Enterprise Matters

I’ve been spending a lot of time thinking about the pending data revolution in the enterprise, and I finally hit on the solution to a problem that has frankly bedeviled the industry for years, and is only getting worse. The problem is this: as more and more data are accumulated across the extended, networked supply chains companies are building even as – or because – the global recession is growing unabated, the problem of what to do with all this data looms large.

More and more I’m confronted with vendors and customers who have unprecedented amounts of data – much of it unstructured, and originating outside their four walls – about demand, consumption, pricing, the competition, and other salient aspects of the interconnected business world we live. The problem is that the growing accumulation of these data are not matched by a growing accumulation of knowledge about what to do with these data to be more reactive, predictive, supportive, and otherwise proactive with respect to revenues, customer and partner satisfaction, and new business opportunities.

Sure, there are tons of tools out there – and some relatively good vertical industry solutions that target various parts of the problem. But fundamentally, both user and vendor are struggling with understanding how to proactively use all these data to greatest advantage, and, quite frankly, both sides are stumped.

Users are largely outgunned when it comes to understanding new ways in which to use new types of data. In part, this is a training issue – getting extremely creative with very complex data is tricky, even for relatively sophisticated users. Many lack the background in mathematics and modeling necessary for this new level of analysis. And in part this is a responsibility issue: too often there is an understanding that some new data analysis would be of value – such as, something as relatively simple as identifying secondary markets and buyers for excess inventory – but there is no one with the mandate to actually do anything about the problem, or opportunity, that the new analysis presents.

On the other side of the fence, vendors are limited either by a tools approach that over-emphasizes a do-it-yourself analytical model that smacks right into the aforementioned user ignorance about how to do the necessary modeling and analysis, or the vendors are so busy building out the technology that can capture and aggregate these new data types that they’ve sidestepped the issue of what to do with all the data they’re now able to bring to bear in the business.

So, here’s my modest solution to the problem. According to the AP, over 200,000 Wall Street denizens have been plowed under by the current downturn in financial services, many of them quantitative analysts, or quants. Which means a lot of these uber-geeks are on the street, and hopefully, looking for gainful employment. Meanwhile, the graduate programs that hone the next generation of “baby quants” are having trouble placing their students in the rapidly declining financial sector. So, here’s my plan. Give some of these baby quants access to all this new data pouring into the enterprise and see what they can make of it. My guess is that, as long as we keep an eye on their moral compasses – who the hell needs a supply chain bubble-cum-meltdown in the current economic climate? – these number crunchers would be able to do some wonderful things with all this new data.

The quants might have to be content with slightly lower salaries – or at least bonuses – than they were used to getting in the bubble days. But hopefully the prospect of gainful, honest employment – nurtured with some decent stock options – might be enough to tempt these geeks to come over to our line of business and start creating real value. If they play their cards right, this could a ground floor opportunity into one of the more interesting data revolutions in our lifetimes. It could also be a boon to the customers and vendors who are increasingly adrift in a sea of data – and are starting to drown in it, despite their desperate thirst for more knowledge.

My last post helped define an important dichotomy in the current debate on the future of the economy between those who think Detroit should be rescued, and those who don’t. Fueling the don’t-rescue group is a set of sentiments that can be summed up in the following way: Detroit makes cars no one wants to buy, and the UAW is responsible for a wage and benefit structure that has helped propel Detroit into the current morass. These twin sentiments help drive its proponents’ to their solution for the current mess: let Detroit go bankrupt, and let the UAW effectively be destroyed in the process.

As I strenuously oppose both those sentiments, I think it’s important to shed a little light on the reality of the situation. And hopefully help everyone on both sides of the issue separate reality from fiction. I’ll start in this post by shining some much-needed light on the question about what Detroit makes and what Americans buy, and then in a subsequent post I’ll tackle the issue of why the UAW matters.

So, it seems that everyone agrees that Detroit can’t make a car that anyone wants to buy. I saw an almost embarrassing version of this sentiment in an interview on Hardball between host Chris Matthews and Representatives Gregory Meeks (D NY) and Dan Lundgren (R CA). (Thanks to my Enterprise Irregular colleague Zoli Erdos for pointing it out.) These poorly coached public servants did a great job of fumbling Matthews’ key question: what kind of car does each of them drive. The conclusion that the anti-Detroit crowd can gleefully draw from this interview is that neither of these representatives are big Detroit car buyers (Meeks owns a Honda and Lundgren owns a Ford and two Toyotas), and that this is emblematic of the problem: We want to bail out an industry that isn’t making cars people want to buy.

Feels like Matthews nailed it, right?

Okay, now on to reality. Who can name the number-one selling vehicle in the United States in recent time, if not in the last 20-plus years? How about number two? You’d think the answer would be something made by Toyota or Honda, judging from the current anti-Detroit sentiment and self-righteousness of Matthews smirky takedown of the two Representatives.

Wrong. So wrong.

For your information, and hopefully that of a fact-deprived nation, the number one vehicle sold in the US is the Ford F-Series truck, followed by the Chevrolet Silverado. And it’s been this way for years – according to Ford, the F-Series has been the number one vehicle sold in the U.S. for 26 years. The F-Series’ status even held up in 2007, when the automotive slump really got started, and considering that Toyota’s sales are down 30-plus percent this year, I’m guessing the F-Series will keep the number one spot in 2008 too.

So if you think Detroit doesn’t sell cars that Americans want to buy, it’s time to realize that you’ve been trapped in a nomenclature game that carries more than a faint whiff of elitism to it. Yes, the Camry is the best-selling passenger car in the U.S., but it’s far from being the number one vehicle: in 2007 Toyota sold 473,000 Camrys, while Ford sold 690,000 F-Series.

Sure Toyota and Honda makes great cars, but Americans want trucks more, and will buy them, despite what members of the House of not-so-Representatives drive. Take that, you latte-sipping, French-loving, eastern elites. (For the record, I quaff, not sip, lattes, actually speak French, am a Midwestern elite transplanted to California, and until we had our second child, I owned a succession of three pickups. Okay, they were Toyotas – though the last one was made down the road in Fremont’s Nummi plant – but that was mostly because I didn’t want a full-size pickup and Detroit only sells the big trucks. The point is, I share a love of pickups that apparently puts me in closer touch with the rest of my country than I thought.)

In case you’re tempted, don’t go thinking that Detroit is a one-trick pony, either. The number two vehicle sold in the U.S. is the Chevy Silverado, and, when combined with the F-Series, these two trucks beat the pants off the Japanese In 2005, Detroit sold more than 1.5 million F-Series and Silverados, beating sales of Camry, Corolla/Matrix, Accord, and Civic combined. This disparity continued in 2006 and 2007, though it diminished as gas prices rose.

Throw a couple of best-selling cars into the mix, and it becomes evident that American manufacturers are doing an even better job building cars – er, vehicles – that Americans want to buy. If we look at the top five American versus Japanese vehicles sold in 2005, total U.S.-made vehicle sales were over 2.4 million units, versus Japan’s 1.7 million. (In case you’re wondering, the top five American vehicles are the F-Series, Silverado, Dodge Ram Pickup, Dodge Caravan, and Chevy Impala. Topping the list for Japan is the Camry, Corolla/Matrix, Accord, Civic, and Altima.)

As gas prices crept up in 2006, there was, admittedly, a shift in Japan’s favor: Detroit’s top five only sold 2,246,250 units, while Japan’s top five sold 1,739,369 units. I don’t have complete 2007 data, but it’s hard to imagine Japan was able to beat Detroit in the top five category based on a 500,000 unit gap in 2006.

Back to my elitist comment. (I can’t believe I’m about to call the media elitist, but here goes.) The reporting on the car crisis has reflected this elitist view that it’s about cars, not vehicles. If you’ve ever been in the hinterlands of this great country, and I’ve spent many months wandering the blue highways over the years, far from the latte-sipping crowd, you would have probably figured this one out by now. In pretty much every corner of rural America, it’s the pickup that dominates. It’s not a style issue for many of these buyers: They use pickups in their work and in their daily lives in ways for which there is simply no substitute short of dialing back a century and hitching up the horse and wagon.

So let’s not kid ourselves, this a class issue as much as anything else. The pickup is the workhorse of the solidly middle class in this country, and Detroit has been making these buyers happy for, in the case of the F-Series, 26 years. So, can Detroit build cars that Americans want to buy? Not well enough. But it builds vehicles for Americans really really well, much better than the Japanese competition ever could. (Toyota’s heavy truck sales in 2007 were approximately 170,000, pretty wimpy by comparison.)

It’s time to retool the argument about rescuing Detroit. We should rescue Detroit because, while it does a lot of things wrong, it’s also doing a lot of things right. There are some massive structural and cost problems, and lots to fix. But the point is that, when it comes to rescuing Detroit, there is indeed something to fix. Detroit isn’t just the “arsenal of Democracy”, as FDR called it as he recognized Detroit’s ability to retool in support of the war effort. This is also a vital industry that provides an important segment of our nation’s overall economy – the non-car driving non-elite – with the vehicle they want and need. And one that Detroit can and does manufacturer at a profit – which you can’t say for the Toyota Prius: every one of the 600,000 Prius’ sold to date have been sold at a loss. And Toyota won’t be able to make a profit on the Prius until it gens up its U.S. battery manufacturing capacity sometime in 2010. If it goes through with those plans.

So you can hate Detroit, and you can hate spending taxpayer money bailing out private industry. But you can’t claim that Detroit doesn’t build vehicles that Americans want. They have always done that, and, if we let them, they always will. Detroit may not make the vehicle that you or your Representatives and T.V. pundits want to drive, but that should be beside the point. It’s time we recognized the different between a car and vehicle, and a salvageable industry and basket case, and make the right decisions. Before we make the kind of ill-informed mistake that will haunt our economy for the rest of our lives.

Two enduring concepts have crept into my thinking in the last few weeks, as the economy continues to lurch about with no apparent direction and no visibility into what the future may hold.

The first concept comes from an absolutely brilliant movie about racism in France, La Haine. The movie features a memorable “joke” that serves as a metaphor for the social/political strife that inflames the 1995 movie, which quite neatly predicted the riots in suburban France ten years later. A man has jumped from a building, and as he is descending towards certain death, he keep repeating, despite his eventual doom, the optimists’ mantra “so far, so good, so far, so good.”

The second thought swirling about my brain is another mantra, this one taken from a more genuinely optimistic venue: the twelve-step programs that dominate rehabilitation therapy in the U.S. (Full disclosure, I have no personal experience in a twelve-step program, though I have been on the receiving end of step nine a little more than I would like.) That mantra is this: One day at a time.

Taken together, the two mantras have come to symbolize where I stand in the current economic crisis, and where I think a lot of our economy stands. On the one hand, we know we are in a free fall, though, for many of us, we haven’t crashed through to the bottom floor, yet. So far so good. And, simultaneously, each day I take stock of my business, my clients’ business, and the market in general and, instead of panicking, I direct myself towards looking for what needs to be done today to make all of us better off than we were yesterday (Hint: it usually involves leaving the market tickers alone and getting back to work.) With that comes the serenity that enforced myopia affords us. One day at a time.

What is interesting about my attempts at living with the prospect of imminent collapse is how much the psychology of the moment rules our perceptions much more than reality. With the benefit of 20/20 hindsight, it’s clear that we’ve been on the verge of a financial disaster for years, pretty much the last decade as far as I can see. Bubble economies really got started in the late 1990s, with Y2K begetting the dotcom bubble in our industry, while easy credit, deregulation, and the “greed is good” mentality continued frothing up bubbles across the financial sector until the credit markets began to collapse in mid-2007. And then the shit really hit the fan.

What this means is that while we’ve been living on the edge of a disaster for a number of years, we’ve only just now began to act as though this disaster could result in our personal destruction. In other words, the bliss of ignorance kept us spending and planning despite the possibility of imminent collapse. As long as we didn’t worry about a collapse, to a large extent we were able to avoid one. But once we actually popped our head out of the sand, we found ourselves panicking at the awful reality that uncertainty brings.

