Posts Tagged ‘innovation’

Why we about to move from cloud computing to industrial computing?

April 5, 2010 7 comments

I spent the other week at a new conference called Cloud Connect. Being able to spend four days emerged in an industry discussion about cloud computing really allows you to step back and think about where we are with this emerging industry. While it would be possible to write endlessly about all the meeting and conversations I had, you probably wouldn’t have enough time to read all that. So, I’ll spare you and give you the top four things I learned at Cloud Connect. I recommend that you also take a look at Brenda Michelson’s blogs from the event for a lot more detail. I would also refer you to Joe McKendrick’s blog from the event.

1. Customers are still figuring out what Cloud Computing is all about.  For those of us who spend way too many hours on the topic of cloud computing, it is easy to make the assumption that everyone knows what it is all about.  The reality is that most customers do not understand what cloud computing is.  Marcia Kaufman and I conducted a full day workshop called Introduction to Cloud. The more than 60 people who dedicated a full day to a discussion of all aspects of the cloud made it clear to us that they are still figuring out the difference between infrastructure as a service and platform as a service. They are still trying to understand the issues around security and what cloud computing will mean to their jobs.

2. There is a parallel universe out there among people who have been living and breathing cloud computing for the last few years. In their view the questions are very different. The big issues discussed among the well-connected were focused on a few key issues: is there such a thing as a private cloud?; Is Software as a Service really cloud computing? Will we ever have a true segmentation of the cloud computing market?

3. From the vantage point of the market, it is becoming clear that we are about to enter one of those transitional times in this important evolution of computing. Cloud Connect reminded me a lot of the early days of the commercial Unix market. When I attended my first Unix conference in the mid-1980s it was a different experience than going to a conference like Comdex. It was small. I could go and have a conversation with every vendor exhibiting. I had great meetings with true innovators. There was a spirit of change and innovation in the halls. I had the same feeling about the Cloud Connect conference. There were a small number of exhibitors. The key innovators driving the future of the market were there to discuss and debate the future. There was electricity in the air.

4. I also anticipate a change in the direction of cloud computing now that it is about to pass that tipping point. I am a student of history so I look for patterns. When Unix reached the stage where the giants woke up and started seeing huge opportunity, they jumped in with a vengeance. The great but small Unix technology companies were either acquired, got big or went out of business. I think that we are on the cusp of the same situation with cloud computing. IBM, HP, Microsoft, and a vast array of others have seen the future and it is the cloud. This will mean that emerging companies with great technology will have to be both really luck and really smart.

The bottom line is that Cloud Connect represented a seminal moment in cloud computing. There is plenty of fear among customers who are trying to figure out what it will mean to their own data centers. What will the organizational structure of the future look like? They don’t know and they are afraid. The innovative companies are looking at the coming armies of large vendors and are wondering how to keep their differentiation so that they can become the next Google rather than the next company whose name we can’t remember. There was much debate about two important issues: cloud standards and private clouds. Are these issues related? Of course. Standards always become an issue when there is a power grab in a market. If a Google, Microsoft, Amazon, IBM, or an Oracle is able to set the terms for cloud computing, market control can shift over night. Will standard interfaces be able to save the customer? And how about private clouds? Are they real? My observation and contention is that yes, private clouds are real. If you deploy the same automation, provisioning software, and workload management inside a company rather than inside a public cloud it is still a cloud. Ironically, the debate over the private cloud is also about power and position in the market, not about ideology. If a company like Google, Amazon, or name whichever company is your favorite flavor… is able to debunk the private cloud — guess who gets all the money? If you are a large company where IT and the data center is core to how you conduct business — you can and should have a private cloud that you control and manage.

So, after taking a step back I believe that we are witnessing the next generation of computing — the industrialization of computing. It might not be as much fun as the wild west that we are in the midst of right now but it is coming and should be here before we realize that it has happened.

Sometimes its the little business process mistakes — not the strategy

April 17, 2009 3 comments

As an industry analyst I am always looking at new technology innovations and new approaches that help companies transform their business process. There are some technologies that I have been seeing that are really excellent at adding robustness and sophistication to help companies transform the customer experience. But every once in a while you come across a business process example that makes you stop in your tracks and think about the small business process issues that can undue all the innovation.

