers plan for COVID recovery with the push around his recent acquisition, Slack as a collaboration, work from anywhere, platform and as he calls it his "Digital HQ"

What I would caution Marc (and other influential executives) about is the zealots who jump on the bandwagon of "causes". I recently commented on Dennis Howlett's post on "Wokeistan" "These are do gooders who guilt us all about gender, race, sexual orientation, inequality, sustainability, vaccines and so much else. You must agree with our position - don’t dare present contrary data or else you are racist, sexist, MAGA, deserve canceling, and worse."

Let's look at sustainability, as an example. We should have been focusing on the "circular economy" which the WEF defines as “an industrial system that is restorative or regenerative by intention and design." Instead, a lot of attention has gone toward demonizing fossil fuels and building up renewables, particularly wind and solar fuel.

As Europe stares at a winter with major fuel shortages, it is useful to learn from the German experience over the last decade 

I started pointing out a few years ago that "in spite of spending hundreds of billions of euros on subsidizing renewables, Germany will struggle to meet its 18% renewables target for 2020. The country continues to rely heavily on its coal and lignite, and more recently on natural gas from Russia."

However, most just lauded Angela Merkel as Klimakanzlerin  or "climate chancellor". Now that she is out of office, we are starting to see sobering assessments. Here's Bloomberg, The Wall Street Journal and New Statesman.

The reality is Lufthansa will fly on aviation fuel, the German export engine will rely on tankers which run on bunker fuel, German auto makers will make diesel cars for a long time. Look at this site about carbon intensity (the amount of CO2 produced to generate a unit of electricity - a kilowatt per hour) across Europe. 

The important thing is not to just focus on Germany which looks a bit stark. Look instead at how green France, Iceland and Norway look. They have done so with a focus on nuclear, geothermal and hydroelectric power  It is a reminder to other economies to not just look at renewables. We should all be looking at a balanced energy strategy. And expand the definition of sustainability.

In their fervor, fanboys actually hurt the credibility of so many other worthy causes. I can provide several more examples around many causes where they have narrowed the focus. Hope Marc emphasizes a 360 degree view as he builds the playbook. 

In the meantime, watch the keynote and Marc's passion about building trust.

Enterprise Applications: Get busy living or get busy dying

I have been telling some of my friends "I started my career when the pendulum said "Build systems, don't buy them". Since my first implementation (a mainframe application in 1983) I have enjoyed a glory time for packaged applications and related services. However, I am afraid I will end my career with the pendulum swinging back to "Build, don't Buy"

Ok, for starters, I am not retiring anytime soon, so this is not likely to happen for a few years. But then, I have been saying it for a while. In SAP Nation 3.0, which came out two and half years ago, I wrote

"Enterprise vendors, who were sitting so pretty at the turn of the century, have lagged in many new markets, as profiled in the last bunch of subsections (I had identified markets like smart products, digital marketing and the Industrial Internet they missed)."

and

"More alarmingly, we are starting to see customers get tired of waiting for vendors and go back to building their own replacement systems. With microservices, open source and other options, we are seeing the pendulum swing away from buy back to build. That’s a stunning reversal from the 1990s."

What happened last year has only accelerated the pace. We saw new ways of doing business (micro-fulfillment, telemedicine, virtual open houses in real estate etc etc) in most industries and geographies, but many vendors continue to sell what they had in the bag in January 2020.

I saw The Shawshank Redemption recently (for the nth time) where the Andy Dufresne character says at a pivotal point "Get busy living or get busy dying". And I asked myself why are we wasting time with vendors which 2020 confirmed are the 'living dead",  when there are so many others are vibrant?

Let's talk about the vibrant ones first. Whether you think they can get there or not, I love Salseforce's ambition to get to $50 billion in 5 years - 2.5 today's revenues or Workday with its goal of $10 billion by 2025.  My recent conversation with Tyler Prince, who runs Global Alliances at Salesforce only confirmed it.  

