Wednesday, 1 February 2012

Apple is the No. 1 Client Device

A report out by Canalys on the final quarter of 2011 puts Apple ahead of HP as the preferred client device amongst corporates and consumers. Who would have ever thought that? Apple as the domain of geeks and marketing agencies is officially a thing of the past. Ty, you were right all along.

Some will say that this is wrong accounting as it includes iPads and iPhones in the total - but this is the entire point about the rapidly shifting client device market in corporations, the device is fast becoming the choice of the user not the company.

Bring Your Own Device (BYOD) is a real phenomenon and it is helping Apple become a corporate standard in a world traditionally dominated by PCs and Microsoft. 

Learn a lesson, everyone. There is not a penny of discount given for Apple products whether it be an iPod, iPad, iPhone or a Mac and they are top of the range end user prices. The PC market has been long rated as a commodity market and wags will tell you that Apple would never become a corporate standard as resellers and Apple itself never negotiate. That's another myth busted as Macs continue to grow and take market share off all the main players like HP, Dell, Lenovo and the rest. The PC market is no longer a price sensitive, high competition market - Apple have redefined the way to sell.

How did Apple do it? By winning the hearts, minds and wallets of real users through innovation, ease of use and entire new ways to buy products and applications. Incredibly, real users have gone back into corporations and not asked but demanded that their tablets, smartphones and, now, Macs be attached to the network even if they foot the bill themselves.

Microsoft, HP, Dell, everyone, never saw this coming that not just Apple but their operating system would take a massive chunk of the world dominated by the PC. Recent figures released by Microsoft show that they can no longer rely on consumers for their profit - now they are being squeezed in corporations.

The pace of change is incredible and none of the mighty companies saw it coming. Apple is the No. 1 client in corporations.

Pinch yourself, it's real.

Friday, 27 January 2012

Apple Doubles Everything

In stark contrast to Microsoft's earnings announcements, there were considerable crowings at Apple. Microsoft showed that without a strong enterprise performance, their overall numbers would have looked pretty grim and now it seems there will almost certainly be my predicted earnings drop in 2012 at some point.

But Apple just plough on. In fact revenue over doubled comparing the last quarter to the same last year with 118% growth to record over $46bn in revenue. And profit rose the same degree to $13bn and they added $17bn of cash in the quarter too.

Over 37m iPhones were sold and 15m iPads putting Apple back at No. 1 in both categories while Macs shipped over 5m units rising a steady 21% as the PC industry took a noticeable dive in shipments and earnings.

Considering there is a pipeline of amazing new products on the horizon, Apple's future looks very rosy. There may be a few green faces in Seattle. After a long and clever plot, Apple is now a serious product in the eyes of corporations despite the fact it is expensive and it doesn't run Windows.

Now who would have predicted that 10 years ago? OK, other than Ty.

Tuesday, 24 January 2012

Is Billing Aggregation the Nirvana in the Cloud?

If you want to buy the most common way is to work out what you need in seats and the types of user, then work out the monthly total charge, multiply it by 12 to get the annual fee then add any project management work to go in and you have your first bill. Eh? You mean that despite the advertised monthly fee you actually pay annually up front?

Actually as a residue of the world of SaaS this is exactly how operates. As did my company, PlaceWare. Even with a minuscule discount for cash offered, most companies paid the annual charge up front rather than pay monthly.

Here's the even dafter thing, companies buying the actually accrued the charge monthly to the profit and loss account despite paying annually. Meanwhile, themselves smoothed the revenue recognition equally over the 12 months for the seats while recognising any project management fee up front.

So why this difference in the cash and P&L? The old way of buying software was on the capital account - pay up front but depreciate the 'asset' over 36 months. offered to not use the capital account but to pay for the software through overheads as a service while saving the cash account the extra two years. So to some extent, paying annually up front represented a positive on the cash-flow versus the old way. And it stuck.

Until now there hasn't been that many mainstream successful Cloud software offerings with the exception of, and maybe NetSuite, Taleo, Workday and a few others. SaaS has kept its little notion of paying 12 months up front as a peculiar thing to software. You even get it to some extent in buying storage space as Dropbox, and others all advertise monthly costs but charge annually.