Let me give you a real life example that got me thinking about this issue. An individual I knows owns rental property. It is a multi-unit house in the middle of a city. Needless to say, it needed insurance against potential disasters. My friend, being a responsible landlord sent his payment into his insurance provider. In fact, he set up a process with his bank so that his payment would be automatically sent out each month. Things were going great until one day my friend got a check from his insurance provider for “overpayment”. This really puzzled my friend since a process was in place for automatic payment. That process seemed to be working fine.  After numerous calls to the insurance company he finally got to the bottom of this complex business process problem. It seems that the company has a funny way of creating customer account numbers. The first seven digits of the number are the account number; the next two digits are the number of years that the policy has been in place.  My friend has put all nine digits in the account number field in his online payment system. Unfortunately, for my befuddled friend, no where on the insurance company statement did it suggest that those last two digits had nothing to do with the customer account number. So, basically, the payment was rejected because the year field was added. The company simply had not anticipated that anyone would not understand their process.

Now, I am sure that my friend wasn’t the only customer on the planet that thought that all nine digits were the account number. The happy ending is that the insurance was reinstated.

But here is the issue that I started thinking about. I suspect that this company spent a lot of money on its business process strategy, buying technology and tools. And they are pretty proud of their efforts. But it is so easy to get caught up in the broad process issues and forget the small issues like the structure of the customer account number. However, the reality is quite important. Take the example of my friend’s insurance company. If there were a few hundred customers who all made the same mistake it could result in an unanticipated loss of revenue. And in the future, those customers may decide that they really can’t trust their insurance provider and will choose to move to another insurance company.

An account number confusion problem will probably never be noticed by the management team. No one is going to call a meeting to discuss the fact that customers are confused by how we print our account number on our bills. But the reality may be that this small business process mistake made by an innocent programmer somewhere in the world can impact a company in a big way. I guess it isn’t a huge momentus issue in the full spectrum of world economies or technology evolution and it certainly isn’t the most exciting topic. But I think it is worth stepping back and thinking about.

Can companies reinvent themselves in a down market?

April 2, 2009 2 comments

Many years ago I heard a story about how AT&T redesigned the phone network in the 1950s. It doesn’t really matter if it is true or not but it holds a valuable lesson. The story goes like this. In order for AT&T to take its telephony technology to the next level, it had to break the old model and start fresh. Management called all of its key engineers into a meeting and told them that the existing network had been destroyed and they had to start from scratch and design a new network.  And that is precisely what they did. They came up with a new design that was not burdened by the past.

What does this have to do with the world we are living in right now? I think that businesses have a unique opportunity to use this economic downturn to rethink the world.  What would we do if we could start over and reinvent the way we run a business or work with customers or design products that are more modular, more creative, and more accessible? What if the products and services we offer were blown up and we could start over?

I actually think that this may be happening behind the scenes. The really smart companies are using a time of crisis and uncertainty to prepare for the future. There will be a time in the future when customers will be more willing to buy products and services. There may be fewer providers in the world. The companies that survive and thrive are the ones that accept the chaos of the current business environment and see the hidden opportunities.

There is some very good thinking going on in companies that are blowing up their old models and thinking creatively. These companies will be the ones that become the powerful players in their markets in the future.  Who will the losers be? They are the companies that are filled with panic and looking for who to blame. So, whether you are in the technology market or in manufacturing or something completely different, it is a time to think about innovation and reinvention. It is time to rethink processes. Great companies are a combination of great flexible products and great innovative processes.

There are five things that future leaders should do:

1. Investigate your customers pain. What is it that they want that they can’t do. Even if their needs sound unsolvable, it may offer opportunities

2. Leverage emerging technologies. Leverage technology that lets your company explore its information about customers, product requirements, unsolved problems, and opportunities. This means that you need to stop looking in the rearview mirror at the past. Look at information in a way that allows you to anticipate the future and what is possible.

3. Don’t be held back by current reality. Clearly, you depend on revenue from existing products to stay afloat. However, think about your intellectual property in completely new ways.

4. Listen. I am finding that in this tough market people are doing more talking than listening. It is better to listen.

5. Experiment and fail. The only way to innovate is to try new things and fail. More innovation comes from failures than from initial success.

