Michael Fauscette

Maybe it should be "Networked Business"?

I like the term social business, I'm comfortable with the concepts I've used a lot over the last two or so years. I think that it captures the necessary transformation that the post-industrial enterprise needs. As I think about social business I've started to use another concept that seems to help clarify things a bit, people-centric enterprise. But, I've started to think that maybe something beyond social business and people-centric enterprise might help us think through what is really happening or should be happening in the business transformation. There are two very key social outputs (see the IDC Social Business Framework for a discussion on social outputs) that we need to consider, content and community, that represent the force of the social web. In the social context content is often represented by social media and community is seen as a social network. So here's my idea, maybe we need to start thinking of the new business model as the networked enterprise?

To build a new model for business we have to leverage the power that comes for shifting the focus from process to people. Relationships are drivers of people-centricity, so doesn't this really mean we're changing from a hierarchy to a network? I considered other terms that apply, connected enterprise, ecosystem, collaborative enterprise...all are relevant. The business transformation has impact on all parts of the business from sales to field service and from inside to out. There's a concept in economics called the network effect, or the tendency that the value of a product or service increases as more people use it. The example of network effect most often cited by business texts is the telephone, a single telephone is useless but value increases the more people have and use it. We see this effect on the social web to a great degree, social networks like facebook and Myspace are relevant because people are connected there and become more or less valuable as more people join / use the service (or don't, so network effect can be both positive or negative).

From what I've started to observe I think that there could be a related concept to the network effect in a networked enterprise. In the networked enterprise there is an effect that I call network synergy, or value to the business is increased as a result of the increased interconnectivity of it's people. The addition of the term synergy implies that the interconnection of people produces a result that could not be obtained if the people were not connected (in simple form it's the idea that 1 + 1 = 3). So in a people-centric business the increased interconnection of employees, suppliers, partners, and customers produces a result greater than what could happen if the network didn't exist, or in other words increases value to the business. The social business, which has people as its platform, performs at a higher level because of network synergy. The more interconnected the business becomes the greater the return from network synergy.

Tags: network, social business, social web, Internet, community, enterprise

Workday takes the Gloves Off?

Starting a little over five years ago, workday quietly went about the business of redefining ERP software. After spending a day with the team at its first ever analyst technology summit yesterday I have to say that they are not being quiet anymore and with good reason. The management team reads like a who's who of software innovators, many from the glory days of PeopleSoft and led by co-CEO's Dave Duffield and Aneel Bhusri. I know this team well, having spent a few years at PeopleSoft myself in the mid to late 1990's so I'm not particularly surprised to find a lot goodness here. And you have to give them credit for inviting 20 of what are probably the toughest group of software analysts you could assemble in one room, to the inaugural event.

Workday's vision is to redefine ERP software not only from a business / delivery model prospective (SaaS / cloud) but also from the focus on usability and modern design. Business is becoming people-centric (people as the platform) and workday is approaching its software from that basic design premise, a very powerful concept. Software and technology, in particular ERP have gone through a few phases; the mainframe, then the shift to client server, the emergence of the Internet and the subsequent advance of the social web, the rise of mobile computing and global hyper-connectivity.  Many of the enterprise systems in use today are still based on designs and technology from a previous phase, and the user experience is quite dated. Workday claims to be the only modern ERP system in the last decade, and while it's a little more marketing than actual fact, it does make one think.

So what did I learn about workday:

• Current Offerings: Core Human Capital Management (HCM) [benefits, compensation, absence, performance management, staffing, succession, worker spend management], Payroll, Financial Management, Higher Education, Spend Management and Services.

• 

• Delivery / License model: SaaS / subscription pricing (single price for all modules currently and no extra charge for storage, although they are planning on providing some tiered pricing for higher data volumes), multi-tenant - by their definition they are "real SaaS" (off premise in shared datacenters, pay as you go, all customers on the same code base, multi-tenant, virtualized for scalability and updates are included in the subscription)
• Average contract term: 3 years (but Aneel indicated that many larger clients are pushing for 4 years to lock in pricing)
• Current customers: ~160+
• Employees: ~630 2010, targeting 1100+ in 2011
• Growth: YTD ~130% (no revenue numbers released, they're still private). Targeting 100% per year growth.
• Product focus: "all roads lead through HCM" - focus was initially on building out a solid core HCM SaaS product. Targeting large multi-nationals. Core HCM is there today, payroll is moving up the size curve and currently is in the upper mid to lower enterprise, but hitting stride this year; talent management 2010/11; project and spend management 2011 and financials is in smaller mid-market currently with a target of hitting the enterprise in 2012. They plan to be a full ERP by 2012.
• Usability and user experience is their key differentiator in the apps market
• Largest Deployment: 100,000 employees, average deal in pipeline today is ~10,000 employees.
• Biggest driver for enterprise customers to move to workday / SaaS: painful and expensive upgrades, instance consolidation and aging user experience.
• Verticals: Targeting services but have customers in high tech, financial services, healthcare, higher educations (just closed their first deal) and some in manufacturing (but they are emphatic that they are not targeting manufacturing)
• Distribution Strategy: Direct for enterprise and upper mid-market, indirect for small and lower mid-market
• Biggest Competitors: Most often compete against legacy apps but they are focused on SAP (and they claim that they are winning in HR), they think that Oracle is more focused on competing  with IBM.
• CRM solution: partnered with salesforce.com (salesforce.com is a workday customer as well)
• Questions for Aneel: "Who do you admire in the apps/tech space?" - salesforce.com, Google and Amazon
• Platform: They do have a solid platform that includes integration (more on that later) but that are not planning on offering it as PaaS. They are an apps company.
• Average Time to go live: 4-5 months on first phase
• Design Focus: People and work ("not who works here but instead here who works?") - strength from the core - worker - work - performance. Easy to use including search, tags, links, self-service, collaboration, contextual apps, mobile and personal productivity. HR designed for business users not just for HR professionals
• New Release process: 3 releases a year. The whole process takes no more than 6 weeks to completely migrate everyone. Every customer has a sandbox copy of their production data and gets to preview the coming release there. All major new features are delivered turned off. Workday is the first customer live on every new release.
• Development cycle: agile process, 8 weeks development, 5 weeks validation and 6 weeks deployment. The new development cycle starts simultaneously with the deployment phase.
• Technology: Open standards, open source stack, object oriented, in-memory processing, metadata based, multi-tenant and elastic processing. They use MySQL for the underlying persistence data store.

• User Interface: Design goal is enterprise class technology that feels like a consumer applications. Adobe Flex based "clean and simple with the wheel paradigm for non-power users". The definitional app development process enables consistency in the UI. The use of the UI server allows the apps to scale, facilitates rapid development and enables multiple end user device support. Key interactions are developed for each device but the content is populated by the UI server which can dynamically generate UI forms, hierarchies, and grids. The UI containers are developed for specific devices and the device framework enables multiple device support. From a mobile perspective they have a 3 tier approach, tier 1 - completely native app, tier 2 - native app / shell with HTML / browser for transactions and tier 3 - browser only. Currently the iPhone is the only tier 1.
• Next big innovation: C-level apps (executive mobile) that are focused on KPI's and predictive analytics. They will be designed and deployed on the iPad.
• Collaboration and social: They have embedded collaboration around processes (comments / sharing) but currently that is it. When pushed on why no social focus on the roadmap they stated that their customers are not asking for it (in fact the customers are scared of it from a privacy, security perspective). The executive mobile initiative was prioritized higher and got scarce resources rather than a more social collaboration initiative. That said we did later hear from the new workday Labs group and they have some very interesting social initiatives that are being studied for the future.
• Workday Labs: Organization that is tasked with driving innovation and future enhancements into the product. They are currently looking at things like natural workspaces, data filters, collaboration and mobile.
• Integration: Options are - 1. web services API (filtered data where you want it), 2. Prebuilt Integration Networks (HCM, Benefits, Spend, Payroll and Financial) and 3. Enterprise Integration Builder (forms-based integrations) and 4 Integration Studio for complex integrations.
• Analytics: Embedded and designed to work in context with the current user system activity

So in summary I like what I see so far. The user interface and the focus on user experience does deliver a more modern enterprise system. I think users will find the interface clean, simple and very familiar to other consumer experiences online. The architecture and development processes should deliver a very scalable enterprise class SaaS experience. I suppose I would have liked to see a lot more in the way of collaboration, particularly around social collaboration and ad hoc interaction, including activity streams, but I guess I'll just have to wait and see if the new workday labs helps drive some of that into the product. I think they're missing an opportunity to be a thought leader around social, even if many enterprise customers still deny that they will (or in most cases already are) use social tools in their businesses, but then I would think that.

Tags: cloud, application, SaaS, PaaS, workday, innovation, ERP

Apps are Cool Again?

I've had a bit of fun this week watching the banter created by the Wired cover story and related articles titled "The Web is Dead. Long Live the Internet". The idea, fueled by an infographic that shows the rapidly increasing percentage of Internet use devoted to other than visiting web sites, is that Internet use is changing, mostly caused by the shift to the richer experience of apps. Of course in any debate there needs to be at least two sides (in this one there are probably many more than two but still), so here's an article that takes the same infographic and shifts it to show the dramatic growth of the Internet. The truth, well, they're both accurate at least.

There was a time in the history of the web that the point was the destination, the site, the page. Search evolved to help find that destination. Remember web history though, the original web was static. You went to the destination and aside from reading / looking that was it. We evolved though, and soon along came the transaction web and ecommerce. Ecommerce was still mostly about the destination and the browser was king. There was a lot of talk about the browser as the interface to the app as more software became Internet capable. Portals were born and provided browser based windows into various enterprise tasks and activities.

In the next web era the social web started to change the nature of web use, and interacting, creating, sharing and learning became the drivers of activity. This new activity type started the move away from the web site as the destination in some small ways... social site updates via SMS, for example (you could also see the start of the increasing importance of the mobile Internet). The web became a media type and the Internet became the vehicle of content distribution. The two unique forms of web based social activity took shape, content or media and network or community.

The change from web destinations and browsers to apps can really be traced to Apple's introduction of the iPhone and the Apps Store. If you'll think back, the first iPhone did not have an apps store initially but instead had web based apps, which were really not so good. Once the apps moved to the device it opened up a much better user experience and a wider variety of potential activities on the mobile computing platform. The apps become the vehicle for both creating and consuming social content (through RSS and native content) and even provide a richer experience around ecommerce. Slate computing devices like the iPad, with their increase in screen real estate, have added to the app momentum.

User experience in the enterprise is a growing concern a companies hold static with their core enterprise systems in a tough economic environment that has taught many to stretch out upgrades and core system changes in favor of new vertical and other "edge" apps that provide higher value. Unfortunately these aging core systems, while adequately handling business requirements, provide a less than adequate user experience. In contrast the new Internet apps that have grown out of Web 2.0 have a simple and much improved user experience. Employees are increasingly looking for the same experience from enterprise systems and this desire is creating a great deal of friction and what I like to call the "bring your own workplace" where workers feel empowered to work around enterprise systems when those systems don't do the job or provide the desired user experience. This behavior has added to the accelerated adoption of these new Internet apps, particularly Internet apps available on new mobile devices.

The other contributing trend in the move away from web sites as destinations and the broader use of the Internet as the enabler of technological advancement is the proliferation of smart devices or as some call it the "Internet of things". These new smart devices span a wide range of activities / uses and generally include context awareness as a key component. Context awareness in apps (mostly location awareness at present but other context information could be useful, like "what task is the user trying to perform") improves the user experience but also adds important functionality. In smart devices context awareness can add all sorts of independent data from temperature to location. Fedex launched a business last year that utilizes context awareness, called Senseaware, that creates smart packages, a feature that could be very useful in shipping biomedical materials, for example. And the definition of smart device could vary widely as well, everything from a refrigerator to an automobile has the potential to be a smart Internet device.

So apps are cool again I guess...well, for me they always were. The Internet is the backbone for these new cool apps which are enabling rich user experiences with ubiquitous access across multiple device formats. I was in a meeting today at Citrix and I heard a statement that I think captures the new normal of computing, they said, "it's really about three screens (laptop / computer, mobile, slate) and a cloud", I like that thought. I'd maybe modify it a little though, at least for the future it's about "my choice of screens, a cloud, apps (especially context aware apps) and a world of connected smart devices". And when I say apps I'm talking about the new generation of apps with simple, clean user interfaces, people-centricity (which includes user configurability), device portability, and connectivity. I'd almost add embedded social but I think people-centricity captures that possibility. Is the web as a destination dead, no, but that's not the most important part of the Internet anymore (or maybe it never was), it's about connectivity. 

Tags: Internet, web, mobile, applications, software, smart device, cloud

A Few Links

1. A free download from IDC (authored by me, Erin Traudt and Mary Wardley) on Social Business. The document presents a framework for applying social technologies to real world business problems: Social Business Framework: Using People as a Platform to Enable Transformation (IDC #223862)

2. A few weeks ago I sat down with a few people from PTC to talk about social product development. As a part of the conversation we recorded a video of some questions about wisdom of crowds and its application in the product development process. Erin Daly wrote this post on her PTC blog and included the first of the videos segments.

3. This is the link (subscription or purchase required) to the paper referenced in the PTC conversation, Product Lifecycle Management and Wisdom of Crowds (IDC #222331), that I co-authored with Michael Krigsman, Lisbeth Shaw and Sanjeev Pal.

4. A second document (subscription or purchase required) on wisdom of crowds as it applies to the CRM market, authored by Michael Krigsman, Mary Wardley and me: CRM and the Application of Wisdom of the Crowds, IDC #222166.

5. If you're interested in Social CRM (and CRM in general) you need to follow these blogs:

• Paul Greenberg: PGreenblog and Social CRM: The Conversation
• Esteban Kolsky: CRM Intelligence and Strategy
• Mitch Lieberman: A title would limit my thoughts
• Mike Boysen (and other contributes): Effective CRM
• Brian Vellmure: CRM Strategies
• Brent Leary: Social CRM
• Prem Kumar: SCORPFROMHELL
• Mark Tamis: Social CRM Ideas
• Chris Carfi: The Social Customer Manifesto
• Martin Schneider: CRM Outsiders
• Jim Berkowitz: crm mastery

6. Other smart reads on "social":

• Michael Wu, Lithium Principal Scientist on analytics
• Wim Rampen co-innovation and social business
• Ray Wang: A Software Insider's Point of View
• Jeremiah Owyang: Web Strategy
• Paul Gillin

This is not an all exhaustive list of course, but the people that I read and exchange ideas with regularl,y so hopefully it's useful to you.

Deal Log: An Update on Software M&A for 2010

So far 2010 has been another prolific year for M&A activity in the software markets. The software industry and tech in general has seen a solid amount of M&A activity through out it's existence, but over the last 6 years or so the pace has accelerated quite a bit. The current economic conditions have created additional pressure and opportunity that has caused the pace of acquisition to increase substantially this year. Vendors looking for bargains, looking for new growth opportunities, filling needed talent gaps and looking to build out additional product capabilities have aggressively pursued the M&A route this year. We also see consolidation starting to accelerate in a few newer hot technology areas like social software, mobile and cloud, as both start ups and established vendors look to expand product portfolios to take advantage of the emerging markets.

 I try to keep a reasonable list of M&A activity during the year, especially around the enterprise software markets, so I thought it might be useful to share it. If I missed anything please add it in the comments and I will update my list.

Tags: M&A, software, deal log, acquisition

Supporting Work in the Information Economy

The nature of work has changed for a great portion of the workforce. In the so-called "information economy" what we do and how we do it is in a state of transition. Add to that the growing influence of the social web on work and businesses and the gap between the "normal" in the industrial age to now is quite wide and getting wider. I wonder though, are the underlying systems that support work changing as rapidly? The roots of our current enterprise resource planning (ERP) systems, for example, are evolutions of the manufacturing resource planning systems (MRP) of the 1980's. As a part of system evolution the ERP systems were developed to manage a wider set of business processes outside of manufacturing and to provide relevant business information. In fact ERP and most other enterprise software systems followed a fairly simple path from basic transaction system to aggregating data to analysis of the data, decision support and eventually to automated decision support. CRM followed the same basic path as well. The systems that we use to run our businesses today are fairly mature at this point but is that maturity itself a fundamental problem in a dynamic work environment?   

The way you do your work should have a profound impact on the way supporting systems are designed. That seems simple enough on the face of it. MRP was designed to support manufacturing processes and since it grew out of MRP, ERP mimics that approach. Manufacturing is by its nature very process centric and repeatability to a standard is very important, especially from an economic and quality standpoint. In fact we spent a great deal of time in the 1990's doing business process reengineering to try and get all of business shoe horned into set processes. Companies spent a lot of time working out industry best practices and software tried to capture those best practices in their internal workflows.

Knowledge work is very different from making things in a traditional assembly line driven manufacturing process. Knowledge workers do research, analysis, and design / development. They take this analysis and apply it to problems, defining the problems, identifying solution alternatives and implementing their designs. Taking data, often unstructured in nature and through analysis they create information or as the pic above says, creating meaning. This information work is the crux of innovation in today's businesses and innovation is absolutely essential from a competitive standpoint in a global, hyper-connected, highly competitive, social web integrated business environment. Information work then, by its inherent unstructured nature is not process driven and in reality mostly ad hoc.

This is where, in my opinion we have a growing conflict between the needs of knowledge workers and the underlying business systems in use today. The enterprise software is process driven and yet the nature of information work is ad hoc and predominately unstructured. Don't get me wrong, there are plenty of job functions in side businesses that do require repeatable process, even outside of manufacturing. These process driven functions are well served by today's business systems. Knowledge workers do:

• Analyze data to establish relationships and cause and effect
• Brainstorm solutions
• Identify and understand trends
• Networking and making connections (both people and data)
• Creating and modifying strategies
• Business critical convergent and divergent thinking
• Evaluate and rationalize conflicting priorities
• Designing new products, services and capabilities

In contrast knowledge workers are not involved in functions like:

• Order entry
• Financial transaction processing
• Ledger entries
• Shipping

But there are positions that seem to be transaction driven that require knowledge workers like:

• Customer service (resolving customer issues, especially in today's social customer environment)
• Technical support
• Handling inquiries

In addition to the individual knowledge function there is also a growing need for social knowledge work. I think that this could actually reflect the concept of co-innovation that is gaining momentum with the social customer. This internal co-innovation is the evolution of collaboration in the social business.

So back to systems. My point is that current systems fall short in dealing with ad hoc work and that knowledge work is inherently ad hoc and unstructured. Business analytics tools try to address some of these underlying shortfalls but do not really provide all of the capabilities needed. It's an accepted fact validated through survey that knowledge workers spend on average ~70% of their time working around rigid systems. Add to that the growing need for implementing flexible business strategy in business systems to accommodate rapidly shifting competitive and market pressures that can change with alarming frequency and the problem is even greater. There must be a new generation of knowledge tools to facilitate the growing social nature of work and to allow a more ad hoc and unstructured approach for knowledge work.

Tags: social business, socbiz, knowledge, information, work, social web, ERP, software

Redefining Leadership in the Emerging Social Business Environment

It's 2010 and business has changed. The combined impacts of technology shifts like the social web, real-time mobile computing, and cloud computing; business shifts to an information based economy; and sociological changes in individual and group behaviors and expectations are creating a revolution in business. In a historical context the situation today looks reasonably similar to conditions that surrounded the start of the industrial revolution. The shift from agrarian business and social structures to industrial based structures changed almost every facet of life, modes of social interaction, social structure, hierarchies, management and leadership styles, education systems, etc.; all built to support the growing industrial economy and society. These structures have had more than 300 years to become ingrained social patterns and practices yet more and more they are coming under pressure to change to modes that will support the new imperatives in business and society.

I've spent quite a bit of time researching and discussing the business changes that are starting to have significant impact on the way companies interact with customers, employees, suppliers and partners. Out of this research we are seeing the emergence of a new business paradigm that incorporates the learning from the social web and the new interaction models and expectations of all of the business stakeholders. Social business requires new ways of engaging customers and prospects as well as new methods of operating a business. Part of the urgency to change is driven by people that have learned and gained new expectations based on their personal online life, people that make up a businesses customers and employees. People have a new level of empowerment because of their online voice and expect experiences from business that mimic those in their personal life. This has led to business looking and adopting new customer programs ranging from social web monitoring to social customer support communities. Internally companies are starting to look at employee tools and implement new ways to collaborate and interact across the business. All of this change is really related to the idea that business culture has to change to meet these new requirements and take advantage of the new opportunities presented by social business models. Along with this culture change leadership and management models are starting to feel the same pressure for change.

 I've been keenly interested in leadership and management science for most of my adult life. I have worked almost exclusively in management positions including my 10 year career as a Naval Officer and even now in my player / coach role as a group VP at IDC. Educationally I studied / have degrees in history, sociology and business management, with a particular focus in my MS program on organizational design. As a Naval officer I learned a great deal of practical leadership. As a software project / engagement manager I also learned many management techniques. I list these experiences simply to say that this is an area that I am experienced in and have studied quite a lot. All of that has not prepared me for what I now believe is a fundamental change (or need for change) in the way management functions in most organizations.

Management structures in a factory are clear and the models are "tried and true, as the saying goes. If you want to produce widgets these methods will work. In an idea and information based economy that is fueled by creativity, empowerment and independence they will at best produce mediocre results and at worst fail miserably. The industrial model, which is to varying degrees the approach in most businesses today, is based on a strict adherence to hierarchy and the centralization of power.  The model generally includes some or all of these traits:

• Strict hierarchy with a clear chain of command both up and down
• Need to know mentality, information is hoarded and can become a power base
• Openness is not encouraged and often can be used against a person in a political struggle
• Strategy is disseminated from the top
• Decision making is centralized
• Policy and rule based control driven from the top of the structure
• Conformity is rewarded
• Managers are "served" by employees
• One way communications are common (from the top down)

In the new social business a model of management and leadership will be required and will feel very different from the industrial model. This is in fact, one of the reasons that the transformation to a social business model will be a long and difficult road. Many in management today could feel threatened in the new model. Some of the traits that I believe will be required in a social business include:

• Coaching versus "managing"
• Information and content is the life blood of the social business and is shared openly and frequently (hoarding is not rewarded or tolerated) (I call this content liberation).
• Employees are empowered to make decisions (I'm not advocating anarchy, there will need to be some vision and strategy as a framework, but even the formulation of the strategy and vision is participatory and not centered in a select few). Empowerment also means the power and obligation to speak up when something is amiss.
• Transparency which leads to ethical behavior.
• Power and communication are networked not hierarchical and one way
• Managers exist to serve not be served
• Strong personal brands are encouraged and people's individual brand gains advantage from association with the corporate brand in a symbiotic relationship
• People become the enterprise platform
• Everyone has a voice and can influence the company community
• Personal responsibility and accountability are rewarded and valued

These are a few of the traits that I think will be increasingly important and lead to competitive advantage for companies and leaders that adopt them in support of a social business culture. I'm sure there are many more ideas, what should I add to my list?

Tags: social business, empowerment, social CRM, leadership, management

Socialytics for Sales, Marketing and Customer Service

Last week at the CRM evolution conference in NYC I presented an updated discussion on socialytics in a social CRM context. The conference itself was excellent, here's conference chair Paul Greenberg's follow up post. Anyway, the concept of socialytics (a trend we started covering last year) or deploying an analytics platform to capture and analyze data generated by the social web is gaining momentum and getting a lot of attention from social software vendors and more importantly from end users. The diagram at the left represents what I call the "intersection of highest value information", the point where social data intersects with existing enterprise data. The mashup of social data and enterprise data opens up a long list of potential opportunities for enhanced decision making to drive significant business value. Here are my slides form the presentation and what follows are a few comments about the content, although not the entire presentation voice over of course:

Socialytics: Using Social Data for More Effective Sales, Marketing & Customer Service

View more presentations from Michael Fauscette.

The process of socialytics is fairly straight forward, listen and/or capture social data from defined public and private data sources and pass that data through analytics applications. The socialytics platform should provide the foundation for the capture process and the analytics applications. The social CRM application of socialytics is in effect the intersection of CRM, web analytics and social data. From listening on the social web companies can capture compliments, complaints, questions, problems, competitive information, crisis, influencer, voice fo the crowd and opportunities / needs from prospects, influencers and customers. From that listening companies can then track things like positive mentions, length or span of travel of information, conversations, synchronization, tallies of all mentions, sentiment and activation. Each of these tracked items could relate to an analytics app or series of apps. Overall socialytics in the SCRM context is about social activity, engagement and about driving new business.

Most enterprise analytics provide information that are reactive, something happened in the past and because of it the business needs to take some action to get back on track or get some additional value. In socialytics there is an additional promise or potential to turn analytics into a predictive tool. So from the monitoring and decision support process the information could actually be used to take action on events that are in the future versus reacting to history. Predictive analytics could be applied to define customer future buying behavior, or community behavior. How powerful would it be to learn that a customer was close to defecting before it happens or that a community member was a future influencer. While reactive analytics are useful the real opportunity, especially in dealing with customers is predicting behavior and taking action on that information.

Tags: socialytics, social CRM, SCRM, social business

  

Cloud Application versus On Premise, Myths and Realities

I was reading something recently on SaaS TCO that once again dredged up one of our industry folktales about SaaS versus on premise software and it reminded me that no matter how mainstream I think the SaaS apps market has become, there's still a lot of misunderstandings and misinformation rattling around with prospects, analysts and vendors. My first reaction was one of frustration that we still have some "experts" pushing concepts that I would have thought we put down over the past few years. A lot of the existing confusion from end users and even some vendors and analysts comes, I believe, from overstatements and misinformation by both SaaS vendors who are zealously trying to drive their change into the marketplace and from traditional SW vendors who are of course trying to protect their existing business. At an event recently I heard an executive from a leading SaaS vendor make the statement that SaaS was replacing all on premise software going forward and that the world would be all SaaS soon...now while this might sound great for his business if not for his credibility, reality is very different, the world of enterprise software is hybrid delivery with both SaaS and on premise (and appliances, on premise subscription, etc.) co-existing for the foreseeable future. I also believe that we may have issues with defining metrics for new business models that are actually only relevant in older models and that those issues are creating some of the misperceptions on both sides of this argument.

So let's get to the specifics of what I'm referring to here. The argument that I hear from both sides on return on investment (ROI) and total cost of ownership (TCO) are maybe only half true or maybe are trying to compare apples and tomatoes, they're fundamentally different. The commonly held belief, at least from on premise vendors is that while in the short term ROI numbers on SaaS might look good, the overall TCO of on premise makes SaaS a poor investment. SaaS vendors have focused more on ROI because it is an easy metric to use to show significant value to prospects.

From an ROI perspective SaaS vendors (and also any other delivery model that uses subscription pricing and licensing) has a strong short time to value message. The implementation of a SaaS product over an on premise product should be faster, it's simple math, I don't have to, as a project team, install servers, databases, middleware, nor do infrastructure testing, manage infrastructure, etc. so the project to get the software configured and up and running takes less time. If it takes less time to implement then by all rights the customer should see value out of the software sooner (again, simple logic).  Also from a ROI calculation perspective it's fairly straight forward, lets say you pay $1000 up front for a perpetual license, $300 for implementation and then 20% per year for maintenance there after. For the subscription for the same product maybe you pay $36 per month for the life of the relationship with the vendor plus implementation costs of say $200. In the first year I spend $632 instead of $1300, and am using the product sooner (shorter implementation remember) so my ROI is very high (assuming that the software actually generated some value, otherwise why would you do the project in the first place). SaaS looks like the winner, right?

Now look at the on premise counter argument, TCO. The basic premise for the discussion is that if the vendors stay constant and you take a long enough period for that constant relationship, on premise is a much better buy because the TCO is lower. Just looking at the software costs this point is easy to illustrate. Take the same pricing in the last example, and assume the relationship between the vendor and the customer lasts 10 years, how much did the software costs? The on premise cost $1300 + $200 per year after the first year, or $3100 total. The SaaS product costs $432 per year x 10 years or $4320 + $200 initial implementation = $4520...so the SaaS product seems to have cost 30+% more and thus have a lower TCO. But wait, what about other costs? The SaaS implementation had no license costs for database and middleware and no hardware costs up front. That's not all though, since they didn't set up a datacenter to support the new apps the customer saves on resources to manage, update, support, train, etc, all of those system infrastructure components. A true TCO calculation for the same 10 year period then could look very different and I've completely ignored integration costs and ongoing costs for both systems...that is if that was the real question here.

As I think about the question, whether SaaS or on premise is "better" or costs less, or returns value sooner, or whatever else, I really need to look at a couple of other thing. The first is a business decision to consume software (all, part, or none) as a service and the second is for each application is the functionality and usability roughly equal between the software products (or maybe which software fits my business needs the best) despite the model. In other words a lot of other issues have to enter into the discussion of SaaS or on premise or appliance or subscription priced on premise. Things like is it better for my business to rely on a vendor to deliver the datacenter (or cloud) services to me rather than invest in them myself? Is the required functionality available in whichever model I prefer? Is there business advantage in one product or one deliver model over the other for my business? Is it better for my business to consume software out of my operating budget in a pay as you go model or is it better to invest capital in the deployment of business systems?

