At Cloudforce, New York last Friday, we heard a smattering of things we also got at Dreamforce. That was part of the plan because Salesforce bills its regional events as a chance to bring Dreamforce to the customer. As proof I heard that Marc Benioff and crew are off to Japan this week to do it all again and there are various other trips like Europe that they also do. That’s quite a travel schedule.
One of the less well-known parts of both events is the press conference held immediately after the keynote for members of the technology and financial analyst communities as well as the technology press. It’s also the most intimate part of the whole conference, the time when we get one on one with Marc and the atmosphere more resembles a graduate seminar than anything else.
Of course, Benioff has to maintain a certain reserve given his status as the head of a publicly traded company. Questions about future earnings are not encouraged and they can’t really be answered but people still like to ask. It’s fun to watch the non-answers.
Two ideas struck my radar in the press conference — one, the idea that Windows is “over” but also, a more mature attitude by Benioff toward competition. First Windows.
This wasn’t the first time I have heard Marc say that Windows is over but this time it had the ring of truth rather than being more like the hyperbole of a competitor. Benioff thinks Windows is no longer necessary and when you say Windows you might also include OSX or any other operating system whose purpose is to provide a general purpose operating environment for applications.
You know this in your bones by now. With applications and data becoming increasingly cloud resident, a much smaller and more secure operating system that supports a browser and not much more is about all you need. Google Chrome is a kind of new era OS and the Chromebook a new device that leverages these ideas. So the stage is apparently being set and Benioff thinks that Windows 8 will be an important inflection point in the history of the operating system.
You can already see problems with Windows revenues especially in the latest numbers the company reported last week. The Windows Division’s revenue was down 33% year over year and the company’s net income was off 22% with revenue down eight points over the prior year.
Microsoft has become another example of what Clay Christensen described in The Innovator’s Dilemma of a company wedded to its golden goose unable to pivot to the new revenue generator in part because the new generator would force revenues down. New things cost less and in the ever-ongoing product commoditization cycle less means less and you have to make it up on volume — that’s the cloud.
So, devices are what’s driving the market — the handheld a.k.a. phone and tablet, which come in multiple sizes for different applications. Devices use stripped down operating systems like iOS, Android and Windows Mobile (and Chrome) and users spend much more time in a vendor’s site or app than ever making the general purpose OS less and less necessary.
Microsoft has more or less seen the same thing coming, which explains at least on one level, the company’s rush to the cloud. You might even say similar things for Oracle and its latest release 12c. It goes without saying that the UI and the data center are different places and operating systems will continue to be as important in the data center as the air you breathe, at least for now. But Oracle is showing that it understands the new reality though it isn’t necessarily playing at the same level as Salesforce, which brings us to my second point.
I also saw a more mature attitude about competition than I could see just a few years ago and I think that was at least in part because Benioff knows he’s winning. He made the comment that the competition used to say they had a better approach than Salesforce, as in Larry Ellison’s words that cloud computing was all vapor. Competitors used to say that cloud or SaaS was dangerous to your business, that it was not secure or any of a hundred other things designed to spread FUD (fear, uncertainty and doubt). But that’s ancient history.
Now, Benioff noted, all the competition is saying, “They have what Salesforce has”, which is typically a variant of cloud computing designed to provide infrastructure as a service (IaaS) and thus keep customers locked in. Nevertheless, in other words, the dynamic has shifted and the competition has learned that is has to play a new game.
Finally, one more impression. It seems that Salesforce has now articulated three distinct ways of socializing the enterprise and they’ve done a good job of showing how their products apply in each case. The three cases involve socializing the vendor-customer interface, socializing the employer-employee interface and socializing the man-machine interface.
The vendor-customer interface is the oldest challenge and the place where Salesforce and CRM got started. The employer-employee interface is a bit newer and it is still being fleshed out but Salesforce and its partner ecosystem with companies like Jobscience, are populating the market with credible solutions. The man machine interface is both the newest and possibly the thing most dreamed about for the longest time.
Much of the advancement is coming by way of Chatter, which is advancing on all fronts. With its suite of socialized business solutions Salesforce is now able to approach its customers on multiple levels. Socializing the enterprise will be a slow process and there is no telling which socializing approach will first appeal to customers. For example, GE and Coke are apparently starting with the man-machine interface but it will be logical to expect success to breed success. Success in one area like the man machine interface will give a company confidence to try something in another area like the vendor-customer interface and in so doing a company will socialize itself. Most importantly, and this should really be in ALL capital letters, the economy will be socialized as well.
I am fond of studying macroeconomics and looking at long-term economic cycles called K-waves after the Russian economist Kondratiev. From Wikipedia we get this on the Kondratiev cycle:
Kondratiev’s economic cycle theory held that there were long cycles of about fifty years. In the beginning of the cycle economies produce high cost capital goods and infrastructure investments creating new employment and income and a demand for consumer goods. However, after a few decades the expected return on investment falls below the interest rate and people refuse to invest, even as overcapacity in capital goods gives rise to massive layoffs, reducing the demand for consumer goods. Unemployment and a long economic crisis ensue as economies contract.