You can see the whole interview with Tyler here and he talks about how Salesforce ISV partners like nCino helped banks through the pandemic. He talks about how SI partners pivoted to a world of virtual deliveries. How with the Slack acquisition Salesforce is helping customers deliver Success from Anywhere with the continued chaos of COVID workplaces. How the TrailBlazer community continues to blossom.

In background, we had a chance to reminisce a bit. Tyler and I helped Price Waterhouse set up a software intelligence group - an internal, mini Gartner - in the early 90s. Tyler reminded me we "found" i2, Commerce One, Platinum Software and many other vendors and introduced them to the PW field. Most of those vendors are a distant memory - as they have changed names or are part of other entities. But it reinforced to me, Salesforce has been busy living.

There are many others who are keeping up with rapid changes. In a book, I recently helped narrate for a CEO I talked to a number of companies which are dramatically reshaping their business models to outcome based contracts and developing platforms like those of Apple and Google. I have talked to strategy consultants and investors who are putting together application portfolios for micro-verticals most vendors know very little about. More proof of busy living.

Now for the living dead. While they continue to invest in areas like quantum computing, they have done little to help move along the enterprise application game. If anything, their products and services burden applications with a significant layer of overhead.

Take Arvind Krishna, the new CEO at IBM. He inherited from the previous CEO, Ginni Rometty a labor-intensive outsourcing business and an aging systems software portfolio where application assets like Maximo struggle to be recognized (Tivoli, Domino - want me to go on?).  Ginni herself was dealt those cards by Sam Palmisano a decade prior. IBM now has a cash dividend yield which makes some public utilities look stingy. Not my idea of "get busy living" in this vibrant digital market.

Or Oracle. It continues to spend billions of dollars in legal fees trying to protect a business model of maintenance revenue which is decades old. Think how long it would take them to move to outcome based models. They call themselves an ERP vendor, but hardly ever talk about operational areas. They spent billions acquiring retail, utility, telco and other vertical industry assets but largely talk about their cross-industry accounting and HCM products. The cross-industry space is one of the most crowded with competitors. Their prerogative - but not my idea of "get busy living"

In contrast, there are companies like Amazon and Spotify delivering ecommerce and fulfillment capabilities to thousands of small merchants. On a pay-as-you-go basis. There is Zoho which has taken a page out of Amazon Prime and keeps delivering to thousands of SMEs  more apps each year for the same price as part of its Zoho One suite. Think these customers are going to sign up for Oracle or NetSuite licensing and IBM's hybrid clouds and services given the price points and convenience they have become used to? Or even large companies - I know several executives who have unwritten "no new purchase" policies around vendors who have treated them like cash cows over the last decade.

Don't mean to pick on just those two vendors. There are many other vendors who have wasted much of the last decade.

They have been busy:

- renaming products (over and over) instead of building new functionality

- pretending to be focused on UX and "experience" when much of the innovation there has come from consumer tech.

- investing heavily in analytics and cloud architecture but not growing their geographic or vertical functionality

- continuing to rely on armies of people when they should be automating and moving to digital services like their customers

- screaming about machine learning when very little customer data is available in their clouds or worse, is locked up in customer data centers their machines cannot learn from

- scheming to charge more for the same while claiming to be proud about Moore's Law

- bragging about their diversity, their "ethics", their green policies. Nice, but how about also some new features and functions?

I do hope they turn around. I am reminded of this quote from Hemingway's novel The Sun Also Rises

“How did you go bankrupt?” Bill asked.

“Two ways,” Mike said. “Gradually, then suddenly.”

I plan to spend much more time with those busy living. And especially with those that recognize they are at a critical juncture and like Andy decide they need to do something radical.

Marc Benioff, CEO of Salesforce, has long preached the Zen Buddhist concept of Shoshin = Beginner's Mind. Look at everything afresh, even if you are an expert in the field. He said again recently "In this new world, if you're not cultivating a beginner's mind as a CEO, you're making a mistake."

