Tuesday, 29 November 2011

Single Access to Multiple Applications in the Cloud

Cloud applications are proliferating. It's likely that somewhere in your company a group or more uses one or more of Salesforce.com, NetSuite, Workday, Taleo, Evernote, Webex, LiveMeeting. It's also likely that the first implementation was some sort of unauthorised trial followed by a departmental purchase and in many cases it was followed by an enterprise wide deployment. That first point of entry probably was in defiance of company policy on IT, bought via a low flying departmental discretionary budget and avoided the clutches of the IT manager.

That's how Cloud has grown in many companies and it was the way it was originally sold by people like me. Pick off specific groups with particular needs who had budgets at their fingertips and then work your way out from there with internal reference selling.

Today, it means that Cloud applications are usually on-boarded without the usual controls and checks by IT, particularly when it comes to security. This has been exacerbated in the recent past by the growth in the phenomenon of Bring Your Own Device (BYOD). Who would have thought that in these tough times people like you and I would go out and buy own devices like smartphones and tablets and then bring them into work and have them put on the network? And these devices aren't cheap, particularly as most companies issue perfectly capable products like Blackberries and laptops for us all to work with.

But times have changed and work and leisure are beginning to merge thanks to the new wave of smart devices that can combine the two worlds as one. But this also presents massive security issues for the corporation as many of us start to use handy applications like Dropbox to quickly share files we are working on. What happens if the device gets lost or stolen? The data can be accessed all too easily as most iPads or similar are protected by a PIN at best and with nothing as robust as a standard VPN.

And there is the general issue of 'password-fatigue'. Hands up how many of us use the simplest of passwords like a common word, your spouses' name or a simple thing like 'qwerty' or '123456'? And how many of us use the same password for all or many of our entry points? Why? Because we simply cannot remember all the multiple points of entry into the various systems we have. I recently bought one of these password memory apps and have recorded 32 applications or websites so far that I have entry points for. I just hope I can remember the password to get into it…..

So as this whole Cloud thing and BYOD takes greater holder on companies the issues of multiple logins, security and control over deployments, data and access rights is going to get worse and worse. And more complex. How is it all going to be controlled?

Well, one solution could via a US company called Okta.com who have looked at the whole issue of multiple logins, access rights and password fatigue in conjunction with the proliferation of applications and services in companies. They go a step further in helping companies to fully understand the ROI in SaaS or Cloud based software. One of the biggest aspects of this is that with perpetual licence software you basically bought one licence for every user regardless of how many people use the software, to what extent and how many simultaneously. 

Okta, by giving a single point of access to all applications in a Cloud Services Network, can also monitor and manage the usage of all software who gets access to what. Crucially, this control can be device agnostic and so all these new exotic devices being brought onto the network can come back under a single point of control by administering the access to the applications and data.

Okta are currently focusing on growing their North American business but could be coming your way soon. Certainly take a look at downloading their whitepaper and you may even be able to take a free trial but it's well worth keeping a watchful eye on this company as the Cloud grows.

Microsoft fails - Apple wins?

Yesterday I explored the hypothetical case of Microsoft collapsing. While I am not a Microsoft 'Arnageddonist', as I think $60bn of cash should buy them some path to safety, I do argue in my 5 predictions for 2012 that Microsoft will see revenues and profits stall in 2012 as pressure grows on Windows sales as PC shipments continue to fall while there will be increased pressure on Office products due to corporates questioned pricing models and the rise of new alternatives plus less PC shipments to sell them on. I do believe Microsoft needs a radical change in plans and I think that requires new management throughout. It has to break out of the rut its in. It may not be so vulnerable in large corporations but in the higher margin heartland of SME and consumer, Microsoft is at extreme risk to the likes of Apple and Google.

A sobering thought - 97% of UK companies are classified as SMEs, employing the largest share of the workforce and there are millions of consumers out there. That is where Google will sustain its attack in the places where free and low cost products and services are readily accepted. Microsoft are incredibly vulnerable down there in its long tail of untouched users.

But if Microsoft were to fail, would Apple gain and become the flag bearing IT giant of the future? Right now it is the US' most valuable company with more cash than the US Treasury. Not bad for a company that almost expired around 10 years ago. So would Apple be the company to take over Microsoft's mantle of IT giant and dominant force in the IT industry?

I don't think so. However, I am a recent convert to Apple and I love the company and the products. I am fully kitted out with Macbook Pro, iPad2 and iPhone 4 with IR keypad and somewhere we still have an iPod and iPod Shuffle. Now the whole triumvirate of products are bound together by iCloud which backs me up.

The clue was in the series of products. Apple has a strong base, which is how it came up by stealth on Microsoft, in the consumer market. This can also be a curse as the need to sustain the longevity of products and find the next new ones is a ceaseless and sapping task. Smartphones has been a productive area but there is intense competition from all angles and Apple cannot always sustain it's position on mere gadgetry. Just this morning, I am experiencing battery drain on what is now my third iPhone to show the same problem. Quality needs to match usability once the fad value is over.

And iPad. What a fantastic product. In the heat of taking it on, I off loaded around 80% of my work onto the device, forsaking my PC. Full of warm feelings, I switched my PC to Apple Macbook Pro and it has been a huge success for me. So much so that I now only use my iPad2 for around 10% of my work - mainly blogging and viewing documents.

The usefulness of tablets needs to be enhanced if they are truly going to take up the long term slack in the PC market and Apple's growing market share in the business world actually threatens the iPad in the same market.

In the final analysis, Apple is a superb innovator in the user experience and will always have its place as an end device of choice amongst users. The brand is cool and the products are always one step ahead. That may change but the wave is worth riding. But beyond that, Apple has no real binding to the mainstream infrastructure that sits at the heart of networks and computing today. It doesn't make servers or network stuff, not much software for interactivity, it's pretty much an end device company only and proud of it. It's operating system is different to the standards and there is always the annoying incompatibilities at the edge of things that just irk the corporate user and makes the full user experience just short of the nirvana expected for the outlay.

Should Microsoft falter then Apple will indeed benefit but it will not be the defacto standard that Microsoft has been. But what it will do is to continually challenge the status quo and set standards on the user experience that have been sorely missing from the Microsoft world from which we are slowly emerging. I think it will also, along with Google, challenge the absurd amounts of money we have all continued to pay for ropy old office productivity products that really are not that special. In fact, there will be a real software revolution as more products appear for less cost doing more.

Steve Jobs called this the post PC era and he was right. Microsoft will stumble and it will be the mark of the management to see if it can make this just a minor slip up or whether it will be a slow decline or the collapse that some foretell. Whatever happens next has to be good for the industry and even if they do not emerge as giants, we have a great deal to thank Apple for in shaking us all out of the malaise of accepting second best as the only way.

In my other predictions for 2012, along with MS issuing a profits warning before the end of the year, I predict Groupon will fail and get bought for a fraction of its IPO price, aggregators will rise as a force in computer channels as the Cloud takes a grip, corporate AppStores will arise in the face of the BYOD phenomenon and Google will see sales of its Google Apps for Business rise to between $500m and $1bn of annualised sales by the end of 2012.

New Cloud developments? Keep a close eye on two companies called Okta and independenceIT. 

Monday, 28 November 2011

My Top 5 i-Technology Predictions for 2012

I have been doing a bit of Mystic Meg'ing and you can find my predictions published by Jeremy Geelan of Cloud Expo Inc.

Nigel's i-Technology Top 5 Predictions for 2012.

Feel free to challenge or agree!

An early Happy Cloud Year 2012.

Is Microsoft Going To Collapse?

There have been a lot of articles speculating on potential scenarios in which Microsoft will collapse - no, not just from Apple or Google-ites but from learned experts such as Forbes.

There are some scenarios in which Microsoft could come a cropper and there is a good slide show about 'Steve Ballmer's Nightmare' which depicts things too. I have argued that Microsoft need to be worried about some of the key industry trends and I focus on the growth of smartphone, tablets and office productivity tools in the Cloud as well as their treatment of channel but Forbes looks at the universe of Microsoft software and where the revenue comes from and argues that there are some doomsday scenarios.

The reality is that the vast majority of Microsoft revenues come from Windows and Office. The PC market as we know it is declining fast and this is Microsoft's staple income. The slack is being taken up by new wave devices like tablets and smartphones and Microsoft has has given that territory to basically Apple and Google on both counts. If the operating system is at risk, so too is Office as new waves of Cloud based software comes onto these devices and Macs for a fraction of the cost of the expensive Office products. Microsoft is not just under a barrage of attacks from alternative software but their costs too.

