Morettini on Management

General Management and Marketing Advice for Software and Tech Companies

Year: 2009

Is The Tech Recovery Upon Us?

Let’s face it, things still aren’t great economically: unemployment is over 10% nationally in the US, credit is tight for small businesses as well as reduced access to investment capital, and consumer’s moods, while improving are still not positive.

However, while I don’t want to overstate the case, but I do believe we are on the way to recovery. This has strategic implications for software and tech companies.

A look at the positives:

Stock markets on the rise–The Dow Jones Industrial average is up nearly 65% in the last nine months. Tech stocks in particular have been strong: the benchmark NYSE Arca Computer Technology Index is up nearly 95% in the same period. This is from a very deep bottom, of course. But it adds considerable wealth increases optimism, which usually leads to positive momentum.

Search firms are adding their own staff– ExecuNet’s benchmark Search Firm Hiring Index has increased the last two quarters, after many quarters of decrease. This is a nice indicator of expected increased hiring by businesses overall.

Worldwide employment on the rise — Manpower, Inc.’s Global Employment Outlook Survey for Q1 2010 states that the employment outlook is mostly positive in the Americas and Asia-Pacific, while still somewhat mixed in EMEA. Labor market strength in Asia-Pacific, which is becoming increasingly important as a consumer market, is expected to return to levels similar to before the global downturn.

VCs still have lots of money to invest — After sitting on the sidelines in fear (like everyone else with money in their pockets) during this great recession, Venture Capitalists are starting to poke their heads out among the economic green shoots. They were sitting on huge amounts of capital that was raised in the pre-recession bubble environment, much of which is still not invested-but still accruing management fees. I have heard that there are now many limited partners filing lawsuits as a result of their funds lying fallow, which may stimulate an acceleration of VC investments in the coming year.

IT spending is forecast to rise — After several down years and a very bad 2009, Garner is projecting an increase in excess of a 3% in IT spending worldwide in 2010. This is very important, and a bullish signal for the tech sector heading into the New Year.

The IPO market window appears to be opening — Security software company Fortinet had a very successful offering in November. Meru Networks, a supplier of wireless LAN solutions, announced today it planned to raise $86M in an initial public offering. IPOs tend to drive increased capital access up and down the food chain, and that window has been closed for some time. If it opens significantly, that bodes well for growth in the software and tech sector.

No more bubbles – at least anytime soon

We’re not heading toward another bubble anytime soon. It appears we’re headed for moderate, but hopefully sustainable growth as a result of our two catastrophic burst bubble in the last decade. Government debt, commercial real estate and inflation potential are concerns in the long run, but appear to be manageable in the near term.

What should tech companies do?

First of all, don’t be stupid and increase spending if your situation doesn’t support it — credit is still very tight, and access to investment capital still remains below typical levels of the last decade. So make sure your plans are supported by cash flow, or in the case of early stage companies, at least access to reasonable levels of debt financing or investment capital.

If you are able to spend, it’s a great time to grow fast or take share from competitors — when the economy is just starting to take off and buying is accelerating, act before your cautious competitors have come out of their shells.

In general, companies tend to be too conservative in their investment and hiring plans — Take note that hiring tends to peak at the apex of an economic cycle, just before growth slows or turns negative. In fact, many experts consider strong hiring a leading indicator of an economy that’s lost its momentum. I’ve never been a fan of hiring just because you have the money and growth rate to support it. This is a leading cause of bloated cost structures and bureaucratic, slow moving organizations. But most companies are pretty lean in staff after several years of recession. So if you really do need people, it’s more productive to hire them now as we begin an up cycle, instead of waiting until the very end of it as so often happens.

That’s my forecast and advice for the software and technology business sector as we enter 2010. What’s your forecast? I’d love to hear it. Post a comment or shoot me an email to add your own spin to this discussion.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter. Contact Phil via email at info@pjmconsult.com.

No Comments by admin on December 21, 2009
filed in Corporate Strategy, General Management
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VAR vs. Retail Distribution in Software and Technology Markets

There is much talk in the software and technology industry about distribution through the “Channel”. Generically that means selling through some type of a third party company, rather than selling directly to the end customer. But in reality the “Channel” includes a wide variety of disparate types of third party resellers. Today we’ll take a look at when to consider partnering with two of the main channel reseller types, VARs and Retailer–which also happen to be two of the most different.

What’s the difference between a VAR and a Retailer?

Let’s start with the retailer, as that’s a bit more obvious. With respect to software and hardware products, we’re talking about computer, specialty electronics and mass market stores, independents as well as regional and national chains. Retail is both a B2C channel and a B2B channel, especially when talking about serving the small and medium size business (SBM) market. While retailers may offer some “value-added” services such as extended warranties, delivery, installation, etc., the main purpose of a retail store is quite simple. The retailer serves primarily as a point-of-sale location, holding inventory and enabling end customers to have immediate access to products at favorable prices.

VARs (Value-Added-Resellers) are in many respects the polar opposite to retailers. The VAR channel is strictly B2B, and sells to both large enterprises and the SMB market. Usually there isn’t a retail storefront–if there is, it’s not a big part of the business. Expensive retail space is avoided to minimize their real estate costs, because walk-in traffic isn’t part of the business model. Unlike retailers, VARs are focused on selling their services, such as installation, configuration, integration, customization, etc, rather than turning over large quantities of products. VARs aren’t interested in having a large “assortment” of products like retailers. This is a key point that channel newbie are prone to miss–at great cost to their company. While VARs do sell products, they are motivated to do so in only two instances:

1) Core products which are strategic because the VAR’s services are built around them
2) Easy to sell, demand-driven commodity products requested by their customer base

If you take just one thing away from this article, let it be this: VARs aren’t dying to sell most products. If your product doesn’t fit into one of the two categories above, you will be pushing on a rope trying to make progress in the VAR channel.

