Center of the Ecosystem

Vertically integrated technology companies like Apple and Oracle have established themselves in the center of the the consumer and enterprise ecosystems by building proprietary systems with just about every feature contributing to customer lock in.  The strategy has clearly worked for them, so far.  Getting new customers is going to get more and more difficult for them as the world moves away from lock in and the competition does something other than push customers away by throwing up ill conceived and poorly executed competing products or services.  

In this context a diverse and horizontally oriented technology firm will have a once in a decade opportunity to establish itself in the center of the new world -- not unlike the way IBM did in the ‘90s.  In fact, we can learn a lot from Lou Gerstner's playbook from nearly 20 years ago.  Here are the three partner relationship management things a company could do to establish itself at the center of the technology world of the next decade:

Embrace Open

The difference between open-ness and open source are more nuanced than can be described in this post.  One similaritiy however serves our purposes.  In an open system everyone is welcome.  Everyone.  Some companies can do this and others just cannot get their brains around it.   Companies that are insecure about the value they deliver -- build walls and moats. Companies that are good at what they do are the ones that can let everyone in.  

Love Engineering Great Products

A company with an engineering pedigree and that is full of talented people that love building great products has what it takes to be open.  Such a product focus injects confidence into the decision making about being open.  

Deliver Value Every Day

The irony of the lock-in strategy is that its is a cancer that eats the host from the inside out.  IBM has shown us that the discipline of being open inspires everyone in the company to deliver value every day. 

A company that works to immobilize its customers with contracts and proprietary and non transportable systems sends a message to customers -- but more damaging is the message it sends to the people inside the company.  Soon the company is hiring more lawyers than engineers.  And that cannot end well.

Make it Transparent

This is the third in a series of posts about how big new thinking could transform the way computer hardware, software and services are sold.  Here is the first post that serves as an overview, and here is the second post that dives into the details.

In this post I will outline what the transparency idea, and offer some specific suggestions of action to take.  But first, why transparency is important.  

Partners that are involved in a conversation are engaged and productive.  Transparently exposing some of the machinery inside your partner organization will create that conversation.  Here are three specific things that create transparency:

Share Reporting

Often times the reports exist, but for one reason or another are not shared with partners.  Even my residential power company now shows me how my power consumption compares to my consumption last year and the aggregated consumption data of my peers.  Expectations about better reporting are going up fast due to these consumer experiences -- and a good partner program must keep pace with progress.

Allow Multiple Access Points

Social media has trained everyone to engage in a web of communications.  The tools exist today to employ social media tactics that allow for a criss cross and free flowing exchange with partners -- that still have consistent messages and institutional memory.

Admit Mistakes

Everybody makes them.  Everybody knows it.  Labeling a bug as a feature just drains away credibility too fast.  A simple post that says what the intention was, what was learned, and what is next will go a long way towards long term successful partnerships.

Those against transparency claim it looks unprofessional, or say it is a good thing to start next year after we get our act together.  Transparency starts as a way of thinking and then becomes operational as team members and partners experience the benefits.  Unless it starts today, it will always be something to do another day.

Make it Unbelievably Easy

Many industries are going through revolutions where new entrants are completely changing the market.  What Amazon.com is doing to bookstores and Google is doing to newspapers is just the beginning.  The companies turning markets upside down are do so by not knowing how it has always been or how it is supposed to be.  In our business almost every maker of computer hardware of software makes it stunningly complicated to be a channel partner.  Partners are made to jump through hoops of every conceivable size and shape, achieve certifications, prove sales history, get customer testimonials, maintain a staff of salespeople or engineers, and on and on.  And as soon as a partner has run the gauntlet with one manufacturer, the trials start all over with another one.  Each of these relationships are at least as complicated as that with a bank.  And to be a successful technology service provider and selling partner to the manufacturers of the technology, more than a dozen and sometimes several dozen of these channel partner relationships must be maintained.  There may not be any other industry that makes it this hard to get the parts and pieces it needs to be successful.  Can you imagine if a restaurant had to maintain 20 or 30 complex and fragile business relationships -- just to get the ingredients needed for its recipes?  

All of this market friction points to a big opportunity for a new entrant to really make a big leap forward -- just by making things unbelievably easy.  Here are some ideas that just might achieve that end:

Be One Company

All big companies have quarreling departments and the makers of computer hardware and software are no exception.  Apple Computer presents a single face to its customers and that one thing should not be underestimated.  Lesson number one therefore is to Be One Company.  After all, a new entrant will certainly be one company.

Take Advantage

A great deal of the component parts needed for partner relationship management already exist in the marketplace.  From LinkedIn profile information to already achieved partnerships with other industry participants, partners are forever re-doing work that they have already done.  Most large technology manufacturers force their partners to use their proprietary system when all of the information is already being maintained elsewhere.  To be the unbelievably easy partner program to work with, take full advantage of the other systems available.  It would be a great partner experience to link to profile information and automatically graed access to those that had certifications from the competition.

Ask What You Can Do for Your Partner

Mapping programs offer up more than one route to a desired destination.  Engaging with partners can be achieved by designing a program and getting partners to conform, or alternatively, by asking partners and building to their specification.  Either way the outcome is increased sales, in fact the latter probably delivers better results.  So don’t ask what the partner has done for you, but what you can do for your partner.

The conditions in the technology industry channel partner ecosystem are such that change will come.  The question is, who is going to make it happen?

Big Pain Equals Big Gain

Everyone in our solar system knows about the pain going on at HP.  I would not be surprised if even a few extra terrestrials know about HP’s roller coaster ride of CEOs, acquisitions, write downs, re-orgs, lay offs, and other painful stuff.

The tendency of course is to write off a company with this much trouble.  Why work for, work with, sell to, sell with, or even write blog posts about a company that seems to put its business plan in the blender before deciding what to do each morning?  

Well, because with this much pain there is enormous opportunity for gain.  In the fifteen years we have been helping big technology companies market through their partners we have been involved in many conversations with HP.  Most of those conversations have included a significant thread about how HP does things and about how there was no chance the way HP did things was ever going to change.  

Well, things are changing now!

On every measure except market capitalization, where even Facebook has a bigger valuation, HPQ is pretty big.  Seventy three years of history, over one hundred billion dollars in revenue, and 350,000 employees.  Add to this HP’s tens of thousands of business partners that sell their hardware, software, and services all over the world and I would not be surprised if the HP ecosystem was more than a million people strong.

No matter what experts say about the rapid pace of change inside technology companies, every company in every industry avoids change and HP and the technology industry are not immune.  Right now, the move to the cloud and BYOD is moving the pieces around the technology industry chess board and presenting a once in a decade opportunity to companies willing to change big.

So all of the planets are lined up and HP is Jupiter.  

If I were HP, this is what I would want to do with my influence:

• Make it UNBELIEVABLY EASY to work with HP
• Set a new TRANSPARENCY standard
• Establish HP in the CENTER of the ecosystem
• Make each change FOUNDATIONAL

Clearly these measures build on each other.  Each will have an impact on its own.  With a little luck the compound impact could change the whole industry.

The Value of Self Organizing Strategies

Getting everyone to work together in a large organization is nearly impossible.  I propose it is actually impossible when approached by brute force.  Making employees work together is about as fun as making a two year old eat his Gerber plumbs.  

Self organizing entities do somehow work together with seemingly little effort.  Think of the large flocks of birds or large schools of fish as the fly or swim together.  There is no time for top down orchestration -- it just works.  There is an invisible feedback loop that reinforces certain behavior that causes the actors to act together, all without a single email or meeting.

Here are a few basic principals to try when thinking about using self organization to your advantage: 

1. Keep it Simple - and reinforce:  Yes, one of the oldest maxims when it comes to marketing and advertising.  A simple clearly communicated message is essential.  All messages must reinforce a theme.
2. Listen hard for feedback:  Feedback is everywhere and to be effective leading a fragmented organization listening is tied for first as the most important part of the formula.  This means not over-reacting to outliers too.
3. Many small adjustments:  The theme here is constancy; constant communication, contstant feedback, and constant adjustments.  These are not gigantic launches with canyons of silence between them.  
4. Let the "stick" take care of itself:  So many programs are tied down by rules and their enforcement.  Not only do these establish barriers between top performers and their goals, but they take valuable resources away from communicating, listening, and adjusting.  Left alone, the outliers will take care of themselves.

When coordinating marketing activities across large organizations, particularly those like our clients that also involve tens of thousands of partners that are in fact outside of the company, some of this self organizing stuff is helpful to think about. 

Big Data in Big Companies

We work with big technology companies.  If there is anyone that is really doing Big Data, I would think it would be big technology companies.  After all, they believe in technology, have plenty of computing horsepower, and have people that have the necessary skills to do it.  

The reality is quite the opposite however.  Most of the time we are working to overcome very simple problems like duplicates or obviously incorrect entries.  The real data industry came up with ways to deal with these problems decades ago.  Nevertheless, our clients have such low confidence in their data that they often retain us to start over.

Here are a few of the things we see preventing big companies from truly using Big Data:

1. Legal Departments:  The legal department does not play to win, they play to not lose.  They would much rather prevent the collection of data than otherwise.  After all, a company that has not collected any data does not have to worry about losing data in a breach and then getting sued. 
2. Poor Planning:  Good data handling takes time and effort.  Data initiatives invariably take longer than a quarter to implement, and longer than that to produce returns.  Almost all companies are looking to hit the number this quarter.  
3. Internal Competition:  Competition between departments can cause them to hoard data (at best) or go underground with their data (at worst), creating silos of data that is riddled with duplicates and innacuracies.
4. Turnover:  The people in charge of these data initiatives have their eyes on bigger and more important (more visible) jobs -- so they change often.  The person taking over the job is just as uninterested in long term data health, so the problems go unaddressed.

As with many promising technologies, Big Data's biggest challenge is not in the technology but in the way people work together inside companies.  There are enormous gains to be made by the companies that realize what can be done with these new tools and organize themselves in such a way to take advantage of it.

Marissa’s Brains and Steve’s Brute Force

I have never been pregnant so I am not going to comment on Marissa Mayer's condition or how it relates to her new job at Yahoo.  I have never been CEO of a multi billion dollar company either, but that is not going to stop me from commenting on what I am sure is going to be one of the most interesting meetings in the near future -- between Marissa Mayer and Steve Ballmer.

Microsoft and Yahoo have a complicated past and a complicated present and likely a complicated future.  This first meeting is going to be interesting for a number of reasons not the least of which is the way that Ballmer has targeted Google so intensely and for so long.  Now he is going to be sitting across the table from the devil herself, and she is exactly what he needs -- a smart experienced person with design sensibility and vision.

While he is realizing how she could help him, she is probably doing the same.  I don’t know anything about her willingness or ability to use brute force to crash through barriers, but Ballmer’s tendency to do so could be quite useful to her.

And they both have the same problem -- their own companies.  They each have an opportunity to use the strength of the other to influence their own teams.  Marissa can get Steve to beat her cranky board members into submission and Steve can get Marissa to get his team to stop fighting with each other and focus on the challenge at hand.

Solving the Tablet Puzzle

When I was a kid my mom taught me how to solve puzzles.  She said to find the corners first, then the edge pieces, then assemble the frame, then sort the pieces by color...  It was a sound process and surely was easier than randomly picking one of the 500 pieces out of the box and trying to figure out where it went.  From that experience I learned that solving the puzzle depended heavily on the sequence.

It is interesting to see how the four big players in tablets computers:  Apple, Amazon, Google, and Microsoft are each approaching their complex puzzles.  Just like doing puzzles with my mom, the sequence is everything.

The first entrant into the market was Microsoft - over a decade ago.  Bill Gates was correct that tablets were going to be big.  We now know that his vision was extraordinary.  Unfortunately, he was pulling one piece out of the box and there was really no hope of fitting it in with the other pieces.

Meanwhile, Steve Jobs was laying down the corners and the frame of his puzzle with the iPod.  It was a simple but amazing device that enabled users to do one thing:  carry 1,000 songs in their pocket.  At the time the next best solution held only 10 songs.  Then the iPod lead to the iPhone, the iPod Touch, all those apps and app developers, and finally the iPad.  That final puzzle piece was easy to place in the picture because so many other pieces were in place already.

At the same time, Amazon was creating an amazing shopping experience for books and everything else in the universe on its web site.  By the time it introduced the Kindle (same time as the iPhone in 2007) its puzzle was pretty well formed too.  The Kindle put hundreds of books in your pocket and there really was not another alternative.

Just after that, in 2008, Google introduced its Android Operating System and the Chrome Browser.  This story is a bit more complicated because Android was started outside of Google in 2003 and acquired by Google in 2005.  Either way, the Google puzzle was being assembled well before the Samsung Galaxy Tab was introduced in late 2010.  Add the proliferation of Android devices, 400,000 apps, and by the time we arrive at yesterday's announcement of the Nexus 7 a great deal of the Google tablet puzzle had been filled in.

It is true that there were a billion personal computers already running Microsoft operating systems when Bill Gates introduced his tablet in 2002.  Surely that would form up the Microsoft puzzle. Right? So why does it seem like Microsoft is just now pulling out the first puzzle piece with the Surface and holding it over a blank table?  Because Microsoft is trying to start a whole new consumer puzzle -- and all of its existing puzzle pieces make up an enterprise picture.  Yes we use the Windows OS at home -- but it has not created any more of an ecosystem than Phoenix BIOS -- which we all run at home too.

It is going to be tough for Microsoft to complete its consumer tablet puzzle.  The Surface may end up being a great device, it may get a great response from Microsoft's enterprise customers.  But it is going to be hard to put the pieces together for consumers.

Microsoft's New Partners

Lost in the fracus about Microsoft and its relationship with its partners is the new partner relationships that invariably are going to emerge.  Microsoft has always been a partner focused company and will always be.  But the partners do change quite a bit.  Some people think that the partner ecosystem has a churn rate of as much as 30% per year.

Long time partners of Microsoft including HP and Acer have been quoted recently saying that were mystified about the move by Microsoft to develop the Surface and not consult them first.  Many have predicted, including me, that partners will ultimately produce most of the Surface devices.  The partners just may not be the ones that we think.

Apple did not start cold with the iPad.  First came the iPhone and more importantly, the iPod Touch.  In fact, according to the account in Isaacson's book, the iPad idea came before the iPod Touch and the work done on the iPod Touch was necessary to prove that the iPad idea was even viable, and of course to ensure that the product was insanely great.

Microsoft's OEMs might be frustrated with Microsoft's moves on the Surface, but they really should be looking at Samsung and HTC and maybe even Nokia.  They are the ones with the expertise to build a Windows 8 tablet that could compete with the iPad.

PC Mag reported this week that Samsung may be working on its own operating system just in case it needs it to compete with Microsoft and Google in the tablet market.  That is crazy talk.  

Oracle and IBM: Making Tracks in the Enterprise Market

The papers love to report on the consumer end of the tech industry.  All the while, a great deal of business is being done on the enterprise side.  Admitedly, the consumer angle is tough to resist because if I had put Apple on this chart it would be up 373% in this same time period.  So it is easy to see how journalists get drawn to Apple and the consumer business.  

This chart shows how the big enterprise players have performed over the past 5 years:

(click on the chart to go to Google Finance for a larger view)

Microsoft and HP, the two companies that are drawn to the consumer flame but also have a majority of their business in enterprise computing, have not done as well as Oracle and IBM -- who are completely focussed on winning the enterprise marketplace.   Microsoft just acquired Yammer - which shows a focus on business computing, but they also introduced the Surface, which is aimed back at the consumer.  

Now would be a good time to show the focus that Oracle and IBM have shown.  

This Just In: Microsoft Screws Its Partners (or so the media says)

The media loves a fight and the media is quite good at making sure there are plenty of fights to report on.  It is true that Microsoft could have done a better job of getting its partners onto the Surface bus before it left the station, but it would certainly have sacrificed the secret, and the surprise.  And the media also loves a good surprise.

Ordinarily I would put links here to articles supporting my thesis that the media is itching for a MS vs Partners fight, but there are so many articles I could not pick.  Just search for "Microsoft Partners Surface" and you will see what I am talking about.

By the time Surface gets to market in the fall, this will all be forgotten.  Here are some more specific predictions:

Will Microsoft let partners sell the Surface?  Right now it is being reported that the device will only be available in Microsoft stores and on the Microsoft web site.  I find it hard to believe that Microsoft will prevent its partners from selling the device.  So I predict, that if MS can make enough of them, partners will be able to sell them too.  Who knows, maybe MS is in the middle of big deal negotiaitons with Best Buy, or even Verizon, and so they cannot announce the distribution deals yet.

Does Microsoft want other great Win 8 tablets on the market?  Microsoft did not refer to the Surface as a reference design, but I think it is a reference design.  If the product is a hit, Microsoft will not be able to make enough of them.  If it is a dud, no one will care.  So Microsoft must want other PC makers to enter the market.  In fact there is nothing Microsoft can do to prevent it.

Will this put Win 8 at the front of the line?  To date the predictions in the business market have been pointing to wide adoption of Windows 7, and not so much for Windows 8.  I do not think this will change that.  Windows 7 is a great product and businesses are not going to jump to Windows 8 for this.  It will be a great addition to the windows line, and now a business can give an exec a Surface running Windows 8 instead of an iPad.  The billion or so installed PCs currently running earlier versions of windows, including 200 million still running XP, will be upgraded to Windows 7 (if possible) or not upgraded at all.  

All around, great job Microsoft.  You have introduced a credible competitor to the iPad.  Microsoft Partners are better off today than they were a week ago -- and I am sure the partners know it.  

Year 11 of the Tablet Wars

USA Today has this good piece on Microsoft's complicated history with tablet computing.  Just goes to show that having the idea is not enough -- even when you are Bill Gates!  

Microsoft has been doing the tablet thing since at least 2002 and with its announcement this week of the new Surface, has a credible competitor to the iPad.  Here is a pretty good treatment on Engadget covering the launch event.  It is hard to get too excited without a deliver date or price.  And when Steve Sinofski had to trade out his frozen Surface for a new one -- the pain was palpable.  

Despite the long drawn out history and the incredible lead Apple has already established, this is going to be a very intereting fight.  There are two contrasting views that I can think of:  Consolidate or Extend.

Apple Wins if it Continues to Extend

Apple has done an amazing job of getting customers to extend their personal computing infrastructure to yet another device.  We have all walked down the isle of the plan and seen an iPad at every other seat -- and practically every seat in first class.  We know however that while many of these people may no longer travel with their PCs, they still own them.  If Apple can continue to extend to the iPad -- Apple wins.

Microsoft Wins if Consolidation Happens

Microsoft's new Windows 8 operating system, that hits the market in the fall, will be optimized for tablet devices -- including the new Surface, to be built and sold by Microsoft itself.  Clearly Microsoft is positioning this device to be both the tablet and the PC.  To the extent that Microsoft can consolidate the market back from PC + iPad to a Win 8 PC only --  Microsoft wins. 

Either way, this will be very interesting to watch.

Apple Jumps Back Into The Channel

Michael Dell used to say that the channel was the gift that just kept on giving -- and it was not meant as a compliment.  A few years back Dell changed course and now has over 100,000 partners.  In truth, partners were always a big thing to Dell.  Only they would tell their customers what to buy and when the Dell boxes came in, the "partner" would show up make everything work.  Now those people actually are Dell Partners.

Apple has also gone without the channel for much of its history preferring to let the products speak for themselves and the fans to figure out how to set everything up.  Recently however, Apple has started courting partners more directly than we have ever seen before.  

Here is an article about it from the website: Redmond Channel Partner.

Here is a link to the intro page on:  Apple's website.

So now that Apple finds itself deep in the business environment as a result of the BYOD movement in IT, they are making an effort to take full advantage.

This will be interesting to watch.  One thing Apple has always had as a result of their independence from partners or business customers it the ability to make their products without having to consider large customers.  Microsoft, along with all of the enterprise focussed vendors, have for a long time had to collaborate with partners and customers on their product roadmaps.

Apple has not been very collaborative about this kind of thing in the past.  So new muscles will have to be built.

Taking the P out of Freemium

The numbers in the Freemium business model are similar to direct mail.  2% of the users buy.  Fortunately for the businesses selling their services through the Freemium model, serving the 98% is about as cheap or maybe even cheaper than sending out direct mail pieces.  Better yet, the cost of servicing the users that don't pay is offset by selling access to them and their data to advertisers.  

All good?  Yeah!  But wait, what happens when some other company swipes the 2%?  In an emerging marketplace where new entrants create new sectors and then have them all to themselves, this all works great.  But as the market matures and competitors flood in, it is pretty easy to see how there could be a company that gets the Premium customer and does not have to give away their service to 98 out every 100 users.  

What if small businesses try out cloud storage with DropBox, but when it comes time to pay, go to Box? Box bills itself as the enterprise version of DropBox and it could play out that users perceive that it would be silly to pay DropBox when they could get an enterprise version at Box.  Maybe this is why Box has been able to raise $150 million even while Google is entering the market with Google drive and Microsoft is entering the market with Skydrive.  Could those companies be serving as Freemium providers just driving Premium users to Box?

This is what Apple has done.  They dominate the Premium part of the hardware market and their share of the profits in the industry far exceeds their share of the market.  

The Freemium Highway Is Changing Your Town

When I started my company in the mid 90s one of the big consulting firms wanted to charge me $83,000 to design a process for selecting a PBX/ACD for the call center.  They seemed to think it was business as usual, so I guess some companies actually paid them to do things like that.  The implication was that the cost to run the selection process would be an even bigger number, but I never learned the details because I was already out the door.

Now I can just go to RingCentral.com and sign up for a free trial and be on my way.  No money to the consultants, no million dollar hardware purchase, no multi year maintenance contacts, no waiting six months through an expensive implementation process to see if it will work at all.  We have come a long way in 15 years.

It seems that just about everyone is offering a free service as an enticement to check out their stuff.  In some cases it is for a limited time and others limited functionality, but getting the technology needed to start a new company or start a new project is cheaper and easier than ever.

So in this new universe, what is that channel partner's (the consultant) role? They probably still get big companies to pay big money to design processes and implement them, but it is clear that they are not as essential to the selling process.  The new Freemium model is an interstate highway right past their town.  Cars may can get off and buy stuff, but they don't have to slow down.

Companies are finding expense reports showing purchases at amazon.com that are not books.  Their employees found the line at the IT department for a new server to be too long, so they just went to AWS and rented one.  Where is the channel in that purchase?  The cars on that highway didn't even need to stop for gas.

Market Like an Engineer

It seems that every time I attend a presentation, usually at a conference, given by a Googler, it starts with the disclaimer "I am not a marketing person...". The narrative from there can devolve into a rif against the evils of sales and marketing people and the comparative virtues of engineers. Despite the hyperbole, they do have a point. Marketing without good engineering is just snake oil sales.

Here are three virtues of engineering that I appreciate the most:

1. Desire to build a better mouse trap: Good engineers want to be useful and solve problems. Engineers don't want to work on something that is not really a problem, or that is invented just to serve some other purpose.


2. Disdain for waste or duplication of effort: Engineers want to share their work so those that come after them can build on top of their efforts instead of wasting effort relearning what has already been learned by someone else. While this does not always result in good documentation, it does produce a collaborative atmosphere with vibrant knowledge sharing.


3. Thirst for customer feedback: Engineers want to know as much as possible about the customer experience using their product. If you give engineers a choice between the good news (compliments) and the bad news (criticisms) they will take the bad news because it will help make the product better.

These traits are encouraged in engineering departments because most engineering departments are set up like academic institutions where sharing knowledge is rewarded and failures are celebrated as long as there is strong thinking behind them.

Marketing people that think like engineers apply these same virtues to their objectives. They want to get their product into the hands of people that can use it, they don't hoard data, and they want to know the real numbers.

The people running marketing departments need to think about how to create an environment that encourages marketers to market like engineers.

The Fremium Highway Is Changing Your Town

When I started my company in the mid 90s one of the big consulting firms wanted to charge me $83,000 to design a process for selecting a PBX/ACD for the call center.  They seemed to think it was business as usual, so I guess some companies actually paid them to do things like that.  The implication was that the cost to run the selection process would be an even bigger number, but I never learned the details because I was already out the door.

Now I can just go to RingCentral.com and sign up for a free trial and be on my way.  No money to the consultants, no million dollar hardware purchase, no multi year maintenance contacts, no waiting six months through an expensive implementation process to see if it will work at all.  We have come a long way in 15 years.

It seems that just about everyone is offering a free service as an enticement to check out their stuff.  In some cases it is for a limited time and others limited functionality, but getting the technology needed to start a new company or start a new project is cheaper and easier than ever.

So now what is that channel partner's (the consultant) role in the marketplace? They probably still get big companies to pay big money to design processes and implement them, but it is clear that they are not as essential to the selling process.  The new Fremium model is an interstate highway right past their town.  Cars may can get off and buy stuff, but they don't have to slow down.

Companies are finding expense reports showing purchases at amazon.com that are not books.  Their employees found the line at the IT department for a new server to be too long, so they just went to AWS and rented one.  Where is the channel in that purchase?  The cars on that highway didn't even need to stop for gas.

The Cloud is Out of Our Control

Anyone familiar with network diagrams knows that the cloud symbol is used to refer to the things outside of the control of the network owner. In the old days it meant our network connects to the Internet here, or connects to the telephone network here.

Wait, that is still what it means!  By this definition we have had cloud computing since the 50s. What is the big deal about all of this “Cloud Computing” then?

True to the definition, we are shifting more computing from inside our networks to the part of the diagram depicted by the cloud – the part out of our control.

Web email (gMail, Hotmail…) was the first mainstream application of this, but network administrators know that the migration to the cloud started well before that with security services, enhanced phone services, distributed computing grids.  And everyone else is watching as we are now getting cool cloud apps like Dropbox, Evernote, Google Docs, and Office 365.

So are we just back to timesharing the VAX? Well, no.

Yes MS Azure, AWS, Google App Engine, OpenStack, and the dozens of other offerings do look a lot like mainframe timesharing with one big exception – the new cloud services talk to things inside your network, and talk to each other.

All of this talking is done with Application Programming Interfaces (“APIs”).  These are instruction sets that enable people or computers to interact with systems, without being in the system. 

We will all be hearing a lot about APIs in the weeks ahead because how they are used and who owns them is the center of the currently front page lawsuit between Google and Oracle. 

Did You Know that Netflix Runs on AWS?

CloudFair 2012 ended yesterday and I was lucky enough to see about a dozen of the presentations.  It was a good show with many well thought out pitches. Some were more educational, some more evangelical, some fell flat. 

I find it interesting to find the theme in any convention.  Here is what emerged for me during CloudFair 2012:

1. The Cloud is Real:  It scales, it is cheaper, it slices, it dices.
2. IT Departments are Dinosaurs:  Some presenters tried to defend IT departments by explaining why they are in a tough spot. But everyone agreed that IT departments are in the way.
3. Some Cool App Runs on our Stuff:  Google had the royal wedding, AWS has Netflix, Everybody has a validating customer.  If you doubt it, here is a juicy chart about traffic or here is a customer quote about how we saved the day.

Who attends these conferences?  The premise is that the audience is the potential customer.   Which could be either the IT Department or the end user inside a business.  If not that maybe channel partners that already work with the potential customer.   The potential customer is the IT department.  How it got to be cool to blast the customer is beyond me.  Last I checked, the IT department still had the budget.

Selling to Enterprise; or the Shadow Enterprise

Everyone agrees that IT at the enterprise level is messed up.  Here at CloudFair it is just an excepted fact.  The are those that think the Cloud will save us and we just don't have to think about the Enterprise anymore.  That would be nice, but most people realize that Enterprise IT will be here next year, and some of them realize that it will probably not be much different than it was last year.  

This thought tracks along with a post from famed VC Ben Horowitz:  Meet the New Enterprise, Same as the Old Enterprise. So what should channel partners do today to span the widening gap between new technologies and Enterprise IT.

1. Skip the hyperbole: talking about the end of the world as we know it is tiresome
2. Realize your value: wide gap = big opportunity, where do you fit?
3. Find your voice: the new entrants have done a great job at this, so can channel partners
4. Find like minded clients:  there are so many potential clients that qualifying becomes the key.  

As an industry, we need to think differently about channel partner attributes.  The badges of yesterday (gold status; certifications) will fade and new  badges (success cases and competencies) will rise.  Newer still will be complete end runs around old thinking. When the environment gets confused and uncertain, decisions slow down (or stop).  

The enterprise sales landscape is littered with stalled sales cycles that can be tracked back to the uncertainty associate with the changing IT environment.  Salesforce.com has benefited from the stalled CRM environment.  Salesforece.com may soon become a casualty of this very phenomenon.  Most companies buy Salesforece.com because they just cannot bring themselves to buy a big CRM ($ millions, years...) projects, but must do something, so they buy salesforce.com by the seat by the month.  Then Twitter comes along and enterprise IT really does not like it, so it they buy Chatter.

By some measures, half of all big IT initiatives (and that is big in terms of dollars and time) never even make it to launch. 

Add to all of this the growing trend of shadow IT in big enterprises and it is clear that we live in interesting times.