The next wave of the Cloud, where many more software packages will migrate to the Cloud, is reckoned to be offered a different way. Gone will be the days of up front annual charges but monthly invoices will be payable for all the software licences consumed by companies. Currently, firms average less then 2 or 3 Cloud based software services each in the US and that's considered relatively high adoption. Most SaaS is offered directly from the vendor and so there is no middle man reseller involved in the main. So it is easy to provision and charge in a certain way.

But the next wave could be very different. For one, it's likely to use channels to a much greater extent. Why? Because most of the new entrants into Cloud based software will be traditional software vendors migrating their offerings as a web alternative. They will most likely leverage the channels they already use to service customers and so resellers may be selling multiple SaaS offerings from varieties of vendors to lots of end users. Pretty soon, keeping track of all those licences in play will become a pretty intensive task.

But if the end users are only buying 2 or 3 SaaS offerings, why would they be worried by over complexity of bills? Might they still be happy to buy the service paying annually but smoothing the charge over the P&L monthly? In the case of larger companies that may be the case - they have deeper pockets and can negotiate harder. But SMEs will be different. For one, they are greater credit risk to resellers and vendors and secondly they have less inclination to pay up front for 12 months, is the theory. But secondly, one of the great advantages of the Cloud to SMEs is that they can smooth costs for IT as they scale rather than having pump, cash-intensive periods of investment - each incremental user is a simple additional monthly cost.

So the aggregation of bills on a consumptive basis is seen as the way forward. Companies offering billing platforms which will take all that sold licence information, storing the history and producing one monthly bill based on the amalgamation of all that information per end user is important.

Well, not actually as important as it will be for the resellers who will have to produce bills for all their customers. It's actually the layer in between which has the greater need. End users may be happy to consolidate bills as usual - after all they have multiple bills coming in from multiple suppliers already with enough staff in accounts to deal with it. SMEs may appreciate an amalgamation service but realistically isn't that what their credit cards are for?

If an SME buys its SaaS on a monthly credit card account, all the bills will be in one place with an average 30 days credit.

Resellers, meanwhile, will have tons of data to deal with and those distributors who offer an aggregated billing service will be adding significant value in the supply chain. The question is - how much will that service be worth? 

Today, if you want to pay for monthly, you can get it with a finance charge through a select band of resellers or you can play really hardball with the vendor themselves and they will cave in if the deal is big enough. But will all vendors operate the same way?

What if the aggregators offered monthly billing to resellers but the resellers charged up front for 12 months? What if the aggregators bought all licences with 12 months in advance but billed monthly with a finance and service charge added? In general it means that software bought via aggregators will inherently be more expensive as the cost of the service and any finance will have to be added. This reduces the reseller margins. Some high end resellers will possibly be able to afford their own aggregation billing platform and make more money in the long run.

Most companies have not considered the transformation of billing services required to support the Cloud. Things are going to get complicated and most current billing systems do not perform well on monthly recurring billings and the burden on cash collections is heavier. Meanwhile, if cash collected is only one twelfth of the annual fee then cash-flow is hit a little harder for the reseller making that hyper jump to the Cloud all that much harder.

The end result is that there is a lot yet to play out in the world of Cloud software billing. Services like cohosting already have moved to monthly billing and cash but software has not. Will it really change or will the original SaaS vendors' models of annual collections up front pervade?

Will aggregators provide enough value to charge for their service to resellers and possibly end users? Will this new billing model negate some of the cost benefits and ROI that Cloud purports to offer over on-premise solutions? All this has yet to really play out.

However, if you run the numbers on Microsoft Office 365 over on premise Exchange or even Hosted Server Exchange, there is little or no cost benefit of moving to the Cloud. The only saving could be monthly billing and payments. Surprise, surprise - Microsoft's most popular payment method is 12 months in advance.

Either the end users are a strange lot or some assumptions about the monthly billing models are wrong. The answer has yet to be clarified.

Is Curbing Executive Pay the Right Thing to do?

Vince Cable is in his element. He has the sort of face that seems to say he has it in for someone and he has. In his line of fire are the executives of public owned companies and he is proposing to curb their pay. His reasoning is that over the last few years the combined performance of the top companies in Britain in terms of share price has been static at best while in that period executive pay has risen 13% each year, every year. He has a point.

Or has he? After all these companies have survived a recession, haven't they? And we should be glad of that. Besides, the incentive schemes that executives may be on could be bottom line related and we all know that share price has not always reflected the actual performance of companies in terms of profit making but is more a barometer of the market generally - perhaps more exactly, the sentiment of a select few traders of shares in the world and dastardly computer systems.

