Are you renewing your your business model before it is too late?

Business Model Change will cause many organizations to loose market share
Business Model change will cause many organizations to loose market share

Business Model change will cause many organizations to loose market share

Many organizations are feeling the pain of spinning-out-of-control with their business model. I have spent the last few weeks contemplating on everything that I have learned the past two years in software technology and I have to say that it has even got me off guard how quickly things are changing for companies. Organizations that used to have a solid business model are running into huge difficulties, and mostly not because of bad products, but more or less of not having understood the market correctly. Dallas Morning News wrote about Nintendo’s surprise profit warning today where they say that the game console Wii U has sold 70% less than expected. That is a huge miscalculation from Nintendo, but the issue is not just the console, it is that the market has moved on to games on smart phones and Sony and Microsoft has taken the market with more innovative products that appeal the current gamers. Nintendo is not on their own, we have seen this with many other sectors/players. Who would have thought 3 years ago that BlackBerry market share would drop to be almost non-existent?

What I have also seen happening is the struggle among system integrators and the current business model that is starting to fail them. I have had the luxury to serve not only software vendors and system integrators, but also end user organizations and what I am seeing clearly is an acceleration of interest in providing more cost effective, flexible with full support for mobility with a reluctance to customized and tailored solutions. This has a tremendous impact on system integrators specifically. My guidance to end user organizations is to look at the ecosystem players to identify the best-of-breed solutions, ensure that these solution vendors have defined an API strategy that enables seamless integration between modules without having to do everything from scratch. This is of course not something that many system integrators want to see as many of them have based their survival on selling hours, and doing it with long-lasting projects. The problem with this approach is that many of these long-lasting projects fail as smaller system integrators do not have the skills to manage projects and if the end user organization has negotiated a good contract with penalties, the system integrators ends up “paying for the solution”. I have seen this many times and specifically and this does not have a good impact on any ecosystem in the long run. This is one of the reasons why smaller system integrators have been “swallowed” by the larger ones as system integrators need scale.

Another way to differentiate from the masses is to be very specialized in a given vertical domain (or functional domain) where  you can command the pricing for your delivery. This is something that larger SIs have difficulties with as their scalability comes from using offshore and in these scenarios it is not easy to maintain highly skilled vertical experts where the client is prepared to pay a higher price.

The problem that I see in the market does not apply only for system integrators, there is a huge pressure mounting for traditional software vendors that are still making good money, but with new and exciting entrants popping up from different areas such as Silicon Valley, it is evident that many software vendors will have the same path as Nintendo and BlackBerry. I do not want to sound pessimistic or doom organizations to fail, but I have seen the signs of radical transformation and this is based on my numerous hours each week tracking the market, studying software and working with clients. Just look at the valuation of Dropbox from last week where the investment was based on 10 Billion dollar valuation. It is amazing to even think about this, but I think it is logical. It is a sign from the marketplace that things are changing and valuations are based on what people want and see as being the next wave of things.

Vendor ecosystems are also making huge bets on the next wave of computing. Microsoft is adding data centers around the world like recent announcement of Azure data center in Brazil. IBM is betting their farm on IBM Watson that is in the cognitive computing space and IBM’s acquisition of SoftLayer will increase the competition in the cloud space especially now when IBM announced that they will invest 1.2 Billion in data centers around the globe. What this means to me is that the acceleration of software solutions to the marketplace using new modern ways. This means that it is not good enough to “repurpose” what you have, but  you have to think about how your solution is going to be consumed and how it will fit into other ecosystem players. Think about Dropbox for example. The concept is very simple what they do and there are a myriad other players doing the same thing. They have understood the role of ecosystem and their technology is embedded in every app that is relevant and that has to include document sharing/distribution of some sort.

photo by: PSParrot

Will your app developer be able to support your app use?

Light BikesI believe in the new app ecosystem. I can see the change happening in front of my eyes and I can see this in many ways. I can buy and install value-added apps for our Microsoft Dynamics CRM 2011 Online solution without having to call anybody and most of these solutions can be tried out for a period of time. I can also buy apps to my Windows Surface Pro and RT and some of the same apps can be purchased to my Nokia Lumia 1020 Windows 8 Phone.

