12
Aug

Simpler Branding May Drive Higher Levels of User Adoption for Microsoft’s Office 365 Business Productivity Cloud SaaS

For most business users, Microsoft’s Office suite is a familiar set of computer tools. But some of this familiarity is associated with a hybrid “feature rich” and “hard to use” brand. Simplifying this branding, by turning down the “hard to use” component may help Microsoft’s efforts to persuade more of its business customers to migrate to its Office 365 cloud, SaaS offer.

Tom Petrocelli touches on some of this problem in an article posted to CMS Wire on August 7, 2014. In The Barriers to Working like a Network in Office 365. Petrocelli focuses, specifically, on the collaboration features of Office 365, which makes sense given his reference to “work like a network”, which is a concept Jared Spataro (Microsoft’s General Manager of Enterprise Social) presented in a post to the Office Blog back on March 3, 2014.

This writer has first hand experience with the Office 365 conundrum resulting from a combination of “two many features” and “too many ways to get it down”. It took weeks for him to figure out OneDrive for Business, and how it interacts with SharePoint Online (another component of the Office 365 suite).

The aversion instilled from this confusion was further exacerbated by what he could only assume to be a poorly coordinated offer, by Microsoft, for its Office 365 business customers: each subscriber to Office 365 for business would receive 1 TB of cloud storage for its OneDrive for Business service, but only 25 GBs of storage for SharePoint Online. This made little sense as, on the surface (no pun intended), SharePoint Online appears to have all of the components required to provide business consumers with a fast and accurate method of finding just the content they need, should they opt to use enterprise search. In contrast, OneDrive for Business did not appear to have the same capabilities. The fog only cleared when he discovered OneDrive for Business is actually a SharePoint Online Document Library, with some added features.

Petrocelli’s article, and the personal example, above, both talk about too many ways to get things done when business consumers need to collaborate. But this post purports to talk about too many components of a product branding message. Where’s the connection? The connection can be found in the market messaging Microsoft is presently creating and articulating around its efforts in the enterprise search market. In this writer’s opinion, there are too many components to this message, which, ultimately will likely only confuse business consumers.

If Microsoft can renovate its product branding strategy around some simpler themes, the process of persuading business consumers to migrate to Office 365 can only get easier. The related costs may be less, as well, helping the profitability of the product.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

11
Aug

Twitter and Other Cloud Businesses Benefit from Investor Enthusiasm

Twitter and its Cloud business peers are benefiting from highly enthusiastic investor sentiment. Investors appear disinterested in a widening distance between GAAP and non GAAP earnings results for these businesses.

Sandra Ward illustrated some of this disconnect last Saturday, in an article published in Barron’s Online titled Twitter’s Results: Less Than Meets the Eye. She writes: “Using generally accepted accounting principles, or GAAP, Twitter (ticker: TWTR) lost 24 cents a share in the second quarter, but it played up a non-GAAP measure that showed a two-cent profit, versus the consensus of a penny loss.”

As of the date of this blog post, August 6, 2014, a loss of $.24 per share for Twitter, amounts to $141.585 Million, USDs. This loss is actually 45.38% of all of the revenue ($312 Million, USDs) Twitter generated for the quarter. One would think investors would care about a company losing almost a dollar of every two it brought in for the quarter, but they appear not to have cared. By the time trading resumed on Monday, August 4, Twitter closed at $43.45, a mere 1% below its closing price on Friday, August 1, 2014.

While the primary driver of investor appetite for Twitter still alludes this writer, it is, perhaps, safe to assume a lot of momentum can be attributed to investor satisfaction with the non GAAP presentation of the same quarter’s results, namely the mirage of the 2 cent profit Ward notes in her article. Perhaps investors are now convinced management has “gotten the message” and subsequent quarters will continue to show profits, albeit on a non GAAP basis. Hasn’t this been the case with Facebook, which is often characterized as a direct competitor to Twitter? After all, quarter after quarter, Facebook has reported profits over the last couple of years.

What is likely to be of greater concern than this excessive investor enthusiasm in this social media business bleeding cash, (which has now opted to highlight its results, as expressed according to non GAAP) is their complacency. Maintaining confidence this business “will eventually get it right”, simply as the result of throwing cash at its problems, doesn’t make sense to this writer. When one looks at the overall market for these types of publicly traded businesses, one likely will conclude the whole sector is simply too inflated, at least at present.

Disclaimer: I am neither invested in Twitter, Facebook, nor any other social media cloud business at this time.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

7
Aug

LinkedIn Reports Q2 2014 Results

On July 31, 2014, LinkedIn reported its results for the second quarter, 2014. All product segments reported substantial year-over-year sales growth.

The strength and importance of its “field sales channel” group is, perhaps, atypical of its peers in the Cloud, SaaS market, and worth some words. This business segment produced $319 Million for the quarter, approximately 60% of total revenue. These sales represented a 73% increase over the performance of the same group in Q1, 2013.

In contrast, LinkedIn’s online sales for Q2, 2014, totaled $215 Million, or a 52.8% increase over the performance of the same business segment in Q1, 2013.

So, one can conclude, at least according to these results, the “field sales” segment is growing faster than online sales for LinkedIn.

According to an article written by Ingrid Lunden, and published by the TechCrunch web site on May 2, 2013, titled LinkedIn Stock Dips 10% On Slowing Growth, Even As It Beats Q1 Estimates On Sales of $324.7M; EPS $0.45, things looked a bit different back in 2013.

Lunden provides a definition of “field sales”, as a business segment, along with a prediction for its likely future performance: “Field sales, involving actual people, are more costly for LinkedIn and so the company will likely be trying to increase its online sales in quarters ahead to improve earnings as growth slows.” (quoted from Lunden’s article as published on TechCrunch).

So it is likely safe to assume the “field sales” team at LinkedIn looks a lot like a typical outside sales force, which, LinkedIn, in contrast to many of its cloud, SaaS peers, opts to deploy to produce most of its sales.

As per our quote, above, Lunden opines LinkedIn will likely try to reduce the proportion of sales attributable to this business segment over time. But 16 mos later the revenue share of this business segment looks flat, at 60%, but is actually growing at a faster pace, year over year, than its online sales sibling. Is it safe to say LinkedIn is actually increasing its field sales efforts?

In this writer’s opinion, the answer to this question is likely “yes”, and for good reason. If LinkedIn is to maintain a very fast growth rate this field sales segment will likely be even more important to its overall health than is the current case. Sales of methods to promote recruitment requirements to Fortune 1000 businesses in the US, like the kind powering LinkedIn’s results for Q2 2014, are still complex and show no potential for change. At least not for the near-term future.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

6
Aug

Are Business Tech Consumers Likely to Adopt Cloud Computing for High Use, High Value Applications?

Analysts following cloud computing may want to include a “usefulness” factor into their assessment of how users are adopting these new computing trends. Early examples of how high value applications perform, when clients are located remotely from terminals and screens may not be as promising as one would otherwise expect.

We maintain an Office 365, Enterprise Edition subscription. Once we learned of the “1 TB of OneDrive storage coming to an Office 365 near you” offer from Microsoft, which provides any/all subscribers to Office 365 1 TB of storage, at no additional charge, we decided to back off of using an on premises Linux storage repository and move all of the active, daily storage we need to this OneDrive for Business cloud offer.

Unfortunately, when users are consuming office productivity applications like Word, Excel, or PowerPoint from the Office Professional Plus suite included with an Office 365 enterprise plan, the bi-directional communication required between desktop, remote client, and remote storage can (and in our case does) create a rather unsatisfactory daily computing experience which average users may not be willing to adopt.

Despite maintaining a high-speed fiber optic data connection with the WAN, we are experiencing 10-30 sec latency, literally 100s of times a day, as we create or edit documents which are stored in our OneDrive for Business repository. When the applications subject to this experience were limited to email and browsing web pages, this time drain didn’t amount to much and, therefore, was tolerable for our users. But when high value applications take on the same characteristics, it may not be easy for the “average” business technology consumer to accommodate the experience.

It would seem the same type of procedure is required of businesses using Google Apps for business, especially where the desktop hardware are Chromebooks. This writer thinks resellers like BestBuy opted to “pre-warn” consumers about the unique “flavor” of cloud-intensive computing as the results of a heavy rate of product returns from dissatisfied consumers (caveat: we have no hard statistics on this point, but still note introductory material designed to help consumers “learn more about Chromebooks” before they actually purchase one on BestBuy’s web site).