It also belittles how a company may be managed in terms of its performance measures. After all, some companies may be going through a transition and require large investment and less profit for a while, others may actually measure profit per head which may increase despite overall profits decreasing. Key Performance Indicators may vary from company to company depending on market conditions and just looking at share price is a very narrow way of assessing the overall success or lack of it for companies. But Vince Cable does have a point.

We have seen spectacular pay offs for executives who fail rapidly and monumentally - take Fred Goodwin for one. But it is becoming the norm. The faster and more effectively you fail, the more you can get in terms of a severance package - so why succeed? This is something most of us find abhorrent in modern day business.

It would seem the way forward being proposed is to reward long term share performance and to let shareholders have some kind of binding say in the matter. That's not always practicable. After all, the significant shareholders in companies may be pension funds managed by well-off mangers who actually only look at a short window of up to 5 years maximum. Why would these significant shareholders vote against a pay award if there are not in for the long run? It may be fanciful to believe that small shareholders can actually club together and organise a revolt that's binding as there may be thousands of individuals to organise.

And what happens when the markets recover? Business will boom and everyone will want the most hung-ho, highly rewarded executive no matter what. Worrying about exact pay now is only a symptom of the austere times we are in. When Britain's back on its legs, no one will worry how filthy rich an executive gets so long as we are all earning something. Isn't that right?

Anyway, lets' get to the nub of this matter. What we are all unhappy about is not so much executive pay but the pay of a thin wedge of incredibly well paid people in the finance sector. In truth, the finance sector only accounts for around 9% of our GDP, yet there is a disproportionate amount of money earned by specific staff within that sector, nearly all working in the City. These are the people who over the last 15 years have hardly increased share price, netted out the profits of their companies to zero at best and in many cases drove their companies to the brink of oblivion. Yet in that same period they earned on average around £3m each and it is rising this year to around £4m each.

Let's face it, these are the people who have made sure that we have extra tax to pay for the next 30 years. Even as we speak, the CEO of RBS, Stephen Hester, will receive a substantial bonus even though the value of our 83% holding in the company is still showing over a 40% loss.

These companies and their high earning staff remain untouchable. They are supposedly regulated by the FSA whose own staff actually received bonuses as they presided over the implosion of the British banking system and their response was to pick on the array of Independent Financial Advisers and drive most of them out of business while bank executives named their salaries and bonuses despite owing us a fortune.

No, Vince, you are looking in the wrong direction. Focus on what's really wrong first before hacking at the general melee of executives. There is a specific, massive problem that affects each and every one of us because we underwrite their failure. We have skin in the game. Our call is to pick on bank traders and executives first - curb the way they earn, how they earn, what its paid for and what they can trade. Then pick on the other guys who also do need curbing too.

The price of failure in banking is always laid upon the general retail banking staff and the taxpayer. And failure wins bonuses. With logic like that, banks should be the first port of call.

Thursday, 19 January 2012

Kodak - What can Tech Businesses Learn?

Today one of the pioneers of the photography, Kodak Eastman, filed for Chapter 11 bankruptcy protection in the US. After 132 years of dominating the world of photography, Kodak is on the outtake pile.

Yet the photography business has never been bigger. We buy more cameras, take more pictures and share them more today than we ever did and the market is growing. How could a savvy giant like Kodak have so misjudged the market? How could it just stand by and watch the world around it change? How could it stand up, King Canute-like, to the sea of change and get drowned so very easily?

It proves just one thing. You can be the biggest, even the best, but you have to move with the market and change. Microsoft needs to watch this implosion very carefully and mull over just what happened here because you have to innovate to survive. And when management goes to sleep or gets to swallow too much of its own story, that's when danger occurs. The market moves swiftly and pays no respect to status.

That's the Kodak lesson, learnt the hard way.

Saturday, 14 January 2012

Is Microsoft doomed in its Current Form?

It seems Microsoft has had a dose of reality in the last week. At the Consumer Electronics Show in Las Vegas, Tami Reller, the CFO of the Windows division, has warned that PC shipments will be lower than an already gloomy forecast in this quarter. In her case, she put this down to supply problems in the Thai flood regions where the high waters are still causing havoc to component makers, particularly on hard disks. Some UK distributors have plenty of servers but no disks which will impact their sales in the next few months.

