Can Google go Enterprise?

There’s a growing opinion that the answer to that is no. Om Malik got stuck into gmail last week.

 

How is one supposed to run a business on such an unreliable platform? The integration of Google’s services remains a distant dream, reminding us of the limitation of its competence beyond search and advertising.”

Today Phil Wainewright posted about Sergey Solyanik, [a?] development manager at Google who has gone back to Microsoft because “he values reliability far, far more than coolness”.

 

Sergey point according to Phil is that Google’s emphasis

[is] on building Web properties that are popular, but which “primarily help people waste time online,”

Its interesting how we pidgin hole companies. Google is a technology company for sure, but they are a technology company that does online advertising really well.That's it.

 

Is it even reasonable for us to expect them to be able to deliver on-demand business grade services?   I rather suspect that for Google to deliver other (any?) applications is a stretch because of the same barriers that all entrenched, incumbents face. Culture, resources, big revenue levers getting attention etc., etc.

 

The evidence seems to be growing that Google is lacking something when it comes to building business grade, on demand services.  

Low risk plays provide no differentiation

 

This might be obvious but i see it time and time again. Old world companies are so fixated on risk that they are going no where. Old world companies behaviours can be characterised by panic, followed by engaging consultants and outsourcing to drive down cost and build ‘unique capability’. End result not a lot of action, no differentiation, but a whole warm fuzzies are derived. That is to say its more about the process and less about the outcome.

Let me expand on this.. I had coffee with a friend who attended a senior managers day at a large Telco. The interesting thing about this conference was some very insightful thinking provided by Michael Porter who spoke at this event. He asked the executive if they had engaged McKinsey’s to help with their strategy. When the response was ‘yes’, he challenged this decision saying

how do you think you are going to be different from your competitors when you are all engaging the same consultants and getting the same advice”

 Michael hit the nail on the head there. Its an interesting phenomenon because maybe 15 or 20 years ago it wouldn’t have mattered because everyone played cosily in their own markets, but globalisation has changed all that. Unfortunately management practices haven’t kept up.  His point also raises a cultural issue. To me he also said “why is your culture supportive of outsourcing key decision functions, ticking a box and not on creating real differentiation”

Consulting isn’t unique in this. The currently the flavour of the month with Telco’s is reinventing themselves. But here’s the kicker, they are all doing this with the same company. Check this out

Tech Mahindra, a company which is incidentally 43% owned by BT, is currently doing systems / transformational / rebuilding of the following Telecommunications companies, Fuji, BT itself, Telecom NZ, Botswana and if you look at their own website a bunch more.  

How are these guys going to differentiate themselves when there is a strong possibility they will be getting the same stuff – consulting, design, software…

It appears to me that New world companies are different, they’re disrupting, attracting talent and getting on with it. They back themselves to achieve and generally speaking make things happen. Why can’t old world companies have this kind of attitude?

 

The battle royal will be mobile.

 

The announcement yesterday about Nokia’s acquisition of the rest of Symbian clearly draws the battle lines for a new age of competition.  To me this strengthens my view about Google’s Android play.

 For those who suffer from Nick Carr’s internet driven attention disorder, i basically said that Android is Goggles play to stay relevant in an increasingly mobile world. Currently Google can’t serve up Adwords to (my) mobile browser and given the growth in sales and increasing power of PDA’s and micro computers this will be a big problem for them.

There has been a bunch written about Nokia’s acquistion but here are the titbits that i’ve used to support my theory and the title for this post.

 Firstly lets just talk about scale. I mention it briefly in the Android post, and for more on scale (different industry), i go into more detail here. Richard McManus of R/WW has a great graph showing market share of handset OS players. Check it out.

 {mosimage}

Image from Read Write Web

 

Android is no-where, Apple is a minnow, Microsoft and RIM are clear challengers. But look at the Symbian share! They are already the dominant player. They get all those scale benefits. They do have their challenges to address though.

 Nat at Radar O’Reilly has picked up on the fact that both Android and Symbian have chosen to license the OS in a way that is both open source and allows them to build future monetisation revenues based on proprietary technology.

 

Proprietary competitive hardware and software can be put into any Android or Nokia phone at the appropriate level of the stack.”

 This is proprietary component critical for both. I’d be guessing as to what they’ll do, but i can tell you why. Both Nokia and Google need replacement revenue streams to start coming to fuition.

 The ‘open source’ component is also critical. At this time, the only thing Symbian appears to be lacking is a good developer community.  As Microsoft has proven again and again, you need developers to really make a platform stick.  Nokia urgently needs to get everyone developing on its platform. Hell replicate the Apple play if you have too, just do it,

 In his analysis of this move Om Malik talks looks at the disruption that is going on in the handset world. It’s a good analysis, but a little narrow for my liking, there are more than one industry involved here. The gem from it that i think are highly relevant to my platform theory.

 

[discussing handset makers] “The PC industry went through a similar gut-wrenching change …. The biggest prize went, unsurprisingly, to platform owner Microsoft — which didn’t merely sell an OS, but relentlessly wooed developers to write applications for its platform to make it more useful.”

In the battle to be the most relevant mobile platform, the vendors could do a lot worse than learn from Microsoft’s successes and failures.

We are heading toward a mobile future. Handsets are cheaper, do more and are more functional. More people have them!  The mobile data networks of today are able to support our growing data requirements and speed demands.  Many nations who by passed computers and even PSTN telephony are embracing mobile technology, which means a bigger market pool available to the winner. This is also directly threatening to some really big companies futures – Google, Microsoft, Apple for instance. Make no mistake, whoever wins this battle will win big. For that reason there will be a massive scrap afoot in this space.

