Rob Enderle

Google and How Bad Hiring Practices Can Kill a Company

webadmin@itbusinessedge.com — Thu, 19 Nov 2009 17:49:56 GMT

One of the annoying things I get to do is watch successful companies that should know better design in failure. I could argue that many of the problems Microsoft has faced this decade go back to bad hiring and internal job placement decisions it made last decade. I’m picking on Google today because I ran into an article written by a recent Google applicant who walks the reader through an interview process that appears to be designed to exclude the most qualified applicants for a marketing job. This likely explains why the company has lots of offerings but seem unable to sell most of them very effectively.

The recent Android campaign, which was surprisingly good, was driven by Verizon, not Google. Sometimes I find Google's mistakes funny, but there is nothing funny about mistreating applicants or employees. Unfortunately, Google is hardly alone and since I spent much of my life trying to prevent or fix this kind of problem, I think it is well past time to get on a soapbox.

Interviews: Flawed by Design

Interviewing is a skill that requires training and lots of practice. Even with that training and adequate practice, though, interviewing is highly subjective and really only tests how well an applicant does under certain artificial circumstances. Against a background check and with an applicant untrained in interviewing, it can determine honesty, ability to respond under pressure and some social skills. Interviews can also help determine if people will get along well with their working team, but team members who are themselves concerned about turf or job security, or who are intimidated about a competent applicant, may blackball that applicant for the wrong reasons.

There are a lot of reasons why interviews are generally unreliable. You can find other examples of bad Google interview processes showcasing some of what I'm talking about, some showcasing a level of stupidity even I've never seen. It is hard for me not to get angry because I see this as avoidable abuse. Against an applicant trained in interviewing, the process is virtually worthless. I’ve regularly watched people hired into senior positions on false credentials based largely on aced interviews. Ninety percent of the hiring process should be based on a validated skill match and deep background check.

One funny story was about a CEO and his newly hired Harvard MBA VP of Sales going to Australia and having drinks with the VP's buddies. One, who didn’t realize who the CEO was, spouted off, “Man, this guy’s boss must be an idiot -- not only doesn’t my buddy have a Harvard MBA, he never finished college.” Strangely enough, in a VP of Sales, the skill needed to convince someone of this is likely more valuable than the MBA, anyway, but he was fired regardless.

Interviews can also create lifelong animosity between the applicant and the company. Assuming that the competence of the applicant was initially assessed correctly, this is incredibly stupid and unnecessary. I was once interviewed for a position in a tech company using a stress interviewing technique that most would feel was abusive if the job didn’t require that level of stress. This one didn't. After watching another candidate leave the room in tears and finding out the interviewer had a history of abusing employees, I exited the review process and filed a formal complaint against the interviewer, who subsequently lost their job. I clearly did not think well of the company and eventually reached a position where I could have done the firm substantial harm.

One of the reasons Gateway almost failed was because one employee who eventually ended up at Best Buy as a PC buyer was poorly treated and vengeful. Best Buy was one of the company's largest retailers. In the interview at Google I began with, the writer, who appears more than adequately competent for the job she was being interviewed for, was left with a deep dislike for Google for no purpose. The process cost the company a qualified applicant and may have created a lifetime enemy.

Speed Should Never Outrank Quality

When a company is hiring as fast as Google has been, there is a tendency to focus on a cookie-cutter process that is closer to triage than the custom process that it should be. This is far from uncommon; at Netscape this was even more blatant. There is a massive amount of cost that goes into training a new employee, and employees are the foundation of a firm’s revenue and profit. Often when I’ve gone back and looked at how successful firms went wrong, a major component of the problem has been hiring practices that put the wrong people in jobs. Netscape was a case in point because in forecasting when it would fail, which I did reasonably accurately, I based the work on a hiring practice that was increasingly bringing in poorly qualified people and placing them in critical jobs. I recall one hire in particular that the company was incredibly proud of, from Microsoft. Netscape didn't realize that he was in the process of being managed out of that company due to poor performance. Speed got ahead of quality. The end result was a large number of people that were in the wrong job or shouldn’t have even been hired in the first place. No wonder the firm had execution problems.

Process Must Match Job

The process must match the job. In the article I’m basing this piece on, the woman is being hired out of college for an entry marketing position. Yet many of the questions seemed to focus on her math competence, something that would showcase skills closer to an engineer than someone who is creative. Marketing, done right, is a creative position. The questions should have focused on her ability to intuitively come up with ideas that could sell products. This is an entry-level position so you’re not looking for expertise but potential. The one marketing question that was asked showcased that she actually did have excellent potential. However, that one answer was overshadowed by questions that appeared to have little to do with the job she was being interviewed for and resulted in Google losing someone that would likely be better than someone else who actually aced this interview. This is the result of not thinking through the process, a use of cookie-cutter questions, and largely incompetent interviewers.

Audit the Process

One interview does not, in and of itself, showcase that Google’s process is flawed. This could be an exception and it is viewed through the eyes of the applicant, typically not a very reliable source. However, you can see that the author made the initial cut and that her background and performance in the article are well within the skill set for an entry-level marketing position. In addition, you can see from Google’s lack of marketing and PR skills as a company that the firm itself is not getting the skilled people it needs to do an adequate job.

This suggests at the very least that Google’s hiring process isn’t being audited to make sure it is working optimally. Any process like this should be professionally audited on a regular basis to make sure it is performing as well as it should. The way to do this is by sampling both accepted and rejected candidates by HR management to see if the decisions were being made correctly most of the time and to communicate back mistakes so that the process would improve over time.

I’m picking on Google, but most companies don’t audit their hiring process and don’t train most of the folks in interviewing who do key interviews. Because most firms also aren’t growing at a high rate, they generally can survive this and let internal employee programs pick up the slack but in fast-growth companies this can do massive damage. In any case, the saying we used for computers, “garbage in, garbage out,” would seem to work here. Putting quality into the interview process can pay huge dividends.

Building a Path to Failure

To me, there is no excuse for sloppy hiring, firing, or an inappropriate layoff process. I’ve actually watched one executive argue that he would be vastly more successful without a sales force. Fortunately, he was immediately fired, but it amazes me how many brain-dead employee decisions seem to be happening this year. A company’s success is founded on the quality of its employees. If you don’t assure and protect that quality, it doesn’t matter how successful you were, your best years will always be behind you. Google, following what appears to be a common practice of ignoring the importance of good hiring practices, is painstakingly building a path to failure. The cancer this hiring process is creating is already showcased in its poor PR and marketing skill set and is likely mirrored in other functional company areas. It may take years, as it did with Microsoft, for practices like this to severely affect performance but, once it does, Netscape is the perfect example of what the worst-case scenario will be.

Wrapping Up: By Assuring Your Employees, You Assure Your Future

When you become dominant in a market like Microsoft and Google, your real threats often are not competitors but mistakes you make. The better matched your people are to their jobs, the less of those there are. The financial industry didn’t slide because the housing market collapsed; the housing market collapsed because someone put idiots into senior executive jobs. Assuring the quality of your employees should be job one if you want to be successful. I’m amazed at how seldom this gets adequate focus. Assuring you find, hire, and can retain and protect the best people is a great foundation for sustaining a great company regardless of size. Take a moment. When was the last time someone audited your hiring process? Don’t you think it is well past time?

Gift Ideas: Two Books Every Executive Should Read Plus One for Marketers

webadmin@itbusinessedge.com — Mon, 16 Nov 2009 20:38:44 GMT

We are starting the final countdown toward Black Friday, the huge shopping day after Thanksgiving here in the States, and I thought I would do a series on gift ideas for different groups of people. After reading how Bill Gates praised Steve Jobs today, three important books written by tech insiders came to mind as natural gifts for that aspiring or actual CEO in your life. You could send it anonymously through interoffice mail, and given how sensitive some of these folks are, that might be one of the safer paths.

The first two books deal with a common weakness in most executives, particularly CEOs, and that is that presentation is often more important than content. Given this is something that Jobs, Fortune magazine's "CEO of the Decade," excels in, it shouldn’t be a surprise that the books have Apple content. The last book is focused on marketing train wrecks and showcases the messes that can result when executives make really stupid decisions.

'The Presentation Secrets of Steve Jobs'

I'm often taken by how poorly executives do on stage. Most tend to read from their slides and many don’t seem to have much to do with creating them in the first place. They have no sense for what is important and the organization of the material seems more suited to dealing with a sleep disorder than to delivering a message, motivating an audience or selling a product.

"The Presentation Secrets of Steve Jobs" by executive coach Carmine Gallo talks about how the CEO of the Decade (he got this award after the book was published) was able to create iconic products like the iPhone and iPod. Both products entered competitive markets and created massive revenues and profits for Apple, but they wouldn’t have been successful had Jobs not presented them the way he did.

The key lessons from each section of the book are highlighted and summarized at the end so you can use it as a refresher. While this won’t make anyone into Steve Jobs, it does help prioritize things, and it points out that taking the time to do a presentation right can pay huge dividends.

Simply put, Jobs tells stories around benefits that make you want to buy products -- and increased sales go to the core of successful companies. This book should be in every executive’s library.

It’s less than $13 on Amazon and if you have a Kindle, you can read it yourself for $10.

'True Enough: Learning to Live in a Post-Fact Society'

While you can certainly say Jobs understands that facts don't matter as much as presentation, it was actually the AP story suggesting Sarah Palin’s book “Going Rogue” was largely fiction (and Palin’s response) that reminded me of this book.