Is one of these channel types “better” than another?

One is not superior to the other. Each reseller type is better for different product types and circumstances. They both can be used quite profitably, but they serve different purposes. It’s important when designing a channel strategy to start with the end customer and work backwards. Where would the end customer like to buy? How important is price vs. services and support? What reseller type best meets the desires and needs of your target customer type(s)?

When you should use the VAR channel

While VARs aren’t product-oriented businesses, in aggregate they are still a very important channel for many product types. If you have a product which requires a high level of support, or “value-added” services such as expert installation, integration with other products, customization or 24/7 support, VARs can play a key role in your distribution strategy. If you have a popular commodity product, they can be useful (in aggregate) to greatly expand your distribution points. The VAR channel is highly segmented by vertical market, so if your product has a vertical orientation (networking, medical, insurance, etc.) this often creates an opportunity for VARs to be an important channel partner.

When you should use the Retail channel

Retailers are usually best for horizontal, commodity or mature products. They are effective at providing broad, immediate access to your products across a wide geographic area. Retailers typically are “inventory turn” oriented in their business models, and tend to work on thin margins. So if keeping your price point low is important while still using a third party channel, they are an excellent choice. Of course the fact that they provide instant access to your products during business hours can be a very important asset.

Can you use both VARs and Retailers for the same product?

Yes, but you must know what you are doing, or you may end up very sorry that you did. Since VARs and retailers bring very different things to your distribution, there is a strong chance of serious channel conflict if you use both reseller types for the same product. The biggest potential issue is degradation of your product street price, because while VARs typically work off high product margins and low turnover, retailers are the opposite. Retailers optimize their businesses for high inventory turnover, while accepting low product margins. The low margin strategy causes the street price of your product to fall for all channels distributing your product. If the street prices drop too low, the margins may drop too far to be interesting to VARs (even though they are focused primarily on their service offerings). Companies new to multi-channel distribution sometime make this problem even more acute by offering price discounts based on volume, which makes the situation even worse. A volume-based pricing strategy favors the higher volume retail channel, and also incentivizes even deeper street price drops, to create higher volumes and resulting better wholesale prices. Multi-channel pricing is a complex area fraught with danger for the uninitiated–new players should solicit outside advice, and tread carefully.

VARs and retailers can be important, high volume distribution channels for many software and tech companies. They can each be primary distribution channels, or combined with direct a sales approach and other channels to form highly efficient multi-channel distribution networks. More distribution is not always better, however. Companies need to know what they are doing when proceeding with a multi-channel strategy, or risk doing great damage to their sales and marketing efforts.

That’s how I view using VARs and retail in your distribution strategy. How do you see it? Post a comment to get a discussion going. Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter.

No Comments by admin on November 8, 2009
filed in Business Development, Distribution Channels, Retail, VARs
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Will SaaS Lead to the Death of Software Product Management?

There is a lot of talk in the software business these days about changing business models, particularly the trend toward SaaS (Software as a Service).

Will SaaS business models dominate the software business?

Many consultants, pundits and other industry figures are proclaiming that SaaS will very soon take over the world; saying if you’re not on the bus soon, you’re going to be out of business. I believe this is a bit overstated, but the strong trend toward the SaaS business model can’t be denied.

My opinion on SaaS adoption: When bandwidth is unlimited and close to free, all IT systems are totally secure, the Internet is as reliable as old AT&T; and every customer in the world decides they want to rent everything and own nothing–then I’ll agree that SaaS is heading toward 100% market share. As I said above there’s a strong trend in this direction, but we’re a long way from there.

Is software product management dead?

I’ve written about SaaS a number of times before, and since it has become very important in the software business I’ll continue to do so frequently. What I want to address today is another opinion some “experts” are also espousing: that the trend toward SaaS means the end of the Product Management function in the software business.

I find this statement to be downright silly.

When following this debate, it’s important to take notice that many of the folks proselytizing these opinions have businesses whose success is based upon these predictions actually coming true. It’s always important to consider conflicts of interest among the debaters.

In one recent webinar they trotted out a SaaS software company that was growing briskly every year with no product managers in the company. What wasn’t said is that it was always possible to find software companies (of the traditional sort) who didn’t have a product management function. Software companies are often founded by programmers, and they haven’t always seen the need for Product Management. There are very successful companies where the developers talk directly to the customers, with no product managers at all. However, the facts are that a very small percentage of companies that do business this way are successful, and its usually based upon special circumstances: the rare developer who understands markets and customers as well as he does coding, markets where the developers themselves are perfect customer proxies, etc.

So while software companies without Product Managers have always been out there, it just hasn’t been a broad formula for success. Trotting out one SaaS company successfully doing business this way (incidentally, I saw some big holes in their model long-term) doesn’t impress me much.

I’m not defending the status quo–I’ll say it once again, there is a huge move to SaaS in the software biz. Many (and maybe most) will be doing business this way in the near future. However, like most over-hyped trends, this are some pretty big overstatements being thrown around.

SKILLED product management will always be important

The argument being made is that many of the functions Product Managers currently perform are obsolete under the SaaS model. With continuous development more practical using SaaS, there may be fewer (or no) new version introductions. So the old waterfall chart with MRDs being created for the new version may go away along with new product introductions. I’m sure you get the picture. SaaS is a pretty fundamental change to the software business model, so you wouldn’t expect a product manager’s job to be stagnant under such change.