Bottom line: over time we think a substantial segment of consumers will be reluctant to adopt pure cloud computing for high value applications.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

4
Aug

Microsoft Differentiates Its Azure Offers via Acquisitions

In the aftermath of the public release of Amazon’s most recent quarterly earnings report, analysts have focused on price and margin reductions for its Amazon Web Services (AWS) product line. Microsoft’s Azure is a competitor of Amazon AWS, but, per Microsoft’s most recent quarterly earnings report, Microsoft is adding services to its Azure offers via acquisitions, presumably to better differentiate its cloud, IaaS offers for consumers.

Satya Nadella, CEO, provided word of these acquisitions during the “Quarterly Highlights” section of the earnings report, and within the specific context of a mention of “high value services” for Azure, and an increasing consumer appetite for them: “To support these high value services in Azure I have prioritized acquisitions such as

  • Greenbutton for big compute
  • Capptain for mobile backend services
  • and, Just in the past few weeks, InMage for disaster recovery for hybrid clouds

Earlier this month we published our opinion on the InMage acquisition. We maintain an Office 365 E3 plan subscription and have experienced, first hand, the need for a robust backup system for our data stored in the cloud, one which can be managed by SMBs without recourse to potentially expensive third party service So we think InMage is a positive addition to Microsoft, and, to both of its cloud offers — Azure and Office 365. We do need to note Amazon AWS claims to be compatible with “many popular disaster recovery architectures” (quoted from AWS Disaster Recovery Cloud Services.

From the short message on the front page of its web site, Greenbutton appears to have been designed to work with Azure since the business commenced activities in 2006. So this acquisition is more about folding what was third party business back into Azure than it is about breaking new ground. From the promotional information still available on the Greenbutton web site, it would appear consumers with applications requiring a very rapid transformation into a cloud-ready condition would want their developers to implement the Greenbutton SDK to hasten the process. The promotional information speaks of flexible capacity planning for IaaS resources as another plus for the SDK.

Finally, Capptain looks like at least part of a solution Microsoft needs to offer to its App Developers as it grapples with how to magnetize more interest from them, and add to their ranks at the same time.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

30
Jul

Office 365 Subscription Plans Evolve Into a Promising Revenue Opportunity for Microsoft

During Microsoft’s most recent quarterly earnings conference call numerous references were made by Amy Hood, CFO, and, I believe, Satya Nadella, CEO to Microsoft’s Cloud business proceeding at an annual run rate of $4.4 Billion USDs. This is a substantial number. Facebook’s annual run rate, per their latest 10Q as filed with the US SEC is approximately $12 Billion USDs. Google’s entire “Other” product revenue segment produced $1.6 Billion USDs for the latest quarter, only 9% more than the run rate Microsoft is claiming for its cloud offers (mostly Azure and Office 365).

The rate at which Office 365, specifically, is developing into a promising revenue opportunity for Microsoft should not be underestimated. We have first hand experience with the cost realities. We maintain an Office 365 E3 plan and a Dynamics CRM Professional plan. These combined plans are costing us $90 USDs per month. Assuming we are simply one of literally hundreds of thousands of SMB customers, one can quickly get a grasp as to how large the potential market is for Microsoft for this offering.

But it gets better. One of the most highly promoted features of Office 365, and the basis for a lot of the editorial content enfusing Satya Nadella’s recent presentations, has to do with Business Intelligence (BI) and Analytics. We purchased an Office 365 E3 plan in order to leverage some of these features, for example, SQL Server Reporting Services for SharePoint, and Excel Services for SharePoint. But Power BI, which includes Power Map, Power Q&A, etc, is now an extra cost add on service, which we will need to pay for. At a listed cost of $40 per user per month, we are looking at an almost 50% increase in our monthly subscription cost to add the service.

Are the benefits worth the expense? The answer will, of course, vary from customer to customer. But, for any SMB in a regulated industry, or any SMB doing business with larger companies with an appetite for BI reports, the answer will likely be yes.

Microsoft’s principal competitor for this type of service is IBM. To the best of our knowledge, Google has nothing close.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

21
Jul

Google May Come Up a Big Winner After All in the Cloud IaaS Market

Amazon AWS may be the largest cloud AWS provider, with Microsoft Azure a somewhat distant second, but Google’s Kubernetes may change all of that. This likelihood runs counter to an opinion of this writer, which provided the content of an earlier post to this blog.

