Strategy: On Death of Newspapers and Impending Dealth of Airlines

I don't think too many airline CEO's read my blog. I do know a few tech CEO's that do read it. Let's pretend to be an airline CEO - I want you to answer this question:

What business are you in? Flights or Meetings?

Just as newspapers thought they were in the business of gathering news and printing news papers; the music industry CEO's thought they were in the business of vinyl records, tapes or CDs; many airlines appear to think they are in the business of ensuring flights are running on time, tickets are sold and customers pay extra for baggage (monetization). I think they are wrong.

Serving Customers with 50 year old technology - the flying machine (Image)

Cisco Telepresence is to airlines what Google Search was to newspapers and classfieds. And airlines have a choice - they can rethink their mission and realize that what customers are looking for is not flights or tickets or baggage fees but meeting business counterparts face to face, connect with family and go on vacations. The visionary airline CEO would then try to see how Telepresence would impact this market. And then take steps to re-imagine their business.





Here are things I would do if I were the CEO of Mythical Air:

• Embrace Telepresence as another mechanism for people to meet and declare that we would help customers with this.
• Create "Mythical Air" Telepresence Lounges - in major cities and smaller towns. These lounges will include Cisco Telepresence.
• Mythical Air Lounges in airports will also include Cisco Telepresence - while this may threaten our 'flights' business but in reality our customers would be happy - if they are late, they can connect via telepresence. Even when the flights are on time, they can leverage time in the lounges doing business - and learning how useful this system is. So, next time they are likely to buy Mythical Air Telepresence trips rather than Airline trips.
  
• Tie up with major hotel chains to partner and run Mythical Lounges inside hotels. Now our customers can run global meetings by meeting regionally in hotels.
• Work with Expedia, Orbitz and others to list Mythical Telepresence among the 'flight options' in results. So, when a customer types in Sacramento to London - the results include flight from Sacramento to San Francisco and 'telepresence flight' from San Francisco to London (and offer a hotel in San Francisco).
  

Imagine if,

• Newspapers had co-opted internet search and publishing
• Music industry had co-opted internet delivery

Let's see if any airlines re-define their mission statements and co-opt this innovation. Or do they all end up fighting this trend and each other for the shrinking market. Blue ocean or red ocean?

(If you find this post interesting and would like to be a valued reader, please subscribe by email by entering your email in the right-hand top corner. We don't spam, ever. Or you can subscribe by RSS.)

McKinsey Report Misses The Mark on Cloud Computing

Couple of McKinsey guys have kicked up a micro storm in the Cloud Computing world with a presentation that claims that moving your data center into the cloud is not advantageous for IT. I am quite confident that others at McKinsey would differ - perhaps those presenting at another conference that is not catering to a server-hugging data center audience.

As TechCrunch summarizes - 'The report paints cloud computing as over-hyped and maintains that cloud computing services like Amazon Web Services (AWS) overcharge large companies for a service the companies could do better on their own. The study also says that while cloud computing is optimal for small and medium-sized businesses, large companies will spend less if using traditional data centers. Virtualization is the optimal way to go, says McKinsey, and by implementing virtualization in-house, corporations can reduce costs when factoring in depreciation and tax write-offs. Virtualization, which McKinsey says can boost server utilization to 18% from 10%, lets you treat one machine like many, by carving the servers into many virtual engines, so that software can maximize power from one machine and add scalability. Not only is this cost-effective for companies, but cloud computing takes advantage of virtualization.'

I believe that this report misses the whole point when it comes to Cloud Computing.

What McKinsey duo did was assume CIOs take the same exact crap software and run it on exact same excessive number of nodes provisioned for the full month at peak capacity numbers - and move that to the Cloud. That's just wrong!

This is even worse than ASP model where at least the vendors provide 'managed services' and even then it was a big failure. The real value of cloud computing kicks in when you leverage a full application platform (such as Force.com) to either buy applications written to take advantage of a multi-tenant platform or write your applications on this new stack.

Why McKinsey Report is Flawed?

There are some key things that the McKinsey duo ignored:

1. Elasticity vs Provisioning for Peak Load: They assumed that if you buy 50 servers internally, you would rent 50 servers in the cloud for the full 30 days a month. In reality, the rent by the hour approach means you could be renting an equivalent of 1/2 to 1/10th the amount.
2. Elasticity for Unmet Peak Load: How does a CIO provide a 50 node cluster for one small group in the company that wants to analyze last 17 years of demographic data? By saying "No, we can't do that. It will cost $7 million." With an external platform, he can say yes, and pay for 50 nodes for 3 hours.

