The Predictions about Chinese Consumers Are Coming True

While looking for some files recently, I came across an old PowerPoint presentation that I had given five years ago that talked about what China would be like in 2010. One bullet said that the country had already emerged as the leading market for cell phones, steel, and coal. The second one said that by 2010, China would be the No. 1 market for cars and No. 2 for PCs. Well, it has already earned the top spot for both.

On this topic, there was an interesting piece on Chinese consumer spending last Thursday in The New York Times. In the third quarter, there were 7.2 million PCs sold in China compared to 6.6 million in the U.S. It looks like Chinese buyers will buy 2.5 million more cars and light trucks than Americans–12.8 million to 10.3 million. Car sales there rose 42% in the first 11 months of 2009; they were up 96% in November alone. Meanwhile, U.S. car sales were down 37% last month.

China is also the top market for appliances. By the end of this month, Chinese consumers will have purchased 185 million refrigerators, washing machines, and other appliances this year. By contrast, Americans will have bought 137 million over the same period.

The Chinese may yet overtake their U.S. counterparts in credit card spending, too. The Times notes that spending rose 40% for the first three quarters of this year compared to the same period in 2008. You may be surprised to know that one out of eight Chinese consumers has a credit card, while the U.S. averages two per person.

What’s most amazing, though, is that incomes are still very low relative to the North America and Western Europe. Annual income for China’s urban areas averages $2,775 per person. It drops to $840 in rural areas.

Salesforce Chatter and Faceforce

While searching for a piece that I had written about the concept of visual apps, "The Future of Software? Think Visual Apps," I found that I had written about a potential precursor to Salesforce Chatter back in October 2007.

In order for the Faceforce piece to make sense, you would have had to have read the previous paragraph on Twitter. Here’s an excerpt:

“Do you Twitter? When I first read about it, I thought the last thing the world needs is another time-wasting tool ... I already have Freecell for that. If this is the first time you’re reading about it, Twitter may be the best known of all of the microblogs, with people posting what appears to be only a series of random thoughts or activities (for example, one entry this morning read, “Friday morning and time for laundry.”).

After Mr. Martine and I talked about Fantastic Voyage, he asked me if I had ever used Twittervision, and when I said no, he showed it to me. This takes the Twitter posts and plots them on a map of the world. Every few microseconds, he would get posts from friends and strangers from across the globe.

As soon as I saw it, I had an Aha! moment. Could Procter & Gamble use a private version of Twittervision to track the success of a new product launch? Rather than e-mailing back to corporate, field representatives could log into a private site and post their findings after visiting a store. They can enter the early sales successes, note any competitive responses, and suggest ideas for improvement in real time. This would also be visible across the entire organization.”

OK, here’s the Faceforce piece:

Salesforce.com: Should we look for Faceforce next?

“I recently met with two executives from salesforce.com and opened the meeting with talk about the P&G idea. In addition to new product launches or campaigns, microblogs would also make great tools for either the start or end of a quarter. For example, at the beginning, reps could post their goals or targets, which could be text, voice, or even video. Throughout the quarter, they could provide updates on the status. Microblogs, which would be far more visually appealing and interactive than a portal or e-mail string, would be good tools for global account teams too.

We segued into a discussion of Facebook, the privately-held social networking site with the $15B valuation, thanks to Microsoft’s investment of $240M for a 1.6% stake. Last month, I had written that salesforce.com was not-so-quietly attempting to become the Facebook of the business world: a social network hub for collaboration.

If you haven’t joined, Facebook is a free service that allows you to stay in touch with classmates, coworkers, clients, and friends. The company makes its money by selling advertising on your page. While salesforce.com has attracted 35,300 companies and 900,000 users, Facebook has 60 million people signed up.

Where salesforce.com has 725 third-party applications on AppExchange, Facebook has more than 5,000 applications. Okay, we’re not comparing the same kinds of apples here, but, nonetheless, Facebook adds over 100 new applications every day, with more than 80% of Facebook clients having used at least one Facebook Platform application.
I could envision a salesforce.com community on Facebook. What if salesforce.com offered Faceforce, a social network for top sales and/or marketing people? It’s possible. After all, the salesforce.com execs had come to my office to talk about the new microedition for the wealth management industry, which are microvertical offerings for politics, venture capitalists, human services, insurance agency management, economic development, and microfinance.”

OK, so my idea was not exactly the same thing as Chatter. I hope you might find it interesting nonetheless.

Rethinking Twitter

To date, I have ignored all of the inbound e-mails from friends/readers/strangers offering to follow me on Twitter. My only reason is that I can’t possibly manage any additional e-mails. Every day I’m greeted with the dreaded “Your mailbox is over its size limit message.” Why would I want to know that I have a surplus of unread tweets?

Yet, I can see the business value of the 140-character messaging service. A few years ago I wrote about the value of a private Twitter-like service that would allow sales reps to post the results of a new product promotion in near real-time. Imagine these in a mashup with Google maps to show how well that promotion is doing in various geographical markets. This would eliminate the latency that often comes from the collection and scrubbing of field information.

This week at the salesforce.com event I talked with executives from Ariba and Eloqua about their use of Twitter. Both described using it as an early warning system about customers who were stymied by their software. Rather than calling for help, they tweeted about their frustrations. By tracking tweets about their companies, these alerts allowed the vendors to be proactive. As a result of their interventions, the customer went on to tweet about the vendors’ strong support.

On the flight back from San Francisco, I read a day-old article in The New York Times about how the United Students Against Sweatshops organization had managed to win back 1,200 jobs for unionized employees in a Russell Athletic manufacturing plant in Honduras. One of the tactics involved the use of Twitter to send messages to shoppers at Dick’s Sporting Goods urging them to boycott Russell athletic wear.

While I can see the business value, one of the things that bugs me about Twitter (and Facebook) are the inane posts: “I’m really sleepy … My kids have a soccer game and it’s raining … I did 1,000 push-ups and sit-ups instead of going to karate class.” Get a life.

But, I bet it would be good for our business if I let you know the highlights from a briefing with Vendor A (Vendor A would love it) or insights gained from a discussion with a well-known CIO (Vendor A might like that, too).

Maybe I’ll tweet when I get Outlook under control. Don’t hold your breath … unless you look good in blue.

Will Salesforce Chatter Neuter Microsoft Office and SharePoint?

On the Friday before Dreamforce, I read an interesting article in MIT Technology Review, entitled “Fixing E-Mail” that offered insights from the recently completed Defrag 2009 conference.

As I read it, I was struck by two comments attributed to Lili Cheng, general manager of Microsoft’s future social experiences labs. The first is a direct quote while the other is comes directly from the article.

• “E-mail is kind of this giant, endless task list, and you're really the slave to a lot of stuff that comes to you.” The article goes on to add that Ms. Cheng “believes that incoming messages need to be organized and sorted in a more automated fashion.”
• “Cheng said her group found that about 70 percent of the e-mail people receive is information they don't actually need to read, though many like to have it on file. Her group built a prototype that created a different section of the in-box for this type of e-mail and extracted a daily summary of it that could be displayed to the user.”

After reading this, here’s my visceral reaction:

• Thanks to its success with Outlook, Microsoft is largely responsible for e-mail enslaving us to “giant, endless task list(s).”
• E-mail is not a collaboration platform. Because I sent you an e-mail asking for help or requesting that you perform a specific activity or set of tasks, that doesn’t guarantee that you’re even going to read my message. That’s not collaboration. In the old days that would be called “shifting the monkey.” My burden is now yours … or vice versa.
• If Marc Benioff is right about Chatter adoption, I’ll bet that a large percentage of internal e-mails will shift from Outlook to his new cloud offering. The ease of using Facebook and Twitter will make it a preferred collaboration platform compared to SharePoint, and an alternative to dead intranet sites. This could easily result in a tighter relationship with Google Apps … and possibly IBM’s Lotus group, too. I hope Marc’s budgeted for a lot of new storage.

I don’t know about you, but I’m eager to lose the shackles of Outlook.

Microsoft, Oracle, SAP, and 100,000 Missed Sales Opportunities

On a third-quarter earnings call last Tuesday, salesforce.com founder and CEO Marc Benioff announced that his company had reached 67,900 net paying cloud customers. Presumably, this doesn’t include the 7,500 nonprofits and non-government organizations that are using it for free.

The updated tally represents an addition of 4,700 net new customers in the quarter, and an increase of 16,100 customers over the last four quarters. The new business helped fuel a 20% revenue jump over the year earlier period. This is a nice contrast to the weak application license results reported by Oracle and SAP in their latest earnings calls.

If you take the 67,900 figure and add Concur’s 9,000 customers, NetSuite’s 5,000 or so, Taleo’s 4,200, and SuccessFactors’s 2,850, you end up close to 90,000. If you add Ariba, Kenaxa, Intuit, RightNow, Saba, and all of the others who are busy crafting e-mails to admonish me for excluding them, we might end up with a universe of 100,000 unique companies using SaaS or cloud applications.

While not all of these companies would make good Oracle or SAP customers because of their size or software needs, my point is that their lack of a strong cloud offering has caused them to miss out on  a lot of sales opportunities and seats. At the Dreamforce luncheon, Marc mentioned that his company currently supports 2 million subscribers. On its website, SuccessFactors brags about touching 5.4 million users.

It’s worse for Microsoft. In addition to missing out on CRM and ERP licenses, the delay of the long-promised Azure offering has allowed Google to attract more than 2 million companies to Google Apps. Some 3,000 businesses sign up for Google Apps every day.

And these aren’t just startups. The roster of Office and/or Outlook defectors include Avago (5,600 users), City of Los Angeles (30,000), District of Columbia (38,000), Genentech (17,000) Mead Westvaco (17,000), and Valeo (32,000).

If you believe the old adage that “the trend is your friend,” salesforce.com’s strong results in a crappy economy prove that people will find money for software they value. If you talk to CIOs who are salesforce.com customers, they are shifting more of their current/future applications to the cloud.

Maybe there’s no one left in Redmond that remembers the impact that Microsoft (and Lotus indirectly) had on Wang and the other word processing companies. Wang refused to be commoditized by being in the software-only business. Instead, it hung on too long to the high margin hardware business until lower cost PCs killed that market.

Microsoft is scheduled to have Azure offerings ready early in the new year. Oracle has CRM On Demand, but little else. The new Fusion applications are at least a year, maybe two, from shipping. SAP has a smorgasbord of offerings—including single-tenant CRM, the multi-tenant Frictionless Commerce platform, and the third-party HCM software from NorthgateArinso. If I’m Marc Benioff or the CEOs of the cloud/SaaS companies mentioned above, I continue to be thankful for the head start that Microsoft, Oracle, and SAP keep extending.

Comments?

Clarification on My Coverage of Dow’s Sustainability Achievements

Early this morning I received an e-mail from Henry Ward, Global Supply Chain Director, Security, Sustainability & Public Policy at The Dow Chemical Company. Mr. Ward was one of the featured speakers at the Sustainability Exchange that we hosted last week in Boston. I wrote about some of the highlights from his presentation in today’s First Thing Monday. As it turns out, I did not get all of the details right.

In the interest of accuracy, I have reprinted his e-mail here:

Thanks for the great coverage.  Just to clarify, however --
 
1.  In the first bullet regarding Dow's accomplishments, the noted savings were achieved between 1996 and 2005 -- and were noted in my presentation as accomplishments against our 2005 Sustainability Goals (which were set in 1996). We have achieved additional milestones since that time against our 2015 Sustainability Goals (which were set in 2005). Apologies for the confusion.

2.  In the second bullet regarding Dow's chlorine reductions, although pipelines (especially between plants located at the same geographic location) have played a role in reducing our chlorine transportation, that was just one of several listed methods we employed to reduce shipments. It would not be accurate to say that we shifted "most" of our distribution to pipelines. Further, the equivalent energy savings of 200,000 gallons of diesel fuel reported in the article was actually an annual savings -- it was not just a one time or total reduction since 1999.
 
No need for further action, I just wanted to set the record straight. Thank you. Henry

Ready To Trust Google as Your Keys and Wallet?

As I write this it is 66 degrees on a sunny afternoon. One can really get used to a very rare Indian-Summer-in-November streak. That said, it will be dark in just a few hours, and the cold weather won’t be far behind.

I recently received an e-mail from Calvin Fine sent from his office in Melbourne, Australia. Even though we’re enjoying great fall weather, I was envious that it was spring Down Under. In a follow-on email he mentioned that the Melbourne citizenry was buzzing about beaches and BBQs while we will soon be worrying about shovels and boots.

Maybe we need to go visit Calvin for a closer look at Melbourne. In the meantime, here are some of his ideas on a set of products that he thinks we could see from Google in the not-too-distant-future:

Hi Bruce,
 
Thanks for the always entertaining First Thing Monday e-mails, and hello from a cloudy afternoon in Melbourne, Australia.
 
I’ve been thinking about Google in the context of simplifying, since reading about the Google disruption play of including free turn-by-turn navigation directions with each and every Android mobile (see abovethecrowd). I imagine a lot of people have similar habits to mine. The 3 things in my pocket when I leave the house each and every time are keys, wallet and phone. Music is on the phone these days. So is e-mail. If I’m driving some place, there’s a sat-nav and a CD player in the car.
 
In the future we’re likely to only carry one “device.” Your phone has already integrated voice communication, diary, watch, walkman, TV, maps, and more. And with cloud computing to augment process-intensive mobile computing, the phone will likely replace your laptop too.
 
But, what about keys? What about wallet?
 
Cars already run on proximity keys, most new Lexus’ unlock doors on proximity. It wouldn’t be a stretch to wire your house, car, and office into your phone. And we already happily run small value transactions on wireless devices: NTT DoCoMo's Edy mobile wallet in Japan is a prime example, as are London’s Oyster card and Hong Kong’s Octopus card.
 
The largest consumer issue with ‘contactless payment’ and proximity key systems is typically security; and one of Google’s key attributes is that people trust them. With Android running the world's mobile operating system, Google is in a tremendous position to create a global mobile, contactless payment and security system. And they could do it 'for free', at least in the sense that as a consumer you wouldn't have to pay for it. In much the same way as 'free' maps can integrate localised advertising, Google could match up buyers and sellers at the moment of truth better than anyone.
 
It’s "better than the competition" AND "cheaper than the competition," too. No AmEx service charge. No wallet to carry. No train ticket. No hassles. That’s Finance 2.0: Instant, personal, and always on your person.
 
Would people trust it? Would they use it? And who could compete with that as an offering?
 
I hope this finds you well (and not too stressed about the Yankees).

Warm regards,
Calvin

Kudos to Manhattan Associates’ Clever Marketing Promo

This morning I walked out of Starbucks without realizing that the design on my cup was that of a Christmas tree. To think that I still have my golf clubs in my trunk...

When I got to my office there was a small box waiting on my desk that had been delivered via priority mail. I opened it up and inside was another box that was just a shade or two away from the classic Tiffany Blue and wrapped in a white ribbon.

As I slipped the ribbon off, I guessed that inside was a keychain or something of similar size. Instead, I got a jarring note proclaiming, “Sorry Bruce, Out of Stock.” The note unfolded to four panels. The first two panels featured “Disappointed?” in bright red. As I read the rest of the text, it led to a custom website.

Yes, I typed in the URL and saw the website for Manhattan Associates’ new “Zero Disappointment Retail” initiative and the offer for the free ROI calculator to help me justify buying software. 

We’ll be in Atlanta in early December to visit Manhattan. One of my first questions will be about the effectiveness of the campaign. I found it to be eye-catching and clever. We’ll let you know how buyers reacted.

In the meantime, the box is on my desk. I’m waiting to see how many people ask what I got from Tiffany’s.

United Breaks Guitars, Then Loses Luggage

In September, I wrote about the role that social networks play in shaping opinions and used the example of Dave Carroll’s “United Breaks Guitars” video that was entertaining millions on You Tube while completely distressing United Airlines. As you may recall, I followed this with an interview with the video’s creator/victim.

This week Dave was invited to appear at RightNow’s user conference in Denver. As the video clip played, a light shone on him as he sang along to the video. Chris Fletcher was in the audience and told me that the crowd went crazy. 

The irony is that United lost his luggage on the flight from Saskatchewan to the conference where he was to be the surprise guest before a packed audience of customer service executives. As if losing your bag containing CDs and clothing was not bad enough, he was forced to wait around DIA as airport personnel insisted that his bag was delayed, not sitting back in Canada. His bag actually ended up in Dallas/Fort Worth. 

The lost luggage incident made the front page of the business section in today’s The New York Times and is scheduled to be featured tonight on CNN. There may also be a story on one of the major networks, too. The new episode has also generated good publicity for RightNow, too.  

Somehow you know that this latest episode will soon appear as the subject of a fresh video. Meanwhile, his first video has attracted more than 5.8 million viewers. This is up nearly 400,000 in the six weeks since we first mentioned his song.

While some readers may question why he continues to fly United, you have to admit that the airline has certainly been a boon to his career.

BigIdeas from BigMachines on the Front End of the Supply Chain

In the latest First Thing Monday I noted that one Model N executive had pulled me aside and chided me for “missing the front end of the supply chain.” Basically, his point was that while our annual supply chain executive conferences are wildly successful, we attract few, if any, vice presidents of sales and sales operations as either speakers or attendees. I bet he’s not alone in having that sentiment.

A few weeks ago I was in Chicago for the annual BigIdeas conference sponsored by BigMachines. While co-founder and CEO Godard Abel didn’t make the same comment, he could have. Like Model N, his company offers software on the customer-facing side of the equation albeit for different roles, industries, and processes. Specifically, the products include on-demand, guided selling applications encompassing the quoting and configuration processes. 

Despite the ongoing recession, BigMachines has enjoyed a strong year since last year’s BigIdeas conference. It added 46 new customers, bringing its total customer base up to 70,000 users at 170 companies in high tech, software, industrial equipment, medical devices, services, telecommunications, financial services, and media. 

The firm also expanded head count to 150, up 50 during the same period. Employees are spread across operations in the United States, England, Germany, and India, with planned expansion to Japan, too.

One of the unique features of the BigIdeas conference is that Godard and team ask attendees to vote on the new features they want to see added at next year’s event. You can tell that this is a real user group because the top two vote-getters among the 350+ attendees were for configurable page layouts and configurable administrative enhancements. 

While I may have preferred that attendees pleaded for big picture ideas like real-time pricing or revenue management functionality a la Model N, or enhanced pipeline management and sales forecasting tools like those provided by close partner Right90, the customer requests were in line with the types of enhancements requested by salesforce.com customers on the Ideas site.

One could argue that a combination of BigMachines and Right90 represents a cloud-based version of the “new front office” needed to better serve the supply chain. From my perspective, this merits further research and analysis.

What do you think?

Salesforce.com and Oracle: A Tale of Two Worlds

In the current edition of First Thing Monday I opened by asking, “What’s salesforce.com doing at Oracle OpenWorld? At the conference, I found the answer: salesforce.com is making the most of what might be a one-time opportunity.

On the first day of the conference I stopped by the company’s booth in Moscone West. At the right end of the booth sat a pair of Mini Coopers wrapped with the company’s cloud logos and bearing the “best of both worlds” messaging. Each night at 6:00 p.m. salesforce.com is giving away one of the cars. This will continue for three days. The only requirement is that winners must reside in one of the 48 continental states. Sorry, no shipments to Alaska or Hawaii, or outside the country. Outside the convention center, six similarly clad Minis make a continuous loop around the sprawling Moscone complex.

Next to the car giveaway there was a small theatre that was full every time I walked by. Periodically, a joint Oracle/salesforce.com customer would take the stage to talk about their experience straddling the two worlds. 

I stopped to talk to a couple of salesforce.com employees who were clearly enjoying their front row seats in a foreign arena. One told me that they were thrilled to be invited to participate in the “IT event of the year.”

The heart of the booth featured standup stations with product demos. The banners on top of the booths proclaimed that this was the home of “Service Cloud2,” “Sales Cloud,” and “Custom Clouds.” The latter is a reference to a new announcement with Dell where the two companies will provide cloud offerings for small and midsized organizations.

Ironically, SAP had a booth behind the salesforce.com pavilion. While this may have seemed to be a good opportunity for guerilla marketing, I sense that staffers would have preferred to be almost anywhere else. When I walked through, I saw employees talking only to each other. 

At 12:30 p.m. on Tuesday, Jim Shepherd and I walked over to the Novellus Theatre to see Marc Benioff’s presentation. We were surprised to see hundreds of people already queuing in line despite a heavy downpour. While some may have been there to receive vouchers for one of the 500 Flip video camcorders distributed at the booth, I suspect that most were here for Marc’s theatrics.

Shortly after 1:00, Marc took the stage. He opened by thanking Oracle for inviting him and acknowledging Larry Ellison for being his first investor. He also talked about how he had appeared on this stage many times to introduce new products during his 13 years as an Oracle employee. Before long, he was into a sales pitch for cloud computing. As he talked, a PowerPoint behind him illustrated the three generations–or worlds–of enterprise computing: mainframes, client/server, and cloud computing. For me, the not-so-subtle message was that client/server was the old world that he left behind when he co-founded salesforce.com a decade ago.

After a brief overview, Marc was joined on stage by Michael Dell who recounted the various ways that their two companies have worked together as partners and mutual customers. When Michael left, Marc invited two employees to demo the new Service Cloud2 and the integration with Facebook, Google, and Twitter. In the new cloud world, social networks matter.

Near the end, Marc invited Sanjay Mirchandani, EMC’s CIO, and a mutual Oracle customer on stage. This was another brilliantly calculated move. The messaging here is that smart companies are looking to cloud applications that link to their legacy ERP system.

To be fair to Oracle, salesforce.com is a relatively important customer. Its multi-tenant architecture is built on Oracle’s database and middleware technologies. The company also runs Oracle financials as its internal backbone. 

Still, the presence of salesforce.com only reinforced that we’re on the edge of another critical technology transition. Oracle needs to step up and take a leadership position before new companies do what he did to Cullinet and McCormack & Dodge. Attendees are waiting to see what Larry has to say on Wednesday afternoon.

Stay tuned.

A Wall Apps Pioneer Weighs In On the Topic

Robb Bush, an innovator at i2 Technologies in the '90s, and now with SAP, offered his perspectives on Wall Apps:

Bruce,

I read with great interest "The Future of Work: Wall Apps." I have also enjoyed the thoughtful commentary. However, I do not think I am either a dissenter or a proponent in general—it depends on the definition.

From my perspective, I can see the definition of Wall Apps in at least two different ways (each of which may have its own proponents or dissenters):

1. Wall Apps as a "bigger dashboard" These represent a display that can be seen by many people in an environment and are generally read-only. That approach has some pros, and cons, as illustrated by other commentary.

Yes, this type of Wall App can be more of a “billboard” than anything else. However, with some real-time data, it can be a valuable "scoreboard" that can be used in practical areas such as call centers, and even industrial environments.

2. Wall Apps as a "High-Definition App" This type is highly interactive, but exploits the larger viewing area, higher resolution, and other methods to make the business interaction more game-like, participatory, and faster than a small 1:1 application trapped in desktop monitor.

“HD Apps” open up many more possibilities, and it is becoming more and more cost-effective to realize.

For example, when I was recruited by i2 in the mid '90s from the consumer and "info-tainment" software world, I could immediately see game-like design solutions to the challenges posed by very complex Sourcing, Manufacturing, and Supply Chain problems. As a result, we developed the first data-driven 3D value-chain designs and applications - showing logical, physical, and temporal flows in real-time. This just happened to work much better on large, or multiple screen displays. Sometimes we used up to 11 screens of varying sizes, working all on the same application data and working synchronously.

However, back in 96-98, to pull this off required some powerful machines, custom programming, multiple advanced graphics cards, projectors and/or very exotic flat screen displays. While it was ‘state of the art' then, the same power is now readily available in commodity machines and console hardware!

In addition, think about how most teens "see" applications and GUIs. They don't! They see, and more importantly... expect, something far different.

Anyone that has raised 'connected kids' in the 21st century quickly understands this. The "Future of Work generation" has never known a world without the Internet, always-on accessible information, and increasingly compelling and immediate ways of interacting in engaging multi-dimensional environments and real-time communications. This is more prevalent in highly-networked console Games, and not limited to what is called Web 2.0. Watching kids use "computers"—you quickly see that the Future of Work is not trapped on a monitor sitting on a desk, but it is on larger wall-sized HD displays, and on handheld devices (But, that’s another story. To get started, just think differently of the handheld-mobile as a new "controller," or an auxiliary "viewer" between virtual and physical, and we’re off!).

In the near term, the most productive Wall Apps may not appear just in management suites, but in busy industrial environments that any employee can walk up to with a familiar hand-held wireless controller, 3D navigation conventions, and real-time communications via wireless headset. They will be able to quickly understand plans, scheduling, inventory, and be able to collaborate across the value chain in a way that makes sense to them, immediately and intuitively.

So to wrap up, bigger dashboards or scoreboards on-a-wall can be very useful, depending on the execution and situational context. And yes, they could easily be call "billboards" if existing only for show.

However, if we think about making "HD-apps" and inform our design-thinking on the tools and the expectations that are already in practice daily by the future workforce, then we really will be heading toward the future of work. And, it may not be too different than the future of play.

Best regards,
Robb

Reader Comments on Wall Apps: The Proponents' Edition

One reader noted that after reading my piece, he happened to watch “Three Rivers,” a new TV drama that employed the Wall Apps concepts in an episode that aired that same night: “At the morning meeting, the doctor went to a wall of glass, hit the top with his hand and the wall lit up with the patient’s ID with photo, and stats/test results:  a scan of the heart; the current heart rate, blood pressure, etc. As he spoke to the patient, statistics appeared on what works and what does not work due to this person's condition with the probable success rates. And of course he moved it all around a la CSI at times.”

Adtran’s Tom Dadmun sees Wall Apps as a great application for sales and operations planning meetings:

“Hi Bruce!
My quick thoughts. Get wall apps going in the monthly S&OP meeting with senior folks concentrating on the Core Competency KPI's and then migrate it to mahogany row via a pull from the execs who liked it in the S&OP. Behavioral change does not take place easy and unless you have an aha! moment it will fall to the wayside as a great idea with no action.”

Senthil Rajamanickam prefers a more interactive display.

“Bruce,
I would define 'Wall App' slightly differently—taking a cue from the CNN Wall. The key difference being interactivity by means of 'touch' (mouse clicks would work as well) rather than 'streaming' data. The other difference being more an Executive Dashboard with full-bore drill down rather than a NOC buried into an operations team.
 
 
(Source: CNN)
 
About a year back I was talking to a Nielsen rep about combining retail geographic information with a whole host of Trade Promotion, Causal event, POS and order fulfillment information organized into a hierarchy of KPIs that can be summarized into a map of United States—like a Google Map mashup. The idea is to deploy such an appliance in the Executive suite so that they can monitor performance on a variety of dimensions—brand, customer, geography etc.
 
Interestingly, I mentioned the same again to one of my consulting providers 2 months back when they were asking for my ideas on how to spruce up their DSR (demand signal repository) consulting sales booth @ Oracle OpenWorld—and they took it on and apparently have executed on that. I am eagerly awaiting to see the results in the OOW!
 
Anyway, here is an interesting convergence of consumer tech and corporate IT ...”

Gerry Bignell, manager of data integration for WESCO Distribution Canada LP, liked the Wall Apps as I described them:
 
“I love the idea of wall apps—from the command centre to those depicted in movies & TV.
 
I think ‘constant’ visibility of ‘measurement’ factors of any sort would be beneficial, although it might have a downside when things are going badly.
 
I would think 4 to 6 slices of measurement data would be sufficient to stay on top of – I like the idea of 4 constant quadrants being displayed—easy to get used to and still large enough for good detail. It could also be multiple of this (i.e., rotating from one 4 quadrant display to another and than back as long as the quadrants were easily recognizable (and each set of 4 was related in some manner).
 
Of course with today’s technology of smaller & less expensive projectors, a flat, unencumbered light coloured wall would probably suffice if cost was a factor (also portable).”
 
Meanwhile Harish Iyer focused more on new tools like OLEDs and Augmented Reality:

“Hi Bruce,

I would like to refer you to a demo on TED titled Sixth Sense which describes how a combination of  mini-projector, camera, cellphone - which acts as the computer and some color tags on your finger tips can be used to have a significantly profound interaction with the environment.
I believe that in the future instead of carrying foldable LED mats etc we would just be looking at a viable mini-projector that can project on any surface and the computer would be just a small box like a pack of cards that u can carry around in your pocket. a small image capturing feature built-into the computer will be capable of tracking all inputs such as drag/drop, typing and other finger movements and translate into actions. I think we are set for an interesting future!”

As for the idea of linking your SmartPhone to your hotel room TV, one reader who requested anonymity recently took the first step by using the TV with his laptop.

“Bruce,

Great commentary on the future of work.

I recently stayed at Starwood’s newest line of hotel’s called Aloft, in which “each room is also a combination high-tech office and entertainment center equipped with wireless Internet access and plug & play, a one- stop connectivity solution for multiple electronic gadgetry all linked to a 42” flat-panel, LCD- ready television.”  The cool thing about it is it actually worked!  I was able to connect my laptop to the flat panel TV in my room, very quickly and easily.”

What do you think?  I welcome your comments.

Reader Comments on Wall Apps: The Dissenters’ Edition

In my recent post on “The Future of Work: Wall Apps,” I  advocated placing large screens in the executive suite and around the building to display real-time performance information. Not surprisingly, I received several emails from opponents and proponents.

The Dissenters’ Edition features emails from three readers who did not agree with me.

The first came from a reader who asked that his name and company be withheld:

“Bruce,
I continually fight "front end" visualization hysteria, lately the world of Business Objects due to our strong relationship with SAP. I find it dangerous! The reason being is that 90% of the work is in the business process, gaining common definitions, having sustainable governance and accountability for data integrity, and going through data and system validation processes all has to occur first. The "front end" stuff is the fun part, but in a large global operation such as ours the business process is the work that has to be accomplished first, ... and it's not easy.”

The second dissent piece came from Jeff Tognoni, CEO, Consona:

“Bruce:
While I have great admiration for your concept from an aesthetic viewpoint I am not sure that all of this visually appealing stuff makes that much difference to actual business results. The bigger point is this, if I had real time sales pipeline data always in front of my face I am not sure that would make me a better CEO or quite frankly a better Sales VP. The question you have to ask yourself is what are the actions you would take based upon having that information and what business impact those actions would result in. So lets say I notice that sales in the SE region are not looking as good one day, am I going to call the SE regional sales vp and ask him what’s up? Quite frankly CEOs that do that usually just create a lot of CYA activity that adds no value to results. From day to day this stuff bounces all over the map and it is only by analyzing this stuff over longer periods that you get real actionable data. I know there are many real time actionable things in some industries but not sure if they are the majority or even the most important to actual results, even in the short term. But like you I am all for the aesthetics of the whole concept and if it sells more software bring it on.”

The third e-mail came from Ed Hancock, a partner at Business Navigation Systems LLC:

“Bruce,
I remember visiting the network operations center of a large computer services company in the 1980s. Standing in the viewing gallery, looking at all of the large screen displays of the real time network status was pretty impressed until one of the tour guides told be that they were just for show. No real work went on in the center. The people on the floor were just working at their desks doing their normal tasks. The room was just setup to impress customers. Ever since that visit, whenever I see visual data displays in factories, call centers, data centers, telecom operations centers, etc. I always wonder if they are there to help manage the business or to impress customers and close business.

I think the same thing applies to wall apps. Will they help managers manage better and improve real business results or are they sales aids?”

Please read the Proponents Edition, too, and add your comments.

Reader Comments on “The Future of Work: When Will Desktops Catch Up to Consumer Electronics”

The current edition of First Thing Monday continues the theme of
“The Future of Work.” This time we asked, “when will desktops catch up to consumer electronics?" If you look at the advances in price/performance for processors, memory, storage, printers, and mobility, we had to ask why we haven’t seen similar advances in the screens that sit on my desktops.

Based on the responses, there are many readers in violent agreement with us. Most have allowed us to use their name and company name, though asked us to point out that these views are their own and not necessarily those of their organization. 

From Charles Milligan, IBM:

“Bruce -
You tickled my techno-weenie side this morning....

Let's see.... Moore's law projects a doubling of density of semiconductors roughly every two years; it's been applied to storage, extended backwards to tubes and relays, camera pixels.... So in our careers - mine is 32 years - that means 15 or 16 doublings since I was in college.   So what did you get in '77 or so?  Graphics-barely - there were stored-image CRTs that could draw lines pretty well (Tektronix made the ones I came in contact with - maybe 11" diagonal?).   Color on a 'standard' CRT display was still a couple of years out - and only characters to start.  The usual screen size was measured in characters, like 24 lines of 80 characters - which mimicked a punch card well (and key punches were still around, and could be called to have a 1-line display, perhaps). Weighed 50± pounds, so rate this as 24x80x2 levels of text (normal, bold) = 3840 (round to 4k).

Skip forward 10 years, I'm in grad school. We have a few pretty much state-of-the-art IBM 5080 graphics terminals connected to a small mainframe (4341) in the lab I worked in. It can do 2-D CAD with no problem most of the time, but it's an eighty pound (but roughly 20") display with a pile of electronics in a separate cabinet. If I had pretty much exclusive use of that mainframe, CADAM would paint my relatively simple wireframe at maybe 4-5 frames per second; enough to use but hardly smooth. On the traditional-business, character front, I had a plasma of a similar size (a very distant precursor to today's color ones) display that would show about 80x160 characters or maybe 800x800 binary pixels when in graphics. Rate this as 800x800x1 = 640k in graphics or 13k in character mode. Or you could buy a Macintosh with it's laughable (today, at least) little B&W display.

Today, my 1 year old laptop probably exceeds that mainframe in compute capacity - it certainly has more memory and disk space.- and has 1400x1050 color pixels, each of which can display 24-bit color; but for business use 256 colors are plenty. It isn’t optimized for real-time graphics rendering but can certainly keep up with Powerpoint, play DVDs, show my vacation pictures, etc. It can display text reasonably well that is too small for me to read at a comfortable typing distance. Increasing the pixel density or color depth isn't going to show me more information. A standalone display of this size might weigh 3 pounds. Rate this as 1400x1050x256 = 376M for graphics and about 85x160x256= 3.5M for text, although if you include fonts, bold, italic, etc. you can push this up significantly.

So, for text, we've grown from 4,000 arbitrary units to 3.5 million, a growth of 870x over 30 years, well short of Moore's law, but we reached the physiologic limits of what's useful about a decade ago. For graphics, we've only really had useful devices for about 20 years or 10 doublings. In my arbitrary units, this is a growth of just shy 600x, not far off the 1000x that Moore's law would project, but again we're running out of  ‘useful.’ So, do I want more? Sure; two screens (in today's metrics) is nice and I can see there are professions where four to 6 would be an advantage, but not a lot. Portability has something to say for it, but if you need 30x40" of display space, you're not going to portable or mobile, ever. At some point in the bigger-is-better debate the data presented ceases to be information because there's too much of it to absorb; we should be spending time/energy figuring out how to present it more intelligently/usefully - thus everybody's desire for ‘dashboards’ - not in displaying every possible facet for the user to wade through.  

3D is around the corner for the business user and is likely to pay off in some disciplines, but until we either have 'cool' 3D glasses or it works without wearing something geeky, it won't make it into middle management or higher.” 

Two Comments From Dave Anderson, Supply Chain Ventures

Here’s the first:

“Bruce
 
Right on as usual…
 
And while you are at it, why not whine about our cars???
 
They are so far behind in enabling mobile work (not while moving, I might add), it is crazy
 
My boat is more technology enabled than my Lexus—weather, depth, position, fish finder, radar and internet on the same Raymarine navigation screen.
 
Go figure…

Dave
 
PS—sitting in the office with two active PC screens, a third screen on CNBC, WGBH playing through Bose, and the BB synching with the machines…sounds cool, but I would like one of your dream “work rooms.” “
 
Here’s his follow up:
“While I am on a roll, here’s how I would like to get my WSJ, FT, Technorati, Economist, NYT in the am:

I get up, go to the media room, sit in comfortable chair while Starbucks brews, spool up the news website (all-in-one news/Blog/? subscription options; no web site reloads!), project on my media wall (10x12 feet), bring up print-like versions of today’s papers (allowing for some format improvements) and scroll through them with a biometric device on my finger, with immediate full article read capabilities, among other apps.

PERHAPS IN A FEW YEARS…

Dave

From Asvin Ramesh, HCL America

“Hi Bruce,
 
Great article, very insightful on how things have not progressed on some aspects of computing and display to keep pace. Another part that is really lagging is the area of Power Management.
 
“One of my professors in engineering school had joked in 1996 that you will have all your computing functions in the size of the watch (13 years hence, he is close with the iPhone) but you will still have to carry a bag for the power that will be needed. I believe had power management been developed at the same pace as the rest of the High Tech world, we would have been living in a completely different world. I found a recent article on how Andy Grove teaches leveraging advances in one field for another in the Economist interesting on a related subject.”
 

From Brian Carter, SAP Labs

“Just what we need, Bruce. 250 people getting on a plane with their yoga mat style graphical displays and trying to find room in the overhead for them. Don't you think that projection technology and the ability to either project a large screen on a wall with a good resolution from a cell-phone sized device (or even from within your cell) or the ability to connect your laptop wirelessly or via a universal docking station (with wireless mouse and keyboard on the desk, which hopefully faces the big screen TV) would usurp OLEDs for travelers - unless maybe you can fold them instead of rolling them up, then maybe we would be have something. And of course, there will be the 80+% of hotel rooms that don't contain the right setup (or it doesn't work) where you will still need the old standby laptop display. I don't think the laptop form factor is going away any time soon, for anything more than a day trip to a customer where you are going to make a one hour presentation and you can fit it on your smartphone. But I guess we can dream, can't we......
 
I enjoy your newsletter. Keep up the great work!”

From Gregory Anderson:

“Having been in a cubical all my professional life, I’ve long wished for all the walls to be displays. Some panels would be set for work, manipulated via a keyboard and touch (like iPhone and/or Minority Report). Others would be communicating panels… video & voice to other cubes, conference rooms and home. Is Janice at her desk, or has anyone shown up for the 1:00 meeting (yes, privacy concerns abound but I cube video should be no more invasive than walking by someone’s desk).”

From Kapil Mishra, Infosys Technologies Ltd

“Very insightful write-up on desktop. As a full time IT worker, I share your views that bottleneck for IT productivity no longer lies with processors and memory but largely with User interaction layer and desktops play a key role there.
 
As a side thought, why have a physical screen at all. No one size will ever fit all needs. There are some advanced researches in holographic projection screen that offer interesting possibilities. 
 
Another related aspect to desktop innovation is matching abilities at OS level. You alluded gently to MacOS in your write-up though I can be a little blunt with how primitive Microsoft UI concepts appear today though they may have been path breaking in early 90s.
 
At the wish list level, I would look for a ‘Stretchable’ screen that can be adjusted to differing needs (a laptop size when I am commuting in train and a 30 inch one in my study). Till then, I will live with my laptop and CRT displays.”
 

From Kevin Wolf, spokesperson for NextWindow:

“You should check out www.nextwindow.com. These guys are making optical touch screens for desktop PCs from Dell, HP and others. Desktop touch is heating up. Win 7 will launch 10/22 and all the largest PC makers are preparing new touch PC products.  Let me know if you have questions about NextWindow and what’s happening in this market.”
 

I welcome your comments, too.

Tom Gunn Comments on My “ERP Doomsday Scenario”

I first got acquainted with Tom Gunn by name only after the publication of his book, “Manufacturing for Competitive Advantage” in 1987. This was one of four books Tom wrote on manufacturing. At the time he was the national director of Arthur Young’s manufacturing consulting group. That company later became part of Ernst & Young. 

I met him when he was serving on the board of a supply chain company that had hired me to run marketing. Tom later became CEO of that firm. He then went on to serve as Process Information Officer at General Motors and to be the managing partner of the worldwide manufacturing practice at AT&T Solutions. He’s still active in this market through his Gunn Associates consulting practice. 

Needless to say, Tom has extensive experience in MRP II and ERP. Here’s his take on my update doomsday scenario:

 
Hi Bruce:
 
Re: Your Re-Visiting My 2006 "ERP Doomsday Scenario"
 
You nailed it, Bruce! A few thinking CIO's have figured it out. Here's the scenario in many large companies with respect to large ERP implementations (in addition to other large application software implementations):
 
1. The CIO's company is already one or more revision levels behind with respect to their ERP software
 
2. Their company's current users are using less than 15% to 20% of their current ERP package's functional capability
 
3. Their company has for years underinvested in ERP education and training efforts in order to reduce costs. Older trained and experienced ERP users are being laid off or are retiring. The company is hiring entry level people with little to no ERP or manufacturing/supply chain management backgrounds and throwing them into positions for which they are not prepared. At best, users know how to use the few screens that their department is responsible for. No one understands the big picture of how the company's business processes and total ERP system is supposed to work. Since few to no people really understand the status quo, no one knows enough to drive systemic improvements in the company's business processes and information systems.
 
4. ERP software vendors are continuing to raise their annual maintenance fees.
 
5. The accuracy of the underlying data used to drive the ERP system—bills of materials, routings, inventory levels, customer/supplier data—has degraded over time, rendering the ERP system's output value increasingly questionable.
 
6. As you pointed out, there is no downtime available for software upgrades, no additional IT and user staff to do the work, and no money for new education and training for IT staff and users on the new revision level's increased capabilities and operation.
 
Add it all up and why continue to pay software companies usurious maintenance costs? Instead, keep the maintenance money, hire a small specialized IT firm to help keep the current ERP system going, and use some of the saved money to focus on getting more out of the current system by increasing user education and training and improving the accuracy (and real-timeness) of the data that drives the ERP system.
 
The software applications world is heading toward a hybrid model of cloud computing and software-as-a-service that is bound to prevail in the marketplace as it offers superior value to customers. Once application software is standardized in a cloud service, look for this scenario to be married to application software vendor and industry-specific applications add-on products to develop similar to Apple's iPhone applications store offerings. Want a custom master production schedule add-on for your ABC vendor's ERP cloud software that drives your brick manufacturing company? Download it from ABC's approved apps library directly into your company's cloud-based ERP system.
 
Application software vendors should take a tip from the cell phone companies and focus on perfecting the core product, while making it possible for and encouraging customers and outside developers to develop industry-specific add-ons.
 
Keep up the great work, Bruce.
 
Best regards,
 
Tom

Revisiting My 2006 “ERP Doomsday Scenario”

Three years ago I published a piece entitled “ERP Doomsday Scenario: Death by SOA?” that questioned whether “rapid adoption of SOA will lead to the end of the ERP market as we know it.”

While I may have overstated the importance of web services and service-oriented architectures and the time horizon, I think I got some things right. Look at the first two sentences in the fourth paragraph:

“Between 2010 and 2012, these same (ERP) customers start to gripe that their legacy ERP systems have become bloated “understructures” that have become too expensive to maintain. CEOs threaten to withhold maintenance payments if fees aren’t sharply reduced.”

I thought of this earlier this week when I received several e-mails about an article in a European publication that said a large, well-known industrial company had notified its ERP vendor that it was not planning to renew its annual maintenance agreement. Various related stories had the customer tendering a RFP for a third-party replacement for maintenance.

While it’s unclear what will actually happen in this specific case, I have talked to several Fortune 500 companies who are questioning whether they should freeze their existing systems at their current release level and turn to a third party for maintenance and support. When you ask them whether they would miss the innovation coming from updates and upgrades, they tell you that they don’t have any available downtime windows in which to test and install the new software. To them, all of that innovation is going for naught. As a result, the cost of maintenance exceeds the value.

This represents a serious threat to vendors who have grown increasingly reliant on maintenance streams. While we question whether there are enough third-party specialists to support more than a handful of customers, it will cause predators to circle. One large manufacturer told me that he’s under a lot of pressure to replace his ERP vendor’s on-premise HR applications with one of the new HCM-as-a-service offerings. He doesn’t know whether he will be able to successfully fend off those eager for change.

Are we close to an ERP Doomsday Scenario? What do you think? 

Talking with Dave Carroll, Creator/Victim of “United Breaks Guitars”

The September 14th edition of First Thing Monday talks about the logical linkage between various social networking tools and your customer-facing operations. I used the example of the “United Breaks Guitars” video on YouTube as a how-to guide to ineffective customer service.

Shortly after the piece came out, I received an e-mail from Stan Goodrich, PR manager for SYSPRO. Since I had neglected to point out the brand of the damaged guitar, he told me that it was a Taylor. Given that Taylor just went live with SYSPRO’s ERP software, he knew that the guitar company had hosted Dave Carroll at its California factory. 

A short time later I received an e-mail from Chalise Zolezzi, PR manager, with Taylor Guitars. She asked me if I wanted to talk directly with Dave. Later that afternoon my cell phone rang and there he was. Here’s his side of the story:

The incident actually occurred on March 31, 2008. When he took his guitar in to get it fixed, most places told him it couldn’t be repaired. He found one person willing to repair it for $1,200 (CDN), but it meant that he would be without the instrument for a couple of months. While the video makes it look like the guitar neck was broken, the damage actually occurred at the base of the guitar.

Last November, Dave began a series of futile e-mail exchanges with a customer service rep who told him they would do nothing to compensate him. He finally asked for $1,200 in flight vouchers and would consider the matter closed. The customer service rep said no. He asked her to reconsider. He also vowed to write three songs and produce three videos with a goal of getting 1 million hits on YouTube in one year. United held firm. So did Dave. He wrote the first song in January, the second in February, and made the first video in June. The second was done in August. 

Working with friends and volunteers, Dave created the video for $150 (CDN). He posted it on Monday, July 6,  2009. By Friday, it had been viewed by over one million people. As I write this, it’s been seen by over 5.5 million people. More than 65,000 people have watched it since I wrote about it. According to Dave, the 4:36 video is “big in India, Australia, the UK, and Germany.”

His song has become an anthem for those who feel they have been victimized by uncaring corporations. Dave said he has received “hundreds of direct pleas to take on telephone companies and banks.” He even cited one woman who wants him to write a song about a small Comfort Inn in British Columbia where she said she was bitten by bedbugs.

United did come around to offering compensation only after the first video came out. The airline offered $1,200 in vouchers and $1,200 in cash. He asked them to donate the money to someone that needs it. In response, United gave $3,000 to the Thelonious Monk Institute in Dave’s name. As for an apology, that only came last week during a meeting with three United vice presidents.

The video has proved to be a costly embarrassment to United. Dave cited a BBC article that estimates that it has cost the airline $180M in lost business. He also talked about another article that had noted that United’s stock price had dropped 10% since the videos have come out.

The story has had a happy ending for Dave, though. Yes, Taylor executives did host him on a plant tour and told him to pick out a couple of guitars. For the curious, he chose a Taylor 810 (to replace the repaired 710) and a new Taylor T3. He has also seen a pick up in corporate gigs and speaking engagements. Next week he is going to Washington, D.C. to talk with legislators about passenger rights.

As for his YouTube career, his second United video is up on the site. He hasn’t started work on the final one in the United trilogy. He told me that he’s asked United to show him that they have made changes to the company’s customer service policies.

In the meantime, the popular video is also available on iTunes. Dave has recorded nine CDs with brother Don with their band “Sons of Maxwell” – Maxwell is their father’s name, and last year recorded a solo CD. I suspect that you may get to meet him and hear him play at an upcoming user conference.

Design Your Own Tragic Quadrant

In the current issue of First Thing Monday I offered my own version of a 2-by-2 matrix with time to value and relative complexity for the x and y axes. Instead of picking winners I wanted to point out factors that would likely doom software vendors. 

Here’s your chance to design your own Tragic Quadrant. What are the X and Y factors that would likely land a vendor in the box on the dreaded lower left?

Readers’ Comments on “Too Late for the Sky”

Last week’s piece on the challenges facing ERP vendors who may not have moved fast enough to support cloud/SaaS apps drew the most e-mail so far this year.

Peter Fingar was the first to comment. Peter recently teamed with Andy Mulholland and Jon Pyke on "Enterprise Cloud Computing: A Strategy Guide for Business and Technology Leaders." He has also written or co-authored several must-read books on technology, including "Dot Cloud: The 21st Century Business Platform Built on Cloud Computing," "Extreme Competition: Innovation and the Great 21st Century Business Reformation," "IT Doesn't Matter, Business Processes Do," "Business Process Management: The Third Wave," "The Real-Time Enterprise: Powering Profits with Process Automation," "The Death of 'e' and the Birth of the Real New Economy," "In Search of BPM Excellence; Enterprise E-Commerce," "The Blueprint for Business Objects," and "Next Generation Computing: Distributed Objects for Business." 

“Bruce, are you slacking... you totally didn't include the VPC (Amazon's big announcement) in this fray. Haven’t you been reading Dot Cloud. I'm now almost done with Enterprise Cloud Computing w/ Jon Pyke of WfMc (Workflow Management Coalition) and Andy Mulholland, CTO, Capgemini.”

Naomi Lee Bloom, managing partner of consulting firm Bloom & Wallace was quick to follow: 

“Bruce,

I hope this finds you well and prospering. 

I've been thinking a great deal about true SaaS versus licensed/on-premise in the HRM software market, and I'm about convinced that almost no one should be going down the licensed/on-premise route with a new implementation, beginning in 2010, with SAP HCM (could do NorthgateArinso to get this same foundation in a SaaS version if you must have the SAP foundation to fit a broader corporate IT strategy) or Oracle PeopleSoft HCM (there is no SaaS version available, although there are some single tenant, highly templated BPO offerings). 

I believe that, by 2010, Oracle EBS HCM 12.1 will appear in a SaaS offering, if not from Oracle then from another source, but that's down the road a bit, and I hate to bet on futures. 

I just can't see starting a multi-year implementation in 2010 of software that's about to be overtaken by Fusion Apps HCM (in the case of Oracle EBS or PeopleSoft HCM, for neither of which, IMHO, will there be much functional innovation after 12.1 and 9.1) and whatever next generation results from the forced death march development effort that I presume SAP will launch if Fusion Apps looks like a winner once it emerges. 

For large, multi-national to global companies, there just aren't many good SaaS options for core HRMS replacements, and the talent management SaaS vendors, although they are trying to build toward becoming the system of record, have a LONG way to go to catch up on the basics of regulated and record-keeping HRM. 

Workday is coming along very well, and there will be a few more options in a few years, but it's a little thin on the ground for the highest end of the market as we make this eighth (could be ninth depending on how we address the various client-server architectures) generational change in software architectures since I wrote my first line of code.

Am I being too aggressive in guiding end-users to reconsider licensed/on-premise and very dated ERP/HRMSs? Your thoughts would be appreciated. 

Naomi"

My Checklist on the Economics of Cloud Apps

Over the last year or so I have participated in a several webcasts where my role has been to offer advice on how to select your next business system. If you read last week’s First Thing Monday, you will detect my belief that more and more applications should move to the cloud/SaaS because of the economics.

Here’s a slightly modified checklist from the most recent webcast. Feel free to add/delete or rant/rave.

The Future of Work: A Vote for Google Wave

The flurry of posts drew this comment from Jeff, who asked to be identified only as a director of product management at a supply chain software company. Here are his comments:

Bruce,

Great articles the past few weeks. I believe current multi-media and social networking tools out in the market today have a large negative impact to multi-tasking and productivity. At the end of the day, there’s just too much information and too many ways to communicate it. Additionally, too many people lean on one type of tool or another, which may or may not make sense for others.

It looks like Google is attempting to pull all these tools together so that whatever the method(s) are to your communication madness (e-mail, Instant Messenger, blogs, wikis, social media, etc.) you’ll be able to get the information you need in the form you prefer. I recall in the video (link below), that the Google developers mentioned something along the lines that if e-mail/social networking/collaborative tools were created today, Google Wave is what it would look like. Not individual apps, or even interfaced apps but one tool (professional and personal) that can be used in many different ways based on device/access point and preferred method of communication. I’m sure you’ve already seen this, but if not enjoy!

http://wave.google.com/help/wave/about.html

http://www.youtube.com/watch?v=v_UyVmITiYQ

Regards,

Jeff

Is There a Fit Between Innocentive and Prediction Markets?

One of my favorite daily reads is Xconomy, an online publication covering all facets of technology and innovation in Boston, San Diego, and Seattle. 

Last Monday, Xconomy wrote about Innocentive’s success in raising an additional $7M in funding to help fuel the growth of its Open Innovation Martketplace. Innocentive brings together “seekers” and “solvers.” The seekers post problems across a wide range of disciplines and solicit solutions from a network of 180,000 solvers. If successful, the solvers received cash awards ranging from $5K to $1M.

As I read the piece, I immediately thought of Crowdcast and prediction markets. Innocentive provides a large base of acknowledged experts. Imagine Crowdcast hosting a market on Innocentive’s website soliciting bets on the date of the first commercial flight of the Boeing Dreamliner.

Three Voices on Prediction Markets: The Analyst, the Believer, and the Skeptic

I was pleasantly surprised by the reaction to my First Thing Monday piece on Crowdcast and prediction markets. Here are some of the initial comments I received. 

An analyst’s view:

Bruce,

Someone forwarded your article about Crowdcast and I see that you asked for anyone with experience in these matters. I wrote about several forecasting methods including prediction markets in my books How to Measure Anything and The Failure of Risk Management. I analyzed the retired claims of the prediction market in www.ideosphere.com and I compared them to the results from other prediction market studies. Here is what I found:
 
1) On average, prediction markets are fairly well “calibrated.” That is, when an option is selling at 70 cents on the dollar, it has about a 70% chance of coming true, 90 cents on the dollar has about a 90% chance of coming true, and so on.  There are some qualifications to this statement (see below).
2) Prediction markets seem to suffer what I call a “lottery effect” to some extent.  That is, extreme long-shots are slightly overvalued and nearly certain payoffs are slightly undervalued. That is, coupons selling at 5 cents on the dollar might have more like a 2% chance of coming true and those selling at 90 cents might have more like a 95% chance of coming true.
3) Free markets (where no real money is wagered), seem to generate a large number of long-shot events and those events are slightly overvalued. Since there is no real dollar cost of generating a claim, there is no penalty for generating fanciful claims with almost no chance of payoff. (e.g., “ESP proven true by 2015”, “Perpetual motion engine proven to work by 2020” or “UFO invasion by 2050”)
4) Free markets seem to show a negligible time value of money. Predictions for events that would not payoff for decades do not seem to be priced to reflected compounding discount rates.
5) Other than these issues, free markets or markets that offer some kind of non-monetary prize (and cost nothing to enter) are almost as well calibrated as real money markets.
 
I hope that helps.
 
Douglas W. Hubbard
President, Hubbard Decision Research
http://www.hubbardresearch.com
 

One believer’s perspective:

Hi Bruce,
 
Your write up was interesting—full disclosure—I spoke with Mat 2 years back when he was first setting up to see if we could use his tool within Wipro, and also with our consulting clients.
 
Several years back when I was a product manager at (a high tech company) I put together an Excel-based “market” for product units booked and billed for each quarter. It was not anonymous—I was the market maker and folks in marketing, sales, manufacturing, strategy/forecasting and finance would send me their estimates for end of Q units booked and billed in round 1. In round 2, people could pay a higher price to adjust their bet based on seeing everyone else’s bet. Even with this crude, limited market we found that the average derived from all the estimates was more accurate than the official forecast around ¾ of the time. We all had a different view of the business and oddly enough there were very few forums where you could get information from all the different functions in one place. I think this is a common problem for large organizations, and Mat’s product helps to address that need.
 
Tim Morey
 

A skeptic’s perspective

Dear Bruce,

I read your article this Monday morning about the prediction market tool. Firstly I was amazed by this tool, thinking it is a great way of having honest and on time feed back from the employees on "how are we doing."

In the meantime I did not think it would work at least in my company culture. Maybe I'm too conservative but I thought it would amplify the "grapevine" discussion when people give their opinion with few facts or only a part of the true picture. And sometimes with wrong facts. Grapevine is something that must be heard, but I do not think encouraging it and developing its magnitude like this is a good thing for my company.

Thank you very much for this interesting article.

Herve

What do you think? Please add your perspectives on the usefulness/danger or prediction markets.

Bruce

Crowdsourcing and Prediction Markets: Right-Timing Revisited

After talking with the Crowdcast team, I went and retrieved my right-timing file. Some of the features I was interested in would be nearly impossible to implement. Others are already baked in Crowdcast’s prediction market. Here’s a closer look.

If you review the example involving Shai Agassi’s Better Place, my thought was to have at least two separate prediction markets that would be linked together. These include bets on the level of funding that Better Place would need to raise and the date for the opening of the first battery replacement service station

Why stop there? As I sat next to the bed that night I considered some of the other related issues: How much would the batteries cost? How much would consumers be willing to pay? How long would they be willing to wait as the batteries got swapped out? What would happen if oil dropped to $20 a barrel? Should Better Place target commuters or government vehicles? 

At the same time, it seemed fair to ask whether other technologies such as hydrogen might be ready before Better Place was able to build out the infrastructure or whether Toyota or another car manufacturer could design/deploy better battery technology. All of them seemed to merit wagers, too.

As I saw it, bettors could segue between these markets. They would be aided by RSS links to relevant news stories. This is a feature offered by Crowdcast. Participants could also offer comments on a discussion board with expert postings differentiated from others. This is also offered by Crowdcast. 

As the related markets changed in importance (e.g., hydrogen was viewed as not being viable for another decade), the effected markets would change colors. Cold discussions would turn deep blue, while the hotter markets would turn red.

After unsuccessfully testing the right-timing idea internally, I did approach at least three software companies to see if they had an interest in talking more about the concept. I was hoping to end up having something that we could use for our research and post on our website. Nothing happened.

As I reviewed my notes today, I still like the concept. After talking to the Crowdcast team, though, I realize that these bets need to be more bounded to be effective. The linkage of related markets may have proven to be too much of a stretch.

What do you think of the idea?

Crowdsourcing and Prediction Markets: My 2:00 a.m. Epiphany

In this week’s First Thing Monday analysis of Crowdcast, I mentioned that I have been interested in prediction markets since first reading about them in MIT’s Technology Review in June 2002.

In fact, 18 months ago I became convinced that prediction markets could play a key role in our analysis. Here’s the backdrop:

On February 26, 2008, my wife had arranged for me to meet an editor to discuss a potential book idea. While I was interested in writing about unique instances of global innovation, the editor told me that her company was primarily interested in works that proved a theory. I didn’t have a theory, only an area of interest and passion. 

That night I woke up at 2:00 a.m. with an idea for a new research project around the concept of “right-timing.” I went downstairs and grabbed my notebook and a pen and spent most of the next two hours writing down ideas. The next day I sent the following memo to two colleagues asking for input:   

“Here’s the idea: Right-Timing. How do you ensure that your new product is hitting the market at the right time and that all elements—pricing, packaging, distribution, feature sets, contingencies are all properly aligned?

Two examples:

1. Is Shai too early? Shai Agassi raises $200M in venture funding to build a network to support electric cars. As I understand it, drivers will tool along until they nearly run out of juice. When they are close to empty, they will pull into a Jiffy Lube equivalent and swap out the batteries. 

Without knowing a lot about it, think of the questions: Will car manufacturers be ready? Is $200M enough? Or, we he need $1B? What’s a realistic timeframe? Can the batteries be produced? Can they be swapped out quickly? Will there need to be government/corporate incentives or mandates in order to gain market acceptance? Should he first target government vehicles? How far will the batteries go on a charge? Will you keep a second battery in the trunk? Will another technology kill him first (e.g., hydrogen)? Are there any hidden owner costs (e.g., higher insurance, etc.)?

2. Is Tata too late? Tata has spent the last few years developing the Nano, the “people’s car” that will sell for $2,500.

Without having seen the car on the streets of India, a ton of questions come to mind. Should Tata have introduced this car 10 years ago before the infrastructure was overburdened? Can you sell this vehicle in India’s major cities (the roads are already jammed)? Where will people park these vehicles? Will there need to be driver’s ed? Can buyers afford the car and the insurance? How many will Tata sell? Are there enough gas stations? Will a competitor come out with a more feature-rich product at a higher price? Is this a one-year product (a la the Ford Pinto) because people lose interest in a low-end product as they become more affluent?

The logical move would be to hire McKinsey (or an equivalent) to answer these questions.

What if we were to create an online stock exchange instead to leverage the “wisdom of crowds.” Take Shai. “Investors” could bet on the timeline when his dream would be realized. There could be side bets on the funding costs ($200M, $1B, $10B, etc.), the likelihood of government mandates, required price points, chance of alternative technologies, etc.
 
“Prices” could be influenced by news announcements, blog posting from the crowd, etc. We could measure which news or experts caused the most movement. We could also compare the reaction by Israelis vs. Americans (or Indians vs. others in the Tata case).

Bruce

(Note: I also could have used Nintendo and the Wii. The company missed the lucrative Christmas season because it couldn’t get enough units. Was it a lack of good insights into demand? Did it have good demand signals, but couldn’t align manufacturing capacity or supply? Could an online community of consumers, distributors, sales reps have saved this? The two others are more provocative and will play out over a longer period.)”

Editor’s note: In the next post, I look at how that thinking evolved over the next 18 months.

Avago Leverages Model N for Better Margins and Successful IPO

With so few IPOs these days, it’s easy to overlook the fact that the window is slightly ajar for worthy companies. We were reminded of this in an e-mail we received from Kamal Ahluwalia, vice president of corporate marketing at Model N:

Bruce,

Hope you are doing well. I’m sure you saw the news of Avago’s IPO. The company sold 43.2 million shares, 7 million more than was expected from the IPO. The stock was priced at $15 a share and closed the first day at $16.18, up 7%.

In the semiconductor business, the revenue multiple you get if your GM is 40% or better is substantially greater than the multiple you get if the GM is less than 30%. Companies with lower revenues but margins greater than 40% often have a higher market cap than companies with higher revenues but margins lower than 30%.

Two years ago, AMR Research published a report on how On Semiconductor had increased its gross margins from 27% to 42% in four years with Model N.

Last year, AMR Research published another report on how Avago’s strategy of improving its gross margins – particularly from their channel business. You heard the details directly at our last Executive Advisory Board meeting on how Avago has complemented Oracle ERP with Model N’s Revenue Management solution to execute on this strategy.

Avago went public last week and has already generated additional ~$800M in shareholder value on a $2.7B investment for KKR and Silver Lake Partners.

There are very few solutions in the market having such an impact on a regular basis. 

Regards,
Kamal

The Future of Work: Microsoft Responds

My recent First Thing Monday article drew the following response from Microsoft:

"Hi Bruce,

Thanks for including references to Office 2010 and SharePoint 2010 in your most recent articles in the “First Thing Monday” newsletter. I did want to point out to you an inaccuracy in your newsletter today:

"SharePoint 2010 and Office 2010 are scheduled to enter beta in Q4 CY09 and release in the 1HCY10 and not October (beta) and April (GA) as you point out in your article. We are currently in Technical Preview for both products (as of July 13 2009). Microsoft has not committed publicly beyond what I stated above about the beta and release dates for the 2010 release. All other information we have shared with AMR Research about the 2010 release is considered to be covered under NDA.

Will you be able to update the online version to reflect the more accurate positioning of the release? If you/AMR Research believe that 2010 will beta in Oct and release in April I would prefer that you post that this is AMR’s position rather than one confirmed by Microsoft.

Thanks Bruce and please let me know if you have any questions or concerns about this.

Jennifer Pisani | Microsoft Analyst Relations"

Note: For the record, the information on shipment dates came from reliable sources who have been briefed on the company’s plans.

The Future of Work: Hey, We Got “Smart Office”

This theme continues to generate a lot of e-mail. This week’s First Thing Monday piece on the need for a layer above Office and Outlook drew a near real-time response from my friend Kathy at Lawson Software. Here it is:

Bruce -
You forgot to mention Lawson Smart Office, a collaborative user environment that combines Lawson enterprise apps, Microsoft Office tools (including bi-directional Excel integration), Microsoft Outlook (manager self-service via Outlook without even logging into the Lawson app), Lawson Business Intelligence, Lawson Process Flow Integrator (workflow), and Microsoft Groove (collaboration) as well as mash-ups with other web 2.0 technologies and more...  All delivered in an integrated canvas leveraging Microsoft WPF.

We’ve had great market reaction to Lawson Smart Office and now have more than 225 clients.

Kathy

Here’s a screenshot so that you can what Kathy is talking about. She also included a link to the intro on the Lawson website in case you want additional information.

 

The Future of Work: “Information Percolation”

Eric Rasanayagam is an IT executive at a well-known Fortune 500 company. Here he weighs in on what he sees as the need beyond what Microsoft and Google are providing for office tools:

Bruce – Appreciated your article regarding enterprise information mining. I think enabling or accelerating information percolation is important to the viability of companies, especially large organizations. I would put one set of tools above this in priority: intelligent summary/aggregator generator combined with prioritization. I rank this high in priority because I believe we are getting buried in information (email, news aggregators, research notes) on a daily basis that we are not able to focus on the important things enough: innovation and strategy development. I have searched and yet to come across any effective or useful tools. One set to manage the deluge of influx and another to cull, aggregate and summarize internal enterprise IP.
 
Thanks
Eric

What do you think? Please add your comments below.

The Future of Work: One CIO Checks In

Within hours after writing about the fact that “It’s Time for New Office Tools,” I got an e-mail from a CIO who was in violent agreement with my perspective. When I asked if I could publish his comments, he agreed as long as I withheld his name and that of his company. Here’s what he had to say:

“Bruce,
 
Good column on the need for more useful office applications.
 
The functionality that I think is most required is a tool to help severely multitasking people stay organized. For example, in my role (CIO), I have to track information about a zillion projects, issues, tasks, problems, requests, notes, questions, suggestions, and ideas. I have things that I need to do, and things that I need to make sure that someone else does. I also have a lot of information that I better be able to quickly find when necessary. Outlook/Exchange task management is a joke. The right tool needs to be seamlessly integrated into Outlook so incoming and outgoing messages get logged to the appropriate place.
 
I raised this issue to Ballmer, which led to a detailed discussion with one of the lead MS Office architects. I don’t know if they were just being polite or actually considered what I was suggesting. I think the need is real.
 
I actually developed something a couple of years ago that I use on a daily basis. It was a good start, but the program is quite limited due to the limited time I have to work on something this ambitious. If Microsoft or Google would put some serious developers on this sort of functionality, they might just have a home run. I think there is a lot of professionals, like myself, that struggle to stay on top of so much stuff on a daily basis.
 
Your column did bring back some memories from the past. NBI was always my favorite company name. At least they had initials that really meant something!”
 
In reading the CIOs letter, I especially liked his last line about NBI. If you knew the Boulder, Colorado firm, you know that the acronym stood for “Nothing But Initials.”

Uncovering Counterfeit Drugs

Did you happen to read “Using Scientific Tools in an International War on Fake Drugs" in the science section of last week’s The New York Times? 

It turns out that scientists are using mass spectrometers and other tools to determine the legitimacy of the product being inspected. While effective, the instruments cost $150K per unit.

The article also noted that some scientists are actually analyzing microscopic pollen grains that are embedded in the medicines or packaging. They can link the grains to specific parts of the world to determine where they were produced. One scientist has determined that many fake drugs are being manufactured in the border between China and Vietnam and the shared borders between Laos, Myanmar, and Thailand.

Unfortunately, the medical counterfeits are spreading well beyond drugs. Interpol has found a wide range of fake medical supplies, including bandages, blood bags, contact lenses, and syringes. Nice, huh,

What’s Next for Amazon?

While I have yet to make my first purchase on Zappos.com, I remain fascinated by the company’s growth. And, like many of the site’s fans, I was disappointed to hear that Amazon was acquiring the company for $850M in stock and cash.

Xconomy is one of my must-read daily news sources. On Tuesday, the site featured a map of Amazon’s acquisitions that will instantly remind you of the London Underground transit system. As Xconomy points out, Zappos is Amazon’s sixth acquisition this year.

When I interviewed Zappos’ Amanda Nevins on stage in Scottsdale at our annual executive conference, I asked her what we might see next on the Zappos site. I’m anticipating that the company will continue with its planned expansion into sporting goods. Given that there seem to be few golf specialty stores, this would be a logical move. The Kiva robotic system can easily manage the handling of these items.

Remembering Tom Glaza

Last night I received an e-mail from Joe Phelan telling me that Tom Glaza had passed away on Saturday morning after a lengthy battle with cancer. Sadly, just yesterday I had made a calendar entry on my BlackBerry to call Tom at 9:00 a.m. today.

I first met Tom in 1993. At the time, I was running marketing for a small software company and he was the vice president of business development and strategy for MAPICS Corp. Our mutual goal was to build a supply chain planning application that MAPICS would resell through its global network of distributors back to its 10,000+ active customers. While the deal never came together because of economics, Tom and I stayed in touch until he retired in 2000.

Tom was one of the early pioneers in the MRP II and ERP markets, dating back to his days at IBM. While at IBM, he was chartered with finding a way of spinning out MAPICS from Big Blue. This resulted in the takeover of Marcam, one of the early leaders in providing ERP applications for process manufacturers.

In addition to his love for software, Tom was very passionate about Michigan football. He earned his MBA and BBA from Ann Arbor in the 1950s. In 1994, I joined him there for a Michigan-BC game. The following year he came to Chestnut Hill for the rematch. In both cases, his team came out the winner. 

The ERP market has lost a legend. Go Blue!

Wal-Mart To Require Suppliers To Provide Eco-Ratings

Today’s newspapers are abuzz with Wal-Mart’s plans to have its 100,000 suppliers provide labeling on the carbon footprints of all products sold on its store shelves. The retail giant plans to work with a group of academics, suppliers, and environmental groups to create a scoring system. The company is hoping that other retailers will adopt the same system. While some newspapers reported that the program will take up to five years to implement, others said that it could be in effect by 2011.

Today’s edition of The New York Times showed a sample of the sustainability index score used by Faded Glory. This provides an overall product grade and rates the apparel relative to environmental damage, climate impact, water usage, energy usage, pesticide usage, air pollution, water pollution, and size of carbon footprint.

Wal-Mart has prepared a list of 15 questions that it plans to ask suppliers about their sustainability plans. It plans to start with its largest domestic suppliers first.

The natural question is how much will the new labeling cost suppliers? The Associated Press quoted retail consultant Burt Flickinger III as saying that new labeling and redesign can add 1% to 3% to the cost of a product.

In addition to the added cost, there is some question as to whether consumers will understand the new labels. In an interview with The Wall Street Journal, Len Sauers, vice president of sustainability at Procter & Gamble noted that similar initiatives in Europe “have been quite difficult, because they have not really provided the consumer with information that makes sense.”

As for how suppliers feel about the new initiative, I think Michelle Harvey said it best in the same Journal article. She’s with the Environmental Defense Fund and part of the new Wal-Mart program: “A lot of suppliers are scared, but there is an opportunity here for them. I think the most significant improvements will come before the consumer ever sees a score.”

What do you think? Would knowing about a product’s carbon footprint impact your purchase decision?

ClickAndGo Wayfinding Maps: “MapQuest for the Blind and Deaf”

A few months ago I got a call from Joe Cioffi. Joe is an old college classmate of mine who has spent the last 30 years teaching deaf and blind students. He was thinking of starting a software company and was looking for some help.

We reconnected recently after the untimely death of another friend who had lived in our dorm. At the end of the call Joe asked if I had time to review his brochure and to look at a demo of his product.

Joe started InTouch Graphics in December with Phil Agee, a former Wall Street software developer. In March, they released their first version of ClickAndGo Wayfinding Maps, and have been out meeting with prospects ever since.

When I saw the demo, my first reaction was “MapQuest for the blind and deaf.” The directions are very precise and designed for pedestrians. I tried to get a screenshot so that you can see them. I trust Joe or Phil will post one to this blog.

When Joe and I were in college, we had a blind student in our hall. In those days, schools would hire a mobility instructor to show a student around campus. Over time, the student would accumulate mental maps of all of the key facilities on campus. As Joe explained to me, “This can be very challenging at a campus like the University of Minnesota, which has 200 buildings. In addition, sighted people don’t know how to give directions.”

Here is how it works for blind students. They can access the maps via their cell phone or download them to an MP3 player or to their PC and read the maps with a Braille converter. Each map includes a starting landmark and a destination landmark. The intention is to compile routes and have the database grow like Wikipedia.

The plan is to provide the maps for free to deaf and deafblind students and travelers. Over the last few months, Joe has been meeting with universities and government agencies. He plans to target museums, hotels, airports and public transportation agencies to see if they are interested in buying his software so that he can add to the maps.

I suggested that he might also look for sponsors. While now might not be the best time, socially-minded companies like Starbucks might be interested in this as a public service.

Joe has a pretty cool idea. He serves as another reminder that one or two people can make a difference. If you want to know more, the website is www.clickandgomaps.com.

Servigistics’ Next Step: Enter the Broader Supply Chain Planning Market?

When I first got the phone call from Servigistics’ founder Mike Landry telling me that his company was being acquired by Marlin Equity Partners and would be merged with another Marlin property—Click Commerce SNS—here was my initial reaction: 

The combination of Click Commerce SNS and Servigistics brings together the pioneer in service parts planning with the leader in strategic service management. This pairing also brings strong vertical expertise. Click Commerce SNS dominated aerospace and defense, while Servigistics owned high tech and automotive. Together the two will be a strong force in the emerging opportunities in life sciences, consumer goods, retail, and logistics.

As for the standalone market, there should be some cross-selling opportunities to promote Servigistics’ software for pricing, knowledge management, workforce management, and command center back into the Click base. At the same time, Servigistics customers can use Click’s applications for warehouse management, returns and repair, and network logistics. 

In terms of new sales, the combination of the two provides this market with a clear leader. This status should help pull the company into significantly more sales cycles. There is a lot of growth left in the core industries, and more opportunities are being created in retail, consumer products, industrial products, logistics, and energy. 

Yet, at the same time, I’m willing to wager that Servigistics will ultimately move into the broader supply chain planning market pioneered by i2 Technologies, Manugistics, and others. If the company is going to successfully engage in hand-to-hand combat with Oracle and SAP, I think it will need a broader footprint. It won’t need to do this right away. I would be surprised, though, if we did not see some sort of announcement over the next 12–24 months.

New Momentum and the “Mafia of the Future”

It’s hard to believe it’s been more than a year since I talked to New Momentum executives about their plans to help tech companies deal with the rapid rise in counterfeit products. If you read “New Momentum Carving a Slice Out of the $250B Counterfeit Problem,” you may recall that the company specializes in helping electronics organizations identify fake components and products by searching across foreign websites, push e-mails, bulletin boards, forums, gray markets, and other data sources.
Its search technology looks for part numbers. If it locates products being offered at an inappropriate discount, volume, or date, New Momentum sends an alert to the customer’s dashboard, containing all known information about the seller. The customer then uses this to verify whether the products are from legitimate channels or a gray market and whether or not they’re counterfeited or modified (i.e., products that are supposed to meet mil-spec standards, but are commercial grade).

A lot has happened in a year. For one, the company has expanded into additional vertical markets, starting with pharmaceuticals. Last month, we published a case study on the work New Momentum has done with Pfizer.

While China continues to be the primary home of counterfeit tech products, it’s a more global issue for the pharma industry, with growing operations in Russia, the Middle East, Latin America, India, China, and other markets. It’s also more closely linked with organized crime syndicates than opportunistic manufacturers that are willing to add an authorized third shift to turn out surplus or fake products.

New Momentum is now moving into luxury goods through a new alliance with a European-based supply chain software company that owns the fashion industry. It’s also eyeing the entertainment market.

It’s expanding its range of services too, partnering with a global third-party firm to help customers set up test buys with the intent of getting closer to the source of production. In addition, New Momentum has set up an office in Beijing.

As we’ve written many times, the counterfeit market continues to grow exponentially. When I first interviewed New Momentum CEO Stu Clifton, the U.S. government described counterfeits as a $250B problem. When we talked this week, Mr. Clifton said that the latest estimates make it a $1.2T issue. As he put it, the ramp up is being driven by “the Mafia of the future.”

(Note: In case you’re experiencing déjà vu, this is a condensed version of a slightly longer piece that appeared in First Thing Monday. We believe that anti-counterfeiting efforts merit increased attention.)

One Vote for the Goliaths

As you might guess, most of the e-mails I’ve received on the innovation debate have been in favor of the best-of-breed vendors as the source of innovation. One reader, though, took exception and offered her own perspective:

“Very interesting read. Being a former BoB girl, I'd be the first to admit that we large vendors struggle with our “bigness.” However, after spending 5 years in ERP, I have a couple of items to point out:

1. Given the fact that it takes users over 18 months to take advantage of new technology and technology solutions (and that time frame seems to be lengthening), do large vendors need to outpace the little ones in innovation or do we merely need to move fast enough to keep pace with customers' ability to adopt? Of course, that doesn't excuse us from innovating but it enables us to take the time to evaluate and develop a comprehensive offering, taking into account the technologies and solutions that we already offer.

2. Having a large number of customers means that we have a responsibility to deliver solutions that work. We can't add lots of new and experimental technologies into the solution and then remove them later when they are either not commercially viable or don't work. Remember i2's DOM (Distributed Order Management)? It was innovative but never managed to provide customers with a usable solution.
3. We don't turn fast but when we do, we can be much more effective than our smaller vendors. And we manage to stick around, affording our customers with peace of mind and an ongoing product strategy.

Best regards - I always enjoy the Sunday e-mail from you. “

We welcome your comments, too.

What’s The Fully Loaded Cost of Software Delivery by Platform?

I wish I had a dollar for every time I found myself in a debate over whether SaaS is cheaper than on-premise software over a 5- or 10-year period. Well, here’s some ammo that’s not going to win me friends in the on-premise camp.

This morning’s edition of the GigaOM blog opened with a piece written by George Gilbert, partner and co-founder of TechAlpha, and Jeurgen Urbanski, managing director, TechAlpa. They reference a new book by Dr. Timothy Chou, former president of Oracle On Demand, entitled “Cloud: Seven Clear Business Models.” What captured my attention was the data on fully loaded costs for the following deployments.

“Traditional legacy applications such as Oracle or SAP have a fully loaded cost of delivery of $1,000-$1,500 per user per month. Several years ago, Oracle On Demand got that cost down to $50-$100, whether it was Oracle-hosted or customer-hosted. Salesforce.com has squeezed that cost down even more to $7-$10, though admittedly just for the much lighter-weight CRM portion of the suite.”

I have to admit that I want to see the spreadsheet with all of the fully loaded costs. Still, if Dr. Chou is even close to being right about $7-10 per user per month, that’s going to grab the attention of the most SaaS-averse CIO.

Highlights From Oracle’s Earnings Call

Last night after the market closed, Oracle reported its Q4 and FY09 results for the period ending May 31. And they did it in a tidy 40 minutes or so. Here are some of the highlights and some additional notes:

• FY09 revenue was $23.252B, up 4% in dollars and 10% in constant currencies over FY08.
• Software license updates and product support—or maintenance—contributed $11.754B, or 50% of total revenue. This is 14% in dollars and 19% in constant currencies.
• It was not a good year for new license sales of Oracle applications. New app sales accounted for $2B in revenue, down 16% from the $2.369B reported last year. 
• There were two bright spots, though. Application customers generated $4.1B in maintenance revenue, up 18% year-over-year. On Demand revenue came in at $779M, up 12% from FY09. This would place the company in a dead heat with Intuit for second place behind salesforce.com.
• With the expected release of Oracle Fusion Apps later this year (and delivery next year), the company will provide customers with three implementation options:  Traditional on-premise, on demand, and Oracle-hosted on demand in the customer’s own data center.
• The company ended the year with $12.6B in cash and investments.
• Oracle provided 1Q10 guidance of 1% to 4% growth in constant currencies.
• 26% of Oracle E-Business Suite customers have upgraded to version 12.
• Annual R&D spending is running around $3B.
• The Sun deal is expected to close this quarter.
• Based on yesterday’s closing price, Oracle’s market cap is $99.02B. To put this in perspective, it’s more than twice that of arch-rival SAP which is valued at $47.03B.

More Comments on Oracle’s “100 Days of Innovation”

Yesterday we received an e-mail from Mitchell Ashley commenting on Oracle’s new marketing campaign on innovation. I think you will find his insights to be of interest. I’ve also included links to his blogs on social media, convergence, and guitars.

Hello Bruce,
 
Excellent article, “Oracle Set To Kick Off 100 Days of Innovation.” Having been in both large companies, and since the mid-nineties, smaller and startup companies, I see much of what you talk about in this article. “Feature-based” startups face the challenges of scale, both in the software they create and within the company. Startup developers and execs inexperienced in creating and selling enterprise software are in for a double paradigm change whammy, always grossly underestimating what it takes to achieve scale in both areas.
 
One of the interesting companies I find in this area is Apple, who many are always looking at to tackle the enterprise IT organization, when in fact what Apple has done is taken their first generation “Google style” skunk works product innovation approach and married that with the consumer market, rather than taking on the enterprise IT market head on. iPhone software apps are the epitome of this; small targeted apps delivering a narrow and valuable range of functionality.
 
I just completed an interview about Oracle and their Sun acquisition, and talked about that while Oracle now has Apache and Java in its hip pocket, it’s extremely unlikely Oracle would become the open source evangelist in the truest form of the word. If anything, they will further legitimize open source technologies in the enterprise and expand its use in their products. Companies rarely successful stray from their stripes, and the Oracle + Sun acquisition could end up being a very interesting one two watch.
 
I guess I’m saying all this to you to say that I believe what large, traditional software organizations like Oracle and Microsoft do is “innovate at scale” vs. smaller more nimble ISVs innovate vertically or create new niches which if proven valuable will later be taken to scale, likely by an acquiring company.
 
Thank for your articles. I enjoy them very much.
 
Mitchell
Converging Network LLC
 
Blogs:
http://www.networkworld.com/community/ashley
http://www.theconvergingnetwork.com
http://www.guitartropolis.com 

Technology Buyers Respond to the Innovation Debate

Does innovation come from the Goliaths (a.k.a large ERP vendors) or from the best-of-breed vendors? This was the topic of a recent blog post and my most recent First Thing Monday commentary.

The latter generated quite a few private e-mails, including several from technology executives at well-known manufacturing companies. They have agreed to let me print their comments as long as I don’t use their names or that of their companies:

Comment 1

“Bruce:
 
This debate of the best of breed vs. ERP vendors looks set to go on for a long time. Here are some additional points worth considering on this debate:

1. Innovation = more risk. ERPs are very centripetal and innovation is centrifugal.
2. The push for business innovation comes in most cases from the business units/functions and that is inherently opposed to the ‘central brain’ compute paradigm of ERPs.
3. The IT shops are risk averse, and this is even more true of ERP support personnel--who by nature of their work in most cases miss the forest for the trees, and in any case can't see the adjoining meadow being lost inside the forest! This means any innovative idea even on the periphery falls victim to the strong risk averse 'keep it simple' philosophy
4. IT outsourcing models exacerbate this tendency.
5. System integrators tend to treat ERP skills as 'commodities'--this is especially true of offshore vendors AND for SAP (as Oracle's growth through acquisition tends to reduce the centripetal force), resulting in less than optimal ability to leverage any product innovations.

It was interesting to note Sonny Singh's examples of convergence as 'innovations’: neither of which would appeal as they were articulated to a C-level officer other than the CIO!

I do buy the convergence theory, but I think the real story there is going to be less about the traditional software vendors trying to converge their lumbering code bases into delivering business value than by the convergence of Open Source, Web 2.0, semantic web, expert search (Wolfram), and so on...

Thanks for a thoughtful series!”

***************

Comment 2

"Thanks for the First Thing Monday write-up on Oracle and your meeting with Sonny Singh. I reacted strongly to the following:

One is innovation at the user interface. In this case, he described the 'seamless convergence of structured information and transactions with unstructured information and transactions.'

As an Oracle 'User Champion' within Supply Chain, I have the responsibility to drive forward implementation of both Oracle and Agile module products for the benefit of Operations. By far I find my biggest task is 'people change management,' i.e., getting people to adopt new Oracle functionality. One of the biggest impediments in getting people to change is the Oracle user interface--most high-tech and creative personnel HATE it! They find transactional system interfaces so cumbersome and non-intuitive, and they don’t want to use the system. Heck, each week just getting all company personnel outside Finance and Operations to use Oracle Self-Service Time (Oracle Time & Labor) to input system timecards is painful, and this exposure to the user interface negatively paints their view of Oracle.

For me, before worrying about the convergence of structured and unstructured information, how about really addressing the Oracle user interface?

For instance, could the user interface be audio, using prompts? Could the person use a Microsoft file or a simple worksheet reduced to a PDF, and could Oracle assess the Microsoft or PDF file to 'extract' the relevant transactional data so the user doesn’t have to know what (non-intuitive) order the fields are normally entered by power users in Oracle? With the prevalence of manufacturing outsourcing, think of the time-saving cost benefits that could be realized (without UPK or other Training) if suppliers to OEMs could collaborate using simple audio or document extract user portal interfaces.

My Observation 1: If a person hates using the system, there’s little reason to worry about them running queries for unstructured information. So really fix the user interface to make it an appealing portal for users. They’re not dummies – they know how to shop on intuitive web portals and transact money, so get more creative Oracle; you’re lagging!

My Observation 2: There’s a much bigger population out there that would use and integrate Oracle (and SAP, and ABC Software …) if they could actually use the system. Maybe it’s not n+1 companies; maybe it’s going from x% users to greater y% users within n companies?

Give it some thought, and thanks again for the stimulating Sunday night (my time) insights.”

Are SaaS Stocks Better Investments?

On Saturday morning, I received an email from a client asking if I had plans to revisit a blog post that I had written last December 15 that asked, “Is Now the Time to Buy the 'SaaS 20'?” 

Here’s an update on the five SaaS companies I cited in the December post. Based on Friday’s closing prices, these vendors are doing much better than their mostly on premise brethren:

• NetSuite closed at $6.63 on December 12, and at $10.62 on June 19 (+60%)
• RightNow was $6.23, now $11.86 (+90%)
• salesforce.com was $22.32, now $39.91 (+79%)
• SuccessFactors was $4.99, now $9.47 (+90%)
• Taleo was $5.73, now $18.09 (+314%)

RightNow wasn’t on the original list, but that stock is up 42% during that same period as it increased from $8.33 to $11.86 during the period covered.

Here’s a couple of selected on premise stocks for the same period:

• Epicor closed at $4.34 on December 12, and at $5.32 on June 19 (+23%)
• i2 was $6.38, now $12 (+88%)
• JDA Software was $12.62, now $14.61 (+16%)
• Lawson was $4.60, now $5.23 (+14%)
• Manhattan Associates was $14.16, now $18.27 (+29%)
• Oracle was $16.84, now $20.66 (+23%)
• QAD was $3.41, now $3.19 (-6%)
• SAP was $33.82, now $40.07 (+18%)

It’s true that the SaaS vendors outperformed all of the stocks with the exception of i2 Technologies. If you had put money into any of these stocks when the market opened on December 15 and held it until last Friday, you would have made money except on QAD.

Once again, I probably should have pointed this out last week. All of the stocks I track on Yahoo! Finance are getting spanked today.

How Do We Know There’s a Puck?

A few weeks ago, I was sitting in a meeting with the executive team from a relatively new startup. As might be expected, the team had a million ideas on how to establish a new product category.

As they talked, I somehow thought about the quote attributed to hockey great Wayne Gretzky, and watched as they made plans to skate to where the puck is going to be. 

Yet, I wondered, what if there is no puck? What if it’s just a bunch of smart guys loaded with venture capital racing to create a market that doesn’t really exist?

Eco Software: Is There a Vendor-Buyer Chasm?

This week we met with two Oracle executives to catch up on the Conformia deal and related supply chain activities. At some point the conversation veered off to a discussion of some of the new software ventures formed to focus on green and carbon-related issues.

One of the executives said that he had attended the recent Corporate Eco Forum event in San Francisco. While many of the software vendors wanted to talk about emissions and energy management issues, their focus appeared to be 180 degrees from what’s on the mind of executives at consumer goods and high-tech companies. This is not to say that they don’t care about their carbon and/or water footprints, it’s just that are more concerned about potential product labeling requirements.

There are many facets to this issue. For example, is it conceivable that there will be a sustainability chart next to the “nutrition facts” on your favorite food product? Will companies need to disclose every ingredient or material included in the manufacturer of their products?

In the case of the latter, there are third parties tracking just that. This week The New York Times profiled GoodGuide ("On Web and iPhone, a Tool to Aid Careful Shopping"), which provides a website and iPhone application to allow consumers to know more about what’s in the products they use.

GoodGuide was started by Dara O’Rourke, a professor of environmental and labor policy at UC Berkeley. The article describes how after applying sunscreen to his daughter, it dawned on him that he knew nothing about the ingredients. It turns out that the sunscreen contained two skin irritants, an endocrine disruptor and a sunlight-activated carcinogen.

Today, GoodGuide is building the equivalent of a Zagat’s Guide for “safe, healthy and green products” for food, personal care, household chemicals, and toys. On the website, you can look at the scores of 75,000 products, learn about issues of importance to other GoodGuide supporters, and read about product recalls and other news.

Oracle Buys Conformia IP for Undisclosed Price

Earlier this week Oracle quietly announced it had purchased the intellectual property assets of Conformia Software. Conformia provides product and process lifecycle management software for drug design and development for life sciences firms. The intent is to integrate the new software with PLM software from Agile Software. Oracle acquired Agile two years ago for $495M. The price was not disclosed.

In addition to adding to the Agile suite, this acquisition is consistent with Oracle’s intention to add unique vertical capabilities. This is a logical fit with the year-old Oracle Health Sciences Global Business Unit.  The unit’s software products include Oracle Clinical, Oracle Remote Data Capture, Oracle Thesaurus Management System, Oracle Adverse Event Reporting System, Oracle Life Sciences Data Hub, and Oracle's Siebel Clinical Trial Management System.

Who Drives Software Innovation? The “Best-of-Breed vs. Giants” Debate

I got an e-mail from a client earlier this week who asked if I’ve ever written about whether more innovation comes from the Goliaths or the best-of-breed vendors. 

I’ve been studying the software industry for nearly 30 years, and have spent the last 21 specifically focused on the enterprise applications market. I’ve certainly talked about this subject, but have never written about it. Until now.

In every case, market sectors were created or developed by small companies. Look at supply chain planning, warehouse management, human resources/human capital management, enterprise asset management, customer relationship management, sourcing and procurement, applications-as-a-service, and the nascent energy and emissions management markets. 

While we can debate whether SAP created the ERP market or has been the primary beneficiary over the last 18 years, it’s important to remember that SAP was a modest-sized company back in 1991 when it launched R/3. It closed 1990 with $313M in revenue. 

Call me cynical, but I believe today’s large vendors are more interested in commoditization than innovation. Ideally, they want to be able to sell a generic version that will appeal to customers across dozens of verticals, hundreds of countries, and tens of thousands of customers. For them, true breakthrough innovation doesn’t scale.

The real software innovation will continue to come from smaller vendors. And they will continue to be attractive acquisition targets for the Goliaths.

Heard in the Hall, Part 3: Oracle to TXT e-solutions

Here is the final installment of notes from our recent Supply Chain Executive Conference. We welcome your comments.

We spent a couple of hours with Oracle’s John Burke at the conference. Here’s the condensed version: Oracle has invested millions to re-architect its supply chain capabilities as modular applications, and to enable open ERP integrations using its Applications Integration Architecture (AIA). Customers can implement transportation, PLM, warehousing and advanced planning software without having to upgrade their core ERP system, regardless of which one they are using. Oracle has also delivered numerous execution applications which provide real-time visibility to both the multi-tier supply chain and manufacturing operations by leveraging their OBI technology. John claims that Oracle is attracting SAP customers that need new supply chain software, but don’t want to have to go through a suite upgrade.  

Speaking of Oracle, look for a major campaign touting some of the recent innovations and future plans. We expect to see additional industry-specific additions to the Oracle portfolio. 

I posted "Seven Questions for Captains of the Content Economy" in a recent First Thing Monday. One of the questions focused on how to price content. It seems that the attendees from PROS were on the same track. PROS is one of the most intriguing companies in the pricing software space. Here’s one executive’s take on the relationship between content and pricing: "The monetization of IP throughout the supply chain begins with setting the right price at each point the value gets transferred – optimize that price!"

During my fireside chat with Zappos.com’s Amanda Nevins, we talked about how her company uses Kiva’s robots for near real-time order fulfillment. In addition to attracting new customers, Kiva is also drawing interest from vendors that want to provide third-party fulfillment for customers. One of the first to sign on is start up Quiet Logistics. At the conference, CEO Bruce Welty told me that his firm had just signed an agreement with Gilt Groupe. Gilt Groupe provides access, by invitation only, to fashion and luxury brands for men, women, and children at prices up to 70% off retail. Each sale lasts 36 hours and features hand selected styles from a single designer. 

Selectica and EMC recently announced a new contract management solution and a global go-to-market alliance to jointly market and sell the solution. Contract Lifecycle Management is the first solution built on the EMC Documentum xCelerated Composition Platform (xCP), which was unveiled at EMC World a few weeks ago. In the last 30 days, more than 100 EMC salespeople have been trained on the new product. EMC and Selectica are reporting traction in enterprise-wide deals led by IT, legal, sales, operations, and procurement.

The folks from SYSPRO were eager to talk about two new modules. The first was a new set of embedded financial ratios that are built into its financial applications. SYSPRO is making this available at no additional cost. The second is the planned 4Q release of a new inventory optimizer model that is designed to help customers increase order turnaround times and customer service.

Last month ClearOrbit changed its name to TAKE Supply Chain to reflect the company’s continued expansion and transition into a single, global division under parent company, TAKE Solutions, Inc., which acquired ClearOrbit in 2007. At the same time, TAKE Supply Chain has significantly expanded its product portfolio to include supplier collaboration and supply network gateway applications, demand-driven distribution and fulfillment, mobile data collection, and global trade management.

We caught up with TraceGains to talk about its new Supplier Compliance and e-Affidavit monitoring software. Think of it as a SaaS-based “brand firewall” to help companies avoid recall disasters. The Supplier Compliance offering ensures that suppliers, co-packers, and contract manufacturers are complying with critical business rules. The e-Affidavit dashboard provides automatic notification, risk assessment, and supplier performance management data.

A few months ago I joined some of the executives from TXT e-solutions for lunch in Boston. There has been a lot of activity since we last dined. After launching the redesigned version of TXTPERFORM2008 last year, the company is introducing a new demand-driven PLM package that is designed to be integrated into business planning.

I think that covers it. If I missed anything, please add your comments to our blog.

Heard in the Hall, Part 2: Crossgate to Manhattan Associates

Today’s post is a continuation of snippets of ideas and news gathered from the hallways and gathering spots during our recent Supply Chain Executive Conference at The Phoenician in Scottsdale, AZ. Part 1 covered companies whose names begin with an A, B, or C. We even flunked that elementary exam by forgetting to include Crossgate. We regret the error.

Crossgate AG has been teaming with SAP AG to develop a set of core service extensions to streamline and reduce the cost of enabling end-to-end business processes, such as order-to-cash and procure-to-pay. Each service extension includes all application interfaces, business processes, and a bundle of partner mappings to help companies optimize the deployment of SAP ERP, SAP Business All-in-One, SAP Supply Network Collaboration (SNC), and SAP Transportation Management (TM). These service extensions are provided at a fixed cost and include implementation. The next step is to include service extensions for Business Objects and SAP SCM and Event Management applications.

The big news at Descartes was the continuation of the financial turnaround that began five years ago. The company had recorded $55M in losses in fiscal 2005, and had gone six years without a profit. On May 28, Descartes announced that 1Q10 revenue was $17.4M, up 7% from the year earlier period. The company also reported that it had exceeded its adjusted net income for the 21st consecutive quarter.

Endeca used the conference to showcase its new Endeca Manufacturing Suite. Endeca has a clever system for managing data for a variety of different applications and databases and making it look as though all of the information resides locally in one database. AMR Research employees also showcased the beta version of our website, which is powered by Endeca’s search applications.

Enginuity told us that its new Product Development/Formula Management System is being rolled out globally this month by one of the world's largest detergent companies. The release is based on the new Enginuity R4 platform that includes new, advanced detergent-specific calculations and functionality. This rollout brings the number of billion-dollar brands that rely on Enginuity to 15. It’s hard to dispute the company’s claim that it is “the leading Product Development/Formula Management System for the world's largest and most successful companies."

UK-based Eqos is best known for its hosted sourcing software for retail giants like Tesco, Lidl, and Edcon. The company is expanding into a new sector thanks to a recent deal with HMV, the leading provider of home entertainment in the UK. Eqos will be providing HMV with software for promotions and supplier deals. Rather than starting with the promotion and working backward, Eqos leverages its supplier management strengths to structure and audit complex deals—like making sure than all the Star Trek DVDs, games, and other paraphernalia are in your local store and on the web in time for the movie.

The big news at GXS was a recent win at Electrolux, the well-known appliance and vacuum cleaner manufacturer. Electrolux has implemented the GXS Logistics Network, part of the GXS Logistics Visibility service on GXS Trading Grid, and linked it into its U.S.-based transportation carrier network. The company has seven factories throughout North America and more than 200 carriers competing for its shipments. It needed a way to automate the shipment tender process. The GXS implementation includes the on-boarding of carriers representing more than 80 percent of Electrolux’s shipment transactions.

InfinityQS’ eSPC solution provides statistical analysis and visibility of defective lots while products are still at the supplier's site. If a problem occurs at a supplier's facility, eSPC will send out an alarm when the issue arises. Better to find the problem there instead of after inspection and receipt at the customer’s site.

Infor is leveraging its expertise in supply chain and performance management along with a new SOA development framework to build a brand new “advanced S&OP” application that will be offered as a standalone product to compete with ERP and best-of-breed vendors.

LLamasoft, a supply chain strategic modeling company, has already surpassed its new-name client total from 2008, its previous record year. The biggest year-over-year jumps have come from the retail and industrial manufacturing sectors. Many companies are bringing supply chain modeling and network design initiatives in-house for the first time, acknowledging the need for faster and more frequent reaction to market or commodity price shifts.

Manhattan Associates is set to launch its Unified Forecasting Method™, a patented algorithm set that was specifically architected to optimize inventory for intermittent and seasonal demand items. According to insiders, early test cases in grocery, fashion, and consumer products have delivered precise fine tuning well beyond market available approaches, enabling companies to shave millions in inventory while improving customer service.