The earlier post, titled Is Google’s Compute Engine (GCE) a Direct Competitor to AWS or Microsoft Azure? contended Google’s cloud, IaaS offer, Google Compute was an unlikely direct competitor to Microsoft® Azure, given its lack of direct support for Microsoft’s line of proprietary servers.

There is no indication of any changes to this status quo in an article written by Quentin Hardy and published to the New York Times Bits Blog. Rather, this blog post, titled Cloud Computing Giants Add to Open Source Credentials With Kubernetes presents an opportunity for Google’s efforts in this market of, potentially, much greater magnitude.

As Hardy notes, and Mary Jane Foley confirms in another article on this topic, this time published on ZDnet, Kubernete is Google’s effort to offer the very rich set of tools it has developed to support its Search and eMail products to the developer community via an Open Source approach.

If the initial list of committed partners — including IBM, Microsoft and Red Hat — simply add Kubernete to their lists of supported IaaS components, the rate at which users consume these tools may take on geometric proportion.

In the case of Azure, the Kubernete tool set, per Mary Jane Foley, will be made available within Azure’s lineup of IaaS components for Linux. Since Google search remains Google Search, with every implementation, more consumers will be exposed to Google products, including PPC advertising.

The benefit to Microsoft looks to be the opportunity Kubernete provides, which may transform Azure into a much more appealing solution than has been the case.

In turn, since Amazon AWS has expressed no interest in signing on, a clear differentiator will likely be created between Azure and Amazon AWS.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

12
Jun

SMBs are the Low Hanging Fruit in the Corporate Cloud Computing Market, but is this Anything New?

With enterprise business moving at a very slow pace, it looks like ISVs are increasing their efforts to persuade SMBs to make the jump to cloud SaaS offers. This heightened activity should not be read as a change in focus. As far back as 2011, Microsoft published an article titled How to Sell Office 365 to SMB Customers. Google, in turn, claims 5 million customers on its Google Apps for Business web site. The Google Apps for Business customers featured on the web page appear to include a number of smaller businesses.

But the driver behind this new effort may be a renewed confidence of a substantial amount of additional sales potential in the SMB market segment for these offers. In a post to Microsoft’s “Fire Hose” news blog on its TechNet web site titled Survey shows that most small businesses feel the need to keep up with technology, but many have yet to adopt the cloud, some results of a survey, sponsored by Microsoft® and performed by Ipsos Public Affairs, of 500 SMBs point out “60 percent surveyed do not use cloud technologies”.

So, is it safe to infer the 60% not using cloud technologies amount to sales targets? If the actual market size is, as the survey claims, 28 million businesses in the US, then almost 17 million sales targets are out there waiting to be signed up.

But, hold on, the survey includes another very important statistic: of the 28 million businesses in this segment in the U.S., 92% of them, nearly 26 million, have fewer than 4 employees. Keeping an eye on just how small the majority of these SMBs actually are, then I think it makes sense to carefully calibrate just how much additional potential there is in this market segment.

What if this market segment follows the same pattern as the enterprise segment? If a mere 40% of the remaining uncommitted businesses sign up by, for argument’s sake, by 2016, then we aren’t looking at a really meaningful amount of additional revenue potential, especially when one considers the competition for those sign ups (16.8 million x 40% = 6.8 million x $20 per month = approx. $16 billion annual run rate / 2? or 3? players)

Based on this survey, the new focus (which both of the main competitors in this space, Microsoft and Google, appear to have adopted), and my math, the recent re-calibration of market valuations for a number of these cloud SaaS offers, downwards, looks very sensible to me.

How about you?

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

6
Jun

Is Anyone Really Betting On Enterprise Business Embracing Public Cloud Anytime Soon?

Senior Executives at Microsoft® have been uniformly presenting the company’s heavily branded statement of current and near term objectives — to be the leading provider of productivity solutions in a ‘mobile first, cloud first’ world — since Satya Nadella assumed the role of Microsoft CEO. Salesforce.com still promotes its catchy 1-800-nosoftware toll-free number on its website. But is there an ISV, anywhere, really betting on enterprise business fully embracing public cloud solutions anytime soon?

