• December 5, 2019

    • This was first published over the summer.

    It’s about time, or better said, it’s timely. Earlier this week the justice department announced it was opening anti-trust investigations into some of the biggest tech companies around including Facebook, Google, Amazon and others. This is nothing that either the public or the companies involved should fret about.

    For a long time, I’ve been writing that this was a necessary step and that it is part of the evolution of the tech sector. Furthermore, we’ve been through this kind of thing before. In fact, each economic era, which I researched and wrote about in a book, follows a similar trajectory. A disruptive technical innovation arises, many companies quickly emerge to take advantage of it, and a long process of dispersing the innovation throughout society takes place.

    That last bit about diffusion happens at the same time as winnowing, as in all the companies don’t survive, most are bought, merge, or go out of business and it’s that part that drives formation of oligopolies or a monopoly (the simplest form of oligopoly). The tech sector is quickly becoming the preserve of a few oligopolistic vendors and thus the DOJ is, in my opinion, right to pursue this action.

    Memes

    We’re at that point when the oligopolies are so recognizable that they have acronymic memes that are not at all complementary like FAANG (Facebook, Amazon, Apple, Netflix, Google). We reach monopoly or oligopoly status when a service becomes so necessary to the public and the economy that depriving anyone or charging disproportionately inflicts harm, so antitrust actions arise.

    Historically, oligopolies don’t get wiped out, they become regulated in one of several ways. In one of the most obvious outcomes they become utilities. This is often good for the economy; for example, utilities are regulated to prevent the former oligopolies from price gouging.

    Around the turn of the 19th century, J.D. Rockefeller’s Standard Oil company had such a tight grip on the petroleum market, setting prices even for its competitors, that the government required the company be split into seven parts, the Seven Sisters. Such breakups often stimulate the marketplace and foster innovation while lowering consumer prices. When AT&T was broken up in a 1984 consent decree it ended a century of monopolistic phone service. Suddenly people could purchase (not simply rent) phones and a whole host of new services and devices quickly evolved, like voice mail. Wireless devices and long-distance competition quickly followed and costs to consumers fell.

    New age

    We’re living at the tail end of the Age of Information and Telecommunication as I write in a recent book. When the era started there were thousands of companies competing in computer chips, hardware, storage, operating systems, databases, compilers and applications. Gradually that’s all consolidated to the point that there are only a small number of players in most categories today. Cloud computing has taken that situation a further step by commoditizing even the basic idea of owning and operating IT. Cloud computing is both the ultimate commoditization of IT and the beginning of the IT utility.

    Today the tech sector is rapidly maturing, and consumers need protection from monopolistic vendors of what have become essential services. That’s where antitrust efforts come in but it’s early days. There are great differences between Facebook and Netflix and one can be excused for not seeing a similar economic threat that each would provide if left unchecked.

    Additionally, vendors like Facebook and the cable companies all exist on the wrong side of the common carrier concept, an antitrust idea that you can’t own all of the means of production and set prices and have a healthy market. A common carrier must take on all customers asking for service because the service has become so integral to the economy that preventing some people from access causes economic harm. A cable company that both provides content and the infrastructure for delivery is in a position to throttle its content competitors. This also applies to Facebook whose decisions about safeguarding user data fell to secondary status in the pursuit of pure profits for advertising on its infrastructure.

    It’s likely that at least some parts of IT and tech in general, will consolidate into utilities. We’re already seeing early examples beyond generic cloud computing. For instance, in June Oracle and Microsoft entered into a relationship that enables interoperability between Microsoft Azure and Oracle Cloud. This could easily be the start of IT as a multivendor utility and resembles the situation with electric utilities.

    We don’t have a national electric grid, which might be a good thing as grids are being challenged by hostile foreign powers. The electric utility is an assortment of vendors in various parts of the market and geographies who adhere to a common set of standards thus producing the semblance of a grid. Is this a model for the future IT utility?

    Other tech vendors might have better cases but maybe not. Consider Amazon which is rapidly becoming the go-to vendor for many consumers. But does any one of us want only a single choice for so many things? As I wrote recently, I’ve been doing book signings in actual bookstores recently and I was shocked at what I’d been missing through buying online.