These two apply for Cloud infrastructure providers like Amazon Web Services. There are additional economies of scale that kick in when you look at multi-tenant application platforms such as Force.com. With a multi-tenant platform, you are now talking about having a highly optimized environment where multiple customers are leveraging the same set of servers (and cost of maintenance, upgrades, security, etc.). The McKinsey duo does make a distinction between Cloud infrastructure and Cloud services but omits any mention of the advantages of moving the applications to Cloud Service platforms (in their jargon).

Credit Where Credit is Due
As a blogger, it is my duty to throw gasoline on a burning fire and not rain on the cloud parade! Pardon my puns. But to their credit, the McKinsey duo (which I assume does not reflect opinions of all of McKinsey) does make some points that I agree with.

First, the private cloud is not a magical solution to your data center challenges. They suggest - Rather than create unrealizable expectations for “internal clouds,” CIOs should focus now on the immediate benefits of virtualizing server storage, network operations, and other critical building blocks.

Second, virtualization is a powerful tool for making your existing applications in the data center use fewer resources.

Third, public clouds are providing business benefits to SMEs. I concur. But I believe and large organizations like Cisco, Dell, GE, etc. that have been cited for using SaaS applications are proof in my view negate the notion that cloud computing is somehow not enterprise ready. A look at the customer list of vendors like Google, Salesforce.com, Taleo, Workday etc. can prove otherwise.

My Enterprise Irregular friends and other bloggers have already pitched in with their opinions.

Deal Architect's Vinnie writes - I would normally ignore yet another “overview” of clouds, but being McKinsey it will get read by executives and several of their generalizations about “not being cost effective for large enterprises” are just plain misleading.

Appirio's Balakrishnan maps out the Cloud with infrastructure, platform and applications as three different tiers with their own pros and cons. He also questions McKinsey report's primary topic - moving existing apps to the cloud, and concludes with - We have seen the benefits of cloud platforms first-hand at over 150 customers, including companies like Avago, Genentech, Japan Post, Qualcomm, Starbucks and Dolby. Once customers experience the benefits of cloud platforms - quantifiable savings, rapid time to value and innovation that drives the business, they seldom want to go back. This is why 90%+ of customers plan to increase their spending on cloud platforms. In these economic times, there is no greater vote of confidence for cloud platforms than that!

Nick Carr is much more postiive on the report but even he finds that the report entirely ignored SaaS applications - 'The cloud also, of course, provides a way to tap into powerful software-as-a-service applications that can provide substantial savings, not only in equipment and labor but in licensing and maintenance fees, over the cost of installing an in-house application. (The McKinsey analysis ignores those opportunities.)'


I expect the blogosphere to continue this discussion and I hope the discussion will include the missing pieces from the report - benefits of Cloud Platforms and Cloud Applications - and not just focus on infrastructure Clouds.

Update: Google has an excellent post on this titled 'Official Google Enterprise Blog: What we talk about when we talk about cloud computing'.

Take Twitter and FriendFeed to Go with Feedly Mini

Feedly today announced its launching Feedly Mini - a floating toolbar that shows up at the bottom of your web browser as you visit a website - and lets you engage in conversations via FriendFeed and Twitter. For those who don't know what Feedly is - it combines the best of RSS Reader, a magazine-like interface (think Newsweek home page) and makes it come alive in the context of conversations via email, Twitter and Friendfeed.

Let's take an example - reading the New York Times editorial page. While the New York Times has a comments section - those comments are from people that I don't know and have no background on. Before Feedly Mini, I would have to post this on my Twitter page or FriendFeed to start a conversation with my friends - and do so manually. But with Feedly Mini, as shown below, a small non-intrusive toolbar floats up at the bottom of the page and in less than few clicks - I can discuss the bailout with my friends.




What does the Feedly Mini do?

One killer feature (shown below) is the ability to Tweet a blog post or web page directly from that page with less than 2 clicks. I simply click on the floating toolbar and add my comments and it shows up in my Twitter stream. Easy.

Re-Tweet From Feedly

The other feature that I really like is the ability to see what people are saying on FriendFeed about the blog post you are reading (or a newspaper webpage - like a New York Times Editorial page) and to be able to join the conversation directly in-context (see below).

Join FriendFeed Conversation from Feedly Mini

Summary
As the web goes from a publish subscribe (one-to-many) model to a conversational (many-to-many) style, tools like Feedly Mini will increasingly be important. Just as most of us no longer log into our computers or iPhones without turning Yahoo! or Google instant messaging on, the browsing of the internet will no longer be a lonely experience. You get to participate in a conversation in-context and with people that you are friends with. Of course, the term friend is loosely defined here. Very loosely. But that's a topic for a future post.

Try Feedly Mini out, and let me know what you think. And remember, comments are to bloggers what flowers are to women!