If that sounds at all familiar you understand my interest. So my big question as I continue to watch and report on the evolution of the Social Economy is simply to try and understand if social is the new K-wave or at least part of it. It’s not the only contender and things like raw materials and resource management and alternative energy development seem to be more germane as fundamental K-wave candidates. But social will at least be an important substrate for the next K-wave linking together people and, increasingly, devices and that’s why I go to events and try to listen carefully at press conferences.
Zuora held a successful user meeting just prior to Dreamforce that I attended and I was most impressed by its size and the new product introductions. The event, “Subscribed,” is a couple of years old in name but older than that in practice and the company packed a lot of enthusiastic customers and partners into the Ritz Carlton. The choice of location was smart, in the financial district at the other end of town from the Moscone Center, which gave some distinction from the larger event later in the week. But my greatest interest was in product messaging.
Zuora CEO, Tien Tzuo, filled the last slot (for now) in his product universe and deployed a nifty description to how the product line comes together and why it matters. The product focus was on Z-Finance, which joined Z-Billing and Z-Commerce in a holy trinity of back office applications aimed at subscription companies. The description is “Subscription Business Management,” which I like as it elevates the discussion from simply how do I do my subscription billing to how do I manage a subscription business which is much different from a product business — especially when the subscription business is inside of the conventional business.
Z-Finance gives financial executives the tools they need to examine their subscription data and manage their businesses accordingly while being able to dump the proceeds into the conventional GL in a way that makes sense to the traditional side of the house. It’s smart really and no simply feat. So now Zuora provides its customers with the ability to simply and quickly configure, administer, bill, collect, analyze and reconcile the subscription business.
The importance of Z-Finance is two fold. There is no doubt that pure subscription companies would need it sooner or later, but Z-Finance is also a key piece of technology that will help conventional companies exploring subscriptions to understand better how subscriptions fit into their business models. This expands Zuora’s market significantly, so bravo for Zuora.
Truth check — Zuora is a client and I recently published a small book, “The Subscription Economy—How Subscriptions Improve Business.” Fortunately, my messaging was congruent.
All right! Recess is over! If you went to Dreamforce last week you can be forgiven for taking a kind of victory lap in your head today because it was a truly great experience, besides if you are like me you are still tired. One reason I think so many people like Dreamforce is its relentless focus on the future and on what will likely become standard practice in the not too distant future. But also, if you went to the keynotes from M.C. Hammer to Colin Powel to Richard Branson to Tony Robbins, you left San Francisco with a certain “lightness of being.”
However, if you are an analyst you need to put all of that behind you and get ready for Oracle OpenWorld (OOW), which promises to be a barn burner for its own reasons. Same city, same Moscone Center, same closed Howard Street, similar large crowd — where Dreamforce was all about the social enterprise, OpenWorld is about a lot that might not be so clearly connected. There’s hardware and operating systems and then software for the back office, front office, databases, middleware, and development tools. There are things I’m leaving out too like the America’s Cup. At OOW Oracle will provide a glimpse of its own into what the future looks like for the enterprise and in some ways it’s very different from what Salesforce is talking about and in some ways they are similar.
This is not to say that one vision is less good than the other, far from it. The competing visions reflect different world views and different realities. For instance, while Salesforce approaches things from a clean slate perspective, Oracle takes the view that what it introduces has to work with what delivered before. You can see this in its disciplined approach to supporting customers of the companies it bought way back in 2005.
Companies like Siebel and PeopleSoft whose products are getting long in the tooth and are prime targets for Oracle’s new offerings that are based on its platform called Fusion. You may recall that Fusion went GA (that’s general availability, not the mid-night train), more or less, at last year’s OpenWorld but it hasn’t exactly set the world on fire and there are persistent rumors that the stuff doesn’t work very well or that it requires a phalanx of consultants to make it do its tricks.
The big hurdle for Oracle therefore will be to convince the assembled multitude that Fusion is real and that the path to the future goes through the intersection of Fusion and Big Iron.
Speaking of big iron, last year the company rolled out some additional gear to complement its Exalogic computing devices. It seems this family of hardware is built and optimized for very big jobs involving terabytes of data gazillions of users. That’s exactly the kind of stuff the growing cloud computing movement might gobble up. Currently data centers are masses of commodity servers in racks running feverishly but without a layer of sophisticated management that would optimize their utilization and reduce costs.
There has been an interesting series of articles by James Glanz here and here in the New York Times over the last few days focusing on the power consumption and pollution caused by data centers. The pollution comes from diesel generators periodically fired up to test the centers’ ability to withstand a power interruption. The consumption is gargantuan.
