How can a nation take advantage of cloud computing.

I spoke at Cloudcamp Auckland last week.  In this unfconference, the awkward but real question came up

“ what does cloud computing mean for New Zealand business”.

This question is directly applicable to every nation with an ICT industry. 

First lets get clear on what cloud computing is. It is an industry wide disruption.   That means that the old business model of ICT is under attack. In this instance of disruption, there is an attack on both the technical delivery and commercial model. Anyway, this means there is going to be a re distribution of wealth within the ICT (a fancy way of saying there will be losers).

But most importantly a disruption is an event when new entrants can rise up. Where before the entrenched organisations could out compete due to superior resources, now the more agile start ups can win.

Now what is most interesting about this phenomenon is that it can also be applied to nations and their individual ICT industries. 

You will see this on blogs, ICT workers know that as cloud centralises whole functions, roles simply disappear.  But if one nation is loosing, another nation is winning.  Circle of life.

So back to the topic, how can a nation take advantage of it?

  • Firstly develop a product and become a global powerhouse. There is no reason why couldn’t have been developed and launched from another nation. 
  • With enough government support, you could set yourself up as a cloud computing ‘node’. Utilising climatic, political and economic factors to your advantage. For instance cold climate for cooling economics, being known for being not being corrupt, or being located close to big markets but not carrying their wage overhead.
  • You could take a deliberate strategy of targeting an incumbent with a disruptive play.  Take on Microsoft office, or SAP or McAfee. Get national fervour to gain a bit of scale then take on the world.
  • You can use time differences, for instance New Zealand is time is 12 hours different from the UK. Why not do the coding overnight and make cash during the day?
  • Look for the second wave of innovation. For instance collaboration is the next big thing in CRM. Don’t take on Seibel or, instead “skate to the where the puck will be”.
  • You could carve out a role as independent arbitrator or even create and manage compliance. ITIL for cloud.  

There are a number of ways you take advantage of the opportunity as a company and a nation. If you take anything away from this post, I hope that its something like Nations have an opportunity to make serious inroads into the global ICT market because of cloud computing and that now is the time to act.

Any thoughts on others? Am I alone in thinking this is a huge opportunity for whole nations?



Why Microsoft wants to move to Cloud Computing


Over the last couple of years, there has been a fair bit of commentary on Microsoft’s lack luster performance in the cloud computing space. And generally speaking it’s a fairly accurate assessment at this point in time. Critical in this statement is “point in time”.  I believe that MS views the move to cloud computing as a major opportunity.  I’ve heard that Ron Markezich, CVP MS online, is telling his troops that they are going to “Creatively Disrupt” themselves.  Which is a great internal line, something you would absolutely use when trying to convince your staff that everything they have worked towards is now going to be thrown out the window.  We’ve got Ballmer talking about the need for channel partners, which is true…now. Again, if you are MS you have to do this because your old business 100% depends on channel partners and you don’t want to alienate them.

Both great lines, but a bunch of baloney.  If you believe this and you are a channel partner or operate in a subsidiary supporting the channel, you are in big trouble. Heads up! In a cloud world, Redmond  doesn’t need you… In fact its worse than that, in a cloud world Redmond believes they can make more profit.  Forrester agrees with me..

Check out this picture to see how…



On the face of it, this profit increase is derived from cheaper operating model, no channel and no subsidary required. And to some extent it is, but its way more than that.  MS is moving into the adjacent market of its very own integrators by absorbing up the complexity it has traditionally created in the on premise world.  And if you are MS this is a huge new profit pool, I’ve heard ratio’s of 4-6 : 1 services to license spend are normal. This means that the potential profit pool is something like $200-300bn.

On top of this, I think that MS knows that with its on premise software its now ‘overshot’ to use disruptor language.  And in fact, there are large pools of users who are ‘non-customers’.  By offering up a simpler package, priced accordingly and that has much more wider appeal, MS can actually grow its market share.  Think about it, all over the world,  broadband and mobile networks are opening up computing to completely new users.  Netbooks, PDA’s and notebooks are becoming increasingly affordable to boot.  In affect MS’s addressable market is increasing massively too, but only if it meets this new markets needs. Something that a cloud solution will do nicely…

Make no mistakes, Microsoft  dearly wants to be a cloud computing company…..


