Pattern Finder

The Tsunami of Google Wave

Image via CrunchBase

Well, Google certainly made a big splash with Wave at its I/O Conference. (Backstory: Google sent me an invitation. However, since Google Apps Premier Edition has been such a wet squib, I decided not to go. Oh, well, live and learn.)

The media has gone into over-hype drive, asking the wrong questions such as, "Is this the end of e-mail?" and "Is this the downfall of SharePoint?" (Uh, the short answer is "No" and "No.") These are the wrong questions because they look at this announcement through a technical lens: will this technology replace that technology? The better question to ask is, "How will this affect business viewpoints and processes?" And from that vantage point, Google Wave is a significant announcement.

It's significant because Google Wave makes physical a groundswell towards contextual collaboration that has been building for some time. There are a bunch of communications technologies (e.g., e-mail, IM), collaboration technologies (e.g., social networking, workspaces), and content technologies (e.g., productivity suites, document sharing) that the market has always perceived as separate. Google Wave takes them, munges them together, and allow workers to perform both synchronous and asynchronous collaboration within a work context. Rather than making the worker open an e-mail application and a word processing application and an IM application, the worker just works. The three Cs come to him, rather than him going to them. The impact of Wave is that it's an instantiation of a vision that many people--including Burton Group--have been talking about for a long time.

In the real world, what that means is enterprises will start to say to vendors, "I want a Wave-like product." Google has given them a new product category to ask for. So give Google an A+ for vision and market impact. However, they'll probably earn a much lower grade for delivering on the promise for large enterprises. There's a bunch of dynamics at work here.

A Good Idea: Paying for What You Use

"Paying for what you use." Yes, I know, it's a radical concept in the software world, but not in other areas. Electricity: the utility company measures your electricity consumption, and bills you for it. If you consume a lot of electricity at peak hours, then you pay a lot more than someone who uses little electricity at off-peak hours. Gasoline: if you drive a lot, you buy a lot of gasoline; if you drive a little, you buy little gasoline.

In the software world, equitable payment for what you consume is much more elusive. The definition of consumption is all over the place. If you're talking servers, the measurement might include the server model number ("size"), the number of CPUs, the number of potential users, the number of concurrent users, etc. If you're talking PCs, the measurement is usually a user, but with little regard to their usage of the software. An expert who uses every feature in the software is often billed the same as someone who buys the software but never uses it. True, there is some rudimentary granularity in the market--for example, the business intelligence market has often offered two types of client software: an expensive rich client package for the analyst who drills into the numbers and creates reports, and a less expensive client (usually web browser-based) for the casual user who reads canned reports from time to time.

However, in this recession, that rudimentary granularity is no longer enough. I'm getting a lot of calls from clients who feel they're paying too much for Microsoft Office and want to explore other options. It isn't that they feel they're being overcharged across the board--they think Office is an excellent suite for their expert users. For example, Microsoft Excel is incredibly feature-rich, and their spreadsheet jockeys can do incredible things with it. At the same time, these same companies have given Excel to workers who just use it as an application for generating simple tables. The most spreadsheet-specific thing they do is sometimes add up a column--and you can do that in Word.

So when someone like Google or IBM or Sun comes along and says, "We can give you a pretty good productivity suite for a much lower cost [including free]," these budget-strapped companies take notice. Now due to a variety of issues--the need to support expert users, some file translation issues, etc.--it's not easy to do a wholesale replacement of Office. However, surgical replacement can be done.

In my view, both sides of this argument are wrong: Microsoft saying that you need to overbuy because you never know when a worker might need a certain feature (true, but not as often as Microsoft claims); Google, IBM, and Sun saying that you don't need all that functionality (actually, sometimes you do). In other words, both sides assume that rudimentary granularity is here to stay.

The way out of this conumdrum is to say, "No, we're going to charge customers for what they use." With a SaaS-based solution, that's quite easy to do--the web server tracks feature usage and charges back in a much more granular fashion. For example, one user is typically a casual user, but because she's been assigned to a three-month project requiring heavy usage of a spreadsheet, she's charged for heavy formula usage. After that, after she goes back to using the spreadsheet as a glorified table creator, she's charged the lower rate again.

Even with software, this is possible. Microsoft has been monitoring usage stats of Office for years, as a way to understand feature usage. However, it's part of the development process, and has never been used for licensing.

