I wrote before about the music industry. In this piece I said that the model is broken. Since this bit, both Nick Carr and Allan Leinwand at Gigaom have both written about it some more.
To me this one statement sums up the issue
Money needs to flow to artists for their creations in a legal manner.
The key word being ‘the Artist’. Isn’t it funny that the lobbying and noise is all coming from the record companies. .I would wager that they’ve wrapped up their actions in a nice bundle called ‘we are serving your best interests’ Mr or Mrs artist. But I think even a cursory examination of the wealth pools within this industry show that the artists get only a fraction of the benefit of their creativity. So in fact all this noise is entirely self serving, and people know it.
I think most people would happily pay for content knowing that most of the wealth is going to the content creators. ( I accept there will be outliers who never will)
The internet as a distributor model makes the record companies somewhat redundant and that is the issue. The internet gives you reach, rating and social networks give you authority weight or cat through. Downloads removes the need for CD’s –So what is left?
The ability to get payment and restrict access to content exists. Why not sell music in the cloud… or MaaS . This way the content creators get paid, the middle man is cut, and the content is protected. Just an idea….
Actually the more i think about this the more i think that the artists would love this kind of disintermediation play to happen and should actively embrace the internet model
Ben Kepes read my last post and disagreed with my assertions
In an enterprise world, tied as it is to Outlook, MS Office in general and oftentimes IE to boot the above statement carries plenty of validity. However my contention is that the future (my emphasis added) is about small, nimble and agile organisations, the sort of organisations that run on Zoho, Google and Twitter.
I think Ben is missing the point. By definition the future is it an unknown entity. In fact in planning circles, HR and a lot of industries its well accepted that the best predictor of the future is the past. If you accept that premise then MS is in good shape. They missed the internet, but won the browser wars (should that be massacre), they missed home entertainment, look where Xbox is now. Search, webmail (msn) …. The list goes on. Music should be mentioned, its one area where they’ve not made it. Point is, a lot of those functions are consumer and they were late into the game.
The second point I’d like to call Ben up on is his assertion that all consumer users will be early adopters.
I use MS Office but I use Google apps or Zoho roughly 10 times as much as I do MS. Similarly I email with Google and browse with Firefox. We CRM with an Open Source/SaaS product and project plan, specify and Wiki with similar solutions.
Sure they have consumer eyeballs and enterprise eyeballs, but consumers will tend more and more to being earlier adopters and will outrun MS developments and even enterprise is starting to see the value in the new, nimble and alternative options.
My pick is that the operating system/windows live tie up will buy MS some time, but a reinvention is what’s needed if they really want to win this race.
I’ve met Ben, he’s a great guy, but I wouldn’t call him representative or typical of you’re average small biz owner. I’d put him quite a long way to the left of the adoption curve. In this instance I think Ben has fallen into the trap that most people who play with IT a lot do. That is assume that everyone is the same as themselves.
I think most small businesses owners are innately more conservative, further back on the adoption curve and more likely to fly toward quality. Things like brand and trust will play here. Again all factors that play for MS.
Hot on the heels of Ben Kepes post about how SaaS companies will have some protection against the looming recession. McKinsey have come out with a piece that analyses the cost benefits to a customer of purchasing a SaaS solution.
Given that SaaS is 30% cheaper for the end user, expensible, has more flexible growth and retraction capabilities and delivers business benefits faster. I would say that things are looking quite rosy for the SaaS sector.
Added to this the VC and share market has shown a willingness to continue to shove money its way too (maybe they understand the things listed by Ben, but I suspect it’s more a swarming affect in action)
I maintain my earliest opinion about SaaS. It delivers true customer benefit. Whether this be cost, flexibility or speed to benefit. If you keep your customers happy you are onto a winner. a position like that makes you truly recession proof.
I read this interesting side piece by Russell Shaw about how the RIAA’s website was hacked. Russell hypothesises that its most likely the work of disaffected students who have been the target of the RIAA’s aggressive stance around their content.
Yea, the RIAA hanging on for dear life using broken business models, and then summoning the might of the state when those models don’t work and CD sales from their music-company masters continue to plummet.
And yes, music companies headed by CEOs who still, in 2008, are cyber-illiterate and still dictate their emails to their secretaries.
Russell then goes on to say
I don’t care if the hackers are digital guerilla warriors or practical-joker punks.The way you combat your opponents is not through malicious scripts, or whatever they used to temporarily bring the RIAA site down.
You lobby Congress for a change in the copyright law you find unjust
I find this very interesting. Lobbying to my simple way of mind is a form of legalised bribery. Sure its got rules and some fancy names like ‘Public relations’. The fact remains that lobbying is undertaken by big business to asserts its interests and influence the political system to vote for their interests against the small guys. Lobbying has virtually nothing to do with minority interests, popular opinion, market forces or democracy. You very rarely see one large industry attacked by another in lobbying (like the RI AA and Telco’s who should in fact be the targets of their ire ). Instead its typically a protectionist stance against a popular trend that has large ramifications ( ie job losses) for that industry. In fact it is suspiciously like evoking regulation and a massive hindrance to competitive change. Check out the http://www.opensecrets.org website to see just how much money is being spent.
In this system, I don’t know how minority interest with limited funds and no vested interest in defending an obsolete business model can affect change.
I find the RIAA’s stance around this whole evolution to be quite intriguing It’s almost like they believe they’ve got this divine right to deliver music to us in this archaic manner. They missed the technology disruption, but instead of addressing the real issue, have embarked on this crusade. I could understand this strategy if they were feverishly working on alternate business models that spread the wealth equitably and embraced the internet as a delivery model. But I rather suspect this is it from the RIAA, they've got nothing else but this legalised defensive play. History is clear on this though. If you don't evolve you do become obsolete. The environmental forces at work here can only be held back for so long
I’m a little reticent to put up this kind of research given my previous post about how research houses themselves were being disrupted. But here are the top predictions from Gartner .
- By 2010, 15% of large companies will have started projects to replace their ERP backbone (financials, human capital management and procurement) with new service-oriented architecture [SOA] and SaaS-based solutions).
- By 2012, business process management suites (BPMSs) will be embedded in at least 40% of all new SaaS offerings, as providers strive to make business processes explicit and mass-customizable by their customers.
- By 2012, more than 66% of independent software vendors (ISVs) will offer some of their applications optionally or exclusively as SaaS.
- By 2010, 85% of SaaS vendors will offer uptime service levels of 99.5% or beyond in standard contracts, as well as performance SLAs.
- By 2009, 100% of Tier 1 consulting firms will have a SaaS practice.
Reading these I actually don’t have too much to argue with. In fact they seem to cover topics i’ve posted on previously.
I absolutely agree that if SaaS is going to mainstream (point 1) then service level agreements will be a requirement. Quite how this fits with an Internet delivered service could be quite a conundrum for many ISV’S. I personally think it opens up some massive opportunity for Telco’s. Phil Wainwright speculates that 2008 could be the yr that Telco’s crack SaaS but because of their ability to deliver utility computing. I think that utility computing coupled with an ability to deliver end to end SLA’s .
The prediction about BPMS i don’t quite get. Coupled with consulting yes but it would seem to me that getting to ‘mass customisation’ kinds defeats the purpose (and value) of SaaS. See my post about customising the code or change the business for more on this.
The number’s of ISV’s in the SaaS game is an interesting prediction. That is a huge amount of change in yrs – cultural, skill and channel. I would suggest that those companies with SaaS development and deployment (like Force, Microsoft and apprenda) platforms are in for a helluva few years too.
Ok, i’m the first to acknowledge that when it comes to the share market, I’m not an expert. But even I can see that something doesn’t add up on the NetSuite IPO.
Problem number 1. The company hasn’t turned a profit in 9 years of operation. If it isn’t making a profit, how then will it fund its product development, support and sales and marketing costs let alone repay the debt it now has to it’s shareholders?
Problem number 2. The segment it’s targeted at is highly competitive and given that the offering is essentially the same (except for the delivery method) Netsuite doesn’t have a bunch of differentiation. Ben Kepes discussed this some time ago.
Problem number 3. economics. Recent commentary would indicate that the US is heading into a recession. Bob at Smoothspan writes a great piece on the effects of a recession. And while the annuity revenue of SaaS affords NetSuite with some protection, Bob’s number 1 rule of flight to quality doesn’t. That would go to MS, SAP, Oracle and possibly Intuit.
Problem number 4. SaaS revenue takes time to grow. My experience with SaaS is that you cannot spike your revenue. Even signing up large customers you are still subject to the rule of 78. So for an unprofitable enterprise who obviously hasn’t got the scale advantages to yet cover its costs (and is still subject to marginal cost per user increases unlike companies that sell CD’s) it would seem to be a long haul to profit and hence dividends. The numbers just don’t stack to me.
Problem number 5. Hype. If you are in during the early days of hype good on you. Unfortunately its quite damaging for others who are in it later or for the long term. The Successfactors IPO combined with this one have set a trend. I’m old enough to remember the heady days of 1998-2001, I remember 2002 very well too. I wonder how many investors have long memories too.
I’m not bagging Netsuite, i’ve never seen their product or had any dealing with them at all. What i am questioning here is the apparent valuation the market has given them and wondering about the soundness of that valuation. I guess only time will tell….