Not everything will go into the cloud, BUT everything will be affected by it

I came up with that one liner for a presentation I had to do today, it resonated because of its accuracy. 

Cloud computing is disruptive, it causes transformation within businesses and whole industry sectors. It impact won't just be limited to  geeks and the IT department.

Think what telephony did for the world and how it changed.

What the internet did to us all

What mobility is doing.


Cloud computing will have that kind of profound impact.

You need to figure out how it will change your customers and suppliers, what you do as a company, your job.


SaaS providers, know your business.

A cross posting with


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.

  1. There is an incumbent business model
  2. 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.
  3. 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
  4. Then someone finds or offers an alternate product or delivery method, which is much cheaper and actually more suited to the clients  real needs
  5. 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.
  6. 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)


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

  1. 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….
  2. 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
  3. 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

  1. 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
  2. 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
  3. 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.
  4. Who can you pre integrate with to offer a broader offering (instead of building it all)

Can the combined weight of Global Telco’s beat Skype?

A couple of posts today (Om Malik and a follow up on Skype Journal ) discuss a rumoured Skype Killing application that is allegedly being planned for. It seems that some of the Telco heavyweights want to build a VoIP based P2P calling service in order to stunt the success of Skype. Those providers in the consortium won’t change interconnection (on net) calls, but if you call another carrier’s number (and i’ll hazard a guess here) or even a POTS number within the providers number pool, you’ll get charged (like Skype out)

It’s a good strategy that has been successful before.  The basics are that you enter an adjacent market, tank the revenue pool in that market to such an extent that the incumbent (Skype in this instance) has no resources left to enter your market because its fighting for its life in its home market.

Great plan except for a couple of things fella’s.

Firstly Skype’s disrupting you!, Secondly you can’t tank what is already free, and thirdly Skype is already in your market (the opps too late moment!).

Apart from the problems with the strategy, i see a bunch of implementation ew issues with this the approach

1) Can these Telco’s work together
2) Can they get a value proposition that isn't "old Telco” going at the same time as “Telco 2.0” – BT is a strong advocate of the “Protect and Grow legacy revenues”. How will this fly?
3) Can they suffer the cultural change of not charging for calling?
4) Can they physically build it
5) Who will buy it? – only ray of hope is that they have financial security that Vonage etal don’t. They have a long way to go here. Skype’s adding 360 000 subscribers a day. That’s growth no Telco except China or India has dealt with ever.

6) Can they sell it? Big step change for a sales teams

 Thoughts on this anyone? Smacks of desperation to me.

Has SaaS become what it disrupted?

I read a piece about 2 weeks ago that gave me one of those moments. You know, when a whole lot of pieces fall into place and your mind races. I was entitled 

You Become what you disrupt

 Since that moment i’ve become increasingly aware of this trend in the SaaS world. (Its like when you buy a new car, suddenly all you see is the same car). Its my contention that SaaS has itself fallen foul of some of the very (bad) traits it set out to remove. All for sound economic reasons, but the proof is there.

Lock in – ,,  (plus a whole bunch more ). Here’s a list of the glittering stars of SaaS, internet and PaaS. All going after lock in. Tim O’Rielly comments on the Google App Engine.

Keeping the internet as an open platform is a choice. We didn't understand what was happening to the PC ecosystem, but we've seen this movie before, so we should recognize and fight this plot line when we see it happen on the internet. We need to keep our cloud services vendors honest, and tell them we want an open, interoperable platform, not one based on lock-in.

 Bob on Smoothspan suggests that Amazon should more aggressively move toward lock in to further its financial success. Hmm,  I thought lock-in was so last decade? Isn’t one of the tenants of SaaS the way you can change vendors easily?

 Interoperability. Hey software vendors, get this. We want our applications to work together!  Have a quick think about why Microsoft desktop applications are so wildly successful. They did two things – 1) they made it simple to use. The leap from DOS to GUI was massive in making PC’s mainstream. Secondly they made all the programmes you commonly use work together on the same platform. Its my understanding that way back when they brought the various services like word and excel together one at a time (the argument about how successful this was done is irrelevant for most people). They made it easy to do.

