Cloud Service Providers Scale Back Features to Reduce Operating Costs

We wrote earlier in this blog on LinkedIn. Specifically, we commented that we saw too little value in LinkedIn’s subscription offers to justify maintaining a paid corporate subscription for any significant period of time. We now need to update our earlier observations to add that it appears to us that LinkedIn is reducing the amount of information provided about contacts that we would refer to as “distant”, meaning 3 or more steps removed from a LinkedIn user. Of course, it is understandable that the cost of services, over time, will escalate; but we think LinkedIn should be providing some greater value to users to justify increases in cost of service, rather than stripping services of the basic features that users have come to take as basic to the service. Looking at this product development tactic from a prominent cloud service provider like LinkedIn from 30,000 feet, we have to note that the product marketing effort seems pretty amateurish to us.

But LinkedIn is not the only cloud business to wield the feature-reduction sword as a method of raising cash. One of our clients maintains a paid account (a group subscription) with Salesforce dot com. Months ago we could reach support personnel on a telephone call when problems arose with Salesforce. Recently we needed some support configuring activity reports. We were disappointed to find that the only method available to us of reaching support was to submit a request for support via email. Further, the request form was peppered with questions at to the “severity” of our issue, which we took to be a pretty crude method of justifying a slow rate of response for requests that were not submitted as “critical” or “urgent”. Of course, most honest users will not attempt to characterize a request for some support as “urgent” if, in fact, systems are working and users can still process their work.

It took Salesforce support 3 business days to get back to us on our request. We think that amount of time is unacceptable, regardless of the level at which a business is subscribing to the service. But the worst part of this experience was the fact that the support technician who reached out to us informed us that what we were looking for was not available at our level of subscription at all. We should explain that we were merely trying to produce 1 activity report for efforts made for “leads” along with efforts made for “accounts”. We can’t see how this request is very sophisticated, at all, and, by no means the basis of a big change upwards in subscription cost.

Finally, we read today (December 7, 2012) that Google is dispensing with its free “Apps” offer. Here we go again.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


There are Few Excuses for MARCOM for Enterprise Software that Fails to Present Clear Benefit Statements for Business Users

As we wrote in the last post to this blog, public relations, and, specifically, the task of informing influential members of the public (like critics, well known authors of product reviews, etc) properly about products are very important aspects of MARCOM functions for enterprise IT ISVs. Of perhaps equal importance is the need to infuse promotional collateral with information about the benefits that business users can expect to obtain once products, services or integrated solutions have been successfully installed. As we wrote much earlier in this blog, we think the most compelling type of benefit amounts to the savings that can be realized by implementing a solution. In 2012 we think there are few enterprise businesses purchasing IT software solutions for any purpose other than saving money by replacing legacy computing procedures with something new that can be counted on to lead to lower operating costs.

But the reality is that there are still lots of products (some of which are authored by very large enterprise IT ISVs) for which promotional material is lacking that speaks to the business user in this language of cost savings. Most of the time this type of promotional material takes the form of case studies, or success stories. In fact, case studies, success stories and white papers can be found for most any successful product. Most of the time these examples of IT Software MARCOM are put together very well. It is very likely that this type of MARCOM effort is delivering on its objectives, which, for most businesses, will be good enough.

What we have in mind is the type of MARCOM that is closer to first contact with the market. Specifically, we need to see that conference handouts, brochures and direct mail pieces and even the type of brand messaging that is usually selected for trade show booths, all incorporate some type of message for the business user. In contrast, what we find in a lot of this “early contact” MARCOM is technical content; specifically, lots of mention of technical features, as if the type of technology used to build a piece of software (for example, HTML 5.0, Javascript, etc) is going to provide business buyers with an imperative to buy something.

