When PR Goes Wrong

So you are in the middle of the desert and you look into your viewing scope on your tank. At first there is nothing there, then eerily several cows start to lumber towards you threateningly. Do you ignore it and look for solid targets that resemble tanks or do you fire?

Well if you had kept up to date with your daily reading of the Telegraph or Twitter, as an experienced tank commander you might have noticed that BAE Systems latest technology is to 'cloak' the infra red signature of a tank so that it appears as a cow on a scanning device.

Now I have never been in the army, far less been in charge of the weapons system on a tank, but armed with BAE's press release I might now know that if I was in the heat of a battle and several cows advanced at me threateningly I might actually guess that they were tanks.

They say any publicity is good publicity but sometimes is it not better to just shut up? The great advantage of the Klingon Cloaking device in Star Trek is that Captain Kirk never new it was there. If it looked like a cow floating in space at warp speed then he might just have guessed that there were Klingons actually off the starboard bow after all.

Is it me or should the PR man be fired? 

There may be trouble ahead

As the FTSE continues its merry plummet and shareholders and pensioners alike look at their investments draining away, and as average wage rises among workers struggle to get anywhere near the inflation target levels let alone the actual rate of inflation, spare a thought for the company directors of these companies.

As Corporate profits fail to impress and futures look very uncertain, there has been an average rise in bonuses across FTSE 250 companies of 187% over the last 10 years while the average long term incentive scheme has risen 700%.

Some would argue that too much of the profits are being creamed off by directors but this is not a new phenomenon. I would argue that there has certainly been a growth in the wealth of 'Portfolio' non-executive directors who just put their names to companies, do the odd lunch and collect fat checks and nice equity plans. Shareholders and pension plan holders like most of us may rightly ask, 'What the hell is going on?' as it is unclear what value we are all getting for such increases in bonuses. But it seems to be the vogue and glib line that. 'If you don't pay the big bucks then you don't get the talent'.

For those of us in business, this is tosh. There are a handful of executives out there who seem to have the knack of turning under performing situations into vast growth in wealth, usually by leveraging someone else's money. Private Equity are the drivers here but that has nothing to do with general purpose company running. The average across the FTSE 250 companies show that profit growth is nothing like the growth in bonuses. And people earn them, as we all know.

Picking on the banking sector, the share price performance over the last 10 years has been pitiful but the incredible bonuses paid have been mindblowing. At the end of the cycle the whole thing went pop and banks literally survived only by our unwilling cooperation by pledging our tax money for the future. This might be allowable if it was a one off situation but the whole thing has been primed to go the same way again. Nobody seemed to realise that the underlying problem was debt and how we trade it. We are finding out that Gordon Brown, that Mensa genius, had no idea either.

But it isn't just banks, even if they are the most idiotic of the culprits after the financial crisis pleaded for a total reform of their modus operandi. Regular companies are at it too. Shareholders should certainly be concerned - but what of the employees?

Surveys about a year ago showed that the average salaries amongst bosses now exceeded the average of their general staff by 10 times in the UK while in the US it's closer 20 times. That is an unsustainable and dangerous gap. There is no such gap in talent and capability and it could be argued that the average value to the company is much more even. But it's dangerous as it seems bosses are immune to the market vagaries and performance. In fact, the worse a company does, the more it will pay its bosses for failure or to get new ones in.

What message does that send staff? What message does it send shareholders? It's incompetence on a growth curve. In too many situations whether a company director or in sport management, it pays to fail spectacularly and quickly. For that you get heaps of money in severance, far more than you could earn in bonuses over the long term for success and you get to do it all over again. It seems the more you fail, the more people will pay you.

It's a cycle we need to break. I don't think general staff will sit about too much longer bearing the brunt of failure with their jobs and wages while fat bosses earn massive bonuses for mediocre performance and failure.We learned very little at all from the financial crisis and it papered over a mentality in company boardrooms that is distinctly unhealthy in modern business.

What happened to only getting paid commensurately for success? Seems to have gone out with the bail outs.

Breast is Best

Well at least I have your attention and, no, this is not some politically incorrect debate by drooling males over which female limbs or organs are better than another.

This is about the Government and NHS dogma over breast feeding. My second child is now 6 weeks old and one of the best strategies my wife and I have on sharing duties of care is to supplement the young child's intake of breast milk with formula, namely SMA. We also have the same strategy still with my 17 month old son who drinks the SMA 2 follow on milk. In fact, my daughter is progressing so well that my wife couldn't possibly keep up with her and so she has 'Hungry' version of the milk.

It's a small thing but it illustrates the 'Nanny State' going to the nth degree. The Government and the NHS have decreed that 'Breast is Best' and no one would disagree with that position about breast feeding. However, to promote it as rabid dogma is just stupid. In our case, if we followed that line solely,not only would our daughter fail to thrive but I could not share in feeding duties particularly at night when exhaustion for my wife is a huge threat.

What prompted me on this diatribe? Would you believe it is the trivial matter that in the thousands of pounds we have spent at Boots on various substances and accessories for our children, they don't issue rewards points for baby milk. This, we are assured, is not a Boots policy. This is a direct, Central Government and NHS decree and it is designed to stop mothers feeding their babies formula milk.

So to get this straight, Government and the NHS have interfered with the pricing of a major over the counter product to the point of discouraging its sales. Not on the grounds of safety but because it supports a dogmatic position which enforces the sole burden of feeding a baby on the mother not just for the first 4-6 months of its life, but for all of its requirements of milk. I know there are things like 'expressing' which may ease things but realistically this is probably an infringement of people's rights but also of EU Competition Law as the price of this milk is unnecessarily high.

As a father, it is great to be able to share in the duties of feeding and I am glad to give some respite to my wife at nights when she can do with the rest. It's still hard but at least it just gives a modicum of sharing. If we followed dogma on this, it would be my wife only and I just think that's both idiotic and unfair.

It's not about having the Boots points, it's about some common sense. I am no doctor or health worker but even I can see the sense of that.

Is doing nothing a strategy?

It's something I often hear in meetings, 'Sometimes, doing nothing is a strategy'.

It's right up there with, 'Sometimes, no decision is a decision.' Indeed, I was taught a whole series of selling strategies where our biggest competition was identified as 'doing nothing'. That was in the early days of SaaS at the turn of millennium when we were cutting our teeth selling what is today Microsoft LiveMeeting but was PlaceWare. Very often, SaaS identified new communication methods or collaboration tools which helped companies save time, costs, increase productivity and so increase their bottom line. When packaged in those terms, it was a wonder why people didn't bite your arm off. But in spite of some real benefits which not just saved money but increased teamwork and output, people turned it down in favour of the status quo.

Today, such tools are used widely across our industry as de facto standards of doing business. Teleconferencing, web collaboration, webinars, ad hoc meetings like Webex, Go To Meeting, LiveMeeting and others are all parts of the standard kit bag of the modern day company. Back then, it was bleeding edge stuff.

It took a lot of hard work, evangelising and daily use of the product to sell monthly seat intsalls but we saw that by getting a small sale, building adoption, internal reference selling and proving ROI continuously we eventually got larger seat sales and big renewals. By the end of the second year we had built up quarterly annuity sales of over $1m in Europe alone. A year later, Microsoft bought the company and bundled the product for free. Webex, our major contender, was bought by Cisco for $2.3bn and is still charged on a monthly fee basis today.

Some companies really understand SaaS sales, some don't. What is certainly true is that in order to sell it and adequately engage others to buy and sell it, it helps a great deal to have been there and sold SaaS before. Today, traditional vendors talk of resellers transforming their model yet the same company has themselves not transformed. In most cases, they don't use the product internally and they are not rewarded solely (some evenly partly) on the sales of the SaaS version of their product.

It makes them poor advisers to customers and resellers to start with. But in my opinion, it is a recipe to make sure that 'No decision' is once again the vendors' greatest competition and that is because for resellers and their channels, they are generating a 'doing nothing is a strategy' as a response.

By not evangelising and truly believing to the point of total dependency on the sale of the product, they are not committed to its success. That's a huge problem for those vendors who are trying to convince their users and channel of their SaaS or Cloud credentials. Nobody believes a doubter. Nobody believes anyone who hasn't got 'skin in the game'.

The strongest advice I can give to such software vendors is to put your money where your mouth is. Get true SaaS people in, change your model of reward and make the Cloud based product a separate division - even in competition with the old product - with separate P&L. That's the real world. And it's a real strategy. It's what you are asking your resellers to do.

Don't make 'No decision' the competition and don't make 'Doing nothing is a strategy' the reason why you don't succeed.


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Dark Day

{EAV_BLOG_VER:517ccea0cd3381c0}This morning's blog is short and sweet.

Yesterday, as we lead up to the anniversary of 9/11, in the face of continuing our role as 'International Bouncer' and Plod-like Policeman we started making perfectly good soldiers redundant.

Whether this is a direct consequence of our mismanagement of our finances in the wake of the 2008 crisis or it is a progressive trimming of our Armed Forces, itis both stupid and disrespectful to those who have fought, died and got maimed for life over the last few years as well as putting up two fingers to the proud Ghurka nation whjo serve us so unquestionly.

Shame on all Politicians on all sides today. It is another decision, they will deeply regret.

ROI in The Cloud - Not for the Faint-Hearted

How do you produce an ROI for Cloud software selling or SaaS as we used to call it?

A lot is talked of business transformation by large vendors and how resellers should change their business model. But in a recent straw poll done in silence by me in a room with staff from a large vendor only one person had ever actually sold SaaS based software and that same person was the only one who had actually been MD of such a company and who had actually worked on an ROI model. That person happened to be me. But it was rather disconcerting to know that the large vendor staff were preaching 'transformation' to resellers and ROI when they had no idea what they were actually talking about. No change, there some might say. It is also fair to say that few, if any, of the large vendor front line people have worked inside channels let alone run a business there.

The scorecards for each of the large vendor staff was to get a certain number of seats of their software sold as SaaS seats by the end of their fiscal year. At this point, we were already some way into their fiscal year. So an esoteric question on ROI was considered. If the scorecard target was, say, 1,000 seats, then would it matter if the salesperson sold the 1,000 seats in the final month of the year or the first?

The answer to the question is that it matters a great deal. 1,000 seats sold in the 12th month of the year is recognised as only one twelfth of its value to the P&L even if all the cash is collected at once - such is the accounting of SaaS. So 1,000 seats sold in month one would have a full 12 twelfths of the P&L impact as opposed to one twelfth. It isn't rocket science but it is rather fundamental to the calculation of ROI and it's why those large vendor staff are at once at loggerheads with the resellers they sell to.

But traditional software salespeople work like that and it's why they are not good people to sell SaaS and it's why resellers fear the Cloud model in many instances because it immediately puts their traditional model of P&L and sales reward schemes into a spin. Give me an Oracle salesperson and I would tell you they might earn £250k a year but they would probably survive less than 3 months on a SaaS model and leave by mutual consent.

With SaaS you have to consider the long game. It's all about basic KPIs and selling each time you lift the phone up. It really is about starting small and growing.

So when you look at Salesforce.com - they have only 77,000 corporations they do business with in the world. Microsoft have 4 million in the UK alone. Salesforce won hearts and minds by picking off pockets of users who had specific needs, proving ROI and building adoption. Microsoft's problem is that they are going to have convert a user base. Another problem is this. SaaS based salespeople like Salesforce had nothing else to sell - they ate their own dogfood because they used their own products every day. If they didn't sell their product, they were out of a job. Traditional vendors don't fear failure as much as they have have the old tree to hug if it all fails. And few, if any, of the traditional vendors actually use their SaaS based products daily to be able to understand it like a user and evangelise like a real SaaS person. It produces mixed messages by their senior management and Microsoft are a prime example of that but they are not alone by any means.

Back to ROI. Consider MS Office 365 at a sweetspot of £200 per user per year. For that you get hosted Exchange and Office 2010. The old Office was 2007 so it suggests a 3 year cycle of upgrade. Which means that you would expect a user to upgrade at around £300 per user every 3 years or £100 per year. In that period a new user of Office 365 would have paid £600 per user and the local Office client is not automatically upgraded in Office 365. The mathematics is flawed at the user end. True you have to consider the cost of upkeepeing and upgrading the Exchange server and the running costs of the old but immediately there is an ROI problem at the customer level even before you get to the reseller level.

