Getting the Skinny on the Big Four
On an otherwise slow news week there was a story emanating from a Gartner analyst, Dennis Gaughan, at a recent Gartner talk in Australia that I found interesting on Business Insider.
The headline told the story, as good headlines often do. “What Microsoft, Oracle, IBM and SAP Don’t Tell Customers” identifies, in Gaughan’s opinion, the primary strategies or approaches to the market employed by the big four software companies. There’s room to quibble with this but there are also elements of truth. I hope you’ll click the link and read the rather short piece, here are the major takeaways.
- Microsoft mainly wants to protect its Windows and Office franchises
- Oracle products don’t really work well together
- IBM wants to take over your IT strategy
- SAP confuses customers with pricing
Got that? I wonder how many readers came away from the article saying, so?
Didn’t we already know this in our bones? And, more important, aren’t these simply strategies for locking in customers and getting the maximum footprint in customer data centers?
IBM has been running IT strategies at its customers for a very long time. That’s not new nor is Microsoft’s fetish over Windows and Office. Dynamics CRM has an Outlook interface because the company tells me, that’s where people spend their day and they already understand the interface. Fair enough, but do they understand the interface primarily because they’ve been trying unsuccessfully to use Outlook as a CRM system all along? Client-server was a boon for windows and cloud computing is a major threat. Why else is Microsoft trying to sell their idea of an operating system for the cloud?
And can anyone take Oracle’s claim of systems engineered to work together seriously? A few years ago the company said that customers should use their products as they come to minimize breaking systems. And when Oracle bought Sun they immediately extended the blanket to cover hardware. In last week’s column I quoted Dave Yarnold CEO of ServiceMax who wondered in print if the universal devotion to SAP’s ERP (and I must say ERP in general) might be sapping companies’ ability to creatively engage the marketplaces they serve.
Nope, sorry, nothing really new here. As they might say in court if you’re an IT executive, you knew or should have known all about this. But what is new is that this kind of news or information is surfacing and it is surfacing at a time when people are thinking differently about their futures and companies are trying to keep up.
The legacy systems of the twentieth century that mediated the manufacturing economy have proven inadequate to the task of keeping up with the increasingly mobile and socialized customer. Moreover the customer is increasingly turning to the cloud and to subscriptions for all manner of things that were once considered products but are now delivered as services.
The news in the article I quoted is not that the big four have tried for a long time to—legally—control their customers. The news is that Gartner said it and the speaker acknowledged that the information was culled from Gartner’s experience with its own customers. To the best of my knowledge Gaughan has not been reprimanded for speaking bluntly and Gartner has received no law suits for the honesty, but it’s early.
No matter, what this indicates to me combined with other things I’ve been reporting on are two things. First, IT customers are getting restless and starting to speak out. This may be the beginning of a cascade. Second, the vocalized dissatisfaction rising in the market may indicate a turning point in the paradigm.
Paradigms are remarkably stable. They may crumble for a long time accumulating pressure for change but never reaching a tipping point. But then, seemingly without warning a catastrophic event causes a shift. There is nothing foreordained to the effect that today’s big four will be tomorrow’s. They have big installed bases and tremendous market presence and that might delude some people into thinking that they are too big to displace.
Alternatively, though, major market shifts don’t happen because the leading vendors fail. They happen when the leaders become irrelevant to the problems they provide solutions for. We haven’t been a primarily manufacturing economy for a long time yet our enterprise software is built to support it. Hand in hand with the irrelevancy of the old regime, the free market boasts a huge number of vendors with robust solutions that are more relevant to the moment.
Multiple economic drivers are in place and that should make the new year very interesting indeed.
Venture Outlook Bullish on Cloud, Enterprise Startups
I was hoping to save this idea for either a year-end story or something focusing on the new year but events seem to have a mind of their own. The story, whenever it would be issued, would go something like this: Enterprises are picking up more cloud computing solutions and as they do there is a willing audience of customers happy to jettison the legacy systems that have increasingly hamstrung them.
