Microsoft’s New Coke Moment
Windows 8.1 is beginning to make the pre-release rounds with the influencers as this post by Ed Bott in ZDNet documents. Version 8.1 brings me back to the 1990s and 1980s for various related reasons because it is not unlike what happened with Windows 3.0 when it was followed by version 3.1.
In the Windows 3.0 era Microsoft could do little wrong. It was before the Justice Department and the European Union started wondering how they could continue to monopolize the market legally. But back in the 1980s it was all good. Windows 3.0 liberated us from monotonous green screens and multiple confusing attempts at application level user interfaces; so what if there were bugs? That’s the environment that 3.1 was launched into and it’s not unreasonable to say that version of the OS launched the company on a decades long trajectory that helped build the industry and made Bill Gates the richest man in the world.
This time with 8.1, the tide has turned. There are many critical voices about version 8.0 and it’s shortcomings and the 8.1 release is more of a rescue mission than 3.1 ever was. But Microsoft isn’t the only company to fall from grace with its critics and the experience can do a lot to help a company grow we saw that in spades in another instance from the 1980s — the introduction of New Coke.
You may not be old enough to remember that one but on April 23, 1985 Coca-Cola decided almost unilaterally that it had to change the Coke formula. The recipe had been almost unchanged from the company’s founding in the late nineteenth century and the company was famous for efforts to protect it that made the Atlanta headquarters look like Fort Knox.
The short story is that customers didn’t simply express displeasure or talk about having to get used to it, they spontaneously rebelled to the extent that the company had a public relations disaster on its hands. New Coke made a graceful exit under the circumstances and became Coke II but whatever it was called the company learned a few things about its position with its customers.
First, customers liked Coke just as it was, an important finding. Most importantly though this may have been the first time in history that a company discovered that its brand wasn’t exactly its exclusive property. Customers have a great deal to say about a brand and what it means and for me some of what we understand today about brands can be traced directly to that moment when the customers effectively told Coke, “We’ll tell you when something’s wrong and in need of fixing. Otherwise don’t fix what ain’t broken.”
Fast forward to 2013 and version 8.1. Perhaps this is Microsoft’s New Coke moment. It’s not that the company has never before faced customer displeasure over a release of the operating system. Vista was a notable moment in customer disappointment and parenthetically it made me a Mac user and I expect it had that effect on others too. This time, Microsoft is responding with something approaching customer empathy.
The long list of fixes that Windows 8.1 will deliver is an interesting mix of making the user interface easier to work with and bringing back things that worked and that people had come to expect from Windows — I am talking about the Start button.
One of the more puzzling aspects of Windows 8.0 was the way users started using it. Over a period of years and several generations of the OS, people had come to rely on the start button. It was familiar and regardless of whether Microsoft had found a better way to use the product, customers had figured out that the start button was fixed in the firmament.
Version 8.1 is an important moment, maybe even a New Coke moment for Microsoft and not a moment too soon. I think the real learning from this experience is that the operating system is no longer the center of the customer’s universe. With so much computing going on line and on so many different hardware platforms, the idea of a PC based operating system acting as the gateway to all things online seems quaint. In fact the idea of software living and running on a local machine is becoming old school.
So perhaps this episode will say something to Microsoft about customer expectations and the value of tinkering with things in the product that many people had considered settled issues. It might even give Microsoft the freedom to deploy resources to pursue other business rather than focusing on re-inventing the PC operating system every few years.
Siebel at 20
Siebel saved my life. Not really but sort of. By the early 1990’s I had been selling software for what seemed like a lifetime and dealing with the typical frustrations of life in sales. There weren’t enough leads and there was always more work to do than you could squeeze into a day. I kept records on legal pads and file folders and I had a Rolodex that I would never update because it was way too much work. And then there was forecasting.
Fortunately, I was young and gifted with a great memory so I could remember everything that was relevant in a deal. Beginning in the 1980’s I had worked for a succession of DEC partners and I found that I could memorize whole catalogs — VAX and PDP-11 were separate — without trying.
But, yes, Siebel saved my life because by the early 1990s I was burned out — the mini-computer boom was fizzling, the dotcom boom had not yet started, and there was a recession which made everyone skittish about installing systems on PC networks because they were also skittish about network operating systems.
Finding leads was hard. No one would spend much on marketing and bingo card leads were of such low quality that it was easy to return them to marketing with a heavy dose of scorn. Cold calling was a way of life. There was no Internet to speak of and researching prospects was tedious. The early market euphoria in which every company was a prospect had given way much too quickly to a war of attrition.
