The Fork In The Road

Beyond Virtualization – What Comes Next

While cloud computing continues to be widely discussed, its cousin virtualization continues to be strong and growing as well. According to a 2012 Kaspersky Lab survey:

• 69% of US companies are in the process of implementing or have implemented server virtualization
• 46% plan to implement a virtual desktop infrastructure
• 51% plan data storage virtualization 

Although these are strong numbers, virtualization as we know it today is just the latest step in the evolutionary march.

While some people believe their needs to be a cloud versus virtualization decision, others are arguing that virtualization is cloud. VMware makes this argument and to a degree its correct. Virtualization is at least private cloud and in some cases, could be more. In fact, a strong argument can be made that virtualization has fueled infrastructure cloud adoption.

Many new developments are already here and their adoption is growing like a snowball rolling down a mountain. Three trends – Security, Cross-platform availability, BYOD - are quickly switching from nice-to-haves to must-haves.

Let’s face it.  Although security is always on the requirement list for any technology, there are assumed limitations that have been accepted as “the best we can do.” This will not do. Security must be baked into all virtualization or cloud-based offerings. We can’t continue to expect enterprise companies to purchase their security from yet another company. Layering another technology on top of what is already being used is a clunky solution that should be temporary. Every new technology MUST sufficiently address security.

Originally, the Bring Your Own Device (BYOD) trend was addressed when senior management wanted the freedom to use whatever device they chose or when the engineering and creative teams might be on different systems than the rest of the company. Today, BYOD is a must for a global, mobile workforce. When implemented well, it addresses the need for superior and flexible security, support, collaboration and cross-platform usage.

Speaking of cross-platform, 2013 is the year it becomes a must-have. Business users are running out of patience with applications that don’t operate on multiple platforms or have vastly different experiences depending on the platform.  If as marketing budgets seem to suggest, 2013 is the year mobile marketing takes off, it must also be the year cross-platform become ubiquitous. Although there’s still confusion in some organizations if apps and mobile are the same thing, as the mobile experience becomes more tailored and apps become more sophisticated, it’ll become more clear how these differ.

Tools and applications that don’t operate cross-platform will begin to see declining new sales and limited adoption. Soon after, they’ll be on the list of soon-to-be-obsolete technologies. It isn’t enough to roll out tools for one platform and then a second or third a month down the road. The patience we’ve had for startups’ development roadmaps is waning. When it's an established company that's saying the "it's on the roadmap" line, it's even more unforgivable.

Forget about what will be developed in 2013 or 2014. What’s exciting are the adoption rates that will push enterprises and businesses overall to a new way of operating.

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Benioff Wins This Round

Whether Oracle actually cancelled Marc Benioff’s keynote speech or simply “rescheduled it” to Thursday, a day Benioff couldn’t be there, is immaterial. Oracle World is clearly huge and very focused on all things Oracle. I walked on the bridgeway above Howard Street yesterday and even from the outside, you can see it dwarfs the Dreamforce conference from a month ago. However, if someone thought moving/cancelling Benioff was a way to avoid giving him a voice, they calculated very, very wrong.

Now, no matter what Oracle and its partners announce, Benioff will always be mentioned in any news coverage of the event and, possibly more importantly, the gossip/Twitter streams, and blogs like this one. That means a whole lot of money is being spent and Benioff gets the last laugh.

I missed Benioff’s alternative talk this morning at the St. Regis Hotel – which happens to be across the street from Oracle World – but what he said doesn’t matter. What will remembered is the already famous tweet I saw retweeted dozens of times in my Twitter feed starting yesterday afternoon.

Whether you like Benioff or Larry Ellison, no one should question Benioff on this one. I’m not sure if Ellison actually made the call to cancel Benioff’s keynote or if it was someone else’s idea. If it was some else’s idea, their boss should be asking why someone who can’t think through potential ramifications is in a position to make these types of decisions. Anyone who knows Benioff, his reputation or has read his book should have seen this exact course of action happening, including the “street protest.” If this truly was Ellison’s idea, it is another example of what happens when people can’t tell their leader he has a bad idea. Either way, today, and this particular Oracle World conference, belong to Benioff.

