cloud computing

  • March 29, 2012
  • I moderated a panel discussion this morning, something that goes with the job I do.  It was with the Massachusetts Technology Leadership Council (Mass TLC) and the event went really well.  People were engaged, there were good audience questions and the panelists gave well considered answers.

    The title of the session was “Finding the Right Way to the Cloud: Measure, Manage and Monetize for Success” and I was told it would focus on the financial and business model aspects of becoming a subscription company which it did for the most part.  What interested me and what motivated this piece is the quality of the discussion about technology.

    In a discussion that was supposed to be about business there was a lot of technology talk.  We were ostensibly talking about metrics for managing the business like churn, deferred revenue, recurring revenue, renewals and more.  But the technology discussion was also about monitoring API calls in a public cloud and other things that never come up in discussions about companies like Salesforce, NetSuite, Oracle, SAP, and Microsoft because those SaaS applications hide all this complexity form the user.

    I don’t pretend to understand the significance of an API call and the costs involved, but the panelists seemed to.  In the middle of this I began thinking that this is the price you pay for going for an infrastructure as a service solution.  I suppose there are situations when a company might want or need a bare bones hardware solution. But it seems counter intuitive to me that anyone would give up a data center only to take on this level of complexity.  What is saved or gained with this down in the weeds approach?

    Published: 12 years ago

    Every year around this time I write two columns one on the year that was and another on what I expect the new year to bring.  There is no methodology for this process and I believe this lack of method is important.  I take a blank screen and fill it up with what has been on my mind for the last year and what made it out through my posts.  Here are a few ideas that bubbled up.

    Steve Jobs

    We lost Steve this year and the outpouring in the media was inspiring.  For some reason, many people felt the need to try to reconcile Jobs’ fastidious and demanding personality with the beautiful products he inspired.  One who did not was Malcolm Gladwell who placed Jobs in a long continuum of people who did not invent original products but who tinkered with and improved them significantly.  The world needs all kinds.  That might have been true for the GUI but Jobs still gets high marks for things like iPod (an improvement on Walkman) and especially iPad, iTunes and the store for which there was little if any precursor.

    A quote from a Time Magazine (July 10, 2011)review of GM executive Bob Lutz’s book from 2011 “Car Guys vs. Bean Counters”

    makes an important point: “It’s interesting to note that the one area of the U.S. economy that’s adding jobs and increasing productivity and wealth is also the one that is the most relentlessly product- and consumer-focused: Silicon Valley.  The company off Highway 101 that best illustrates this point is, of course, Apple.  The only time Apple ever lost the plot was when it put the M.B.A.s in charge.  As long as college dropout Steve Jobs is in the driver’s seat, customers (and shareholders) are happy.”  Thanks, Steve.

    Social, mobile and analytics plus cloud

    On deck to assume the Jobs niche in the tech industry and beyond may be chairman and CEO of, Marc Benioff.  To be clear, Benioff and Jobs are very different people in most respects but Benioff has the same blue ocean strategy that Jobs had and a knack for entertaining his customers.  Benioff also likes to invent things.  He has driven the rest of the industry to embrace social, mobile, analytics and cloud much faster than it would have left to its own devices.  This combination of attributes is really all any Martian would need to know to understand the market upon arriving here.  The drive to embrace these technologies first is what separates Salesforce from all other conventional CRM companies and is a big reason for the Silicon Valley quote above.

    Cloud computing

    We’ve been hearing about cloud computing for many years already and interestingly 2011 was a year of a dramatic demonstration of its power in reverse.  Target Stores pulled its web site from the cloud into the premises in time to launch a huge marketing campaign featuring Missoni brand clothing.  The campaign was so successful that it clobbered the site and crushed the ambitions of any other IT leaders who might still think on-prem will be a workable strategy as we go “all in” on social, mobile and analytics.  Right?


    The Missoni fiasco gave me a chance to showcase curation software from Storify.  Curation products enable anyone to find and bring together relevant content from the web to produce a one of a kind package of related information that is greater than the sum of parts.  Curation plucks gems from the torrent of things rushing by in the digital river (pun!) and it will be an important part of how we use the web in the future.