I was not a Siebel user but it nevertheless saved my professional life because it showed there was a better way to sell that didn’t involve dialing till you dropped, unmanageable paper records, and monthly forecasts — little fictions whose greatest quantitative attribute was that they were rendered in spreadsheets. Siebel wasn’t even the first tool of its kind. ACT! and Goldmine were already on the market but Siebel took what had been a single user experience and made it germane to selling in the enterprise.
It would still be many years after Siebel’s founding before we would see integrated marketing and customer service but true to form Siebel was one of the leaders in consolidating the CRM suite at a time when public companies would buy other companies in simple swaps using their stocks like cash.
Siebel also hired aggressively. EVP David Schmaier would routinely visit his alma mater, Harvard Business School, each spring and round up its best and brightest for export to San Mateo. As a strategy it worked reasonably well and the company was always awash with smart, talented people, not just the Harvards by the way. Many of them are still in The Valley, populating other companies including Oracle where some settled after the buyout. Today having Siebel on your resume is akin to having Oracle or HP back in their heydays. It says you were first, you were prescient, you’re a survivor
The company was never loved, in my estimate, and that is a key lesson for all those who come after. They played by a script that was pure Geoffrey Moore. Not that Moore is like that, I don’t know him. But in “Crossing the Chasm,” Moore set down some absolute truths about how paradigms shift and how the eventual winners conduct themselves. Early markets are take-no-prisoner ground acquisition games. Capture as much territory as you can to deny it to your competitors; deal in a general-purpose product and accept customization ideas with great reluctance and great cost; expect the customer to figure it out and provide adequate but no frills support because most of your energy is dedicated to capturing more, more, more.
It was a brilliant strategy that some might say was invented at Oracle so it was only commonsense that Tom Siebel and several other titans of today’s software landscape would come out of that culture. But the strategy has a down side too. As I say, Siebel may have been respected for its execution but I doubt if it was ever loved in the way that Apple was loved, for instance.
The lack of love made it easier to accept the assertions of an upstart analyst firm at the time that Siebel’s marquee customers could not show an ROI. A scandal erupted that took a good deal of wind out of the company’s sails. Then, too, a Gartner analyst famously forecasted in off the cuff remarks that half of all CRM efforts would fail. Many people grasped at these factoids like they were drowning.
If all you read are the headlines, then your world is rather black and white but if you delve just a bit deeper you understand that the world is rather gray and this situation was no exception. Frustrated by the charges that the company believed were bogus, they hired me to evaluate not the charges but their customer base. My partner at the time was fellow Aberdeen analyst Harry Watkins who happened to hold a Ph.D. in Marketing and also taught at the university level.
Our work was clean. We were separated from Siebel by three thousand miles and given broad latitude to question their customers. What we discovered in many cases was exactly what Geoffrey Moore might have predicted. Major corporations had bought Siebel because it was the market leader and because they didn’t want to lose a step to a competitor. They were early adopters after all. The result, our research showed, was that a whopping half of the customers never bothered to conduct even a rudimentary needs analysis before or after purchase. Many could not quote an ROI because they had no relevant starting point to compare with.
Also, in a great bit of statistical analysis, Watkins discovered that some of the companies that were reporting ROI numbers were among those who failed to perform that needs analysis. When he compared this group with those who had actually performed needs analyses, he found that in aggregate the faux reporters had lower ROI to report. Our conclusion was that without a valid starting point for ROI the faux reporters either developed amnesia about how bad things had been prior to implementation or they’d downplayed their results so as not to contradict the evident truth of the herd and the headlines.
When we published the results, a few people in the industry, whom we had thought of as friends, demanded our heads on platters. It was all good fun. But that’s not the whole story. In direct follow up interviews with some customers we discovered additional truths. Siebel really was hard to use, especially for people who had never followed organized business processes and organizing sales people of that era was like rustling cats. Its client-server architecture, the most advanced for the times, required a great deal of handholding. One major company I spoke with had three teams of technologists dedicated to Siebel — one each for the last release, the current release, and for the next one. They were tired but curiously not angry.
Siebel had the lifecycle of a meteor — a bright youth and an ignominious end. In subsequent years, relative newcomer, Anthony Lye would do much to integrate Siebel into Oracle and flesh out the product line with a SaaS architecture and many auxiliary functions — other free standing companies bought with Oracle cash to fill out the very complete suite we see today.
Siebel got started in 1993, which means this is the twentieth anniversary year of its founding. A lot has happened in the interim. Siebel is no longer a standalone entity having been acquired in a greater version of stock market brinkmanship than even it had participated in during its growth phase. But in many ways, Siebel still is the market. Go into a Global 2000 company and you will see a Siebel system; today Salesforce users might flank that system’s users too. For many of these companies Siebel is a workhorse system that has been through some of the wars and continues to be serviceable.