The likely answer is “no”. In an interview titled ‘Ginni Rometty: Reinventing Big Blue’, which was conducted by Leslie P. Norton, and published on Barrons.com on May 31, 2014, Ms. Rometty notes: “Every client I speak to – every head of every business – is interested in cloud, to a certain degree . . . ” (quoted from Leslie P. Norton’s interview, as published on Barrons.com). But Ms. Rometty doesn’t offer any more specificity about just how interested the CEOs she is speaking with are in cloud.

Anyone reading the transcript of Sterling Auty’s interview with Judson Althoff, President Microsoft North America, from the 2014 JP Morgan Technology, Media & Telecom Conference, can gain further clarity, by industry type, as to the likely level of interest an average CEO will have in cloud computing offers:

“[I]f you talk about the cloud motion, for example, you have a different propensity to want to move to the cloud with different speeds depending on those markets. We would love to always help our customer make that journey to the cloud because of the efficiencies that it brings, the new collaboration capabilities that it brings, and the return to shareholder value that it brings. But at the same time, heavily regulated industries don’t have the propensity to want to move there just because of all the complications around security and data privacy.” (quoted from the above mentioned transcript. A link to the entire transcript has been provided earlier in this paragraph)

Getting back to the Barrons interview with Ms. Rometty, Leslie P. Norton refers to a “survey published by the Open Data Center Alliance”. This survey reports a mere 70% of the CEOs interviewed were willing to forecast running at least “40% of their operations on internal clouds by 2016”. Readers otherwise unfamiliar with cloud jargon should understand “internal clouds” amount to any private network supporting Ethernet data communications. I believe what Norton means by “internal clouds”, are IaaS resources managed by a third party (for example, Amazon AWS, Microsoft Azure, Google Compute Engine, or IBM’s offer), but entirely dedicated to a single tenant. Company proprietary information is reposed on these IaaS resources for access by company personnel from either mobile locations, or from company facilities.

These “internal clouds” are, by no means, public, multi-tenant offers. Norton confirms this by noting “[Open Data Center Alliance] Member interest in public clouds barely budged at 20%”.

Bottom line, ISVs with products predicated on an enterprise customer relying on on premise computing resources should be able to earn healthy returns for the foreseeable future. Unless/until solutions become available to ensure a much higher level of privacy and security for corporate, proprietary information, than is the case, presently, the situation does not look to change very much, if at all, at least for another couple of years.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

28
May

Microsoft Evangelizes Public Cloud and Mobile at TechEd 2014

During the Keynote Address of Microsoft’s 2014 TechEd Conference, Brad Anderson, Corporate Vice President, spent a considerable amount of time citing the explosive growth of smart devices and the enormous amount of additional data they produce. Mr. Anderson appeared to be citing these facts as examples of the important drivers for organizations to adopt a cloud data repository architecture, together with matching, Software as a Service (SaaS), computing procedures.

Mr. Anderson pointed out the value of cloud repositories for all of this new data, but not just any cloud repositories, he really focused on public cloud.

The tone of the opening few moments of the Keynote is very much along the lines of an argument from authority. The multimedia content supporting Mr. Anderson’s presentation includes interviews from unnamed authorities (presumably staff at Microsoft). Each interview is a testimony either to the value of all the new data produced on a device-to-device basis, or to the usefulness of a ubiquitous cloud repository for the data and related computing processes. One interviewee even states “Don’t be afraid of it, just jump on for the ride”

Whether at a subliminal level, or consciously, anyone viewing the presentation will likely perceive the presentation as an effort to encourage usage of the cloud, along with acceptance of the value of smart devices, and all of the data they produce. Perhaps the reason for the evangelical tone of the presentation is some resistance in the TechEd community (which is made up of “IT Professionals and Enterprise Developers”) to public cloud computing resources, and, perhaps, big data, which is the stuff produced by all of the smart devices cited in the presentation.

If my assumption is correct (and I have nothing substantive from Microsoft® to indicate it is correct), then it is also safe to infer the enterprise organizations supported by these professionals and developers have expressed a reluctance to embrace public cloud computing offers.

The impact on the big picture of what this all may mean for Redmond’s product marketing plan is as follows:

  1. There is a need to encourage faster adoption of the usefulness of public cloud computing on the part of enterprise businesses
  2. Redmond benefits when more customers use Microsoft’s public cloud offers
  3. Redmond is firmly seated on the “Internet of Things” bus

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved