Michael Fauscette

Private Social Networks

By now you'd pretty much have to live under a rock to be completely ignorant about online social networks, whether you participate in them or not. Earlier this week facebook hit the news again with its ever rising valuation now topping $70B, capping last week's news that unofficially the network's membership jumped over the 750M mark. Public social networks like facebook are mainstream now and they have a fairly clear business use as a marketing and advertising tool for the enterprise. Their use as a business communication channel has even extended to many customer support organizations. What they don't have though, even with some granular and complex security and privacy settings, is the level of security and control necessary for them to be used by businesses as internal social networks. What's public can't really be made private, no matter how hard you may try. Even with quasi business use by individuals the wise are very careful how they use them and what gets posted there. But I'm not planning on offering a lesson in building online personal brand presence in this post, instead I want to talk about the business use of the concept of social networking.

There are a few use cases for social networks in the enterprise, either public, semi-private and private, which fall into two general categories, 1. collaboration (internal or internal to external) and 2. use case driven. The first category, collaboration, is generally completely or mostly private. The second category, use case driven, can be public, semi-private or private depending on the specific objectives of the community.

Collaboration is a word that has been used and abused for quite a few years in enterprise software. In fact if you had asked CIO's a couple of years ago about their collaboration initiatives you would have gotten some angry answers. The old generation of collaboration systems were not particularly collaborative, instead they did an adequate job of controlling files, which frankly isn't all that useful and certainly doesn't help people work together more effectively. For me, today's focus on social has put an important shift in new generation collaboration systems, the move away from focusing on files to focusing on people. The people centric nature of these systems is proving much more effective in facilitating productivity. In our real time, hyper-connected and information driven business world people need tools to help deal with the ad hoc nature of information work where often the human part of the equation is in dealing with exceptions to rigid processes. The new generation of "social" collaboration tools have two key clusters of features, activity stream and social network. I've written on activity streams before so I won't cover it again. The social network functionality is pretty standard, profile with some professional information and perhaps some personal information to humanize the perception of the employee a bit. You could think of it as a modern replacement for the corporate directory but more interactive and providing a broader look at an employee. There's the potential to draw on corporate HR systems to get some of that information as well, with  the employee's permission of course. In some products I've seen there is also some additional capabilities that allow the creation of ad hoc or defined external networks with subsets of functionality and access. This, I believe is critical to the concept of building a business network that reaches beyond the firewall. This ability then is a very important evolution of the tools. I should also mention that I believe these systems need to move from the idea of forming an additional layer, the social layer and get embedded into the enterprise workflow through the software systems that people use every day. Vendors and their products that serve this need include: Salesforce.com Chatter, Novell Vibe, VMWare Socialcast, Tibco Tibbr, Yammer, Jive, Moxie, IBM Lotus Connections, Newsgator, SuccessFactors CubeTree, Neudesic Pulse, Clearvale / Broadvision, SocialText, Oracle Fusion Applications ...I'm sure I forgot some, but this is at least a good start.

Use case driven business social networks are seeing rapid growth with companies finding some very creative ways to use the concept of community. Here are a few examples of some of the more interesting uses:

• Customer communities for peer to peer customer support.
• Healthcare patient communities (healthcare relationship management) where the patients and family members can find information, peer to peer interaction, family support, etc. These communities are generally private.
• Ideasourcing communities where customers and / or partners can provide input into a companies product / service design and development process.
• In government constituent communities to provide feedback on government initiatives at a local or even a national level.
• Government campaign communities where candidates can develop a community of supporters to augment its campaign efforts.
• Private communities serving specialized interest of a group like financial management advice or skydiving
• Partner community that allows a company to interact with its partners, provide sales and marketing assistance and maybe encourage peer to peer partner cooperation.
• Supplier networks. Companies like Ariba provide access to an established supplier network but companies could also develop its own. These networks can provide pricing benefits or could even draw suppliers into closer collaboration around product design and manufacturability.
• Medical collaboration community, a private community of healthcare providers that facilitates all types of cooperative treatment, collaborative diagnosis, etc.

This is not an exhaustive list of course, but hopefully you get the idea. A business could use a community / network platform to build public, semi-public and private communities to leverage the network effect for specific outcomes. The application of community to business issues is virtually limitless. There are two types of social technology that  could be implemented, the network could simply be an extranet version of the internal social network (some of the vendors listed above provide that capability) or a full blown community platform like Lithium Technologies, Get Satisfaction, Sword Ciboodle, Private Social Networks, Inc. and others, see this list.