We strongly disagree with this notion that enterprise business buys products as a result of how they are built. Some broad reference to cost savings has to be infused into this “early contact” collateral if MARCOM efforts are to succeed.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Enterprise IT ISVs Need to Make Best Efforts to Ensure that Products Receive Favorable Publicity from Popular Media

How enterprise IT ISVs manage publicity on new products can have a powerful effect on the success, or failure, of new product launches. For example, Microsoft recently debuted new software for the Windows Phone. Despite some favorable opinion, our overall impression of public opinion about the quality of this new software was largely negative. True, some prominent reviews spoke favorably of either the HTC 8X Windows Phone, or Nokia’s Lumia 920, but the median impression that we had of the marketplace quality assessment of Microsoft’s technology was less than top rank.

We were, therefore, very surprised when we acquired an HTC 8X Windows Phone as upgrade from a Motorola Droid 2 smart phone that we had been using since December, 2010. In fact, we think Windows Phone 8 is great software. The lack of clutter on the phone’s touch display, the quick response of the phone as applications are called into use, the absolute ease of set up on email accounts, are all very strong features for us.

So why the disconnect with popular critics from the smart phone marketplace? As we do no business whatsoever with Microsoft, we cannot say why the publicity campaign took the course that it evidently did, but we can point out that the course the campaign apparently took would be a problem for any enterprise IT ISV looking to enter the market with an offer like Microsoft’s Windows Phone 8 software. Management should have anticipated the response of prominent critics, and taken steps to avert the path that the actual launch took.

Only now, on December 5, 2012, nearly a month since the actual launch of Windows Phones by Microsoft OEMs (including Nokia, HTC & Samsung), can we find a very positive review of this technology — Is Nokia’s Lumia 920 the best smartphone of 2012?.

We think the negative press that met the debut of this product line could have been avoided had more care been exercised. While it is certainly the case that critics cannot be told what to write, products must be correctly positioned, and, then, presented for review. It may make sense for a product management team to hand pick a set of critics for a first set of reviews, to ensure that accurate, but fair opinions are publicized about products. With this point in mind, we fail to see why some critics, with a clear recent past history of looking more favorably on products from Apple, or Google, were selected as early reviewers for the technology. In fact, we think that the set of early decisions on public relations efforts for this product line suggest a kind of self destructive behavior. Therefore, the departure of Mr. Steven Sinofsky makes much more sense, and, in fact, indicates a healthy trend on the part of Microsoft towards improving its efforts at managing public relations and marketing communications as it introduces new products to markets.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Enterprise IT ISVs should Look to Empower Business Users to Build Their Own Computing Solutions

As enterprise IT organizations have struggled to successfully achieve meaningful return on investment from systems development efforts, it has become more fashionable to look favorably upon the likely contribution that line of business (LOB) organizations and other silos within the business can make on these efforts. We think that a lot of the interest in the so-called bring your own device (BYOD) movement, as well as what is commonly referred to as the “consumerization of IT”, are, in fact, both examples of this trend towards considering an important role for LOB organizations in systems development.

In fact, enterprise IT organizations will benefit from a shift of some responsibility (as well as authority) over to LOB organizations in this type of activity. If a requirement is specified by one of these organizations, then it makes sense to provide the organization making the request with a seat within the team that will deliver the solution. After all, if the customer plays a directly role, then who can the customer blame should the final system not meet expectations.

Following this argument further, then one can understand why using no code process development platforms makes a lot of sense for enterprise business. Given the intensity of interest in business intelligence (BI) gathering, together with a matching expectation that automated tools (for enterprise resource planning, ERP, etc) empower users, successfully, to take action, rapidly, in response to changing business conditions, we think it makes sense for ISVs to think about coming to market with no code solutions.

Including citizen developers in the likely typical user mix, makes even more sense for ISVs. After all, these users will come from LOB organizations. Further, citizen developers tend to play important roles within business process management (BPM) operations. They may have a comparatively wider view of the set of factors that must be treated by an automated solution. Therefore, it makes sense to provide them with a role in the development effort.