 

What’s Coming and What Could Hold Us Back

Last week, I attended Dreamforce, Salesforce’s conference. Like the now defunct TechCrunch 50, it is a great place to see a lot of very different companies; in this case with a thin layer of similarity. It is the common ground of Salesforce integration that makes the companies so ripe for assessment and comparison. 

I met some old friends, saw the next version of some familiar technology and had a few people lie to my face.

I’m not necessarily in the market for new vendors/technology, so for me it is a perfect time to skim the surface of new companies. There are definitely some interesting things happening.

Without a doubt, social has become more integrated into the mainstream consumer experience over the last 18 months and will continue to expand into the enterprise in creative ways. Having said this, the next significant wave seems to be new ways to leverage business intelligence and predictive analytics. This makes sense given both the technology evolution and the desire for companies to prepare for whichever direction the economy/business may go.

So getting back to the people lying to my face. Enterprise sales and marketing have often sold ahead of what is actually generally available. I get this. If you assume it will take at least two to three months to roll out new software that could push the software into the next release. With the increasing adoption of SaaS and PaaS, this is becoming less likely, but in many cases could still be a legitimate assumption. For startup companies with limited resources, there is also the development plan that builds what customers want, also called customer-sponsored development. If customers understand the timeframe of receiving newly-developed capabilities, this also seems a legitimate approach. I am not labeling either version of this selling technique as a bold-faced lie. 

Unfortunately, there are companies so eager to close deals, they promise features and capabilities that are several releases into the future. If prospective customers don’t know this timing, this can only be seen as intentionally misleading, and if the company in question is promising what it does not intend to deliver, it can be defined as fraud. This has happened throughout the history of business, but combatting it is more important than ever. 

Although the percentage of companies guilty of this might be small, their reach is large. Dreamforce is a good illustration of the reach of SaaS companies. Obviously, main companies around the world use Salesforce. Now these companies are starting to, or are about to start making significant investments with other SaaS vendors. If what they purchase does not meet baseline expectations, it damages the reputation of that vendor, the cloud computing sector and potentially the bottom line of the business that purchased it. “Bad seed” companies can only survive for so long, but it’s the potential for them to drag the rest of us down a peg or two on their way down that will hurt.

 I love startup companies and I love optimism. All I need now is a BS meter for the next conference. 

 

Microsoft Announcement Helps Cloud-based Marketplace

Microsoft has announced its first cloud offering, Microsoft Office 365, a “productivity suite.” This is a good thing for more than just Microsoft. As well-known organizations such as Microsoft or IBM make related announcements, everyone benefits. It reminds me of a friend who owns a few local coffee shops. He says his favorite thing to see is Starbucks coming to the neighborhood. His business always goes up because seeing Starbucks makes people automatically think of having a cup of coffee, but not everyone likes Starbucks, so they go to his locally-owned and branded coffee shop instead.

Similarly, when well-known, mainstream companies announce they will have a cloud offering, they are making it a legitimate option. The reality is if they only go as far as an announcement and actually do very little, to mainstream consumers and conservative enterprises the fact that they made the announcement means it must be important.

What’s interesting about Microsoft’s announcement are some of the real reasons behind it. We can all see that Microsoft is late to the party and is only offering a cloud-based version of its previous offerings. It is at best mostly a cloud version of Microsoft Office. At worst, this is a desperate “me too” attempt to combat decreasing sales.

This was also the right move for Microsoft. It will cost around $72USD annually for individual users and is likely to attract people less technically savvy who are used to paying for basic word processing software. In other words, Microsoft is likely to carry many of its current customers as they begin to look for a cloud-based solution. They won’t care about paying a starting price of $72 because they are getting the Microsoft name. I find it more than a little hard to believe that Microsoft will pick up a significant amount of Lync’s users as Kurt DelBene, president of Microsoft’s Office division, claims. The kindest thing I could say is that I believe he is mistaken. Someone with a little less tact may say he’s delusional.

The wild card in Office 365 is the integration of Skype. If Office 365 happens to be the only way to access Skype - I haven’t seen a clear answer on this – it could drive more adoption than would otherwise have come. At the same time, it could drive Skype users into the open and waiting arms of other options such as Google Talk.