In the last few weeks we’ve seen an increasing number of articles and reports, and I have written about them, that indicate building or built up frustration with enterprise software, especially the legacy on-premise variety. We all know the drill, legacy software is expensive to buy and costly to maintain. It cramps your style and it requires legions of people to manage. And try as we might to remember that business today leverages information to make a buck, information management is for most companies an external thing. It’s not core to doing the business of making widgets.
But all those observations by pundits don’t add up to much. What we need is proof before decision-makers plunk down scarce cash. We got a bit of that this morning in an article in the Wall Street Journal about venture capital investments.
According to the piece by Ben Worthen, VC’s are investing heavily in the enterprise cloud application sector and it cites recent investment news from companies like Workday, Zuora and Marketo. The latest investments in Workday give that company a $2 billion market capitalization according to the article. Perhaps it’s time to think of an IPO?
But Workday is far from alone. Zuora just raised $36 million in its series D round placing its valuation at $300 million up 100% from a year ago. Marketo recently raised $50 million but I don’t know what that does to the company’s valuation though I could guess.
Want more proof? The article goes on to say “In the third quarter, venture capitalists put a total of about $1.2 billion into start-ups that sell business software online, sometimes known as ‘cloud’ companies, nearly double the $758 million they invested in the year-earlier period and 50% more than in any other recent quarter, according to VentureSource.”
While all this capital is certainly nice for the startups mentioned it also bolsters the trend I alluded to above. These enterprise cloud companies are the tip of a spear aimed at the heart of legacy enterprise software. These guys are lean and focused and they have solutions that are better fits and have greater relevancy to today’s world than some of the legacy products that may have been designed during the Reagan administration.
I think that’s the story. The preponderance of evidence strongly suggests that after many years of dissatisfaction about the state of legacy software, many companies are about to discover, if they have not already, that they have a new array of options.
Interestingly, this sea change in the making is not happening in CRM to the same degree and that’s all thanks to cloud computing. The front office had its change over the last decade when it changed out legacy CRM for the cloud variety. Given the flexibility of cloud computing and the more iterative way improvements and updates are distributed it will be interesting to see if the front office will ever have a similar change again. The front office may be entering the same condition. So let’s speculate in a later piece about what that might mean to the software industry, OK?
Finally, this kind of activity is a net good for the economy. As companies reduce their overhead for IT and spend money on new systems they become more competitive and in many cases require less credit for purchases because cloud computing is a pay as you go affair. Legacy software isn’t going away soon but its advance may have stopped especially if the VC’s intuition is right.
Gates, Jobs and Tinkering
Malcolm Gladwell published an illuminating article on the late Steve Jobs in this week’s New Yorker and I recommend it highly. If you are looking for something that delves into the dirty laundry of Job’s tempestuous personality there’s some of that but it’s hardly the focus of the piece. Nevertheless, Gladwell, with a knack for drilling into a subject and finding something other than the usual stuff, comes out with observations that explain Jobs and help to position him in the pantheon of technology giants.
Much has been made of Job’s second act and of how he seemingly rose from defeat after being booted out of Apple—his triumphant return and the string of “i” devices that turned Apple into a consumer electronics giant and the second most valuable company on the stock ticker (after Exxon). But what’s behind this is, you could say, regular market dynamics. The same dynamics that elevated Jobs in the new century were the ones that contributed to his undoing earlier.
We’ve all been exposed to ideas about market dynamics by Geoffrey Moore, Clay Christensen and others. Early markets are bare bones affairs and capturing market share is paramount for young companies making the market. Later the survivors can go back to flesh out their creations with subsequent versions and vendors who think they can do the fleshing out early rarely survive to do so.