We think that enterprise IT ISVs with workflow products should take the steps required to keep their offers from trending to commodity. Further, we think that it makes sense for these businesses to consider adopting a razorblade product development architecture (complete with durable and non durable features) for their offers. Recurring revenue is always an attractive model. Broadly speaking, providing a development platform to which different, LOB specific modules can be applied with an annual licensing charge may make sense.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


No Code Programming Requirements Provide Enterprise IT ISVs with a Promising Market Opportunity

As we mentioned in an earlier post to this blog, Gartner’s Citizen Developers look a lot like camera hobbyists, when we compare the enterprise IT computing market to mass market photography. We think that enterprise IT ISVs offering methods of producing computing procedures that do not use computer programming should carefully manage their brand with regard to how they are perceived by citizen developers.

It is worth taking a moment to add some substance to our notion that the market for no code automation solutions (other wise known as “work flow”) is a healthy one, which, if managed correctly, can provide meaningful revenue for ISVs with successful product offers for some time to come. The driver, as we see it, is the otherwise dismal performance of the majority of hard coded IT software projects (meaning projects where software is written by programmers to build the end system). Without digging deeply to come up with numbers, we will posit here our notion that the success rate for most enterprise IT projects where custom software solutions are the objective, is approximately 50%. Of course, this low percentage is a major problem, and, further, an inhibitor to the wider adoption by enterprise IT organizations of custom hard coded systems development.

As we wrote much earlier in this blog, in our opinion, the whole concept of IT Project Portfolio Management arose as a direct result of pervasive poor return on investment in hard coded IT projects. Software as a Service offers, today, are positioned by market participants (notably Salesforce dot com) as a “no software” solution to this problem. The pitch is, simply, “you don’t need to build it, just use what I’ve already built”.

The reality of events like Hurricane Sandy amount to an important factor that, in our opinion, will influence enterprise IT decision-makers to continue to search for viable on premises solutions, or hybrid combinations of on premises and remote managed services offerings. In fact, it took a mere 5 minutes here in Huntington Station, New York for our access to managed remote services to be completely cut off as we lost our power and our fail over system, which utilizes dedicated wireless data communications from Verizon, failed as the result of completely compromised cell towers and a flooded central station for Verizon in lower Manhattan.

Enterprise IT ISVs with no code offers can be particularly attractive to these enterprise organizations that cannot, entirely, take the risk implied by remote managed services. In the next post to this blog we will look at an important factor that adds greater attractiveness to these no code process development options.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Enterprise IT ISVs must Plan on Constant Market Price Pressure as an Important Factor on Recurring Revenue Product Models

Professor Willy C. Shih, in an interview aired on November 29, 2012 on Bloomberg TV Surveillance faults Kodak (and other manufacturers of modern cameras) for, effectively, ceding control over manufacturing of the durable component of their camera system products over to foreign businesses. The durable component of the modern photography system is the camera. We entirely agree with Professor Shih’s judgement; however, we are particularly interested in the changes that manifested in marketplace interest in the non durable component of the system, meaning film, and, later, digital recording methods which entirely supplanted its predecessor as the preferred and widely popular method of recording and re-using photos.

We think the history of how this radical shift in market interest occurred is completely consistent with products that become commodities, over time. We also think that Kodak, itself, contributed to this transformation of the home photography market from something unique to merely a necessity for mass market customers in need of a commodity to record family events (like births, weddings, funerals, etc) for posterity in a visual form.

Kodak contributed to this destructive trend by producing film that would work in any camera, regardless of the manufacturer. When consumers could capture the same comparable quality image of an event through any available method, the market need swung all the way over to two telltale factors:

  • price
  • and availability

Of course, the absolute lowest cost photo system, as well as the fastest method of producing photos, are both to be found in digital cameras, and, further in the digital cameras included in mobile telephones (cameras were originally added to the feature set of cell phones as a spurious after thought to push consumer interest).

There are some disturbing parallels of Kodak’s unfortunate experience and the approaches of first IBM, and then Microsoft’s approach to the enterprise IT computing markets. With regards to the personal computer segment of the enterprise IT market, in our opinion, both IBM and, later, Microsoft opted to decouple hardware from operating system. By licensing their computing platform to multiple OEMs, both IBM and Microsoft inadvertently created the basis of a market entirely driven by a quest for computing solutions as commodities. To reiterate: when the computing experience is entirely uniform, despite the type of computer (durable component) used to convey the application (non durable component) to the user for processing, then the only important factors quickly become price and availability, which are two billboards pointing to a commodity market.