    The Subscription economy

    With cloud computing more valuable than ever we see a new idea taking shape called the subscription economy.  You probably recognize it and consider it old by some measures.  But the interesting thing about the subscription economy is that so far it has been at best held together with bailing wire and spit.  Old style ERP systems have been a major impediment to subscriptions and many of us never realized it.  I quoted others talking about how ERP has held back business innovation but also about Zuora and others who are pushing the envelope with billing and payment systems that enable subscriptions like never before.  Zuora announced its series D round of $36 million recently and I look for them to be a major IPO in the next 24 months.

    Blue ocean strategy

    In a press conference early in 2011, Benioff said he had no interest in developing an ERP system to complement his company’s growing front office footprint.  Without using the words blue or ocean in the same sentence he let us know that there is too much untapped potential in the front office, often in the form of applications of social concepts and business processes that have still not been invented or fleshed out.  By the end of this year that approach seems to have put Salesforce into a category of its own as most of the ERP players I watch seem to be focused on re-selling their legacy bases.

    Oracle and Salesforce

    One such ERP company is Oracle, a self described fast follower, that has nonetheless made big investments in the front office.  In 2011 Oracle acquired ecommerce provider ATG for one billion bucks and followed up about six months later with a $1.5 billion acquisition of RightNow.  We’ll miss RightNow but Oracle seems to have blue ocean plans of its own regarding retail in the future.  Watch this space.

    Dreamforce and OpenWorld

    We got an eyeful of how competitive the atmosphere is in San Francisco and Silicon Valley when Larry Ellison disinvited Marc Benioff to speak at OpenWorld.  At first it looked like a bizarre move by Ellison but later it looked liked improvisational comedy by a couple of masters.  It was certainly entertaining.  Ellison used the opportunity to announce his own cloud computing and social strategies though true to form I was not shown much product or given a date for general availability for some parts of the product line.

    CRM Idol

    Speaking of entertainment, Paul Greenberg got the industry organized around the Idol theme in the first annual CRM Idol competition, which I was part of.  The concept is still rough around the edges — one wonders how entertaining business ought to be — but it brought the industry together across most of the world’s landmasses and fun was had by all.  We discovered some very interesting companies and at least one, Assistly, was bought before the competition even finished.  I think Idol has legs if we can get a better set of pre-conditions in place to screen out some companies that are clearly not competitive.  Just sayn.

    What’s going to get the economy moving again?

    Over the summer there was fear of a double dip as the economy seemed to slow but that scare seems to have passed and the tepid recovery continues with job growth in the last 21 months and counting.  Not enough jobs to erase a big unemployment number mind you, but progress, slow and steady.

    Marketo CEO Phil Fernandez offered his own prescription for recovery saying that the revenue performance management (RPM) methodology that he and others (Eloqua, Cloud9) are promoting could generate as much as $2.5 trillion in new revenue globally.  Maybe he’s right, but…

    It’s all about energy

    In May I was in Chicago to give a talk and noticed the prices for gas were almost hitting the five-dollar mark.  The cost of energy, transportation and raw materials all derived from petroleum, hold the key to recovery (and, yes, European bankers and politicians).  There’s no longer any slack in the petroleum production system and when demand spikes so do prices and when that happens, the economy cools.  We’re in for some uneven performance as long as that is true.

    Books I have read recently such as, “The End of Growth” by Richard Heinberg  and “World on the Edge” by Lester R. Brown, tell the same story.  Nothing grows forever and on a finite planet there are finite resources, which ultimately places a cap on many things.  That doesn’t mean doom and gloom but it does mean we need to think about our next steps as a species.  Global warming isn’t going away on its own.

    All the technologies we’ve been debuting in the last few years will be an important part of the next strategy, especially as we are required to pivot away from dead plants as our energy sources.  That’s one vantage point from which I will be evaluating our industry in the new year.  The business processes we use are directly related to the technologies we have to work with — the subscription economy is a case in point.  Along with helping us make money, our great new technologies must serve our need to get carbon and costs out of our business processes ASAP.