Either way, I thoroughly welcome Office 365 into the marketplace, even if I never use it. In the end, it will be good for all of us in the larger cloud marketplace.

 

Is The Enterprise Ready for Cloud Computing?

The Cloud is coming to an enterprise near you. It’s inevitable.

The term SaaS may have been coined in 2001, but it’s the past four years that have seen a significant push of cloud into business. Now enterprises are poised to migrate to cloud solutions in ever-increasing waves.

SaaS solutions have been embraced by departments throughout the organization, particularly sales, marketing and finance. If the predictions from analyst firms and large technology companies are correct, entire organizations are becoming, or will become, cloud-based within the next five years. Promises of low costs, faster deployments and accelerated time to market for related apps are the main drivers of momentum.

Having said this, there are a handful of groups trying to hold back the ocean. The four groups trying to stall this change are:

1)      IT professionals trying to keep control (and in some cases their jobs)

2)      Ultra conservative management teams that fear change and will only embrace it when there’s no other option

3)      Technically uninformed who don’t have a basis to evaluate solutions themselves

4)      Organizations who have a vested interest in the status quo

The irony is innovation is what drives successful companies and trying to control innovation stifles it. The reality is if someone cares about the future of their company, they’re probably already using a cloud-based solution somewhere in the organization, possibly developing on a PaaS.

My prediction for the near future is companies will choose to switch first to PaaS and eventually IaaS as competitive advantages. Next, follower companies embrace cloud computing out of fear of being left behind. The reality is there will always be a group of companies that will never switch, but if Forrester Research analyst Stefan Ried’s forecast that the PaaS market alone will be larger than $10 billion USD in less than 10 years is accurate, many will.

Why The Cloud Doesn't Always Rain Money

So much time is being spent speculating if we are in a bubble or not, that what’s really important is being overlooked: evaluating companies for the long term. It’s time to change the focus of the discussion to business models. We all know that when companies fail, it always comes down to not enough revenue and/or too many losses.  This is a fundamental of business, as well as a pretty obvious statement. Whether it is optimism or misjudgment this is something businesses still fail to grasp. 

Planning for future revenue as the savior of a company is not new. In 2000, I had a client who told me once the add-on technology was offered to the public in two or three years, they would be profitable. In the meantime, if they kept a customer for a year, they only lost $10 on that customer. Two additional facts: (1) they had multiple millions of customers, and (2) in hindsight, we can see the technology for which they were planning only started to hit the market in 2007.

Today, some cloud computing companies are embracing business models that are only successfully in their overly optimistic dreams. The problem with this is they are taking their investors, customers and employees along for the ride and turn ugly when anyone questions their assumptions.

Cloud computing executives should invest in two things:

1)      an analyst whose job it will be to consistently assess the marketplace and the company. This person is likely to straddle finance and sales/marketing.

2)      an honest opinion. You would think this should be the role of everyone on the management team, but too often groupthink, fear or frustration stifles what is sure to be an unpopular question. Ideally, someone on the team will be given this role. If the company cannot do this on their own, a trusted advisor or consultant is essential. Otherwise, you are in danger of engaging in groupthink, which never turns out well.

There are a few versions of cloud computing business models that need to be assessed more closely:

1)      trying to make an enterprise software-style sale via cloud computing. There is a class of SaaS company which isn’t truly SaaS. If your company must do tons of custom work for each installation and you only close a handful of deals a year, your company is not a SaaS company. It only happens to be delivered via the cloud. As more true cloud-based offerings are available in your space, it will become more difficult to sell solutions that take months to implement, require significant investment of customers’ IT resources and cost more than other cloud-based offerings.

2)      Freemium models that don’t have either a path to Premium or an additional revenue source, such as advertising. High-volume user plays are a good sales plan as long as the “free” users don’t become a drain on the company. Having a model that includes“free” users must at least pay for itself. Companies must also take into account the cost of supporting these users. Free trials or limited functionality are two ways to increase the conversion rate to paid customers.