This panic reaction reminds me very much of the difference between my wife’s world view and my own. My wife is a cancer survivor, and, among other things, runs a support group for young adults with cancer. Many people in her support group have horrible prognoses, so in her world, every day is a gift, and the prospect of an untimely death is simply a recognition of a reality that is infinitely easier to accept than it is to fight. We are all going to die, and most of us will probably think it’s going happen too soon – so rather than fight that fight, how about taking a walk, or watching a movie, or playing with the kids. Focusing on the inevitable awfulness of reality doesn’t do much more than fuel a panic reaction that, if taken to its extreme, would keep us all in bed under the covers for the rest of our lives.

How does this tie into the current economic crisis? On the one hand, there are people for whom the current economic disaster is truly a disaster: millions are unemployed, their houses “under water”, their prospects grim. For them, I have no glib nostrum to paper over their genuine suffering.

But for the rest of us, and we are still the vast majority, so far so good. We have jobs, houses, income, savings, and the prospect of a bright future. When we succeed in tuning out the rising panic of external reality, things today aren’t that different than they were two years ago, even as we ignorantly assumed everything was fine despite the pending doom.

What will fuel a recovery, more than anything, is a return to a more realistic, if not optimistic, perception of our economy that includes an understanding, and embracing, of its fragility as much as its potential. Much of the problem with bubbles is not that they are risky, but that the risk is misunderstood or fraudulently represented. Risk is good, and we should take plenty of it. And we should protect ourselves against the consequences of that risk, so that there is room for failure – failure being as much if not more the norm in human endeavor than success – without causing the collapse of the world as we know it.

Some of this risk mitigation can be accomplished by technology – in case you were wondering where the tie-in to the usual topic of this blog might be – and some of this risk mitigation is more societal: my counterparts in Europe, with their guaranteed pensions and universal healthcare, are infinitely less panicked about the state of the global economy than my friends here, who are one paycheck from living in the street and looking suicidally at their 201(k) or 101(k) pension plans, if they even have one left to look at.

I believe our recovery will start only when there is recognition that there is a safety zone in our economy where those of us still blessed with resources can act like consumers of old without fear that some other unknown disaster will soon wipe us out (again.) That safety zone has to come in part from regulation (the credit markets, hedge funds, etc.), and in part from legislation (health care reform, jobs stimulus programs, more equitable taxation). That’s why I believe in the necessity of rescuing the automotive industry – and its workers. Our national safety zone has to take into account the symbolic resources of the country as much as the more tangible – and perhaps fungible ones – that we might think are more worthy of rescue. If GM and Chrysler can outright fail, so can anyone and anything, and if that’s how we set the stage for recovery, we’ll have created a psychological barrier that will be hugely difficult to overcome.

How long will this recovery take? Here’s where I really go out on a limb: A return to a safer, more stable psychology in the economy could engender a recovery almost as breathtakingly fast as the downturn. Poor John McCain was actually right when he said, in the midst of bungling his response to the financial crisis, that our economy is fundamentally sound. It still is, despite its current state of hibernation. We are still a consumer society, a consumption society, and one that doesn’t like to miss a sale or pass up a cool new innovation. We can and will be tempted again, once it’s safe to come out of our shells. If we solve the fear factor, the recovery will happen, slowly but surely.

One day at a time.

I don’t usually plug my own work, but I just wrote a piece for Datamation.com on what enterprise software vendors should say to their customers as the current recession/depression swallows up the global economy. Basically, the gist of the column is that this is the moment to inaugurate a shift in how vendors interact with their customers, and it starts with some key points — some symbolic, others more firmly practical — that I believe might actually change the market for the better, and help vendors and their customers emerge from the current economic disaster stronger and more profitable. Some of this is more utopian than practical, but I stand by the spirit of the gestures I’m asking both vendors and customers to make on behalf of each other.

My main suggestions are:
1) Vendors should offer their customers an immediate 6% give-back on their maintenance fees, provided the customers take the savings and invest them in new, innovative software from the vendor.
2) Vendors should develop an ROI case for every product they sell, and thus arm their customers to make a strong case to their decision-makers based on facts, not wishful thinking. Customers in turn need to be active participants in this ROI process, and start collecting and managing ROI data from within their enterprises.
3) Vendors should take more responsibility for implementation success, and thereby police their big SI partners more closely. Customers in turn need to be more proactively engaged with a vendor to solve SI partner problems before they get out of hand and end up on the front page of the business section.
4) Vendors should engage more honestly and forthrightly in the contracting process, and eliminate “gotchas” and other traps intended to trip up their customers. Customers in turn need to be better prepared for the contracting process, and if that means engaging third party help, so much the better.
5) Finally, vendors should provide real guarantees for the ROI of their products, and put some SLAs in front of those guarantees. In return, customers should promise to shorten the buying cycle significantly, freeing up a huge cost drain for vendors.