The app economy is here and we can’t stop that. I also have a tremendous opportunity to see what is happening on the marketplace as I have to talked and worked with many ISVs about their cloud and app plans. It is fascinating to see how the change is impacting every single company and person that has to deal with software. If you are in denial mode, you will be left behind and many have already lost market share to smaller and nimbler vendors due to ignorance and in some cases arrogance.

I put a question in my title whether you feel that the app developer is going to be able to support your app use. I have already acquired quite a few Dynamics CRM 2011 solutions into our Dynamics CRM instance and each one of these solutions are critical in our daily use. To give an idea what type of solutions one can use is PowerAutoNumber from PowerObjects, an amazing company in the US that was selected as 2013 Microsoft Partner of the Year Winner in the Customer Relationship Management category. PowerObjects have identified a nice niche in their business by adding value to a software platform that is used by many system integrators and software vendors as a platform for derivative software product line development.

This PowerObjects solution module does one thing very effectively: it enables me to generate numbers to CRM entities with a 1-to-many relationships. I recently had a need to start tracking all of TELLUS Academy course participants and decided to build a small app in Dynamics CRM 2011 (like XRM) using custom entities but I did not realize that auto numbering was not part of the “base Dynamics CRM 2011 pack” so I had two options: to build one using JScript, use a bunch of “open source” code from the Internet or buy/pay for a solution to an ISV that will maintain and amend the solution. I decided to stick to the last option.

In my case, it is like having a bunch of Lego blocks that are assembled together and each building block brings value to the overall solution. I am sure that this is nothing new to the ones that still remember the discussion of component-based development in 90s. What has made this a reality in my mind is the acceptance of SOA-based solutions and some ISVs have really understood the importance of building effective APIs for others to consume.

What I like in the case of PowerObjects is their innovation of solutions that any Dynamics CRM 2011 user really needs on a daily basis. I will explain more about these and other topics in our solution portfolio in my later posts.

My message to any organization is that it should select very carefully the solutions/components that it is going to rely on in its operations. This is of course nothing new, but the new app/solution ecosystem is assumed to make everything so easy and we tend to forget that many easy things might break and the ISV even go out of business. What are we going to do then? Do check the background of the company that you are going to bet your business on, that is just a logical thing to do even if the buying and installing is easy in the new app economy.

Aligning your business with your ecosystem

Your business is always part of an ecosystem. So is mine. I am completely aligned with Microsoft business cycle that starts 1st of July and ends last of June. Therefore Microsoft Worldwide Partner Conference (WPC) is the most important event for me and my TELLUS team. Why? Because during WPC I will get the first hunch of the direction that Microsoft is taking for the new fiscal year. This year, it will be all about devices and services (with lots of measure around this) and I have to align my services to reflect this direction. What it means in practice is that all our offers have to reflect and build upon devices and services for us to be able to help both Microsoft and Microsoft partners to align themselves with these objectives. If I continue stubbornly to message the “old fiscal year” objectives that do not reflect what the field needs to do, then please do not expect to have much support from your ecosystem, because they are not incentivized to care about that anymore. It might seem shortsighted (which it is many times), but that is they way it is with businesses today. Everybody has to cut their checks and to be able to do that, one has to look at where the money is coming from.

During the years, I have become pretty brutal in focus when it comes to my own business. I have see too many examples of entrepreneurs that are “all over the map” trying to do different things, but really not doing anything well. I do not want to be in that boat. Have I made mistakes? Sure, and lots of them. As an entrepreneur, I see money all of the place and it is one of the hardest things for me to look away from these opportunities especially if they do not contribute anything to the TELLUS “platform”. If these is value add to the platform, then I am willing to invest time in checking it out, but if it is not, then I have to walk away.

Do you have a focus in your business? If you are an SI, do you spread yourself too thin to too many things and then your team is perplexed as they seem not to know anything really well. If you are an ISV, do you have a focus in a vertical or functional area and become world known for it? If not, you need to revisit your plan as being “too many things to all is like not being anything to anybody”. I have witnessed this so many times that it is not even funny anymore. I suggest you run a small exercise using Business Model Canvas to see if your business makes sense.