But those predicting the death of product management are focusing on the more mundane aspects of Product Management. The essence of this critical function is the ability to understand markets and match widespread, aggregate customer needs to the technical skills and IP of your company–creating a PRODUCT which can be sold to these many people. It doesn’t matter whether you deliver this PRODUCT over the Internet in a hosted manner using monthly subscriptions, or in the more traditional on-customer premises, licensed model. Product Management is about creating a profitable PRODUCT well-matched for a market segment. It matters not whether you are engaged in customer facing marketing/promotional activities, or upfront product planning–the product manager’s understanding of market needs and how your company can fulfill those needs is crucial in a product business. Otherwise, you’re just selling custom software–one-off’s for every customer. That’s a different business–not a bad one–and one you which doesn’t require product managers.

Can Social Media replace Product Management?

Another thing being bandied about by my favorite pundits is the impact of communities and other social media for its potential impact on product development. The thinking goes that there will be much more direct interaction with the end customer, leading to tremendous amounts of data available to ISVs. While SaaS is very well suited to communities (although not exclusive–they can be well utilized by traditional licensed software vendors), the ability to more easily obtain direct customer comments, and maybe take votes on potential new features doesn’t eliminate the need for product management. To the contrary. While communities and other forms of social media are very powerful tools, don’t mistake more data and customer access with actionable market intelligence. Data needs to be interpreted, and skilled marketers are best positioned to discern who’s telling you what and why–the underlying motivations behind any customer feedback. So all of this added customer access and resulting data will only put a premium on good product management, to use these powerful new tools and data for quicker action and to allow better product planning decisions. Remember, SaaS competitor down the road will have access to the same tools and data that you do.

It is rare to find a developer who has truly exceptional product management skills. That’s not a knock on developers; as a whole they are an extremely sharp bunch. But specialization in life happens for a reason–very seldom is someone the best at everything. Developers are trained to write code and build applications, not understand markets or extract the “truth” from customers. Different types of people’s brain’s work differently, and a good developer and good product manager are an example of this.

I find that it’s when a talented, open-minded development manager teams with a market-savvy product manager, that most great software applications are made. So no, I don’t believe that the Product Management function is going away anytime soon in the software business. There are many important changes going on in the business, the SaaS business model not the least of these. With any change in business model, functional roles will evolve and change. But I believe strongly that Product Management is a fundamental, important role that will remain critical in software businesses far into the future.

That’s what I think about SaaS and product management–what do you think? Post a comment to start the discussion! Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter.

3 Comments by admin on October 12, 2009
filed in Corporate Strategy, Product Marketing/Management, SaaS, Social media, Software/Product Development
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Startup Mistakes by Software and Tech Companies

Starting a company, any kind of company is the hardest thing to do in business. Sez me.

It’s also one of the most rewarding and fun, if you’re built for the startup experience–though not everyone is. Technology startups have their own unique challenges. There are many different ways to drive off the road, some of which I list below. Keep in mind that no startup is perfect, and mistakes will be made. The future can not be forecast, and in a software or tech startup you’re often flying nearly blind without a map, because you are trying to do something new and different.

In the end, if you are able to make it through, overcoming your mistakes may be the most satisfying part of the whole startup experience. So keep in mind that it’s almost impossible to play a perfect game. On the other hand, it’s crucial to steer clear of the mistakes which are often avoidable–because you only get some many chances to recover from errors.

Here are some of the common, often avoidable missteps to be aware of:

Too little capital
Sometimes this is unavoidable–but if you really don’t have enough capital maybe you shouldn’t start up in the first place. Activities such as software product development are notorious for going way past schedule and over budget. Most products don’t move like a knife through butter with the first modest promotional campaign. So build a decent amount of backup money into your plan, because things rarely go as planned. If they do, great, you can use the money to accelerate growth. But when things don’t go well, you’ll at least give yourself a fighting chance, if you’ve set aside a bit of money for a rainy day.

Don’t try to be a “Big Company” right off the bat
Many startup management teams are jealous of the resources available to their established competitors. These folks can become “Big Company Wannabes”, a classic formula for going out of business early. Don’t spend your precious time and resources on activities that don’t efficiently bring the product out, or market it. Period. Lavish trade show booths, company parties, expensive or large offices, administrative assistants for all the execs, etc., etc. Don’t hire a lot of big company people who don’t have early stage experience–they are prone to the types of costly waste listed above.

No backup plan
It is a startup and you have to expect little margin for error in reaching success. But that’s no excuse for a lack of strategic planning–within the constraints of your resources. A backup plan might be something simple: software companies going to open source if your high-priced commercial strategy meets resistance, a service-oriented revenue strategy with a cheap or free product, using a channel rather than building a full sales force, licensing your technology instead of marketing a full product to end users. It depends on your circumstances, but do try to have some type of a contingency plan going in.

The “Techies know everything” syndrome
This is a common malady in tech startups, because many new software and tech companies are led by management heavy in experience from the engineering or software development side of the business. Usually these folks are very smart, but in some cases also a bit full of themselves, unable to know their own blind spots. Those blind spots often appear in marketing and sales (which every engineer and software developer knows are easy, non-complex activities). The really smart guys quickly figure out those other parts of the business besides the tech stuff is hard as well, and make adjustments through education and bringing in outside expertise.