3)      Ridiculously thin margins are the death of many restaurants and will eventually be the death of many cloud companies. This coupled with a “do anything to get the deal done” attitude occasionally results in negative revenue by the time the solution is fully deployed. This goes back to having ongoing analysis of revenue and the cost of sales.

As investors look for what can go wrong in the marketplace, they need to first look to see what could go wrong in each individual company. Only then will there be sound companies that can blossom in sunny times and weather any storm.

The Newest Trend in Cloud Computing – Human Touch

As cloud computing is being more widely implemented, one of the excuses not to use it – concerns about quality – is falling away. This is partly because a new ingredient is being added to the mix: the human touch.

Many areas of cloud computing remain perfectly fine with the end user being the only human participation with the application or platform. However, for those that require judgment, fact-checking or outreach, frankly, it is good to have a human available. For example, Pramata provides on-demand BI for contracts. Unlike automated contract management systems, Pramata has humans – in this case those with a legal background – do QA checks where its technology leaves off. The difference is a higher quality of results.

Similar but different is ConnectandSell's approach to improve sales rep productivity. The company offers live dialers who tap into their clients’ CRM systems to work through a defined call list. Meanwhile, their client’s sales rep instantly speaks to whoever answers from the call list. The result is more connects in two hours than reps usually make in a week.

In both examples, people being part of the process is what makes the technology worthwhile. Yes, there are contract management systems that don’t involve people, but they aren’t as accurate as Pramata. And, yes, companies can use robo-dialers to connect their sales reps with prospects, but they are obvious and annoy the person being called.

It’s time to examine our automated programs and determine:

1)      Would this be better if there was a person involved somewhere in the process?

2)      Is the personal touch so valuable it warrants the additional associated time and cost?

3)      Will this hamper and enhance scalability?

4)      How can this be implemented at this time in our technology’s life?

As cloud computing has a larger footprint in more critical areas of business such as finance and legal departments, and sensitive industries such as financial services and pharmaceutical, the need for human drive QA will become more apparent. The companies poised to answer this need will have a clear competitive advantage.

Work Globally or Someone Else Will

In 2009, Cisco’s WebEx launched a “Pass the Ball” campaign. The idea was to keep the work moving forward by passing projects along through WebEx. It is a good concept and obviously speaks to WebEx’s core value. However, this stops short of where business is going.

I’ve looked into a borrowed crystal ball and see that competitive technology companies, particularly cloud-based companies, will be embracing a distributed workforce more in the near future. As companies become more global, they must operate in multiple regions and time zones. Some companies see this as the cost of doing business; the smart few know how to leverage this to propel their company forward.

Smart technology companies will not only “Pass the Ball” with projects, but allow ownership of key functions to live outside of headquarters. Many technology companies already feel comfortable outsourcing development of new products and core technology to less expensive, but highly educated, regions of the world. In some cases, a shift has been made from outsourcing to having an official office in one of these locations. Ranging from Bangalore (India) to Yerevan (Armenia), over the last five years, former outsourcing locales have become the home of official company offices.

The key benefit of this is having a consistent person working on development. This enables the person to develop a deeper understanding of the technology as well as loyalty to the company. Ironically, years of bubbles and layoffs has made company loyalty a rarity in the US, but in these newer office locations, company loyalty is more possible to foster.

The next step moves from development to business processes such as finance and marketing. Having accounts payable on a different continent than headquarters should not be a problem, as long as there are work-arounds for emergency exceptions and someone with authority to activate them.

Although it takes more planning to have marketing effectively operate this way, it is possible. I have a great person working with me in Antwerp. He owns specific functions and a few times a week I have a call with him at 5 or 5:30am PST. Yes, I know that is painfully early. However, what I get in return for my missed sleep is a professional who can own many marketing tactics without constant supervision. He also knows when to call me in the middle of the night with a problem. We have an unspoken agreement: him – can figure out most things and me – I know if I’m getting a call at 2am PT it is really important and I don’t blame him for waking me.

Cloud computing companies seem to be leading the way, but other than personal preferences of executive management teams or board members, there is no reason why this should be limited to cloud-based companies. This more efficient approach will need to be embraced by global companies or it will be yet another advantage cloud-based companies will have over their competitors.