But a bigger question, for which there are ready answers, asks why so much power demand? Part of the answer lies in how many companies are avoiding the necessary virtualization that will make the cloud much more efficient and sustainable. According to the Times and backed up by McKinsey & Company, which did the analysis, conventional data centers run many CPUs and disks at much less than capacity in part to cater to the urban myth of the need to keep one company’s data separate from another’s.
You’ve heard me on this before using the metaphor that we comingle our funds in banks and overlay the pool of deposits with metadata like account numbers and statements. Why are we resisting do this with data? Companies like Salesforce are already doing the same virtualization in the cloud and Oracle has an opportunity to strongly support virtualization and point to a more sustainable future.
I’m going out on a limb to say yes. Maybe it won’t happen right away but keep in mind that two or three years ago Larry Ellison ridiculed the cloud and now that he has modern hardware and software he’s a big proponent. The next logical step would be to endorse the Exa-hardware as a sustainability tool for a power hungry planet. I’m looking for some sustainability messaging from Oracle and it could even happen.
This is not a digression. Sustainability is not alien to ideas like mobility, cloud, social and analytics, you can’t separate them. I think if Oracle wants to maintain its leadership position with many of the largest companies in the world, it needs to put a stake in the ground and become a thought leader here. The next decade in IT won’t be like the one that preceded it and if Oracle simply comes out with a grocery list for replacing old hardware and applications with more modern stuff it will be missing a great opportunity. At the end of the day people go to these conferences looking for new ideas and things they haven’t seen before. That’s what I’ll be watching for.
Oh bother. They’re at it again. I’m on the long flight from Boston to Dreamforce in San Francisco and I have a lot of time to think. First stop is the Zuora user group meeting “Subscribed” happening at the Ritz Carlton. It’s Zuora’s second bash like this and it’s nice to see them doing well with a great idea like subscription billing.
I am on a Virgin flight, which is my choice for these long hauls. The plane is full of Dreamforce attendees and the excitement is palpable.
It’s nice to have the option of WiFi and power for my computer so that I can work. Signing onto the go-go inflight wireless service is always something of a Gumpian box of chocolates, you never know what THEY’RE going to get and today is no exception.
Back in July I wrote a post on a similar Virgin flight titled, “Like a Virgin” that delved into the murky world of product pricing and it looks like this might become a thing for me because I am doing my own little inflation study on the price of WiFi. If you need to catch up on my musings, you can click the link but a synopsis of my study from the original post is here:
Thanks to go-go’s record keeping, I am able to access my account history. It seems in 2010, the first time I bought the service, I paid $12.95. The cost actually went down for several flights after that either because they were running a special to get people hooked or, and this is a dim memory, someone was giving free or discounted service to all passengers during the holidays.
At any rate, my point is that the price of WiFi has gone up dramatically over less than two years. Today I paid $17.95 for the same service I once paid $9.95 for. Off the base of $9.95 we’re looking at an 80% increase and divided over two years that produces a 40% inflation rate. Yikes! Looks like the increasing cost of Internet is tracking the plane’s altitude.
Ok, so back to today. Want to guess what WiFi costs today? Today I plunked down $34.95 for a month because I am going to do this a lot this month, but a single day has a cost of $24.95 and a single day is the benchmark. Going from $17.95 to $24.95 is a rise of a bit more than 33%. Presumably they were making money at $17.95 and now that the equipment is fully amortized the additional fee is pure profit.
I know, the fee indirectly includes the free electricity for my computer but I prefer to think of it as something they throw in for the cost of a ticket since I could use the plug for anything else like charging my phone. But if I am charging a phone and not using WiFi then am I technically freeloading on the WiFi users? It gets complicated.
At any rate I think I’d have to go back to 2010 when I started using WiFi on these flights. If you go back to the July post you see that I started paying $12.95 then it went to $9.95 before beginning its inexorable climb. So take your pick. I have to keep my socks on here so my math might be off but it looks like at least an inflation rate of 100% over two years. But more interestingly, I know I am not paying double the cost of a ticket that I did in 2010 even though jet fuel is up considerably in that time. Again some quick math with shoes on. The cost of WiFi is now roughly equal to 3.8% of the ticket, not bad at all or about six gallons of jet fuel.
Ok, but like an economist I know there is more than one way to calculate this inflation rate. Consider this: The cost of WiFi is so high now that they’ve come up with a new entry point, a ten dollar cost for one hour of service. So that’s ten bucks an hour but when this started in 2010 it was ten dollars for the whole six hour flight or about $1.50 per hour. If you use 12.95 as the basis then the cost per hour is more but no matter, this is back of the envelope stuff. But the change suggests an inflation rate of 600%. Six hundred percent! Oops! I really meant 300% per year over two years. Feel better? I do.
Well enough of this I am signing off from somewhere over Wisconsin traveling at 422 mph at an altitude of 36,199 feet. It’s -73 degrees outside and $24.95 inside.