Finally, it seems that the penny is dropping at Microsoft. Their figures are actually dependent on the shipment of PCs to a very high degree. I have illustrated before that Windows itself and Office Productivity products constitute the majority of the revenues and profits generated at Microsoft and these numbers are directly dependent on the number of client devices sold into homes and corporates. As PC sales alarmingly decline, so will Microsoft revenues and profits - in their very heartland.

Microsoft is a well spread company, for sure. But with servers taking a decline lately, Windows Server, already under severe attack by Linux, is also suffering. All this is occurring as Apple see sharp increases in the sales of its PC-like devices while tablets and smartphones continue to boom - all these devices coming with largely Apple and Google operating systems.

The threat also is that corporations are wising up. They have paid through the nose for arguably second rate products in their companies for too long. PCs which seem to fail conspicuously in less than 3 years, an operating so clunky it takes 5 minutes to load up each morning, office productivity tools which seem to suspend and crash for no perceivable reason, occupying ever expanding disk space.

Apple may charge top dollar for their hardware but you get a robust operating system, rich in features and free utilities of high quality which takes seconds to load up or resume, no matter what state you left it in. And office suite software is far cheaper with a breadth of products available at below £20 a pop - except Microsoft Office for Mac which is £189 but at least half the price of the PC version and many times better.

The fact is that tablets and smartphones are changing not just the array of client devices and how we use them for home and work but they are changing the way we buy software. Suddenly, we have a plethora, a vast hypermarket of innovative, low cost and clever software available to us that costs just a few pounds to buy. And we buy tons of the stuff. Finally, we are finding there are alternatives to the status quo that has frankly held us back for years in terms of real productivity.

Steve Jobs called it the post-PC era. I would liken it to the IT version of a 'renaissance' as people dream up all sorts of clever software and just punt it out in volume.

But there is a new trend. Bring Your Own Device (BYOD) is the consumerisation of IT. This is the concept that we buy our smartphones and tablets, even PCs ourselves and bring them to work as devices of choice to work with and demand access to the corporate networks and all its facilities and data. In the old days, at job offer time, we were told you would get a salary package and then a PC and phone would be provided. Already in the US, job offers go out with no PC or phone provided but the recruits are invited to bring their own.

This is one reason why Apple as a PC, tablet and smartphone provider and its counterparts in the tablet and smartphone arena are doing so well in the corporate world as users rebel against the constraints of the old PC world and flourish in the new post-PC era.

These are worrying trends for Microsoft. I heard of story of a Microsoft executive going into an Apple store to bait the salespeople with a new Nokia Lumia with its noddy-like tiling on the front having already arrived late and behind the market. It must have been a pathetic sight as an army of Apple customers looked up from their iPhone 4S devices and thought, 'whatever'.

This is part of the problem with Microsoft. This ingrained belief of impregnability and that users really have no place to go, so they swallow whatever Microsoft do and say. It's a Windows world, it's an Office world. The Spanish bank BBVA has proved that this is not necessarily the case in choosing to migrate its entire 110,000 staff to Google Apps for Business after a successful trial - encouraging all their employees to ditch the past. They have embraced the advantage of the Cloud to run their company by allowing the web to be the platform, not the PC which unshackles users from being given sub-standard machines and to choose a device of their own.

15 months ago, I bought the top of the range Lenovo Thinkpad - a great machine in terms of weight, PC sexiness and performance. Its battery life was always rubbish even though it was advertised as 10 hours and even though it runs Windows 7 its performance has degraded over time as I have found with every PC I have ever owned - it's as if they get fatigued from running rubbish software. Yesterday, as I walked into the atrium of a Microsoft building, it literally died. One minute I was looking at the presentation I was about to give, the next it was blank and dead. It still is dead.

In supreme irony, I had my Macbook Pro tucked in my bag (having not wanted to antagonise by using it) and latched onto the guest wifi and loaded up the same presentation from Dropbox. In seconds, without skipping a beat, I hooked up to the projector using my convertor cable and without pressing any button the projector and resolution was detected and my presentation was given. Jaws hit the table when they saw the Mac and I expected to get escorted out by security but when they saw how their own software behaved on a Mac with so many more options on how to run a slideshow from a PC and time your delivery, they were impressed.

