Did Ballmer consign Microsoft to oblivion

Its my belief that  CEO’s job is to run a company that will continue for the future.  They do that by putting a strategy in place that will enable the continued viability of the organisation….

I don’t buy into all of the capitalist market mantra out there.

  • I do not agree that growth will continue for ever,
  • I don’t agree with short term market demands like quarter by quarter reporting,
  • I do not agree that a CEO’s job is to only do a great job for shareholders.

The reason for this, is that it drives too many short term decisions.   The drivers are all wrong, given the trade off between moving to new markets or defending, defense always wins out.

Therefore when i look at Ballmers performance at Microsoft over the last 14 years, i’d say he’s failed to ensure Microsoft’s long term health.

one relatively new Apple product: the iPhone, is worth more than all of Microsoft

I really liked this piece by Ben Thompson, ” If Steve Ballmer ran Apple”… the playbook would have been simple, ramp up Sales costs, radically expand the product range to cover all possible segments, try and out muscle Samsung….and oh, maximise short term profits.

But no where in that mantra is their build products that customers love (not just want), There is nothing about entering new markets to stay relevant.  And heaven forbid doing that if it means the creative destruction for the core profit lines.   Steve failed

Microsoft was worth $600 billion the day before he assumed control. Yesterday its market cap was south of $270 billion

Steve couldn’t get his head around the changes needed to remain relevant and position MS for the future. I wrote this 4 years ago. Reviewing it now its a playbook on what not to do when a predictable disruption is on its way… and MS has remained largely a bit player in the cloud market.

What caused this? Well some of this is the capitalist mantra as above, some of this is purely wrong drivers.  Steve had such a personal vested interest in retaining the status quo (look at his wealth in shares). Isn’t it wrong that his wealth increased by nearly 3/4 of a billion just be resigning

His 333,252,990 shares of the company are worth about $11 billion, and the 7 percent run up in its stock after his announcement increased his stake, grossing him $769 million.

With that sort of personal inertia, MS was never going to make the changes it could…It takes someone truely exceptional to make the long term changes required for the continuing health of a company. Someone like a Branson, Morita, Bezos or Jobs… unfortunately for MS Ballmer was none of those…

For MS, the future is pretty grim. The trend is not your friend when the trajectory is down (read Stall points). They are late in cloud, irrelevant in mobile and becoming obsolete in the corporate.  I love Kinnect, and this could be a ray of hope. But the window of opportunity is closing…

 

PaaS moves on with Cloud Foundry

Yesterday, VMware announced the launch of Cloud Foundry. This is a big step in the evolution of Platform as a Service.

What is profound, is that this allows you to build applications in a private (your data centre), public (Amazon’s or Rackspace’s cloud) or hybrid environment (a combination of both). It scales from your laptop, to the hundreds of servers in the data centre.

Finally Cloud foundry is Open source. This is important to you guys out there because this should in theory allow you federate (or connect) clouds together. The theory being that as you have a known code base and API set, you can readily do this task.

In the cloud space, this is big news. PaaS is going to be the most critical enabler of Cloud applications going forward, but todate the execution on this vision by potential leaders like Microsoft (Azure) and Salesforce.com (force.com) has not quite been there…

For some more coverage of this move check out

Krishnan at Cloudave.com http://www.cloudave.com/11714/vmware-disrupts-paas-space-with-cloud-foundry/

A funny thing happened when Apple and Google built their app stores…

They unwittingly built a massive new revenue stream for Microsoft….

According to Microsoft, OneNote had something like 15 million downloads from  Apple ‘s app store to the iPad.

Think this thru. If you are MS, someone else has solved the riddle of how do you get your apps on more devices and to more people. And what is more, you don’t really have to go thru the massive change this disruption has driven, because depending on how much you squint, you are litterally just cutting application code just like you aways did.

Imagine if you could buy one instance of Word, ppt or Excel instead the deplorable bundle that we’ve had for the last 20 years…. Micro payment based growth….

Weird, what the world does sometimes

The impact of governement on cloud computing

If this story about Microsoft moving their Azure (cloud computing) platform from one US state to another for tax reasons is true, there has never been a starker reminder of the role of government policy will play in Cloud computings future.

Tax breaks, privacy laws, lobby groups protecting everything from jobs, industry sectors, to legacy industry (internet music anyone?) , Intellectual property and of course national security will all play a role in cloud computings future. 

Have no doubt about it, this will lead to fragmentation, regulation and regionalisation of cloud computing….

Is attitude more important than technology?

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?

Telcos will be a force in Cloud Computing

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

Does brand matter?

This might seem like a silly question, most marketers (which I am) will crawl over broken glass to tell you that its everything And to some extent it is. (Seth Godin’s post on Hunger is brilliant at describing JUST how powerful). But picture this. In a SaaS framework, especially where you are taking a utility service, does the brand REALLY matter?

I was reading the comments on Mary-Jo Foley’s post about sharepoint in the cloud and was struck by the intensity of the brand dislike coming through. Classic anti-Microsoft vitriol. But if I wanted I could find the same on Google, opensource products etc.

Given that any decision to move to a SaaS application should include the ability to extricate yourself and your data from that provider, does the brand thing even matter? Consider email as the example. Most would agree its a utility application, valuable but utility. If you get antsy with what you get from Google, move to Zoho. You get Antsy with Microsoft move to Zimbra. You get the picture.

In that world, does the brand actually mean anything? Do you know what brand of road you use? What about the tap water?  Does the provider’s brand mean the utility provided is any different from their competitors? What about if you bring your historical perceptions to the table in a SaaS world, does it make a difference? Really make a difference?  Why would you pay differing amounts? Would you fall for the marketing?