Buying and implementing software to generate some necessary business value is a business decision, not a technology decision. The type of technology needed to meet the business requirements comes after defining the business goals, needs, objectives, etc. Each delivery model has advantages and disadvantages financially, technically, and in the context of your business. It's like planning a vacation, figure out where you are going and what you are trying to do before you buy a map, book a hotel because it's cheaper and buy an airline ticket to get a great fare or else you'll end up with a great deal on a flight and staying at a hotel at the wrong destination...I don't know about you but I'd rather end up where I planned than end up with a great deal on something I don't want.    

Tags: SaaS, cloud, on premise, software, TCO, ROI

Dealing with Negativity Online

Last week I did a webinar with Lyle Fong, CEO and Co-Founder of Lithium Technologies and Ken Tuchman, Chairman and CEO of TeleTech. The event was focused on social business; specifically social CRM, social support and the intersection with business process outsourcing (BPO) providers like TeleTech. TeleTech and Lithium announced a strategic partnership earlier this week that will bring traditional CRM BPO services together with community-based social support, a unique and fresh opportunity for companies that are looking at ways to interact more effectively with the social customer. Having top talent to manage customer communities is a critical success factor for running successful SCRM initiatives. Anyway, as a part of the webinar we took some questions from the audience and unfortunately we ran out of time and didn't get to all of the queue. One unanswered question stuck in my head ever since and I want to spend some time with it. The question was how do you deal with negative interactions on a customer community (or something like that)?

Sometimes it seems like there are a disproportionate number of negative people online. I think that's partially because it's easier to spread negativity and tear down that it is to be positive and create things, it's just less effort. And on the other side, it's easier to believe the negative or believe the worst than the positive. There are lot's of reasons why a person might be negative, maybe they are lashing out against change, looking for attention, building themselves up at the expense of others, trying to gain the power over others that they don't have in their offline life, or just having a bad day...and negative people don't generally know they are being negative. In fact sometimes just pointing that out can change or diffuse the whole situation.

How to deal with negativity in a social web setting is something that I get asked fairly often and certainly a big concern for businesses that are building a social presence. While it's not overly complex, it is very important to develop response guidelines and policies, and to train involved employees in the proper responses. This is just another part of your crisis response plan, something that several companies / brands have learned the hard way. From a community perspective some negative comments / feedback are positive indicators and provide opportunity to discuss and respond to issues.

 In general negative comments fall in three categories: 1. real issue or attack over a real issue, 2. constructive criticism, and 3. unwarranted attack, commonly referred to as trolling or spam. For each category there are a few ways to deal with the commenter. I like to use the classic crisis approach; reflect, respond (if warranted), and recover as the framework for preparing the plans. Reflect is the planning phase, and in planning identify the type of negative commenter (if possible) and remember to plan a response that is proportionate to the harm or potential for harm.  It's useful to establish if the problem or complaint is legitimate or not. Responses should also stay positive, show respect and most importantly, don't surrender power over "you". For category 1 and 2 don't avoid, acknowledge the problem, let them know they have been heard. For real issues or attacks over real issues, once the problem is acknowledged, which let's the community know you have responded, try to take the conversation to another private channel (email, IM, DM, phone). After resolution you can go back on the public channel.

Sometimes people just want to complain in public but won't engage in private, so respond, offer, and leave it alone. For sustained attacks, especially unwarranted attacks, often other community members will step in, making your response unnecessary. It's much more powerful for community members to field comments, especially tough ones that reek of attack. Just like in any other social situation there can be bullies. The bully syndrome can be especially harmful in communities or blogs that allow anonymous participation (something that I don't think is a good practice).  In response to unwarranted attacks it is often most effective to ignore the commenter, which takes away the fuel for their fire. More often than not deleting negative comments is not a good practice and will risk creating a larger backlash. I think there's an exception though for obviously abusive, obscene or socially unacceptable comments (which should be clearly stated in your terms of service on the community). Some other thoughts about responding, you can't fight fire with fire (or maybe you can't fight fire by pouring gasoline on it), build a fun community and quite often you can diffuse unpleasant interactions with humor, Also remember a simple rule, apologize if you screw up. How do you deal with negative people online?

Tags: social CRM, community, negative, comments, Lithium, TeleTech