Using political references from history, author Farhad Manjoo in "True Enough: Learning to Live in a Post-Fact Society," showcases how little we depend on facts to make critical decisions and how easily we are misled. This book not only teaches how to avoid being misled, it points to the importance of the message and how the message can generally be more powerful than the product.

Granted, I'm recommending this book in the hope that the recipient executive will focus on not being misled, more than how to mislead others. Both lessons are detailed in its pages and, fortunately, the second lesson is much more subtle.

In the end, our jobs and companies depend on whether we and those we work for make well-thought-out decisions, and this book helps significantly with that process. It is also a handy book to give to that know-it-all in the office who constantly blathers about politics and things that come from biased Web sites. I doubt that person will read it, but you can then say, “Well, had you read the book I gave you, you would understand why you are both wrong and stupid.” This book is around $17 and is not available on Kindle.

'In Search of Stupidity: 20 Years of High-Tech Marketing Disasters'

"In Search of Stupidity" by Merrill R. Chapman is more for the marketing executive, but it is full of examples that can be used in meetings when some MBA starts spouting off about his or her great marketing idea.

Under the Zen of Marketing, the book attacks many of the common beliefs surrounding Microsoft, generally defending the company, then drops into a discussion on how Microsoft really messed up during the Justice Department trial. I think this trial and Bill Gates' own testimony (also highlighted in the book) eventually put Gates on a self-imposed path to retirement. He looked stupid even in his own eyes, and it was life-changing.

Many of the examples are relatively old, but can be applied to current thinking, which is common -- intentionally crippling products to protect markets, failing to own your brand or product identity, responding inappropriately to threats or simply not thinking.

One fascinating chapter, because I lived through it, was how IBM wiped out most of the existing enterprise software industry with OS/2 and lost its software market leadership at the same time. This happened because it fundamentally didn’t understand what was going on in the market and OS/2 was referred to as “IBM’s Idiot Piper.”

This book costs between $16 and $23; the Kindle version is $10.

Wrapping Up: Books as Gifts and Tools of Change

Books can make statements, so be careful giving them as gifts. Still, each of these books teaches a lesson that most need to learn. The common thread is that impressions are often more important than facts. We can use that lesson to our advantage or have it used against us. I’m a big fan of the former path, but I know a lot of career executives that seem to prefer the latter. Here is hoping there are fewer executives on that latter path in the future.

EMC's Secret Weapons Against HP and IBM

webadmin@itbusinessedge.com — Wed, 11 Nov 2009 20:21:35 GMT

I’m at the EMC analyst event this week and it is filled with the typical briefings on new products and services. Much of this I can’t talk about because of the required NDA but there is an overarching message I’ve picked up that isn’t protected. That is about how management is transitioning the company to dominate a technology market that is economically constrained. I’m seeing three areas of unique concentration: Employee Engagement and Trust, Customer Loyalty, and a focus on lean, smart, savings. Let’s take each in turn.

Employee Engagement and Trust

For most of the large companies, both in and out of tech, layoffs have been one of the most common tools of dealing with the downturn. These are often massive layoffs (and I'm not a fan), and these firms have treated employees like easily replaceable parts and sacrificed long-term loyalty for short-term economic benefits. EMC has had some staffing adjustments but has avoided the massive multiple layoffs that many of its peers have executed. In addition, it continues to drive internal education programs that allow employees to get advanced education at the plant, involve the employees in programs where the employees themselves drive cost reductions and quality improvements, and aggressively recognize employees to step outside their jobs and do things that improve the company’s bottom line.

This contract with the employees is somewhat unique in the segment. EMC enjoys one of the highest levels of employee retention, stability, and evident high morale in the segment as a result. Recently, it recruited Pat Gelsinger from Intel; Pat was one of the most respected managers in that company and was thought to be the heart of that firm. His choice showcases EMC's focus on the value of a manager who works with his people and doesn’t dominate them. In short, EMC’s first advantage is being a Great Place to Work.

Customer Loyalty

EMC has instituted the most comprehensive customer loyalty monitoring and feedback programs of any company I’ve ever worked for or follow. As a result, it can see its own products, services and solutions as well as those of competitors through the customers’ eyes. This customer view goes beyond just the things it does; it drifts into the environments that customers live in. For instance, it is one of the few companies that has picked up that decisions have been steadily shifting away from IT through Finance and are starting to reside with line managers. This allows EMC to transition sales programs, offerings, and solutions to better appeal to these new influencers and not only increase customer loyalty but go around entrenched competitors to find more successful ways to displace them.

One interesting fact that has come out of the related research is that every point in customer loyalty it gains equals two points in market share. This is because these customers supplement the sales force and become advocates. As loyalty increases, the accounts are more willing to believe EMC and more quickly buy into new technologies. This reminds me of the very successful IBM model in the 60s and 70s, where a tight focus on building deep relationships led to a much tighter coupling between IBM’s new offerings and business adoption.

Lean and Smart Savings

Like most companies in the enterprise storage space, EMC operates on five nines in terms of product quality. Unlike most companies, its quality efforts are largely employee driven. It lives in the same economic environment, however, and that means it has to cut costs while ensuring it doesn’t adversely impact quality. As a result, unlike most firms, who use a top-down approach to cost cutting and process management, EMC largely uses a bottom-up approach. While it too is aggressive with automation, it will often create a manual process first before building an automated tool to replace it. This allows EMC to explore both the problems and advantages of a new process before it is implemented, avoiding many of the problems and costs other methods enjoy.

In addition, this allowed the company to discover and implement a method of sharing expensive tools that likely wouldn’t had worked if it had been dictated, because employees tend to be territorial. By coming to the conclusion cooperatively, they were more likely to successfully accept it. However, unlike most employee-driven methods, EMC’s is based on the concept of constant improvement, where perfection is not required before a change is made. This prevents employees who are resistant to change from constantly pointing out imperfections to stop the process because the solution isn’t perfect. As long as it is significantly better, the changes are implemented and additional ideas are factored into the next change cycle. It was quite fascinating to walk EMC’s manufacturing lines and see best practices from a number of industries implemented in what appears to be a very lean, in terms of cost, but rich, in terms of quality process, set of practices. It was almost like a living textbook of historic best practices. It was fascinating to experience in person.

Wrapping Up: The Advantage of Focus

So many companies try to be one-stop-shops, which has advantages in terms of being able to be a single throat to choke for customers, revenue diversity, and account control for the firm. However, this approach has disadvantages in terms of complexity, employee retention, customer satisfaction and market anticipation. While the tech market is led by generalists like HP and IBM, Apple just demonstrated that tight focus can even beat another, less focused, specialized competitor like Nokia and has consistently outperformed, in terms of profitability, the top tech market generalists.

EMC, Cisco and VMware are each specialists in their unique space and it interesting that the three firms have partnered to create the Virtual Computing Environment Coalition. If they can gain the advantages of the breadth of this offering without damaging the focus of the individual units, the result could be very powerful. In any case, I leave EMC impressed with its customer focus, employee loyalty, and balanced focus on cost. I’m watching too many firms making bad choices by stripping off strategic assets to make quarterly numbers. I’m pleased to report EMC isn’t one of them.

Why Layoffs Should be Avoided

webadmin@itbusinessedge.com — Mon, 09 Nov 2009 21:20:43 GMT

If I told you that you could save a third of the gas you use by cutting of one-third of your engine, you’d look at me like I was nuts. But if I said you could save a third of your employee costs by laying off a third of the employees, well, that might sound smart. The difference is you can see the adverse impact of cutting up your engine; the adverse impact of a layoff is not only difficult to calculate, it largely takes years to fully manifest.

If someone had told Carly Fiorina that the reason she won’t win the U.S. Senate seat in Congress is because she did a lot of layoffs as CEO of Hewlett-Packard, I’ll bet she wouldn’t have done them. Layoffs are typically done for the wrong reasons and to please financial analysts who couldn’t spell "strategic" if their lives depended on it. Those analysts are focused on quarterly results and, unfortunately, they force that same focus on chief executives. All you have to do is look at Sun to see the truth of this.

Layoffs Are Like Bad Chemotherapy

Layoffs are the massive reduction of a work force in the face of a financial threat. The employees did not cause the threat, the layoffs are not designed to directly address the cause of the threat, and the impact of the layoffs is impossible to fully calculate. Like chemotherapy, layoffs do a substantial amount of damage in hopes that they will allow the company to survive. However, if the cause of the problem isn't addressed, they are used repetitively and often the patient, or in this case, company, doesn't survive.

Chemotherapy is supposed to concentrate on only the cancer cells. Layoffs aren’t done that way for two reasons: Bad employees aren’t the cause of the problem, and review programs typically don’t do a good job of identifying bad employees anyway.

If I were to tell you that you had cancer and weren’t producing enough red blood cells, would you take a knife and cut off large portions of your body so the blood cells you did produce were more adequate for what is left? Of course not because you would be destroying parts that are actually producing red blood cells and you’d die more quickly. Yet that is exactly how layoffs generally work.

Unless a company has lots of people getting paid to sit around and do nothing, each person laid off provides some function needed to maintain the income level of the company. It could be directly, as in a salesperson or manufacturing job or it could be indirectly, such as a marketing, service, middle-management or executive job, but that person generally is doing something of some value to the company.