In the computer industry the flesh came in the form of the GUI, networking, databases and such things that added value to the basic invention. The analogy might be summarized as first we feed everyone then we can invent cuisine. Gladwell asserts that Jobs’ genius was in tinkering with original inventions and making them better and he gives many examples. But he does not stop there; Gladwell compares Jobs to other tinkerers from other ages, notably the people who perfected the steam engine making it a useful tool for the industrial age.
In that comparison, Gladwell effectively makes the point that Steve Jobs was simply too early to the cuisine aspect of the high-tech revolution. He sought to make stylish boots when too many were still shoeless. If true, and this explanation feels right to me at least, it explains much of Jobs’ success in his second coming to Apple. By the very late 1990s the industry had filled out and customers were in need of the finer points of technology that would do more than the mundane record keeping and making the devices actually fun to use was finally the order of the day.
Ironically, Apple had spent much of the prior decade trying to make itself relevant to masses that only wanted utility and through a series of bad business moves had brought itself to the brink of extinction. It was a turning point for the industry and perhaps by pure luck, or the luck of Steve Jobs, it maneuvered itself through a keyhole coming out the other side as the industry icon.
This analysis takes nothing away from Jobs, the guy in the hot seat and the one who needed to make hundreds of right calls to ensure that today we have stylish, elegant and highly functional tablets, phones, personal music players and more.
Jobs has often been compared to Bill Gates and Walter Isaacson chronicles the long relationship between the two men in his biography of Jobs. But they are not exactly opposites. Not even Gates can be seen as an original inventor of technology and sometimes both men can be seen tinkering with and improving someone else’s ideas. For example, Gates actually bought the DOS operating system from someone else and Windows was the stepchild of the Macintosh operating system which we all know was inspired by Xerox’s GUI. Office is the amalgamation through tinkering of applications from Lotus, Word Perfect (and before that Wang) and Harvard Graphics.
But of the two men, Gates and the company he started are creatures of the last century while Jobs is really of this one. I recently watched Jobs’ commencement speech at Stanford from 2005 on YouTube in which he quipped that Windows stole everything from the Macintosh. But the difference between Microsoft emulating and tinkering with an idea and Apple doing the same is that the Apple version improves while the Microsoft version is more of a copy.
Last week I was in Microsoft’s flagship store in Belleview, Washington. It was not hard to see the Apple inspirations in every element of the store from the layout to the products and services offered though the Microsoft employees I met all seemed to believe that their company had practically invented the store concept, no matter I guess. The store is a good idea as were Windows, music players, application ecosystems, marketplaces, handheld devices with big screens and tablets and much more. Knowing something of the relationship between Gates and Jobs and thinking of Job’s place in history as a tinkerer, perhaps it is fitting to recall that imitation is the sincerest form of flattery.
Is Luxury Brand Service Failing?
I’ve been blown away recently by how bad the luxury customer service sites are. They just don’t get it in spades. now, this is not the rant of a spoiled rich kid. I bought a fine Swiss watch a few years ago when some retailers were closing and liquidating inventory, so I got a good price. Today when I need to buy a leather strap to keep the Swiss magic running on my wrist, I am appalled that this luxury product vendor has such a backward website.
You can go there to buy more watches — but trust me the Swiss make these things to last the century at least, so buying net new is the last thing on your mind. But unlike the finely turned metal, the organics — i.e. leather — breakdown over time and you need to replace them. No such luck with my vendor, Raymond Weil.
The website is decidedly not an ecommerce — or even a customer focused — site which is weird. While ecommerce might be seen as déclassé for making a lux purchase (I dunno, just guessing) as a customer service vehicle it makes a lot of sense. I might get a kick out of making the initial purchase at a store but I could give less than a farthing to go through the customer experience of entering a store to buy a wrist band.
WTF guys? Why can’t I even find the thing on your site? The site is way too oriented toward saying how wonderful you are. Don’t you get it? It’s not about you it’s about what you can do for me.
Seeing this nonsense makes me glad I got 40 points off retail for the bloody watch. More importantly though it tells me how much work we have left to do in customer orientation.