The demand for Cloud based office productivity tools is growing and Microsoft's Office 365 is a sham Cloud product which boasts a hosted Exchange and some tools which are too complicated and unusable for SMEs. Google is taking up slack as Google Apps for Business is a simple, flat cost per user and the arguments for a hybrid solution from Microsoft are being eroded.

If this battleground is lost by Microsoft, then its profitability is at risk and the basic tenet of arguments is that Microsoft is then at wider risk.

While this all may be calling Armageddon a little early, it has been disappointing to see Microsoft's apparent lack of creativity and innovation in the Cloud, specifically on Office products while the alleged inbred arrogance of the management is perceived as stifling alternatives for the market and threatening channel confidence. The lack of ability to tackle the smartphone and tablet market has been major manifestations of this.

Personally, I think Microsoft has plenty left in the tank. It makes enormous profits and has strength in depth. They can do more, if they try. Certainly, my observation is that it's a company that has got into the old IBM mode - it is management by upward presentation which falls in line with top level thinking. I don't see much challenge to the status quo and it's Steve Ballmer that everyone seems to want to be sure they concur with. So the slides do just that.

While that may have worked for Apple because Jobs was visionary enough to be ahead of the game, Ballmer seems to be nearing the end of his long tenure of a company that has coasted for too long off the back of a line virtual monopoly. The fact is, it seems to have lost the art of innovation and has lost the hunger to compete by anything more than loud bluster.

Certainly, the rapid changes in the market, the explosion of the Cloud, the decline of traditional computing and the rise in new devices controlled by others seems to have caught Microsoft off balance. This represents the first serious and prolonged onslaught on Microsoft's dominant position and cannot be ignored by either wishing it away or unintelligent arrogance by its employees. 

The reality is that Google and Apple have taken a significant new position in the market, from which they can attack Microsoft's heartland. And it seems as if Microsoft never saw it coming, have been slow to react and thinks it can talk its way out of trouble. All of which points to the fact that Armageddon is more something that Microsoft can do to itself rather than the market do to it.

The obvious answer is for Microsoft to change management fast at all levels to breathe new life, thought and creativity into the giant without the baggage of the past and mobilise the research and production teams to drive new innovation into the products and get costs down while dreaming up its master plan to beat Google and Apple.

It's time to walk the walk not talk the talk. And fast.

Calx Europe is Business Acceleration company which works with vendors and channel to develop and implement plans to win in the Cloud market opportunity. For more information please call +44 (0) 207 193 2356.

Friday, 25 November 2011

Buying Software in the Future

Steve Jobs was an incredible man - I think we all agree on that. But to my mind, amongst all his innovations and acumen what he did to converge the mobile and computing market was stunning. I think it was just the first steps in an exciting journey.

Recently, the CEO of Tech Data asserted that smartphones were the products to watch in the next year or two and he knows a thing or two about products as his company sells around $25bn of Hi-Tech kit a year. So it seems the world is set to ride the tsunami of mobility products - smartphones and tablets to the fore.

This has been much the domain of the consumer until recently when we all started to turn up to work with these products that we bought with our own money and insisted they should be put on the network and to heck with the security risks. This 'Consumerisation of IT' or 'BYOD' thing is becoming a huge issue but it brings opportunity.

So what did Steve Jobs do that was so amazing? Well Vodafone and the likes had toyed with sending applications and things to the phone for a while but it was all a bit disjointed and ineffective. Jobs turned it all on its head. He brought the world of computing to the mobile industry by not just inventing a great smartphone but by re-inventing how applications were to be delivered to the phone and he encouraged hundreds of companies, small and large to develop Apps. And he cut out the phone companies from the action. And he cut out the channel from the action too. It was all owned and delivered by Apple - just as he had done with iTunes, the App Store revolutionised the way software is delivered first to phones and then to tablets - and where next?

Unlike Microsoft who opened up the PC market for everyone to develop in, Apple opened up the phone but took on the role of software distributor by providing the only outlet to get the product. And it takes a sizeable cut of the sale for doing so - much more than a distributor would. By creating this bond with its customer, Apple has also become the fastest growing Cloud storage company in the world when they delivered iCloud. Suddenly the bonds with Apple get stronger and it spreads across the spectrum of Apple iPhone, iPad and Mac computers. This is a superb business model for the future as you can just layer on more products and services easily.

So is this the template for the future of PC software purchases? As yet there has been no great move by a single large company to try to emulate Apple but there are few parallels in the PC industry other than Apple themselves. This leads me to think that the software hypermarket company of the future has yet to emerge.

I can imagine a company setting up an AppStore software hypermarket and aggregating as much software as possible for consumers and small businesses to buy - both traditional perpetual licence software and Cloud based. Such a company could cut out traditional channels as Apple have done. It's not as easy to do as Apple have farmed their own base in doing so whereas there are loads of PC vendors out there. 

That's why I think the software store of the future will be independent of vendors and potentially not of the channel today. Now who could that be? Amazon? Google? Wal-Mart?

Calx Europe is a Business Acceleration company specialising in working with vendors and channel to develop and implement strategies in the Cloud market. Call +44 (0) 207 193 2356 for a no obligation discussion.

The Channel is Dead, Long Live the Channel

This Cloud thing is making vendors do some potty things. Lots of them are investing greatly in their own hosting capacity and then they try to circumnavigate the channel in terms of dealing with the end user. Yet they also want to use the channel's leverage in customers to get recommended for the sale, recognising the role the channel plays in reaching so many customers.

Something tells me this is not a long term business model that has sustainability.

Channel executives are canny folk. They survive most onslaughts on their business and barmy channel strategies by vendors with ever decreasing margins and hoops to jump through and still grow at the end of it. The trouble is that customers just keep on buying. Vendors just don't seem to get all this as they continually claim that Resellers and Distributors offer less and less value yet more and more is bought from them.

Broadline Distributors are a great example of this - the mighty Ingram Micro and Tech Data should have died long ago according to vendor executives if they really do provide no value in the channel but they keep on turning in growth. And they still are the 'Go To' guys when vendors need a favour.

So why is Cloud so much different? And why are vendor executives at some of the top firms in the world so convinced that this time distributors will whither on the vine and die? Perhaps they ought not to say it too loud in case the distributors hear and they might live to regret those words.

All is well at the distributors. Numbers look good, margins are holding with a few collywobbles about supplies of this and that from Thailand and the 'will they, won't they' at HP but by and large things are pretty rosy. It's fair to say as the phenomenon of 'Bring Your Own Device' takes hold, some of the distributors are getting uppity about revenues flowing through things like airtime providers or App Stores but they can't complain too much when they also supply smartphones, as in Tech Data's case, by the bucket load. 

In fact, most distributors are pretty sanguine about such vendor comments that their value ceases in the Cloud. They adopt their hardy pose and say, 'Well we've survived all this industry has flung at us yet' and knuckle down. Much of what they do is for the now as annual, quarterly, monthly and daily numbers drive their mentality and so thinking about what might be in 2015 is usually just a number in someone's imagination. What the business might look like then is not the thought du jour.

Somewhere along the road, vendors and distributors with the rest of the channel need a meeting of minds or else things just might get a bit messy out there. 

Just this morning a VAD Distributor in the Cloud reckoned aggregation platforms at distributors were the domain of only broadliners. That's a naive way of looking at things and although it may conflict with large resellers, the fact is that distributors have a huge presence in the mid-market where no one can afford such costly systems right now nor the problem of running them alongside their current ERP. Let distributors scale up theirs.

The risk here is customer stickiness. If a distributor does this right then it can aggregate the sales of all resources, products and services a Reseller sells on a single monthly bill. It will accumulate vast history, even bill-on-behalf of some Resellers. Effectively it will become both the bank and the back end system for thousands of Resellers and just as it is hard to change your ERP system overnight, it will become equally hard to change your distributor once you commit Cloud business to them. All of which means that margins should start to solidify and even creep up while churn may become lower. 

So that VAD distributor needs to get wise. And so do the vendors. End users will not appreciate having thousands of suppliers. It would be hell for consumers to have to buy their Apps individually from the myriad of software writers and the App market would never have taken off the way it has if that was the case. Apple changed the paradigm for us all in terms of online software hypermarkets and aggregated billings and, guess what, they make plenty of money out of it, far more than the average distributor does on software today.

So aggregation has an important and huge future and it is the one thing that may make those vendor executives regret their words about distributors. Meanwhile, distributors ought not to get over confident that just buying a platform will do the trick. There has to be a meeting of minds and the strategy must coincide with that of the vendors. That's going to take a while.

Why? Because many senior executives at vendors and channel alike simply don't get the Cloud yet.