Now have you ever seen someone actually try to calculate this before a layoff? Think for a minute: How are people typically selected? By review, against some metric they are ranked against other employees. The top-ranked stay; the bottom-ranked leave. What if you did that same assessment on your body: How much do you really need your nose, ears, four of your fingers, toes, and seriously, is sex that important?

Rankings are largely subjective and don’t take into account the health of the team. They also don’t take into account informal relationships between groups, executives, customers or the inherent value of the knowledge the employee has. And people certainly aren’t ranked according to their real value to the company. How would you even calculate that?

When “Dead Wood” Isn’t Dead

There is an old story about an efficiency expert that came in to look at one of the big steel companies. He saw a guy sitting at a desk doing nothing and smartly said to one of the richest men in the world that he could save money by firing that dead wood. The executive replied that the “dead wood” came up with an idea that saved the company a million dollars and was worth keeping on board just in case he came up with another one.

Bill Gates has said that one of the biggest mistakes that Microsoft made was giving options because key people took them and left. Why then would you ever institute a process that would get rid of people in bulk?

Both Gates and Steve Jobs don’t even have college degrees and likely would be laid off at their own companies if they didn’t run them because the lack of a college education typically would rank them lower than peers. Hell, Jobs got fired, right? How’d that work out? Layoffs are firings en masse.

Layoffs Are Too Easy

What makes layoffs attractive is that they are relatively easy. Unless you have a lot of employment contracts or a strong union, it is vastly easier to tell people to go home than to close plant sites, get rid of equipment or eliminate perks (particularly executive perks). And going to the heart of the problem, which is typically poor revenue performance, that is really difficult.

The other thing that makes layoffs easy is you don’t have to feel for the people. Getting rid of one person is tough, particularly if you know him or her, but with a layoff, you can numb yourself. It isn’t your fault as a manager; you are simply following orders and the top executive just sees numbers and will protect the people he or she knows and likes. It’s comparatively painless against actually doing the hard work of individual people management. But it's still hard not to look at a layoff as a betrayal.

Wrapping Up: Layoffs Are Slow Company Killers

I used to call them the last resort of incompetent executives, but that’s not really true is it? There is a reason to use layoffs effectively and that is by a new turnaround CEO in order to get the firm’s attention and to build a team that is loyal and a company that can be managed. Otherwise, it is simply an executive going for short-term benefits by making a decision that has severe and largely unknown costs. Perhaps the best argument against layoffs is they are a betrayal of the trust between employees and management. Trust is so hard to build and shouldn't be sacrificed so easily.

Layoffs give key resources to competitors, break relationships with customers, make the firm sicker and only adversely affect revenues (which is typically the problem the executive is trying to fix). They are speed over quality, they are surgery with a chain saw, and they are generally done because others do them and without enough questioning.

Granted top executives can spike their income by doing them. We just saw an entire industry (banking) make decisions designed to spike executive income and look how wonderfully that turned out. Oh, and by the way, if the problem is too many underperforming employees, might the problem be grading on the curve, poorly trained management or bad metrics? Don’t you think it might be better to find out before chopping off parts of the company en masse? Like chemotherapy, layoffs have a place. But they should be done only as an extreme measure to save a failing company and even then done right. They shouldn’t be done just to make the income statement look more attractive to financial analysts whose own industry has demonstrated such poor judgment of late.

It's something to think about.

EMC, Cisco, Dell, Oracle Shoot for Super-Company Status

webadmin@itbusinessedge.com — Wed, 04 Nov 2009 20:12:16 GMT

Some weeks are quiet and some not so much. EMC pulled together one of the most powerful partnerships this week, from an enterprise standpoint. Dell acquired Perot Systems and became a true enterprise player. And the Oracle-Sun deal began to look like a disaster. Individually, these are interesting moves. Collectively, they indicate a changing power structure in the enterprise space, and all of this will directly affect the move to cloud computing.

EMC/Cisco/VMware: Building a Virtual HP or IBM

This alliance, focused sharply on the opportunity represented by the emerging private cloud market, is positioned sharply against similar efforts by IBM and HP. Individually, these companies simply don’t have the scale they need to compete effectively against the highly integrated offerings from HP or IBM. Collectively, they represent the leading independent storage company, the leading networking company, and the founder of the technology most heavily used in cloud computing, the virtual machine.

This combination of products and services is competitive to the offerings that IBM and HP bring to the table. It likely will lead where networking and information management is critical, given that this is where the partners individually have market leading positions, and lag where server hardware breadth is critical, since HP and IBM have vastly stronger server blade offerings. On services, an integrated effort will be critical to making this all work and EMC, whose focus on customer satisfaction I've written about, is playing the role of general contractor. This is a solid effort to step up to this new opportunity but its success will depend on either getting a partner that is stronger on servers or Cisco rapidly ramping its own server efforts to be more competitive to IBM and HP. The latter, given IBM and HP’s scale, will be difficult. But given Cisco’s size and resources and the special nature of this market, it's not impossible. This does represent a major attempt to balance HP and IBM and create a third major competitor for the private cloud market.

Dell Goes Enterprise Class

Dell traditionally avoided services because services tend to collapse margins and slow growth. But, in a down market, services ensure customer loyalty and don’t decline very rapidly either, providing much more predictable quarterly numbers. Not having services has really locked Dell out of a lot of the potential business and while it has historically partnered, even with IBM Global Services, the result was that Dell really wasn’t considered a true enterprise player.

With Perot Systems, which just closed this week, it now has a comparatively small but nearly complete enterprise services offering and can realistically sit at the table with the major players. Dell may lack the breadth of products, both hardware and services, but what it does have sits in the middle of where most of the volume appears to be at the moment. This merger effectively now adds a fourth chair at the table for enterprise companies that can handle large-scale projects like private cloud efforts and once again changes the corporate dynamic.

Oracle Repeats Mistakes, Looking to Exit Sun Deal: Is Snorkel Dead?

Large companies, for whatever reason, seem to think that they don’t really have to listen to regulatory agencies, particularly if these agencies don’t exist in the U.S. We first saw Microsoft get into a pissing match with the EU and, after some legendary fines adjusted its behavior, Intel got similar treatment. Now Oracle seems to have lined up behind these two firms by not complying with the EU’s requests, which has put the Sun merger at risk. This seems particularly stupid for a company that has historically been anything but -- which makes me wonder whether this is intentional.

Sun has been bleeding value at a massive rate. IBM, and to a lesser extent, HP, has been mining Sun customer accounts very successfully. Oracle has indicated it is losing $100 million a month in value while approval for this deal has languished, suggesting it has dropped nearly $1 billion in value since it bid for the company -- and this may be conservative.

Walking away from the deal would have serious penalties associated with it but if an EU decision forced it to walk away, there likely is a provision that protects it in case a government blocks the deal that would come into play.

I've been wondering for some time if Snorkel (Sun and Oracle) is dead, but this may now be intentional. So I wonder if Oracle isn’t using the EU to help it exit the deal and all of the posturing showing support for it is in anticipation of any lawsuits that could result when it exits, to simply to make it look like it is trying its best. Stranger things have happened, but this merger is clearly at risk.

Wrapping Up

Changes at the top between players in what is becoming a suddenly dynamic enterprise market are hard to miss. EMC, Cisco, VMware, Dell and Oracle clearly want a seat at the super-company table. The path that each is taking is different and Oracle may be deciding that a seat just isn’t worth the cost at the moment. But the players at the top are certainly changing and that suddenly makes this large-scale, private cloud-focused market very interesting.

Ballmer and Microsoft: Credit Where Credit Is Due

webadmin@itbusinessedge.com — Tue, 03 Nov 2009 18:31:32 GMT

Recently Steve Ballmer has been under a microscope. Dan Lyons wrote a Newsweek piece called the “Lost Decade: Why Steve Ballmer is no Bill Gates” and he is right. Ballmer is no Bill Gates. But then I could as easily argue that Bill Gates is no Bill Gates either. Gates is managing his own charitable foundation; in effect he now works for himself and his foundation is no Microsoft. I’ve seen this multiple times, an iconic CEO leaves and everyone who follows is compared unfavorably to him. But times change, companies change, and the conditions that made the iconic CEO no longer exist, and even if the CEO comes back, he or she doesn't reach the same heights.

Often, the poor saps that come in to replace these iconic CEOs when they retire tend to be criticized for not being that iconic CEO and get blamed for all the problems the iconic CEO created. Can you imagine what a nightmare the poor person who comes in after Steve Jobs will face? Jobs is no Bill Gates either. Other than cloning the legend of Steve Jobs, likely nothing else will be good enough.

Assessing Steve Ballmer

Ballmer got the job as CEO largely because he was a fundamental part of Microsoft’s success, making Microsoft into an enterprise player. For much of the '90s people -- competitors and analysts -- pounded on the company and exclaimed it could never be an enterprise company. Certainly Netscape and even Apple never made it to those ranks, and the list of companies that have is short. Companies such as Acer and Apple don’t even try anymore, and Sony’s efforts have largely been pathetic. But Microsoft was successful and Ballmer was largely the reason by managing the sales staff and owning corporate customers.

When Gates stepped down, Microsoft was far from its peak. Lyons correctly points out that Microsoft’s growth over the past decade has been substantially less than it was the prior decade. But in the '90s, the x86 computer market was emerging; by this decade, it was mature and mature markets grow more slowly. Aerospace is far off from its earlier growth; white goods were hot in the '50s, automobiles in the '20s, and TVs in the '60s. Expecting a mature business in a mature market to do as well as it did in an emerging market is just silly. The question is how it is doing against competitors.

Microsoft Comparatively

Lyons compares Microsoft unfavorably to Amazon, Apple and Google. Amazon is an online retailer, Apple a hardware company and Google the leader in Web advertising driven by search. Microsoft is an operating system and tools company. Granted it needs to embrace the concept of cloud computing and evolve, but to try to go after Amazon, Apple and Google likely would be suicidal because it would take the company too far afield from its expertise and the basis of its success. Microsoft can’t be a better Amazon, a better Apple or a better Google. There is such a thing as fighting on too many fronts, and each of these companies is designed for different markets.

Jobs has done a great job at Apple, but he failed miserably with the Lisa personal computer and Apple has never been nor likely will ever be a major corporate technology supplier. Even on the desktop, Windows 7 after a couple of weeks is about to pass Apple in total market share. Did the iPod beat Zune, sure, but I’d argue Microsoft had no business doing that product. Its strengths lie elsewhere. Given that, who has done better against the iPod? Consumer tech companies like Sony, Creative Labs, Sharp, and Samsung sure didn’t. And Nokia, the largest cell phone company in the world, got stomped by both Apple and RIM smartphones. Of course, Nokia now wants a piece of Apple's pie.

Amazon is even farther from Microsoft's core business than Apple. Amazon’s primary cloud offering is S3, basically a simple storage backup service, and it is very good. Microsoft has Hotmail, MSN, Office Live, Windows Live, Instant Messenger, Hosted Exchange and Azure. I don’t even see how you can compare the companies. Amazon is a great retailer and that’s where its money comes from, not S3.

Google is clearly getting into Microsoft’s face; but stop a moment. Its Chrome browser lags Firefox (it just grew to a whopping 3.6 percent against Firefox's 24 percent) , its Chrome OS doesn’t even exist yet and Android is still largely more promise than reality (Apple kicks its butt, too). While Google is making some inroads with Apps, outside of search and advertising, it is still more promise than reality. We assume success, but how much ot it is outside its initial core market? Remember Netscape was supposed to be the next Microsoft and look how that turned out.

The one company I would compare Microsoft to is Oracle. Larry Ellison is one of the few founders who have come back and done well. But Ray Lane, the interim manager brought in to correct Ellison's previous screwups, fixed the company and put it on a successful path. In addition, Ellison created the office of the CEO and got some incredibly good people in to actually run the company. I’ll bet, as a result, Oracle does vastly better than Apple does when Ellison eventually does retire. (And I’ll bet the poor sap who replaces Ellison is found wanting for not being him.) Microsoft competes with Oracle just fine, and it is hard to argue one is any better than the other where the two firms cross, and this is clearly where Ballmer is strongest.

Wrapping Up: Giving Credit Where Credit is Due

I’m often stuck by how badly we measure CEOs. In my early years when I was at IBM, the company was regularly praised for its great management and financial performance even though its executives were selling off its future. It nearly collapsed two decades ago largely because the executive management did what financial analysts at the time wanted them to. They focused so much on quarterly results that they nearly destroyed the company. Louis Gerstner and Jerry York, who helped save Chrysler and who now sits on Apple’s board, saved it. (I think Jerry did more of the heavy lifting).

I think Microsoft also is too focused on expenses and not on providing adequate resources to critical projects, but let’s put this into context. We just saw the entire financial industry collapse because it was too willing to take risks and massively overspent. Of the two problems, I think you could agree, the former is preferred and a perfect balance is likely unachievable. I think Ballmer's problem is trying too hard to please too many people and making the job harder than it needs to be, but that is for another time.

So I get Lyons' point. Microsoft could be doing better, and I think Ballmer himself might even agree -- there is always room for improvement. But could anyone do a better job? I wonder. Jobs couldn’t handle the corporate side or complexity; Larry Ellison wouldn’t understand PCs (remember thin clients?), Jeff Bezos is a retailer, Eric Schmidt belly flopped at Novell (granted Novell was on its death bed when he got it), and HP's Mark Hurd is a hardware guy. Carly Fiorina, Michael Cappellas (turned around and sold MCI), Louis Gerstner? I don’t think so.

I share Lyons' frustration with Microsoft, but it could also do a lot worse and the job running a complex company is far from easy. Ballmer inherited a lot of problems, he certainly has made mistakes, but I can think of no one that could keep a company as complex and unique as Microsoft running so well, either. Sometimes it’s all about perspective -- and I include myself here -- sometimes we need to be a little less critical, and give credit where credit is due. Ballmer will never be Bill Gates. I just hope he finds a way to be the best Steve Ballmer he can be.

First Windows 7 Deployment Update: Under $26 Cost; $852 Annual Benefit

webadmin@itbusinessedge.com — Thu, 29 Oct 2009 21:37:39 GMT

I got a number of questions both in this blog and in e-mail as a result of writing about the first big Windows 7 deployment. I thought it might be more interesting to address them in another post. The biggest question was how much does it cost to roll the product out, and one analyst posted a crazy number, so I figured I’d ask Baker Tilly. It turned out this was audited and reported in a study by Gartner.

In addition, I assumed since Dell was involved, it rolled out new hardware. It didn’t, and this makes the energy and support savings more interesting. Finally, I left out a major partner that made this solution work more quickly, and that was Computer Associates. One of the reasons Del Monte hadn’t deployed was because the Microsoft tools it wanted to use weren’t ready yet, so Baker Tilly used CA Unicenter and was very pleased with the help CA provided.

Getting to $26 Per Desktop

Like many enterprise customers, Baker Tilly has Software Assurance, which means it has rights to a variety of desktop products covered by a renewable contract. Like most, this means it has pre-paid for Windows 7, and that eliminated the software charge. It also found that Windows 7 ran on 4-year-old Dell hardware, which is why Dell was involved, and the company believes it might be able to get five more years out of this hardware by upgrading to Windows 7. It didn’t see a need for additional performance.

Baker Tilly used CA Unicenter, which it had also already purchased, to centrally manage the rollout and, using current exchange rates, this means it spent $56,000 for 2,200 PCs migrated to Windows 7. Most of this money was spent for tests and to get existing software to comply with the new operating system. This means its net additional cost worked out to $25.45 per PC over what it was already paying for services under the Software Assurance program.

$261 to $852 Savings Per Year Per Desktop

Baker Tilly stated it was saving around $161 a year in energy and services. It listed these as improved network access, automated deployment ($51) and management ($82), and PC power ($28) savings. This would work out to a nearly 700 percent return on investment, which might explain why so many companies are suddenly so interested in Windows 7. But this savings does not take into account the extended service life of hardware that it otherwise would have had to replace. That would be an additional $100 to $400 a year (depending on the cost of the hardware it would otherwise purchase) in capital cost savings.

In addition, given this was an aging XP base, there was a measured productivity improvement of two days for each worker (estimated at $591). Because Windows 7 (and Vista, actually) can be patched more easily in the background, this is the estimated aggregation of time workers would otherwise be waiting for their systems to be patched and rebooted. That’s a total of $852 per desktop in savings as a result of an additional $26 investment.

Baker Tilly and Gartner provided these numbers.

Wrapping Up: With Windows 7 Your Results Could Vary

I can recall years ago when AT&T folks came over to a shop where I was working and told us that Windows 95 would save us $1,000 per desktop per year. Given we were only tracking $400 per desktop per year, I asked them if they planned to write us a check at year's end. Needless to say, we didn’t use AT&T and while we did eventually move to Windows 95, we never saw $1,000 in savings.

Baker Tilly is a snapshot of what is possible in an environment where a key part of the rollout of the product was a locked-down desktop and solid central control. My expectation is that, were this control not in place, these savings would be substantially reduced. Still, even substantially reduced, these results are rather compelling, and it will be interesting to see if any additional companies can match them.

The other interesting thing is that while early adopter companies often get special support, they also often get the biggest number of problems. Baker Tilly indicated it hadn’t seen any really major ones, which is very unusual for a company deploying this early. But it likely points to the fact that Windows 7 is a maintenance release and resides on top of and benefits from the years of Windows Vista experience. That means that this product probably is as good as Baker Tilly seems to think it is.

The FCC's Social-Networking Approach to Net Neutrality

webadmin@itbusinessedge.com — Wed, 28 Oct 2009 01:47:49 GMT

I’ve been rather confused about the entire concept of net neutrality for some time. This is because, like anything else that is bounced between political parties and large industries, the politics can get solidly in the way of the truth.

I quickly discovered that beyond the words “net neutrality” very little else was consistent about the various positions. Even Jon Stewart started to joke about this mess. Since the Federal Communications Commission is driving this effort, I thought it would be good to understand where it is coming from and had a nice chat with FCC managing director Steven VanRoekel who, coincidently, I’d met while he worked at Microsoft as managing director (kind of like the COO) there.

I was amazed at the amount of social technology and advanced survey techniques the FCC used to gather citizen feedback in what appears to be an honest attempt to do what is best for the country. In addition -- and unfortunately -- I also found some problems with the approach that likely need to be addressed. But I think the effort being put into getting feedback should mitigate them.

I walked away impressed, not just by what the commission is trying to accomplish, but by the smart use of technology to accomplish it. My hope is that efforts like this will eventually allow the U.S. government to use technology more intelligently and have it become one of the ways the country is made stronger.