Why its hard to build great software companies

January 30, 2009 4 comments

I went to Progress Software’s  industry/financial analyst meeting this week.  I have known Progress Software since the 1990s as it migrated from the 4GL database development market to client/server and then to SOA and Software as a Service.  Unlike some of its peers in the 4GL space, Progress has managed to change with the times and evolve.  What I like about Progress is that it had the ability to move to new generations of software.  In addition, Progress had the good fortune of moving early into the OEM business. It has a large base of packaged software vendors that use its OpenEdge application development and database as part of their solutions.  This solid business provides a good cash flow to support the business. In fact, OpenEdge represents almost about 60% of the company’s revenue. Since it is a mature product, it provides nice cash flow for the company.

Now, I didn’t intend to write an entire report on Progress and its financial performance, although it would be a fascinating exercise. What I wanted to talk about is the issue of what makes a great software company.  I think that Progress is a good software company.  They do a lot of  things right.  What do they do well? Well, here is my list:

1. They have a great OEM base that embeds its technology into packaged software and therefore provides a predictable revenue stream.

2. Progress has used its cash wisely to purchase complementary software companies that already had a good revenue stream in secure markets.

3. The company has a good and predictable process for integrating acquisitions into the company while keeping the revenue stream growing.

4. Progress knows how to sell its newly acquired products to the installed base.

All of this is good. In the end, Progress has established itself as a good software company with predictable revenue that has been growing at a steady pace over the years. Today has revenues of around $540 million with more than $100 million in cash.

But is Progress a great software company? It is interesting to think about what might have been. Progress at this year’s meeting stated that it was going to start providing solutions to its customers. Good idea, in fact this is the trend among many software companies (I have always like solutions more than tools).  And Progress has a handful of offerings for the financial industry based primarily on its Complex Event Processing engine (Apama).  But here is an interesting observation. Progress has many successful ISV/OEM partners that sell solutions in various markets.  During the meeting management mentioned that some of these partners have bought other partners that also leverage Progress’s software (Sonic ESB, appserver, OpenEdge, etc.).  Now, I was just thinking, what would have happened if Progress had started buying some vertical solutions software companies that had been built on their technology? Could they have become that elusive $1 billion software company?

So, what do I think makes a great software company rather than a good one?  Here are my top five recommendations:

1. Great companies start with a predictable business model and turn the model upside down. They look three years ahead and experiment with innovation. They have to have a combination of intuition, risk, and innovation. These companies are willing to take enough risk to win big but smart enough to know the difference between great opportunities and pipe dreams.

2. Great companies find new areas to position themselves for leadership. This is very tough to pull off. The area has to be important enough for the market to pay attention to but not too big that they look silly.  Great companies never try to take a big existing market with established leaders and try to claim primacy.

3. Great companies build great relationships. Management at these companies builds an ecosystem of influencers including great customers who will talk about the value, press, analysts, and partners who together help the company create a persona of innovation and greatness while the company is still building.

Great software companies are complicated to build.   The software business a complicated and brutal with  lots of failures at every turn.  It is therefore proper to admire what Progress Software has done in building a sustainable business model. It isn’t easy. Great software companies are even more difficult and scary to build.

What’s different about SOA two years later? Why we wrote a second edition of SOA for Dummies

December 8, 2008 4 comments

soafd2It seems like just the other day that our team was busily finishing the first edition of SOA for Dummies. But it was two years ago since that book came out. A lot has change in that time. When we first wrote the book, we heard from lots of people that they really didn’t know what SOA was and were happy to have a book that would explain it to them in easy to understand language.

Because so much has changed, we were asked to write a second edition of SOA for Dummies which is coming out on December 19th.    What has changed in those two years?  Well, first of all, there have been a lot more implementations of SOA. In fact, in that edition, we were happy to have gotten 7 case studies.  Many of the customers that we talked (both that were featured in the book and those who took the time to speak with us without attribution) were just getting started. They were forming centers of excellence. They were beginning to form partnerships between the business and technical sides of their companies. They were implementing a service bus or were building their first sets of services.

In this second edition, we were fortunate to find 24 companies across 9 different verticals willing and able to talk on the record about their experiences implementing SOA.  What did we learn? While there is a lot I could say, I’d like to net it out to 5 things we learned:

1. Successful companies have spent the time starting with the both the key business services and business process before even thinking about implementation.