Calx Europe is a Business Acceleration company specialising in helping vendors and channel develop and implement Cloud strategies. Call +44 (0) 207 193 2356 for a no obligation discussion about the Cloud and its future.

Thursday, 24 November 2011

Is Groupon Going To The Biggest Tech Stock Failure?

Groupon shares have now fallen back to pre-IPO level where they spectacularly raised $805m just 3 weeks ago. Investors are getting worried as news that Groupon's Chinese Joint Venture has already hit a rocky road.

Yesterday I blogged on Groupon looking at a potentially flawed business model that is a child of the times. I mean this not only in that we are in a recession and so discount offers are very popular in harder times amongst consumers but also it is a time when it is perfectly acceptable for a business to start up and raise huge sums of money on the back of a business that loses ever more money in its model every time it makes a sale. The actual cost of acquisition of each customer is increasing for Groupon not leveraging the scale of the operations as you would expect of any business - so the question is: when will it ever make a profit?.

I highlighted some reasons why Groupon specifically is flawed in the face of investors who willingly chipped in nearly $1bn for a small stake in the company:
  1. It's a business borne out of hard times that may lose it's shine when the recession ends
  2. It is reliant on the habits of 'Discount Junkies', i.e. customers who are serial discount offer buyers and are not likely to show brand loyalty
  3. The business model for many of the retailers participating is flawed and once they have overcome the fad value they will realise they have to be more targeted with their offers and more frugal 
  4. It's really a 'me-too' proposition that's not only easy to clone but it is potentially at risk by big gun players like Google and Amazon.
I doubt if my article triggered the share slide as there have been high profile news stories of bakers losing thousands on offers that were 'too successful' and in the US there have been cases where the ethics of offering cosmetic survey under an intense, short period deals is pressuring people into surgery they either don't need or haven't sufficiently considered.

It all points to a potential short term story for Groupon and a possible bad news story for investors. To put the case for a fall in even more practical terms there are now rumours that executive and staff lock-ins on stock options are less than 6 months and there may be considerable 'internal' share sales to follow - a sort of sign that rats are leaving  the sinking ship as these people realise the game is up.

This has serious repercussions for other Tech stocks that wish to IPO as investors may well be very concerned at the sight of Groupon's potential implosion. The fact is that I blogged on this potential some months ago and to me it was perhaps too obvious that this company would fail or at least be not so world changing. I get no satisfaction about being right but there has to be serious questions asked about the 'get rich quick' mentality that has pervaded in venture capital and tech investors who have talked the Groupon story up.

Scrutiny may now change to others with 'Potential potential' business models as I describe them like Twitter. You have to ask yourself that if a service is not valuable enough to be charged for at the start, how can it possibly charge later? If Twitter is just modelling itself to be sold then all someone is buying is a glorified and very expensive database.

The Emperor's Clothes springs to mind. 

Will the Industry Benefit from Groupon's Failure?

There is a school of thought that the industry needs a big failure to snap investors out of this daft flawed business model mentality of jam tomorrow. Hopefully, the good that will come of it will be that need start ups have a cogent plan for making money early rather than the too hopeful tack of accumulating vast losses on the wisp of a hope that some day they might hit the seem of gold.

Oh dear, are we living through the second Californian Gold Rush? Lot of people got rich then and many more didn't.
Calx Europe is a Business Acceleration company specialising in helping companies develop and implement plans to capitalise on the Cloud market opportunity. Please call +44(0) 207 193 2356 for more information.

Wednesday, 23 November 2011

Businesses which have potential potential

Yesterday's Telegraph Online had an interesting article about the Groupon and voucher phenomenon. I have blogged on this before and had struggled to see beyond laser hair removal and teeth whitening where the relevance was for people like me (although at my age teeth whitening is definitely relevant). Lately, the offers have picked up some momentum and there have been interesting holidays, breaks and restaurant ideas which are beginning to hit the mark.

But the question remains about the sustainability of the models around these. If you were an investor in Groupon or similar you would be very alarmed at the cost of customer acquisition. For example, on the Boiler Service type offers at around £40, Groupon take around half the money but if I refer this offer to three people I am credited £6 for each referral. Right now Groupon is racking up serious losses because of this and I guess the white knuckle ride for an investor is whether the cut over time to profitability will ever occur.

Let's not forget the boiler person in this - at around half the offer price flowing back to them, the cost of time and travel means they make zip on the whole deal. The only way they make money is if a percentage of the customers have faulty boilers. 

The other worry has to be whether the whole discount offer thing is a child of the times - we are in a recession and sometimes you have to invest to get growth (as Gordon Brown would advise). That's sensible in some respects but if a restaurant makes a fabulous loss leading offer and targets 400 coupons being sold and actually gets 4,000 then suddenly the bookings will start blocking the spaces that could be sold to normal full price payers, so doubling or more the cost of the offer. It becomes a double whammy and it's why, over time, we have seen BA and others revising the terms of their air miles schemes so as to make them a shadow of their former schemes - almost unusable in the end as so few air mile seats are available on each flight.

Are people like restaurant owners really thinking through the offers as part of a longer term strategy? For example, if a restaurant offers the deal between the hours of 2pm and 6pm on a Saturday then they get people in during the times when business is low and costs are high - it doesn't matter if they continue the offer as they are getting marginal returns on the costs instead of losses. If those who take up the offer are told this is now available every week at the same time only to those who took up the coupon then maybe they create a sustainable model. But if that is the only time the customer ever visits then the only way to get them back is to repeat the offer which doubles the cost of customer acquisition.

However, I loved the example of the baker who sold 100,000+ cupcakes as that is perfect - a low cost manufactured, perishable product enjoying peak sales but with it's own sustainable model in that if people liked the taste they would come back - that is great marketing.

Then there is the problem of whether it is truly generating repeat business for businesses. If the restaurant makes a great offer, do people actually come back again and pay full price? Also, if the loss leader is on the food and the restaurant ups the price of drinks, when does the customer get wise to the fact that the normal offers are better (take a look at the supermarket rage of changing offers rapidly so as to block our ability in calculating the actual discounts on offer). The key for all companies making offers is to get sustainable business but if that is always at a loss leading or low margin price then all you have succeeded in doing is extracting profits from your business.

The other issue for Groupon is this is really a non-unique business proposition. There are loads of voucher offers, Gourmet Clubs, loyalty cards and whatnot. This is not a magical new idea although the execution is great. Google, Amazon and others will launch similar and they have deep pockets, wide reach and the systems to really take this concept by the scruff of the neck. 

It all argues that this whole voucher business is a sign of the times and is largely unsustainable in its current, high cost format. Something has to give. More likely, as the economy picks up, less businesses will be eager to make such deep offers and so the engine for the vouchers will slow down as punters have more redeemable cash in their pockets. The stories are great at the moment, but you have to think that there is something unsustainable about the whole package.


It brings me back to Twitter. A networked colleague has been selling knock down courses on how to use Twitter to promote yourself and your business. That's great and there is no doubt that Twitter is a great block in a rounded marketing plan. But it's highly transient in that your Tweet evaporates very quickly - I certainly hardly ever search back more than a page when I log on to see what has been said and I rarely look at it for more than a minute at a time. So if something has not caught my eye in those transient moments then it never will.

Moreover, I tend to screen out out blatant adverts and look for some interesting news or insight (I love Tom Peters' rants and he replies to you too - wow). So my thought is that while this is an incredibly useful and dynamic communication tool, how on earth will it ever make money? And sustainably so?

Some businesses are only ever created to be sold. I suppose the reach to millions by the likes of Skype, Facebook, You Tube and Twitter is a measure of pent up money but the reality is that none have yet capitalised. The businesses have what I call 'Potential potential'. They have the potential to make money - potentially.

I can see Facebook and Skype charging for things but I would say that the percentage willing to pay is a fraction of the user base. That's just a fact - the lure of these platforms is that fact they are free as well as the neat things you can do. Had they ever charged at the start perhaps they would have never have taken off. Or would they?

Mobile phones is a more physical manifestation of this sort of model. Who would really have thought that we would pay loads of money to talk anywhere? We did and we talk more than ever with calls increasing and lasting longer. The small back channel installed by engineers to update phones was exploited for texting and who would ever thought that it would grip us the way it has. Massive profits for a marginal increase in costs. The thing about this industry is that charging was there from the start - no one ever thought to give us all these facilities for free even when the cost of providing them was peanuts. No one really quibbles about using the phone abroad until we get the bills. So you can charge upfront and still create a monster.


Anyone can make a business plan or run a business that loses money - that's pretty easy and takes little imagination or skill. But creating a sustainable profitable business is much harder but infinitely more preferable.