Let’s talk about this.

Adoption of Open Internet Principles

Boy, it is really hard to disagree with these concepts on their face: making sure citizens have access to content, applications and services; the ability to connect the devices they want to use to the network; the benefits of market competition; freedom from discrimination; and a transparent process.

Like all statements of direction, the devil is in the details, and the first thing that jumped out at me was that these principles are subject to four things. Reasonable network management; emergency communications; law enforcement and public safety; and national and Homeland Security all seem reasonable. However, when you look under “reasonable network management,” you find two unreasonable conditions: prevent unlawful content (child pornography) and prevent unlawful transfers of content (copyright infringement).

Most service providers are not equipped to do either of these things, nor would we want the potential invasion of privacy that doing so would require. There are potential freedom of speech and enforcement issues that would make this very painful to implement, but it also likely would raise the exposure to a legal judgment against a provider who didn’t implement aggressive policies to eliminate the unlawful content because not doing so would be seen as not meeting the “reasonable test." In other words, it would make attorneys really happy and insurance for content providers very expensive, while forcing these providers to walk a tightrope that is both changing and largely invisible.

Why Some Discrimination Might be Needed

In addition, the non–discriminatory clause, which rightly puts all content types on the same price schedule, doesn’t appear to allow for latency. The reason latency is so important, or actually provisions allowing for premium services that eliminate it, is because latency kills hosted solutions. The emergence of the cloud as a desktop platform depends on people being able to pay for and get low-latency services so these applications will work. If they can’t, the cloud, at least as it relates to the desktop, could be dramatically slowed as a lower-cost alternative to the traditional desktop. Services like OnLive which depend on low latency likely couldn’t operate effectively and a new industry might be damaged or even killed.

Asking For Feedback

The good news is the FCC is asking for feedback and being relatively aggressive about helping people become informed so they can provide this feedback intelligently. It’s worth going to the Open Internet Web site and contributing to the discussion here. The commission really does want our feedback and appears more than willing to listen and change if necessary. In addition, it is doing some really interesting survey work to not only pick representative samples of people to provide feedback, but to ensure these people are first educated on the topic so they don’t provide feedback blindly (this is evidently driven by a Stanford professor).

I’ve generally believed that if we are unwilling to get involved, we really shouldn’t complain about results, and since the FCC wants to listen, maybe we should spend a little time providing feedback. I did.

Wrapping Up

I was impressed with the extreme effort that the FCC and Obama administration were putting in to get feedback and to try and do the right thing. So often, in my experience, when government gets involved to fix something, I want to run in the opposite direction and hide until it’s over. After talking to VanRoekel, who clearly has industry experience, I had the hope that this wouldn’t be the case this time. But that will only happen if people get involved and, to use a very tired phrase, this means you.

Windows 7: First Large Deployment and Trial Feedback

webadmin@itbusinessedge.com — Mon, 26 Oct 2009 13:33:04 GMT

At the Windows 7 launch, I interviewed two companies in depth about their deployment plans. Given the ITIC survey results indicating that 30 percent of businesses would upgrade within six months of launch, and given that Vista will never get to 30 percent, I thought it would be interesting to see what was different.

One thing clearly different was that a reasonably large company had deployed the offering. This is the first time -- and I’ve covered every launch since Windows 95 -- that there has been a full deployment reference account available at launch. Trials aren’t unusual, but Baker Tilly had rolled out 2,300 new Windows 7 desktops prior to the actual launch date. Typically the first real deployment comes months after a new operating system launches. David Hilland, deputy director of IT was my contact, and I’ve never seen any IT manager more excited about a new desktop OS.

I also met with Jonathan B. Wynn, manager of advanced technology and collaboration services, and David W. Glenn, director of enterprise operations for Del Monte Foods, who were undergoing a reasonably large and more common trial. Let’s talk about what I found out.

Baker Tilly: Clean and Locked Down

Baker Tilly rolled out Windows 7 the way I would if I were going to go with a new OS early. Its managers put it on nearly everything and locked it down so users could not make changes. The first is so you can get everyone quickly on the same code base and focus on problems related to the new software rather than interoperability, and the second is so users don’t install anything that hasn’t been tested by IT yet.

Typically numbers surrounding savings are unreliable, but Baker Tilly is an accounting and business process company, so you should be able to trust its numbers. While it didn’t do this to save money -- later I’ll get to why it did this -- it is tracking nearly $200 in annual savings from each desktop, which translates to nearly a half-million dollars in bottom-line benefit (before tax impact). The company did run into a critical compatibility problem with an old Sun financial application that it's having trouble getting converted so about 2 percent of its systems remain on XP until that can be resolved by updating the product or hosting it.

Dell did the installation and did discount significantly because that company was treating it as a training exercise to build its Windows 7 deployment competency. I can’t tell you the number of times a big vendor has learned on the job and not offered a discount. According to Hilland, Microsoft did not co-fund this.

The nearly $200-per-machine savings came from energy conservation, a sharp reduction in support costs and reduced image-management costs. There were no staff reductions, but existing staff was freed up to do projects that had been languishing. It took four weeks to roll out all 2,300 Windows 7 systems. The only user complaints were connected to being unable to load their own applications. Otherwise, according to Hilland, the employees loved the new operating system.

Del Monte: 65-System Trial, Deployment Months Off

Del Monte was trialing Windows 7 on 65 systems and had run into a number of expected problems with a large percentage for its vendor-supplied and custom applications. In getting ready for the trial, the IT staff discovered that a lot of the company's production applications had been poorly written and they were able to go back to the vendors and request that problems be corrected. This will take some time, but should result in better applications along with the expected Windows 7 improvements.

Wynn and Glenn indicated that the trial was going exceptionally well and actually gushed about Windows 7. I have to say having IT folks gush about anything is kind of a new experience for me.

Del Monte also is 90 percent mobile (laptops) and Wynn and Glenn appreciated the performance improvements that Windows 7 was showcasing on laptops, including better battery life, lower heat and overall better reliability. They even said their trial users were reporting better productivity, which is interesting given how often increased productivity is promised and how often IT says it doesn't see it. The most useful feature for Del Monte was branch caching or the ability to provide increased performance by caching files on servers located in branch offices. Wynn and Glenn said they thought this would significantly improve productivity with Office 2010.

It is interesting to note that no one was tying Windows 7 deployments to Office 2010 deployments. A friend of mine over at Gartner argued that the two systems were no longer tied together, and these interviews appeared to confirm that. While I have yet to run Office 2010 myself, if there was a product they were more excited about than Windows 7, it was Office 2010, especially Outlook. Wynn and Glenn indicated that, in the initial controlled beta, they were seeing some crashing, but that it was so much better that no one cared much. They had tested and assured me that the upgrade to Office 2010 was very simple once users were on Office 2007, so waiting for Office 2010 no longer made business sense. I look forward to trying that product and writing about it later.

Unexpected Benefits

It is interesting to note that both companies indicated that their aggressive use of technology was both a competitive advantage and a source of pride with employees, who often were deprived of newer technologies at other companies. Having newer hardware and software appeared to improve morale and employee retention which, rather than productivity or cost savings, were the primary reasons both companies were aggressive on products like this.

I have to admit that when I changed jobs one year and went to older hardware and software, I was really upset, and at a previous job, we had engineer turnover of 200 percent that, based on subsequent analysis, was tied back to the aging hardware they had to use, so it is important.

Wrapping Up

Windows 7 is no Vista. Companies really like it -- IT people seem to love it -- and with Vista, they ran screaming from the new version. That’s often the nice thing about a maintenance release like Windows 98, XP and now Windows 7. It has nice improvements and none of the risks of a whole new platform. IT people who hated Vista the most may love Windows 7 the most. Now that’s a change I can believe in.

Windows 7: Apple and Microsoft’s Gift to Windows Users

webadmin@itbusinessedge.com — Wed, 21 Oct 2009 15:05:18 GMT

This is Windows 7 launch week and I just finished going over much of the marketing creative that’ll you’ll see in a few days. This is some of the best work I’ve seen, and the fact that it is coming from Microsoft is largely because of Apple. I think there are some lessons here, the first being that negative campaigns tend to focus competitors and Apple’s Mac vs. PC campaign focused Microsoft in a way I haven’t seen in years. The result is possibly the best desktop product Microsoft has ever created. Even IT seems to be getting excited. However, I doubt Steve Ballmer will be sending Apple a thank-you card.

However, if you get to use the product, you may want to. I’ve loaded Windows 7 in its final form on about 10 systems now and, with a couple exceptions which I’ll note, it has been a pleasure to work with. I should point out that several times it actually worked much better than I expected.

Problems:

I’ve had two problem systems: One was an upgrade and one was a clean install. On the upgrade, the system works fine in use, but it won’t sleep properly. This was the same behavior I had with Windows Vista on the same system, and it appears that I’ve effectively passed this behavior on when I upgraded. Every other system is suspending and resuming flawlessly.

The other problem is with my old Intel V8 box. These were sent out as examples of what Intel could do and they are stunning, in terms of performance, 8-core systems with twin high-performance linked graphics cards. They are more like high-end workstations or servers than desktops. This is the only system that seems to want to crash from time to time, and I think it is because it is running custom Vista drivers that simply don’t work that well with Windows 7 yet. Specially built systems are always risky with any upgrade; I don't mean home built, either. The motherboard in this product is derived from a server part and is exceedingly rare.