In the process of transformation, resellers have to consider how to remodel their own business not just learn the end user justifications, so pressure is at both ends. It's why most large, non-SaaS traditional vendors are having such a terrible time converting. Some have used Telco companies as their vanguard but that's equally flawed. Telcos should understand the basics of annuity selling as they sell leased lines and line rentals but they get their real reward based on usage and users worry little about the technology. If a disaster happens, they rub their hands as usage goes up. In the Summer, when usage goes down, they go on holiday. SaaS requires a consistent, pragmatic approach as every sales call counts. Telcos also have the disadvantage of knowing nothing about software.

So how does a traditional vendor move software sales to Cloud if it cannot simply amortise the old costs and host the server? And how does it get ROI in a 12 month period and get resellers to change habits?

Riddle me that one. You have to start from a different place. SaaS veterans like me have been there and done it - we bear the scars but we sold in a completely different way, scaled our businesses differently, paid our salespeople differently, consumed and collected cash differently, and used a completely different model on costs and profit. It's one that doesn't come naturally to large, traditional software vendors. So when they try to engage their reseller and channel base, they inevitably have little experience to pass on other than what it said in their boss' slides.

That is a fundamental problem for the software industry and its channel if it wants to win. The main enemy in this world is the like of Google who know no such limits on thought. They don't worry about client upgrades - they gave 128 new features to users in the last 12 months alone for just $50 per user.

However, can anyone give me the name of a single Google salesperson and their phone number?
Channel enablement is the biggest single weapon that traditional software vendors have in the fight against the likes of Google. Use it wisely as it can be a fickle beast. But it's one that needs to be fed and right now it needs to be weaned. Enablement of the channel is the biggest challenge and the current method of 'transformation' is not successful as it does not address the fundamental questions on ROI either at the user level or the channel.
And that's because the vendors measure ROI in a totally different way. Listen up, people. You have to converge. Most vendors have recognised that that they will have to 'over invest' in order to win in the Cloud - some huge bets, in fact. However, they seem to think that their channel should also invest and produce them an ROI in the first 12 months. How daft is that? This is all about a 'Joint Leap of Faith'. While it is very hard to work out the ROI, the shifting sands of client technology is gathering pace as PC sales plummet and tablet sales grow. The announcements about what Apple's new iOS will deliver is a profound message to us all. Cloud will change the way we all buy software and what we buy. Not just consumers but business uses too.
It is a Leap of Faith, no doubt. But if vendors and channel cannot have mature conversations about working together then vendors risk losing vital weapons in their fight to hold their position and get new growth. Software purchasing has morphed profoundly over the years and vendors and channels have always adapted together to win over time. Another challenge is ahead and it seems the old allies are out of sync.
That must be music to the ears of Google and Apple.


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No Shit, Sherlock

Boutique 'Career Management' firm InterExec have come up with something. They reckon social networking is on the up when it comes to recruitment. Really? I had no idea.

In research that seems some way behind the times they reckon that for very senior executives (with salaries above £150k and up to £1m - yes up to £1m) some 18% of them feature themselves on LinkedIn.

I have blogged on this yonks ago. 97% of headhunters surveyed reckoned that senior executives should have publicly accessible career profiles. Well they would say that. It makes LinkedIn and similar the cheapest way to find potential candidates and foregoes the old expensive CV databases they all used to clamour to get a hold of. In a firm I consulted with a few years ago, a very niche headhunting firm was contracted to find senior executives. In a single year period, of the 10 executives they recruited for the company in question, every single one had been originally found and contacted on LinkedIn. And their charge was actually above 33% of their first year remuneration in each case. Easy money?

I use LinkedIn to network and create new business. Up until about 2 years ago, it was the base source of some 40% of all the revenue I had accrued to that time. Since, I have had more from direct prospecting and word of mouth. Still, my LinkedIn profile does gain me several inquiries per month.

However, it is fair to say that firms paying top dollar to headhunters are paying over the odds in most cases as the source for their searches are usually LinkedIn and similar - essentially free or cheap services. Yet they still charge huge fees. LinkedIn is generally the way for executives to advertise their availability and as such are those in search of career change or better opportunities. In my book, such candidates are not the ones I would want my headhunters to prospect - I want those people who are performing well and maybe not looking for a change. I would rather they got sold on a good opportunity than be on the move.

But hey-ho - what do I know. Of the 10 candidates at the company I highlighted earlier, the last of them leaves this month - average tenure was less than 18 months.

Again, what do I know? Whatever they paid the boutique headhunter for recruiting fees was a total waste. That's what I know.


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