But markets and vendors are changing. Oracle has Fusion and is slowly merging it with Siebel while Salesforce continues to be the juggernaut that prematurely challenged Siebel in a joust of jests. If you follow Bruce Daley’s recent survey work the customer base is in good shape so you might wonder what’s next. Customers seem to genuinely like Siebel these days, a good omen for sure. But current mainframers still love their big iron too. For all that, however, we aren’t building and selling mainframes very much and the installed base is shrinking if only because COBOL/CICS programmers want to retire and kids in school today don’t want to be big iron museum docents.
So where is Siebel at twenty? Somewhere in middle age. There might be a Siebel named product twenty years from now but it will be very different from what we have today, which s very different from what we had ten years ago. By and large, that’s a good thing. So, happy birthday Siebel.
The Era of Wearable Computing
There’s been a lot of chat about Google Glass recently. With 1500 people piloting the hardware and the concept of wearable computing getting its first notices, it’s easy to understand. But I think in one way we might be mistaken. The era of wearable computing didn’t start with Google Glass. Like many things it started even before there really was such a thing. I pin the epoch’s initialization to August 2009. That’s when none other than Brad Pitt posed for the cover of Wired magazine. Somewhere in small print the cover has these words: “Ditch the headset. This guy can barely pull it off and you’re not him.” I’ve never seen or heard a more succinct and on target analysis. hahaha!
Your Glass Watson
I was discussing Watson, the IBM super silicon brain that won Jeopardy! the other day with a reporter writing an article. Around the same time, I was also looking into Google Glass, the wearable computer that enables people to record what they see and to see what they’re recording through a teeny tiny screen mounted on a frame over their eyebrows. It’s all very Buck Rogers or Dick Tracy or Special Forces or just so last week depending on your worldview.
Then it occurred to me, as I am sure it has occurred to many other people, that the two things could/would/should merge especially as wearable computing is already nearly passé and on the way to being replaced by implantable computing which could rapidly give way to ingestible computing once they figure out how to, you know, make the ingestion part more or less permanent. But now I am racing ahead of myself by at least seven years. Besides, what kind of sauce goes with ingestible computing? I’m betting on black mole.
Watson has a tremendous ability to learn and to digest huge volumes of input to come up with an answer. I was told that to appear on the Jeopardy! program, Watson’s handlers force fed it about 200 million pages of structured and unstructured content. I also recall from the show, that most of Watson was not in the studio with the other contestants because it’s less of a computer and more of a network. No matter though. Google Glass would be the thing that could put all that hardware out of mind. Glass: the killer app for Watson? Hmmm.
Glass Watson might be great in any high-pressure situation where snappy answers are important. That would not include things like stock trading assuming Watson is already doing that sans any help from carbon-based life. Glass Watson might be a lot of fun in a traffic stop. “Really officer the light was yellow” or “I was going 37.593 MPH in the 35 MPH zone officer.” And in social situations where it’s hard to read the social cues Glass Watson might be a boon to introverts like me who want to be more lifelike.
Naturally, those social situations extend to vendor customer interactions especially where selling might be involved. A retail clerk with a Glass Watson might be able to assess a customer better and faster than a human though I have to say that twenty years later I am still in awe of the woman in a Nordstrom store who nailed my shirt size in the blink of an eye.
But what if the customer has a Glass Watson too? Would we then be in a situation where the people are skipped over entirely? I worry that my Glass Watson would like everything it sees and the retail Glass Watson would scour my bank accounts even finding the one I misplaced in Geneva (maybe it could retrieve my passwords) and over sell me on everything thus turning into a Glass Watson Hoover as in a vacuum cleaner for my wallet. All of this could happen in the blink of an eye.
Still, I always come back to Groucho Marx, an interest I share with Paul Greenberg. Groucho once quipped, “Time flies like an arrow. Fruit flies like a banana.” What would Watson do with that? I wonder if you can get Google Glass with one of those fake Groucho moustaches? Now that would be cool.
NetSuite’s SuiteWorld
SuiteWorld reveals cloud computing ERP’s mainstream moment
NetSuite bloomed this week, in part because of a very well produced user meeting, SuiteWorld, held in San Jose but also because there can no longer be any doubt that the market for ERP technology is turning to the Cloud.
What was once unthinkable — that ERP could or would ever be delivered as a cloud solution — has been gaining acceptance over the last couple of years and NetSuite has been the most aggressive of ERP vendors at promoting it. According to CEO, Zach Nelson, the company’s revenues, cash flow and profits are up significantly year over year and the company is projected to operate at a run rate of more than $400 million by the end of its fiscal year.
Negative growth rates at other ERP companies, notably ERP enterprise leader, SAP, whose license revenues declined more than nine percent according to financial analysts from Barclays, speak volumes and contributed to the overall good news for NetSuite. Cloud based ERP is now a value proposition that competes so well that many companies are taking the plunge rather than renewing maintenance contracts with the ERP leaders.
There’s nothing surprising in this. Much the same thing happened in CRM and today all CRM vendors have some form of cloud computing solution that they can promote when seeking new business. They may say they offer hybrid approaches but if you review my last two posts on the subject — “End of the Beginning” and “IT’s Ethical Dilemma” — you might conclude that hybrids are not much more than a fig leaf for those who need to defend their on-premise virtue.
The reasons for the surge in cloud ERP can be traced to market dynamics. The early adopters and early majority buyers have spent the last dozen years buying and installing cloud ERP and now that they can prove success, there appears to be a stampede forming to bring the later adopters into the fold. This is also not controversial. If we’re passing the inflection point of this market, the second half will happen at about twice the rate of the first. My contention is that only very specialized and conservative companies will persist with exclusively premise based ERP roughly three years from now.
Of course this does not mean that premise based ERP will simply go away. Companies like NetSuite and Microsoft have developed surround strategies that might keep premise based ERP going for a while but I would be surprised if there were many net new premise based ERP implementations from here on. The condition will mimic mainframes. There are many still in service but who buys one these days?
All this is not to say that NetSuite is acing the exam, though they are the smartest kids in the class. I’d prefer to see them take an approach that recognizes the importance of best of breed strategies for one thing, and for another, their CRM stance is, to put it mildly, puzzling.
Company founder, Evan Goldberg, and CEO, Zach Nelson, both extol the virtues of SuiteCloud but mostly as a customization vehicle. In fact it is that but it is also a primary integration hub for partners and thus the moral equivalent of a platform in the Force.com mode. I suspect, though, that the company’s approach to SuiteCloud plus its messaging about offering a single integrated system is more out of respect for a customer base that consists of finance and operations people whose job is to make the trains run on time. Leave the swashbuckling social media, best of breed, and customer experience messaging to the likes of Marc Benioff and Salesforce.com for the time being, we have bigger fish to fry, I think, is the unwritten assumption.
Speaking of all things CRM, there was an interesting exchange between my esteemed friends Esteban Kolsky and Zach Nelson over NetSuite’s CRM position. Kolsky inquired at a press conference why Nelson paid so little attention in his keynote presentation to CRM (a true statement). Nelson returned serve and opined that the ERP system is the real customer relationship management system for the obvious reason that it contains real “customers” i.e. mortals who have placed an order whereas conventional CRM as we know it is really a prospect management system.
Messrs. Kolsky, Paul Greenberg, Brent Leary and myself might have begged to differ and in fact, the debate about the C in CRM was settled while Mark Zuckerberg was still in college. But let’s cut this baby in half. Nelson has a point about customers and given his company’s focus on eCommerce as a logical extension of ERP and its function as a customer facing solution, his argument does hold water.
However, this fails to explain how Nelson’s ERP customers handle, let us say, their proto-customers or prospects for that period of time when they are interfacing with a company, on its event horizon so to speak, but have not yet placed their first orders. For them the answer might very well be Salesforce.com, which explains the importance I attach to SuiteCloud and all the rest. I suspect it is also one reason that Accenture, Deloitte, and Cap Gemini have devoted practice areas to the cloud and NetSuite. Nice hat trick, Zach.
But that’s small potatoes in the big schema. For now let’s say that ERP is hard to do and this has contributed to NetSuite’s relatively slow start compared to Salesforce. Both emerged from a discussion in Larry Ellison’s office as legend has it but Salesforce is a multi-billion dollar company today while NetSuite has a run rate of about $400 million. ERP might be hard but its time in the cloud is at last here and I look for more good news from Goldberg, Nelson, & Company simply because it’s now their time and because they’ve done the hard stuff to make their solution viable in a demanding market.
Disclaimer
From time to time I accept free travel and accommodations from vendors so that I can attend their conferences. You ought to know this by now but it bears repeating. NetSuite paid the freight FOB Boston and covered my expenses for SuiteWorld. It was an enjoyable experience that, nevertheless, did not influence my ability to write objectively about what I saw. What kind of analyst would I be if it did?