We may get through this phase of high cost of customer acquisition with the hope of recouping later. Some companies did this well like lastminute.com, Amazon, Google and others but ultimately few who set out on that journey actually survive. Could Vodafone have ever grown this far if it decided at the start to give free calls? I doubt it.

History has shown that if you give something away for free, you had better start charging soon after or else you lose the momentum to get people to pay. Or, you find a premium that people will pay for that always keeps you ahead of the freebies.

And, as we eventually emerge from recession, will high discount schemes fall by the wayside as consumers fuel growth? Are such business models transient?

I may be getting a little cynical in my old age but I think these 'Potential potential' businesses have but a short window to deliver their game plan. You can't be free or effectively so forever. Until then, I may get my teeth whitened some day but I just wish that the boiler service offer would extend to Hertfordshire - it was very parky this morning and I think my radiators and boiler need checking.

You know what? In a cold snap, I would pay full value for such a service. Offering it at £39 now is just silly.

Marketing is as much about the timing as the offer. 

Tuesday, 22 November 2011

Microsoft Office 365 - Flawed Go To Market Strategy?

OK, so I have given the product, MS Office 365, a kicking as a small business. I am not happy with its implementation or value as a Cloud application and it's about as innovative as a paperclip. But how about Microsoft's plan to foist it on the world - surely that's where they will win the battle?

You might think that a company like Microsoft with all those fine minds and resources will have worked out a solid plan even if the product is ropey (some would argue they have been doing this for years anyway), given the incredible reach and brand that someone like Google has as a competitor. Hmm, we'll see.

Hosted Exchange vs Office 365

The great thing about Hosted Exchange is that it is widely available from a number of different suppliers who host it themselves. Why is that a good thing when MS Office 365 is hosted by Microsoft themselves?

Here's a few points:
  • Different hosters can mean a variety of SLAs which may be more in line with the variety of business users' needs. Choice is good.
  • Choice is good also from a pricing point of view. MS Office 365 has one single cost wherever you go, and it's non-negotiable. By limiting the syndication of the software, Microsoft has effectively set a standard market retail price with no option for users to shop around. You can go from reseller to reseller but they sell MS Office 365 for a fixed price which you pay Microsoft and each reseller gets a fixed commission or referral fee for doing so. How EU anti-competition Laws view this I don't know but companies have no choice in terms of cost even if they 'source' it through a reseller.
  • If Microsoft suffers an outage then everyone does. Hosted Exchange is syndicated by many service providers which spread the risk - e.g. if Fasthosts has an outage only Fasthosts' customers are affected (just an example - hypothetical, of course).
  • Hosted Exchange really gives all the email capabilities you require for Office so MS Office 365 has the Lync and SharePoint servers as added value. Well, look at my previous blog - value is something that is useful, neither of these are useful to most small businesses. Lync has a fundamental problem if your domain is hosted with companies that don't support its features and this is a big issue if you change from Hosted Exchange.
The Supply Chain

You can use your favourite reseller to buy MS Office 365 but you cannot shop around for the best deal for the product itself. One price fits all - I mean all the bewildering prices in the MS matrix fits all, well you know what I mean. No discount.

It makes you wonder why channel is included at all. Once they sell (no, introduce) the product to you and they get their small referral fee, their incentive to keep close to you diminishes over time as the referral fee on renewals is very low and gets lower.

Microsoft have syndicated MS Office 365 through a selection of Telecom companies but the strategy has been disastrous. Why? Because these companies are not IT resellers. They don't understand the concept of selling complex  products that need some pre and post sales support, knowledge of current IT environments and Exchange servers, Lync and SharePoint. Crikey, if even Microsoft don't have the support for the three elements in the same place, why would Telecom companies have the same?

Ah, but Telecom companies have the capability to bill on a consumptive basis, so that makes them great guys to sell this MS Office 365 as it gets billed monthly and based on the number of users. Actually, the billing side is the post sale administration and has no correlation to the ability to sell and support the product. 

This was a daft strategy.

Consumptive billing is only part of a solution and it's not the vital part to get the product sold and supported - not even close. And there are equally good, if not better ways to bill MS Office 365 and other Cloud products and services. In fact the Telecom approach is not even that good as it's raw inputs are drawn from dumb switches that just monitor consumption of minutes on given ports by individual phone numbers - that doesn't sound like software licences sold with fixed monthly fees, does it? No, it doesn't and it isn't.

The Battle with Google

Google remain the main competitor. While Google may win only the odd major corporation with a fistful of licences in a single sale, they will accumulate thousands of consumers and small business users at the kind price, capability and ease of use they offer. It's simple, easy and cost effective.

Microsoft's long tail of small business users are the real battle ground - students and consumers too. Millions of them - all up for grabs. All of whom face the upgrade nightmare that Microsoft regularly foists on them in terms of cost and disruption. Each time that dilemma is faced, Google has a chance.

Microsoft, meanwhile has a global army of thousands of enabled Microsoft resellers and OEMs who know and love them (well it's a business thing) and yet they have been cut out of the loop in terms of being able to continue to own their customers and recognise the revenue they make fully. Further, they have been forsaken for the likes of Telecom companies in being able to syndicate the software. 

But most importantly, is the implied threat to their future relationship with Microsoft. If the big machine is going to deal direct in the Cloud market, where is the future of the channel? If that's the case, why should the channel be committed to the mature product sets where margins are so small?

I can't help feeling that a trick has been missed. Certainly, as an Office 365 customer, I'm pretty cheesed off with the disparate billing I have from suppliers and it would be great to have one neck to choke and one monthly bill - that I can negotiate on if it's aggregated. Right now, the power of negotiation has gone away and I have to track my own renewals while becoming more of an IT manager than before.

This threatens the Cloud's future and neither Google nor Microsoft have got this right by a long chalk - yet.

They need some sound advice. But would they listen? I doubt it. When you're that big you kind of get used to everyone listening to you.

Calx Europe is Business Acceleration Company and helps vendors and channel companies to develop and implement strategies in the Cloud. Call +44(0)207 103 2356 for more information. For healthy Cloud debate read the Calx Europe Cloud Debate Daily newspaper.

Microsoft Office 365 for Small Businesses - The Truth

I'm a small or micro business - it's really just me but I deal with organisations daily from tiny to huge and they could be anywhere in the world. For my kind of business, the Cloud is my friend. It allows me to leverage resources to make me play in the big league with the same tools for productivity and communication while keeping my costs sensible. If ever there was an argument for Cloud, I have it as a business.

So I have put all my applications and resources into the Cloud and I now run all the normal tools of the trade. I have an Apple MacBook Pro for my daily work running Office for Mac client, a PC still as back up, an iPad2 and an iPhone 4. With these tools I can communicate to anyone, anywhere, share documents and I can even build my website and create books and podcasts. I couldn't be more productive.

Or could I? Three months ago I bought Microsoft Office 365. Up until then I ran a hosted Exchange at Fasthosts and had Office 2007 as client on a Windows XP laptop. I changed - went Windows 7, Office 2010 and Office 365 thinking I would leverage all the new tools Microsoft gives me.

Thanks to Core GB, it took me a full day only (what??) to move from hosted Exchange to MS Office 365 and it would have cost a full day's support which would have cost over 3 times the annual cost of Office 365 licence but we scratched each other's backs. Still, it was incredibly complicated and without their help it would never have happened. Yet, all those years ago when I first had a hosted Exchange it was simple and I was up and running in no time.

Rule 1 on MS Office 365 - changing to it is incredibly time, money and support consuming. For a small or micro business, it is not an efficient use of resources for the result. Avoid it if you can.

Rule 2 on MS Office 365 - in one of the few instances I know, the ROI on changing to the Cloud actually is at best neutral but is actually far more expensive when you factor in support and…..

MS Office 365 - Glorified Email?

I bought the E3 plan (at £189 per user per annum) in the bewildering MS pricing plans which gave me MS Office 365 Exchange plus the Web Apps and an Office 2010 client. It didn't say I could install this on up to 5 devices but you can. As long as one of them isn't an Apple PC, so I had to buy Office for Mac.

I found that to communicate with a main client I needed Windows still as that client used LiveMeeting (it still hasn't moved on since the late nineties) so I resorted to buying Parallels and a Windows operating system (Microsoft would love me for full licence purchases - as a single user I have more valid copies of their software than most large Chinese companies). Then I could use LiveMeeting fine.

But MS Office 365 comes with Lync, I hear you say. Well, it does and so I tried it but it wouldn't work. Core GB told me that my old hosted service where my domain still resided, did not support some sort of SRV things so I had to change domain provider from Fasthosts. I had just bought 10 years of domain registration with them so that money was wasted immediately and I changed to Zen who only allow you to buy 1 year at a time which is very poor and risky in my book.