Suggested Approaches:

This suggests that -- and this shouldn’t be surprising -- if you have special hardware that is relatively rare, you should likely hold off on Windows 7 until, and unless, you know there are Windows 7 drivers for it. Custom systems tend to be designed for a particular code base and work best when they stay on it. The Intel system was rock solid on Vista because it was designed to be, but once out the door there was no real need to continue that support.

Clean installs, while they take a bit longer, are always better. You end up with a new system with all new drivers. If you do an upgrade, there is a chance malware, improper settings, or non-compliant drivers will pass to the new system, and you’ll spend days trying to figure out what has gone wrong. If you have a virus, it is likely it, too, will be passed to the new system and, because it is part of the initial boot image, it may be much more difficult for an antivirus product to find it. Several of us have concluded that it's worth the time to do a clean install.

Surprises:

Unlike Vista, with the exceptions noted above, Windows 7 has installed very cleanly. After about 15 minutes, it has been fully patched and ready to run. I sometimes run down the latest graphics driver from the vendor site because the product isn’t released yet, but this is the easiest clean installation experience I’ve ever had. Granted, I’m generally using hardware that is less than 2 years old, which historically provides the best experience anyway, but I’ve been pleasantly surprised at how easily it goes in.

Desktop suspend, particularly on new hardware, is worth the price of admission. Particularly on the two low-powered Intel Atom/Nvidia Ion boxes I have, the systems drop into low-powered sleep -- all lights and fans go off and then nearly instantly wake up when I move the wireless mouse. This was vastly better than I expected. I found I could live on these new dual-core Atom/Ion-based products very well. This is nice because they are nearly silent and they use about 30 watts, a fraction of the power of a typical desktop.

My Panasonic Toughbook, which has a large amount of custom Panasonic software on it, did the in-place upgrade flawlessly. Everything just worked and it saved me a ton of time I would have spent running down Windows 7 versions of the various applications.

One cute feature in Windows 7 is that when you connect to a Wi-Fi hotspot that requires you open a Web page and sign in, the task bar icon generates a message telling you to do this so you don’t sit there wondering why you’re connected and nothing seems to be working. There are vastly longer lists of things to like that others have posted. One of our friends was complaining that she couldn't just upload a picture and instantly share it, putting her on the list of folks who will love the new Libraries. This really does feel like a hit at the moment.

Overall Impressions:

I’ve been on this platform since January through the late beta and into the RC cycle. My XP machines are long gone and I have only a couple of boxes still running Vista. Windows 7 is what Windows Vista should have been: It is fast, key features work as expected and there is enough new to be interesting, but not so much that it's overwhelming. The addition of Security Essentials closes the door on built-in antivirus, even though it isn’t really built in yet (just free, thank antitrust for that) and Windows Live adds the iLife like elements that were lacking for consumers.

For corporations, the stability and improved useful security -- as opposed to annoying “turn the goddamn thing off” security Vista had -- is welcome. The fact that the ecosystem is up to speed this time means problems related to drivers and application compatibility are vastly reduced. There is an optional XP mode that allows you to run XP in a virtualized layer, though I don’t recommend using it unless you have no choice because I believe it leads to bad security practices. (It effectively doubles the attack surface of the product and delays the elimination of out-of-date and likely vulnerable applications). It's clearly nice to have a choice and you may not be able to move some critical app, though you probably won't be able to stay on XP forever.

Given a choice, bring Windows 7 in on new hardware or my second preference is to do a clean installation, but I have found in-line upgrades generally go well from Vista unless the system was already experiencing problems (the problem may migrate as well). Hardware is pretty cheap. The signature laptop that enables all the key features from Acer is less than $800.

Wrapping Up:

I’m reviewing a survey (I'll post on this later) by Sunbelt Software and Laura DiDio on deployment plans (consistent with last year's survey) that suggest most companies will begin their deployments of Windows 7 within 12 months. I expect much of this will be gated by the release of Office 2010 which the OEMs tell me is extremely good (I haven’t seen it yet). This suggests the beginning of an evaluation cycle once people get back from the holidays and start considering alternative hardware choices like netbooks, ultra-small form factor desktops and all-in-ones, which increasingly will be available to cut both purchase and energy costs.

Windows 7 means change, and I think it is a change for the better. Over the next few months you may want to consider what else you may want to change at the same time. It's something to noodle on with your eggnog or Halloween candy. You might also want to toast Steve Jobs, because, without his pounding on Microsoft as much as he did, I doubt Windows 7 would have been this good.

Acer Passes Dell: PC Leadership Continues to Shift out of U.S.

webadmin@itbusinessedge.com — Thu, 15 Oct 2009 18:05:55 GMT

Yesterday it was reported that Acer, a strong global consumer-focused PC maker, passed Dell, the strongest U.S.-focused corporate PC maker, for the number 2 spot. While the market for PCs grew slightly at 3.9 percent, average selling prices cratered 20 percent, taking revenue and profits with them. It is interesting to note that Apple, which has been the most successful at holding prices, actually grew share 6.8 percent, showing it was at least possible to partially resist price reductions and grow share. (Be aware I'm using a mix of IDC and Gartner numbers, which often don't exactly agree with each other, though the ranking is consistent).

Let’s talk about these numbers and the likely loss of PC leadership in the U.S., as defined by world market share.

Apple’s Gain

One of the things left out of the discussion with regard to Apple is the mismatched timing between Windows 7 and Snow Leopard. Apple rushed its product to market and was able to ramp up inventories strongly in the third quarter (these are shipments, not sales numbers), while the Windows vendors were trying to manage down inventories in anticipation of the Windows 7 launch. Given the consumer-focused sales activity of the back-to-school season, I’d actually expected double-digit market share gains by Apple because the combined effect of Apple’s inventory build-up and Windows vendor draw downs should have been more significant.

What may have happened is that part of Apple’s strategy was a partial refresh of some PC lines to offset the big Windows 7 push. We should know this in a few days. This would have had it drawing down some inventories as well during this period, offsetting what would have been an artificial indication of demand anyway. It is artificial because the difference would have been created through inventory management, not because of any real increase or decrease in consumer demand.

However, had Apple spiked strongly, it could have used this to argue a massive trend toward its platform. As it is, Acer grew market share during this period by a "whopping” 25.6 percent by focusing solidly on the low end of the market (which is where the buyers actually are). Acer basically kicked everyone else, including Apple, all over the court. In fact, HP, the market leader, actually outgrew Apple as well, with IDC reporting a 9.3 percent growth, though I expect Apple will outperform all of these companies in terms of profitability. That will make Apple shareholders happy but will provide little protection for the massive Windows 7 wave that will start next week.

After seeing these numbers, I'm not as sure as I was that Apple will do well during the Windows 7 launch. (It should be noted that Windows 7 grew .3 percent last month, outgrowing the MacOS at .25 percent significantly, and it isn't even shipping yet).

Dell's Drop

Dell has two problems when it comes to market share, one by choice, and one by focus (suddenly I'm feeling connected to Paul Revere). Dell remains largely focused on the U.S. business market -- and the U.S. business market is not buying much at the moment. In addition, because Dell’s financials haven’t been meeting investors' expectations, the company has shifted from a focus on growing share to one of growing margins. This means it is trying to become more like Apple in terms of financial performance. Apple really doesn’t care that much about market share (which is why there is no Apple netbook).

The corporate market for PCs isn’t expected to come back until after Office 2010 ships, Windows 7 passes its first service patch milestone, and economic conditions improve for corporations. All conditions have to be in place for Dell to ramp back up. This could take awhile; most likely all conditions will not be met before 2011.

The next question is, if business comes back, will it come back on traditional platforms? With a lot of the employees coming back to work now having their own newer PCs, might line managers push to have policies allowing these machines in rather than spend money on new hardware? And, given that a lot of hardware was mothballed during the downturn, might it not be likely that a large amount of this hardware could be given to new employees rather than buying new, holding off a replacement cycle? Too early to tell in both cases, but the return of the corporate market remains iffy at best. That is why Acer and Apple, over the near term, look stronger. It’s simply because, increasingly, individuals, not corporations, are driving PC buying, and individuals prefer buying in retail establishments, at least for now.

Dell’s Strategic Blend

Dell is beginning to blend consumer concepts into PC lines and the new Dell Z series is the halo product for Windows 7 early adopters. It is not only a showcase of technologies, including inductive charging and wireless docking, that could trickle down into less-expensive products, it is a good attempt toward showcasing a product that has a better margin and a better value proposition for at least the high end of the business market.

This offering blends technology and design elements from both the corporate (security and manageability) and consumer (design, screen, performance) segments. In short, the Latitude Z is the most Apple-like business notebook currently on the market, and in terms of technology, moves well beyond anything Apple currently has released.

Wrapping Up: Market Shift

The numbers do indicate that margins can be held even in this market and that Dell is trying to learn Apple’s lesson. However, the long-term risk is that the world corporate market may still not come back as expected and, when it does, it may come back differently and not provide the anticipated bounce. In short, while we may still see a hockey stick recovery in 2011, I don’t think we can take it for granted this time. The industry should have a fall-back plan. Certainly it would be nice if, while the industry is still led from the U.S., the U.S. administration were on the helping side for once. Given recent moves, this seems doubtful so, for the near term, the consumer market is king and the U.S. may be losing its crown.