The “Technology is everything” syndrome
This is a corollary to the bullet point above. The technology and product is crucial in a tech startup, since it is usually the basis for your competitive advantage. But it’s not everything, and many a startup has failed despite great technology and an exciting new product.

No marketing budget or in-house expertise
Believe it or not, I see a lot of companies with little or no promotional budget. Its insanity, but they only have enough money to get the product built, apparently thinking “if you build it they will come”. This is nearly always a failure mode. If there is someone with marketing expertise among the founders, they usually won’t allow this to happen. So secure a marketer on your founding management team, or at least find a close advisor you will listen to, early on.

Under-estimating time to market
This is a very common mistake. By definition, you are trying to do something new, which isn’t forecast-able. So don’t believe your own pretty Gantt charts–garbage-in equals garbage-out when it comes to schedules. Don’t count on making it to the big trade show, commit to costly promotional activities with no recourse, or let the developers all plan to leave for that well-deserved month in Hawaii. Get the product done first. I tell you this with many painful experiences as a teacher, both personally in software and tech companies and through my clients.

Under-estimating time-to-success
Even if you are able to get the product out on time, that doesn’t mean version one will hit the ground running. They often crawl, stumble and fall at first. After all, this is your first opportunity at really accurate market research. Even if the product is right on target, finding the marketing mix that works is generally trial and error. Many products don’t find success until their second version is released, so have some money in the bank, and some emotional bandwidth available for this possibility.

Introducing a “buggy” product
This is one of my biggest pet peeves, especially for software products. Most products aren’t fully stable when the developers think it is ready. They work on it so long and hard, that human nature wants it to be finished near the end–and dangerous shortcuts can be the result. Dedicate as many resources as you can spell to ensure a credible, third party view that the product is as stable as it can be, before the market gets the opportunity to “debug it” for you. You only get one chance to make a first impression. If the situation is bad enough, it can cost you your business.

There are my thoughts on what critical mistakes to avoid in a technology startup. I’m sure many of you have your own lessons and ideas to share. Post a comment to start the discussion! Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter.

13 Comments by admin on September 14, 2009
filed in Corporate Strategy, General Management, Software/Product Development, Startup/Early Stage
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Compensating the High Tech Sales Force

A very controversial topic within many software and other tech companies is how to best compensate the sales force. How much is required? How much is too much? What’s the best mix of salary and incentive comp?

If you’ve read anything I’ve written before, you’ll find my next comment familiar:

It all depends on your particular situation.

There is no across-the-board best practice for optimizing your sales force’s performance via compensation strategy. Every company, market and competitive landscape is different at any given point in time.

Let’s take a look at some of the more common variables and how they might affect your compensation strategy:

Established brand vs. startup
If you’re a startup, plan on paying your sales reps more. It will be harder to attract great reps as a startup, unless you are in a special situation with an incredibly hot new product (of course, every startup CEO thinks this way about their product!). You may need to pay reps a higher base, and certainly richer commissions than your established competitors. Some of this can be mitigated if you are offering an equity opportunity, as discussed later. But for sure, prospective reps need to believe that there is a good chance they can make more money at your startup, or you won’t be able to compete with established companies for the same level of folks. That’s just a fact of life.

Price Point
If your price points are higher, you may need to pay a higher base salary, if the total number of sales made will be low. Lower price points lend themselves to higher commissions and lower bases, because the rep will be able to start making money sooner, and more regularly.

Length of sales cycle
The sales cycle aspect is pretty straightforward, and tied closely to the price point discussion above. Price points and sales cycles almost always have a direct relationship. High price points lead to longer sales cycles, and low price points to shorter cycles. It’s harder to compensate heavily on commission if there is a long sales cycle, because sales reps need to eat regularly, too. If you have a product that takes a long time to sell, make sure that you have a decent base salary for your reps, if you want to keep the good ones.

Growth vs. harvest
Companies generally highly value reps that can sell new products and into new accounts–they want to pay for growth. So the more you are asking your reps to do what is considered to be the hardest thing in sales — sell “new”– the higher the commission structure should be. Selling “new” is the highest form of risk in sales, and it should be compensated by the highest reward. Selling established products and selling into established accounts (harvesting) is not as risky, and as a result can often carry lower commission structures.

Initial sale vs. ongoing revenue
Similar to the growth vs. harvest discussion, sometime you are selling a product that has upfront revenue as well as ongoing revenue, typically from updates, replacements or services. You generally want to pay higher commissions for the upfront portion than you do the ongoing revenue. A good example of this is a traditional software license with an annual maintenance fee. If you pay commissions on the maintenance portion at all, in most circumstances the payout should be lower than the incentive on the upfront license fee.

Commodity vs. missionary sales
Commodity sales lend themselves to high commissions and low (sometimes even zero) base salaries. This is because sales cycles are usually short for commodities, and since they are by definition in big markets it’s easier to make a base level of sales and resulting commissions, even for a new rep. By the very nature of commodities the rep’s service is often a major differentiating success factor, so a comp mix toward commissions rewards the exceptional rep to really work hard. Missionary sales, on the other hand, require a great deal of patience by the rep, as well as a lot of hand-holding and relationship building. To keep good sales reps in such a situation, it’s important to have base salaries which are adequate to enable the best sales reps to exhibit patience with the long sales process. Missionary sales are an area that really demands both high bases and strong commission structures, as they are one of the most demanding forms of selling.