Can one of the big boys ‘make’ the cloud market

I caught myself yesterday making the statement, that should one of the really big companies enter the cloud computing market they could literally make the market.  By this statement i meant that with all of the sales & marketing resources at the disposal, could one company accelerate the growth of the cloud computing market and physically grow it. (against what is a good question given my thoughts on market analysts).

Yesterday Microsoft announced it was going to finally going to deliver Office via browser (others call that SaaS but they do things their own way). So the question is, with its enormous marketing budget, market clout and channel could Microsoft (insert IBM,  HP-EDS) make the cloud market? Could a  regional Telco, like BT  (who has bought into the cloud vision) , with its reach and sales channels make the cloud market in the UK?

I think this can happen. I genuinely believe that a large company could cause this type or market distortation. To me there is some evidence of this, I’m told subprime mortgages didn’t exist 5 years ago for instance….bad topic but a clear example. MP3 music players – iPod anyone?  

Zoho – another approach to sustainable growth

Phil Wainewright put up a very thought provoking post this morning, speculating if Zoho could outgrow Salesforce.com. A worthwhile read, the stand out bit being his summation.

 

A disruptive model? Just as Salesforce.com’s CEO Marc Benioff dismisses conventional software vendors such as Oracle and SAP as dinosaurs on the verge of extinction, so Vembu looks on Salesforce.com’s high-cost, premium-priced model (in comparison to Zoho’s) as a throwback to the days of old-fashioned enterprise software.…. Meanwhile, Zoho’s decision not to turn to advertising as a source of revenue is also appropriate for the business market and a useful differentiator against Google, the other big player making headway in that mass SMB sector. On balance, Zoho’s model offers enough value to an underserved market to qualify as disruptive and its state of preparedness for a difficult economic environment could well see it emerge the other side of the coming recession as a leading player.

This got me to thinking. So far most of the we dialogue on financial models has been based around a number of streams

  • Freemium models seem to be getting the most coverage, facebook.com is an example. I was never that impressed (Ben Kepes has a good piece here on why), with the credit crunch i’m even less inclined to believe in this and tbh i’d be amazed to see this one survive in any meaningful way.
  • Advertising supported  – Google is the poster child
  • Traditional pay as you go models – Salesforce.com

There is another way to get scale, then monetise internet assets, funnily enough it’s a variant on the Google model and its being used by Zoho.This approach is to use an existing revenue engine to fund the growth of the start-up, in Zoho case its Adventnet who are funding Zoho.The interesting dynamic here is the financial impacts. No credit you see, organic growth but with no debt. I don’t believe people fully understand the economics at play here. The scale challenges a startup have to conquer are enormous, but when you get there your marginal costs plummet and accordingly your profits go up.  Check this from Zoho. Google and Microsoft have clearly reached scale (in their own markets), Salesforce.com hasn’t… yet. I’m told that their PaaS play is starting to really reap benefits, huge customers signing up, customers putting Tb’s of Data thru a day. All driving EoS.

Back to Zoho, the more i look at it, the more i like the model. Self fund to scale, charge for premium services, consider a slow introduction of pay as you go later (i’d put in an easy migration path for those who aren’t ever going to pay). And keep in scaling. Its Amazon’s mantra all over again, ‘GBF’ “Get Big Fast”, but without the debt and a fairly logical path to monetisation.

 

My advice to Steve Ballmer on SaaS

 

I kind of like the underdog, I think that is why I’ve been known to come across as pro-Microsoft.  I don’t think I am. I think I'm more interested in seeing some balance in the blogosphere and observing what might actually happen.

To that end, I think Microsoft have done a pretty average job (my editor tells me I’m not allowed to use the word crap) in the SaaS space to date. This is my thoughts on what I’d do to address that if I was in charge of Microsoft.

  • Drop software plus services (S+S) as a market term. I understand that you needed to give your channel a sense that they belong in the future. I agree it is arguable a better description of the future direction of SaaS and that into the medium term we’ll have hybrid cloud and on premises stuff. But what you don’t seem to be getting is that the continued use of this term isolates you. It creates confusion (and distrust) in the user community. It relegates you down the credibility ladder and you miss out on the whole coolness factor that SaaS brings. Get rid of it for now.
  • Focus on corporates. Lets face it, MS is only ever going to be moderately cool so trying to keep current in consumer is going to be a slog. Mobile will be the exception here. Another reason? Because all wealth is generated by businesses. Full stop
  • For God's sake build office so it can be delivered SaaS, truly SaaS.
  • Create a whole new division or company to build this web Office variant. This will get around the politics and revenue substitution paralysis. Do it fast too. Your channel are doing it as best they can by themselves, support them in supporting you.
  • Pick your chosen delivery method for SaaS. Partner or go direct, doing both is a recipe for disaster. You will either blow your marketing budget or alienate your channel. While you are at it, pick which part of the platform as a service play you want to be in. Is it a software platform? True PaaS or a hosting platform? My read on the economics of globalisation is that the localisation required to get around language and local data security laws means you should stick to software stacks. To that end I’d pick the Telcos as the local hosters of choice. I’d also start looking for training partners and integrators. Not even you guys can do it all, where is your ecosystem play? How are you going to make the most of the plethora of application developers who want to make the most of your distribution?
  • Get your pricing right, what you think has value (Outlook!!) now has a market price of $0. Get over yourselves and start thinking about the market and how you can make the most out of other applications and services. Be quick, time is short.
  • Capitalise on the fact that the only part of Google’s stack that never goes down is advertising. Their application play is a support disaster, they have no idea how to ‘be’ a software company. Get stuck in while you can
  • Sort out your version control and interoperability. One of the reasons schools are turning to Google is that they don’t have interoperability issues. No Mac vs MS debacle. Just make it easy for everyone to use your software.

Simple. Anyone else got any advice before I lick the stamp on this?