I could not agree more. Pivots, rebrands and turnarounds are always more fun to work with. Let's get busy living. So many new applications to create and deliver.

My Happy Place: New Florence

The New Florence. New Renaissance innovation blog was born in March 2005. Facebook had a different name then. No one had heard of the iPhone. Or SpaceX.  Or AWS. Honestly, I thought I would run out of material in a couple of years. After 6,500 posts, I can safely say I grossly miscalculated. If anything, innovation keeps accelerating.

Someone asked me if it took 15-20 minutes to write a post. He was off by a 10X factor. Much of the effort is in deciding what to profile. I note down everything interesting I read, I see on TV, I experience in my travels, I see in my advisory work. One in 5 finally makes it to a post. Then I find a couple of articles and videos to embed which provide different perspectives on the topic. Digitizing much of the content takes surprising amount of time. I used to go to Barnes and Noble once a month and run through a bunch of magazines and get ideas from them. Now I get them from over 50 magazines on Apple News, similar number of channels on YouTube TV and some direct subscriptions. The next challenge is to find as many non-paywall versions of the content to embed. Some of them annoyingly will not even let me access the full content even though I have paid for them via Apple or Google. Why would I burden my readers with those pubs?

In the last year, I have launched a whole bunch of video series (on the Deal Architect YouTube channel) and several travel posts on Instagram. I have been busy helping a CEO narrate a book, and work on several advisory projects. All that has reduced time for New Florence. But I carved out time for it in the last few weeks. 

And it has been a joyous time. I got to research the drones, the autonomous shuttles and other technology at the Tokyo Olympics. I have explored what Paris will offer at the 2024 games. I have seen Jeff Bezos pivot to space, Mark Zuckerberg to his vision of metaverse, and Elon Musk to domestic robots. I got to profile our trip to the sites and history of Wyoming and South Dakota. Much more coming.

In contrast, I see so many people continue to scare others about COVID or harp on woke stuff. Whatever. To me, the world moves forward when people deliver innovative products, amazing customer service and creative solutions to problems. They deserve to be profiled.

I chose the title of the blog 16 years ago because I thought Florence must have felt as vibrant and creative during the European Renaissance. I am even more convinced of that.

It is a great time to be alive!

Projecting technology leaders for this decade

Over my career I have seen tech industry leadership change every decade or so. Analysts like to come up with acronyms for the leaders and I have seen them evolve from BUNCH to JBOPS to FAANG. I myself coined the acronym SWITCH when the Indian outsourcers were in ascendancy in the early 2000s.

In the past, we have seen technology architecture changes deliver windows for major disruptions - the move from mainframe to client/server, then to the cloud. You could argue we are now seeing an acceleration to the cloud. Hyperscalers - Microsoft, Amazon, Google, Alibaba and dominant SaaS category vendors like Salesforce and Workday are taking over.

But I want to be careful and not fall into the trap of linear thinking and just extrapolate from the past  I think there are at least two other new trends at play this time around - growing interest in new business models and big changes in how we live, work, play and the impact that is having on various industries and their technology needs. And that is opening the door for many new players to have a shot at joining the leadership suite.

Let me give you some examples

a) Every major vendor talks about how ecommerce took off last year - thanks to the pandemic. Very few of them talk about the need to fulfill that massive incremental demand. I was reminded of that when I attended a virtual tour of Amazon Fulfillment Centers last week. It had been 2 years since I had gone to an in-person tour of their JAX2 center, and they keep scaling and navigating around the pandemic.  What's impressive is the integration of Kiva and other robots, miles of conveyor belts, "chaotic storage" with locations all stored in AWS memory, thousands of scanners, cameras and printers at each of the centers and the growing transport fleets of electric vehicles and Boeing 767s and coordination with countless 3PLs. The efficiency is mind boggling - 2,000 or so humans process a million packages a day and most are delivered within 2 days of when the order is placed. You think Amazon will stay content as a AWS infrastructure provider? The level of technology capability and integration in their fulfillment positions them to be a dominant technology integrator in many other industries. Just as impressive is the "scaling down" the co-CEOs of 6 River Systems described here and have been delivering for Spotify. The move to "micro-fulfillment" allows them to accommodate new models like flash sales, order on-line, pick-up in stores, regionalized inventories, last-mile delivery expectations and constraints while keeping warehouse workers safely distanced, quickly trained and incredibly productive. 

