Brij Singh's Random Musings

Enterprise Gaming Software Company

What do you get when you plan something, strategize, restrategize, acquire companies, can them, acquire some more and can some more, launch new initiatives and can some more. Credit must be given to Sun for trying too many things and being transparent about it.  Somehow the overall story keep getting more and more confusing.

Here is a smart company run by extremely bright guys but somehow two and two doesn't add up to 4.  In a warped world of strategy they run the risk of coming out as a  software game company. Not because they make gaming software but because they keep changing their game plan.

Boxed, Just Outside Of It !

Ever wondered why enterprise customers keep asking for "out of the box" (lets call if OOTB to save some typing hassle) features ? OOTB feature usually means the software had that feature at the time of shipment. It was there for customer to use it right from the beginning and doesn't require any expensive consultant tweak.  Consultant's manicured touch blows the spreadsheet. Hence enterprise customer's insistence on OOTB.

This is a conflicting desire.  On one hand there is this strong desire to create a competitive barrier using better and highly differentiated IT solutions, whereas CIO mandate is to keep cost low by rapidly demanding commodity type plain vanilla offerings. If you are following the debates around innovation and IT-is-dead then this dilemma could very well mirror a hypothetical battle between Christensen and Nicholas Carr  over IT budget allocation in front of the CEO !

Similar to Geoffrey Moore's Core Versus Context prescription, this dilemma is not properly resolved at the rank and file level in many big companies.  Somewhere in the politics of selection, maintenance and budgeting "organizational mind" shifts its attention to other concerns.  And Core gets all wrapped around the commodity software.  There is no organizational level API record of what is core and what is context.  UDDI ? Process Network ? Enterprise architecture blueprint ? This is no clear winner here so far.

ERP world doesn't provide all the answers, though it claims  all the available application real estate. I am getting tempted to call SAP as the world's biggest commodity software ! Everybody has it and everybody needs it. Just like MS Office. Whenever customer customizes the heck out of one SAP module it becomes core to their business process. Much to reinforce the common refrain - we do that differently here !   Core is mostly customized. It makes sense. Dell's famed supply chain or Walmart's inventory management systems are probably highly customized and home grown. They are not OOTB.

So ideally customer should not be expecting Core as OOTB.  For the best-of-breed (note to self: remember to parse this term best-of-breed in another post and understand  how this is similar to best-of-flip in current m&a environment) vendors their best bet is to get a sneak preview of customer's core requirements  and bet your life on it. And say NON to every other features. Say it with confidence cause you are trying to be core not contextual. Contextual comes from customer master which is their  SAP.

And then keep working the spiral.

Tough choices for IBM

Bill Burham on tough choices ahead for  IBM:

but it is clear that thanks to deals like Oracle/Peoplesoft and trends like open source, the software world is changing and the status quo won’t survive over the long term.

Couldn't agree more to this software-world- is- changing stand.  Margin squeeze and open source will change this business forever.  This is not your father's software business anymore.  Status quo won't survive over the long term - here long term could mean year 2005.  All the software  industry adjustment we expected during 2002 will happen in year 2005.  Expect major vendor alignment/realignment  and more discussion on : what is a software business anyways ?

Sweet  thing is to  finally  see open source becoming a standard item on the strategy map ! You have to answer three things when pitched against open source:

how to sell into the open source market
how to cut cost using open source  software
how to protect your business from open source phenomena

Every software company on this planet has to ask those three questions in order to survive.

Cringley on Sun

Cringley on IBM , Microsoft and developing plot to rewrite the script for "one ring to rule all" .  Though his predictions are all long shots and long term, his take on Sun is funny -

Their current strategy of selling processing power by the cycle is like a new car dealer renting back seats of cars on the lot to teenagers looking for a place to make out.

Thats why I love this industry, we  never run out of quotable quotes. Now we will wait for Jonathan Schwartz's  response.

After the acquisition

InfoWorld: Talks about what Peoplesoft users think about the future. According to Ephraim there are three choices for Peoplesoft users -

Resignation -- many customers will quietly make the switch because it is the cheapest alternative. I am sure that Oracle  will provide a lot of support to encourage this.

Rebellion -- some customers will look for third-party support solutions. This will be especially true for customers with customized applications or bolt-ons.                      

Defection -- those customers with not a lot of investment in customizations, that do not find the functionality that they  want in Oracle, will look elsewhere."                      

As in most M&A's customers and employees get the short end of the stick. And some ecosystem players get to benefit more than others. Lets do a quick analysis of who wins in those three cases.
In case of resignation obviously Oracle wins along with better pricing power to the business application vendors (SAP, Seibel etc). In case of defection it  will benefit  the likes of SAP and Microsoft and possibly may spawn an IT driven DIY-enterprise app by stiching together bunch of legacy and open source apis.

What will be interesting to watch is this user community who is going to rebel and may go for 3rd party support.  This will reinforce the "software is a services" trend and will help shift the center of power for enterprise apps back to the system integrators. In another twist this will help the offshoring trend as well.  Specially when majority of the support and maintenance staff of these three companies (SAP, Oracle and Peoplesoft ) is all between Bangalore and Hyderabad.

To give credit to these outsourcing firms,  friend was mentioning that Wipro started preparing Peoplesoft-migration tools way back in september !!

Thinkpad is now ThinkChina

Its finally official -

Here is the rationale -

``The problem with the PC market is that margins are tight, and PCs are increasingly becoming a commodity,'' said Bryan Ma, an analyst with market researcher IDC Corp. in Singapore.

Slower growth rates and declining margins may force some manufacturers out of the market altogether, with three of the top 10 PC makers withdrawing by 2007, Gartner researcher Leslie Fiering wrote in a report dated Nov. 30.

PC unit growth is forecast to average 5.7 percent annually from 2006 through 2008, half the 11.3 percent average of 2003 through 2005, Gartner said in the same report.

PC revenue growth will average 2 percent annually from 2006 through 2008, less than half the 4.7 percent average of 2003 through 2005. Emerging markets will account for more than 60 percent of PC market growth from 2006 through 2008, Gartner said.

``Dell is about the only company globally that consistently makes a profit in the computer business,'' said Yoshihide Ohtake, a senior analyst at Shinko Securities Co. in Tokyo. ``The rest are all losing money, or finding it hard to eke out two straight years of profit.''

I wonder how soon similar dynamics will start playing out in the networking equipment market.

Technology cooperative

There used to be a time when one of the big 5 consulting firm will cook up a fancy methodology to push big ERP upgrade. In order to make a killing in the process. Every customer will have to buy the same or similar expensive methodology. Lot has happened since those days - big promises, over run budgets, CIO losing their job and some say relevance. This was bound to initiate some grassroot level activism from the customer side.

Calls for an idea whose time has come - customer driven activism. Bunch of IT execs and CIO have launched one such body in the form of a technology cooperative.

Add this point to the ever growing concern for enterprise software sales execs.

Product Innovation Faltering

PDMA report suggesting that the overall product innovation is slipping.

AMR Research VP Kevin O'Marah pointed to a landmark study by the Product Development Management Association (PDMA) which found a marked drop in more innovative new products (versus incremental enhancements) between 1995 and 2003. This has resulted in many more fast follower companies than new niche developers

benchmark cycle times for "new-to-the-world" products have fallen 40 percent, and many more companies have processes and strategies in place for product development. "I think it comes down to people being chicken," O'Marah says. "In a way everyone is trying to do what someone else has already proven works, rather than be truly innovative."

Part of the problem is risk aversion

many more fast followers than niche developers ! Now that reads like a point straight from Carr's book.

IT Doesn't Matter - now in hardbound edition !

Economist did a revisit to the "IT Doesnt Matter" issue, looks like Nicholas Carr is expanding on his theory in his new book .
It sure is an existentialist debate and one which is ruffling many feathers on the mighty trillion dollar information-technology industry -

Though there are pros and cons to this whole debate and I am not able to avoid drawing connections from Nicholas Carr's point to the one made by Shai Agassi.

This is Carr's point -

Computer hardware and software, Mr Carr argues, have been following the same progression from proprietary technology to infrastructure. In the past, American Airlines, for example, gained a strategic advantage for a decade or two after it rolled out a proprietary computerized reservation system in 1962, called Sabre. In time, however, its rivals replicated the system, or even leap-frogged to better ones. Today, the edge that a computer system can give a firm is fleeting at best. IT, in other words, has now joined history's other revolutionary technologies by becoming an infrastructure, not a differentiator. In that sense, and from the point of view of individual firms, “IT no longer matters.”

This is Agassi's example as to why we need to manage by time -

Whirlpool—they can finish a design and the R&D of a product, and it takes them a year to get the product on the market. You know what happens during that year? All the Koreans get to the market before them. Why? Because they copy their designs—they see them in a show, on the floor, and they copy them—and they have a three-month time to market.

Same thing happened to Philips. Philips invented all the key innovations in the consumer electronics space, and they always were three months behind Sony. Even on stuff they invented, DVDs, they came in after. Manage that time to change, and you become Dell. You don't manage it, you become dealt.

Eventually it will come down to time, NOT THE COST as that will eventually level out due to the technology commoditization. This time factor will reflect in how companies manage their competitive advantage period (CAP), if your company doesnt mind its CAP then probably IT doesnt matter in your case, Otherwise you are busy Dell-ifying your processes and extracting every IT-enabled efficiency as possible.

Sense of overhang in the venture world

Friendster's valuation is proving that greater-fool theory is alive and kicking -

As the economy and the stock market pick up, an estimated 5,800 companies are hoping to get a slice of venture capital, which includes tens of billions of dollars that have been on ice since the dot-com bust. Forecasters say private firms this year will invest about $16 billion with these companies, slightly higher than last year, making it the first such increase since 2000.

What is different in the current investment cycle is the entry of successful entreprenuers who have joined the party and can play both ways for VCs -

"entrepreneurs who made millions in the 1990s boom are also investing their own funds in a new wave of startups, which invariably compete with early-stage investors looking to put money to work.
All of this raises the possibility that another bubble could form as new, old and public money collide in the marketplace to chase the few startup deals that are out there"

One thing is clear, people have a very short memory and very deep pockets (though the combination can make some people so rich that they can continue to power the obscene Silicon Valley real estate market). Bill Tai's point is worth keeping in mind -

"If there is one thing I and anyone else that's been through three cycles in that business has learned, it's that if things feel great and everyone's making money it's time to look over your shoulder and get out of the way"

Though I am not an economist but my gut instincts tell me something doesnt add up here. Parse following news items together -

Warren Buffet on stock market - "We've found it hard to find significantly undervalued stocks. The shortage of attractively-priced stocks in which we can put large sums doesn't bother us. Our capital is underutilised now, but that will happen periodically. It's a painful condition to be in but not as painful as doing something stupid"
Bill Tai on venture investment - "If there is one thing I and anyone else that's been through three cycles in that business has learned, it's that if things feel great and everyone's making money it's time to look over your shoulder and get out of the way"
Dan Gillmore on housing market - "This is unsustainable, and when the bubble bursts people are going to feel some serious pain. "