2. Companies have learned a lot since their initial pilots. They are now focused on how they can increase revenue for their companies through innovation using a service oriented approach.

3. Many companies have a strategic roadmap that they are focused on and therefore are implementing a plan in an incremental fashion.

4. A few companies are creating business services extracted from aging applications. Once this is done, they are mandating the use of these services across the company.

5. Companies that have been working on SOA for the last few years have learned to create modular business services that can have multiple uses. This was much harder than it appeared at first.

There are many other best practices and lessons learned in the case studies.  It is interesting to note just as many companies that said yes also were not able to participate because management felt that they didn’t want competitors to know what they were doing.

The bottom line is that SOA is beginning to mature. Companies are not just focused on backbone services such as service buses but on making their SOA services reach out to consumers and their business partners.

We have also added a bunch of new chapters to the book. For example, we have new chapters on SOA service management; SOA software development, software quality, component applications, and collaboration within the business process lifecycle.  Of course, we have updated all existing chapters based on the changes we have seen over the last few years.

We are very excited that we had the opportunity to update the book and look forward to continuing the dialog.

The ten reasons why software companies lose in a losing economy?

December 4, 2008 3 comments

I have been thinking about the software industry and what is going to happen to companies in this really lousy economy. There will clearly be companies that don’t weather the storm — either because their venture capital backers get nervous or because their customers do.  But, as in every downturn, there will be companies that figure out how to do the right thing and actually thrive. There will also be companies that simply have a business model for another time and will not make it.  So, I thought that I would put together a list of the characteristics of the software companies that will fail:

  1. My technology is so revolutionary everyone will want it. I see too many companies that don’t actually know what problems their technology solves for customers. If it doesn’t solve pain — don’t bother.
  2. The platform we offer to our customers is a complete architecture and we’re going to build an ecosystem. Software companies that think they can offer a complete platform to customers — even if they have only a few dollars in revenue.  This isn’t the time to try to do it all. Anyone, no one will believe you. Pick something you do well and stick to it!
  3. We don’t plan to try to partner with the big players; it’s too hard. In tough economic times, customers want to know that there is someone big and powerful behind the scenes…just in case.
  4. We’d love to partner with a large vendor if they are willing to put our product on their price list and sell for us. Keep dreaming. Big vendors will partner but only if there is something in it for them. If you can fill a hole in their product line you have a good chance but you have to be realistic.
  5. We sell a great tool. Everyone needs tools but they are commodities. So, unless a software company has a deep channel, this plan won’t work.  I have seen too many really nice tools companies go out of business. It takes a lot of energy to make one sale to a customer. If the return on the sales effort is only $199.00, it will takes a long time to get to a million.  And in tough economic times, customers will put a software company throught the same due diligence process for a $200 item as they would for a $20,000. Everyone is afraid to make a decision.
  6. Our technology sells itself. Just a few months ago companies were talking about how they wanted technology that would foster innovation. Now that desire hasn’t changed and probably won’t. However, customers want to know that they can get a fast return on investment.  Therefore, successful vendors are structuring their offerings in a modular way so that customers can quickly prove value.
  7. We sell an entire turnkey environment. The days of big all encompassing implementations are over — at least for now.  Customers need to be able to implement just what they can afford or get budget for. If it is successful, they want to be able to add the next chunk…next year.
  8. We are implementing precisely what our customers tell us they need. I know that it is important to listen to customers. However, there are important lessons to remember. Customers do not always say what they mean. They don’t always know what they want. They might be asking a software company to add functions that are specific to the way their company operates and may not be wise for the market overall. So, to avoid failure, listen but make sure that you are not walking into a trap. Look beyond fear and to what will make your buyer successful in their jobs.
  9. We are thinking about Software as a Service (SaaS)…but… In scary times, it is easier to stay with what you know and not make waves. But customers will buy SaaS offerings because there is no capital expenditure needed. If you don’t know how to do this, partner with someone who does. It is going to become the normal way that many software offerings are provided now and even more so in the future.
  10. We are limiting our outreach in the market. It is too expensive to advertise or market. We’re going to wait until things get better. While these are scary times it is not wise to hide.  While companies are hiding smart software companies are out there doing a lot of low cost but very effective marketing initiatives. It takes some hard work, but prospects will notice because everyone else is really quiet

There is no doubt that there is lots of uncertainty out there. There will be a lot of companies who don’t know how to position, price, and partner. There will be lots of companies that simply don’t know how to prove to prospects that they are worth betting on.  I suspect that the companies that survive will be the ones with great business models, interesting and accessible innovation and a lack of fear.

What’s a Smarter Planet (and what does that have to do with technology?)

November 20, 2008 2 comments

So, who could argue that we need a smarter planet. I certainly couldn’t. I am at an IBM software analyst meeting. I have been attending this meeting for many years. The focus, as you might imagine is on the software strategy. But  there was something this time that I think is worth talking about.  Rather than providing us analysts with a laundry list of products and go to market strategies (yes, they did some of that too), the focus this year is around vertical solutions and markets.  But more than that, there is an overarching theme that is about to become the major theme that will envelope IBM over the coming years – Smarter Planet.  This initiative is driven by Sam Palmisano not just with his operational good sense, but his ability to provide vision for the company.
In his address to the Council of Foreign Relations in New York City on November 6, 2008, Palmisano proclaimed that the next challenge as our world gets more interconnected, hotter, and challenged for growth we need to leverage a new approach to innovation that is smarter.
This approach according to Palmisano, “This isn’t just a metaphor. I mean infusing intelligence into the way the world literally works – the systems and processes that enable physical goods to be developed, manufactured, bought and sold…services to be delivered…everything from people and money to oil, water, and electronics to move…and billions of people to work and live.”
Good thinking but what does this mean from a technology lens? It is clear that we have an overabundance of technology. What we lack right now is the right way to leverage technology to truly focus on customer benefit from both an agility perspective (being able to change quickly and without too much pain) and the ability to support an increasingly connected world.  It is interesting to think about looking at the world this way.

If you think about it, the world is, in fact, a system. To make the concept even further, the world can be viewed as a biological system. The human body itself is an interconnected set of sensors, actions that trigger other actions. The body interacts with other humans, with the physical world as well as the virtual world. We take actions based on the information we are given or intuit from our experiences.
IBM is trying to tap into one of the most important transitions in our world today. And they are not shy about focusing these transformations to their products and services (it is a commercial world, after all).
Here’s a quick view of this idea of the Smarter Planet.  If we look at the idea of a Smarter Planet, it starts with the idea that everything is an asset that takes inputs processes them and produces outcomes.  Therefore, we can look at this from Smarter Planet from five different perspectives:
•    Innovation can transform companies, countries, and governments to lower costs and increase revenue
•    Intelligence that provides an ability to learn from the vast amounts of information in the world (I call this anticipation management). In essence, this means managing information, predicting outcomes, leveraging information across partners, suppliers, and customers
•    Optimizing, managing, and changing based on the customer experience. Organizations no matter how big or small are looking for ways to transform themselves so they are ready for whatever happens.  Companies that focused on this type of change are better able to weather very tough and complicated times.
•    Greening of business. You can’t talk about the planet without thinking about the impact of green on everything we do. This includes everything from saving cash by better usage of energy to protecting the climate.
•    Leveraging smart people.  I think that people makes or breaks this noble goal. Leveraging all these innovative approaches to doing things smarter and more responsibly typically fail if people don’t work together as effective teams.  Politics can kill innovation more quickly than anything else.

Now begin to take this concept out of the general view and apply it to specific industries, their problems, and opportunities. That is precisely what makes the idea of the Smarter Planet intriguing.  For example, manufacturing itself is being transformed as we speak.  Manufacturing has been transformed by technology with sensors and actuators so that the information produced is helping smart companies better control the manufacturing process both in terms of innovation, efficiency, and energy conservation.  In retail, companies are leveraging new processes and technology to leapfrog the competition. If a retailer can optimize the way they change inventory based on an early understanding of changing buying habits of customers they can become a leader.

I think it is important that IBM is talking about this idea now.  This idea of a Smarter Planet is really tailor made for a time when the natural inclination is to hide until things get better.  There is no question that we are in very challenging time.  It isn’t the first time that we have found ourselves in this position and it certainly won’t be the last.  But in my experience, the companies that take action when everyone else is hiding under the bed to innovate, change, and learn will win.  When the world comes back, these companies will be way ahead and everyone else will be playing catchup.