That done, Lync should work, right? Well I you have to become your own IT Manager and go into the System Administration in order to enable 'Federated Domains' for each user, is the first issue. Overcoming that complexity, a client asked me if I could IM him. No problem - it's called Lync now so watch this.

Nothing happened. Finally, yesterday I spoke to a lovely MS Support lady who informed me that outside my domain, federating my domain is one step. Then I have to get all my clients to federate my domain back and to do this they have to contact their System Administrator and get this done - if allowed.

The client in question is a $25bn global company and my contact laughed at the suggestion. So I have had to use Webex which costs £30+ per user per month.

Rule 3 on MS Office 365 - Lync is a total disaster and a waste of money.

But it's bundled in free, so say Microsoft. Companies who make that kind of profit, give nothing for 'free', watch my lips - I mean all those operating systems are for free, aren't they? Get real. 

The support lady, who was lovely, said that they had received many complaints as Lync was way over complicated and required support and it superseded many simple products like LiveMeeting and IM - so I can't initiate contact outside of my domain unless the recipient federates my domain which is about as likely to happen as me winning X Factor. Fine for communicating Office 365 to another 365 user, I'm told.


Ah, SharePoint. You get a server bundled in for free too - and it's worth every penny. For a small business, it's a total nightmare. I tried to use a shared workspace with a client for some large project files but sharing the link was too obvious, you have to go into the Administration site and give the person permission, then send the link. It didn't work still so we used Dropbox. Very embarrassing.

MS Support also concluded you had to know SharePoint to use it and the lovely girl had no idea yet she was MS Office 365 support. That's a clue in itself - not only as a small business do you have to be an IT manager now but a SharePoint guru too.

You get a free public website. My backside. Having downloaded SharePoint Designer, which is a beast of a program, in the vain hope I could design a new website with my own Content Management System in SharePoint, imagine my disappointment when I saw what you get. It's trivial and rubbish and can't even support a blog. Just don't go there.

The Truth About MS Office 365

The rather sinister looks you get from Microsoft executives when you quiz them on MS Office 365 suggest that if you think that Microsoft has got it wrong then you and your family may get a visitation in the dead of night. They really don't like criticism is the first thing, the second is that they are sure that I will come round to their way of thinking because there is no credible alternative. It's a Microsoft world out there.

It is and I feared being an island of incompatibility if I went with Google Apps for Business. But let's face it MS Office 365 for small businesses is absolute rubbish. I can't put it any nicer.

If this is the best a mega company can do then they really ought not to even try - it's a shameful attempt.

The reality is that they are trying to shoehorn big products into the Cloud and into little businesses. The cost is high and the support burden is horrendous. They lob in two unusable extra products so you think you are getting something worthwhile whereas you are paying the salaries of some programmers who would otherwise be out of work in the Lync and SharePoint departments.

This makes MS Office 365 both over priced and bad value. Take note.

Second, it is just a glorified email package in the end and these are two a penny in the industry. Hosted Exchange is a far better, more reliable way of doing things for small businesses and it's cheaper and requires little or no support.

The web apps are useless as you are driven toward client applications so when would you use the apps?? And they work poorly on devices other than PCs like iPads and don't even try smartphones. Hosted Exchange and webmail  far simpler.


I like Office for Mac so it pains me to say this but MS Office 365 for small and micro businesses is a complete waste of money. It's insulting to call this a Cloud application and Microsoft have done nothing to make this a good or simple experience for users let alone design it for the needs of the SME. This is Microsoft designing for Microsoft.

Traditional software vendors have a major problem. How do they get into this Cloud thing without blowing their own foot off? Can they shoehorn in old, staid products tuned for corporate networks or do they have to start again?

Well the answer is that the Cloud has stoked up the creativity and innovation out there and the new products are sassy, clever and tuned to the needs of people like me and small businesses. And it's fun to use them - even accounting is fun with Xero and SageOne - trying saying that with a straight face.

Microsoft is far, far from getting anywhere near understanding the Cloud with MS Office 365 - it's so bad that it's hard to find something positive to say. Why have they got it so badly wrong? Fear of cannibalisation is probably the major factor - after all I was an MS user before so the net new revenue to MS by me converting to MS Office 365 was zero. But I am not with Google - yet. And that would have meant a loss.

That's the danger here for Microsoft. It's better to eat your own tail than allow Google to do so.

Microsoft need to go back to the drawing board and use all that resource and brain power to design something for the Cloud that is useful and cost effective, support free for small businesses. The clock is ticking here - users like me won't put up with this much longer as there is a whole world of innovative choice out there to make being with the luddite chumps a very dumb thing to do.

Rule 4 - if you are a micro or small business, at minimum delay buying MS Office 365. At maximum, don't buy it. It's a waste of money.

Monday, 21 November 2011

Calx Europe Cloud Debate Daily is Launched

Yesterday evening I tried an experiment and launched my own online newspaper, The Calx Europe Cloud Debate.

Using the popular paper li free technology, I collated articles and picked some that I have read in one readable format. My aim is to produce daily (if possible) updates on Cloud issues and successes so that it can help vendors and channel formulate their strategies for the Cloud.

I hope also to change my own website in the near future to become more of a dynamic repository for information on Cloud strategies.

The Cloud is a subject I am very passionate about and I am specifically interested in helping software vendors and channels formulate their strategies and go to market plans and to help them practically execute.

I have 10 years of direct experience of running SaaS and ASP businesses and understand the strategies, selling techniques, business models, compensation plans, sales motivators and factors to success in Cloud business. I also have long experience in working in channels at all levels. Currently, I work with vendors and channel on Cloud strategies and execution of their plans.

For more information, please call +44 (0) 207 193 2356 or read The Calx Europe Cloud Debate at http://goo.gl/8nDX6.

Sunday, 20 November 2011

Software Vendors - How to Build a Cloud Business

So what is the secret of success for companies like Salesforce.com? I mean, they upstarted a few years ago as SaaS CRM specialists in a world dominated by the likes of Siebel, Goldmine and ACT - all perfectly good examples of decent CRM packages as traditional software.

At the time, I was a greenhorn to SaaS and was starting PlaceWare's European business alongside Webex in the online collaboration space. I was learning that SaaS was not an easy sell. It wasn't just trying to prove the application was neat, it was overcoming all the fear factors of the internet - and at that time availability was the biggest fear.

Two things made Salesforce successful, in my opinion: 1) The application zoned in on how salespeople worked as a CRM application which turned the concept of CRM on its head and 2) Salesforce.com used an evangelistic type of salesperson.

Anyone who has used Salesforce.com and other packages knows what I am talking about when I say the software tuned into salespeople. Salesforce.com was a mobile application by its design and that's what salespeople are. There were tons of other things that make the software superb but that was fighting a feature war - the fact it was mobile made it fly. 

Then came the salespeople. Most SaaS salespeople came from traditional backgrounds and for all of us it was a voyage of discovery which wasn't simple. The first thing you had to do was to look at they way you earned money - it meant working a different way. The second was to forget all you knew about how to sell. Evangelising was very different to selling traditional software - you not only had to know your arguments but you had to believe 1000% in what you sold.

Salesforce.com and PlaceWare benefitted by the fact they were companies born in the web at the height of Web 1.0. They had a good supply of cash, good backers and a driven management. Interestingly, at PlaceWare we used SAP and Siebel, traditional software as our main systems to sell SaaS and it was awful. Daily updates on Siebel could take hours extending the working day while the clunkiness of the package made it difficult to use as a salesperson. But we only had a web solution to sell and this made us hungry and we clamoured to get at as many customers as we could.

Success came from selling small amounts to lots of people. We held masses of online demonstrations, some group ones but mostly one to ones, then onsite surgeries. We had a free viral version and we also did events to ease people in. It was a real numbers game - the more you demo'd to, the more seemed interested and the more bought. It was a very disciplined approach and the vast majority of customers were sold to over the phone. In fact, the very first sale I had was a $50,000 deal to the CEO of a company in Norway who, to this day, I have never met in person. That was the way we sold - looking back we had the fear and logic taken out of us as all my old instincts said I had to press flesh to gets a sale of that size.

Eventually bigger sales came along and we needed to visit and the deals came in - some with the likes of BT, Dell, KPN, St Gobain and BOC. But what really made the business fly was how we worked after each sale. You see, with SaaS or Cloud, the sale is only the start of the journey. The real work is in driving adoption and making sure the software is used. For this we had a 'roll out' mentality and held regular online surgeries, worked other departments on a reference basis and then upsold as hard as we could. Come renewal time, we limited churn due to lack of usage and we had a knack of increasing seat sales. We achieved an accelerated, stepwise sales graph and that's the beauty of SaaS - year one looks dreadful but by the end of year two the graphs look very enticing and by year three it has a momentum all of its own. 