Update: Robert Scoble writes about Feedly Mini - New Feedly combines Google Reader, friendfeed, Twitter in great way for social network addicts.

Update 2: A commenter told me to forget about Twitter and focus on my day job. Here is a post on how Dell sold $1 Million worth of equipment via Twitter.

Multi-tenancy is Better for You - the Customer

Lately, the topic of multi-tenancy and single tenancy has again come up for discussion. A leading on-premise vendor recently argued in favor of single tenancy by saying: "The bad thing with multitenancy is when it goes down, you guys write about it on the front page. I don't want to be on the front page for anything bad."

Let me explain what this means for the customer versus the vendor by using an analogy.

Airplanes carry a lot of people. When they go down or even have a small scare, they make front page news. This, over the years, has made aircraft manufacturers like Boeing and airlines that run them prioritize safety and trust over every other bell and whistle feature.

Motorcycles are different. One goes down, a person dies. But it doesn't make frontpage news.

So what's safer? Which mode of transport is actually safer for you?

(Hint:Airplanes are one of the safest means of transport while motorcycles are the least safe - even though airplanes make headlines.)

Trust First

Multi-tenant software businesses work very hard to keep the systems up and running, to keep them safe, to earn and retain the trust of their customers - prioritizing it over bells and whistles. It took Google all of less than an hour to recover from the badware problem - because many of its customers were simultaneously impacted - and fixing one customer's problem meant fixing it for everyone. Imagine, a similar problem in your favorite OS, and how many days of patching and fixing it would take to deliver the fix.

Single-tenant software is good for the vendor. Your instance goes down, you and only you are impacted - even if its down for hours or days. The vendor can resolve the issue at the earliest or at leisure - with no risk to its own business either way! Your fortunes are tied to only yours - not the vendor's and not of others.

As Dirty Harry would say: Do you feel lucky? Well do ya punk?

Barry Diller is Right - Stop Laying Off People

Barry Diller speaking at the Reuters Media Summit opined that companies with healthy revenues and profits should not add to the economic misery by laying off people at exactly the wrong time - when its hard to find other jobs.

There is a certain perversity to the recent layoffs. In good times, smart companies like Google and Microsoft like to hoard talent - living up to the classic "Let's get the right people on the bus and we can then figure out where to go" theme. And it has served them well, mostly. Most graduates of my engineering college that I knew ended up at Microsoft and Oracle in early to mid 90s and this decade every one seems to have landed at the Googleplex (except the really really smart ones ;) ).

The current economic crisis has adversely affected every industry - even the one's that have little to do with mortgages, credit default swaps, or derivatives. But it seems like its the season to cull the ranks, stop questionable projects and trim the fat. While every business deserves the right to manage its workforce, it does seem rather cynical to be trimming fat that many businesses have been carrying for years. The question is not why but why now?

As Barry Diller points out:

The idea of a company that’s earning money, not losing money, that’s not, let’s say ‘industrially endangered,’ to have just cutbacks so they can earn another $12 million or $20 million or $40 million in a year where no one’s counting is really a horrible act when you think about it on every level. First of all, it’s certainly not necessary. It’s doing it at the worst time. It’s throwing people out to a larger, what is inevitably a larger unemployment heap for frankly no good reason.

Are businesses laying off people because they don't have to justify the lay offs? Is it because sacrificing 3% of your work force is the equivalent of modern day sacrifice to please the Gods (on Wall Street)? Is it because what you as an executive are supposed to do?

My question is - what exactly do these companies stand for?

This question goes to core of long-term viability and building great companies. When I think of Google, I know it stands for 'organizing the world's information and making it easily available'. When I think of Apple, I know it stands for products that work and are appealing to the end-user. When I think of Dell, I think of getting value for my money and good quality products without unnecessary frills. The failure of Yahoo!, me thinks is that it has failed to find a mission for itself - and is in a me too race with Google. This is what the new CEO Bartz must fix first. Coming back to question of mass layoffs, its time businesses tried in good faith to find a way to keep as many people gainfully employed as possible.

So while the executives at most companies are asking one hard question: how many people can I lay off without adversely impacting my prospects? Let me suggest a few others:

• What does our company stand for?
  
• Does my product deliver real value so that customers will buy even in dire times? If not, why not?
• How many board members and executives are delivering 10 or 100x what my average sales engineer is delivering? If not, why is he still here?
• If I cut the salary of my top 10% earners by 20%, how many fewer people can I fire? How many more can I hire?
• How do I take advantage of the current sale on talent? Buy low sell high?
  
• Can I tweak my compensation package to reflect what's more dear today (cash) and what's less valuable (stock)?

What do you think?

(All opinions expressed here are personal. Read full disclaimer on my blog website.)