    But for now let me simply say thanks for reading my column this year and for your many good observations and comments.  I hope you enjoy your year-end celebrations, however you do them.

    Published: 12 years ago

    Google’s blogger system was down for a couple of days last week and the bloggerati are up in arms about it. They have a point too.  A software system delivered as a service that loses vital data and is down for unspecified periods cannot be relied on and if you can’t rely on cloud computing — which is, after all the heart of this matter — why do it at all?  But too often it seems that the response to a problem like this, especially when handled by those who are emotionally involved and not by cooler heads can lead to a larger problem.

    People like Ed Bott are calling for business strategies that do not rely exclusively on the cloud for storage.  Bott obliquely makes the case for some form of local storage but I suppose a virtual back up to another vendor might also be possible and could even spawn a new enterprise level industry.  But think of the overhead.

    At its heart this is a “belts and braces” approach.  A little digression might be in order here.  We know what belts are and braces are a British word for suspenders.  Belts and braces describes a needlessly redundant strategy for holding up one’s pants and has been in the lexicon as shorthand for all similar strategies for a long time though it seems to have fallen into disuse due to advancements in high tech belt technology.

    At any rate, the opposite of belts and braces is counter intuition.  We speak of “thinking outside the box” strategies as shorthand for being counter intuitive.  What if we did the opposite of what appears to be the common sense solution?  It doesn’t always work.  Jumping off a bridge with wings strapped to your back won’t materially alter the outcome, so you need to pick your spots and use a bit more common sense.

    Perhaps the best example I can give of this yin and yang of belts and braces and counter intuitive thinking comes from economics.  We’re in tough economic shape right now and many people who should know better are saying we need to lower our deficit.  Spend what you take in and not a penny more and you’ll be fine.  But the historic record tells us this won’t work.  It’s been tried before and deficit cutting by itself makes matters worse.

    A better solution would be to start by asking what we’re spending money on and trying to figure out if the funding is going to beneficial and productive uses.  I think we know the answer to that one.  The American Society of Civil Engineers gives our infrastructure — roads, bridges, water and sewage treatment systems and other similar things — a D+ so we know pretty well that the money isn’t going there.  Meanwhile, last week the heads of the five biggest oil companies testified in the U.S. Senate about their need for government subsidies despite the fact that they are the most profitable corporations in the history of the known universe.

    Let’s not get too far afield though.  The impetus to cut the budget rather than looking for ways to better spend money that will boost economic activity is understandable but wrong headed.  In the General Theory of Employment, Interest and Money and other writings, John Manard Keynes got it right by pointing out that government spending needed to be counter intuitive and counter cyclical and that in bad economic times, government needs to be the buyer of last resort, temporarily replacing demand that the private economy cannot sustain in other ways.  I am a Keynesian but I don’t want this column to be about Keynes.  I am only making a case for counter intuition.

    Back in the cloud, the idea of storing or backing up your data to prevent the kind of outage that happened last week at Google is a non-starter for several reasons.

    First, if you back up data without backing up applications and making them available to run locally, you haven’t solved the whole problem.  You have saved your data but you are still dependent on the cloud vendor to supply the application.  Take either one away and you’re dead in the water.

    Second, if you take the belts and braces approach and store your data as well as your programs, haven’t you obviated the need for the cloud?  Of course you have so the solution is no cloud at all if you take this argument to its logical end point.  Alternatively you have both — belts and braces — and you pay twice.  Not smart.

    But if you do give up on the cloud, then you also give up on the economies you achieve from it and you are back at square one in your data center with more demand for IT services than you can deliver with your budget and staffing levels.

    Hmmm, that’s a tough one.  What to do?

    Clearly, we’re too far down the road to cloud computing to consider pulling the plug.  There’s no safety back there only a different set of problems including the fact that your IT organization would now be responsible for providing 100 percent up time.  Care to take that one on?  Thought so.