The Antitrust Dual-Edged Sword: How Obama Could Destroy the Tech Industry

webadmin@itbusinessedge.com — Tue, 13 Oct 2009 19:38:45 GMT

One of the most frightening sentences in business is “We’re from the government and we’re here to help.” This is because, over the years, we’ve learned that while governments often have the best of intentions (and often not), their ability to deal with problems surgically is almost non-existent. They have the tendency to destroy what they want to help, and to be so slow in responding to a problem that when they do get something right, it often comes far too late.

The current U.S. administration is suddenly focused sharply on the technology and telecommunications industries and unless this focus -- or the government’s traditional approach -- to antitrust problems is moderated, it could end up destroying the industries it intends to save.

Scary Governments

The scariest governments try to get in and fix stuff. You can certainly see that with the financial and automotive industries at the moment. The Cash for Clunkers program replaced one set of problems with a new set by removing buyers from the market and leaving behind new car inventories that aren’t selling because most of the available buyers just bought. This is largely because governments think tactically; they act to address symptoms of a problem, but don’t think strategically to go after the cause.

If you look at health care, for instance, the core problems are that it costs too much and neither the government nor its citizens can afford it. The primary initial cause is economic: The cost has to go down and income up. Instead, government is focused on a path that tries to force a fast solution that may, for many, reduce the quality of their health care by materially damaging existing systems.

This suggests that the U.S. government is focused on doing things fast rather than doing them right. What is particularly troublesome for us are recent comments that antitrust actions will be focused on the technology and telecommunications industries.

Killing Industries

With the recent consolidation in a number of industries thanks to the economic downturn, the opportunity for monopolies to emerge and then misact is very high. On the other hand, U.S. industry could also emerge vastly stronger than before, and in a world market, having the most powerful industry isn’t a bad thing. Ask the oil or diamond cartels.

But excessive government intervention could eliminate that advantage and shift these industries to places like China or India, much like previous governments did with the consumer electronics, railroad and naval industries. I think you could argue that government intervention has been instrumental is crippling the auto industry as well, though it must be noted that organized labor was probably as big, if not a bigger problem here.

In addition, the European industry focused like a laser on U.S. industries as well as the combined impact of two major governments both working to cripple large industry players could go well beyond corrective action and hurt what otherwise could be a very strong industry driver during the recovery.

What’s Needed

Big companies misact and there is a need for timely and effective government response. But much like you wouldn’t approach a sick patent with a chain saw -- at least I hope you wouldn’t -- the tools the government has to take corrective action are too general, too imprecise and too slow to correct the bad behavior in a timely fashion or to protect the industry as intended.

What is needed is the business equivalent of a scalpel coupled with people highly trained in how to use it. This might be as simple as changing the mission of the enforcement bodies from being focused on penalties to being focused on finding a solution that will make both parties healthier. It could be that after a company gets to a certain size and power, a board seat must go to the government so that oversight is made part of the business practice and behaviors that could land the company in trouble are avoided (think of Al Gore on Apple's board), and if they aren’t, corrective action is taken with knowledge of the company and surgically rather than without knowledge of the company and catastrophically.

Wrapping Up

I’m getting increasingly worried that the Obama administration is trying to do too many big things at once and that most are very low quality both in approach and execution. I’m a big fan of speed, but it needs to be balanced by prudence. Otherwise, you simply run around doing more bad things. One of those big things is to bring overly powerful companies that seem to be misacting down without apparently realizing that the impact on the technology and telecommunications industries and the country could be catastrophic if this isn’t done carefully.

A business enforcement program focused on one or two industries is wrong. Focus should be on the source of the problem and where it is most pronounced, it should be surgical in nature to prevent collateral damage, and it should be fast enough to protect the victims. The current stated goal targeting two recovering industries doesn’t appear to meet any of those tests and should be reconsidered. From my perspective, our biggest problem with monopoly power remains with energy and that is likely where the initial focus would better be.

Did Apple Become IBM or IBM Become Apple?

webadmin@itbusinessedge.com — Thu, 08 Oct 2009 19:30:32 GMT

If I were to describe a company that built a very profitable vertically integrated solution and was aggressive at preventing clones in order to protect margins, you’d think I was talking about Apple. But really, Apple only emulated IBM’s original model. This was originally challenged back in 1956, two years after I was born, and the original consent decree that set the groundwork for Microsoft and the modern computer industry was created even though that industry didn’t emerge for decades.

Well, this week the Computer & Communications Industry Association, which also goes back to the beginning of this thing, and has a history of pounding on other large companies like Microsoft and Intel, has called foul, alleging that IBM is once again misbehaving and the Justice Department is looking into its claims. The association ties its argument to the descendent of the original mainframe. It's creating kind of a circle that goes back to 1956 with similar arguments in what is a vastly changed world.

What’s Fascinating?

What is fascinating about this is that it would seem the same arguments could be applied to Apple, which was charged by Psystar using what appear to be similar arguments about restrictive practices. Psystar builds low-cost PCs that run the MacOS, something that Apple allowed for a very short time before Steve Jobs returned. It killed the practice of allowing clones in order to protect margins and save the company. It is interesting to note that Psystar still exists and still sells inexpensive PCs, starting as low as $599, that run the MacOS in tower configurations you generally can’t even get from Apple. And yes, I thought Apple had put it out of business last year, as well.

This comes down to what we define as a computer. Clearly, there are competitors to mainframes in server clusters and there are clearly competitors to the Mac in Windows and Linux PCs, but the switching cost is relatively high and once you are wedded to the software, you are pretty much stuck. The cost of switching a mainframe out and trying to replace the massive amount of custom software that typically resides on one to a less-expensive platform is large in time, money and effort. And that's assuming you have the skills available to do the migration, which most of the remaining companies do not. But this was the way it was before Windows, and for much of UNIX's history, it wasn't a great deal better.

The cost of switching to and from an Apple platform product to another platform is lower, but it isn’t as easy as moving from Windows machine to Windows machine. The same software generally won’t migrate with you either unless you break license and create a Hackentosh or buy a Psystar PC and risk having the company go out of business, care of Apple.

When you have these relatively large switching costs, you tend to have a captive market, and margins in a captive market are what business people dream of at night. But prices are far from customer friendly and there is a sense that you simply have no choice. Years ago, I heard an IBM executive use the analogy that it was like selling air -- folks would pay whatever you charged. But there is a reason why IBM and Apple customers tend to be some of the happiest in the market, at least historically.

The Forgotten Benefit

Having one vendor that handles the entire platform generally results in a more reliable product (granted, there are exceptions), but both IBM and Apple maintain the image of companies that build high-quality products. This image does seem to be tied to their respective abilities to control their platforms. It is hard to argue there is a computer system in the world more reliable than a mainframe, and in the PC market the most reliable machines tend to be Macs.

So you do pay more, but there is a benefit tied to that extra payment that the majority of IBM and Apple customers appear to think is worth it. When it works, both the company and the customers are successful, margins are high and customers are satisfied. But, to keep it successful, the owning vendor has to keep its customers happy, even in the face of falling prices elsewhere. This is often forgotten and successful antitrust action or market collapse results.

The Recurring Problem

Apple products have been getting increasingly unreliable, with reports of products exploding. Leopard and Snow Leopard were relatively buggy at launch, and a lot of folks seem to be wondering suddenly if Apple is covering things up. IBM has had (back in the '80s) the same recurring problem, though. Currently, it doesn’t seem to be enjoying the quality problems that Apple has been seeing.

The recurring problem in firms with this level of control is that they often start to take their customers for granted as they optimize margins (and sacrifice reliability and customer focus). Then, the advantage that makes the extra cost work for them evaporates. In the late '80s, we saw the result for IBM. At that time, IBM went from one of the most profitable to one of the least profitable companies very rapidly, largely because it had aggravated customers enough that the cost of switching was the least of two painful problems. A lot of folks switched or just stopped buying from IBM.

IBM is clearly at the top of its game at the moment, but Apple appears to be drifting toward making a similar mistake. And markets it owns are traditionally vastly more fickle than the large-scale computer market ever was. However, the antitrust action does point to an IBM exposure that needs to be addressed and the possibility that it needs to find ways to reduce customer costs before customers find alternatives.

This kind of thing breeds customer dissatisfaction because it puts a spotlight on costs and makes it appear that people are being overcharged. As Microsoft has recently discovered with the European Commission, these things tend to cross borders now, and once an agency gets its hooks into you, it doesn't let go easily, cheaply or quickly.

Wrapping Up: IBM Is Apple?

It is increasingly interesting to note that IBM and Apple are actually relatively similar, even though they are vastly different in terms of customers and focused markets. Both are at their best and worst when they have absolute control of their markets, both get their profits largely through a combination of this control and a tight focus on maintaining high customer satisfaction, and both lose when they lose their focus on either of these.

Going back to that original 1984 commercial, did Apple become IBM or did IBM become Apple? It may seem obvious, but if you really think about where IBM was in the '80s just prior to its collapse, it may not be.

Can Competitors Unite as GPU Computing Ushers in a New Age?

webadmin@itbusinessedge.com — Mon, 05 Oct 2009 17:28:55 GMT

Last week was Nvidia’s first large developers conference for GPU computing. The San Jose Fairmont hotel had around 1,500 people attending the event, with the majority connected in some way to a GPU development effort. The excitement reminded me of the early days of computing, when people were thinking about innovation and doing impossible things. In fact, the word “doing the impossible” likely should have been a tagline tied to the event, given how often it was used.