    Two bits

    Those of us who remember the earliest days of the tech era are slowly coming to the realization that our market has matured and that we’re on the cusp of consolidation and utility formation. We need not mourn this transition because antitrust actions are designed to keep mature markets mature and functioning as essential parts of society for a very long time.

    Moreover, as with the telephone example, antitrust actions can spawn huge bursts of creativity, innovation and business expansion. It’s worth noting that before the 1984 consent decree, the industry was known for POTS or plain old telephone service. Afterward it became the telecommunications industry marrying computing, networking, telephone and a lot more. Antitrust? Bring it.

     

     

     

     

     

     

     

    Published: 4 years ago


    I’ve been spending time this summer barnstorming Barnes and Noble bookstores in New England signing copies of my book on repairing climate change (The Age of Sustainability). This has been my first visit to bookstores as a seller, not a customer, and I hadn’t visited a store in a while. I wasn’t prepared for what I found; the experience was palpable.

    Like many people with busy lives, I’d gotten seduced by the convenience of going online to purchase what I wanted without understanding what I was giving up. It’s easy to understand the “get” of online purchasing. Online you have an infinite store shelf that never runs out and has literally everything you could think of. Unfortunately, that’s the problem too, we are increasingly confronted by the reality that we only know so much and, worse, we don’t know what we don’t know.

    The bookstore experience is designed for exploration and discovery, not the kind that pairs this purchase with others you’ve made or that others like you have. The exploration happens against a rich background of color, smells, and ideas. Your mind naturally skips from one book or magazine to another without much thought at times. Other times consciousness reasserts itself to make a selection or at least to do some reading.

    The CRM industry has taken this natural process as one of the missions it seeks to provide an online analog for. We try to capture customer data in an effort to discover some hidden facts that could result in suggestions that help shorten the infinite store shelf or at least make its contents completely relevant to the customer. But at what cost? We have to accept a society in which all, or at least most, of our most intimate data can be accessed and crunched and, truth be told, sometimes used against us.

    We’ve fallen in love with the idea that if we can only capture enough data, we could know or infer everything about a customer and influence how they behave. The idea certainly seemed to work in 2016 when hackers captured enough data about voters to influence their decisions.

    As an author, my mission in visiting bookstores is to understand people’s positions on my subject and to try to identify those who might be most receptive to my message. Hopefully, selling a few books this way will spark a trend, but maybe not. I haven’t yet met anyone who believes the hoax mantra of climate change (of course, I live in New England) but that doesn’t translate into immediate sales.

    But what I was not prepared for was the assortment of offerings and the really nice (there’s no other way to put it) people who staff the places. At the bookstore, I discovered that some people might be very happy not knowing what they want or need and may enjoy browsing the shelves.

    As luck would have it my experiences in bookstores coincides with the Amazon Prime Day sale, a time when “Subscribers to the company’s Prime service get major discounts on everything from flat-screen TVs to Ben & Jerry’s ice cream,” according to the New York Times.

    But success has its drawbacks and they’re not all happy problems. For instance, the same article notes that more than 250 retailers have ongoing sales to compete with Prime Day which is really two days. Many retailers are concerned that this sale won’t generate new business but simply borrow from or cannibalize what could reasonably be expected from Back to School sales in August. They might be right.

    Retail and capitalism in general have growth as their primary drivers. Modern businesses have to show a modicum of growth every year or risk losing support from the financial markets that keep their stocks buoyant. But there’s a competing phenomenon, a pillar of capitalist economics called Say’s Law, which simply states that all markets clear at a price.

    The meaning of this simple phrase is sometimes debated. On one hand, it’s a tautology, yes, markets clear (all goods are sold) and we sell them for a price. But what’s interesting to economists is the price of the clearance. Are margins healthy or are they marked down just to move merchandise. In the latter case, clearance happens but profit may not and while revenues might expand, when profits don’t follow, investors worry about that too. So will Amazon Prime Day be something special or just another exercise in cannibalism?

    So the function of any retailer is to move merchandise profitably, maintaining margins in the process. That’s where CRM comes in, especially marketing in all of its forms. But CRM can’t make new demand. It can only organize the demand that’s out there.