Threat and organisations reactions to it

I recently attended a training course on getting the best out of teams by improving the managers skills. I was struck by impact of one of the modules in the course and its applicability to my parenting but also (and perhaps more attuned to you the readers needs) regulatory regimes and companies undergoing disruption.

 

The basic philosophy of the course was that as are 4 basic ways to change someone’s behaviour.  If you want them to do less of a certain behaviour you can either ignore (which stops reinforcement) or punish (direct consequence). It was the view that either will reduce the unwanted behaviour.

 

In terms of promoting or generating a type of behaviour, again only two ways existing. The most effective was reinforcement. You know this from your parenting. You go over the top when your toddler first walks and they keep trying.

The second method, and the one that i think has massive implications on business (if the agency is correct) is that of threat.  The statement that rang true to me is this.

 

If you use threat, you will in behavioural terms only get minimal compliance

 

That is to say, if you tell and employee that if they won’t get their bonus unless they do xyz, they will do xyz to a level that will only just meet the requirement. There will be no additional effort past that point.  

You tell your kids, “if you don’t clean your room no TV”. You get a rushed minimally compliant job.

 

How does this translate to business? Well if we accept the above hypothesis as true and you look at disruption then it has some really interesting consequences. First lets look at regulation.

 

Basically Governments impose regulatory control on an industry when after some ‘gentle coaxing’, that industry hasn’t done what the Government deems is ‘for the greater good’. That is they threatened the industry group (with more control), who respond but to a minimally compliant level, which of course disappoints.  So how does the Government react? They deliver the regulation, which forces companies to do a whole lot of stuff under threat of worse intervention…..

 

I’ve seen some of the documents…. “You will do this by date, if you don’t you will pay us $x million per day…“ Guess what the interfering Government is going go get? Minimal compliance that negates the intent of the regulation but delivers to the letter of the document…. Bet they’re surprised too….

 

A second example. To my mind you can transpose the word threat and disruption.  Right now there are a bunch of traditional ISV’s who are under threat by SaaS providers. How are thy responding??? Well those that who haven’t decided to embrace the change, only to react to the threat (like Microsoft, SAP & MYOB)  with minimal compliance. Doing just enough to get by and say ‘yip we’ve done this SaaS thing’. But the reality is a little ordinary (see Ben Kepes review of MYOB, and R/WW on Live)

 

Implications? Governments try incentivising the behaviours you want (either that or leave the market alone and let natural forces dictate). ISV’s, somehow you have to embrace the new technology and voluntarily let go of the old world. CEO’s need to start a process whereby the organisation decides to change and reinforce behaviours that drive that change. Trumpeting statements like “if we don’t change we’re gone” is only going to end up with crappy products.  Maybe this is another reason for the innovators dilemma.

 

 

Android – people are missing the point

There has been a bunch of commentary about Google’s mobile platform Android. Most commentators seem to be banging on about how it is going after the Apple iPhone (R/WW  seems to be fixated on this aspect). This analysis misses the point. Of course Android will try to emulate the best in class product, there’s no point going out with something 2nd rate. But Android is much much more important to Google than just an iPhone competitor, Android is Google’s punt on protecting its advertising business (98% of Google’s revenue).

 
How? Well we are moving into a mobile device dominated world. This trend has been happening for awhile and is a function of scale and Moore’s law. (basically laptops have gotten cheaper, performance is better etc).  The PDA I have on my desk right now, clearly sits right between my desk phone and my notebook in terms of functions and performance.  When you factor in cloud computing benefits and Web apps (SaaS in some cases), PDAs aren’t that far away from replicating at least 80% traditional computing hardware functionality (and by association replacing those hardware units).

 
Xero believes this trend is happening and has come out with an iPhone supported version of its SaaS Accounting app to get into that space early.

The proof is there, check out some of the stats in this (surprisingly from R/WW) piece from Sarah Parez about how fast the mobile web is growing (and here from GigaOm).

 The implications of this are enormous. There is no dominant OS provider (why do you think MS has listed Mobile as one of its core strategies?). The other major player seeing this trend and having panic moments is Google. Think about it, if I use my mobile to browse the web more and more, then I logically would use it for search. That means Google becomes less relevant in advertising because (you try this) there are NO Adwords displayed in a Google mobile search. 

 
Connect those dots, growing mobile internet use, no Adwords….

So, if you are Google what do you do? Well you try to create a mobile platform that is hugely popular and ensure that in that OS is a browser (or some other special feature) that provides you with an avenue to protect your advertising revenue (or provides you with a new one). This platform must be hugely popular for two major reasons.

1) for your advertising revenues to stay the same you need ubiquity (similar to their 67% of US search type ubiquity)

2) without that kind of demand, no carrier will support Android mobiles.

 
GigaOm outlines a couple of reasons for that here, but more importantly Google hasn’t exactly made a whole bunch of friends in the carrier world with its stance around net neutrality and the San Francisco WiFi project.

 
I’ve blogged before that Google appear to be having their challenges, the shine is definitely coming off their share price.  There are other indications of a new commercial reality coming out of Google too. Check this out by Garett Rogers on the Google App Engine pricing…

 This surprises me because Google is the king at making things ridiculously cheap — not comparable.

 My read on this move, Google is under the cosh for profit growth to justify its PE ratio.