Hunters vs. Farmers
Hunters obtain new accounts while Farmers maintain and maximize the sales into existing accounts. These two situations require two different sales personalities, and the compensation packages should be different as well. The hard-charging hunter will require a decent base salary, but really needs the high commission structure to keep him motivated. The Farmer is likely to be a more stability-oriented, relationship-building style of rep. A relatively higher base and lower commission structure is usually more comfortable for reps in situation.

Equity
In most cases, the playing field is slanted toward established companies when it comes to compensating and attracting sales reps. Equity participation can be the great equalizer for startups in compensation. Every company has a different view of how broadly to offer equity. But a startup that offers equity participation to its sales force can often give up less in cash compensation. For risk-taking reps, equity can even be the deciding factor in recruiting, in some cases. The lure of equity that might grow into a significant stake at a successful startup can help pull a rep from a more established job.

So what specifically should you be paying your reps? Laying out actual numbers is beyond the scope of this discussion, because there are too many factors and potential situations to generalize. All the factors above come into play in structuring a sales compensation package, as well as factors such as inside vs. outside sales. Every situation is different, and competitive factors also come into play, if you’re competing directly with your rivals for reps. Local market circumstances, as well as the overall economy, can also play a strong role in setting the final package.

Above all, if you want to optimize the performance of your sales force using compensation as a tool, you must do your homework. Don’t just quickly come up with something that “sounds good” or is “how you’ve done if before”. Analyze the situation of your unique company at this particular point in time, and at certainly consider at a minimum the factors mentioned above.

That’s my thinking on how to compensate your sales force–what’s yours? Post a comment below or shoot me an email if there is a particular situation you’d like to discuss.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter.

2 Comments by admin on August 17, 2009
filed in Distribution Channels, Startup/Early Stage, sales
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All atwitter About Twitter Marketing

There’s been a lot said and written about the newest Social Media craze, Twitter.

Particularly in the popular press, there’s also been a lot of misinformation. Sometimes the only way to get the real story is to try it yourself. I thought I’d give it a shot, and throw in my two cents on what Twitter’s really all about with respect to marketing.

I’ve been on Twitter for a few months now. As of today, I’m following around 45 people, and have about 45 following me as well. I think that at this point I’ve got a pretty good idea of what Twitter is and isn’t. So here’s my take:

WHAT TWITTER IS

Most fundamentally, it’s a micro-blogging platform with a limitation of 140 characters per post. Most of you have almost certainly seen a blog online by now. Just like blog postings come in many shapes, sizes and topics, so do “tweets”–the term for an individual message or post on Twitter. “Following” someone on Twitter is akin to subscribing to updates on a blog.

The 140 character limitation is very extreme, and forces even the most verbose writers to be very brief. This can be a good thing. This 140 character limitation also allows Twitter to be available on even platforms with very limited resources, such as cell phones. This wide platform availability extends the potential uses for Twitter, greatly adding to its utility as a one-to-many instant-communication tool. Twitter is actually pretty simple.

WHAT TWITTER ISN’T

It’s not robust–it’s very limited by the 140 characters. So it isn’t suitable for everything–certainly not anything that requires a lot of detail. You really can’t publish anything of note directly on Twitter. It’s not good for:

* Complex or lengthy communications
* Private communications, while possible, are probably best handled via other methods.
* It doesn’t replace a Blog or website

Contrary to what you see in the popular mass media, it’s not some weird cult of people who are inexplicably exchanging tweets on what they’re having for breakfast. It’s also not strictly an avenue for following the day to day minutiae of People Magazine’s list of 100 top celebrities (Aston Kutcher’s 1 million twitter followers notwithstanding) The biggest thing to remember about Twitter is that it’s just a horizontal communications medium–which by itself isn’t much of anything. Twitter is really what people decide to make of it.

WHAT TWITTER IS GOOD FOR

The uses for Twitter are almost as broad as the profile of its millions of users. It’s hard to classify best uses because of this. But in simple terms, I find that the major uses of Twitter falls into a few categories–at least with respect to what interests a marketer:

Personal Communications with friends
In this respect, Twitter is like a simpler, quicker version of Facebook in how it’s being used. This is where you see people broadcasting where they’re having breakfast–those messages are really intended for their circle of close friends.

Personal Branding
An executive or professional using Twitter to increase awareness of his/her capabilities or work.

Business Branding
Similar to personal branding, but used by a business to provide exposure to the capabilities, products or services it offers.

Business Communications
This is the more tactical business use–restaurants broadcasting the specials of the day to their customer base, new product announcements, links to press releases, etc.

HOW BEST TO USE TWITTER

Have a strategy, and stay true to it
If you are using Twitter for business branding, don’t continuously talk about what you’re doing for fun that night. A more personal message occasionally which is of particular interest in fine, but remember your target audience. This is one of the biggest mistakes that a newbie Twitterer makes–they think being on Twitter means broadcasting their daily minutae. But for business conversations–who’s interested in that? It’s common sense. If you’re using Twitter for business/marketng purposes, stay on topic at least most of the time. If you want to use Twitter extensively for multiple purposes, it might be best to create multiple personas.

Use it to listen and learn–not just broadcast
If you pick the right people to follow, Twitter can be an extremely efficient source of information in your chosen topical interests. You have to be careful–you can easily become obsessed, and Twitter can become a real time sink. But if you’re judicious in your use, you can leverage the work of others to find things of interest to you. And by watching how other skilled Twitter users utilize the platform, you can learn how best to use the tool yourself.

Use links
Even though the 140 character limit won’t allow complex messages, links are allowed, and are very powerful in Twitter. Often Tweets are “teasers” or introductions to the linked document. For example, I broadcast the availability of new articles on my Blog by posting a Twitter message

Use keywords
One of the most powerful aspects of Twitter is the ability to easily “re-tweet” a message, or pass it along to your own Twitter network of followers. This makes Twitter a very powerful viral platform in getting the word out on your chosen topic. If you include keywords in your tweet that are relevant to your target audience, the viral aspect can really enhance the breadth of delivery of your marketing message.

That’s a take on Twitter after a few months of use. I’m sure many of you have different experiences with this exciting new platform–post a comment and let’s get the discussion going!

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter.

2 Comments by admin on July 22, 2009
filed in Online Marketing, Promotion, Social media
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Business Intelligence Software 101

This month we have a guest Blogger: The Actuate Corporation Team. Acutuate is an Open Source Business Intelligence Software vendor. Hope you enjoy their post-Phil Morettini

Thanks to the global recession, companies worldwide are looking for ways to streamline their organizations and cut costs. Increasingly, they’re turning to business intelligence software to help find solutions. Developed by vendors like SAP, IBM, and Oracle, this highly customizable software enables businesses to analyze and mine data more effectively.

BI software is particularly useful for large-scale organizations with correspondingly large customer bases and data streams. With access to data analysis from across their organization, companies can respond to problems and implement change more rapidly. And in cases where a company needs to make layoffs, BI software can tap into data to track employee productivity.

In this way, business intelligence and reporting tools (BIRT) enable large organizations to be nimble. Fast food companies, for instance, can utilize BI software to see how sales, inventory and operations compare regionally and internationally. BI software can also track operational functionality, determining, say, the optimal staffing scenario for a financial services firm for any given economic conditions.

BI software can also be used to run detailed financial analyses on everything from revenues and expenses to cash flow, accounts receivable and profit statements. This analysis can be broken down further by business unit or region, and can point to trends across an organization. These reports can then, in turn, be implemented in planning, budgeting, monitoring and forecasting.

From a big-picture perspective, BI software can be used to inform strategic decisions. Some companies might analyze the most effective marketing techniques for a product launch in a particular region based on demographics and past performance data. Others might run the numbers on potential partnerships to forecast the likelihood of success.

In the case of direct mail marketers, BI software can be used to mine customer data to track new sales opportunities. Companies can pinpoint which potential buyers to target based on demographic information and prior purchase history, and likewise refine their messaging to reach those customers more effectively.

According to a recent article in BusinessWeek, companies from Carnival Cruises to Proctor & Gamble are utilizing BI software to beat the recession. P&G; recently turned to software to analyze how the rise in gas prices was impacting consumer-shopping behavior. Carnival, meanwhile, mined their database to determine which prior customers to target as potential repeat sailors.

Even the federal government is jumping on the BIRT (URL: http://www.actuate.com/why-actuate/birt-to-actuate/) bandwagon, with the Environmental Protection Agency offering business intelligence software to its offices on a fee-per-user basis. As EPA program manager Timothy Hinds told NextGov.com, “We provide…business intelligence tools [and] analytics tools on a software-as-a-service model, as if we were a contractor. [Users] don’t have to install anything.”

Because BI software is highly customized, it can be quite expensive. BusinessWeek reports that “companies can spend as little as thousands of dollars on BI software, or up to millions of dollars. A typical business intelligence deal in a large enterprise with a large vendor is somewhere from $150,000 to $300,000.”

BusinessWeek also points to a survey released by Gartner in January of more than 1,500 CIOs worldwide. That survey ranked BI software as the top technology spending priority for companies in 2009.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter.

1 Comment by admin on July 9, 2009
filed in enterprise software
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Will Microsoft’s BING Finally Bring Success in the Search Engine Market?

Microsoft’s new search service is called BING, and takes a contrarian approach to the simple Google Interface. The BING interface is kind of a cross between Google and the Yahoo Directory, with a bit of Expedia, MapQuest, Shopping.com, UTube and Flicker thrown in for good measure. Never accuse Microsoft of being modest in their ambitions–this site takes on directly just about every major category in the online world.

I’ve given BING a quick look. It’s polished and appears pretty comprehensive. The search results don’t seem to be that much different from previous Microsoft efforts, although the interface’s major categories may allow the finding of information more quickly than an elegantly simple one like Google’s–if you know upfront the category of information that you’re looking for.

HOW LIKELY IS SUCCESS?

Will they succeed? They have many times before in similar situations. They’ve been laughed at and written off in quite a number of markets over the years. MS has a bad corporate habit of releasing poor products in their first one, two, and even three incarnations. Any other company would give up after so many failures in a particular segment-but not Microsoft. Don’t forget that as a software company, Microsoft has always seemed to believe that it is their god-given right to sell every line of software code written in the world.

There are many examples of Microsoft rising from the dead in software market segments. In spreadsheets, Excel was at one point in time a speck on the wall compared to Lotus 123. WordPerfect had a commanding lead over MS Word in word processing back in the DOS days. And a large number of MS Network Operating System Server software offerings (beginning with LAN Manager) were considered a joke relative to Novell Netware, for the longest time back in the 90s.

In all of these situations, Microsoft had the last laugh, soundly beating their seemingly entrenched and unbeatable rivals in large market segments. As a result of this corporate history, they believe that can beat anyone and rarely give up. Occasionally, I have seen them back off, notably after several tries competing with Intuit in personal financial software. But if it’s considered a strategic, core segment by MS, they will throw a huge amount of resources at the segment, take large losses, and not give up until they’ve broken through.

I call them the Terminator of High Tech.