All of these networks have to address corporate concerns around security, compliance, IP protection, etc. Role based permissions can help give employees the right access to the right data and provide some confidence around limiting access when that is important. Enterprise use of social is growing up, there are still lot's of concerns though. I'm having a lot more conversations around social policies as well and I believe that every company needs to address the use of social tools by setting reasonable guidelines and then training employees on company expectations and limits.

If you have other examples of business social networks add them to the comments, these use cases are great patterns for other businesses to address some of their own issues...

Tags: social, socbiz, collaboration, network, community, private, security

Oracle Reports Q4 2011 / FY2011 Results - First $10B Quarter

Oracle reported its Q4 and FY2011 year end results yesterday and once again posted impressive numbers including its first quarter with over $10B in total revenue and first quarter with over $1B revenue in applications. New software licenses grew 19% year over year and improved on the FY 2010 growth rate of 14%. Oracle's business was equally strong across all three software business lines, applications, middleware and database and although the hardware revenue declined 6% year over year the all important net margin improved. Database revenue, a market that is very mature, grew at 28% year over year, a growth rate that is twice that of any year in the past decade, according to Oracle CEO Larry Ellison. Here's a look at the applications new license growth compared against FY2010:

  Overall, as you can see, the improvement year over year is very strong. From a regional perspective there is also marked improvement across all three regions with Asia Pacific showing particularly strong growth. The area of greatest improvement though is EMEA, the one region that had struggled in the past. That trend has been broken with three consecutive quarters of solid growth. We should also note that the quarter revenue was unaffected by any significant acquisitions. 

So what's behind the continued strength in applications? There are no surprises or major change in the strategy, Oracle continues to execute what has worked well for them over the last 5-6 years. That strategy is comprised of:

• Lead with and continue to evolve deep vertical applications managed by the vertically focused Global Business Units (GBU). These vertical applications then drag in other applications from the broad Oracle portfolio of applications, middleware and database.
• Cross sell / up sell into the extensive customer base derived from the combination of the native Oracle customers with the customers from the more than 60 acquisitions it has made over the last 6 years.
• Leverage both middleware and database sales as opportunities to drag other apps into the customer.

In my conversation with Oracle President Mark Hurd after the earnings call yesterday I had the chance to discuss the GBU's and the health of the vertical business among other things. The top growth verticals last quarter were Communications, which is having good success with its billing solutions including provisioning and metering; and Retail, with its expanding portfolio of offerings. From a bookings perspective both Financial Services, which recognizes a good portion of its revenue ratably because of the service bundling of the i-flex offerings and Health Sciences which is mostly sold in a subscription / SaaS model, had an outstanding quarter.

Apparently the field initiative to gain more density of coverage across all sales territories and GBU's is progressing well. Hurd reported adding over 800 more resources to the sales team in both pre-sales engineers and sales executives. This comes on top of the 1500+ resources already added in Q1-3 as reported in the Q3 earnings call. The concept is simple math, for example, take a sales territory / sales executive that has 20 accounts and split that up so that each sales executive has 5-6 accounts, which forces more focus and should yield additional revenue over time. As a part of the changes Hurd indicated that every effort is made to maintain continuity of the territory and to minimize disruptions, particularly where there are strong existing relationships.

Not to spend much time on hardware but I do think Exadata and Exalogic are significant enough that I should mention them briefly, particularly since pre-integrated devices are clearly a product area that Oracle plans to continue to expand. Oracle CEO Larry Ellison reported that Exadata had sold over 1000 units overall, with 50% growth in Q4 and with over 50% of the customers buying more than one system. In addition he reported that expects to triple that number next FY. As for Exalogic, while no unit figures were mentioned he did say that the ramp is better than Exadata.

As for Fusion Applications the team was again fairly quiet on the subject. When asked during the question and answer session at the end of the earnings call Ellison reported that Fusion Applications are completely rolled out and that there are several customers live already. He also spent some time talking about his view of cloud 2.0 and the fact that multi-tenancy is a 14+ year old approach that is outdated in a world with sophisticated virtualization. Fusion Applications, according to Ellison are about customer choice, with on premise, private cloud (managed by the customer or by Oracle) and  public cloud all as options. This discussion also provided Ellison a chance to take a shot at applications rival SAP, which, according to Ellison has "nothing" to offer in enterprise public cloud.