However, a large part of what got CPU computing off the ground initially was broad industry collaboration. In the early days, Intel, AMD and IBM were on the same page in this regard. They were increasingly competitors, but that competition initially didn’t get in the way of market growth. A lot depends on GPU computing being successful, but I wonder if the key players, both AMD and Nvidia, understand that to take this mainstream, they need to collaborate and partner until the market is strong enough to stand on its own.

Let’s talk about the promise and problem of GPU computing.

GPU Computing: A New Age of Excitement and Wonder

Unlike CPU computing, which really had its birth in the workplace and was initially largely focused on spreadsheets, word processors, and databases, GPU computing had its birth with gaming and has jumped to special effects, large-scale modeling and massive data analysis. The first was exciting for its time, primarily because the tools the PC replaced weren’t particularly easy to use and tended to be very limited and not intelligent at all. However, GPU computing is much more visually exciting and potentially will have a greater near-term impact on the quality of our lives.

For instance, Lucasfilm showcased how it is changing the way it makes movies, making the effects more realistic and dramatically improving the speed in which it gets things done. Much of the work is being done in medical research, which you might depend on for your life in the future. Simon Hayhurst from Adobe spoke of one engineer who was convinced that editing in real time was impossible and, as was the case often in stories told at the show, was dumbfounded when he discovered he could now do it. The impact wasn’t what you’d expect. Yes, it did speed things up, but the existing batch process was so time intensive and expensive that artists and engineers had become afraid of trying new ideas because failures took too long to correct. They were discovering that they could be creative again, which suggests that the movie industry is about to see some massive improvements. (Granted, it will need to improve the storytelling as well, but that’s not a technology problem at the moment.)

The number of applications being developed to do medical research and supercomputer-like scientific analysis was a bit overwhelming (a few examples here) and far beyond what I could understand. The talk on shaving monkey brains for detailed analysis was fascinating, for instance, though I’m not sure they really needed to share the pictures, which will be with me for a while.

An example of saving lives came from Sean Varah of MotionDSP, which takes a number of video frames and analyzes them in real time to get a massive amount of additional detail. This is used to catch criminals (to clear up blurry or distant images of faces and license plates) and to help the military by more accurately identifying threats. In the future, this same information will be used to create 3D images of events, eventually blurring the lines between reality and virtual reality. Each presenter, showcasing an excitement we haven’t seen in the market for a while, testified that GPU computing allowed him or her to do things that couldn't be done before. They weren’t abandoning the CPU -- they also indicated it was still critical to the process -- it's just that the big advances are coming from the other side, largely, I think, because the GPU simply has not been widely used like this in the past. But I wonder if this can truly scale to a new age of computing.

GPU Computing: Problems

To build a market, initially competitors often have to cooperate. Right now, I wonder if there is enough cooperation. Markets have trouble advancing if there are competing standards because developers don’t knew where to build. OnLive showcased how this is a problem with gaming consoles, which are in decline at the moment for a lot of reasons, including that each has its own platform. It is interesting to note that the strongest platform at the moment -- defined by the richest set of games and game sales opportunities -- is the Xbox, which uses a code base common to the PC.

The industry is moving away from proprietary platforms to OpenCL (created by Apple, driven by the Khronos Group) and DirectCompute driven by Microsoft, which should pull the parties together. However, we are still very early in this process. Initially, Nvidia had Cuda and AMD/ATI Stream, which aren’t compatible at all. That Apple and Microsoft are key to the common standards both companies now support is important, but giving up leadership to these two vendors that don’t cooperate well with each other could be a problem long term. Right now, GPU computing is a huge green field where the majority of new opportunity comes at the expense of aging supercomputer hardware and includes a ready pool of people who simply have not had access to performance at this level and desperately need it. If the key players, at least initially, can put aside their differences and work together to open up this market, the result likely will be vastly more lucrative for all.

Wrapping Up: Competition vs. Cooperation

GPU computing, which is improving performance 10 to 1000 times in areas ranging from media creation to medical advancement, is on the cusp of transforming a major part of the computing industry. This is to supercomputers what PCs were to mainframes, and I doubt the world will ever be the same. Given the massive performance jumps being demonstrated, if you are in the distinct areas getting the largest focus and seeing the largest benefits (finance, medical/scientific research, military simulation/monitoring, and multimedia) and aren’t on top of this, the world likely will pass you by very quickly.

I haven’t seen potential like this since the early PC days, and this kind of change turns peasants into kings and kings into peasants. Saying “be careful out there” seems woefully inadequate at the moment.

Will Cisco and Tandberg Fix What Videoconferencing Is Still Lacking?

webadmin@itbusinessedge.com — Thu, 01 Oct 2009 23:43:31 GMT

Down markets often create massive companies. Cisco wasn’t exactly tiny as we entered this downturn, however, it is suddenly much larger, having picked up Tandberg, one of the oldest and largest videoconferencing vendors in the world and the one partnered with HP. In communications, Cisco is playing hardball with the traditional telecommunications vendors as exemplified by an ailing Lucent, sickly Nortel, and few others that even remain interesting. I spent some time with Andy Grove a few weeks ago (great video on this which emphasizes my last post on the economy and will likely scare you as it did me) and recalled that one of the areas he used to believe was his worst failure was videoconferencing. Since I covered that failure, actually participated in or read some of the largest studies on this technology, and recently started noticing a competing technology, one that is quite different and driven by Polycom (another company that at one time cornered the videoconferencing market), I thought it might be fun to explore this.

The Historic Promise and Problems with Videoconferencing

Videoconferencing is a communications technology. But unlike the phone, which replaced the telegraph, and e-mail, which replaced the fax, videoconferencing seeks to replace transportation. To do that, it has to emulate a face-to-face meeting, including all the visual and audible cues. The core problem comes from what people don’t think about, which is that a meeting is typically only one part of an interaction that generally includes social events, dinners, hall conversations and the ability to make side comments.

The key benefit is the massive reduction or elimination of travel time and costs for the company and the individual. When used heavily, the cost savings for a good videoconferencing system can generally provide a recovery on the initial investment in the first year with bottom line improvements, through cost reductions, increasing in the following years.

Policy, Not Technology, Is Key to Success

Regardless of whether the system is very high quality or low, if the policy requiring its use is enforced, the benefits result. If it isn’t, they don’t. Any organization that can’t restrict travel expenses shouldn’t expect to see a return on any videoconferencing system. The other problem is that often the cost of a videoconferencing system hits a company at an organizational level but the benefits hit line organizations' bottom lines. If the line manager doesn’t feel the videoconferencing solution is worth it, they won’t use it and, if they do, they get the benefit and the purchasing organization gets the cost. This is not a good for either selling the systems or for ensuring their use. These systems have been in use since the '80s and the airlines, while hardly at their peak, have been hurt by other things.

Fixing the Force Problem

With a few exceptions, we didn’t have to force employees to use PCs, cell phones, cars, phones, printers, copy machines, or most other forms of technology. But we do have to force them with videoconferencing systems. Given a choice, employees would rather attend the remote meeting. Even if they have to fill out expense reports, get on planes, and get away from their families (granted, for some this last is actually a perk). The missing link is that these systems need to improve on meetings, not simply be a travel-saving alternative. Another technology is suddenly looking a bit more compelling.

A Better Solution? Polycom CX5000

I used to see this device, initially created by Microsoft, in Microsoft conference rooms but rarely in use. Now, I have recently been in several meetings where it has been in use. The device, rather than trying to replace air travel, tries to improve on in-room conference calls and it is actually rather impressive in use. Because it improves on something rather than trying to replace in-person meetings, it appears more natural. And since it uses the Microsoft Live meeting service, also commonly used for meetings and in competition with Cisco’s WebEx, usage isn’t seen as excessively difficult either.

The experience is like a Live or WebEx meeting, where you can actually see the remote participants and they can see the people who are talking. Done right, it is actually a more natural-feeling experience than a typical videoconference is because it feels more like a meeting with people sitting around a table and folks don’t have to go to special rooms.

At $4,300, this is an expensive speakerphone, but against a typical high-end videoconferencing system, this is dirt cheap. It can be easily added to rooms with a good Ethernet feed. In short, enhanced Web conferencing may do what videoconferencing never did and actually make video a standard part of future meetings.

Future Fix – Applied GPU Computing?

I spent today at the Nvidia GPU Technology Conference and one of the things that came up during my panel was the use of this technology to address the conference room problem. The experts on my panel, who came from a variety of disciplines and companies, imagined the creation of virtual conference rooms that would be more like the real thing, allowing for side conversations and social interaction that is currently lacking in most conference room solutions. The sense was that this was likely a number of years away but demonstrations blending the real and the virtual using shipping products were all over the event, which implied it isn’t a technology creation problem but one of waiting until someone applied the technology to this problem. Under conditions like this, things tend to happen rather fast.

Wrapping Up: Rethinking Videoconferencing

The lesson in this market is that solutions need to improve on the status quo, not just provide a cheaper alternative. If this were not true, we’d all be driving motorcycles and not cars because motorcycles are vastly cheaper. It is interesting to note that the last time there was an effort to consolidate the market, it was done by Polycom. It also has the most interesting alternative in the market but likely doesn’t market it heavily for fear of cannibalizing its legacy videoconferencing products. There is no doubt in my mind that eventually someone will get this right. In the meantime, check out the Polycom CX5000 and ponder that Cisco likely would have been better off buying that company than Tandberg.