TERRIBLE TRACK RECORD IN ONLINE SERVICES

Of course, this isn’t a pure software market, its online services. The problem for Microsoft with Bing and the search engine market in general is that they’ve been floundering almost completely, for a long period of time, in online services. In fact, they’ve not had much success in their history online at all. This is especially noteworthy in contrast to their domination of the desktop software business, and the competitive advantage their desktop monopoly should provide them in online services. Yet they’ve done poorly in almost everything online, and are a distant third in search engine marketing–not even all that close to a fading Yahoo.

So as most pundits will confirm, Microsoft has been terrible in the online world. This does not bode well for the possible success of Bing. But as I alluded to earlier, there is another side to this equation.

MICROSOFT CONSIDERS ONLINE SERVICES IN GENERAL AND SEARCH ENGINE MARKETING SPECIFICALLY, TO BE ABSOLUTELY AT THE CORE OF THEIR FUTURE SUCCESS–AND EVEN THEIR SURVIVAL.

Yes, this hugely successful company has always been a bit paranoid–which may be a bit on the humorous side given their overall success. But it has worked well for them over the years. It has given the company a sense of urgency which is very hard to generate in corporations of their size and stature. So anyone with a sense of history would be foolish to rule them out.

HOW CAN MS OUTFLANK GOOGLE?

But how are they going to defeat their competitors, mostly notably Google, this time in the online world? In my quick evaluation, I didn’t see anything technically revolutionary, such as demonstrably more-relevant search results. Some people may prefer the Bing category-oriented interface better than Google’s, but it will be a matter of taste–I can’t see an overwhelming advantage here. In past cases MS may have overwhelmed a segment with marketing, or simply given away a product, to ensure defeat of a rival they feared could grow into a broad line Software competitor (Novell, Netscape, etc.). It’s unclear to me what strategy they will be able to take to defeat Google, which is a dominant, embedded brand with wild profitability in Search Engine Advertising. But I believe they fear the Google franchise and know they need to crack to code to online success if they are going to retain their position in the long run. So don’t expect any throwing in the towel any time soon.

Maybe Microsoft will hit upon some innovative strategy that will enable them to win the day in this crucial market. But the one thing I can think of right now, that may work in their favor, is deep pockets, longevity and sheer persistence. Google has also been unable to achieve success outside of their domination in their core Search Engine Marketing segment. This is very analogous to Microsoft’s struggles outside of desktop software. The Search Engine advertising segment will eventually mature, and there are already some early signs of slowing. Plus Google risks killing the goose that laid their golden egg by raising their “Auction” bid rates to levels that will make it hard for their customers to make money–don’t get me started on that. Advertisers may eventually take their advertising budgets elsewhere. So for MS in this crucial platform it may be a matter of hanging around, making incremental improvement to their Search Engine offerings, until Google shoots itself in the foot.

Doesn’t sound like much of a strategy, I know. But stranger things have happened. Let me know what you thing of Microsoft’s launch of Bing. Post a message or drop me an email.

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/

No Comments by admin on June 5, 2009
filed in Corporate Strategy, General Management, Online Marketing, Uncategorized
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Cloud Computing, SaaS and Such–Have We Read This Story Before?

I have this incredible feeling of déjà vu.

Cloud computing and Software as a Service is all the rage. In my practice at PJM Consulting, I am very involved in software startup activity. Nearly every new software company that I see today is being built on the Software as a Service business model. It’s all the rage–so much so that it appears that any self-respecting software entrepreneur would be embarrassed to start a company using the traditional software licensing model. Even if an entrepreneur was so inclined, good luck finding a VC who would even consider funding such a company. No one wants to look like a dinosaur.

It’s all well and good–there is definitely a real trend toward SaaS and Cloud Computing, with many good reasons for it. But most high technology trends are initially a bit over-hyped, and tend to get ahead of themselves. In addition, this particular story seems ever so familiar to a tech veteran that’s been around for a few of these cycles.

The first bit of history this reminds me of is the old terminal/mainframe model from the early years of computing. There were some real advantages to this model, but also some big disadvantages as well–which opened the door for the golden age of PCs and networking.

The second era that the current SaaS wave reminds me of is “Web 1.0″, when Web-based hosted software (then called ASP rather than the modern SaaS terminology), was first going to take over the world. The current trend seems so very similar because it was around the Web 1.0 years of the late 90s/early 2000 when the traditional software license business model was first proclaimed dead. At that time nearly every new business plan was based upon an ASP model.

So some of this fast-moving Cloud Computing or SaaS trend is new–but much of it could be viewed as recycled from past trends. Let’s look at the Pros and Cons of this computing model:

ADVANTAGES

* Enables “Utility-Style” computing – variable expense instead of. capital investment
* Allows an end run around overwhelmed IT departments (like PC networking did)
* Supposedly “On-demand”–use only what you need, when you need it
* More efficient use of compute resources by time-slicing large farms of cost-efficient computing resources
* Web-based allows anywhere, anytime availability
* Off-site storage of data assists disaster recovery preparedness

DISADVANTAGES

* Immature and inherently more difficult Security
* More difficult integration with other applications
* Internet latency
* Internet reliability
* Data resides outside the company firewall
* Costs over time aren’t necessarily lower for customers
* Lower margins for software vendors–aren’t always accounted for in current pricing

SUMMARY

I believe that the trend toward computing in the cloud will continue, but there will be some stumbles and pullbacks along the way. Cloud Computing and SaaS has some inherent strengths–but also some under-publicized weaknesses. Many software vendors are overlooking the weaknesses at this time, as is typical of any new and hyped technology. Traditional licensed software hosted by the user still has its strengths and a definite place in the market. Like many mature technologies and business models, the death of traditional software licensing has been greatly exaggerated. Once the early hype passes, decisions on whether to computer within the firewall or in the cloud will once again be made on the individual merits, costs and user needs for a particular application within a particular company. That’s how I see it–post a comment with your opinion so we can look at all viewpoints.

