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


Succeeding at Enterprise Software Sales Still Requires Sales People Who Can Do Something More than Just Present Products

During the 2014 Technology, Media and Telecom Conference, hosted by JP Morgan, Judson Althoff, President of Microsoft, North America made clear the importance of “consultative” skills, rather than product presentation, to the success of sales of Microsoft software to enterprise business.

The North America software business, for Microsoft, per Mr. Althoff’s remarks, produces approximately “$25 billion across 8,000 folks” (quoted from a transcript of Sterling Auty’s interview with Mr. Althoff, which took place during the 2014 JP Morgan Technology, Media and Telecom Conference).

Like any other component of Microsoft, the North America business has been in transition. Presently the sales team works with a set of products “down to three or four Microsofts instead of 22 Microsofts when [Mr. Althoff] started from a product standpoint”. (ibid). Mr. Althoff characterized the world of the “22 Microsofts” as a terrain filled with silos, which often worked at cross purposes. The “One Microsoft” reorganization, in his opinion, which Steve Ballmer articulated over a year ago, is still ongoing and promises to alleviate a lot of the drag which beset the company under the “tyranny” of these product silos.

The sales process, as well, has changed. Mr. Althoff’s remarks described the old selling process, where Microsoft sales personnel would “try to dream up a big data project together [with customers]”. The driver behind this type of effort clearly was what I have referred to in this blog as “solution without a problem” syndrome.

According to Mr. Althoff, this approach has been changed. Now “we try to coach our sales force not to have a singular starting point, and show up with a canned pitch, but rather be much more consultative in our approach to understanding” (ibid) the challenges prospects and customers are facing.

He then went on to emphasize the importance of industry understanding to a successful software sales process: “[i]t varies quite a bit by industry, financial services, healthcare, and manufacturing.” (ibid). This response is entirely inline with comments made by Keith Block during yet another technology day sponsored by an investment bank — this time Piper Jaffray’s Media and Telecommunications Conference, March, 2014. Mr. Block emphasized the almost critical importance of sales personnel maintaining an accurate understanding of the software requirements for specific industries, if they are to succeed.

Bottom line: despite the apparent simplicity of a new set of consumerized IT software products, usually served from the cloud, the enterprise software selling environment is still highly complex. For both Microsoft, Salesforce.com, and, I would argue, Oracle (the past employer of Mr. Block and Mr. Althoff), sales personnel with demonstrated success selling complex products are still the most likely to succeed.

Ira Michael Blonder

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