So the next time you sit down with your solution provider to talk about licensing, start the conversation by saying, "You know, we'd actually like to pay for what we use." If the vendors hear that enough from customers, they may start rethinking how they do licensing. Electricity and gas have been sold in an equitable fashion for the past 80 years; it would be nice if software caught up. 

Ernie Roberts--A Blogger Before There Were Blogs

Cover via Amazon

An uncle of mine, Ernie Roberts, died on Monday. It's not a name that means much to most people--unless you're a sports aficionado in the Boston area. Then it means a lot. He worked at The Boston Globe newspaper from 1947 until 1983, working his way up in the Sports department hierarchy--from evening sports editor to sports editor to executive sports editor. He was instrumental in making The Boston Globe's Sports section the powerhouse that it was in the 1970's and 1980's. The story in the Globe notes, "He's probably more responsible for making the Globe sports section great than any other individual," said Globe sports columnist Dan Shaughnessy.

Most readers of the Globe didn't know him as an architect of the Sports section's writing dynasty. Instead, to them he was just another Globe columnist--but with a gimmick. Because Ernie always started his column talking about breakfast--what he had that morning, or what some sport celebrity's favorite breakfast was. After I moved to the Boston area in 1975 I'd read his column from time to time and I can still remember being struck at how casual it all was. He'd start with the breakfast thing, and then talk about this, and then talk about that. It was very casual and conversational--back in a more formal time when most business people wore suits and ties to work and the term "business casual" hadn't been invented.

Now that I think back on it, Ernie was ahead of his time--he was writing a blog before blogs were invented. He instinctively realized that people hungered for a quick, casual conversation--even while he labored at a newspaper, the classic broadcast medium--and he gave it to them. In other words, Ernie and others popularized a writing style that finally found an outlet when blogs came along--a quirky, quick commentary on events of the day.

I'll close with an Ernie story that's probably more of a commentary on me, rather than my uncle. Ernie called me one afternoon in 1978 when I was working at John Hancock in Boston. Excitement was high at the time because the Red Sox were in a tight race with the New York Yankees for the American League East. Ernie had some extra tickets for a Boston/New York game at Fenway and had called to ask if I wanted them. (At the time I lived in Salem, MA and took the commuter rail back and forth to work.) I did a quick calculation, figured that the game would get out late and that I'd be taking a midnight train back to Salem, and declined them. When I casually mentioned to my underwriting colleagues that the Executive Sports Editor of The Boston Globe had offered me free tickets on the third base line to a Red Sox/NY Yankees game--and that I'd declined them--I was almost lynched on the spot.

Saving Money in IT: Granularity Is Key

Saving money in IT is certainly on everyone's mind these days, and one of the keys to doing so is using "granularity."

Huh? The idea is that for a long time, IT has not been very granular in its approach to things. Purchasing over capacity has been a way of life. The mainframe is a perfect example of this: this was a huge box, much of which sat idle until the enterprise had written a bunch of programs for it. Things got a bit better once minicomputers and PCs came along: you could size the box to its tasks. But even that wasn't quite right: if you bought a new application, it usually required a new server. So you had a bunch of computers, all of which had some excess capacity within them. If you could add all of that excess capacity together--and use it--then you probably could coast for a couple of years without having to buy a new computer.

The thing that has added granularity to hardware is virtualization. Now you can split a physical server into multiple virtual machines--and expand or contract the size of those machines as needs dictate. This ability to make a machine just the right size helps explain virtualization's current popularity. It comes down to granularity.

When it comes to software, we've once again typically taken the "big box" approach--or, to be more accurate, the "big list of features" approach. Somebody needs a productivity suite? Give them Microsoft Office. It does everything and then some. In many cases, it does more than the employee needs; but there's no easy way to get Microsoft Office lite from Microsoft. Some enterprises fix that by not buying Microsoft Office for casual users.

However, that is starting to change. Google, OpenOffice.org, IBM Lotus, Sun, and others are offering productivity suites with less functionality than Office--but also making the argument that that's OK because they cost less. Their wins are typically not in displacing Office--but rather in giving productivity suites to users who had none. Once again, it comes down to granularity.

And that makes sense--one of the ways you save money is by buying exactly what you need and nothing more. In the past, due to technology constraints, IT has had to overbuy--but those days are waning. State-of-the-art IT shops are focusing on granularity--whether it's in the form of virtualization or segmenting their employees--and are saving money while at the same time supporting the business.

Note: cross-posted in the Burton Group CCS blog

GAPE Finally Selling in the UK

Two years after Google's announcement of Google Apps Premier Edition (GAPE), it looks like it's finally getting some traction in large enterprises, at least in the UK. GAPE has done well in the SMB space as well as with universities (where Google Apps Education Edition is free for students), but historically it's been unable to convince large businesses to adopt GAPE. When asked about large enterprise customers, Google usually points to Genentech. However, the press and enterprises don't always pick up on the fact that Arthur Levinson, Genentech's Chairman and CEO, also sits on Google's Board of Directors.

According to a post in the UK version of CIO, Guardian News & Media is moving to GAPE. The article notes,

GNM will make the paid-for Google Apps Premier Edition available to about 2400 users as part of a drive to revamp collaborative processes....

'Google Apps was definitely bought as an additional tool set, but Lotus Notes will be disappearing as a result of this,' Beale said. 'It will take a while because we have a range of applications running on Domino but Notes as a mail platform will be phased out, I suspect.'

'Domino/Notes was a product ahead of its time and Lotus is still probably the most credible enterprise vendor [in the space], but in terms of what we’re losing [through the change], it’s not a lot. The problem with things like Notes is they’re trying to be all sorts of things and today’s products don’t have that baggage.'

In mid-2008, another media company in the UK, Telegraph Media Group, ran a GAPE pilot with 140 of its 1,400 workers and it was a big success. Paul Cheesbrough says in the CIO article:

“We’ve got Office 2003, Windows XP and Exchange 2003 and we started to look at the refresh cycle at the beginning of this year. We had a decision to make as to whether to sign up for a three-year enterprise agreement with Microsoft or look at something else. [As a pilot] we put 10 per cent of our 1400 user seat estate and allowed them to use Google Apps alongside their Office and Exchange infrastructure. Overwhelmingly, the feedback was positive and there would have been uproar if we had said we were turning it off. We were faced with the decision of whether we pursued the same [Microsoft] path and paid the price for that or put more and more internal solutions in the cloud.

“We made a conscious decision not to refresh any of [the Microsoft infrastructure]. We’re not going to remove it but we won’t upgrade it. Some users might use Outlook as the client but we’re moving to migrate people from Outlook onto Google by the end of the year. We’re not going to rip and replace but we’ve decided not to refresh Office 2003 and we’ll sweat that asset. Google Apps is good enough and rich enough for us to do what we need to do. Collaboration has been very powerful [in Google Apps] and as people use Google Mail and Calendar they’ll naturally stray to use Google Docs.

“When I started the trial in February I probably wouldn’t have forecast this as the result but the user feedback meant that it was quite an easy decision to make. It fits quite well with other business apps, with things like Salesforce.com. Also, it allows our staff to spend less time on disk upgrades and password refreshes and more time being productive.

According to CIO, other UK organizations starting to use GAPE are Taylor Woodrow, a construction firm, and University of Westminster.

Kindle 2: A Rorschach Test for Technology and a Lesson for IT

Image by Getty Images via Daylife

Note to anyone living in a cave: Amazon.com announced the next version of its Kindle, an electronic book reader, at a press conference in New York City yesterday. The media has had a field day with the announcement, offering commentary ranging from pithy comments (The Washington Post) to musings on the book industry (Business Week). A sample of articles includes:

• The Washington Post: "Amazon's Sequel to a Best-Selling Thriller"
• Business Week: "Amazon's Kindle 2: No iPod for Books"
• The New York Times: "Amazon.com’s New Kindle Is Lighter, Brighter and Chattier"
• Ars Technica: "Hands on with Kindle 2: what a difference a screen makes"
• The Wall Street Journal: "New Kindle Audio Feature Causes a Stir"

However, I think the most interesting part of the announcement is people's reaction to it, which can be sampled in the comments to The New York Times blog post. Some Apple aficionados, who've never used a Kindle, can't believe it could ever be as good as the iPhone; others bewail the fact that it may be replacing paper books (with their distinctive looks and smells); others love the new found freedom it has given them. A sampling:

Note that you can already read many e-books on your iPhone or iPod touch, using Stanza or a couple other readers. Smaller, multi-function, and way better looking.

geez, talk about gadget fetishism– don’t you people have anything more significant to get excited about?