Fast-forward to Monday, SaaS commentator Phil Wainewright went into overdrive about the SFDC / Google Apps integration. Saying a bunch of stuff including.

This is a showcase for on-demand integration. Salesforce for Google Apps is a close integration of two distinct on-demand application stacks, in which both applications can continue to follow their separate upgrade and evolution paths without breaking the integration.

(In the interests of honesty & integrity, so did I about Salesboom .)

But think about that. So basically your saying wow, you can integrate two apps together. Ummm so like integrating your SAP GL with CRM from Seibel. Or how about Payroll with Accounts. Ok, i’m assuming it happened a bit quicker, but the mere fact that Phil is trumpeting this as a major event is…well sad.  This isn’t new, way back it used to be called EDI, then that became unfashionable so it became integration, then webservices and the latest mashup. Sorry, but I would have thought in a 2.0 world this was EXPECTED.

Identity, look at what is going on here. The fact that OpenID exists is to address the same issue users have been fighting since application silo’s were in nappies. The nirvana here is single sign-on. IMHO Google’s suite of products is so useful because i’ve got identity federation across them. This still isn’t addressed. Take the iPayroll / Xero example above. They got database integration, no identity bit. To the best of my knowledge none of the vendors allow for single sign-on (does Does anyone?)

 Proprietary systems – ok here (with one large noticeable exception) SaaS providers seem to be doing quite well. The ability to create customisations (widgets or whatever) seems to be quite universally applied. My question is (and the point of this post), for how long? Using history as an indicator, this free for all can’t last. For a couple of reasons. 1) Vendor share, someone will dominant and change this. You’ll be able to write customisations, but for one company not many. Then you’ll see a bunch of small companies writing auxillary apps for the core… anyone? And 2) Commercial pressures, freeware just don’t cut it. Ad funded apps, well for the time being ok. But the relevance of Adwords is declining, surely that makes that model questionable?  Sooner or latter the market is going to come under pressure. That means a couple of things, consolidation and pressures to retain (lock in) customers…

So has SaaS failed in becoming like the old established players? Who has it failed? Was it all inevitable? Am i way off base?


Managing disruption

I know, its an oxymoron. Key part of that word being moron. The titbits of news that has gotten me to this post is the latest about SAP SaaS (and here) offering A1S. (although they won’t call it SaaS)

The key bit of this news is that SAP think they can launch a mid market play using A1S, service about 100 000 customers, while not cannibalising their existing revenue streams. Cool, looks solid, some leading edge consultants will be nodding their heads sagely saying SAP have indeed found a niche… they’ve missed a critical point tho. Its complete nonsense.

Disruption is just that, a radical break with the current. Incumbents don’t like disruption because its almost certainly an extraneous force impacting on how they do business. Would MS or SAP with their fantastic margins on software licensing deliberately disrupt themselves? Hell no!!!, they’ve been dragged into this kicking and screaming. (as an aside David Berlind does a great job of explaining how these companies keep their revenue streams intact but misses the point).

That is to say that they’re reactive, that things outside their control are impacting them. If they don’t have control, how are they going to manage this disruption? No chance. Its like saying we can control this wildfire. This break with reality isn’t just limited to Software companies, Telco’s are big into this at the moment as well with VoIP, media companies with content. You get the idea

The intricacies of the SAP offering seem to be quite vague. But there are already a couple of things that scream out to me that they haven’t quite got it right.

Firstly, the name A1S. What the hell? The worlds moved on, product codes aren’t marketable anymore.

Secondly according to AccMan “SAP is very coy about A1S which has now been in development for some 3 years”. That just screams uh oh to me. If you can’t build it fast is it what you are good at? Can you meet the fast charging continually in beta competitors? No chance

Thirdly and again from Accman “SAP will have to put considerable resource into a business model with which it isn’t wholly familiar. It has already set aside $3-400 million for this effort.” That’s a tonne of money. Given that they don’t have anything in the market yet wouldn’t that get some alarm bells ringing. Any start-ups out there, what could you do with $400mill?

So lets zoom back up. Those three examples, combined with the ‘we won’t cannibalise’ statements point glaringly to a complete misunderstanding about what it takes to compete in SaaS, to put it bluntly SaaS isn’t in SAP’s DNA.