These new fulfillment models have called for bunch of new functionality (I didn't even touch on the hairy reverse logistics) and importantly a very different business model. They don't sell licenses or subscriptions to the merchants who use their platform - it is an outcome based model. They get paid as the merchants get paid.

b) Jamie Dimon, CEO of JP Morgan Chase wrote in his annual shareholder letter earlier this year.

“Banks already compete against a large and powerful shadow banking system. And they are facing extensive competition from Silicon Valley, both in the form of fintechs and big tech companies (Amazon, Apple, Facebook, Google and now Walmart), that is here to stay. As the importance of cloud, AI and digital platforms grows, this competition will become even more formidable. As a result, banks are playing an increasingly smaller role in the financial system.”

Notice that he did not mention any of software vendors and outsourcers we have long known.

Walmart? Yes look at all the financial services they are into. Even more impressive is Apple. While everyone talks about the success of their devices, the biggest achievement Tim Cook has delivered is the move into services - App Store fees, Apple Music, AppleCare, and revenue from Apple Pay. And much of these are digital services not the labor intensive models outsourcing firms continue with.

BTW, JPM and other big financial institutions themselves are no slouches. They spend as much on technology annually as the R&D budgets of IBM and Oracle combined. JPM's technology group has an annual $11 billion technology spend. Who's to say they cannot become tech vendors in their own right?

c) In the last year, I have had a chance to speak to execs in several asset intensive industries - aviation, railroads, energy etc. It is impressive how tech savvy many have become. They are setting up digital twins of their equipment, making their assets autonomous, using AR in field service, sensors for predictive maintenance, investing heavily in OT (as different from IT) security. Some are eyeing plans to support other's equipment, even in unrelated industries. They are moving to servitization business models at stringent SLAs that are far more demanding that what tech vendors are used to. The asset management software of many tech vendors are glorified depreciation calculators. They have not evolved their functionality, and certainly not their business models. Don't count out the GE's, the Siemens and other industrial companies as potential leaders of tech world.

d) The pandemic exposed us to a world of new digital "channel masters". What's to stop an Instacart from pivoting from delivering groceries and setting up their own supply chain of farmers and consumer goods? Or a Doordash from establishing a chain of ethnic ghost kitchens? Or a Teladoc setting up their own network of telemedicine health care professionals?

I think this decade is going to be a wild one with a blurring of traditional tech buyer/vendor lines. I advise my buy side clients - don't just look at Magic Quadrants. They reflect yesterday's tech categories and yesterday's leaders. I advise vendor clients - don't define your addressable market too narrowly. If the competitors who show up in your win/loss analysis next year are the same as those that appeared last year, maybe, just maybe you are not evolving quick enough.

Analyst Cam: Cognizant "Timeline of Next"

A few months ago, Cognizant asked a few market watchers to look at how we would live, work and learn differently as a result of the 2020 pandemic. Our forecasts were published in 16 themes in their Timeline of Next report - download a copy here. 

A week ago, Cognizant invited three of us: Beth Porter, CEO of Riff Analytics and Managing Partner of Esme Learning, Clay Griffith, Director of Product Marketing, Cognizant Softvision and me to a hour-long webinar on the themes from the report. Manish Bahl, AVP of the Cognizant Center for the Future of Work moderated the discussion.

I have excerpted below 2 segments from each of the living, working and learning sections of the webinar. We covered a lot more ground in the webinar. I would encourage you to watch the whole session by registering here and to read the report.

We got a lot of questions during the webinar - we answered some live, and responded to many others in writing after the session. If you have any questions, send me an email and I will similarly get one of us to respond.

BTW, I mention a business travel survey I recently conducted - you can read details in this post . 

On the road again: Pandemic travel experiences - Part 1

Many executives I talk to complain of the fatigue from all-day Teams and Zoom calls. They cannot wait to get on the road again. So, I thought I would share our family's recent experience - 3 airports, 5 flights, 9 hotels, 2 rental cars, plenty of restaurants. I had described our journey across the US states of Colorado, South Dakota and Wyoming in this note here. 

Accenture's design agency Fjord, coined a term "liquid expectations" — "when you experience a service in one industry, it raises the bar for what you expect from other industries." I like the term and additionally like to benchmark against my experiences from competitors within an industry. I also benchmark against past experiences with a company.

Marriott tells me I have slept over 4 years in their hotels. Avis told me a couple of years ago some similarly crazy number of times we have rented from them. I have qualified for Southwest's highest level - Companion Pass - for nearly a decade. I am a Delta 3 million miler. Been to 75 countries. I have plenty to benchmark against.

This time I broadened the benchmark even further. I ran a survey of fellow analysts and business execs who have done multiple trips in the last few months. I will share that in Part 2.

Long and short - there is a noticeable decline in service across all travel categories I list below. While some of that is explained by labor shortages/supply chain issues plaguing the economy, there is also what I call "COVID copouts" - using the pandemic as an excuse for lowered service

Airports

All 3 of us (my wife, Margaret daughter, Rita and I) flew on different Southwest flights from Tampa (TPA) to Denver (DEN) and back. In addition I had a weather diversion on the way back and we had to land in Orlando (MCO) for a couple of hours.

With TSA Precheck, both Margaret and I found TPA and DEN security lines actually friendlier and quicker than before the pandemic. My daughter does not have it, and found her lines chaotic.

All 3 airports required masks, but the Southwest terminals were overcrowded. I tried to listen to a vendor presentation at DEN airport and it was so noisy I gave up.  The food outlets at their terminals also had long lines.

Southwest at DEN took inordinate amount of time delivering bags - almost 45 minutes both for our flight and for Rita's

Southwest at TPA did not have curbside baggage check-in (when we asked they said "COVID"). DEN did. Southwest had kiosks in both airports which generate tags which speed up the luggage check in process somewhat - however, many first time users find the UX confusing.

TPA usually has a taxi dispatcher. I waited 20 minutes - his handheld radio was crackling at the booth but he was nowhere in sight. One taxi asked for my destination and said it was not on his way home and he drove off. The next one tried to force me to ride share. A taxi! I refused. Even though the car showed the official United Cab logo, he appeared to be a gypsy driver. There was no identification, no fare meter - he quoted me a "take it or leave it" fare. He would not take a credit card or provide a receipt. As we were exiting the airport he nearly had an accident. At that moment, I briefly panicked and was about to call 911 to have him arrested. I have heard that in some cities, taxicabs have used the pandemic to clean up their cars and their acts to regain market share from Uber and Lyft. Clearly, not my experience at TPA, which in other ways still is one of the best airports in the country.

Airlines

Southwest reservations (including a call to upgrade), check-in, wifi on board all worked smoothly. Other than my weather diversion, flights were on time.

The in-flight experience was disappointing. They have quit serving alcohol because of unruly behavior on flights. No problem, but their COVID copout has been to reduce the choice in drinks down to only Coke, Diet Coke, Sprite, Coffee or Water. I had told some kids while boarding they had could have a treat onboard - Hot Chocolate. Before the pandemic, I have ordered that on many Southwest flights. I had to walk back and apologize to them. No hot tea - if you had a tea bag, they could offer you hot water, With the extra time from simpler orders, the flight attendants appear to have more time for monitoring for mask compliance. If you had it off for more than a few seconds while you were eating or drinking you would feel a tap on your shoulder. In contrast, I was surprised that the announcements made no mention of the HEPA filters, the electrostatic disinfectant and daily deep cleaning the planes go through. To me, making passengers relax is far better than tapping them on their shoulders.

More positively, the upgrade to Business Select was much more affordable than it used to be before the pandemic.   

Hotels

We stayed at 4 different Marriott brands - Gaylord, Residence Inn, Springhill Suites, Fairfield Inn, a Xanterra property (Old Faithful Inn), a Best Western and independent properties in smaller towns. Each had their good and bad but using the liquid expectations thinking you wonder why the Gaylord and the Best Western had superb buffets, but the Residence Inn and Springhill Suites had excuses why they could not host breakfast buffets. Old Faithful Inn had NO hot food at all. Across all the hotels we saw insufficient staff - my wife has a bad back and we would have appreciated some help with the bags.  Our worst experience was at the Old Faithful Inn. Margaret was looking forward to the historic property and we were paying Four Seasons type prices. She is not one to complain but was so disappointed that she went with a long list of issues to the manager who, without hesitation, knocked 50% off our bill. 

Rental Cars

I rented a SUV from Avis at DEN at an average rate $75 a day (we got a break for a week long rental). Not bad considering someone told us when we were in Jackson, WY the rates there were $500 a day. But ours had 45,000 miles, was all scratched up, did not have a toll tag (so we will see what that means in tolls and Avis add-ons). The Avis bus drivers at DEN airport were like the Southwest flight attendants - more eager to bark about masks than help people with bags. So bags were rolling all over the buses. Unsafe experience. On the positive side, the reservation online, the Express checkin and checkout were pretty smooth.

Rita rented a car from Thrifty at DEN and the checkin line was an hour long. She paid $100 a day for a compact car.   

Uber/Taxis

My taxi experience described above was scary. Rita used Uber/Lyft and found them fine. I have heard from others of long waits and that surge pricing is increasingly the norm for both services.

Dining

The best advice we picked up - ask locals. Some of the best meals we had on the trip came courtesy of our son, Tommy who works in the Denver area, and knows what is open, how long a wait etc. Thanks to COVID copouts at Starbucks and McDonalds we discovered that in smaller towns some of the gas stations have decent comfort food. We asked each if we could use their restroom and they pointed us to the gas stations :)

Mobile service

T-Mobile claims to have largest, fastest, and most reliable 5G network in the country. I would say in 1,800 out of the 2,000 miles we drove across the 3 states there was no 5G coverage. In fact, in half the distance there was NO coverage at all. I am glad we had backup AAA paper maps. The most shocking was at the Old Faithful geyser that we stayed near. It is estimated to get 4 million visitors a year and the best we could do was text each other. 

Bottom Line

While GE has adopted a new tag line "Building a World that Works", I don't get the same sense from travel executives that there is a focus on the "world that works" part. They are looking for sympathy because they had a crappy 2020. They conveniently ignore all the bailouts and PPP loans they got.

As the new CEO of Marriott recently said "I’ve described this phenomenon as the friction that exists between the short memory of our guests and the long memory of our owners.” Translation - "we need to take care of our investors/franchisees, sure customers will put up with the lowered service"

I am afraid the travel industry is the one with the short memory. They appear to have forgotten they desperately need to bring business customers back in droves. These executives may initially be excited to hit the road but after a couple of trips come to the conclusion "this is not really a better alternative to the digital fatigue". I heard some really interesting adjustments executives are already making. Will discuss them in Part 2 next week.

Ironically, Whole Foods opened a 48,000 square foot store in my town last week. It has a salad bar with 15 soups and 50 salads (not just individual items, specialty salads). They have gloves, disposable plates and cutlery for patrons, so the hygiene concerns are lowered. They have a decent sized sitting area where you can reasonably distance. Think of the chain of liquid expectations that is setting in motion. If they can do it, why not you, Mr. Hotel or Restaurant operator?