Archives for June 2006

When you think of EMC buying RSA Security it may seem like a strategic fit for a storage company to provide security especially with Network Applicances (NetApp) having aggressively positioned itself in security around data encryption.

But it is the math that is most at play here- just as with most small enterprise software companies the cost of sales and marketing leaves RSA Security with only a 12% profit margin. Compare this with margins of larger enterprise software companies (with revenues of over $2 Billion) in the 30-40% range. On top of that EMC can sell security to many more customers worldwide that use its storage software.

Google is launching an authentication (Auth) service that will allow third-party applications to better integrate with Google services. Nathan Torkington of O’Reilly reported this in their blog. So now you can allow a third-party application to access Google services on your behalf. Current limitations include having to manage separate tokens for each Google service. Google is looking into building a true Single Sign-on functionality in coming months.

This Google Auth service is limited to accessing Google services but with Microsoft trying to be a dominating player in the identity market it will not surprise me if Google over time builds out a competing offering to InfoCard (See Kim Cameron’s Identity Blog).

I am personally interested in this and will post further- given my day job involves Identity Management.

Google created a lot of buzz around its Web2.0 Spreadsheet anouncement a few weeks ago. Many other players including Zoho had launched similar or even superior functionality before Google did. So now Zoho is launching ZohoShow to provide Powerpoint-like functionality on the web.

I test drove the ZohoShow and it appeared to be a good enough presentation tool. I am quite sure that it lacks some of the bells and whistles that Microsoft offers but then disruptive innovation can be achieved by providing a good-enough product for the under-served masses that do not require high-end features and want a cheaper (free) product.

In the long run its not clear to me that Zoho (AdventNet) can compete with the likes of Google and Microsoft with their deep pockets, so then the question is who will acquire them? Yahoo!, Google, Microsoft – the usual players or even some companies that have be n sitting on the sidelines of this Web2.0 revolution.

Things I liked about ZohoShow:
-UI is intuitive
-Similar to Powerpoint

Things I didn’t like about ZohoShow:
-Limits PPT imports to 1MB when most PPT files are much larege
-Still raw but I am assuming the idea is to release early and iterate often to improve the experience.

All in all thumbs up to the Zoho team for having a complete Suite offering.

Here are some other points of view on ZohoShow- Islam Ghalimi proclaims Zoho is Complete Miguel Guhlin’s impressed with ZohoShow and Colbert Low comments on ZohoShow online presentation tool. Also, see Zoli’s post.

Oracle Q4 reported higher than expected earnings. (See Oracle Profit Jumps to $1.3B byAP)

So how does a business like Oracle have a high cash-flow and very high margin business? What are the key metrics to look at? Is Database still a growth business? What is the role of SOA and other key technology trends?

In my previous posts (see links on the right) I have discussed the business of software. We will evaluate Oracle’s earnings and see what others have to say.

Alpha Guy writes of Oracle’s earnings and its integration of acquired businesses at http://alphaguy.blogspot.com/2006/06/oracle.html

Jeff Nolan talks about SAP’s earnings here at http://jeffnolan.com/wp/2006/04/20/sap-earnings/

(Strictly personal opinion. Does not represent views of anyone else.)

Google Spreadsheet lacks many common features available in Microsoft Excel. There are plenty of reviews on Google Spreadsheet comparing its features with Microsoft Excel. See Rod Boothby’s ‘Spreadsheet wars!…’ , Computer World’s ‘Google Spreadsheets is more powerful than you think’, Zoli’s comparison of Google Spreadsheet and Zoho, Vinny Carpenter’s ‘Google hits a home run with Google Spreadsheets’,Ken Fisher’s ‘Google’s new spreadsheet is about file formats, not MS Office’.

It is my contention that it is irrelevant as to whether Google Spreadsheet is better than Microsoft Excel or not. In fact, limited functionality that suffices for only the novice Excel user or non users is the audience that Google may be targetting.

In Innovator’s Dilemma Clayton Christensen talks about disruptive innovation as distinct from sustaining innovation. “Disruptive technologies, however, are distinctly different from sustaining technologies. Disruptive technologies change the value proposition in a market. When they first appear, they almost always offer lower performance in terms of the attributes that mainstream customers care about. In computer disk drives, for example, disruptive technologies have always had less capacity than the old technologies. But disruptive technologies have other attributes that a few fringe (generally new) customers value. They are typically cheaper, smaller, simpler and frequently more convenient to use. Therefore, they open new markets. Further, because with experience and sufficient investment, the developers of disruptive technologies will always improve their products’ performance, they eventually are able to take over the older markets. This is because they are able to deliver sufficient performance on the old attributers, and they add some new ones.”

Google_Spreadsheets3
Originally uploaded by Anshu Sharma.
As one will notice, Google spreadsheet fulfilss many of the criteria to qualify as a disruptive innovation:

1. Google Spreadsheet is cheaper: In fact, its free! In due course of time, Google will monetize this offering just as it has monetized email and search probably via ads.
2. Google Spreadsheet is simpler: Microsoft Excel is today a sophisticated business application used by businesses small and large to calculate sales, review product and sales data, create sophisticated forms, display charts and pivot tables. Google Spreadsheet does none of that- at least not yet. And in this apparent limitation, it has a shot at serving the un-served and the under served.
3. Google Spreadsheet is more convenient to use: You can fire Google Spreadsheet up by simply pointing your browser to a URL. To the sophistacted IT gurus (the one’s like me that blog) it may be obvious how to use Excel and may be an easy-to-use app but if you have been up late at night watching Video Professor trying to sell millions of ‘How to learn Excel’ videos- you will realize that there are millions of Americans (and others) who have never used Excel and if Google is to succeed, probably never will.
4. Google Spreadsheet has some new features: Google Spreadsheet lets you easily share your spreadsheets allowing multiple users to edit the spreadsheet, and making it very easy to publish the results. With Office, to get the same set of features and many more that you don’t need and will never use, you would have to buy Excel (to create the spreadsheets), Exchange (to email it to each other) and Sharepoint (to publish it on its portal)- all ‘Enterprise ready’ software that frankly is an over kill for SMBs and individuals.

So while many of us IT enthusiasts and cutting-edge technology lovers will obsess over whether or not Excel + Live is better (or will be) than Google Spreadsheets, we may be missing the core idea. It is the simplicity, lack of high-end functionality, lack of compatibility (yes the truth is Google Spreadsheet is not going to be able real ‘all’ Excel files) and cheaper cost (or lack of apparent business model) that may end up being the greatest competitive advantage Google Spreadsheet has.

This also has lessons for the open-source community that has been trying to fight the Microsoft Office gorilla over the years with a look-alike Open Office. The problem with Open Office is that it is so similar to Office that they are fighting for mostly the same users, with limited differentiation. If you use Open Office you just get a cheaper but much harder to maintain version of Microsoft Office that many users are unable to use as it is deceptively similar yet different. The limited success (or astounding failure) of Open Office has lessons in store for Google as it goes about rolling out applications one at a time. They should continue to focus on building new applications that provide similar functionality as MS Office but not try to copy MS Office.

Microsoft, on the other hand, should adopt a co-option approach to the Web 2.0 Office applications. If the new Web 2.0 Office challgenging applications are similar and compatible, they can become training grounds for future Excel users. It may also acquire other players in the market like Zoho or others and provide users with a genuine choice under Microsoft umbrella. Finally, Microsoft can create disruption by changing how it packages and sells Office. Innovations in packaging and bundling may include subscription pricing and pricing based on actual usage of features. Enterprises, small and big, hate paying forhigh-end features that 90% of users may never use. Rather than deciding up front if I need to buy Professional or Home edition, I should be able to subscribe to a minimal offering and then upgrade (and downgrade) based on my actual usage requirements.

Summary
Microsoft’s two most profitable businesses are under new threats- Windows from Linux and Office from Google and other Web2.0 application start-ups. It is my opinion that neither of these competitor’s, Linux or Google Spreasheets (and other Web2.0 apps), are superior to Microsoft’s offering. In fact, they may be inferior in many ways. However, in analyzing the threat they pose to Microsoft, we should focus on their disruptive business models and serving of newer markets and novice users and not on function/feature bake-offs. The success of Google Spreadsheets may depend on whether it is able to build an ecosystem independent of Microsoft Excel and not become a victim of co-option. And open-source community and other disruptive technology vendors have much to learn from how this war turns out and how it is conducted irrespective of who wins.