    Regardless, being a good customer means more than taking the advice of algorithms or engaging with the brand’s just-so experience. It means being true to yourself and your own interests and sometimes that means breaking out of the mold someone else has set for you. Because of that, I don’t think we’ll ever get to the point where there’s perfect alignment between the vendor and customer. At least I hope not because it will be the end of serendipity.

    On my way out of the store over the weekend, I paused at a magazine section dedicated to art, its practice and the business. I do a little painting and I am not very good but doing it satisfies a need. I saw and bought PleinAir, a magazine about painting outdoors the way the Impressionists first did. I never knew the magazine existed and wouldn’t to this day if I hadn’t taken the time to get away from the infinite store shelf and its algorithms. As Robert Frost once observed, “that has made all the difference.”

     

     

     

    Published: 4 years ago


    Oracle announced it was combining its more than 18 related analytics products under a single banner, Oracle Analytics, this week making it easier for customers to figure out what they need. It’s not unusual for a company to innovate a string of offerings before consolidating them into a single product line and it’s reasonable to assume that vendors who have not done so already will follow suit.

    There’s no indication that this announcement changes anything much for the buyer aside from having a consistent brand. No pricing changes have been announced so far but since one of the highlights of the announcement was to enable broad enterprise adoption, you have to figure that over time pricing will moderate. When you aim to cover every potential user in the enterprise you know (or should know) that you’re a long way from maximizing the per-seat cost of whatever you’re selling.

    So, what’s different with this announcement? For starters this is not a pure cloud announcement though it makes the point that the solutions were engineered cloud first. But in keeping with Oracle’s stated intent to continue supporting its on-premise customers even as it pivots the company to the cloud, it also announced Oracle Analytics Server, the premise-based equivalent of the Oracle Analytics Cloud.

    Messaging

    In my experience, one of the more disconcerting aspects of Oracle announcements has been their focus on what the technology being announced does rather than what it actually delivers to the customer, you know, the benefits. One example will suffice. “We are committed to helping our customers get the most value from their data and to delivering the best analytics experience,” said T.K. Anand, senior vice president, AI, Data Analytics and Cloud, Oracle.

    Often that’s all I get from these things–general statements about value and experience that leave you wondering about benefits. You might be tempted to wonder if, because these announcements are aimed at enterprise buyers that they’re all smart enough to know what value and experience mean to them. Maybe they do but I am always a sucker for the next statements that often begin with the words, so that you can or similar things, that translate the wonderfulness of the announcement into benefits for the buyer.

    This time, Oracle was thoughtful enough to let real customers provide examples of benefits they’re receiving, which helps significantly. So, Bill Roy, senior director, EPM and BI, Western Digital volunteered, “We see the cloud as enabling our internal customers to develop their own content and to be self-serving. That’s really where we see the benefit of using Oracle Analytics Cloud.”

    Got it.

    Autonomous Data Warehouse

    Everything cloud is powered by the Autonomous Database in one way or another. The Autonomous Data Warehouse powers the analytics engines for apps, machine learning and predictive insights and that represents good synergy. In some ways the analytics announcements could not have been made until there was a deep source of data to drive the information generation which is what analytics is really about. Lots of us casually use data and information interchangeably but they are different. We collect data but we distill information from it, hence the need for high capacity data capture and management and then the need for analytics tools to do the distilling.

    My two bits

    The Autonomous Database and Autonomous Data Warehouse are more concrete proof of the IT industry’s continuing drive to commoditization and eventually to utility formation. It fits in with the joint Oracle-Microsoft announcement of some amount of interoperability a few weeks ago. And this can also be clearly seen in last week’s earnings report.

    To date, not even a quarter of Oracle’s database customers run in the cloud though the earnings report indicates continuing adoption. IT managers have been here before wondering if it’s time to begin moving workloads out of the datacenter and to the cloud. Most have resisted but this is no longer a conversation about where to best access compute and storage for systems of record.

    We’re now thinking about systems of engagement which necessitates more data, but also, very high-speed solid-state storage and the redundancy and security infrastructure needed to exist in what has become the cyber jungle. Oracle is pursuing a two-pronged strategy in which they continue building apps that work best in the cloud because they require cloud resources. At the same time, they’re working with customers to help manage their concerns about the big move.

     

     

     

     

    Published: 4 years ago


    If you’re one of the geniuses who was calling for selling Oracle shares ahead of the earnings call yesterday, you might want to recheck your calculations. On your slide rule.

    The headline on the press release is all you need to begin the self-recriminations: “Q4 FY19 GAAP EPS UP 36% TO $1.07 and NON-GAAP EPS UP 23% TO $1.16”

    What were they thinking? More importantly, what were they thinking with?

    I’m not going to quote every statistic, and there were bright and not-so-bright spots in the news but bottom line, there was more that was good than not or as Co-CEO Safra Katz put it,

    “In Q4, our non-GAAP operating income grew 7% in constant currency—which drove EPS well above the high end of my guidance.”

    And,

    “Our high-margin Fusion and NetSuite cloud applications businesses are growing rapidly, while we downsize our low-margin legacy hardware business. The net result of this shift away from commodity hardware to cloud applications was a Q4 non-GAAP operating margin of 47%, the highest we’ve seen in five years.”

     

    So what’s going on? Oracle is executing a pretty run of the mill pivot of its business, if run of the mill is a phrase you could ever use when betting the farm, but there it is. When the pivot started, Oracle had little more than ambition to reference. It had no cloud datacenters and the company with the most experience running the Oracle DB in the cloud was, uhm, Salesforce.

    At that time, then CEO Larry Ellison, told anyone who would listen that the pivot would take about 10 years. That’s right, ten years to move the majority of 400,000+ customers and their data to cloud apps and a new database built for the purpose complete with self-driving capabilities.

    So, where are we?

    New data in G2 Crowd’s Enterprise Grid Report for Relational Databases/Spring 2019, shows that 17 percent of Oracle’s database is in the cloud, 83 percent on the ground. In other words, about where Mr. Ellison might have predicted.

    Of course, G2 Crowd also reports Oracle’s nemesis Amazon Relational Database Service at 100 percent cloud, but it also indicates that the median number of users bought by Amazon customers is 37 users vs. Oracle’s 1,750. Even Amazon Aurora only clocks in at 175 users. In other words, the cloud DB competition is largely still in the sandbox. I’m not casting shadows at Amazon, their Prime service is pretty good and at least they haven’t offered up a cryptocurrency yet.

    Apps are a different story and there’s work to do there. Even assuming a report like Satisfaction Ratings for CRM, also a G2 Crowd product, ranks Salesforce with 84 percent likely to recommend and a Net Promoter Score of 41 against Siebel 66 percent/-15 and Oracle Engagement Cloud 74 percent/-8 and Oracle On Demand 63 percent/-22.

    Quick word on NPS, the scale runs from -100 to +100 so a zero is pretty good and 41 is awesome.

    A full look at the G2 Crowd CRM report indicates that the larger and better-established companies struggle with keeping their growing customer list happy while the newer entrants like Salesflare 92 percent/78, and BPM’Online 98 percent/79 have gaudy, almost unearthly numbers. G2 Crowd says averages are 79 percent/31. So Salesforce’s 84 percent/41 is extra impressive.

    My two bits

    Oracle is a bell weather for the industry so we’d rather see them doing well than not. That said, they’re also riding a secular change in tech that’s aggressively moving to adopt commoditizing solutions like cloud, analytics and machine learning. In this they are on track rather than a leading outlier. Nonetheless, other market leaders have stumbled during this kind of transition so it’s good to see Oracle’s numbers especially in the current economic environment.

    All this notwithstanding, economic storm clouds are on the horizon. A story in the New York Times pins at least some of the problems on the US trade war. Miscalculation beyond its control, in several dimensions, could upset Oracle’s applecart and other warnings for a bumpy 2020 are also making the rounds. It’s impossible to say how it all turns out, of course, but if there’s a way to make the numbers, the team at ORCL seems capable.

     

     

     

    Published: 4 years ago


    Salesforce has a genius way of putting people at ease and opening their minds before any of the company’s representatives say a word about product. People who study neuro-psychology point to the importance of ensuring that the audience’s pre-frontal cortexes are wide open and ready to transact in ideas. The pre-frontal cortex is the part of the brain that matures last and is responsible for executive functioning and decision-making. What is a person with a not fully mature PFC like? They’re called teenagers.

    Over the years Salesforce has opened minds by discussing philanthropy and it has worked brilliantly, especially considering the company has so much data on the subject thanks to its leadership in the Pledge 1 Percentmovement. The opening at Salesforce Connections was a little different but no less effective.

    For one hour in a Fireside Chat, journalist Soledad O’Brien interviewed master cellist Yo-Yo Ma about the art of playing cello, Bach, and how music helps people to connect and, in some ways, helps us to be the best people we can be. There were also plenty of demonstrations from Bach’s six suites for unaccompanied cello. To see the interview and hear some snippets from the master go here. In all my years covering Salesforce, I can’t think of a better opening. Okay, back to work.

    Connections

    It might be a fool’s errand to attempt to integrate all of the data that a business has on a customer. Not only is it a hard job but it is never ending. Bringing in new customers and new applications means the job is endless and bringing together all of the estimated 900 apps that a typical enterprise operates with, and their data, is almost insurmountable.

    But you can achieve the appearance of a very workable solution by changing perspectives. No one, or almost no one, really cares if it’s all really integrated in one big, happy database or data warehouse. What’s more interesting from the perspective of getting things done for a business, is having the data fluidity to get all the necessary pieces and parts together in one place at the right time to make a decision. That takes standards, compute power and very fast storage, all things that are better achieved for many businesses in the cloud rather than attempting to stock a data center.

    That’s what Salesforce’s Customer 360 is all about. The idea of achieving a workable solution through fluidity has been done many times before and one example will suffice. It’s the electric grid. We throw the term around easily, but we don’t really have a grid, it’s an assemblage of many discrete purveyors of power, transmission lines and the like, all adhering to standards and some regulations that provides the impression of integration. If you were to think about unification instead of integration to make that impression real, you’d find that you have more options.

    Customer 360

    First introduced at Dreamforce ‘18, Customer360 is an effort to promote personalization in vendor-customer interactions by supporting a 360-degree view of the customer. That view can best be obtained by linking all relevant customer data and being able to access and analyze it in the moment to support decision-making. It’s really the heart of the digital disruption we see in business today and it’s a necessary and welcome change of subject from how do we store all of that data to what can we do now that we couldn’t do before?

    How we store it is answered by Salesforce’s CDP or customer data platform announced at the show. CDP enables companies to unify disparate customer data throughout their entire organization so that they can then personalize every engagement based on a single view of the customer. This is especially necessary in marketing, commerce, and service, target areas for Connections.

    As noted, this does not mean converging all data so much as it says that Salesforce MuleSoft is the glue that integrates apps and their data to produce an integrated data view to support personalization. And it’s very important too because Salesforce’s own research shows that 78 percent of customers expect consistent interactions across department but only half the companies surveyed are able to tailor their engagements based on past interactions through data.

    That’s where Customer 360 and CDP come in. Many businesses have the data they need but few ways to bringing it together to support decisions. Salesforce’s announcement puts MuleSoft into the equation to connect apps and their data across cloud and on-premise storage.

    The solution

    Customer 360, using CDP is Salesforce’s answer to some thorny business issues. With consolidated data they can better build customer profiles to manage consent, better segment populations to identify groups of people to engage with in the moment and based on demographics. It aims at personalizing engagement everywhere, a high priority today, and using other tools like Einstein Insights help businesses to better know when to engage with customers.

    My two bits

    There will be more news coming out of Chicago and I might update this but haven’t we been talking about a 360 degree view of the customer and customer engagement for a long time? Did Paul Greenberg write a book about it?

    Yes, and Yes!

    But it takes a long time to go from concept to reality and reality involves more than code. It requires having a clear understanding of what to build. Too often we prescribe solutions not realizing that as stated, they involve the technology equivalent of repealing Law of Gravity or violating the Laws of Thermodynamics.

    Salesforce’s Customer 360 initiative and CDP introduction represent elegant solutions to avoiding repealing gravity in the data center. Customer 360 is possible in part because a little over a year ago Salesforce decided to purchase an integration company (MuleSoft) with the interesting approach of creating integrations through networks of APIs for the princely sum of $6.5 billion. That skips over the problem of bringing all the data together in one place and produces a solution that gives the impression of what we want, at a price we can afford.

     

     

     

    Published: 4 years ago