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/

9 Comments by admin on May 4, 2009
filed in Corporate Strategy, General Management, Operations, SaaS, Software/Product Development, enterprise software
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Oracle is buying Sun?

Breaking News…. Oracle buys Sun!? What’s wrong with this picture?

What’s surprising is that a very large software company is buying a very large hardware company. You often see a hardware company buying a software company, but I can’t really think of a deal that’s gone the other way around. Certainly not at this level. My practice at PJM Consulting serves all kinds of technology companies–but a focus is on software. Although every situation is different, my typical advice is for software companies to stay away from hardware, if at all possible.

This news is very interesting on several levels:

Involvement of two high profile, strong personalities in the technology business
I’m talking about Larry Ellison and Scott McNealy. Of course, MCNealy no longer actively runs Sun, but he is still Chairman and a power to be dealt with. He was allegedly the force behind the killing of the potential deal with IBM. Apparently Larry and Scott are old buddies, so maybe there won’t be a problem. But these are two very strong-minded, controversial and sometimes outrageous leaders. Even though they are long time friends, they have never before played together so closely in the same sandbox. It wouldn’t be shocking to see a few disagreements, and some public drama as a result.

Combining the Largest Revenue Database Product with the Largest in Unit Market Share
This aspect of the deal will not get as much attention as some of the others. But Oracle is the 500 lb Gorilla at the top end of the market, and the open source MYSQL is the most popular database choice at the low end, particularly in website development. This aspect likely won’t demand anti-trust scrutiny because they don’t really compete directly. But potential marketplace competition from MYSQL going up market, and Oracle bringing out lower cost solutions, is eliminated by this deal.

Software Company buying a Hardware Company
As I stated above, this is highly unusual, especially for companies of this size. Most established software companies have very high margins, and wouldn’t want to “pollute” their earnings with the lower margin, often commoditized hardware revenue. I can’t think of another comparable deal, looking back even into the distant past. The business models are pretty different. In hardware companies manufacturing efficiency and inventory control are major factors in business success; in most software businesses these are inconsequential factors to success. Hardware businesses tend to be more capital-intensive, while software businesses are very R&D; intensive. I could go on, but suffice it to say that the management of these businesses includes different functional skill sets. Why is Ellison interested in Sun? Just for the Java and the Solaris OS software, or is he really going to continue with the hardware business as well? Even though in some ways, Sun was a bargain at the price of just under $6B net. But if he’s just interested in the software pieces of Sun, the price looks pretty steep–Sun’s direct revenue from Java and Solaris is a pretty minimal portion of its total revenue. Ellison had a flirtation with hardware years ago with the Network Computer concept–could he really still be itching to become a fully integrated systems company?

What will Oracle Do With Sun’s Software?
To me, this is by far the most intriguing question raised by the deal. Solaris is a nice OS, and has a good installed base. But it’s never really had the same impact in the market since open source Linux came around. Java is pervasive in the computing arena, and in embedded systems as well. It has a huge impact on the Internet. It’s literally everywhere. But after trying to charge big money for Java in the early days, Sun decided to give it away. I was intimately involved in the embedded Java market in those early days. Sun initially looked like they had created a technology that could allow them to challenge Microsoft for computing dominance. I believe Microsoft was very worried at the time. But to say that Sun fumbled the ball would be way too kind. Frankly, their effort to commercialize Java was like something out of the Keystone Cops. I could detail their myriad missteps. To summarize, the biggest problem was that they were a hardware company attempting to commercialize a software product, which usually doesn’t work very well. Sun appeared not to have a clue as to what they were doing. Finally, they quit trying to directly make money at Java; they put it into open source and basically decided to give away the technology to anyone who wanted to use it. It looked to me like a way to spite Microsoft, more than anything.

What Happens to Java?
So where does that leave Oracle once they close the deal and own Java? What is their plan to leverage Java in the marketplace? Will they start trying to charge for it somehow? I think this is doubtful; there’s probably no going back on that decision at this point. I’m sure that Mr. Ellison and his team have something in mind–but I can’t imagine what it is. They’ve been very savvy at making some acquisitions that haven’t looked all that complementary, that have worked out well. So I wouldn’t bet against them. But I can help wonder if they haven’t stretched a bit too far in their minds to find synergy in this one. It reminds me a bit of Ebay’s very expensive purchase of Skype, which is now being unraveled because it just didn’t create any synergy. We shall see what happens–it should be interesting to watch this unfold.

SUMMARY
The prospective Sun-Oracle deal is one of the more interesting we’ve seen for a while. There shouldn’t be any major anti-trust issues with this deal, and it doesn’t appear that a higher bidder is likely to emerge. Watching the organizational integration (and possible divestment), as well as the interaction of the outsized personalities, should be entertaining at the very least. But most of all look for what Ellison does with Java–that’s where the real intrigue lays. Post a comment to give me your view of this deal.

Phil Morettini
PJM Consulting
www.pjmconsult.com

1 Comment by admin on April 22, 2009
filed in Business Development, Corporate Strategy, Mergers & Acquisitions, Software/Product Development, hardware
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