But they still don't get it. Even when the graphs point out the clarity of the numbers and trends, they don't seem to get the fact that their very heartland, the core product set of the company is under persistent threat not by their customers but by users. No amount of canoodling with the CIO will make a difference. Users are rewriting corporate policy and deciding the future IT strategy.

I predicted that Microsoft will make a profits warning in 2012 and Keller's announcement prior to Q2 results was seeding some bad news. At some point, a hole will appear in that lucrative area that Microsoft has depended upon for years. If nothing else, the price of MS Office has to collapse in the future - nobody is going to pay the kinds of prices of the past for that product for the future. 

I predict that Microsoft will survive but not in the same form. It will have to radically change and find new ways to make money. Right now, it's not at all clear how they will do that. Is it time for management change? Maybe that's the starting point. 

But what do I know?

Tuesday, 10 January 2012

Is Britain Becoming a Nation of Bureaucrats?

One of the biggest growth areas in the last 15 years has been the rise in the number of jobs in the Public Sector. In fact, the Office of the Deputy Prime Minister never existed before the last Government and now it is one of the largest departments in the firmament of 'Big Bureaucracy'.

It was fashionable to spend more money in those booms days on frivolous red tape and many argued that there was a salary gap between private and public sector that had to be closed. It didn't just close - the kinds of salaries earned in the Public Sector, and then add in fine pension schemes, are fast getting ahead of the Private Sector.

In fact, this morning's story that in Wales the Public Sector wages are now around 18% higher than in the Private Sector is shocking news. It means that the Private Sector is finding it hard to compete in terms of salaries which means that Wales is staring down the barrel of becoming a haven for bureaucrats while innovation, entrepreneurship and business creativity will be stifled because people cannot afford to take Private Sector jobs. It also means that if there is an austerity package meaning Public Sector jobs and pay decreases then the Welsh economy gets hit disproportionally harder.

It's a fast turnaround. Some years ago, thanks to the inbound stimulus of investment by the Welsh Development Agency, Wales was attracting far above its fair share of inward investment by Private business when compared to the rest of Europe. 

It's a sad state when good experienced business people take Public Sector jobs in the middle or end of their career to get high salaries and pension benefits rather than keep the innovation going in business - where the economy can really get stimulated. But that's the reality. If you want to be an Interim Manager/Practitioner, Public Sector pays far more on a daily rate than Private Sector (Oil business excepted). If you want to be an IT consultant, the Public Sector have plentiful openings at great rates as they waste more and more money on useless, never ending contracts.

At one point in the Blair/Brown years, 1 in 4 jobs in Britain were in the Public Sector plus plenty of 'temporary' jobs and many more indirectly in support functions. The Public Sector accounts for, some say, as many as one third of the jobs in great Britain.

It's little wonder that our economy is struggling under that burden of payments but more importantly, how many of the people employed in these 'more secure' jobs could be contributing vibrantly to the Private Sector to help stimulate real growth?

Today, MPs will vote to pass the new High Speed Rail link that first goes to Birmingham costing around £32billion. While the Construction Sector will get great benefits from this stimulus it doesn't seem to be the wisest way to spend money to spawn a massive new Public Sector monolith to cost, administer and manage the project which will inevitably over-run and cost far more than originally intended - you can already write the book on it. And is a rail link to Birmingham the highest priority on stimulating the economy? You get the feeling that investing even a 10th of that into technology and construction of schools would be far better for the long term.

But that isn't what the City wants. £32billion will be split nicely between the construction companies and the banks to make this happen while a big proportion will be to fund the red tape around it. Good business all round.

And one of the biggest issues of a more attractive Public Sector over a Private Sector is not only that the tax burden on funding the jobs goes up but also the long term accrual for the pension deals also rise. For every one job created in the Public Sector around two could be created in the Private Sector (I can't prove that but it wouldn't surprise me).

Public Sector employees work in the same jobs longer, stifling the future for our young and it will mean ultimately that Britain becomes less competitive as it becomes just a sprawling, unimaginative bureaucracy supporting the Finance Sector.

Maybe that's our future. We are so good at administration that we become the new Offshore Outsourcing Centre for all of Europe's Civil Services. Lord knows, we are good at it.

Pity we didn't put so much time, effort and investment in encouraging Private business and entrepreneurship.