What I would like you to do is to really contemplate who well you know your ecosystem and the internal working of it and if the answer is: “I really do not”, then you might want to consider doing something about it. Also, if you work within Microsoft ecosystem, you might want to segment it into smaller segments as there are more than 600k Microsoft partner to work with.

 

Keep it simple stupid! Building solutions that people want to use.

I wrote yesterday about the need to read manuals, and today I wanted to talk about the need to build simple and elegant solutions. My popular example is from my own life when I used to run a business intelligence software product development team and we did lots of exciting innovation, but some of this was really for rocket scientists only. We were building a rocket to take off from Houston to moon, while the end user was ok taking a car from Trophy Club to downtown Dallas (30 minute ride).

Yesterday, I got some tweets back about whether a software solution should be so intuitive that there should not be a need for a manual. In some cases this is true, but if you are using a complex engineering product, the case is definitely not about the UI or usability. Some products just have been built along the years with huge amount of features and functions and it is just not possible to explore these features without somebody guiding you, whether it is a video or a manual. I tend to learn more from online video presentations that are more “to-the-point” and will guide you through the process.

In my workshops I remind people that they should not be building solutions for themselves, especially if they have been around for a while (like myself). They should be building for the new  generation of users that are born with Internet and mobility. This generation assume expect Internet and mobility to be there and this generation does not really care about where the data resides… as long as they have access to it.  My daughter Daniela is a good example of the new generation. She would not tolerate an app that “she does not get” and that is not fun to use. That is by the way a common trend among teenagers of today. Try to get them to use a solution that is built 10 years ago with agonizing screens, multiple steps to get the task done. You can’t force these youngsters to use these kind of systems and therefore I believe many mature software organizations are really struggling to create something that is user friendly. One way to do this is by acquisitions as we have all seen happening this year.

One typical approach for the mature ISVs is not to re-create the current solution, but to identify the Minimum Value Product (MVP) that will match the new market entrants and this gives the potential for the mature ISV to get into the game and then add new functional layers on top of the platform itself. When I recognized this, my mind went back to my doctoral dissertation where I was optimized a software product platform for an analytical application software and how this could be used as part of your software product line engineering. Have you look at your software product development strategy from MVP perspective or are you trying to “cloud enable” your existing solution? If not, you should really think through how your transition to cloud and app world will look like especially if you have an existing on premise solution that could eventually become obsolete. These are strong words, but this is what I am seeing out there.

The App Economy – How should we view app monetization?

The blogosphere is all about apps and how different ecosystems compete for the eyeballs of these and the money of course. You might still remember the the news when a far app pulled as much as $10,000/day in revenue but since then there is tens of similar applications on the marketplace. This started a trend where people left their well-paid jobs to chase their dream of creating apps and living a life without pressures. The growth of app economy is one of the most promising trends, but people/organizations that want to make real money of it, need to include some risk management into it as well. The app industry has become similar to film industry where relatively few people make money and the ones that make, are hugely successful like Angry Birds phenomenon from Finland.

One might of course ask oneself is whether this is a shift in our society and how work is performed. according to Erik Brynjolfsson (director of the M.I.T. Center of digital business), “technology is always destroying jobs and always creating jobs, but in recent years the destruction has been happening faster than the creation”. There is no question that technology is creating new jobs and apps can be part of this opportunity as can be seen in many of the reports that have studied this trend towards “app economy”.

What I have not seen many discussions around is how the app economy is linked with the enterprise software business. I have researched around this and identified the “dimensions” that are typically linked to the app business, but not that much is said how established software vendors should view this space and how these vendors can make a entry to the app space in a way that makes sense and where there is also a sustainable economical model.

So, the question that we should ask ourselves is how much of the app business is truly geared towards the consumer business and how much of this will gradually move into enterprise business? Should software vendors keep the app business in their plans when building enterprise solutions specifically using the cloud? If they should keep this in mind, what kind of pricing should the ISV use? Maybe free as the real money comes from the enterprise solution and not the app that accesses it? As you can see, it is not that clear and my own experience when working with both small and large enterprises, the app business hardly ever comes up in discussions. I am convinced that this will change and it will change very quickly. One of the drivers will be Windows 8 and Windows Phone 8 developers that will create solutions that will be based on app technology and not on traditional desktop app architectural model even if these will be able to run in Windows 8 Pro environment.

Another valid question that we need to ask ourselves is whether app economy should be see purely from mobile app development perspective or should we view it from a perspective where the device is just the means to get to what you want and the backend (typically the cloud) is the one that provides the services and brokers the interaction between different services. Shouldn’t we in fact be talking about services economy instead where organizations build apps to consume and combine information from different sources using different SOA interfaces that organizations/developers have exposed to the world. Isn’t this what we have always dreamt about?

NokiaExpressI downloaded today a Windows Phone 8 app (Nokia Xpress) to my shiny Nokia Lumia 920 and this app really demonstrates where things are going. After having installed the app, it asked me whether it can use location information (which most apps want to use), but what really made me to think about the future of apps is that developers really have to think “outside the box” on when developing apps. The thing with this Nokia Xpress app is that it enables users to store and read articles on your phone (locally) so when you travel, you do not have to use expensive data roaming. I know.. there are many of these apps from before, but what this app has specifically thought of is to really monitory and minimize data usage and provide a combination of technology such as Microsoft SkyDrive technology to store videos and images without having to use the data plan. Why is this relevant to me? Just this week, my son’s data plan was going over the limit and I found out that it was all about video streaming and 2 gig data plan does not cope well with this.

The topic of “app economy” is very interesting to me as researcher, but also as practitioner. A recent paper written by Dr. Michael Mandel and Judith Scherer (commission by CTIA (The Wireless Association) and Application Developers Alliance provides an interesting view on the app economy. According to Mandel, the entire “App Economy” was coming to use in early 2009 and was popularized by a cover story run by BusinessWeek in November 2009.

The way that Dr. Michael Mandel describes App Economy in his February 2012 report resonates well with what I have educated my customers in respect to ecosystems:

“ App Economy is a collection of interlocking innovative ecosystems”. Each ecosystem consists of a core company, which creates and maintains a platform and an app marketplace, plus a small and large companies that produce apps and/or mobile devices  for that platform. Businesses can belong to multiple ecosystems and usually do”.

There is no question in my mind that this topic is relevant to anybody that works in the software industry and it is fascinating to see how this evolves with time and what kind of new companies will rise to take advantage of this.

If you work in the Microsoft ecosystem, I highly encourage you to read the article “Microsoft’s cloud vision: Why Azure is the linchpin of the firm’s new devices and services strategy”. Another great article from Information-Management.com that predicts Enterprise Apps to go mobile big time and that money apps will move to the cloud. The article lists quite a few things that are very interesting and I encourage you to read that article as well.

Stay tuned for more, there will be more to come on my research on different topics and this app economy being one of them!

A tale of “me too” kind of innovation: RIM to launch music service for BlackBerry

It is sad to read about Research in Motion (RIM) attempt to become hip again. I have been a client for RIM for the past few years for one reason: AT&T provides me with an unlimited data plan (worldwide) and that is hard to beat. I have not been able to switch to any other phones as I really need my phone when globetrotting and I am reluctant to spend hundreds of dollars each month for roaming.

As a Blackberry user, I would have appreciated RIM to focus on getting a real phone on the market that is competitive and I can still keep my unlimited data plan but I guess nothing lasts forever and I need to move on and change to a new operating system and vendor and deal with the roaming. I can’t be left behind in innovation and usability and when you look at the current smart phone market, it is growing and advancing with huge steps every month. My current phone (BlackBerry Torch) has a lackluster touch screen that does not react to my fingers the way one would expect. I have also had to rebuild the phone at least 10 times from scratch due to applications that have broken the phone. One would think that cannot be possible, but it is and I have seen it many times. I even had to buy a software tool to “self-manage” the rebuilding as AT&T refuses to rebuild the phone and forces you to buy the phone again if the warranty is over. Not something I enjoy doing. Once returning from Europe I put my phone on and it went dead and by discussing with AT&T service they said to buy it again.

The latest attempt from RIM was to publish BBM Music store that enables BlackBerry users to stream 50 songs using BlackBerry Messenger. Why on earth would I want to do that and wasn’t this something that Nokia already failed in and decided to kill? If I were RIM, I would focus purely on getting new phones on the market and focusing on the youth as they are the ones that either make the platform or break it. Another group are the developers that now are at crossroads as they have to decide what to do to a dying operating system as RIM is moving to the new QNX operating system that they acquired by RIM.

My personal opinion is that RIM needs to focus on having applications that support music services such as Spotify, Rhapsody etc. and forget about things that are outside their own core competence areas. This tale is also something that the software/IT industry keeps seeing all over again: once you are the top dog, you will eventually come down due to many reasons. We have seen this happen with IBM, Nokia and many other players. We need to remember to reinvent ourselves on regular basis and keep working in a humble way. Becoming arrogant and believing in something that is not true anymore can be lethal in the long run. When somebody becomes market leader, it always causes people/employees to think that this stays status quo even in the future. This never happens.

Where does this leave me as a smart phone user? In my mind there are only three players left in the smart phone field: Windows Phone 7 from Microsoft, Android from Google and iPhone from Apple. With these three choices the follow-up decision is to select the hardware manufacturer and that is where the race is going on with Nokia, HTC, Samsung, Dell etc. on the WP7 field and obviously the same thing with Google Android devices but with iPhone with only one manufacturer being Apple.

Life at Apple after Steve Jobs?

I can’t believe how many announcements we are getting from the large IT players: First Google buying Motorola, then HP deciding to kill its HP TouchPad.  I just read news from Wall Street Journal that he is resigning as CEO of Apple and taking the role of Chairman of the Board if the board accepts that. I am sure that will happen. According to CNN, Steve Jobs sent a letter of resignation to the Apple’s board with following statement:

“I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come,” wrote Jobs, who has been on medical leave since January. Cook has been filling in as the company’s leader.

The question that everyone will now have is what Apple will be when Steve Jobs no longer runs the day-to-day business. Some might say that nothing and Tim Cook that will take the CEO role will be doing what he was doing before. However, there is no question in my mind that Steve Jobs is and has been the visionary for the company and there will be a change at least in the long term.

When I look back at very successful software/hardware companies, there has always been a strong leader with almost ruthless and dedicated desire to win the game. Look at Apple and what happened to the company when Steve left long time ago: it was almost bankrupted. There are several books that tell this story such as “The Second Coming of Steve Jobs” by Alan Deutschman.

I am listening to CNBC when writing this blog entry and according to the analysts; Steve Jobs was never the one that has executed on operational level that has been Tim Cook.  The question that I have is whether Apple will be coming with new things as they have with Apple iPhone, iPad etc. According to the CNBC, the stock has lost 5% of its value afterhours.

Tim Cook isn’t Steve Jobs and the other way around. The question that the CNBC is asking whether Tim Cook is the right guy to lead: he came from an IBM operational role to help Apple to run operations smoothly. Only time will tell how Apple will continue on its path and the market is in shock as this could be the end where Steve Jobs and his presentations are over.

What is this going to do for the mobility and tablet market? The questions that the market will have is whether Apple will be able to continue on its iPhone and iPad success or will the market become suspicious whether the ecosystem and the devices will be able to compete. I do not like to speculate specifically as this has probably to do with Jobs illness, but this could be a major break for the competitors to gain some momentum at least on the long term. The market will be in disarray for a while even if CNBC says that Steve Jobs has mapped the devices/software and strategy for years to come. However, when you look at the current mobility and tablet market, it is in flux and any player can take over in matter of months. Just look at Android and how it is taking market share from Apple iPhone and others.

I expect there to be more announcements in the mobility/tablet market during the fall. No question about it.

Cloud ISV: make sure you understand your ecosystem play – example of Intuit and Microsoft collaboration on software platforms to create a foundation for solution developers

I have written several times in my blogs about ecosystems and the role that ecosystems play. I recently run into an interesting article in the Redmond ChannelPartner with the header “Intuit Extends Cloud Pact with Microsoft”. As I am working with Microsoft ecosystem every single working day, I became interested what the article was all about. Intuit has been building a Partner Platform (IPP) that was reported by Mary-Jo Foley already back in January 2010. I am a longtime QuickBooks Online user so I have a pretty good picture of Intuit’s SaaS delivery model at least from 2003. I believe Intuit was one of the first software companies to introduce a full-blown accounting solution for the SMB market and my company still uses it every single day.

In January 2010 Jeffrey Schwartz reported that Microsoft and Intuit stroke a cloud pact for small business where Windows Azure would be the preferred PaaS platform for Intuit and Intuit App Center.  This value proposition is obviously good for ISVs that can build solutions to the waste QuickBooks ecosystem with integration not only to QuickBooks data but also between QuickBook applications.

The idea behind this Intuit Partner Platform (IPP) is to help developers to build and deploy SaaS applications that are integrated with QuickBooks data and also to give huge exposure for the ISV on the marketplace that Intuit provides for its partners. This marketplace (Intuit App Center) has thousands of applications that can be used with QuickBooks and other QuickBooks third-party solutions.

Let’s look closer to why Intuit and Microsoft need each other. I read an interesting blog entry from Phil Wainewright that includes very interesting remarks about software platform that happens to be the topic of my Ph.D. dissertation (Evaluation of a Product Platform Strategy for Analytical Application Software). The blog entry from Wainewright includes following picture:

 

You can read more about this topic and download Wainewright’s report “Redefining Software Platforms – How PaaS changes the game for ISVs) for Intuit” and this can be found by following this link.

When you review the picture above in more detail, you will find interesting and relevant information how Windows Azure and Intuit IPP platform play together. According to Wainewright, the conventional software platform capabilities are all about functional scope of the development platform whereby cloud platforms add three additional distinct elements according to Wainewright: Multi-tenancy, Cloud Reach and Service delivery capabilities.  The service delivery capabilities have to do with provisioning, pay-as-you-go pricing and billing, service monitoring etc. The multi-tenancy is typically not something that the PaaS platform provides automatically without the application developer building the multi-tenancy logic to the application. I still hear people saying that a legacy application that is migrated to the PaaS platform will automatically become multi-tenant. This is not true as each application has to be re-architected to take advantage of things such as scalability (application increases compute instances based on load).

The idea behind Intuit IPP platform according to Wainewrite is that Intuit has built service delivery capabilities that can be abstracted from the functional platform that is on the left hand side of the picture. The idea that Intuit had initially was to be able to provide support for any PaaS platform to be integrated to the IPP platform which I think is a good idea by not practical considering how fast the PaaS platforms are evolving and the amount of investments that are put into them.

One thing to remember is that all cloud platforms such as Windows Azure has already moved on the horizontal axis whereby the situation and clear cut separation between functional platform and service delivery capabilities is no longer that obvious. This also means that any Microsoft ISV that builds additional infrastructure elements to Windows Azure has to be carefully aligned with Microsoft product teams as there might be a danger to be irrelevant as some third-party functionality will be covered with the functional platform itself (PaaS platform) like Windows Azure. I have seen the same situation with some ISVs working with BizTalk extensions that suddenly have become part of BizTalk itself. Microsoft is very clear with its ISV partners that they should focus on vertical functionality or features that are unlikely to be part of the Microsoft platform in the short-term.

A new post from Jeffrey Schwartz on August 11th, 2011 explains how Intuit IPP and Microsoft Azure will be even more integrated as Intuit will drop its native development stack and instead “focus on the top of the stack to make data and services for developers a top priority” according to Schwartz. In reality this means that Intuit will invest heavily in Windows Azure SDK for IPP and make developing an app on Azure and integrating it to QuickBooks data and IPP’s go-to-market services easy and effective. Microsoft released some more information about this partnership in the Windows Azure blog. The two companies have launched a program for this called “Front Runner for Intuit Partner Program” that explains what the developers get by participating in the program. The site portrays three steps: Develop, Test and Market and there is a video that explains what it means.

So what should we learn from this blog entry? First of all, every development platform (PaaS etc.) will evolve and my recommendation for the ISV is to focus and invest on one that you think is here in the long run. I think this example from Intuit is a great example of a company that was initially in the race of competing in the PaaS space to some extent to conclude that the investments to keep the competition going is just too huge and this led to the conclusion to select Microsoft Azure as the foundation for IPP. Intuit will be much better off by focusing on building logic on-top of Windows Azure by participating in SDK development an ensuring that any solution specific development can be easily integrated into Windows Azure platform. Intuit will therefore focus on providing data and services for developers to use with Windows Azure PaaS platform.

Microsoft has been in the development tools and platform development since its foundation so they are much better off to do those kinds of massive investments. I think this is very smart from Intuit and this enables Intuit to have a scalable solution that developers can rely on even if the decision was not easy according to Liz Ngo from Microsoft. Alex Chriss (Director, Intuit Partner Platform) from Intuit explains this in his blog why Windows Azure is a good foundation for Intuit development. Also, Intuit provides a tremendous opportunity for ISVs like CoreConnext and Propelware report based on the blog from Liz Ngo.

Software ecosystem will continue to evolve and EVERY ISV has to figure out how its solutions will meld to be part of different sub-ecosystems. This will also require efficient and well-defined Application Programming Interfaces (API) from all parties to be able to create an integrated solution based on service oriented architecture (SOA).

Let me known if you know other good examples where software ecosystems mesh nicely with each other.

Did Google find out that open source does not pay out as expected?

Here we go again. The mobility world is changing with Motorola Mobility being acquired by Google for $12.5 billion. This was widely reported this morning when I woke up. Doug Barney from Redmondmag.com concludes that this move from Google might anger device manufacturers. My personal belief (that many other analysts support) is that Google woke up to realize that it might be good to make money on the phone business and not have it “free” as it is now.  The fallacy of open source might have finally caught up even with Google….. It could be that Google executives also realized that the winning formula is about ecosystems and  not only about the operating system as Galen Gruman conclude in his blog entry today.

I have stated in many of my writings that I do not believe in the open source model for an ISV and there are many reasons for it. One reason is obvious: the more success you get, you will have patent trolls suing your ass with our without reason. I have seen it so many times and it is frightening. Yes, large companies do the same thing to each other, but I guess the reasons are little different. Large companies can afford lawsuits but for the small ones this can be a death sentence.

Another reason has to do with valuation of the company in case you want to sell it in the future. There is no question that a company with real IP has more value that the one that assembles things from pure open source. In some cases this might be OK, but if you want to build something that has real value, some pieces have to be closed from competition to view it. I have been part of software organizations that have been sold (both as CEO and as Chairman of the Board) and there is no question in my mind that the buyer is interested in where the code (and algorithms) came from. I am sure there is a place for open source as well… If I had to start a company today, it would not be based on open source.

The announcement from Google to acquire Motorola is has caused a stir in the marketplace with speculation of whether Microsoft is now going to buy Nokia to have the same situation with Google. One blog entry suggested that even RIM might be a target now, but based on CNBC analyst interview this morning, RIM does not bring any additional value to the table so the market does not expect them to be bought up. This is going to be a race between Apple iPhone, Microsoft Phone and Android.

How should we now read the market and the intentions from these three players? Nokia’s share shot up 10 percent today: maybe Nokia will also be bought and or Android will be loosing attractiveness to players such as HTC and Samsung that are now going to compete directly with Google in hardware design and manufacturing. Interestingly, I read today from the news that Apple has ordered 95 million iPhones for the fall and Samsung is going to be one of the largest manufacturers, which makes this game very interesting. Samsung and Apple are fighting for the same markets and are in fact even in a lawsuit on patent infringement but still doing business together. Go and figure out……

The Business Insider blog entry today concludes that the deal between Google and Motorola might end in a disaster mainly because of Google stabbing HTC and Samsung in the back by now competing against them. At the same time, Microsoft now became the only big player that does NOT manufacture its own handsets and this could potentially be really good for Microsoft and Microsoft Phone future. It could be that Microsoft ends up also acquiring Nokia going forward, but this is purely my own speculation. Some bloggers from ZDNet think this would be the most logical option for Microsoft. It seems that the embedded software/hardware design ala xBox Kinect could work well where Microsoft would design the best handset to be optimized with Microsoft Windows Phone operating system. This is probably what the Nokia-Microsoft partnership is trying to do.

Another interesting perspective that Galen Gruman provides is to claim that Android really isn’t open source and now with the Motorola deal we are most probably going to see more closed sub-systems within Android that Google will not disclose from algorithm perspective. Gruman also concludes that the Android open source system development does not have an iron fist to make decision like it has in the Linux development environment with Linus Torvalds in the helm. Failed attempts such as Moblin, Maemo and MeeGo are examples of open source mobile platforms that never really got the traction that the platform needed.

What today’s acquisition confirmed to me was that the future of smartphones really does not have anything to do with just to operating system, but it is about software ecosystem and how software developers, handset manufacturers can manage the user experience. Nobody besides Apple is making really serious money on smartphones today as the entire market has matured and margins have come down.

IT IS ALL ABOUT ECOSYSTEMS AND FIGURING OUT WHERE EVERYBODY WILL PROVIDE VALUE.

 

Cloud ISV: Do not focus on building infrastructure, but focus on building value add for the end user

Software developers love to challenge themselves with things that make them feel good and the trickier the problem, the merrier it is to find the solution. In some cases, this could obviously be the killer innovation that nobody else has ever done, but if it is something that already exists and can be purchased from a third-party organization, it is waste of time and money to rebuild something that is already available. Do you remember the saying “ it can’t be good as it was not invented by us?”. I do remember vividly and have been the witness multiple time during my career.

Ten years ago software developers had to work on basic infrastructure before getting the solution built, but today, the focus should be mostly on innovating and assembling solutions that bring something new to the marketplace. I still see SaaS ISVs to claim that they need to build a billing solution as part of the solution, but there is plenty of other solutions already on the marketplace that do that well an can be integrated to the overall solution scenario.

I happened to view Microsoft Windows Azure homepage today to see if there was something new and was very happy to see the homepage to include the same statement that I am bringing here: “Focus on your application. Not the infrastructure”.  A good place to start looking at other SaaS components/solutions is to visit Windows Azure marketplace that includes listings of different solutions that the ISV can use as part of their solution delivery. If you are a system integrator, you should also spend time understanding what the software ecosystem has to offer so you can become a trusted advisor to your clients.

I do recognize that in some cases there is a need to build “glue” components that can be regarded as infrastructure components, but at the same time, the ISV needs to realize that those components will be replaced by commodity software whereby the original solution needs to be reengineered in some way or the other. In the past, as a leader of a software development team, we had to spend lots of time creating infrastructure for our solution to even work. I used to be the lead for several business intelligence solutions and at that time, there just weren’t enough components or infrastructure that would take care of the basic functionality. I still remember vividly our fight in going from 16-bit Windows to 32-bit technology and we had to support APPC communication between the mini computer and the Windows desktops.  The bad news was that IBM decided to redo most of the router software with a pace that we as an ISV had really hard time to follow and we run into pressure from our clients to upgrade our 16-bit technology.  You typically do not want to be the first one on the planet to test new technology, but in this case we did not have a choice. We spent multiple months “running against the time” when trying to get our solution to work with the latest Windows router technology and it was not fun and it was very expensive.

I mentioned that SaaS ISVs should look at other SaaS solution to bring functionality as billing and organizations such as Zuora, Inc is an example of an organization that brings subscription billing and commerce platform that can be used by other SaaS vendors.

My message to cloud ISVs is simple: learn your cloud ecosystem, learn what there is that you can consume as part of your solution and focus on innovation on the solution and not on the infrastructure.