    The solution isn’t backsliding into conventional IT or quasi-cloud solutions but redundancy might play a part.  I think the real answer can be found in redundancy, planning and policy.  I know nothing about Google’s approaches to these issues but as an outsider looking in, it seems like there was little or certainly insufficient sandbox activity on Google’s part before they went ahead and upgraded the blogger software.

    Sandbox activity, despite its childish sounding name, is a super-important and hyper-rational approach to avoiding this kind of problem.  Rather than calling it a sandbox we should call it what it is, a model.  Cloud vendors might be guilty of insufficiently modeling their customers and their services.  A realistic model of the system that went down and the upgrade that caused it would most likely have caught the problem before it was one.

    This is the kind of thing that only gets figured out in live practice during a product’s early life.  The need for modeling is not hard to discern but until there’s a problem its an issue that won’t get funding.

    So this was the wakeup call.  We need much better system modeling in the cloud and I expect that smart customers will soon skip over their vendors’ comforting SLAs and pledges of a specific number of nines and ask the much harder question of how those nines get delivered.

    Mirrored data centers and intelligent modeling policies as a standard seem like the next big steps in cloud computing.  Counter intuition or thinking out of the box got us to the point of this solution, but there’s nothing counter intuitive about it.  It is an approach that relies on redundancy but appropriate redundancy that is very different from the case where we were thinking about going it alone back into the past.  I hope the people who think about the national budget think this way soon.

    Published: 13 years ago

    There’s an interesting and short article by Maxwell Cooter at IT World about cloud computing.  Seems that a survey turned up some CFOs who were eager to reap the financial advantages of the cloud but less than sanguine about potential security issues.  It was fine, in the survey’s findings, to send the web site to the cloud but most CFOs developed hives when the subject turned to the company’s financial data.

    Well, LOL for that bit of common sense.

    It’s no surprise, and probably an indication that the CFO is a sane individual, that so many consider the cloud a bit risky.  Back when the cloud referred to and its ilk (i.e. multi-tenant operations in redundantly secure data centers with the lights turned off), the idea was so new that many parties were suspect, even though the security was always top notch.  But this is something else.

    In the last couple of years, cloud computing has become the flavor of the month with almost as many permutations of the idea as there are vendors, and new ones spring up like mushrooms.  The issue is that the security in many cases comes down to not just the vendor of the software but the reseller/partner.  A company like Salesforce provides the soup to nuts solution including mirrored data centers, software security and power from sources that are as secure as they can be.  Reseller partners do what they want and what they actually provide in up time, security and fallback — the holy trinity of the service level agreement — is variable.

    OEM’s sell the core software as a service to any partner who wants to get into the business and it is the partner who becomes responsible for power, physical security, data security and the rest.  So the marketplace has become much more fragmented than before with the result that the CFO — and everyone else in the organization — ought to be skeptical and perform due diligence on the specific solution offered.

    I am not saying that it is impossible to assemble a secure cloud solution from the components available today, I am simply saying that it’s more challenging.  It’s also not a job for a novice.  As Chuck Schaeffer, a guy who really knows this stuff, recently told me in a Thought Leader interview, there are a lot of audits and certifications you need to acquire to prove that your operation is secure and that’s another reason to leave it to the guys who have done this kind of thing before.

    In every market there is a time, early in the lifecycle, when you can start a business on a shoestring and improve it as you go along.  That gets harder as time goes by because the barriers to entry rise with every new certification and wrinkle that the early guys add.  I think we are at the point now where if you haven’t already gotten on board as a cloud computing vendor, it’s too late.  You might be able to physically get the job done in cloud computing, but it may be at a cost that would make the effort unprofitable.


    Published: 13 years ago

    Recessions are always a good time to rebuild your competitive infrastructure and the slow growth/recession of the last couple of years has been no exception.  On the stock market, the technology sector seems to be doing quite well.  After bottoming in the middle of the summer the software companies especially seem to be rebounding.  Microsoft, Oracle, Salesforce, RightNow and NetSuite are all gainers.

    But the drivers for software acquisition remain what they have always been—improving processes, saving money or making money.  Companies whose products can do one or more of these will do well.  And customers will gobble up their wares as they seek out more competitive stances in their chosen markets.  The theme to watch for is replacement as many foundational applications that were implemented for Y2K reach the end of their shelf lives.  Here are some issues to consider.

    • Ten year-old ERP and CRM systems will be more than ripe for replacement.  New business processes and better economics will do the heavy lifting to prove the case for new applications.  Many of the conventional vendors like Oracle and SAP will be there as will newer entrants who’ve proven themselves over the last decade.  Watch for names like NetSuite, RightNow, Salesforce and others to command attention.
    • Cloud computing.  After several years of debate about what cloud computing is or is not, customers are in a great position with lots of choices for solutions.  It doesn’t matter whether you prefer single tenant or multi-tenant solutions, the economics of running software in the cloud are so compelling that you can find a vendor that speaks your cloud dialect.  Virtually every front and back office vendor has a cloud offering or two.
    • Analytics is another solution set that has been in the background for many years.  But new demands in the form of trying to make sense of the mountain of data brought in daily by our social applications makes analytics a necessary add-on.  Analytics solutions are abundant and even SAS Institute, a pioneer in enterprise analytics, has jumped into the market with cloud based solutions for social data.  It is somewhat surprising that Gartner expects only 35% penetration in customer service centers by 2013.  That looks like a great opportunity for differentiation to me.
    • It will also be a year for collaboration and I think collaboration may be the first true business social application type.  Judging from the rapid adoption the Salesforce’s Chatter is receiving I anticipate the broader market will see collaboration as a business process no one can afford to ignore.
    • Integration will be important in the year ahead too.  There are no so many applications and application types on the market that we can safely give up any pretense that a single vendor could deliver all of a company’s CRM needs. APIs and cloud computing make integration more important and feasible.  More vendors will discover that the winning strategy is to do whatever is possible to pre-integrate their wares with strategically important foundation CRM vendors.  It wouldn’t surprise me to see some vendors begin to organize around specific business processes or types such as channel selling.
    • This also implies that many companies will be looking to extend their solution sets with strategic additions.  Any company can optimize its CRM deployment and probably gain competitive benefit by looking at its business processes and comparing their level of automation with the product sets now on the market.  Need a way to keep your sales people in the game?  Try a compensation management system.  It will give them a way to quickly understand their progress in the only way they keep score.  At the same time it will reduce the back office overhead caused by end of quarter commission calculations.
    • If you have an interest in bringing out a new product but worry that a limited marketing budget could limit your success, you might first consider a variety of customer analytics that can help you determine which customers have a need, what that need is and how to approach them.
    • Or perhaps you are looking to improve service and save money but worry about displacing the good but expensive handholding your service group provides with faceless automation.  Try a social service solution that engages your user community to help answer basic customer inquiries through Twitter and Facebook.  Not only will you be able to maintain a person-to-person approach but response times might decline and there’s no telling what positive fallout might happen when customers help each other.  If you’re monitoring the chatter you might discover that a core group of customers has great understanding of your product and does a super job of helping out.  The help can also turn into articles for your knowledge base.
    • The last area for social penetration might be using solutions to analyze your negatives—to identify instances where customers express their displeasure with you on the Web.  It’s much better to deal with an irate customer than to let their anger fester, but first you have to find them.  Social media and analytics can help and it’s a worthy investment.  Our research shows that even the best companies have their detractors but often a vendor knows little or nothing about a problem.

    My analysis

    To summarize, the year ahead in CRM will be important for replacing old systems and for integrating new niche applications that sharpen your game.  The costs of these additions will be relatively low due to cloud computing and the nature of some smaller niche applications.  The recession ended in July of 2009 and while it might not feel like a recovery right now, there is ample evidence of improvement.  You can use next year strategically to improve your stance as a recovery picks up steam.  There are good products on the market and vendors are still hungry.  If you miss this opportunity, I think you’ll be saddled with your old and relatively expensive systems for longer than you might like.


    Published: 13 years ago