As a contented Kindle user for over a year I am so amused by the tone of all the anti-Kindle comments. Hey, I enjoy real books as much as anyone, the fact that I own a Kindle doesn’t mean I have to stop rummaging through dusty bins of old books at used bookstores or enjoy the feel and smell of those books.The fact that I have hundreds of books on my Kindle doesn’t mean that my children can’t read the rest of the thousands of books that line the walls of my house. The fact that I use my Kindle every day doesn’t mean that the iphone is or isn’t the greatest electronic product ever marketed. The kindle isn’t a weapon in the culture wars, it’s just a great way to instantly buy books, store a lot of them in a small, convenient device, and read them comfortably. For many of us reading on the Kindle has stopped being so fraught– It’s just the way we do >some< of our reading.

Contrary to some of the negative posts here my Kindle experience has changed my life. I have a degenerative cornea disease and my reading capabilities had decreased to almost completely unable. After purchasing a Kindle last year my reading is once again as it has been all of my life. Actually even more!

I would argue that these comments are a mirror of the wide range of user reaction that IT now gets when it rolls out a new system. Unlike the 1980's and 1990's, when users were cowed by technology and told by IT they were lucky to even have a computer--"So stop complaining"--users now view technology as part of their everyday life and feel free to editorialize on what they like and don't like. Any IT department that doesn't think through how to evangelize a new system to such a wide range of people is making a big mistake.

Lotus Symphony: Looking to Go Beyond Playing Catch Up

IBM Lotus had several presentations on Lotus Symphony this year. Symphony is an office productivity suite that natively supports ODF-based word processing documents, spreadsheets, and presentations. Other characteristics are:

• Free license
• Supports 28 languages
• Runs on Windows (XP, Vista), Linux (Redhat, Suse, Ubuntu), and Mac OS X
• Based on Lotus Expeditor
• Three support options: Symphony Embedded Version (free: included with the purchase of other products such as Notes 8, Foundations, and iNotes); Standalone Symphony Free Support (free: online support via forums); Symphony Standalone Fee-Based Support (priced for up to 20,000 users, limited to 20 technical contacts)

At the moment, Symphony acts as a wannabe to Microsoft Office, with a few things missing, such as VB Macros (that feature is coming). If Symphony were just that, it wouldn't be that interesting--true, it could save you licensing fees compared to Office, but that would be all it does: it would improve the bottom line but not offer increased productivity for information workers.

However, IBM Lotus is becoming a bit more outspoken about their future plans. On slide 5 of the IBM Lotus Symphony Overview (presentation ID506), the company portrayed a pyramid with five tiers, with an arrow pointing up the pyramid stating, "Over time, investment will shift." From bottom to top the tiers are:

1. Meet needs of most users: Usability, stability, platform support
2. Adoption capability: Interoperability, compatibility, deployability
3. Linked values: Cross integration with Lotus portfolio, first choice for office tools of Lotus users
4. Solution enablement: Programmability for ISVs, extensible and open
5. Beyond Office: Breakthrough document manipulation experience

The interesting one is number five: Beyond Office is the idea that Symphony should become part of an ecosystem that makes composite documents, similar to what the DITA standard allows for technical documentation. And guess what--IBM is the company that pioneered DITA. So given the company's DITA heritage and IBM Lotus' declared strategic plan, over the next several years Symphony should become a much more capable, interesting, and productivity enhancing product.

If This Is Tuesday, It Must Be the SaaS Conference in Rotterdam

Today I was in Rotterdam, where I discussed the roadmap and vision of SaaS at the first European SaaS Conference. I must admit that as I was putting the presentation together several months ago I was a bit stumped on how to talk about the SaaS roadmap--it sort of wanders all over the place, with different applications arriving at different times. For example, SaaS-based web conferencing and SaaS-based web analytics came out in 1995 and 1996, and so have now been around for over a decade, while SaaS-based document sharing solutions arrived only several years ago. All of a sudden, it came to me--while the destinations were all over the place, the roads weren't. I needed to describe the roads themselves: the map of roads. Once I thought of the problem that way, it became very clear. There are three stages of roads:

• Gravel Road: 1993-1999--During this time, hardy pioneers were blazing new trails--startups were looking for a way to break into a market and SaaS (called ASP at the time) was an attention-grabbing hook. Meanwhile, on the customer side, enterprise departments were looking for a software alternative. However, there were no real customization/configuration capabilities.
• Highway: 2000-2006--At this point, SaaS started to go mainstream. Departments (e.g., HR, Sales, Marketing) began using SaaS because sometimes it was a better solution than software and they could buy it faster than software. At the same time, the vendor attitude of "You can have any color you want as long as it's black" attitude started to soften, with suppliers starting to allow some customization via configuration settings.
• Superhighway: 2007+--Today, SaaS is accepted as a delivery model and being exploited. Large vendors are buying up SaaS providers and enterprises are starting to look at migrating significant portions of their business to SaaS (e.g., e-mail). Also, SaaS is now being viewed as a platform.

The conference had some big players in attendance--IBM, Iron Mountain, KPMG, Microsoft, and Salesforce.com were there; Google was supposed to present, but backed out at the last minute.

Serena Software: Moving from Exchange to Google Apps

This summer the Collaboration and Content Strategies practice within Burton Group published a report on SaaS-based e-mail, saying that enterprises would increasingly use such an option, whether it came from Cisco, Google, Microsoft, or another provider. There's an eWeek article this morning reporting that Serena Software is moving from Microsoft Exchange to Google Apps, thereby saving $750,000 in annual license and support fees.

It's always nice when the market behaves the way you predict it will.

Social Software in Politics: "Blogged Down in the Past"

An article in the Columbia Journalism Review compares the online strategies of the McCain and Obama campaigns. It notes,

Barack Obama’s campaign reaches out to activist bloggers in order to communicate with and mobilize campaign volunteers and feed them into its online social networking site, MyBarackObama.com. In contrast, John McCain’s campaign takes a top-down approach, using blogs—many of which it helped incubate—as an echo chamber for channeling mostly anti-Obama attacks into the mainstream media, in order to create an impression of grassroots online support.

This "bottom up" characteristic of Web 2.0--embraced by Obama's camp and never really understood by McCain's camp--is puzzling some enterprises as well. The classic command-and-control enterprises, looking at things like blogs and wikis because they feel they have to in order to stay technologically current, are struggling with the fact that they may have to let the community police itself. Otherwise, employees worried about getting fired for saying the wrong thing will stay away in droves, and the community never progresses beyond the rah-rah rollout stage. In short, many companies are finding that in order to use social software effectively, they need to change their culture first. Buying the software is easy; interweaving it into the way employees work and think can be hard.

SaaS: Driving Simpler Licensing

A side effect of enterprises moving towards Software as a Service (SaaS) solutions is that it whets their appetite for simpler licensing. Think about it. You can pay Google $50 per user per year for Google Apps Premier Edition (and complete the transaction within minutes), or you can spend days, weeks, and even months negotiating with Microsoft on an enterprise license for Microsoft Office.

OK. If you also buy MOSS 2007, we can give you an additional 2% off of the price of Office. Oh, you also want to buy OCS? Let me see how that will effect the deal we can give you [clicking of keys in the background].

This is a purely hypothetical conversation, but you get the idea--it's long and complicated, and in the end you aren't really sure what you've paid for each product. Now just because licensing is easier with Google Apps doesn't mean large enterprises are flocking to it--but it does make them wistful for a simpler licensing life.

All of the big software vendors--IBM, Microsoft, and Oracle--will have to get over the idea that licensing software has to be complicated. If you have a large direct sales force, complicated pricing is tolerated and even welcomed. That's why byzantine enterprise software pricing (e.g., bundling, discounts, and special deals) has been the modus operandi for years, and enterprises haven't had another option--until now.

Therefore, a huge question is how the large software vendors will alter their pricing practices going forward: will they keep their old and increasingly outdated habits, or will they simplify licensing to save their customers time and aggravation? I must admit I remain skeptical that these behemoths (1) will figure out that they need to change and (2) be able to act on that realization. However, I was pleasantly surprised to see that at least one Microsoft division is moving in the right direction with Small Business Server 2008 (a packaging of Windows Server 2008, Exchange Server 2007, Office Live Small Business 2008, Windows SharePoint Services [WSS], and Windows Server Update Services for small businesses).

You can read the InfoWorld article here; in terms of licensing, the article notes:

Microsoft SBS Client Access Licenses (CALs) can be assigned to users or machines, a nice option if you're running multiple shifts or have users with intermittent access requirements. CALs are available in 20-packs, 5-packs, or, in a hat-tip to the realities of small-business life, single-CAL packs. In addition, SBS comes with five "temporary CALs" that you can borrow against to get a new user up and running immediately. The idea is that you set up a new employee with a temporary CAL and then buy the regular license, returning the temporary CAL to the pool. This way, you don't have to wait until you've had a chance to buy a CAL before you can bring on a new user, and you don't have to buy more CALs than you need. In many ways, the new licensing scheme may be the most important change to the product.

While not as simple as Google Apps, this is a start in the right direction, and recognizes that licensing is going to be more dynamic in the future. Companies don't know how many employees they're going to have in the future--especially in these tough economic times--and so a more dynamic licensing model is a good thing.

So the next time you see your IBM, Microsoft, or Oracle sales rep, ask him or her how they're going to make your licensing life easier over the next year. They'll probably look up at the ceiling, shift from foot to foot, or try to change the subject. But if enough customers ask, the large software vendors will recognize that this is a problem that they need to fix.

Three Scenarios That Would Force a Market Rethink

We're in a pretty wild time here in the collaboration, communication, and content market. For example, content management has gotten a new lease on life thanks to Microsoft SharePoint, Google Apps has everyone rethinking how to deliver productivity suites, and Cisco has decided it wants to do hosted e-mail. With that in mind, here are some possible scenarios that will further disrupt this market. (Note: these are all possible; whether they will occur I have no idea. However, part of an analyst's job is to play "what if" games as a way to think through market dynamics.)

Microsoft offers Word, Excel, and PowerPoint over the web: I had a reporter e-mail me this rumor yesterday. It's not that farfetched; Microsoft certainly knows that its software-based Office suite is under attack by SaaS players such as Google, ThinkFree, and Zoho. The gotcha with most of the current SaaS-based challengers is that they can't match the feature richness of Office. The challengers, of course, pass that off as a plus--"You don't need all that stuff, it just complicates your world"--but try and tell that to a financial analyst who depends on all sorts of arcane features within Excel.

Given that reality, if Microsoft goes this route I would not be surprised if it builds the web-based version in Silverlight. Something similar to this has been done before--last year, Virtual Ubiquity was showing a gorgeous word processor built in Flash that put all Ajax-based word processors to shame. Adobe bought Virtual Ubiquity towards the end of last year, and that move wouldn't have been lost on Microsoft. If Microsoft does build a Silverlight version of Office, it will have a credible answer to Google Apps (assuming that Microsoft matches or beats Google's $50 per user per year pricing, which is a big if, given Microsoft's penchant to squeeze its customers for money) and basically wreck any dreams of Adobe to move into the productivity apps space.

Cisco buys Yahoo!, sells the ad business to Microsoft: Cisco's recent purchase of PostPath is a signal that Cisco is going after the Exchange hosting business. Cisco already offered a SaaS-based e-mail system, since it bought WebEx and inherited WebEx Web Office. However, Cisco wanted more than that--it wanted a SaaS-based e-mail system that would work with an Outlook client. Hence its purchase of PostPath.

SaaS solutions require a major hosting infrastructure. One quick way to grow that would be for Cisco to buy Yahoo!. Then Cisco could turn around and sell the ad part of the business to Microsoft. Microsoft gets the ad business it wants, Google has to worry about Microsoft more, and Cisco's collaboration strategy gets a shot in the arm.  

Google buys Salesforce.com: Frustrated at its slow penetration of the enterprise market, Google finally says, "Enough!" and buys Salesforce.com as a way to gain expertise in developing for and selling into the enterprise market. With that, Google hosts even more corporate information on its servers (sending privacy advocates into a tizzy), improves the probability that Google Apps will eventually be adopted by enterprises, and increases its threat to Microsoft.

As I said before, I'm not sure any of these scenarios will come true, but they do highlight that, at this point, anything could happen.