Steve Ballmer
There is a very good article in the current issue of Vanity Fair (with Alec Baldwin on the cover) about Microsoft. In “How Microsoft Lost Its Mojo” Kurt Eichenwald recounts the failures and bad decisions of the company’s “lost decade” a time overseen by current CEO Steve Ballmer.
If you are in this business you can probably recall at least some of the major inflection points related to missed opportunities and in-fighting that cost the company its market leading position. I thought it was just me, but Eichenwald even compared Microsoft to Detroit auto makers and their past glory. For good measure he ends with a long quote from Steve Jobs’ biography about the difference between having a sales or ops guy running the show and having a product guy in charge. Sad. Worth reading.
According to the article, Microsoft’s stock has barely budged over the last ten years while other tech companies flew by — Google, Facebook and of course Apple. In one recent quarter iPhone alone made more money than all of Microsoft.
The article quotes Ballmer saying he wants to remain at Microsoft till 2018 but I don’t think the company can wait that long. The article also implies that Ballmer might be a smart pick to break the company up and to take the legacy products into the sunset while more product oriented people try to salvage the core of innovation, if it still exists.
Fun fact: According to Wikipedia, “Ballmer was the second person after Roberto Goizueta to become a billionaire in U.S. dollars based on stock options received as an employee of a corporation in which he was neither a founder nor a relative of a founder.”
Ten years of stagnation can’t be sitting well with Wall Street. What will it take to orchestrate a palace coup?
Think Bigger
I spent the best part of last week cruising up and down Silicon Valley checking in with customers and would be clients. The consensus from this non-scientific survey is that business is better than OK and most people are expecting this year to be the best in a while. Of course there is a cloud—literal and figuratively—to go with that silver lining. After all, we’re bouncing off a long fall to what’s still a soft bottom.
Business is good enough out there that many companies can’t find enough qualified people. Ted Elliott, CEO of Jobscience, sometimes refers to it as a skills gap with many older workers not having all of the skills that newer companies seek. People with all the requisite skills are rare and valuable and Elliott refers to them as “unicorns” because they’re so hard to find and, yes, he’s got and app for that.
While you might say that such gaps are generational and common it’s still noteworthy that a generation ago the gap was between laid off steel workers and service sector job requirements. Today it’s between laid off tech workers and new tech job openings.
Interestingly, if you have a Ph.D. especially in a science or math, there’s no job shortage especially if you like to work at IBM. A recent story in the New York Times said that IBM hires more math Ph.D.s than anyone else in the world. You could have figured that out from all of the patent applications they file.
What’s been interesting to me in the last couple of weeks has been the intersection of big data, IBM’s quest for brains and a recent report from Forrester Research. The report in question is a project led by Phil Murphy titled: “BT 2020: To Thrive In The Empowered Era, You’ll Need Software, Software Everywhere.” I can’t critique it because I don’t have the $499 necessary to read it but I also happen to think that’s right, but what kind of software?
The report talks about the coming reality that software is and will be even more ubiquitous in the future and interestingly it posits the emergence (according to Forrester) of “cloud cartels”—large corporations dedicated to serving the processing and storage needs of the future. We’re talking more about big data than about running ERP in the cloud. With some 22 billion attached devices by 2020 (also according to the report) spitting out second by second data, a lot of processing and storage will go to machines understanding machines.
I can buy all that but what I find harder to internalize is that the short list of winners quoted in the Times story about the report includes “Amazon, Cisco Systems, Google, I.B.M., Microsoft, Oracle and a few competitors.”
While those are all good names the list fails to mention any of the companies that started it all such as Salesforce.com. The report reveals an assumption that though the data center might be moving to the cloud the fundamental software paradigm isn’t changing. But I disagree. In my little corner of reality I think about things that haven’t been invented yet that are going to need all of that processing horsepower. Many of the companies not making the short list have a foot on the ground in the Valley and they are exciting for the novelty of the solutions they envision.
The Times article, and to a degree the report, support the kind of linear thinking that I have always criticized because the forecast looks more like a scientific experiment that keeps all variables constant save one. But in the real world systems are dynamic (yes, IT is a system) and change cascades through systems leaving no stone unturned—exactly the opposite of straight line forecasting.
If Forrester is right, and I think they are but perhaps for different reasons, then much of the processing power in the cloud will not be taken up by mundane ERP and CRM applications but by applications demanding computational answers to figure out what people want and need and what the connected devices need as well.
I am certain that the actual processing will be as different from that conducted by today’s applications as a fish swimming is different from a bird flying. I’ve lately been reading Isaacson’s “Steve Jobs” with great interest in the emphasis that Jobs put on the customer experience. Interestingly, while the book spends a great deal of time on the customer experience it is almost mute about loyalty and promoting it. Not that it matters—Jobs fixated on the customer and got loyalty and then some. Yes, we need more software in our civilization but it’s time not just to think different but to think bigger, if you ask me.
2011 Say Bye-bye!
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” http://amzn.to/sZEwaq
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 Salesforce.com, 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?
Curation
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 http://amzn.to/vYJesf and “World on the Edge” by Lester R. Brown http://amzn.to/sv0pvy, 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.
Apple Software, Inc.
When Apple changed its name by dropping the “Computer” word we all thought that the reason was the phenomenal success it has had in consumer electronics. Sure, the company kicks booty with its computers thanks to great design and a stable operating system, but the success of the iPod seemed to point the company in a new direction.
Apple’s success has been three fold — near flawless manufacturing, customer service and software. More than anything it has been the software that seems to make you almost forget there’s a device involved as some of those who played with the iPad yesterday seemed to indicate.
Yes, Apple unveiled its long rumored slate computer, the iPad, yesterday but what I saw was release three or four of the software that runs the modern iPod and iPhone. Apple’s success comes from being able to repurpose and add on to a core piece of software that runs its consumer devices.
For example, start with the iPod Touch and you have, an iPod with applications and a nice user interface. If you add a camera for stills and video plus phone capability you get the iPhone. That was a nice trick but not so revolutionary as it was evolutionary — at least from that angle. But now take the iPod software and put it on a bigger device and then plug that device into your HD TV — in the presence of a high speed wireless network — and that device is called Apple TV. In that vein, yesterday’s iPad announcement is really not much more than iPod in a different form factor and with some tweaks to the software including more applications.
Ok, now there are some significant differences in look, feel, purpose — what is iPad’s purpose? — and the applications that run on each gizmo but the fundamental software appears to be common to all these devices. And it needs to be said that all of these devices also have in common the ability to connect with the mother ship (not you, Apple!) to download content for a price.
One of yesterday’s announced uses of the iPad will be for downloading and reading newspapers, starting with the New York Times, and books. In fact a whole new (?) store format for book content will feed the iPad, but let’s face it, that sounds like a repurposing and modification of iTunes.
Now, I am not complaining about any of this. Downloading digital content — especially the kind that you read and that has heavy-duty information — has been a missing factor in our digital lives and I, for one, am glad to see this evolution. If iPad can help to save the newspaper industry, I am all for it. But I am most impressed with the vision and the execution on that vision. Apple built sophisticated software for iTunes and the iPod and then contemplated the number of ways they could leverage it to invent not only a number of useful devices, but also categories. That’s genius, if you ask me.
Perhaps the next game we all play on the web will be asking and answering the question, What will Apple do next with its software? I think it’s worth pondering.