If enterprise IT ISVs choose to compete in these commodity driven markets, then they must be constantly on the lookout for lower cost methods of producing items, as well as the quickest delivery times. In the next post to this blog we will look a bit closer at whether or not there is an important opportunity in the Citizen Developer segment of the enterprise IT computing market for ISVs offering no code application development solutions.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Parallels Between the Modern Mass Market Camera and Enterprise IT Software are Worth Considering for ISVs

For those readers who are unfamiliar with the modern camera business we need to point out that the camera, itself, represents the durable component of the product model. We should note that there are many segments to the market for cameras. Two of these segments are of particular interest to us for this discussion of razorblade product design and its importance for enterprise IT ISvs, regardless of whether the requirement is maintaining current products, or conceptualizing new ones: the segments made up of professional photographers and the segment made up of consumers. With regard to the professional market for modern cameras, we think that up to the very recent present, the non durable component of this hybrid product, specifically, the method of recording photos in a reusable format suitable for storage, reproduction, etc. amounted to rolls of film, In fact, one can argue that rolls of film are still very much in demand by professional photographers, despite a shift to digital recording.

For the consumer market it is a dramatically different story. There is little to no further significant interest, now in 2012m, from the consumer market in film. Almost all of the interest is now in digital methods of recording and re-using photos. One can only conclude that a radical shift in market interest in the non durable component of modern camera product has occurred. The extent of this shift was so wide that the entire business model for Kodak suffered a terminable blow as a complex result of it.

Before we take a bit of a deeper dive into the components of this shift in consumer interest, it is worth taking a moment to look at an important parallel between enterprise IT product design and modern photography marketing — specifically, with regards to target markets. For modern camera marketing the film buff (or hobbyist) made up an important market segment, much like -->


Enterprise IT ISVs Should Commit Equal Resources to Managing Durable and non Durable Components of Products

We have spent sometime over the last few posts to this blog discussing what we refer to as a “razorblade” product development strategy. The purpose of this strategy is to equip an enterprise ISV business with a method of building recurring revenue. The model we are describing owes much to the product strategy that Gillette Corporation and its competitors implemented to meet the personal needs of men with regards to shaving. Within this model the durable component is the razor designed by Gillette and its competitors, which replaced the blade of the razor with an apparatus which would accept cartridges. These cartridges added a non durable component to the shaving system. In fact, users need to replenish these cartridges. Over time, the amount of revenue received by manufacturers of these systems from sales of replacement cartridges far exceeded the revenue received from the sale of the durable component–meaning the razor, itself.

There are many examples of products that have been built along these lines. Most of these examples derive a considerable proportion of revenue from sales of the non durable component of the product. We spent sometime discussing one example of these present day examples, the Kerig® one cup coffee system. This system produces a considerable amount of revenue from the sale of so-called “coffee pods” which must be purchased, specifically, for the coffee maker, which is the durable component for the system. An added benefit for the manufacturer is that the amount of content (meaning the ingredients that make up a lot of the benefit for users of the complete coffee system) required for each pod is very small; therefore, the non durable component of the system is highly efficient, which contributes even more to the profitability of the operation.

On November 29, 2012, Willy Shih appeared on Bloomberg Surveillance. We found the airing of this interview with Professor Shih to be quite timely. In fact, as we will present in a later post to this blog, in our opinion, Prof Shih presented a compelling case for manufacturers of razorblade products — including enterprise IT ISVs — to allocate substantial ongoing resources to the task of defending market place position for the durable component of these products. We should note that prior to his present position at the Harvard Business School, Willy Shih spent a considerable amount of time at Kodak. In fact, he served as head of its consumer digital business in 1997. Therefore, he speaks with considerable authority on this topic.

In the next post to this blog we look at the modern mass market camera product as a preamble to our comment on Mr. Shih’s interview on Bloomberg Surveillance on the 29th of this month.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved