Thoughts on Competition

I have seen way too many small companies proceed cautiously; lose potential advantages because they worry about competitors learning about their plans. They withhold opportunities to share their new products with influential folks in the industry. They spend way too much time being stealth. They alter their plans because of perceived competitive moves. Unfortunately they worry about the wrong things and pay less attention to right things.

Where to watch competition carefully?

  1. Sales Positioning and Tactics – watch your competition very carefully – learn as much as you can about their tactics and vary your approaches. Whether you get into an opportunity and whether you are able to convince a prospect to become a customer will depend on perceptions and it is important that you pre-empt your competition. When it comes to positioning, philosophical differences, you should strive to have an advantage. I will illustrate with an example:

Let’s say you are selling an on-prem solution and competing against a SaaS vendor – SaaS vendor will try to position you as outdated and out of touch with reality. They may use specific talking points. If you learn what those talking points are, you can pre-empt them. You may also be able to structure the conversation differently. Instead of making the evaluation about deployment models, shift the discussion to focus on maturity of the solution, number of similar customers using the solution.  Learning your competitor tactics will help you frame the evaluation context with your prospect. (Trust me, many deal RFPs are written by vendors).

  1. Market positioning – to investors, analysts and press

Very important to know what your competition is saying.  It’s easy to learn, most analysts and press will tell you if you ask nicely and you are not considered a jerk. This is an area where relationships matter. Oh, and whatever you do, do not piss off press reporters – they are just doing a job – don’t fight them publicly or criticize them – it hurts you more. If you come back with a rational argument on why their article is wrong behind the scenes, most will correct it.

This is important because how market perceives you is critical to your future success – if they view you as a vendor on decline, you will be left out of many evaluations. You must proactively work to position your company and product in the most positive light – this task cannot be taken lightly – as the saying goes, in any social system, perception is the reality.

When not to alter your plans due to competition?

  1. Product Plans

Shielding product plans or altering them based on competition is plain stupid. Here is why. Even if your competitor learns about your product plans, trying to make a change in their plans will take herculean effort. And even if they successfully do that, they will end up working with incomplete information and as a result will build an inferior product.

Changing your product plans: you will have lot of heart burn convincing your dev team to change course midstream because a competitor is doing it. First of all, engineers are by nature suspicious of marketing driven features and when you describe what you think is competitor doing, you are doing it without understanding “the why” of the feature and engineers will detect your BS. Now, you will be negotiating for a bare minimum implementation of the feature because you want “some” competitive parity. This will hurt your product in the whole because a small crap feature can impact overall product design decisions and drag you down.

  1. Launch Plans

I will be honest here. You are an idiot if you pre-announce a product to pre-empt a competitor. First impressions of a product count. Do not ship a crappy first product under GA (Its fine to do an MVP for a small subset of users). Do not pre-announce a product – as the saying goes, you cannot build reputation on what you are going to do. No one cares, not even your mom. Are we clear?.

Even if you successfully pre-empt a competitor product by some unnatural gyrations done by your product team, your product will look inferior to your competitor product, which was built with a proper understanding of the “why” for the feature set. Your “why” is “pre-empt competition”.

This is not a comprehensive list, just few thoughts – agree/disagree? comment or tweet your thoughts.

 

 

Cloud Computing is not for us.

I had heard all the following statements in recent weeks/months.
 
“we tried cloud – it didn’t work too well for us”

“We had a policy of cloud-first, but licensing costs were bit too much”
“While we wanted to cloud, our software vendor wanted to charge per CPU and we figured it will be too expensive to buy for all virtual CPUs”
 
STOP THE MADNESS GUYS.
 
The bad guys have won – the marketers have muddied up the water. They have succeeded in re-branding their existing on-prem crap as “Cloud” – this is bad not just for the industry, but for customers too.
 
In each of the instances I had heard, they were trying to do virtualization and were under the false belief that they are doing Cloud. The perception that Cloud is not right for many organizations is spreading like wildfire, especially in mid sized IT organizations. If this perception continues for long, we as an industry will be taking several steps back. 
 
Why is this bad? Its bad because the mid-size companies will stick with their on-prem software, while their larger competitors leverage advantages of using public cloud and beat the shit out of these mid-sized companies. This is not just bad for the mid-sized companies, its also bad for competitive markets.  
 
What can you do? Simple thing really. Anytime someone refers to virtualization as “Cloud Computing”, smack them hard and explain to them that its not the same. Next time someone talks about Private Cloud, call their BS publicly. Tell your friends in IT not to believe on-prem software vendor’s marketing BS on Cloud. There is no such thing as on-prem Cloud or private cloud.
 
Thats all folks for today – gotta run, almost PBR time. 

Two Markets

Every so often a discussion erupts on whether AWS is disrupting VMware, Oracle, IBM and HP or not. Quarterly results come out and they show some weakness in hardware for Oracle, IBM and HP. Some of us declare it is the effect of Cloud. It’s hard to know if it’s because people are virtualizing more or if they are adopting Cloud. VMware seems to be doing well when it comes to quarterly earnings.

There is also a sense that AWS is disrupting mainstream vendors. I asserted that as well. However, the signals in the market do not conclusively prove that. This, I believe is the beauty of disruption – while it’s happening, you get all kinds of conflicting signals.

When it comes to infrastructure software, this may well be the peak time. They are exceeding their goals, they are firing on all cylinders, and strategy is working well. The perceived threat of public cloud seems to be going slower than feared. Perhaps, it was just a Fad. Right? Wrong.

I thought about this a bit and think I have arrived at an explanation of what is happening that seems to answer my questions.

I believe what we are witnessing is two markets in motion. A maturing market that is ether at the peak or has just crossed the peak. A Second market that is emerging.

What are these markets?

Market 1: On-prem Infrastructure Software

Market 2: Public Cloud

These markets have different characteristics. I listed few of them below:

Characteristic On-prem Infrastructure Software Public Cloud
Consumption Model Enterprise Licensing ( discount fake subscription models here) Subscription
Business Model Enterprise model – well understood margins Emerging, low margins
Speed of initial & ongoing implementation Days/Weeks/Months Minutes
Innovation Long list of Innovations Still newer tech
Rate of Innovation Moderate High
Customer Commitment Commit to a platform long-term Short term commitment
Rate of Change Too much change is bad Change is expected
Current Market Size Large Small

 

The players in these markets are different.  The discussion becomes confusing when we mix these players and start comparing them.

In On-premInfrastructure Software market, the players are VMware, RedHat, HP, MSFT, IBM, RAX ( w/OpenStack) and few others.

In Public Cloud market, the players are Amazon, Google, Microsoft and few others such as CenturyLink. (Could argue, IBM and HP has some here, but not significant enough to be of consideration).

If you look at these markets together, it looks as below:

 

Image

As you can see, the players in first market race will look healthy in the short term. The players in second market race will look to be growing rapidly, but overall numbers are still small.

Assuming current trajectory continues, the first market will start stagnating and the second market will start growing rapidly. And before any of the on-prem infrastructure software players can realize it, they find themselves in an unfortunate situation of having been disrupted and become zombies. The best they can hope for is the strong players in the new market to acquire them.

One note on Microsoft – these guys seem to have made a jump to second market and are competing effectively against AWS and GCP. They also have healthy business in the first market. This is not an easy thing to do as first market forces will exert enormous pressure to innovate in it rather than investing in the second market. For ex: VMware has yielded to these pressures and all you hear from them is how tiny and irrelevant the public infrastructure market is. Microsoft on the other hand has discipline. I tip my hat to them.

Agree/Disagree? Comment or tweet away.

 

A letter from the real world

Recently, I had the fortune of stepping outside of our carefully constructed tech bubble and step into real world for few days. You know a world outside of clouds, VMs, Software Defined Stuff etc.

I sat next to people outside of tech industry; I watched them do their work. I was not a mere tourist sitting in a conference room, I tried connecting with them. I went in there expecting to find technology novices that are not very smart, resigned to their fate of using computers to keep their jobs and generally hating software. I was also told to lower my expectations and these people do not know how to use computers and they are tired and old. I am talking about end users of enterprise software, not IT folks. These are also mid-sized companies, not Fortune 1000 companies.

What I found was different. I found people full of energy, curiosity and a willingness to learn. They were not afraid of computers, but were afraid of making a mistake that breaks a computer. Whenever an hourglass was present they kept saying “Its thinking, its thinking – sometimes it thinks hard” – they accepted that computers are smart and they generally work. When software is slow, they think it’s doing some complex thing.  These people are trying to do the important work that keeps America running. They work in industries that are seen by technology folks as being outdated, stale and seriously in need of disruption.

 

They are supported by an IT staff that is short on budget and juggling multiple balls in the air to keep lights on. They have outdated servers that are over capacity, server rooms that are overflowing and client server software that is harder to maintain. Given past experiences of changing their software or upgrading it, they are bit gun shy. They would rather apply band aid to the problem than undertake a new software implementation. The tech industry have screwed them and left deep wounds. We can blame majority of large vendors that built crappy software in the 90s and nickeled and dimed customers with professional services. I am sure there are also some success stories, but current state is that majority of these systems have become useless for future.

This real world I speak of is now at a breaking point – the band aids are not holding things together and very few large competitors are eating into their business. These guys have a risk of going out of business in next decade or two unless they catch up and improve their workflows, modernize their systems and remove inefficiencies. The IT guys are frustrated and business guys have had it with IT not delivering. The blamestorming is not happening within IT as we vendors love to talk about, it’s happening between IT and business.

A person who is not familiar with the real world and who haven’t spent time with these people may conclude that doing a full stack startup and disrupting these industries wholesale is the right approach. This may work for few, but doing full stack startups for core industries that run US is simply not going to happen in near term. Entrepreneurs shouting full stack do not have the patience to build solid foundations for replacing these businesses. They are not willing to wait 15 years to build a company; they want to flip a company in 4-5 years for few billion dollars. Full Stack craze will die down in an year or two is my guess.

What do we need to do?

We need to offer these organizations upgrade to solutions that take away responsibility of physical systems and software away from resource constrained IT folks. We need to provide them with software that is delivered as a service. We should stop selling them yet another server that will work as a band aid for just couple more years. Instead, provide them with elastic unlimited capacity. Provide them with software that will be upgraded by the Devops team that developed the software in the first place. Give them SaaS, give them public cloud. Make them efficient and they will show the world that they have in them to be leaders again. These organizations have smart business folks that are put in a constrained box by IT systems that tech industry had delivered them in last 2 decades.

In their greed to preserve margins, software vendors will try to sell them on expensive on-prem software and get them again on a road of frustration. This will be a bad thing. We need to educate the IT folks that buying on-prem software is not a smart thing to do and they are harming their organization and end users that work there.  Why? Because, on-prem software will always be inefficient to maintain, upgrade, scale properly and keep it in sync with advances in software.

Secondly, no matter what you do, do not tell these IT folks that they should do private cloud – do not do a smoke and mirrors show and try to sell same old crappy on-prem solutions as Cloud. Do not do it.

We created the problem of crappy on-prem software and systems in the first place; it is our responsibility to solve it the right way using a public cloud that is designed for long term, scale and maintenance. It doesn’t have to be AWS, it doesn’t have to GCP, it can be Verizon, it can be CenturyLink, it can be SoftLayer, it can be Profitbricks, but it cannot be same old software recompiled and packaged and relabeled ‘cloud’. I am not unrealistic to expect this to happen overnight, but if every replacement when needed going forward is with public cloud and SaaS, with interim Interop between on-prem systems and public cloud using something like Eucalyptus, that is a good journey for these organizations.

Now I have nothing against selling on-prem private cloud to Fortune 50 – they have  money and I view that as distribution of wealth. Heck, sell them few mainframes and 8″ tapes or even a 10000 pack floppy disks. Who cares, they got money to spend to keep their budgets growing.

Agree/Disagree/Have a Comment? Share your experiences from the real world. Tweet away or comment below.

 

Few more questions to ask your SaaS vendor

As you are evaluating new SaaS products from smaller vendors, you want to make sure you do good due diligence. You may already have a good process in place. Below are some additional questions you may want to consider adding to your list.

– Where does your infrastructure reside? ( dig into this, it may be in their mom’s basement too 🙂 ).

– Is your infrastructure ready for High Availability? Is it geographically distributed?

– Do you build your own infrastructure or do you leverage an IAAS solution?

– How does your infra costs compare to AWS/GCE costs?

– Do you expect to pass on your infra cost savings to customers?

 – How many dedicated infrastructure staff do you currently employ?

– Which standards do you comply with?  See list here: http://aws.amazon.com/compliance/

Why are these questions important?

If the vendor you choose is building their own infrastructure and they are small, they are not getting full leverage that can come from scale that leading IAAS products offer. Secondly, they are at risk of getting out-competed by other startups that leverage IAAS and invest all their resources into their core product vs. investing on the infrastructure.  

While these questions are not the sole factors for making a selection, asking these questions would help you uncover if the SaaS vendor is using Cloud as a term in sales or if they are indeed truly believes cloud can offer real cost savings and leverage from numbers. For ex: if one of the large customer requires them to be compliant with a standard, they may re-focus product resources from innovation to meeting infrastructure audit. Compare this to a vendor that uses public IAAS and compliance request is a smaller effort for them than someone building their own infrastructure. 

 

I love Private Cloud

I had a revelation – a revelation that was so powerful, it had changed my opinions overnight. I realized I love private cloud and there are several reasons for it. I have outlined them below:

  1. It is powerful showing your infrastructure to prospects and customers

We grow up taking our potential and current customers around our data center and showing them the infrastructure on which we run our operations. In anticipation of these visits, we often decorated the data centers, asked sys admins to dress up nicely and even gave them coffee. Public cloud makes all of this disappear. So, what are we going to do when customers show up? Show them our Macbook Air and iPads? That’s not that impressive guys compared to massive Iron we could be showing. Public Cloud makes selling software harder.

  1. It was a place to get away from it all

When things get boring, or working late, we often found Data Center floor to be perfect place to take a nap. This was a benefit that those folks in IT had. Public Cloud threatens to take this away from us. What, can’t we not even have a place to sleep for a bit with the white noise coming from the servers? If this does not bother you guys, you need to examine your belief systems.

  1. It was the basement

Private Cloud forces us to have a basement. I am not talking about some lame colo. I am talking about a full basement with large screen TVs and servers humming and disks spinning in the basement. It was kind of Man Cave for us.  It was the basement we couldn’t afford to build at our houses. We were even allowed to take a 6 pack there and it was tacitly accepted as a normal thing. Public cloud takes this away.

In addition to this, we were dealing in seven figures and we had status. The hardware salesmen took us to nice dinners. Imagine what would happen to the nice steakhouse across the street from the office if we stop buying multi-million dollar hardware?. Imagine the impact to local economy. Do we want to shift all our spending to some remote location in Virginia, Portland or Ireland?. I say No.

How wrong I have been to push public cloud guys. Private Cloud is the last link to our past and I say we fight hard to preserve it.

Happy April Fools Day.