It's why small sales early on are crucial as they are the acorns of the future.

Applying this logic for companies coming from the traditional software market is hard because inevitably it means a slow start. If this is at the cost of traditional revenue then it's a tough pill to swallow. And then there is the internal sceptics - those that question the potential of the Cloud, who have a million and one good reasons why it won't take off. Then there are those who think by having a dual Cloud and traditional strategy will hedge bets and probably Cloud will pull through sales of mature products.

Such strategies are doomed. Salesforce.com proves the point as did PlaceWare and Webex amongst rafts of others. If you don't have a true, 100% focus on Cloud then the business model is flawed. Companies have to have a pure strategy for the Cloud and not fear cannibalisation by its own Cloud products. Fear of the future and change is the biggest barrier that traditional software companies face. If they don't overcome it, they threaten their own future.

Vendors making their moves in Cloud need to learn these lessons. It starts at the product level. Design up with the web as the platform rather than designing something not born into the web down. There is no logical fit the other way around. My strongest advice to vendors is to go back to the drawing board and design something new and innovative and listen to the market.

Here's a clue. Small companies don't buy SAP. You can chop and dumb it down but all it is a smaller version of a product for big companies. Small companies want something that is tuned to their needs, that's nimble and adaptable. They want products that don't hold them back as they grow and they want products that give them a competitive edge. The same can be said of Microsoft Office, and MS Office 365 is a classical example of lack of innovation and clever thinking to try and condition users to accept the status quo when small businesses want something innovative and in line with their needs. 

But Microsoft and other traditional software companies are sceptics at heart. When a senior VP stands up and tells partners to sell Cloud as it will pull through more traditional sales at their annual event then you know what is in the minds of the staff. And that's the problem traditional software companies have. They will never succeed in the Cloud until they believe - 100% and purely.

The only way is to design new product, set it up in a new business structure and staff it with people who are prepared not only to evangelise but sell against the mother product if need be and get rewarded for it.

There are few companies who have really embraced that yet it's so clear from the models that companies like Salesforce.com had in order to succeed. If Salesforce.com had a premise based traditional product too, SaaS would never have got off the ground.

The silly thing is that vendors now question the value of channel. They look at Salesforce and think that the trick is to get margins high, use your own salesforce and sell in small chunks. Yet the reason why Salesforce did not use channel was not because they didn't think it could work but because they knew they would be fighting for mindshare against traditional software. They wanted pure minds and not have to compete for sales twice - once in the reseller and once with the user.

But it's different now. For companies like Google, they need to beat Microsoft in a tough fight. On the web, Google has the big advantage - it owns search and advertising and so it has untold reach. Yet at the end user side, Microsoft has an army of trusted advisors calling daily. So what does Microsoft do?

Well, go see for yourself. But they are not the only traditional software company trying to work out how to slam a square peg in a round hole.

What software companies need is purity of thought, total belief and the courage to kill their old business. For every software vendor out there they will be a huge long tail of small customers who bought once and never again - no upgrades, no support revenue rolls in. They are the first place the competition will go to to win sales. So better you win your own customers over a second time than to leave them to chance.

It isn't rocket science. In a new competitive world it is better to sell your old, small customers a new product of your own making than to leave them prey to the competition. And to do that, you need a whole new outlook on sales - indeed a different business altogether.

That's the first step in winning in the new Cloud market. For traditional software companies, they risk, at best, delaying their success in the Cloud and, at worst, killing their opportunity and risking their entire business.

Calx Europe is a Business Acceleration company specialising in the Cloud. For further information, call +44 (0) 207 193 2356.

Friday, 18 November 2011

Channel & Vendor Strategy for the Cloud

Mainstream Cloud vendors like Salesforce.com continue on their rapid road to success. Others that follow are Evernote, NetSuite, Taleo, Workday and, of course, Google. The feature of these businesses is that they were all born as Cloud companies. They have no other products to sell and so they have had to stand up, evangelise and live only off the money they make in the Cloud. There are no other traditional versions of their products to sell if a sale goes wrong - their success has been binary. Win or lose.

In building these businesses, few have resorted to a channel strategy and still today, Salesforce.com, while accepting the channel has a major role to play in the future of Cloud, says that resellers are not keeping pace with the market and so vendors are reluctant to engage. Webex did much the same in the early days and found different channels to their market only for business they could not directly get at.

Quite where this leaves Microsoft on their Office 365 strategy which seems to straddle both worlds remains to be seen. After all, you either engage channel or you don't. The future for MS resellers in Office 365 looks as Cloudy as the product.

The factors for success for vendors and channel, as I have blogged on before are:
  • Build a separate Cloud business. The new organisation needs to have total belief and focus on Cloud products and mixing with traditional is a strategy that will hold people back. The focused people need to be KPI'd, compensated and motivated by only Cloud products to succeed and the systems and accounting needs to reflect this.
  • For vendors and resellers, the relationship with customers has to be stronger and deeper than ever before. The Cloud is a journey not just for the channel but for the customers. They need persuasion, help in understanding ROIs, to know the pitfalls, to have clear understanding of benefits, to trial easily, to have a structured implementation plan and, most of all, a strong after sale plan. After the sale comes the adoption phase as Cloud success is all about usage and adoption. To not only get annual renewals but to build the base you have to up and cross sell continually. It's a whole new concept versus 'sell and forget'.
  • Don't oversell. The biggest problem with Cloud selling is that people think that customers will automatically save money. You need to be realistic about the cost of change, the new processes and adoptions as well as describing the obvious benefits of scalability and less upgrade costs. Make sure that the customer is fully aware of how the ROI model works and is bought in early.
  • Here is a tip for vendors. The one thing that has made Cloud companies successful is that they made their own market. They did not have channel players to do things for them. So think of resellers as an extended salesforce while you, the vendor, focuses on creating the market. The problem going through most vendors' mind coming from the traditional world is that they either see channel as a cost or they see it as their salvation. Either way they seem not to want to invest in channel in any great way. The expectation is that channel will accept pass-through deals or that they will invest their own money to create marketing campaigns and educate themselves on how to structure their own business. In distribution, there is a layer of channel that can exploit the breadth of relationships to help educate the resellers but this will take joint investment - and when facing the same sort of margin returns it is hardly likely that distributors are waiting to watch vendors fail while itching to get into the market.
  • The one thing I learnt in building SaaS/Cloud businesses is that you need evangelists - people who just go out there and become infectious in their enthusiasm and who are unencumbered by normal sales shackles like quota and commission. Their role is to make people believe and that means a total freedom to create a viral effect on the market and within customers. They must know their product, its uses, the tricks to make it really sing and the way to get round pitfalls. They must spend time with customer, be at shows, do demonstrations, surgeries and be spokespeople.
  • Companies born in the Cloud have no real past and so they don't have an installed base to worry about. Traditional vendors do and they are paranoid about the word 'cannibalisation'. They don't want to sell to their existing customers and convert them. However, that is the exact opposite approach of their competition - so if you are going to lose customers, you may as well as lose them to your own new product. A sample strategy for a vendor in conjunction with channel is to look at the long tail of their customers who do not receive direct sales attention, who have bought in the past but buy little more, whose information you may have. These customers may use a particular low end product and buy few upgrades so contribute little to new revenue. This is an ideal place to re-engage with clients and convert them to the new product in the Cloud. It has the double whammy of creating new revenue from old but also defending against the attack of competition.
  • In an ideal world, for vendors venturing into the Cloud it would be wise to design a specific product for the Cloud. A great example of this is SageOne where Sage has taken a new approach to their products for the Cloud and not tried to take old products and shoehorn them into the Cloud. They are targeting both net new customers and converting small customers on old products. Sadly, MS Office 365 is just that. It does not attempt to address the needs of Cloud users but tries to force a current product structure onto users whereas Google comes with a completely new approach that resonates with the market they are trying to aim at.

Much of the above is alien to vendors and channel in the traditional world or if they get it they don't quite understand how hard you have to go at things or how deep engagement needs to be with customers. The Cloud is as much about a belief that it is a genuine market. You have to make customers believe and the only way you can do that is to believe, totally, yourselves. The only way to to do that is to create shadow, Cloud focused organisations. 

In vendors and channel.

Calx Europe is a Business Acceleration company specialising in the Cloud - helping vendors and channel. It's founder has 10 years experience building Cloud businesses in Europe as SaaS and ASP companies. Call +44(0)207 193 2356 for further information.

