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              Showing posts with label strategy. Show all posts
              Showing posts with label strategy. Show all posts

              Tuesday, September 30, 2014

              Focus On Your Customers And Not Competitors


              A lorry is a symbol of Indian logistics and the person who is posing against it is about to rethink infrastructure and logistics in India. Jeff Bezos is enjoying his trip to India charting Amazon’s growth plan where competitors like Flipkart have been aggressively growing and have satisfied customer base. This is not the first time Bezos has been to India and he seems to understand Indian market far better than many CEOs of American companies. His interview with a leading Indian publication didn’t get much attention in the US where he discusses Amazon’s growth strategy in India.

              When asked whether he is in panic mode:
              For 19 years we have succeeded by staying heads down, focused on our customers. For better or for worse, we spend very little time looking at our competitors. It is better to stay focused on customers as they are the ones paying for your services. Competitors are never going to give you any money.
              I always believe in focusing on customers, especially on their latent unmet needs. Many confuse not focusing on competitors as not competing. That’s not true at all. Compete hard in the market but define your own rules and focus on your customers. Making noise about your competitors and fixating on their strategies won’t take you anywhere.
              But there's also some opportunity to build infrastructure from scratch. When you think of facilitation commerce between small shops and the end-consumer there would be things you would build - I don't know what they are, we will have to invent some of these things - that you might not build in other geographies where infrastructure grew for different purposes.
              All emerging economies are different and India is a very different market. Bezos does seem to comprehend that. Things that you take for granted and things that you would invest into in the western countries are vastly different in India. Amazon has a great opportunity to rethink logistics and infrastructure.
              The three things that I know for sure the Indian customer will still want 10 years from now: vast selection, fair, competitive prices and faster, reliable delivery. All the effort we put into adding energy into our delivery systems, reducing defects and making the customer experience better, I know those things will be appreciated 10 years from now. We could build a business strategy around that.
              Innovating doesn’t mean reinventing strategy, the "what." What holds true in the US is likely hold true in India as well. It’s the execution—the “how”—will be different.

              Speaking of Amazon as a growth company:
              I like a quote from Warren Buffet who famously said: You can hold a ballet and that's okay and you can hold a rock concert and that's okay. Just don't hold a ballet and advertise it as a rock concert. Are we holding a ballet or are we holding a rock concert? Then, investors get to select. They know we have a long-term viewpoint. They know that we take cash flow that gets generated from our successful businesses and invest in new opportunities. India is a great example of that happening.
              Even though Amazon has been in business for a long time with soaring revenue in mature categories the street sees it as a high growth company and tolerates near zero margin and surprises that Jeff Bezos brings in every quarter. Bezos has managed to convince the street that Amazon is still in heavy growth mode and hasn't yet arrived. In short term you won’t see Amazon slowing down. They will continue to invest their profit in their future to build even bigger businesses instead of paying it out to investors.

              When asked whether Google is Amazon’s biggest rival:
              I resist getting in to that kind of conversation because it is not how I think about our business. There are companies who in their annual planning process literally start with: Who are our three biggest competitors? And they'll write them down. This is competitor number one, two and three. Then they'll develop strategies for each of them. That's not how our annual planning is done. We do have an annual planning process and actually we are right in the middle of it now. We start with,`What'll we deliver to our customers? What are the big ideas, themes?'
              Amazon has innovated by focusing on what customers really care about and not what the competitors do. This approach has paid off and I can see why Bezos is keen to do the same in the Indian market.

              I really liked what he said when asked about being gifted and being kind:
              I believe that humans would achieve anything that we are determined to achieve, if we work hard. So, celebrate your gifts but you can only be proud of your choices. And, cleverness is gift. You cannot become Einstein no matter how much you work. You have to really decide on how you're going to make choices in your life. You get to decide to be a good husband and a good father.
              I strongly believe in why making right choices is more important than being gifted. I share this with as many people as I can and I also tell them, “you control your effort and not the outcome.”

              Photo courtesy: Times of India

              Wednesday, March 12, 2014

              Why And How Should You Hire A Chief Customer Success Officer?


              For an ISV (Independent Software Vendor) it is everyone's job to ensure customer success but it is no one person's job. This is changing. I see more and more companies realizing this challenge and want to do something about it.

              Sales is interested in maintaining relationship with customers for revenue purposes and support works with customers in case of product issues and escalations. Product teams behave more like silos when they approach their customers because of their restricted scope and vision. Most chief technology officers are fairly technical and internal facing. Most of them also lack the business context—empathy for true business challenges—of their customers. They are quite passionate about what they do but they invariably end up spending a lot of time in making key product and technical decisions for the company losing sight of much bigger issues that customers might be facing. Most chief strategy officers focus on company's vision as well as strategy across lines of businesses but while they have strong business acumen they are not customer-centric and lack technical as well as product leadership to understand deep underlying systemic issues.

              Traditional ways to measure customer success is through product adoption, customer churn, and customer acquisition but the role of a Chief Customer Success Officer (CCO) extends way beyond that. One of the best ways to watch early signs of market shift is to very closely watch your progressive customers. Working with these customers and watching them will also help you find ways to improve existing product portfolio and add new products, organically or through acquisitions. Participating in sales cycles will help you better understand the competition, pricing points, and most importantly readiness of your field to execute on your sales strategy.

              I often get reached out by folks asking what kind of people they should be looking for when they plan to hire a CCO. I tell them to look for the following:

              T-shaped: Customer don't neatly fall into your one line of business and so is your CCO. You are looking for someone who has broad exposure and experince across different functions through his or her previous roles and deep expertise in one domain. The CCO would work across LoBs to ensure customers are getting what they want and help you build a sustainable business. Most T-shaped people I have worked with are fast-learners. They very quickly understand continuously changing business, frame their point of view, and execute by collaborating with people across the organization (the horizontal part of T) due to their past experience and exposure in having worked with/for other functions.

              Most likely, someone who has had a spectacular but unusual career path and makes you think, "what role does this person really fit in?" would be the the right person. Another clue: many "general managers" are on this career track.

              Business-centric: Customers don't want technology. They don't even want products. They want solutions for the business problems they have. This is where a CCO would start with sheer focus on customers' problems—the true business needs—and use technology as an enabler as opposed to a product. Technology is a means to an end typically referred to as "the business."

              Your CCO should have a business-first mindset with deep expertise in technology to balance what's viable with what's feasible. You can start anywhere but I would recommend to focus your search on people who have product as well as strategy background. I believe unless you have managed a product—development, management, or strategy—you can't really have empathy for what it makes to build something and have customers to use it and complain about it when it doesn't work for them.

              Global: Turns out the world is not flat. Each geographic region is quite different with regards to aptitude and ability of customers to take risk and adopt innovation. Region-specific localization—product, go-to-market, and sales—strategy that factors in local competition and economic climate is crucial for global success of an ISV. The CCO absolutely has to understand intricacies associated with these regions: how they move at different speed, cultural aspects of embracing and adopting innovation, and local competition. The person needs to have exposure and experience across regions and across industries. You do have regional experts and local management but looking across regions to identify trends, opportunities, and pace of innovation by working with customers and help inform overall product, go-to-market, and sales strategy is quite an important role that a CCO will play.

              Outsider: Last but not least, I would suggest you to look outside instead of finding someone internally. Hiring someone with a fresh outside-in perspective is crucuial for this role. Thrive for hiring someone who understands the broader market - players, competition, and ecosystem. This is a trait typically found in some leading industry analysts but you are looking for a product person with that level of thought leadership and background without an analyst title.

              About the photo: This is a picture of an Everest base camp in Tibet, taken by Joseph Younis. I think of success as a progressive realization of a worthwhile goal.

              Tuesday, December 31, 2013

              Challenges For On-premise Vendors Transitioning To SaaS

              As more and more on-premise software vendors begin their journey to become SaaS vendors they are going to face some obvious challenges. Here's my view on what they might be.

              The street is mean but you can educate investors

              Sharp contrast between Amazon and Apple is quite clear. Even though Amazon has been in business for a long time with soaring revenue in mature categories the street sees it as a high growth company and tolerates near zero margin and surprises that Jeff Bezos brings in every quarter. Bezos has managed to convince the street that Amazon is still in heavy growth mode and hasn't yet arrived. On the other hand despite of Apple's significant revenue growth—in mature as well as in new disruptive categories—investors treat Apple very differently and have crazy revenue and margin expectations.

              Similarly, traditional pure SaaS companies such as Salesforce is considered a high growth company where investors are focused on growth and not margins. But, if you're an on-premise vendor transitioning to SaaS the street won't tolerate a hit on your margins. The street would expect mature on-premise companies to deliver on continuous low double digit growth as well as margins without any blips and dips during their transition to SaaS. As on-premise vendors change their product, delivery, and revenue models investors will be hard on them and stock might take a nosedive if investors don't quite understand where the vendors are going with their transition. As much as investors love the annuity model of SaaS they don't like uncertainty and they will punish vendors for lack of their own understanding in the vendor's model. It's a vendor's job to educate investors and continuously communicate with them on their transition.

              Isolating on-premise and SaaS businesses is not practical

              Hybrid on-premise vendors should (and they do) report on-premise and subscription (SaaS) revenue separately to provide insights to investors into their revenue growth and revenue transition. They also report their data center related cost (to deliver software) as cost of revenue. But, there's no easy way, if at all there's one, to split and report separate SG&A costs for their on-premise and SaaS businesses. In fact combined sales and marketing units are the weapons incumbents on-premise vendors have to successfully transition to SaaS. More on that later in this post.

              The basic idea behind achieving economies of scale and to keep the overall cost down (remember margins?) is to share and tightly integrate business functions wherever possible. Even though vendors sometime refer to their SaaS and on-premise businesses as separate lines of businesses (LoBs), in reality they are not. These LoBs are intertwined that report numbers as single P&L.

              Not being able to charge more for SaaS is a myth

              Many people I have spoken to assume that SaaS is a volume-only business and you can't charge customers what you would typically charge your customers in your traditional license and maintenance revenue business model. This is absolutely not true. If you look at some of the deal sizes and length of SaaS contracts of pure SaaS companies they do charge a premium when they have unique differentiation regardless of volume. Customers are not necessarily against paying premium - for them it is all about bringing down their overall TCO and increasing their ROI with reduced time to value. If a vendor's product and its delivery model allow customers to accomplish these goals they can charge them premium. In fact in most cases this could be the only way out. As a vendor transitioning from on-premise to SaaS their cost is going to go up; they will continue to invest into building new products and transitioning existing products and they will significantly assume the cost of running operations on behalf of their customers to deliver software as a service. They not only will have to grow their top-line to meet the growth expectations but to offset some of the cost to maintain the margins.


              Prime advantage on-premise incumbents have over SaaS entrants

              So, what does work in favor of on-premise vendors who are going through this transition?

              It's the sales and marketing machine, my friends.

              The dark truth about selling enterprise software is you need salespeople wearing suits driving around in their BMWs to sell software. There's no way out. If you look at high growth SaaS companies they spend most of what they earn on sales and marketing. Excluding Workday there is not much difference in R&D cost across vendors, on-premise or SaaS. Workday is building out its portfolio and I expect to see this cost go down in a few years.

              Over a period of time, many on-premise vendors have built a great brand and achieved amazing market penetration. As these vendors go through SaaS transition they won't have to spend as much time and money educating the market and customers. In fact I would argue they should thank other SaaS vendors for doing the job for them. On-premise vendors have also built an amazing sales machine with deep relationship with customers and reliable sales processes. If they can maintain their SG&A numbers they will have enough room to deal with a possible initial hit on revenue and additional cost they would incur as they go through this transition.

              Be in charge of your own destiny and be aggressive

              It's going to be a tough transition regardless of your loyal customer base and differentiating products. It will test the execution excellence of on-premise vendors. They are walking on a tight rope and there's not much room to make mistakes. The street is very unforgiving.

              Bezos and Benioff have consistently managed to convince the street they are high growth companies and should be treated as such. There's an important lesson here for on-premise vendors. There is no reason to label yourself an on-premise vendor simply making a transition. You could do a lot more than that; invest into new disruptive categories and rethink existing portfolio. Don't just chase SaaS for its subscription pricing but make an honest and explicit attempt to become a true SaaS vendor. The street will take a notice and you might catch a break.

              Thursday, May 31, 2012

              I Want USPS To Think Outside The Box


              Recently I had to go to a consulate to get a visa and the consulate would only accept a USPS money order and a USPS pre-paid envelope. I went to a post office to get those. That particular post office decided to change their business hours that day to open late. I hurriedly drove to a different post office where two out of there clerks didn't know how to issue a pre-paid envelope! At personal level I never look forward to going to a post office. It invariable delays my schedule. I am met with unpleasant customer service and inefficiency everywhere. This is also true with some of the other services that I get but there's one major difference. I cannot opt out of USPS.

              USPS anticipates to lose about $7 billion during the fiscal year that ends in September. They even have their own conference called PostalVision 2020 where they have invited technology thought leaders such as Vint Cerf and many others to honestly and seriously look at the issues they have. The agenda is to:
              "Postal Vision 2020/2.0 is as much a movement as it is a Conference.  It is a forum for an open and honest dialog to better understand the future of postal communications and shipping, and what this means to those who regulate, supply and use mail.  It’s about sharing ideas and knowledge with the hope of sparking innovation and the creation of new successful business models.  It’s about asking each other lots of difficult questions for which there may be many answers to consider before finding those that serve the long term health of the industry and any particular enterprise."
              USPS is broken at so many levels; they have short term as well long term issues to deal with and it is likely to get uglier before it may get better. Channeling Geoffrey Moore, USPS needs to retain their core and and redefine the context. Massive fleet of trucks, logistics, and outlets in all foreseeable locations is their core strength. Postal mail and other related services is their context where they are simply unable to compete because of shrinking addressable market (due to digital communication) and poor service design that applies the legacy mindset to solve today's and tomorrow's problems.

              USPS should think outside the box. No pun intended.  

              Here are some ideas/suggestions:

              Deliver groceries: Remember Webvan? I loved their service during the dot com boom. One of the main reasons they went out of business is they had no expertise on logistics. Since then nothing much has changed in home-delivered grocery business. What if USPS delivered grocery to your home? What if they partnered with a local supermarket and took over their logistics business? This is a complimentary business model. The supermarkets are not in the delivery business and it's not economical for them to enter into the logistics business. This is also a sustainable business that helps the environment. The USPS trucks are on the road no matter what, but now they can take a few cars off the road. This may sound crazy but times are changing and it's time for USPS to rethink what unfair advantage they have over others.

              Re-think mail delivery: It's perfectly acceptable to me if I only receive my mail every other day. In many cases, I am fine if I don't get my mail for a week at times. There's nothing time-sensitive about my mail. And with changing demographics, this is true with a lot of other people as well. Incentivize customers to skip mail by offering them discount on other services and have less trucks and less people going around the neighborhoods. This brings the overall cost down and opens up new revenue opportunities.

              Double down on self-service: I know USPS is trying hard to add more and more self-service kiosks but they're not enough. Think like Coinstar and Redbox. I should be able to do everything related to USPS at the places where I can get milk at the 11th hour, money from ATM, and gas for my car. They really need to work hard to give people a reason to use USPS when people have much better alternatives to mail packages. Think of UPS, DHL, and FedEx as incumbents and leap frog them at places, using the unfair advantage that USPS has, where they can't possibly compete.

              Rethink the identity: USPS doesn't directly receive federal tax dollars and it is expected to meet expenses from the revenue it generates. But, it's not that black and white. Even though USPS doesn't get any tax money it receives plenty of other money via grants and other special funds. It's neither truly a government entity nor truly a business entity. If USPS needs to be fixed it needs to rethink its identity and decide whether it's a complete public sector or a mix of private and public sector and how. Once that identity is set they can follow through on their revenue sources, cost measures, and building an ecosystem of partners. Mixed and complicated business structure introduces complexity at all the levels and prevents the organization to think and execute in a unified way.

              Friday, September 30, 2011

              Disrupt Yourself Before Others Disrupt You: DVD To Streaming Transition Is Same As On-Premise To Cloud


              Recently, Netflix separated their streaming and DVD subscription plans. As per Netflix's forecast, they will lose about 1 million subscribers by the end of this quarter. The customers did not like what Netflix did. A few days back, Netflix's CEO, Reed Hastings, wrote a blog post explaining why Netflix separated their plans. He also announced their new brand, Qwikster, which will be a separate DVD service from Netflix's streaming website. These two services won't share the queues and movie recommendations even if you subscribe to both of them. A lot has been said and discussed about how poorly Netlflix communicated the overall situation and made wrong decisions.

              I have no insider information about these decisions. They might seem wrong in short term but I am on Netflix's side and agree with the co-founder Marc Randolph that Netflix didn't screw up. I believe it was the right thing to do, but they could have executed it a little better. Not only I am on their side, but I see parallels between Netflix's transition from DVD to steaming and on-premise enterprise ISVs' transition from on-premise to cloud. The on-premise ISVs don't want to cannibalize their existing on-premise business to move to the cloud even if they know that's the future, but they don't want to wait long enough to be in a situation where they run out of money and become irrelevant before the transition.

              So, what can these on-premise ISV's learn from Netflix's decisions and mistakes?

              Run it as a separate business unit, compete in the right category, and manage street's expectations:

              Most companies run their business as single P&L and that's how the street sees it and expects certain revenue and margins. Single P&L muddies the water.The companies have no way of knowing how much money they are spending on a specific business and how much revenue it brings in. In many cases, there is not even an internal separation between different business units. Setting up a separate business unit is a first step to get the accounting practices right including tracking cost and giving the right guidance to the street. DVD business is like maintenance revenue and the streaming is like license revenue. The investors want to know two things: you're still a growth company (streaming) and you still have enough cash coming in (DVD business) to tap into the potential to grow.

              Netflix faces competition in streaming as well as in their DVD business, but the nature of competition is quite different. For the enterprise ISVs competing with on-premise vendors is quite different than competing with SaaS vendors. The nature of business — cost structure, revenue streams, ecosystem, platform, anti-trust issues, marketing campaigns, sales strategy — is so different that you almost need a separate organization.

              Prepare yourself to acquire and be acquired:

              Netflix could potentially acquire a vendor in the streaming business or in the DVD business and that makes it easy for them to integrate. This is even more true in the case of ISVs since most of the on-premise ISVs will grow into the cloud through acquisitions. If you're running your SaaS business as a separate entity, it is much easier to integrate the new business from technology as well as business perspective.

              Just as you could acquire companies, you should prepare yourself for an exit as well. Netflix could potentially sell the DVD unit to someone else. This will be a difficult transaction if their streaming business is intertwined with their DVD business. The same is true for the enterprise ISVs. One day, they might decide to sell their existing on-premise business. Running it as a separate business entity makes it much easier to attract a buyer and sell it as a clean transaction.

              Take your customers through the journey: 

              This is where Netflix failed. They did not communicate to the customers early on and ended up designing a service that doesn't leverage existing participation of the customers such as recommendations and queues. There is no logical reason why they cannot have a contract in place between two business units to exchange data, even if these two units are essentially separate business entities. The ISVs should not make this mistake. When you move to the cloud, make sure that your customers can connect to their on-premise systems. Not only that, you need to take care of their current contracts and extend them to the cloud if possible and make it easy for them to transition. Don't make it painful for your customers. The whole should be great than the sum of its parts.

              Run your business as a global brand:

              Learn from P&G and GE. They are companies made up of companies. They do run these sub-companies independently with a function to manage them across. It does work. Netflix has a great brand and they will retain that. As an on-premise ISV you should consider running your on-premise and cloud businesses as sub-brands under single brand umbrella. Branding is the opposite of financials; brand is a perception and financials is a reality. Customers care for the brand and service and the street cares for the financials. They seem to be very closely related to each other for a company looking inside-in but from an outside-in perspective they are quite different. There is indeed a way to please them both. This is where the most companies make wrong decisions.

              Tuesday, September 21, 2010

              Telcos Could Be The Future Enterprise Software Vendors For Small Businesses

              Having worked on enterprise software product and go-to-market strategy for SMB (small and medium businesses), I can tell you that these are the most difficult customers to reach to, especially the S in SMB. It’s an asymmetric non-homogeneous market for which the cost of sales could go out of control if you don’t leverage the right channels. The competitive landscape varies from region to region and industry to industry. In many cases instead of competing against a company you would be competing against a human being with paper-based processes.

              Tomorrow I am speaking at the Razorsight annual conference on the topic of cloud computing. I am excited to meet their customers, the telcos. While I prepare for my keynote, I can’t stop thinking about the challenges that the telcos face and the opportunities that they are not pursuing. My keynote presentation is about how telcos can leverage the cloud, but this blog post is about how telcos can become successful enterprise software vendors and market their solutions to small businesses.
              There are very few things that are common across small businesses. They own a landline (at least for now) and they have Internet access, in many cases from the same vendor. I believe that the landlines will be more and more difficult to sell to these customers, but losing a channel – a relationship – would be even worse. If leveraged well, these relationships could be worth a lot more compared to the landline business as it stands today. Just think about it. Selling to small businesses is all about leveraging existing relationships with them. This channel is priceless.

              What will it take for the telcos to market products to small businesses?

              ISV acquisitions or VAR agreements: If telcos are bundling software, on-premise or SaaS, the telcos, as organizations, don’t necessarily have the skills or resources to make software for small businesses. This would mean a series of small and niche ISV acquisitions across geographical areas and industries and VAR agreements with current ISVs.

              What kind of software can telcos bundle?

              There are two kinds: horizontal and vertical. The examples of horizontal software are accounting, payroll, point of sale etc. Ask Intuit and they will tell you all about the horizontal cash cow. The vertical software is industry specific for the business that you are in. One of my favorite companies in this area is OpenTable. If you have made an online reservation at a restaurant you have most likely used their software. They had a successful IPO last year and they are on track to become a $100 million company.

              Telcos should be doing all these things. They have cash and they can borrow cheap money to buy companies. Telcos also have an option to leverage the cloud, their own cloud in many cases, to provide SaaS solutions to small businesses. They can leap frog the on-premise ISVs who don’t have access to these customers and are sensitive to margin cannibalization.

              Thursday, August 19, 2010

              Software Is The New Hardware

              Today Intel announced that it is buying McAfee for $7.7 billion. This acquisition made people scratch their heads. Why McAfee?

              The obvious arguments are that Intel has hit the growth wall and organic growth is not good enough to satisfy the shareholders. But this argument quickly falls apart from margin perspective. Why dilute their current nice gross margin even if McAfee has steady revenue stream? [Read my update at the end of the post]

              I believe there are two reasons. The first is that the companies need a balanced product and revenue mix regardless of different margins. Oracle bought Sun and HP bought EDS. Big companies do this all the time. The second, not so obvious, reason is a recognition that software is new hardware. The processors are processors – they are a commodity any which way you look at them. It is not news to anyone that the computing has become commodity which is the basis of utility style cloud computing. Software, embedded or otherwise, has significant potential to sell value-added computing. The security solutions could fit in nicely on a piece of chip. When you drive a few miles from Intel’s headquarters to meet folks at nVidia you will be amazed to see what kind of value a software tool kit can derive from the processors.

              I don’t know how Intel will execute the merger considering the fact that this is their largest acquisition ever. But, I am even more convinced that software is the new hardware. Cloud computing, data center automation, virtualization, network security, and a range of other technologies can leverage software in a chip that is optimized for a set of specialized tasks. Time to move from commodity to specialized computing until specialized computing becomes commodity. Interesting times!

              Update: Romit sent me a message commenting that how McAfee will dilute Intel’s margin since McAfee’s gross margin is more than Intel. I should clarify. The assumption on the street is that the cost of capital for this purchase is about 4% and Intel expects 8% return on the investment even after paying 60% premium for the purchase. The tricky part is that how long Intel can maintain the close to 75% software margin of a software company operating inside a hardware company. When I say diluting the margin I mean diluting the overall combined margin post-purchase. The analysts are skeptical about the success of the merger and so am I. Intel has no track record of integrating large software companies such as McAfee especially after paying significantly higher than average premium. Hypothetically if Intel were to buy a company with more synergies that can leverage existing channels and can fit into their culture they could have increased the gross margin and hence the return to their shareholders.

              Friday, July 2, 2010

              Podcast: The Next Cloud: Emerging Business Models

              I was a guest on Novell's radio/podcast series, the Cloud Chasers. The topic was "The Next Cloud: Emerging Business Models And Their Impact On The Enterprise". It was a great conversation! You can download the podcast here or tune in below:


              Monday, March 15, 2010

              Emergent Cloud Computing Business Models

              The last year I wrote quite a few posts on the business models around SaaS and cloud computing including SaaS 2.0, disruptive early stage cloud computing start-ups, and branding on the cloud. This year people have started asking me – well, we have seen PaaS, IaaS, and SaaS but what do you think are some of the emergent cloud computing business models that are likely to go mainstream in coming years. I spent some time thinking about it and here they are:

              Computing arbitrage: I have seen quite a few impressive business models around broadband bandwidth arbitrage where companies such as broadband.com buys bandwidth at Costco-style wholesale rate and resells it to the companies to meet their specific needs. PeekFon solved the problem of expensive roaming for the consumers in Eurpoe by buying data bandwidth in bulk and slice-it-and-dice-it to sell it to the customers. They could negotiate with the operators to buy data bandwidth in bulk because they made a conscious decision not to step on the operators' toes by staying away from the voice plans. They further used heavy compression on their devices to optimize the bandwidth.

              As much as elastic computing is integral to cloud computing not all the companies who want to leverage the cloud necessarily care for it. These companies, however, do have unique varying computing needs. These needs typically include fixed long-term computing that grows at relatively fixed low rate and seasonal peaks. This is a great opportunity for the intermediaries to jump in and solve this problem. There will be fewer and fewer cloud providers since it requires significantly hi cap-ex. However being a "cloud VAR" could be a great value proposition for the vendors that currently have a portfolio of cloud management tools or are "cloud SI". This is kind a like CDO (‘Cloud Debt Obligations’ :-)) – just that we will do a better job this time around!

              Gaming-as-a-service: It was a while back when I first saw the OTOY demo. Otoy is scheduled to launch in Q2 2010. I believe that there is significant potential in cloud-based rendering for the games. Having access to an online collection of games that can be rented and played on devices with a varying degree of form factors is a huge business opportunity. The cloud also makes it a great platform and a perfect fit for the massive multi-player collaboration. Gaming-as-a-service could leverage everything that SaaS today does - frequent updates, developer ecosystem, pay-as-you-go etc. This business model also improves the current monetization options such as in-game ad placements that could be far more relevant and targeted.

              App-driven and content-driven clouds: Now that we are hopefully getting over the fight between private and public cloud let’s talk about a vertical cloud. Computing is not computing is not computing. The needs to compute depend on what is being computed - it depends on the applications' specific needs to compute, the nature and volume of data that is being computed, and the kind of the content that is being delivered. Today in the SaaS world the vendors are optimizing the cloud to match their application and content needs. I would expect a few companies to step up and help ISVs by delivering app-centric and content-centric clouds. Being an avid advocate of net neutrality I believe that the current cloud-neutrality that is application-agnostic is a good thing. However we can certainly use some innovation on top of raw clouds. The developers do need fine knobs for CPU computes, I/O computes, main-memory computing, and many other varying needs of their applications. By far the extensions are specific to a programming stack such as Heroku for Ruby. I see opportunities to provide custom vertical extensions for an existing cloud or build a cloud that is purpose-built for a specific class of applications and has a range of stack options underneath that makes it easy for the developers to natively leverage the cloud.

              Tuesday, February 9, 2010

              Google Buzz Is New Black - Solving A Problem That Google Wave Could Not


              Today Google announced Google Buzz. Watch the video:



              The chart below shows the spectacular adoption failure of Google Wave as a standalone product. This was predicted by a lot of people including myself. As Anil Dash puts it Google Wave does not help solve a "weekend-sized problem".



              Besides the obvious complex technical challenges there are three distinct adoption barriers with Google Wave and Google Buzz has capability to overcome those:

              Inseparable container, content, and collaboration: Changing people's behavior is much more difficult than inventing or innovating a killer technology. Most of the people still prefer to keep the collaboration persisted separately from the content or not persisted at all. Single task systems such as email, Wiki, and instant messaging are very effective because they do one and only thing really well without any confusion. Google Wave is a strong container on which Google or others can build collaboration capability but not giving an option to users to keep the content separate from the collaboration leads to confusion and becomes an adoption barrier. 

              Google Buzz certainly seems to solve this problem by piggybacking on existing system that people are already familiar with - email. Google Buzz is an opt-in system where the users can extend and enrich their experience against using a completely different tool. 

              Missing clear value proposition: Google Wave is clearly a swiss knife with the open APIs for the developers to create killer applications. So far the applications that leverages Google Wave components are niche and solve very specific expert system problems. This dilutes the overall value proposition of a standalone tool. 

              Google Buzz is designed to solve a problem in a well-defined "social" category. People are already using other social tools and Google Buzz needs to highlight the value proposition by integrating the social experience in a tool that has very clear value proposition unlike Google Wave which tried to re-create the value proposition. Google Buzz assists users automatically by finding and showing pictures, videos, status updates etc. and does not expect users to go through a lengthy set up process.

              Lack of a killer native mobile application: This is an obvious one. Google Wave does work on iPhone and on some other phones but it is not native and the experience is clunky at best. When you develop a new tool how about actually leveraging a mobile platform rather than simple porting it. A phone gives you a lot more beyond a simple operating system to run your application on. 

              Google recognized this and Google Buzz is going to be mobile-enabled from day one that leverages location-awareness amongst other things. I hope that the mobile experience is not same as the web experience and actually makes people want to use it on the phone.

              You could argue that why Google Buzz is going to be different since Google did have a chocolate box variety tools before Google Buzz - Latitude, Profile, Gmail, Wave and so on. I believe that it is all about the right experience that matches the consumers' needs in their preferred environment and not a piece of technology that solves a standalone problem. If done right Google Buzz does have potential to give Facebook, Twitter, Foursquare, and Gowalla run for money.

              Tuesday, January 19, 2010

              What Can Enterprise Software Learn From CES? - Embrace Ubiquitous Convergence

              One of the biggest revelations to me from my trip to CES is that the ubiquitous computing, once an academic concept, has finally arrived. The data, voice, device, and display convergence is evident from the products that I saw. There has been wide coverage of CES by many bloggers who track consumer technology. However, as a strategist and an enterprise software blogger, I have keen interest in assessing the impact of this ubiquitous convergence in consumer technology on enterprise software.

              I believe that the consumers will soon start expecting the ubiquitous experience in everything that they touch and interact with ranging from their coffee cups to the cars and everything in between. This effect is going to be even more pronounced amongst millennial who grew up digitally and are entering into the workforce with an expectation of instant gratification. The mobile phone revolution was consumer-driven at large and Apple made the Smartphone category popular and appealing to non-enterprise consumers. These consumers slowly started expecting similar experience in enterprise software, because of which, many enterprise software vendors are now scrambling for making mobile a priority. I suggest that they learn a lesson from this and stay ahead of the curve when this ubiquitous convergence picks up momentum.

              So what exactly does this mean to the enterprise ISVs?

              Any surface can be an interface and a display:

              I saw a range of new interface and display technology including pico projector, multi-touch screen by 3M, a screen with haptic feedback, and 3D gestural interfaces. A combination of a cheap projector and a camera could turn any surface into a display or an interface. The consumers will interact with software in unanticipated and unimaginable ways. This will put ISVs under pressure to support these alternate displays and interfaces. I see this as an opportunity for ISVs to differentiate their offering by leveraging instead of succumbing to this technology trend. Imagine a production floor that has the cameras and projectors mounted on all the walls. A maintenance technician could walk in and the maintenance information is projected on the machine itself which also doubles as a touch interface. The best interface is no interface. We all use software because we have to.

              Location-based applications and geotagging will be a killer combination:

              Google's Favorite Places and Nokia's Point and Find (that I saw at CES) are attempts to organize, and importantly, to own the information about places and objects using QR codes. The QR codes are fairly easy to generate and has flexible and extensible structure to hold useful information. The QR code readers are the devices that most of us already own - a camera phone with a working data connection. Combine geotagging with Augmented Reality that is already fueling the innovation in location-based applications, you have got a killer combination that could lead to some breakthrough innovation. This trend can easily be extended to the enterprise software to geotag objects and the associated processes from cradle-to-grave that provide contextual information to people when they interact with the software and the objects. This could lead to efficient manufacturing, smarter supply chain, and sustainable product life cycle management.

              3D will go from "cool" to "useful" sooner than you think:

              Yes, you and I will be wearing those 3D glasses in our living rooms and may be in our offices as well. Prada and Gucci might make them. What seems like beginning of 3D with movies, video games, and game consoles this area is going to explode with the opportunities. What is being designed as "cool" will suddenly be "useful". With the exception of a few niche solutions ISVs will likely brush off 3D as not relevant in the beginning until someone unlocks the pot of gold and everyone else will follow. Simply replicating 3D analog in a digital world will not make software better. Adding third dimension as an eye candy could actually introduce noise for the users that can look at the data in 2D more effectively. The ISV will have to hunt for the scenarios that amplify cognition and help users understand the data around certain business processes that are beyond their capacity to process in 2D. The 3D technology will be more effective when it is used in conjunction with complementing technology such as multi-touch interface to provide 3D affordances and with location-based and mapping technology to manage objects in 3D analog world.

              The rendering technology will outpace non-graphics computation technology:

              The investment into rendering hardware such as Toshiba's TV with the cell processors and graphic cards from ATI and nVidia complement the innovation in display elements technology e.g. LED, OLED, energy-efficient plasma etc. The combination of faster processor and sophisticated software is delivering hi-quality graphics at all form factors. The enterprise software ISV have so far focused on algorithmic computation of large volume of data to design various solutions. The rendering computation technology always lagged non-graphics data computation technology. Finally the rendering computation has not only caught up but it will outpace non-graphics data computation in some areas very soon. This opens up opportunities to design software that not only can crunch large volume of data but can leverage high-quality graphics without any perceived lag that delivers stunning user experience and realtime analysis and analytics.

              Consumers will have "Personal Cloud" to complement the public cloud:

              Okay, this is a stretch, but let me make an attempt to put all the pieces together. The consumers now have access to ridiculously powerful processors and plenty of storage in their set-top boxes, computers, appliances etc. These devices can be networked using wired and wireless devices that support wireless HDMI and USB 3.0. This configuration starts to smell like a mini "Personal Cloud" even though it does not have all the cloud properties. The public cloud, as we all know today, will mature and grow beyond utility computing and SaaS. The public cloud, the hardware that leverages IP6 and multicasting, and sophisticated CDN will see plenty of innovation ranging from streaming movies to calibrating carbon footprint of consumers against their neighbors. The public cloud and the personal cloud will complement each other in providing seamless ubiquitous user experience across all the devices. The ISV who will leverage the cloud and the channels to these consumers' devices have great potential to grow their portfolio of solutions that extends well beyond enterprise software and has a lot more productive and delighted users.

              I don't want to predict what is a fad and what is the future but the convergence is clear and present. It is upto the ISVs to be innovative and find the golden nuggets and tune out the noise to deliver better business value to their customers.

              On a side note, I really badly want this iPhone controlled AR.Drone - the coolest toy that I saw at CES!

              Saturday, October 31, 2009

              Google Does Not Have Innovator's Dilemma

              I asked a question to myself: "Why has Google been incredibly successful in defending and growing its core as well as introducing non-core disruptive innovations?". To answer my own question I ran down Google's innovation strategy through Clayton Christensen's concepts and framework as described in his book "Seeing What's Next". Here is the analysis:

              Google's latest disruptive innovation is the introduction of free GPS on the Android phone. This has grave implications for Garmin. To put this innovation in the context it is a "sword and shield" style entrant strategy to beat an incumbent by serving the "overshot customers". The overshot customers are the ones who would stop paying for further improvements in performance that historically had merited attractive price premium. Google used its asymmetric skills and motivation - Android OS, mapping data, and no direct revenue expectations - as a shield to enter into the "GPS Market" to serve these overshot customers. Google later turned its shield into a "sword" strategy by disinteremediating the map providers and incentivizing the carriers with a revenue-share agreement.

              On the other hand Google's core search technology and GMail are a couple of examples of "incremental to radical" sustaining innovations where Google went after the "undershot customers". The undershot customers are the ones who consume a product but are frustrated with its limitations and are willingly to switch if a better solution exists. The search engines and the web-based email solutions existed before Google introduced its own solutions. GMail delighted the users who were frustrated with their limited email quota and the search engine used better indexing and relevancy algorithms to improve the search experience. I find it remarkable that Google does not appear to be distracted by the competitors such as Microsoft who is targeting Google's core with Bing. Google continued a slow and steady investment into its sustainable innovation to maintain the revenue stream out of its core business. These investments include the next generation search platform Caffeine, social search, profiles, GMail labs etc.

              Where most of the companies inevitably fail Google succeeded by spending (a lot of) money on lower-end disruptive innovations against "cramming" their sustaining innovation. Google even adopted this strategy internally to deal with the dilemma between its sustaining and disruptive innovations. One would think that the natural starting point for Google Wave would be the GMail team but it's not true. In fact my friends who work for Google tell me that the GMail team was shocked and surprised when they found out that some other team built Google Wave. Adding wave-like functionality in the email would have been cramming the sustaining innovation but innovating outside of email has potential to serve a variety of undershot and overshot customers in unexpected ways. This was indeed a clever strategy.

              So, what's next?

              If I were AT&T I would pay very close attention to Google's every single move. Let's just cover the obvious numbers. The number of smartphone units sold this year surpassed the number of laptops sold and the smartphone revenue is expected to surpass the laptop revenue in 2012. Comcast grew their phone subscribers eight-fold with the current number exceeding 7 million. Google Voice has over 1.4 million users of which 570,000 use it seven days a week. Even though Google does not like its phone bill Google seems to be committed to make Google Voice work. This could allow Google to serve a new class of overshot customers that has a little or no need of land line, desire to stay always-connected, and hungry for realtime content and conversations. Time after time Google has shown that it can disintermediate players along its value chain. It happened to NavTeq and Tele Atlas and it is happening to other players with Google Power Meter and Chrome.

              Many people argue that Chrome OS is more disruptive. I beg to differ. I believe that Chrome OS does not have near term disruption trajectory. Being wary of hindsight bias, I would go back to the disruptive innovation theory and argue that Chrome OS is designed for the undershot customers that are frustrated with other market solutions at the same level. For the vast majority of the customers it does not matter. If Google does have a grand business plan around Chrome OS it certainly will take a lot of time, resources, and money before they see any traction. I see the telco disruption happening much sooner since it serves the overshot customers. I won't be surprised if Google puts a final nail in telco's coffin and redefines the telephony.

              Tuesday, August 18, 2009

              SaaS 2.0 Will Be All About Reducing The Cost Of Sales

              A clever choice of the right architecture on right infrastructure has helped the SaaS vendors better manage their operational infrastructure cost but the SaaS vendors are still struggling to curtail the cost of sales. As majority of the SaaS vendors achieve feature and infrastructure cost parity, reducing the cost of sales is going to be the next biggest differentiation for the SaaS vendors to stay competitive in the marketplace.

              Direct sales model is highly ineffective and cost-prohibitive for the SaaS vendors as it does not scale with the volume business model that has relatively smaller average deal size. The role of the direct sales organization will essentially get redefined to focus on the relationship with the customers to ensure service excellence and high contract renewal rates in addition to working on long sales cycles for large accounts.

              How can a SaaS vendor reduce the overall cost of sales to maintain healthy margins and growth?

              This is a difficult nut to crack. There are no quick fixes. There is no easy way to optimize the tale end of the process without holistically redesigning the entire SaaS life cycle.

              Self-service demos to "self-selling" trials:

              Fundamentally the direct sales model for an on-premise software sales has been all about initial investment into the right demos to model customer scenarios and align the sales pitch to match the solution needs. The SaaS vendors moved away from this model as much as they could and replaced it with the self-service demos or trials. However these demos are not "self-selling" and still requires intervention from the direct sales people at various levels.

              The SaaS vendors need to move from self-service demos to the self-selling ones that are not only fully functional out-of-the-box but also articulate the solution capabilities implicitly or explicitly. The demo is not just about showing what problems you are solving but it is also about how well it maps to the customers' pain points. It is like buying a hole and not a drill. The demo and the product should scream out loud the value proposition without making customers go through a webinar or a series of PowerPoint slides.

              Customer acquisition to customer retention:

              SaaS companies have traditionally focused their sales and marketing budget on customer acquisition against retention. While customer acquisition is a necessity the increasing SaaS competition could result into the current customers ditching the vendors. Customer support is the new sales model. Design your customer support organization and operations to retain customers. Don't let the contract renewals slip through the cracks.

              Your customers are the biggest asset that you have. Market new solutions to them as an up-sell. One of the powerful features of a SaaS platform is to be able to integrate and push the new products effortlessly to the existing customers and have them try it out before they start paying you. Modernize your internal tools to track the usage analytics to better understand your customers, sales activities and effectiveness of the marketing campaigns. You have a problem if you cannot tell which customer is using what, who are the right partners, who needs training and support etc. If you haven't lately looked at the tools that your sales people use this is the right time. I would not expect a SaaS vendor to reduce the cost of sales without empowering the sales force with the true customer, competitior, and partner intelligence.

              Low-touch persuasions to hi-touch interactions:

              Low-touch one-to-one selling does not scale. Replicate the Avon model. Design a great ecosystem of your channel partners to whom you can pass on the cost of sales. Align the incentives and encourage the partners to sell but ensure the customer support and overall brand integrity. This strategy would require an extensive partner program with sizable investment in training and tracking what and how the partners are selling but this investment will go long way.

              Reserve the direct sales force engagement for large hi-touch CIO type deals where you are required to go whole nine yards before you get a contract. The key is to have a highly variable sales force and extremely efficient compensation model to deal with a variety of prospects and customers. One size does not fit all.


              Low-barrier adoption to zero-barrier productivity:

              The SaaS model pioneered the low-barrier adoption empowering the LOB to sign up and start using the software without an approval or help from the IT. Eliminate any and all barriers to further penetrate the adoption. Do not enforce upfront credit-card requirements and even skip the registration if you can. Let the customers use the software with the minimum or no information up front. Demonstrate value when asking for more information e.g. Picnik lets you manipulate image in any way you want but would ask you to register if you want to save images. There should be no paper work whatsoever, not even a physical contract. Allow customers to bring in the content from other sources such as Flickr, Facebook etc. Allow the customers to have access to a live sandbox as a step before the dedicated trial. Starting from a blank canvas could be a hindrance to evaluate a product.

              Sunday, May 31, 2009

              Calculating ROI Of Enterprise 2.0 Is Calculating The Cost Of A Lost Opportunity

              I get this asked a lot – How do I calculate ROI of Enterprise 2.0? Bruce Schneier says, “Security is not an investment that provides a return, like a new factory or a financial instrument. It's an expense that, hopefully, pays for itself in cost savings. Security is about loss prevention, not about earnings. The term just doesn't make sense in this context.”. Similarly thinking of Enterprise 2.0 as an “investment” looking for a return does not make any sense. At best it is the cost of a lost opportunity.

              If you are a CIO looking for a detailed ROI metrics or a simple checklist for Enterprise 2.0 you are probably out of luck. However you could adopt a two-pronged approach. Convince the business that the organization needs Enterprise 2.0 by showing whatever resonates with them e.g. sharing files help reduce email quota, Wiki makes people productive by X percentage, giving them a copy of The Future of Management by Gary Hamel etc. Once you do get a green signal for Enterprise 2.0 deployment, please, don’t be prescriptive to frame the problem or the solution. Instead simply provide the tools at grassroots and let people run with these tools.

              For any collaboration, productivity, and social networking tools there is content and there is context that significantly depends upon the individuals that use these tools. For example some people prefer to be human-centric against artifact-centric. Some start interacting and collaborating with other people before exchanging the artifacts and there are others that prefer collaboration that is primarily an artifact-driven. Most of the tools mandate that users make an upfront choice. Even worse the IT makes the decision for them when they decide to purchase a specific tool assuming how people might want to work. This is the reason I like Google Wave since it does not make any assumptions on how people may want to use it. In fact it allows people to weave across people and artifacts seamlessly.

              When Google Wave was announced Google spent most of the time demonstrating what it does and spent very little time showing what problems it is designed to solve. They received quite a criticism for that. Many designers questioned Google whether they really know if people want to work this way. Some bloggers called it an act of breathtaking arrogance of blowing off potential competition and touting tech buzzwords. I believe they all are missing the point. Google Wave has broken the grid that the designers are very protective about and has empowered people to stretch their imagination to make mental connections about how this tool might meet their needs that no other tool has met so far.

              Would you still ask what’s the ROI?

              Monday, March 16, 2009

              Cloud Computing Strategy Crucial For eBay To Become One-stop E-commerce Shop

              "We were the biggest and the best. And when you're the biggest and the best, there's a strong tendency to try to preserve that.....EBay has a storied past. But frankly, it's a past we've held onto too much." This is what the CEO of eBay, John Donahoe, told the analysts while explaining eBay's three-year revival plan to achieve low single digit growth. The outlined plan calls for continued investment into Skype, PayPal, and secondary-channels with an end goal to move eBay beyond an auction place to make it a one-stop e-commerce shop. Lack of explicit diversification plans to capture the fast growing e-commerce market (15% to 20% in the next five years) makes me wonder if eBay correctly assesses its core and context at this juncture and has the right infrastructure to support its strategy.

              eBay's application-led multi-generation platform strategy has supported its core business strategy really well but eBay is significantly under-invested in the cloud computing to meet the new challenges. Unified e-commerce experience requires connecting heterogeneous and radically disparate data sources, applications, and their capabilities to monetize the traffic across them. Even if eBay does not tightly integrate Skype with PayPal and auction it should have the infrastructure to mine the information from Skype to support its strategy to gain major share of the e-commerce market especially to go after the digital goods such as e-books, songs, videos, ring tones etc. It would be a step backwards to limit the strategy view to the physical goods and a narrow transactional platform and not look at the holistic total customer experience that is SaaS delivered with the help of dynamic and elastic cloud-based platform.

              MySpace is ahead in the game to monetize the immense clickstream data with the help of the cloud computing. eBay has huge untapped value in the social interaction and e-commerce data that it collects from all its assets. A right analytic cloud platform could make eBay rich from this gold mine. Social media cloud computing strategy is crucial for eBay not only to make competition irrelevant by going after emerging secondary markets but also to better prepare eBay for the megatrends such as millennial and sustainability. If eBay does successfully execute this strategy, tomorrow's eBay may not look like what you and I have seen so far.

              Friday, February 13, 2009

              IBM's Blue Cloud Meets Juniper To Alleviate Cloud Computing Adoption Fears

              Security and lack of an acceptable SLA are customers' top adoption fears to move to cloud computing. IBM's recent announcements to further advance their cloud computing initiative known as Blue Cloud should help alleviate these fears to some extent. IBM announced their partnership with Juniper for their hybrid cloud initiative to provide secured private cloud with better SLA. IBM also announced new offerings for the cloud - Tivoli storage as service and a new set of cloud management tools to align with what a typical CIO would look for when migrating to the cloud. In addition IBM is pushing some of their existing offerings on the cloud that customers can now use off Amazon's EC2 on pay-as-you-go subscription model.

              IBM has been experimenting with the concept of a private cloud for a while. One of such experiments included creating a private virtual cloud inside the firewall to deploy some of the regions of SecondLife with seamless navigation in and out of the firewall. The partnership with Juniper to leverage its EX series MPLS switch would allow IBM to have better QoS from Layer 2 to Layer 4. In simpler words, MPLS switch would allow the network operators to have much better control over what kind of data can be routed across what paths across private and public clouds based on dynamic network conditions such as congestion, failure etc. ensuring predictable SLA. This should alleviate some of the security concerns of the customers who want to stay on a private cloud and want a better SLA. IBM is in great position to offer tiered SLA due to the hybrid nature of their cloud deployment.

              So, what about Juniper?

              Juniper has been competing with Cisco since its inception and has lately struggled to differentiate. Last year Juniper made a splash by announcing a data center infrastructure solution with the EX series switches and the SRX dynamic appliance. Juniper's partnership with IBM is an introduction of a networking player into the cloud computing game that will give Cisco and others run for their money. Cisco's Nexus switch and the data center offering, HP's networking switch Pro Curve, and now Juniper's partnership with IBM are signs of vendors looking for adjacent market potential essentially blurring the boundaries
              between data center infrastructure, networking hardware, and traditional storage. The vendors are eager to ensure their presence in the evolving "cloudware" category by leveraging existing investment and customer-base with partnership opportunities.

              Thursday, February 5, 2009

              Demystifying Sales Pipeline Crystal Ball - Risk Management With VaR And Black Swans

              “If you put a gun to my head and asked me what my firm’s risk was, I would use VaR.” - said Richard Bookstaber, a hedge-fund risk manager. New York times has a long article on the role of VaR in risk management (bugmenot for nytimes) that includes the arguments on both the sides. Simply put Value At Risk, known as VaR, is a mathematical framework based on many underlying models that quantifies the risk into single dollar figure with 99% probability. Firm managers really like this number since they can measure individual trader's risk and the total risk of the firm. People such as Nassim Nicholas Taleb who are against VaR passionately argue that not being able to measure the impact of the last 1% could result into catastrophic losses under Black Swan events. He argues that people cannot predict and measure the risk using a model for the events that they have not seen in their lifetimes but the events that do occur in their lifetimes. Nassim is a person who hates ties, loves reading though does not read newspapers, and does not watch movies. He strongly believes that the current economic downturn is an example of financial firms manipulating VaR that resulted into asymmetric risk proportions leading to such catastrophic losses.

              I am not an expert in financial risk management and won't argue whether VaR is a good or bad indicator of the health of firm's portfolio. I would rather describe a phenomenon as it relates to direct sales process that lacks VaR like indicators leading to poor risk management. Sounds strange, isn't it? But it is not.

              Let's take an example of traditional direct sales process of enterprise software company. Due to the unpredictable current market conditions many enterprise software companies have stopped providing revenue guidance. Even during bullish economy the health indicators of sales pipeline, similar to the health of investment portfolio, are more of an art than science. The sales reps have "confidence" in certain opportunities that they are pursuing and there is no model in place to roll up all the subjective indicators and come up with single confidence number that allows the executives to communicate the revenue risk based on the current pipeline. The enterprise software systems are good at keeping track of what sales people are actually doing but they are not designed to model the risk of opportunities based on macroeconomic changes such as customers' aspirations to go green, changes in government subsidies etc. These systems are not even designed to model customer-specific risks that could derail the sales process such as viability of customer's business model, probability of change in customer's annual IT budget, CIO likely to get fired, a possible merger or an acquisition etc. As a whole these systems do not provide any support to roll up the risk to the executives to empower them to intervene, mitigate, and communicate.

              It is critical for an organization to stay on top of their sales pipeline to meet and exceed the street's expectations, but it is even more critical to detect the risk early on and course-correct to mitigate and manage the risk. That's what all the stakeholders - executive management, employees, customers, and investors - would like to see in a sales process of a modern organization. There is a lot that the sales pipeline can learn from the financial portfolio risk indicators such as VaR. And yes, there are Black Swans in the IT world too - a dot com burst would certainly qualify being one of those. Sales pipeline needs a robust set of models that are built on subjective sentiments and objective data to represent the risk of loosing a opportunity leading to lost revenue.

              Thursday, January 29, 2009

              Open Source Software Business Models On The Cloud

              There are strong synergies between Open Source Software (OSS) and cloud computing. The cloud makes it a great platform on which OSS business models ranging from powering the cloud to offer OSS as SaaS can flourish. There are many issues around licenses and IP indemnification and discussion around commercial open source software strategy to support progressive OSS business models. I do see the cloud computing as a catalyst in innovating OSS business models.

              Powering the cloud:
              OSS can power the cloud infrastructure similarly as it has been powering the on-premise infrastructure to let cloud vendors minimize the TCO. Not so discussed benefit of the OSS for cloud is the use of core algorithms such as MapReduce and Google Protocol Buffer that are core to the parallel computing and lightweight data exchange. There are hundreds of other open (source) standards and algorithms that are a perfect fit for powering the cloud.

              OSS lifecycle management: There is a disconnect between the source code repositories, design time tools, and application runtime. The cloud vendors have potential not only to provide an open source repository such as Sourceforge but also allow developers to build the code and deploy it on the cloud using the horsepower of the cloud computing. Such centralized access to a distributed computing makes it feasible to support the end-to-end OSS application lifecycle on single platform.

              OSS dissemination: Delivering pre-packaged and tested OSS bundles with the support and upgrades has been proven to be a successful business model for the vendors such as Redhat and Spikesource. Cloud as an OSS dissemination platform could allow the vendors to scale up their infrastructure and operations to disseminate the OSS to their customers. These vendors also have a strategic advantage in case their customers want to move their infrastructure to the cloud. This architectural approach will scale to support all kinds of customer deployments - cloud, on-premise, or side-by-side.

              The distributed computing capabilities of the cloud can also be used to perform static scans to identify the changes in the versions, track dependencies, minimize the time to run the regression tests etc. This could allow the companies such as Blackduck to significantly shorten their code scans for a variety of their offerings.

              Compose and run on the cloud: Vendors such as Coghead and Bungee Connect provide composition, development, and deployment of the tools and applications on the cloud. These are not OSS solutions but the OSS can build a similar business model as the commercial software to deliver the application lifecycle on the cloud.

              OSS as SaaS: This is the holy grail of all the OSS business models that I mentioned above. Don't just build, compose, or disseminate but deliver a true SaaS experience to all your users. In this kind of experience the "service" is free and open source. The monetization is not about consuming the services but use the OSS
              services as a base platform and provide value proposition on top of
              that. Using the cloud as an OSS business platform would allow companies to experiment with their offerings in a true try-before-you-buy sense.

              Wednesday, January 14, 2009

              Situational Marketing and Participatory Information Platform To Lure Info Shoppers

              Mark Penn, the author of Microtrends, has written an article in WSJ describing information shoppers. These shoppers are the consumers who go online to find all the related information ahead of time before making a purchase. The traditional sales people and the TV commercials don't interest them and do not fulfill their information appetite. I enjoyed reading Microtrends and this article does a great job highlighting a psycho-demographics that marketers will have trouble going after using traditional approaches. The marketers should pay close attention to this trend. The emotional appeal of a brand could help attract consumers to the products but may not necessarily translate into sale unless info shoppers are satisfied with the necessary information for a given situation to make that decision.

              Situational Marketing: The marketing campaigns, active or passive, miss the real situational context. The consumers are making a decision under specific circumstances that I would describe as a micro-situation. The information that is presented to them, most of the time, lack the context and stop just at the brand appeal. If the marketers can identify these micro-situations such as looking for a new iPod since my Zune froze or a dual layer DVD that would support my current burner they could win over those consumers.

              Google pioneered the search over browse via AdSense. The contextual ad placement based on users' intent while searching have performed better over non-contextual banner ads that people typically see (or not) when they browse. Extending this concept beyond the ad to make information available to the shoppers when they need them, until they complete the sale, would go a long way against bombing them with non-contextual marketing campaigns. Marketers have used obscurity to promote the coolness of the brand but what really helps consumers to seal a deal is the brand transparency.

              Think beyond traditional information channels: The average number of visits to a vendor's site has been consistently falling since people are exploring other ways to find information and engage into conversations. Providing information on a participatory platform allows the consumers to build community around the products and brands to exchange information. The marketers can tap into the collective wisdom to promote the products. The open source software is a living example that demonstrates the influence of community and community-generated content in buying behaviors.

              Monday, November 17, 2008

              Microsoft Cloud Computing Blogger Roundtable

              Today Microsoft announced the cloud offering for Exchange and SharePoint. I was invited to participate into the Microsoft Blogger round table that took place after the announcement as an initiative by Microsoft to establish relationship with the bloggers and thought leaders in the cloud computing area.

              The launch event, attended by select customers, partners, bloggers, and the press, included a demo that articulated the seamless ubiquity of the solution – from the cloud to on-premise and vice versa reiterating the client-server-service strategy. Microsoft also iterated their commitment to continue investing massively into the data centers and also emphasized commitment to sustainability.

              When asked about the SLA the answer was that the SLA is based on availability, security and privacy, and recovery time in the event of a disaster based on the geography. The SLA is three 9.

              Stephen Elop, president of the Microsoft Business Division at Microsoft dismissed the possibility of slow online adoption due to the continued investment into the on-premise products commenting that the customers will still need an on-premise client - some kind of “local processing” - citing Google Chrome (without naming it)

              The event was followed by a blogger round table that I participated into. This was an effort by Microsoft to establish relationship with the bloggers and thought leaders in the cloud computing, Enterprise 2.0, and social innovation area. It was an interesting conversation on the topics such as Microsoft embracing the cloud computing culture as an organization, better ways to engage with the bloggers, cloud computing adoption concerns, messaging issues around Microsoft products, SharePoint as a platform on Azure etc.

              The discussion was quite open and well moderated by David Spark. Microsoft expressed the desire to better connect with the thought leaders and bloggers in the cloud computing area. Following is a list of some of the bloggers that were at the table:

              Jeff Nolan – Enterprise 2.0
              Ben Metcalfe – Co-founder of the Data Portability group
              Salim Ismael – Headed Yahoo Brickhouse in his previous career
              Phil Wainwright – from ZDNet
              Geva Perry
              Tom Foremski
              Adrian Chan
              Deb Schultz
              Ohad Eder
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