The discussion with the executive team on acquisition strategy provided some insight. When asked about whether Oracle planned to continue acquiring companies at its "normal" aggressive pace during the Q&A session, they indicated that the market was getting to a point where many companies were very overvalued and that they would not over pay for what they acquire. The focus for now will be on organic growth, particularly through engineered systems but if something comes up that is a good value, then of course they would act.

Overall Oracle continues to execute extremely well and there is every indication that the trend will continue. With expanded sales coverage, progress in hardware particularly through Exadata and Exalogic, a database business that seems to be accelerating, strong middleware growth, successful deep vertical applications, great overall applications growth and the promise of both more engineered systems and the broader availability of Fusion Applications it is well positioned for continued revenue growth and margin improvement...

Tags: Oracle, earnings, hardware, software, applications, vertical, tech

IDC 2011 Innovative Companies to Watch Program Now Open for Applications

It's that time of year again, time to take a look at innovation in the world of enterprise software and see what new products are out there that have creative solutions to and exemplify the key application trends for this year. This is our third iteration of the program, which ends in the selection of the top vendors and an IDC publication to highlight them and their solution. The submissions must be related to these three application trends:

• Commerce 2.0
  The resurgence of eCommerce, driven by the increasing importance of providing a social customer experience, the proliferation of context aware mobile apps and the emergence of new social tools, is leading to an innovative commerce experience that is a combination of social, mobile, online and brick and mortar. Underlying this shift in commerce are new technologies, platforms and applications that will power the next generation of customer commerce experience
• Social Business Solutions
  Enterprise social solutions that support the transformation to a social business. Solutions could be social platforms that enable communities, blogs, microblogs, wiki's or other social collaboration and business functions and applications, or other innovative social business software tools.
• Socialytics
  Analytic applications that listen, collect and analyze social data like emails, IM, blogs, social communities and networks, microbogs, etc. using techniques like behavioral modeling to provide actionable business insights. access.

The "fine" print:

• Must be less than $100M in revenue for the 12 months trailing
• Products that have won in the past are not eligible again (but new products from companies that have won before are eligible)
• Must provide a customer reference that was implemented in CY2010
• Must complete the survey here, before July 30, 2011

I look forward to reviewing your submissions with my team, good luck!

Tags: innovation, applications, software, socbiz, socialytics, IDC

Driving Adoption of Social Collaboration Tools

I was having a discussion yesterday with a vendor client on adoption of its activity stream product and wanted to share some of our thoughts. Adoption for social collaboration tools is extremely important, it's a network effect issue, the more people that use the tool, the more people will want to use the tool. I have some concerns, which I've talked about frequently, that not everyone in the enterprise will find it acceptable to (or want to) use a tool that adds a social layer across the business. Some roles are very focused in one enterprise tool and it would be difficult for them to step out of that tool to use a social tool to connect...or in fact it isn't much different than just doing what they do today, use email to get the answers they need. Some roles will like the new place to work and some will want the new place to be embedded into what they do every day. This is an important point because I believe that there has to be a clear answer to "what's in it for me" or adoption will suffer. Beyond the embedded versus social layer issue though, there are some clear change management tactics that can help drive adoption of social collaboration tools. Here are a few:

• Executive sponsorship and visible use. Sponsorship is important but I think even more important is the obvious use by key executives. This will in itself ensure that many people in the company will feel compelled to use the tool, or be left out on important information and conversations. The more relevant the information that flows on the tool, the more people will find that there's something in it for them.

• Identify champions or power users. Use champions as mentors to help drive adoption. Early adopters often can be turned into these champions. There are always very influential employees that are not necessarily showing on the org chart, employees that others like and tend to mimic. Identify those and work to get them using the tool, if you can get one or more of them as champions you will be much ahead of the game.

• Change incentives to encourage cross-silo collaboration and knowledge sharing. Misaligned incentives, rewarding the behavior you're trying to eliminate is a common problem and one that will kill your efforts quickly. Work with HR to align compensation, incentives and rewards to incent the behavior you want. Building a knowledge sharing culture starts here.

• Hands on activities at launch are very important to help familiarize employees with the tool. Brown bag lunch sessions with champions, road shows, live reporting on the tool for company all hands...anything to get people using the tool is good. Also make the exposure to the tool a part of your new employee orientation program to get new employees on board as they are added.  

• Define as many use cases as possible for the tool, and be very specific. The more employees see the relevant activities that the tools helps address the better. For example show the customer support reps that they can use the activity stream to get real time assistance from across the organization for help in answering customer inquiry's. Show sales reps how they can get real time direct access to product specialists to answer prospects questions or prep for an upcoming meeting. The more use cases you identify the more likely the tool will be used.

• Share company wide important announcements only on the tool so that employees will feel compelled to use the tool and an important breaking news channel. Things like key sales wins, new product releases, new hire profiles, executive's analysis of earnings, anything that will draw employee attention.

• The more you can tie the new social system to existing systems of record the more likely employees will fine reasons to use the system. Beyond embedding the tool, tie in things like company directories to make a company social network, integrate with document management systems, integrate to any system possible that ties the new tool into established workflow's.

• Ask employees for feedback on the tool and on how they are using it, and make those conversations public. Crowdsourcing use cases leverages the power of the tool and will uncover unique ways to use the tool for added value.

These are a few ideas that would help drive adoption, what else should I add to the list?

Tags: socbiz, social, activity stream, adoption, use case, employees, change management

Groupon, Is this Another WebVan?

I've read quite a few posts and articles over the last week since Groupon filed it's S-1 to go public. I guess it's not surprising that S-1 filing generally generates some interesting conversations, it is often the first deep look into a companies finances. The fact that Groupon is the fastest growing company in US history based on revenue just puts this filingunder a bigger microscope. 

Groupon's business model is simple, sing up merchants to offer deeply discounted deals to an ever increasing number of potential customers. Groupon sells the deals, collects the money and pays back half to the merchant. From the merchants perspective it's a customer acquisition play, draw in new customers with the deal and try and keep them after the sale. The location centric nature of the deals helps build a more compelling offer of course. Now there's nothing in what I just described that would be (or I should say has been) hard to duplicate, LivingSocial, for one, has a very similar model andis the #2 competitor in this new space. 

Looking at the S-1 there are a few things that do look well, not so good (some have even referred to it as a ponzi scheme, but that's pretty harsh): 

• Like many fast growth companies it's not yet profitable. In Q1 for example, there was a net loss of $102M on revenues of $644M. 
• It is about $230M in debt, with current assets of $290M ($208M in cash) and liabilities of $520M ($290M in merchant accrued merchant payables - money owed to merchants for services they have already provided).
• Most of recent funding rounds have gone to buy back founder and early investor shares. In series F + G rounds from April and December of 2010 the company raised a total of $1.08B. Of that amount only $150M went for working capital, the rest ($930M) is now in the pockets of CEO Andrew Mason, a few senior employees and few early backers.
• Groupon's quarterly burn rate is about $100M and rising rapidly to support it rapid growth. To put that in perspective that's going from zero employees to over 7,000 in a couple of years.
• And a few other tidbits, margins seem to be declining, there's a bit of accounting "optics" going on between its GAAP and non-GAAP numbers, the model is susceptible to customer fatigue and the playing field is getting crowded with new competitors.

But, with all of that said there are two things that might just trump all of the other factors: 1. Sometimes being the first mover and / or capturing a massive customer base in Internet business wars can be the trump card, just look at Google, Skype, Twitter, Facebook , Amazon, YouTube, etc. and 2. Groupon has done what Google and many others has not been able to figure out, translate online to offline effectively. This last advantage can't be taken lightly in the "local wars". Are the flaws fatal, guess we'll have to wait and see...

Online Business Model Innovation

The Internet is enabling some very innovative and creative twists on traditional business models. Back in the day (you know, 1995ish) businesses made money simply by selling a product or service directly or perhaps indirectly through a distribution partner. Value was created in a very predictable way, even with the addition of one or several sales partners. A business made / delivered a product or service that costs X for Y, and perhaps the channel partners added Y + margin to get to an end price. As long as Y > X you presumably had a viable business model. Of course this works for direct transfer of goods / delivery of service and for renting / leasing the product, or subscribing to the service (SaaS, for example).

Enter the Internet and the age of "Google" and value creation changed with the new online ad supported approach. For many new online businesses this became the default business model. There's even a blended model that uses ad supported and direct sales (usually subscription) called freemium. Companies "give" away the core product for free, getting their value indirectly through ad revenue but allow the customers to get rid of the ads by paying the subscription.

