Thoughts on Always On

I spent the last couple of days at the Always On conference at Stanford, as always this event combines a solid invite list with one of the best produced events in the industry. I was sitting with Jeff Clavier yesterday and we were both commenting that this is one event where you can literally just hang out in the outdoor patio area and run into everyone eventually, in many ways the outside the conference action is more interesting that what is going on inside on stage, but that’s not really that uncommon these days.

The one thing that I did observe and was disappointed in was that there is still too much emphasis on the convergence of media and the internet as a topic of discussion, which for much of the audience is probably spot on (lot’s of PR and advertising people here) but for a large section of the audience this is getting to be redundant.

I was part of a panel discussion about corporate blogging and the changing tactics of marketing, and for the life of me I can’t understand why these questions about brand and message control are still floating around… ferchristsakes, you never had control to begin with so get over it. I am also getting tired of hearing about case examples (anecdotal, not full case studies) about how car companies and consumer electronics companies are using blogs to facilitate product development and target audiences. At least we’re still not using the Kryptonite Lock story… we’ve moved onto Dell exploding laptops.

There was a good amount of discussion about user generated content, which appeals to the media types. Nobody could tell me how I could take advantage of user generated content.

I would have liked to see some discussion about how Generation M entering the workforce is going to force changes on the systems that we deploy and how we build them. The convergence of enterprise and consumer software has a much bigger impact on my world that the convergence of media and the internet.

Mark Benioff gave a keynote about software as a service… I didn’t catch it (what’s the point, is he going to reveal something we don’t already know), and then there was a panel with Mark and a bunch of other CEOs from SaaS companies, as you can imagine they were all selling against each other. There was an open source panel, shocking as that may be, but it was more or less the same buzzwords, catch phrases and stories… and Bruce Perens still hasn’t found a problem open source and $5m of funding can’t solve. Just once I’d like to hear him say “you know this isn’t for everyone and it does have some challenges but we’re working on it.”

I had a really fascinating conversation with Peter Hirshberg from Technorati (Sifry was there as well, as is usual he was wearing a nice smile and carrying a kind word) about how we could blend social media into our corporate website and, of course, how Technorati could work with us to facilitate conversation-based marketing campaigns. That guy has forgotten more about social media than I’ll ever know, seriously. Why couldn’t that get captured into a one-on-one talk with someone like Richard Edelman? I wish we could have talked more about this on the panel I was on.

Met a lot of startups, most of them pretty interesting. The IRC was tame and that made it kind of boring. Food was good and the parties good.

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San Francisco’s plan: health care for all

I did the math on this, it actually could be a good deal for employers. For employers with 20-100 employees the monthly premium for the City plan would be about $170 a month per employee, which is less than a private plan. It may not be quite the idea that the sponsors of the plan had in mind, but I could see smaller employers dropping their health care plans and telling employees to enroll in the City-sponsored plan.

More power to ‘em, but I really hope the residents of SF don’t get stuck with a huge bill because the politicians put through a plan that doesn’t cover it’s own costs.

MercuryNews.com | 06/20/2006 | San Francisco’s plan: health care for all:

Under the plan, employers with more than 100 workers would be required to kick in $1.60 for each hour a non-management employee worked, or provide at least the equivalent in premium contribution to a private plan for that employee. It drops to $1.06 if the workforce is between 20 and 100 employees.

E-Health Gaffe Exposes Hospital

You will be shocked when you read this article, the method and simplicity by which the security was breached is scandalous and should result in contracts being cancelled and people being fired.

Wired News: E-Health Gaffe Exposes Hospital:

Georgetown University Hospital suspended a trial program with an electronic prescription-writing firm last week after a computer consultant stumbled upon an online cache of data belonging to thousands of patients, Wired News has learned.

I hate shitty software – webroot spysweeper v5

This is a classic, if for no other reason than each of us has had a similar thought about some product at some time. By way of background, Webroot is a Colorado company that raised a ridiculous amount of capital last year ($108m) to do a security sector rollup.

BeyondVC: I hate shitty software – webroot spysweeper v5:

For the life of me, I don’t understand how a great product went to shit with just one release.

Oracle’s Support Revenue Is Its Key Driver

Timely post considering what I wrote this morning about software licenses going to zero.

Oracle’s Support Revenue Is Its Key Driver – SeekingAlpha:

Even if license revenue growth was flat, software license updates and product support revenues would continue to grow assuming renewal and cancellation rates remained relatively constant since substantially all new software license transactions add to the support contract base. Substantially all of our customers, including customers from acquired companies, renew their support contracts when eligible for renewal. When support contract renewals are negotiated, inflationary price increases are assessed, where applicable.

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No Money Down, Zero Percent Financing

If you think objectively about pricing trends in enterprise software you can easily come to the conclusion that almost all software should be free or nearly free. I’ll sidestep the entire topic of open source because while that segment is certainly a participant, I don’t believe it’s the main driver. Also please note that this post is pretty rough in terms of having thought it all through… in other words, I’m thinking out loud here.

Let’s look at a couple of realities in enterprise software, first and foremost being that license sales are simply a proxy for the future annuity that a maintenance base is. If you could offer core application functionality that is competitive neutral as free, not only would you go a long way to eliminating a major obstacle to building a large installed base – the actual sales cycle – but you would also be able to reconfigure your entire strategy for going to market in the first place.

Enterprise software selling is a nasty and inefficient process that favors the large vendors at the expense of the rest of the market (one reason why Oracle bought all those companies, to become the largest “share of IT wallet” in their customer base). Current enterprise sales processes don’t facilitate selling across the entire market spectrum and that’s the only reason software companies ever had partners selling for them in the low end of the market, they couldn’t afford to do it direct. Salesforce.com is turning that on it’s ear but even they have some challenges ahead of them as they grow up in enterprise accounts, and in the end they may end up looking a lot like Oracle and SAP rather than different.

If you could dramatically lower the cost of sales while horizontally scaling the customer base you could, ideally I admit, transform a hunter/killer sales force into a farming operation where the objective is the upselling of components and maximum penetration of existing accounts. In just such a scenario the sales force becomes an extension of customer support because what they are monetizing is the support part of the deal and that’s just long since moved away from the promise of upgrades. Customer advocacy in these companies could take a dramatic turn for the better if the software license component was removed, but there is the risk that it could worsen because the investment a single customer is making is considerably less and therefore the vendor may in fact re-calibrate what the expectation of satisfaction is. Another scenario is that the support side of the business would be subject to a new range of competitors that could price cannibalize the entire business… it’s a possibility but I’m not going to pretend that I can predict every unintended consequence.

The other aspect of enterprise software sales is that customers are already conditioned to expect a huge discount on the list price for the software, so going to zero, or close to it, synchronizes the actual price list to the official one… it’s like acknowledging that nobody pays MSRP so why bother having it.

There are considerable obstacles to this concept, the most direct being that you are effectively cannibalizing billions of license revenue for the prospect of rewards in the lower margin services business. Not an easy decision, I admit, but if you accept the premise that license revenue is a dead man walking then it would be irresponsible to not anticipate how to structure your business when it’s gone because of market conditions. Having said that I am also forced to admit that taking out a few billion in license revenue, even if the unit economics are improving, creates a major problem that is only fixed through dramatically upsizing the support and services side of the business, which being more people intensive could end up eroding the economics (I guess this could the call “the Dell dilemma”).

The other obstacles are tactical, such as how to compensate a sales force and report financial results. Largely solvable but hugely disruptive. Another interesting challenge is how to price support/maintenance when you don’t have the license cost denominator to work with, but again this is an opportunity for a new and creative approach to support pricing.

Lastly, not all your software should be free, just the what we would call the “core” which in our case is ERP. The segment of software products that do deserve the traditional pricing models are the “context” pieces, such as industry extensions and truly proprietary components, including analytics. I’m hesitant to even suggest this, but in many ways this is like the bubble-era tactics for “buying eyeballs” but in this case there is a rationalization that is rooted in the true economics of our market, not just the hypotheticals of a B-school case study.

Instant Messaging and Trashing Google

It would help if Google Talk was available all the time. Quite often in the last month I have been seeing “server error” messages in the gtalk box in gmail. Seems like Google may have overestimated their ability to deliver a compelling IM service, which is actually kind of staggering when you consider the 3 major IM platforms today are pretty mature. In addition to that, Yahoo and MSN both have new clients in beta that are take IM in entirely new direction with regard to media content, everything from videos to RSS feeds. But this really just highlights the one thing that Google is especially bad at, product management. Google engineers are very good at coming up with cool new products, they suck at broadening existing products to capture new opportunities or drive deeper in their core markets… Google’s own Monica Marissa Mayer said as much just today.

UPDATE: (via Jasmine) Here’s Yahoo’s gallery for IM plugins, impressive.

Techcrunch » Blog Archive » Instant Messaging and Trashing Google:

The user numbers coming out on Google Talk are staggeringly terrible. Comscore usage numbers show that nearly a year after launch Google is a distant, distant 4th after MSN, Yahoo and AIM. They hold a pitiful 1% of total instant messaging market share, with 3.4 million unique users in May 2006.

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AOL founder says he is ‘sorry’ for Time Warner merger

Steve Case says he’s sorry… is promptly sent to his room with no dinner.

AOL founder says he is ‘sorry’ for Time Warner merger | Tech&Sci | Internet | Reuters.com:

In an interview broadcast on Friday, Case, who was shoved aside as chairman in 2003 and who left the board entirely in 2005, said, “Yes, I’m sorry I did it,” referring to the 2001 merger of Time Warner and AOL. The deal, known as one of the worst corporate mergers in history, destroyed some $200 billion in shareholder value.

SAP Israel Update

When the current round of troubles between terrorists and the Israelis broke out I remembered back a few years ago when a suicide bomber blew himself up in Haifa and I asked one of my colleagues, who is Israeli, here in Palo Alto about that city. He looked at me and in a rather somber and unemotional way said “you know I used to live in an apartment just above that cafe”. Not only did his stoicism make an impression on me if nothing for the fortitude but it also made me sad that someone I knew could be accustomed to violence as to be just as disconnected from it as those who thankfully never had to experience it. Such is the reality in that part of the world and hopefully the current actions will finally deal with the root of the problem rather than the just the effects.

My second thought in response to the current wave of violence was to wonder how my Israeli colleagues were managing their day-to-day activities while a war is raging and their cities are under attack. SAP Labs Israel is located in the Ra’anana, a northern suburb of Tel Aviv, is if the news reports are accurate, could be within the radius of potential missile attacks. SAP operates a truly global development organization and that means that any disruption in one part is felt around the world, but at this point it appears that has not been the case.

The northern part of Israel is home to Technion University and many multinational companies, including IBM, Intel, Microsoft, and KLA-Tencor, with R&D and manufacturing facilities. According to news reports, Microsoft and Intel have moved their employees to shelter locations and many companies are temporarily relocating to other parts of the country.

Not being on the ground I can only offer you what I have read in e-mails and inquired about, but it appears that SAP is taking 2 courses of action in Israel at the moment. The first is ensuring business continuity by backing up our core data center and then backing up the backup location. The more important part is ensuring the safety of our employees, and to that end SAP is, predictably, discouraging travel to the north, ensuring that all our people are up-to-speed on safety regulations and in touch with local government officials.

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AppExchange-ing Ideas with the Irregulars…

The week before last the Irregulars hosted a call to discuss AppExchange. I was on vacation that week and despite my intention to participate in the call I ended up missing it, but judging by the commentary on our Google group it would appear that it was a very interesting call. Fortunately, Jason Wood stepped up and has provided an in-depth post devoted to the call in which he offers some good insights to what AppExchange really is and what the trajectory is likely to be.

The Ponderings of Woodrow: AppExchange-ing Ideas with the Irregulars…:

Last week, I took part in a discussion with some fellow Irregulars regarding salesforce.com’s AppExchange. One of the great things about our motley band of enterprise-focused bloggers is that we bring many different lenses to the conversation, and this 90-minute chat proved no different.

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