Unreasonable thoughts

SaaS providers, know your business.

Paul — Tue, 07 Jul 2009 22:42:33 +0000

A cross posting with Cloudave.com

I’ve always viewed SaaS as a disrupted technology, and I mean disruptive in the classical sense as outlined by Clayton Christensen. Looking at the SaaS market though, I can’t help but wonder if the a good deal of SaaS companies don’t fully appreciate this.

By this I mean, they don’t seem to appreciate the macroeconomic forces they are playing with as well as the customer needs they are addressing.

Not wanting to do Clayton a disservice, but I’m going to quickly summarise my understanding of disruption and how it occurs.

There is an incumbent business model
These incumbents enter into a cycle (arms race even) of continually adding features to their products in an attempt to keep adding value to the clients, and hence maintain their pricing.
The cycle continues until you get to a point where the products are over spec’d compared to client NEEDS or even requirements, and accordingly over priced
Then someone finds or offers an alternate product or delivery method, which is much cheaper and actually more suited to the clients real needs
The incumbents, talk to their clients (who have sunk investments and a political agenda to support their buying decisions) who say they aren’t interested in this new product approach etc. The incumbents completely miss the new trend, because hey…the customer base aren’t asking for it.
The disrupter gains a foothold in a niche part of the market, gets scale over time and eventually becomes acceptable to the mainstream. They then enter the arms race cycle (they are the new incumbents), while the old incumbents struggle belatedly to meet the market…

Phew… all this is shown in this picture (from Wikipedia)

{mosimage}

So back to today’s SaaS market and my assertion that many of the players don’t fundamentally get this economic and market dynamic. Here is what I see

Many SaaS providers seem to be targeting the mainstream market, not the niche. You can tell this because they are going after current incumbent providers customers….
They are over specifying their products. That is to say instead of understanding the niche’s absolute needs, they’ve attempted to offer like for like functionality when compared to the incumbents product. My guess is because they aren’t targeting niches
Their pricing isn’t disruptive… in some cases its not that cheap. Instead they are banking on other levers like speed to benefit, opex not capx and the other regularly articulated benefits of SaaS

Based on my assumption that SaaS is still early in its market cycle ( 2 minutes into the first quarter of the game ), by acting this way the SaaS companies are missing the greater opportunity and literally giving the incumbents a breather.

I know some SaaS providers aren’t playing like this, to those that are I would say this. Know your business,

Step back, think a little, be the disruptor. Ask yourself

Are we better suited competition head on with a SAP, Oracle or MS with their huge resources, channel and marketing engine, or going after those customers who have a more basic need, haven’t bought a product or literally hate the incumbent price model. I would contend that there are a bunch (the vast majority in some markets) of clients who’d love some basic HR, ERP or accounting products (for instance) who can neither afford the entry price or the ongoing maintenance and are ‘making do’ or deferring another year
What features does this niche really really need? I bet its not 30 massively configured modules requiring 50 servers, and a team to implement and manage
At what price can you offer this much simpler product? Make sure its more than it costs you to make and ensure it’s a lot cheaper than the traditional providers. You need scale to win, price for the long term.
Who can you pre integrate with to offer a broader offering (instead of building it all)

The mental step change we need to occur

Paul — Mon, 29 Jun 2009 21:44:41 +0000

I had a conversation yesterday with our CIO function about collaboration tools. It was an epiphany to him, and a stark reminder of the step change in thinking that many companies need to go through if Cloud computing services are to become more widely adopted.

Here is a bit an abbreviated overview of the converstation.

Me: "my team want some collaboration tools"

Him: "Not going to happen, you don't have any CAPX"

Me: " I don't need any, i'll be putting it on my credit card"

him:"who the hell is going to sign off that, thats breaking DFA rules..yada yada"

Me: " errr [name] these options are cloud services, we're talking $5 per user per month"

Him: " stunned silence"

Therein lies the rub. My employer is in the cloud computing game, we offer them to our clients!!!. But we still haven't fully appreciated the disruptive impact this change is going to have on our own consumption, let alone our clients.

I was reminded of a throwaway line my peer got from the last Interop converence... "in cloud computing, we are 2 minutes into the 1st quarter of the game".... we've got a really long way to go

technology must complement human behaviour

Paul — Tue, 23 Jun 2009 03:46:28 +0000

I like reading Bob Warfield’s smoothspan blog, some of his postings really get my neuron’s firing, today’s more than most. Paraphrasing, Bob was talks about how good search (and recommendation) technology was overcoming the strength of brands. In itself quite insightful, but to me the more interesting theme was human behavioural elements outlined in the post.

It got me thinking. With all the advances and uses of technology we see today, are the only successful ones those that complement existing human traits. In Bob’s post the he mentions two.

First, the traditional behaviour of his kids was to go to brand restaurants. They did this because they knew what they were getting (what the brand stands for), and they got a some brand transference (what they thought they got from being seen in those places).

In the second example, Bob talks about Yelp and its rating engine. I would hazard a guess (and only Bob can answer this) but search, even with the geo-awareness, would have been meaningless without the rating feature. Why? Well the majority (not all) of people don’t like being first…it’s a security thing. In general the unknown unnerves us. Luckily some people are natural first movers, and the rest of us (the thundering herd) need them to show us its safe. I see Yelp as a technology that complements (actually addresses an issue with) human behaviour. Its kind of surreal in a way. Basically some people you don’t know, have been down this path before and taken the time to do a rating, and that is good enough.

(As an aside, Imagine a system where people you did know and trust did this. How powerful would that be? Interesting. )

Other examples, mobile phones. Sounds weird, but the change from fixed to mobile telephony was at one point in time, an epiphany. Suddenly folks could call you, no matter where you were…. and we liked that.

Cisco Telepresence is another. Because the experience is so realistic, you get all the nuisance of conversation that is so innately human that it renders travel obsolete. And in this context, getting up early, queuing to check in, herding through security and then being penned in a vehicle for hours on end without moving around….isn’t naturally human.

Instant messenger, was next on my list but that is incorrect. Presence based communication is. Apparently humans like to know that the person they are communicating with is… well there.

SMS is different, I think it fills two requirements. If fills a gap that voicemail doesn’t address. You open a message and you get the content. Most vmail solutions just tell you you have a vmail, and then you have to do something else to get the message! SMS also allows for clandestine type communications, your phone becomes a substitute for other tools of communications… like email and IM.

Unfortunately there are some flaws with this thought. In fact IT is littered with them. The fact that I’m typing right now is a dramatic case in point. In my life I’ve learned to communicate in three ways… I learned to speak, then write, then type. The absurdity of that is boggling. Speech recognition surely isn’t that difficult? Using writing to text conversion isn't a brilliant system yet either and its the second best alternative! The process of adding a Contact in outlook is farcical. Why should I have too? You telling me this can’t somehow be automated?

Therein lies the rub. We normalise these absurdities, become desensitised to it everyday.

So, this post finishes then with a challenge and a hypothesis. Look at the technology you use everyday, if it isn’t human centric, why are you using it ( if you are reading this you are human). I would also suggest to you that making this process or the application of the technology more human centric is an opportunity. We tend to pay for things that we deem valuable.

Is attitude more important than technology?

Paul — Wed, 17 Jun 2009 03:49:59 +0000

I’ve been thinking for quite some time about what you have to do to be successful in cloud computing and SaaS. The more I think about it, the more I think that the attitude of the company is this defining characteristic.

The technology, while no small feat to get right, just seems inconsequential when compared to the attitude of a company.

The attitude defines how the company behaves, it gives it focus and unity. It gives clarity about what that company will and won’t do, and how it does it.

I personally think that the {mosimage} logo Salesforce.com used defined SaaS, especially as they strived to make the market. By taking on the entrenched software model they gave their staff a clarity of vision the majority of vendors lack, their sales channels knew who and what they were selling against, their clients knew what they were offering.

{mosimage} ProWorkFlow, while also being SaaS, are different. The small amount of dealings I’ve had with them struck me by their clarity of purpose. They are proud of their lean model, they were crystalline about their direction and what they would and would not do technically.

When you compare this to the clumsy attempts of Microsoft, Google or SAP you have to wonder what is holding them back. It’s not for want of clever people, or money, or mindshare.

I believe its their attitude, they're either trying to do this ‘cloud stuff’ on the side, or their hearts aren’t really in it.

Thoughts?

A cup of coffee

Paul — Mon, 08 Jun 2009 00:21:35 +0000

That's the price of entry to business consultancy, that's how my network operates.

I'm not fond of formal business networking, I detest sycophants, I kind of do business on my own terms. Because of this I don't have hundreds of folks in my network, more a small number of trusted advisers.

I form strong working relationships with people over time. I subconsciously choose these people, and I seem to do this based on their intellect, integrity and knowledge.

To these folks i'm always willing to help, forward a request of do what ever I can to get things done. Doing things this way i've built some great relationships, beyond just work too.

Interestingly enough, working this way, these folks love to reciprocate. The cost, a cup of coffee.

In the last week I've got A grade consultancy on web design, sales remuneration and collaboration tools. Total cost $9.00 NZ.

Riddle that through the next time you sign off a cheque for some advice...

Interventionist government practices demean us all

Paul — Sun, 17 May 2009 22:27:24 +0000

Our office has just been submitted to the indignity of a health and safety audit. Its not hard to tell this because of the sudden influx of absurd signs around our office. Adding 3 additional exit signs to our current 2 florescent ones just in case we didn’t already know where the doors were. Signs in bathrooms reminding you to wash your hands and the massively ironic signs on doors asking you to ‘think, there might be someone on the other side’.

I have no issue with Health and safety laws where they are required, especially in hazardous working conditions, but in an office environment please? What is going to happen? An especially dangerous keyboard cable is going to cause havoc? For godsake, if we see a live wire lying around, we are going to do something about it.

This to me is moving beyond governments role. It’s a fundamental waste, tax payers like me are funding people to write and enforce this nonsense, people who could be doing something productive (ie wealth producing). You do not see this absurdity happening in nations who are more concerned with basic needs like food and shelter. Its a luxury of the so called '1st world'.

But major issue, the final indignantly, is that it demeans us all. By deciding to treat the entire country this way, the government has benchmarked us against the lowest common denominator in intelligence and maturity. Trumpeting to the nation that we aren’t grown up enough to make even these most basic of decisions.

This effectively denies those who are at that lower levels the opportunity to learn and grow into fully functioning adults. It also makes those who are able to make their own decisions increasing lethargic, mentally dull. This is caused by repeatedly telling everyone you aren’t intelligent enough to make these choices coupled with removal of responsibility and it belittles us all.

No choice means no accountability, something that shows up everyday... in our courts, in our homes, in our debt levels, in our companies.....

Telcos will be a force in Cloud Computing

Paul — Mon, 11 May 2009 20:39:22 +0000

This is a cross post from Cloudave.com

Ben Kepes asked me to write my thoughts on Jeff Kaplan’s post Can Telcos dominate cloud computing, in which Jeff argues, that based on their history, this is 'unlikely'

While there is nothing wrong with delivering reliable services, in today’s rapidly evolving cloud computing environment reliability is quickly becoming table-stakes as businesses of all sizes seek cloud computing services which can give them greater agility, better economies and added functionality to reduce their operating costs and strengthen their competitive positions. These are not attributes which people associate with telcos...

...Telcos are still struggling to figure out managed services, which have been around for over a decade, as a new wave of Software-as-a-Service (SaaS) and cloud computing services become mainstream.

Jeff also throws in a comment about Telcos failing it their own markets:

In fact, even responding to new ideas and business models in their core communications business continues to be a struggle for the telcos… Now, Skype is the largest international long-distance carrier.

This is a red herring and I will tell you why later.

First let me be very clear; in this post when I talk about cloud computing, I mean utility computing, IaaS or Cloud Computing services. I am excluding PaaS & SaaS from that definition. These are different propositions and to the best of my knowledge only BT, Telstra & Telecom NZ have commercial propositions launched.

Within that definition, I do believe telcos will have a large role (maybe not dominant), here’s why;

All cloud services require a network, who better to provide you that? SLAs that are currently conspicuously absent in cloud computing will become table stakes as businesses demand greater surety from their providers (just look at the buzz when gmail goes down). Unless you can deliver the end to end service, you aren’t easily able to do this

Telcos know about reliability. I just don’t get Jeff’s point above. If reliability is table stakes then can you seriously consider an internet delivered model as being better than an integrated private network and cloud model?

Cloud Computing is only just becoming mainstream. Really, just look at the numbers. The vast majority haven’t moved. Cisco, IBM, Microsoft and HP have only just entered the market. Customers look at these guys for legitimisation of any trend. No offence to any existing provider, but most companies are risk averse and naïve about today’s market leaders. By endorsing cloud computing, these vendors will make the cloud computing market much more real to end customers.

The other critical component of these vendors entering the market is their view on Telcos as a channel. That is the vendors that are going make cloud computing real for the majority of business users are all looking to work with Telcos for local delivery. Just look at the recent announcements (Cisco, IBM Juniper), they are all partners Telcos are familiar with.

It is also my belief that Governments are going to force regionalisation to occur within the cloud market. When Governments realise what this movement to the cloud will do for their tax intake (less IT spend, combined with less employment) they will figure out ways of protecting that. This again is advantageous for Telcos as they can enforce geo boundaries and they are generally large regional players.

Telcos have access to capital in the sort of multiples most start-ups would kill for. And make no mistake; it takes lots of cash (see this for speculation on Google’s spend) to build this sort of stuff.

Convergence of data and IT means this is a logical extension of Telco services. This is important because as Jeff accurately states, Telcos are under financial pressure. The difference between Cloud Computing and tolls is incumbency. One of the reasons Skype was successful is that they disrupted the incumbent Telco business model, a business model that Telcos are still very eager to protect. That is not the case in cloud computing, all that utility hardware is an upside for them. That’s why Jeff’s comments about Skype are a red herring, completely different challenges.

I’m not clear if Telcos will dominate this industry, compared to many other types of organisation they are slow to move and aren’t that innovative. That certainly isn’t universal and I would question whether it’s altogether relevant to mainstream customers. But I do believe that when the dust settles, some Telcos will be major providers in this space.

Disclosure - I work in the ICT industry - the views in this post are my own and may, or may not be, shared by my employer

Can employees ever run a company better than owners?

Paul — Tue, 21 Apr 2009 22:47:31 +0000

An interesting debate i’ve been having for a while is trying to understand if employees (i.e CEO’s) ever run a company as well as owners (good, astute owners).

Why even ask? Well I think our current financial ‘crisis’ is directly attributable to how we operate our companies. I take exception to the finger pointing that has been directed at the CEO’s of some of the failed companies. Those guys do carry some of the blame, but what isn’t acknowledged is that they are employees. Yip recruited and incented to do stuff by company boards or executives.

While not in these words, i am willing to bet that up the run up to the big crash, these very same CEO’s were having conversations with their EMPLOYERS that went something like “ how are you going to deliver more growth to keep the share price up” . Which would have created some debate where the said CEO’s may or may not have voiced their concerns over the companies exposure (risk) or the cost of doing such short term initiatives. End result is that the long term viability of the businesses were jeopardised.

Back to the debate, Its my belief that private companies can make better long term decisions because they have to deal with the long term impacts AND don’t have to worry about short term bonuses and the counter intuitive behaviour it drives. Rumour has it that Rupert Murdoch is the supreme example of this (love or hate him). Case in point, the New York paper price wars. His companies took the position that they needed to increase their readership, so they cut slashed the price. The resulting years of financial loss were offset against that growth. The questions are, could an employed CEO 1) even make that decision 2) achieved their bonuses in doing so? Logically the answer is no.

Another Murdoch legend (which i cannot source) goes something like this. He wanted to put the prices up for his paper in a specific location. His competitor didn’t follow suite, so he identified those geographies where his competitor had a large market share advantage and gave his paper away free until the competitor took his hint & put their prices up in line with him. Again could a CEO who is an employee make these kind of plays? I don’t believe so in the majority of cases.

Our CEO’s have bonuses and employment tenure (which effectively drive medium term thinking at best)

I’m not a CEO, and i’m not saying that they turn up to work to deliver a bad outcome, but it does seem to me that current practices and behaviours are counter intuitive. I know of at least one ex CEO who reads this blog, I'd love to hear his perspective.

Microsofts S+S has a long way to go.

Paul — Fri, 03 Apr 2009 03:24:35 +0000

I attended a workshop yesterday at MS which covered off a number of things including MS’s virtualisation pricing, their Service Provider license Agreements (SPLA) and their BPOS (MS online services).

Things I was particular struck with in these sessions

The way MS is treating licensing is deliberately stopping users moving from on prem (enterprise licensing) to Service Providers (SP). For instance, if you transfer your licenses to a service provider, that service provider cannot put you on a virtual server farm. They have to put you on a physically isolated server (and of course ) with its own server license. Implication; SP’s are inhibited from cannibalising due to the lack of price difference
The way they are licensing there server products is by CPU & virtual machine. Implication; Even if you don’t use Hyper-V (Zen or VMWare for instance) to do your back end virtualisation, they will get their pound of flesh for server licenses. In my opinion they need to be real careful here otherwise they may drive SP’s to use other OS’s.
MS will bill the end company directly. Not negotiable. Implication; massive channel conflict is in the offing here. Essentially they are outsourcing the sales function of BPOS and in doing so are setting this sales function in direct competition with their Service Providers (who sell to end customers) and installed product (who sell CD’s). Chaos ….absolute chaos
Their online services start at a minimum of 5 users and its not that cheap. You would have to wonder why that is so? I think i know the answer (see point 5)
One of the terms of use of their online services was that you must upgrade your ‘whatever’ within 12 months of MS upgrading that product. What the? Upgrade? I thought it was SaaS? Implication; The way MS is doing SaaS (S+S) is just like their service providers, that is multiple virtual instances of their core products. This differs wildly from conventional SaaS wisdom, where you literally have one instance of the code. It explains many things like how vanilla the offerings are, like why 5 users minimum, like why you need to upgrade the product. Essentially MS themselves are now their own Uber SPLA, delivering in exactly the same manner. They realise this is costly if you customise the solutions too much or offer it to SOHO customers, hence the draconian rules…

Overall, I wasn’t that impressed. The S+S strategy is being poorly implemented. It clearly demonstrates an incumbent grappling with a legacy revenue problem. It also highlights some true technical naivety .

How different will the world be ...

Paul — Thu, 02 Apr 2009 20:03:57 +0000

when our children start to have influence the world

I had a conversation this morning with my 3 year old son that was a straight out ephiphany.

It kind of went along the lines of "mum's hair is getting long", "yes Danny we need to ask get auntie Suz (who lives in Australia) to cut it" (and here is the kicker) he replied " we should video her on the computer to ask her".

In his world telephones are old news, they don't even make his top of mind communications needs. Makes sense as what is the point if you can't see the person on the other end? The whole 'wow' factor that I went through when video technologies like Skype became free and mainstream never existed.

The question is, what will wow him & what impact will that have?