Thursday, 17 November 2011

Accounting for Start Ups

You have a great idea. You are brimming with enthusiasm. You can't wait to tell people. You can't wait to book your first order. 

If there is anything that is going to dampen your vim then it's going to be thinking about accounting packages - particularly if you are a sales or marketing person. Double entry, counter-intuitive fiddly back room sort of stuff presented through complicated software designed to absorb as much of your time as possible. Of course, you could always outsource it to some nice accounting type who will baffle you with enough science to make sure you think you have no idea how to go about it yourself - and pay the fat fees too.

Relax. Accounting for start ups is now not just easy, it's actually interesting and even exciting. SageOne is one of a new breed of cashbook based accounting software that actually works exactly as we all account for our cash. We watch what goes in and out of our pockets and accounts - and that's exactly how SageOne works.

You simply set up your payment options, by account, cash or credit card and just enter the amount each time you spend. It takes care of VAT and you can also create invoices. With a neat set of cost centres you don't have to endlessly breakdown spends as they are logically grouped together. The last thing you need is paralysis through analysis as a start up. You want to be nimble.

You also want to focus as much of your time, money and effort into selling what you have as much as possible. You don't want to be worrying about the back end stuff. That should be easy and SageOne makes it that way.

And SageOne is a Cloud based application which means there is no installation required, no dedicated PC or server, no worries about backing up data and it's available to be used on any device which has a browser and internet access - PC, Mac, iPad, smartphone, you name it. It makes the starting up entrepreneur truly mobile.

Even better, it's not a drain on your costs. Starting at £5 per user per month for simple cashbook accounting or £10 per user per month for full accounting, it's not that hard on the pocket either. Better still, it's back by excellent local support people at the heart of one of the last independent UK software companies that is publicly quoted. To add to that, it has over 14,000 accounting practices who are part of its Sage Accounting Club so there are plenty who understand the product out there.

If the package has a particular sweetspot then I would say it's absolutely ideal for those starting up as consultants, freelancers or contractors although it scales for small businesses of all sorts.

SageOne is part of a larger family of products and services focused on helping businesses grow efficiently and it's ideal for start ups.

For more information, please see: www.sageone.com

Calx Europe is a Business Acceleration company helping companies grow in Europe - call +44 (0)207 193 2356 for more information on our services.

Virgin on the Sublime

In face of collapse of Northern Rock back in 2008, Gordon Brown rejected Virgin's advances to buy the business.

Instead, Brown took the dead Building Society into public ownership, split it so that its toxic debt was in one company and the viable business was in the other. Now, some 3 years down the line, Virgin Money have bought the good bit for £747m (surely a coincidence with Virgin?).

On paper, the taxpayers are down by around £500m and then there is the minor issue of the toxic £21bn steaming away in the bad bank part. However, George Osborne is only doing what should have been done in the first place - let the market sort out dead banks. We are lucky to get away with the loss being only £500m to be honest.

This is the end to a sorry saga and one for which Brown will be remembered as full of knee jerk reactions to the crisis. It was the wrong thing to do at the time and all that has happened is that Virgin have bought a business at a knock down price with the bad part still in public hands.

Cloud Billing Models for the Channel

Latest research sponsored by virtualisation giant, Parallels, shows that SMBs are adopting Cloud much faster than larger companies. This tends to validate the view that SMBs can glean much greater efficiencies and scale their businesses more easily, cost effectively and flexibility if they adopt Cloud - and this ends up as a competitive advantage as well as a positive influence on the bottom line.

This means there is a great opportunity for channel businesses to get in on the act and provide solutions for SMB companies. Traditionally, channels have been led by vendors and their distributors, and so have sold the solutions provided. Pretty much, it has been a product sold by a vendor is bought by the distributor, sold to the reseller and then sold to the end user. At each level orders are placed for specific sku's from the product catalogue and invoices are cut and the difference between the value of each invoice provides the gross margin. So the accounting systems needed to transact this business are pretty much standard stock control or ERP systems and involve a level of logistics at the back end to deliver the actual products.

Times have changed. Software can be downloaded or just licences sold and distributors and resellers have had to modify their approach. This has changed further with the trend to annual software licences as opposed to perpetual licences and suddenly tracking numbers of licences, when sold and renewal dates is crucial to everyone. Typically, these old stock based systems are not good at tracking such sales or virtual product and renewable licences. Either manual intervention is required or parallel systems have to be built. Either way, there is a significant new cost to the business in terms of systems compared to the past and, guess, what margins are tending to get smaller rather then bigger in order to pay for these systems.

The Complexity of Doing Business in the Cloud

Enter the Cloud. If you resell software and services today as renewable products then you have a headstart in terms of understanding how you have to account and bill for these products. But many resellers and even distributors do not have the necessary systems in place to bill for such things as monthly recurring seat licences, monthly fees for use of physical resources within a co-hosting centre or any permutation of such solutions.

Utility Style Billing

Since forever electricity and gas companies have billed us monthly for 'product' consumed. They have various ways of collecting the data they need on our consumption and this is fed into the system and the appropriate pricing plan is applied and we get our monthly bills. Surely this style of billing is pretty much what the Cloud requires and so the systems in place should be easily modified for use in the Cloud?

Well life isn't that simple. After all, who today has such  thing as a 'smart meter' for any of their utilities? I don't. I have two meters stuck on a wall outside my house and the SLA from the energy companies is that they will be read at minimum once every two years. So most bills I get are estimated. But you can't get over the fact that the basis of these systems are manual collections of data. That's hardly going to help large computer distributors or vendors who transact as many as 70% of their orders automatically online.

Then comes the challenges. How many of us believe their utility bills are true reflections of either the amounts of energy we have consumed or the tariffs we are on? And for the energy companies point of view, how many customers have they undercharged over a period as they have not had the most up to date data or not changed everyone's prices as they should have? The margin for error is enormous but then again the gross margins involved in those businesses tolerate a significant 'leakage' in revenue in these cases.

Consumptive Billing

The Telecom industry has a sophisticated set of systems which allow them to match a specific account with all the usage data they require. Systems poll the dumb switches which handle calls between specific telephone numbers associated with specific SIMs and accurately measure to the millisecond if need be the actual minutes in calls consumed. We may have plans that allow certain numbers of minutes to be billed at a flat rate but these are just complex pricing tables which need to be compared to before the actual billing occurs for each individual number.

The result is that vast amounts of data can be consolidated onto a single bill giving an aggregated price. Now that has to be more in line with the concept of billing for 'resources' used as in the Cloud, yes?

Well firstly, the information gathered by Telcos are just minutes off ports on dumb switches. This is an actual amount consumed and varies greatly from month to month for every account. The reality is that Cloud resources are similar but quite different. Firstly, they are logical resources which are grouped together to form a service plan - so it could be that a number of servers plus storage, infrastructure and software licences need to be allocated and billed for starting from a certain date which is then billed exactly the same for subsequent billing periods. It is not a variable usage model dependent on the number of times the resources are used but a flat charge based on their original costs.

This means that Telecom systems which are inherently complex and expensive have to be significantly modified, even dumbed down, to actually do what the Cloud requires. Such systems tend not to take specific vendor sku's and bill for them but map onto the signal from a switch and whether it is on or off and what that relates to.

The telecom industry also has a 'leakage' problem. A whole ancillary industry has cropped up around Telecom usage called 'Revenue Assurance' and these are equally complicated and highly expensive systems that verify the accuracy of the Telecom billing system. It is estimated (and there is a ton of research on this by a Revenue Assurance associations and whatnot) that Telecom companies leak between 2% and 7% of their revenue annually through inaccurate billing. At the kinds of margins resellers and distributors make, this could be the difference between profit and loss.

Why are these systems so inaccurate compared to stock based systems? Because they are measuring actual usage not auditing a trail of transactions. And that means a very high level of manual intervention - if only to account for the multifarious price changes, promotions and service plans that go in this industry. To be frank, it is very likely that a reasonably high proportion of customers are either being significantly over or under charged by utility company at any given time. Surprise, surprise there is also a whole new service industry developing which interrogates telecom bills on behalf of customers and charge by proportion of amount saved rather than a fixed fee indicating a high confidence that charges are inherently wrong.

Such billing systems are not well suited to the orderly world of IT channel where the capacity to tolerate billing errors is very low.

Logical Resources, Service Plans & Aggregated Monthly Billing

Companies like Parallels have thought about this and have robust systems that can accommodate the provisioning of resources, creation of service plans and the aggregation of these plans to form single monthly bills. It is a potentially complex world where the accumulation of billable services and tracking of renewals becomes a growing and self perpetuating story in terms of complexity.

