Archive for June, 2008

Web 2.0 Turns The Enterprise Inside Out

June 18, 2008

A couple of good examples emerged from the Churchill Club session yesterday on “Succeeding with Web 2.0 within the Enterprise”:

  • Serena Software is using Facebook as their corporate intranet and it now seems to be morphing into a sort of extranet. To overcome adoption challenges among its employee base, most of whom are ages 45 and over, Serena brought in a bunch of 16-year olds for Facebook Fridays. Serena’s SVP Marketing Rene Bonvanie claims 90% of employees are now using it. The primary benefit seems to be increased collaboration. Bonvanie says this makes it easy for both employees as well as customers to identify the right person for a specific question. Conversations have become more open and imbued with better knowledge. Thus, marketing and sales are losing some of their monopoly power as touch points with the outside world. In addition, knowing more about your previously face-less co-workers may also help increase a sense of common purpose at the workplace, states Bonvanie
  • Best Buy’s Steve Bendt shared how their internally-focused ‘Blue Shirt Nation’ network helps generate recommendations that can increase store sales. Giving this online market place of ideas the look and feel of ESPN and online games was key to creating adoption among Best Buy’s young workforce, where turnover of 60% per year is the norm
  • Paul Pedrazzi from Oracle shared how it’s internally-focused Oracle Connect and externally-focused Oracle Mix social networks do a great job of filtering content. One use case for Mix – once the traffic picks up more – is prioritizing customer needs and feature request prioritization. A common challenge is that product managers tend to overweigh feedback that is recent, local or comes from the largest customers – those who can afford to send their folks to Oracle’s executive briefing centers
  • Shiv Singh from Avenue A / Razorfish shared how their own internal wiki, now used by 75% of employees, aims to increase internal information sharing. There is no silver bullet for overcoming employees’ tendency to ‘keep information close to their chests to impress their boss’. As you would expect, measures that can drive the right behavior range from executive sponsorship to making sharing fun to incorporating collaboration in the informal and formal reward and recognition systems

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Marketing Strategies for a Recession

June 16, 2008

It is not uncommon for large enterprises to spend $300m or more per year just on marketing (e.g., $10bn in sales, 3% marketing budget). The bulk of that money is typically spent on lead generation (i.e., driving interest in the company’s products and services), vs. high level awareness. Is that money well spent? Three facts suggest not:

  • Our own interviews with 100+ Sales & Marketing executives confirm that 85-90% of leads generated by Marketing are never followed up by Sales
  • The average tenure of US enterprise CMOs is 18-24 months. CMOs are the C-level function with the highest turnover
  • Third party studies (e.g., www.cmocouncil.org) regularly point to marketing performance optimization as a top 3 marketing pain point

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When Applications Talk To Each Other Via SOA, What Happens To User-Based Pricing

June 16, 2008

Alphabet soup of evolving application design patterns: SOA, EDA, BPM

It’s clear that SaaS doesn’t represent a threat to client/server pricing.  Consider what SOA might represent. In case the terminology is new, here are the definitions first. Bear with the abstractions. To be technically correct, we have to include Event-Driven Architecture (EDA) and Business Process Management (BPM) technologies as well for customers to get the full value out of autonomous services communicating with each other with few users involved.

  • In the case of enterprise applications, SOA means functionality in the form of business processes that are made up of services that communicate with each other’s interfaces by exchanging data. These interfaces might be implemented as Web services. The supplier electronically submitting an invoice to a customer is the relevant example here. 
  • EDA allows services in an SOA to be more loosely coupled. They can communicate by publishing and subscribing to events without either side talking directly to the other. A retailer tracking delivery of goods to its distribution center via RFID would be an example here.
  • BPM orchestrates services and includes users in a workflow where necessary to manage a complete process. A BPM agent for a supplier may be managing the order to cash process when a customer places an order that goes beyond their credit limit. The BPM agent may escalate this exception to the finance department as well as the sales account manager for resolution.

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Why SaaS Isn’t The Real Threat To Enterprise Application Pricing

June 16, 2008

Whether subscriptions or perpetual licenses, it’s still about user-based pricing

Imagine for a moment that you are at IBM and a small supplier of components from the Far East has just submitted an invoice. It just shipped an order of printed circuit boards to IBM’s networking equipment division in upstate New York. IBM receives it and a clerk in its invoice processing department enters the invoice into its ERP system. Whether IBM bought a client/server or software-as-a-service (SaaS) ERP system doesn’t matter. The clerk has to fill out and navigate as many as 20 screens to enter the invoice so the purchase to payment process can move to the next step.

But go back to the distinction between client/server and SaaS applications. Conventional wisdom says that SaaS applications such as SalesForce.com and their subscription licenses represent a threat to the perpetual licenses and the business models of traditional client-server companies such as Oracle or SAP. Stretching payments out over multiple years, as SaaS does, makes it harder to show the profitability and growth that comes from the upfront payments of perpetual licenses. The reality is somewhat different. As many know, SaaS actually takes in significantly more revenue over the product’s lifecycle. But the pricing models have much more in common than their differences. They both charge based on the number of users accessing the application.

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Roadmap to Improving IT Services Profitability

June 11, 2008

Pricing excellence can lift the profitability of services businesses by 300-500 basis points. Getting there requires a well-structured, multi-functional approach with strong executive sponsorship. The size of the prize though is well worth the pain.

CONTEXT

The Professional Services (PS) business at product-led enterprise technology vendors often fails to live up to its potential. Managed properly, PS can play a key role in enabling customer loyalty, deepening account relationships, and channeling insights from the frontline back into product development. At many vendors, though, the PS business falls short of delivering on these objectives and is plagued by low overall profitability.

This post lays out an approach to improving PS profitability which we have refined over the course of working closely with several Fortune 100 technology providers.

CHALLENGE

Managers in Professional Services businesses often focus on reported utilization, i.e., volume, as the primary driver of improving overall profitability, followed by a focus on structural labor cost (e.g., on-shore vs. off-shore mix). Compounding the profitability challenge, billable utilization is often affected by the need to remediate product quality issues in the field.

RESOLUTION

Pricing though can yield large potential for improving aggregate profitability but is often an undermanaged area, as it resides at the intersection of services product management (strategic pricing), the services field (tactical pricing) and services operations (enabling infrastructure).

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Making Advertising Work On The Other (Non-Search) Part Of The Web

June 3, 2008

MAKING DISPLAY ADS RELEVANT

Just about everyone knows advertising on the Web, outside of search, isn’t living up to expectations. Advertisers and publishers buy and sell inventory of display ads for CPMs (cost per thousand impressions) well below the offline equivalents in magazines, newspapers, and tv. Part of the reason is that outside of search, the Web hasn’t found its equivalent of the 30 second spot or the two page spread (an insight courtesy of John Batelle). But a major part of the reason is that Web sites can’t consistently serve up relevant and engaging ads to an audience that’s no longer captive. So how do we substitute relevance for the more traditional reach to increase ad prices?

For years users have left “breadcrumbs” about their interests across the Web. Now there are increasingly sophisticated ways to connect that information into rich profiles, much of it by user choice, while still respecting privacy concerns. The consolidation and massive reach of ad networks in the hands of Google, Yahoo, and Microsoft likely means that most of the economic rewards of this shift will continue to accrue to these companies. Even if the traditional media giants accelerate their migration to the Web, they are likely too late. They won’t be able to match the reach of the tech giants’ online ad networks and their trove of online personal profiles.

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