Now though, there's a third method for creating value that is by far the fastest growing, shared revenue, that also depends on the Internet. The idea is pretty simple, the business enables / facilitates a transaction between another business / individual and an end customer, taking a percentage of the total deal for that service. Groupon, the fastest growing business ever, uses this revenue model, as does its competitor LivingSocial and many others including eBay, Ariba, Airbnb, Getaround, etc. This model is particularly useful for the host of new companies growing up around the concept of collaborative consumption.

 Collaborative consumption vendors fall into two basic types, one that is a direct business, like Zipcar or CityCarShare and others that are peer to peer. I've written about peer to peer here. Peer to peer businesses work in the transaction business model, the vendors, like Airbnb, facilitate the transaction and take a percentage for the service, connecting people who have a room, apartment or house to rent with people who are looking for short term housing. The transaction business model combined with the hyper-connectivity of the Internet makes the peer to peer businesses viable. Peer to peer businesses also rely heavily on peer reviews to ensure quality of service as a key part of the model. For now this model would seem to be the one to watch, with lot's of innovation and growth emerging. 

Tags: innovation, business model, groupon, airbnb, collaborative consumption   

Consolidation in the Social Software Market Continues: VMware Acquires SocialCast

I have to admit that Tuesday's announcement from VMware was a bit of a head scratcher for me, at least at first. Don't get me wrong, I'm very familiar with SocialCast and have written several times that I think highly of the product and the team, as presumably SocialCast customers like Avaya, Humana, Nokia, Phillips Electronics and VMware itself do as well. I guess I wasn't as current on VMware's strategy though, and at first I had a hard time understanding how SocialCast fit into the VMware story. After a little catching up on VMware and some reflection I'm starting to see an interesting picture emerge.

I've followed VMware to some extent, I mean server virtualization, while not directly related to applications, is important to both public and private cloud. I have also wondered about the long term future of virtualization as a stand alone function, should it actually be a set of features in an OS? In some ways maybe you could look at virtualization as a sort of OS for the cloud. Beyond that, desktop virtualization is interesting from an apps perspective, particularly around mobile and multi-device support, and I follow Citrix fairly closely in this market. Anyway, it does make sense that VMware needs to broaden its offerings but I'm not sure I would have immediately thought of a social collaboration tool as the next adjacent app.

If you look at the acquisition in context though, it's a bit more obvious. Think of the three major enterprise tech trends that I've talked about for the last few years, mobile, social and cloud, and how they are related. Each of these tends are deeply interrelated and in one way or the other add value to each other through that interdependence. VMware already plays an important role in cloud and as I mentioned in some way is starting to look almost like a cloud OS. A shift in mind set is also happening among employees, who now feel empowered to use whatever tool they choose to help them get their jobs done. Businesses are starting to see a proliferation of devices and IT is struggling with how to manage them. Citrix has invested quite a bit in this part of the market through desktop / mobile virtualization. VMware just launched a competitive product called Horizon App Manager which provides secure multi-device access to public and private SaaS apps.

This leaves VMware with two issues, 1. how to compete aggressively with Citrix (and Microsoft) and 2. how to take advantage of the trends around social business? The answer, at least from its perspective is to offer more value to Horizon App Manager customers by providing apps that facilitate collaboration, thus gaining a social business software offering. VMware has done that through three acquisitions this year, Zimbra, SlideRocket and now SocialCast.  Zimbra gives VMware customers cloud based email and collaboration, SlideRocket delivers a cloud based presentation solution and now SocialCast adds social collaboration / activity stream capabilities. The SocialCast addition also gives the capability to embed the social layer into any app in context, something I believe is critical to drive enterprise adoption. The complete package provides a cloud based (public and private) end user suite of robust collaboration and social tools that when combined with Horizon maps directly to the next generation model; mobile, cloud, social, in context and in real time. Now there's a story...

One additional thought, what about VMware's platform offering, SpringSource. VMware has positioned the platform as a cloud development platform even partnering with Google and Salesforce.com (VMforce). What if VMware embeds SocialCast into that platform, much like Salesforce.com has done with Chatter in its Force.com platform. That could drive adoption in both directions by giving developers an embedded social collaboration tool to enhance their products and by getting wider distribution of the SocialCast app. That could be an interesting offering, although one has to wonder if partner Salesforce.com would see that as competitive to Chatter?

    Tags: VMware, SocialCast, social, social business, google, salesforce.com, collaboration, socbiz