However, the reality is that if you look at each seat of software or logical device provisioned and the cost to you, then you can create a service plan that covers what you are selling. You don't need to query it monthly to ask how many times it has been used. Once provisioned you only need to account for any changes to the service plan in terms of additions or deletions.

The problem for distributors is that they would like it to be an orderly mapping of a sku from a vendor through their system. Then that gets billed monthly. But what if that sku changes price after the initial contract has commenced? At each new billing cycle, the new price of the sku will be picked up and the new bill will reflect the change. Unless each sku is individual to the service plan for the customer then it doesn't map going forward.

So a system is required to bridge these two worlds. For the reseller, the complexity and cost of implementing such a new aggregation billing system is almost completely prohibitive for all but the largest ones. The best they can hope for is that their favourite distributor implements a system that can account of what they sell in terms of service plans and then produce an accurate monthly bill indicating all net new service plans they have sold and account for all those that they need to invoice from historical sales.

Super Stickiness

The goal for distributors is to create such systems that can do exactly this for resellers. If distributors can aggregate all service plans, new and old and produce a monthly bill that is detailed enough for resellers to accurately know what they have to bill each customer then they will have provided a real value to their resellers. Interestingly, itemised billing has been a service which media and telecom companies have often charged for which is an interesting point, such is the actual cost involved in the systems behind the scene.

But the real benefit to distributors is this. If a distributor can create service plans and aggregate bills, even bill on behalf of its resellers then for the lifetime of the service plans provided, it will form an almost unbreakable bond. The cost and aggregation of change from one distributor to another by a reseller will no longer be a simple choice based on price and availability as an example but it will be an issue of not just porting historical data access but also of the worry of where the logical resources being provisioned are located too. At last, distributors will be able to limit churn of customers.

While this is a possible downside in the negotiation position of any reseller it's also actually a godsend as once a service plan is in place, it needn't be worried - it will have one 'vendor' to chase on bills and costings rather than polling multiple suppliers for multiple service plans for multiple customers. That's a headache that can be alleviated.

It does mean that distributors have to step up. They need to have robust aggregated billing systems with the most flexibility in terms of provisioning software licences, services and physical resources. If their portfolio is weak then it's likely that other distributors will get the lionshare and this is why the big broadliners are actually back in play. Size and portfolio will count in the new world of Cloud products and services.

But for those in early, the rewards are potentially greater. The key point here is that if distributors and resellers get this whole billing model right then there is every possibility of being able to increase gross margins, thanks to being able to break free of the shackles of mapping sku for sku in vendor portfolios for fixed margins. At last the channel may get back to making some new margins.

And they will need it. Such systems, wherever they come from, are not cheap. My take is that Utility and Telecom billing models for Cloud are too expensive and not tuned to the actually way in which the products need to be resourced into a service plan and billed. The actually bills they produce would be fine although my own experience of them is that they are not by any means ideally suited for accounting for channels.

I think there are far better options available at a fraction of the price far better suited to Cloud billing.

The Cloud as a Growth Enabler for Your Business

There's a lot of talk about transformation of businesses into the Cloud. There are plenty of FUD factors lobbed in and there are many wishful thinkers. However, few companies really understand the real benefits of moving to the Cloud.

I can speak from some experience being a micro company that now uses the Cloud exclusively. I manage it all myself which is fine on one level but it is a potential issue on another level. Take a look at my IT spectrum:

  • Accounting - Xero.com. The supplier is Xero and it is hosted with them somewhere in the Cloud and I pay them directly by company credit card monthly.
  • Evernote - Project & research tracking and repository - hosted by Evernote and I pay them annually by company credit card.
  • Microsoft Office 365 - Office productivity and emails - hosted by Microsoft in Ireland and I pay them annually by company credit card.
  • Salesforce.com - CRM - hosted by Salesforce.com in the Cloud and I pay them annually by company credit card.
  • Apple iCloud - iPad back up - hosted by Apple in the Cloud - free at the moment.
  • SugarSync - Total backup and device synchronisation solution - hosted by SugarSync in the Cloud and paid annually by company credit card.
  • Dropbox - Project storage and shared drive facility - hosted by Dropbox in the Cloud and paid annually by company credit card.
  • Domain Registration - hosted by Zen and paid for annually by company credit card.
  • Skype - Communications software - hosted by Skype and premium service is on advance credit purchase and monthly via company credit card for SkypeIn service.
I also use Twitter, LinkedIn, Ecademy, Facebook and Empire Avenue as social networking services and all are free accounts. 

While I have accrued many benefits from all this, not least in terms of cost and IT management, the fact remains that all these applications are sourced and delivered from many different places. There is no 'One neck to choke', no single support line if something goes wrong, no single bill to pay. If I want to add users or adjust settings, there is no single Control Panel to access, I have to make changes to every application. So while I get some economies of scale by using the Cloud, I get few benefits of scalability as each bit of growth is, frankly speaking, a pain in the neck to actually transact.

Cloud as a Real Enabler

Many people think of the Cloud this way. Piecemeal collections of best in breed applications hosted in multiple sites in the Cloud. Few companies are offering real consolidation. There are co-hosting companies who give some solutions by allowing you to take your IT infrastructure and applications and place them in the Cloud where you can access them 24x7 and get the whole set up locally managed and maintained but few of these solutions actually offer a full service incorporating a whole swathe of applications that can be served, a true single monthly cost per user and 24x7 application support.

Is this an idealistic proposition? A truly outsourced IT department? Well if you are an Enterprise company, such solutions are achievable by working with heavy outsourcers like Wipro or the like who re-employ IT staff and have insanely complex contracts and service options which you pay merrily through the nose for. These are not viable for SMEs.

Is there a truly scalable solution for SME businesses without the complexity and without the pay-by-the-service-request mentality that really allows SMEs to get the real benefits of cost and scalability that larger companies enjoy in the Cloud for a fixed, single monthly price per user? A service that has no minimum revenue or seat requirements to get going? One that encompasses all their IT?

Part of the problem is that several of the largest software companies now make this difficult. Of the applications I use, Xero (and SageOne), Evernote, Salesforce.com and Microsoft Office 365 are only available from the vendors themselves, although you might be able to buy MS Office 365 from a Telecom company but why you would do that defeats me. So some of the software vendors are making life difficult and locking out channel - even Google has so few partners it would be tough to find one.

So perhaps the best method of getting into the Cloud is to take what you have today and transform it into the Cloud. Think of it this way, instead of thinking about the Cloud as having 'Capacity on Demand' which is the normal way you would deal with a Cloud hosting company who sell you physical resources. But think of having 'Capability on Demand'. This is a whole new way of looking at outsourcing your current resources.

By taking the applications you have into the Cloud and having an IT department truly outsourced as a small business with 24x7 support and a 99.999% uptime guarantee, you get the best of all worlds. Properly done, there need be no upfront capital investment, no minimum revenue or seat requirements, full sales and marketing support when you need it and 24x7 application support. This would allow companies to funnel their resources into actually growing their business, be able to accommodate growth or assimilate acquisitions more easily and cost effectively, make IT a competitive differentiator, have IT as a strategy rather than a must-have, and have solid auditing and compliance as standard as well as protecting your data in case of disaster.

The benefits of Cloud to SMEs is creating predictable costs for scaling the business - it's smooth and in line with actual growth rather stepwise and lumpy. It means that new applications can be added more easily and cost effectively whenever they are required, and you can leverage the economies of scale in the Cloud to make resources like storage and computing power not only scalable but a fixed cost per unit consumed. If you are a company into buying other companies, the Cloud is the fastest and easiest way to merge businesses allowing a 'cut and paste' model to acquisitions rather than having to mount vast projects for assimilation.

Often the Cloud's in-built adherence to ultra high standards of data protection and security will mean higher standards of audit, governance and compliance for SMEs allowing them to become more credible against larger enterprises in bids or working with Local or Central Government. 

Making IT strategic is a real benefit to SMEs who usually either try to back fit IT into their businesses or have to grow the way their IT lets them. By using the Cloud, IT gets in-built maintenance, a truly outsourced IT department, best in class infrastructure, true mobility and flexibility for the workforce to help cut down on costly premises, decreased power consumption, more sustainability and creates value in IT rather than just cost. 

But all this really only comes to be a big benefit if there is just one vendor involved, one neck to choke. If you can get to that 'Nirvana' then not only will the Cloud unlock real cost improvements and efficiencies but it will finally become an enabler to helping companies optimise business processes and help your company grow.

Does such a vendor exist today? Well, contact me and I will let you know as there are some exciting moves in this market that will have a great impact for the future.