Could this actually happen? I think it would be more than a little interesting to see someone adopt at least suggestion #1, if not the others. But whether or not any of this ever sees the light of day, my real point is this: Now is NOT the time for business as usual, particularly of the adversarial kind. Vendors and customers need each other more than ever, and it’s long time past for a little love to replace the perception of pure opportunism that permeates too much of the vendor/customer relationship.

Before it’s too late. Way too late.

I just received a rather interesting email about a new study by NETCompetition.org, one of the groups that fights for net neutrality and other largely worthwhile causes. The study, authored by NETCompetition chairman Scott Cleland, claims that Google sucked up almost 17 percent of the total consumer Internet bandwidth in 2008, while effectively paying for only a fraction of the cost of supporting that bandwidth. Cleland then comes to a rather incendiary conclusion: Google gets an “implicit bandwidth subsidy” of $6.9 billion from American consumers.

That’s a pretty big number, so it’s important to note that this is merely an estimate gleaned by taking Internet usage data from Cisco and other sources, and extrapolating Google’s share based on its relative market share. Google doesn’t reveal anything regarding its Internet usage or payment for that usage, not that any company I know does.

The report goes on to lambaste Google’s public support for affordable, unlimited bandwidth access through a group called Internet for Everybody, particularly in light of this alleged $6.9 billion free ride Google is taking for itself. Assuming Cleland’s data is remotely good, there is something to be said for asking such a successful and profitable company to shoulder more of the burden of the infrastructure that it depends on.

More importantly, and somewhat regardless of the magnitude of any potential individual Google “subsidy” is the question of what this issue of broadband use has to do with the advent of cloud computing. If the various cloud platform proponents have their way, an enormous amount of potential or actual internal IT infrastructure will effectively be shifted to the cloud. With that shift, and I’m pretty sure it will amount to a significant amount of resources moving over to the cloud, there is the real prospect that the usage of broadband resources by some of these cloud platform companies will exceed their net contribution to the infrastructure’s costs.

It’s an interesting public policy question to add to mix as we consider a clouded future. Internal IT gets to pay for all its resources, or the very vast majority, including the high-bandwidth connections it uses to communicate to the outside world. There is definitely a net savings coming to internal IT costs from the shifting of resources to the cloud — those savings being the main raison-d’etre for cloud computing. But the question of what happens to cloud dependent resources like Internet bandwidth as this shift occurs — mostly in the form of who pays for them — isn’t something that’s been explored very much, if at all.

Cleland’s report shows overall Internet traffic doubling between 2007 and 2009, and while it doesn’t mention anything specific to cloud computing, it’s easy to assume that, considering how much Microsoft is spending on building out its Azure platform — one Microsoft insider told me he measures their platform growth in megawatts, not CPUs — that there’s a lot of bandwidth about to be soaked up by cloud computing.

So, the question is, who should pay? If the freight forwarders have a good year, they pay more in taxes for using the roads and rails than they would in a slower year. Same with the airlines: though our tax dollars built the airports and finance the air traffic control system, the airlines pay fees and taxes relative to their use of these resources. Shouldn’t cloud computing platforms, and everyone else using major chunks of subsidized Internet bandwidth do the same?

Seems to me that, when budgets are strained all over the economy, giving a free ride to wealthy companies might not be the smartest move. I certainly pay for my broadband usage — and so do you. Why should Google, Amazon, Microsoft, and anyone else not shoulder their fair share?

I was sitting in the lobby at a client site waiting for our meeting to begin, when my compulsive need to check email yielded a frightening result: my client had just emailed me to ask if I was still coming to the meeting? There I was, $500 in expenses and a day spent traveling, and there was a chance that this meeting was about to NOT happen.

What had happened was simple: my client, in an attempt to deploy some Web 2.0-ish collaboration tools, had mandated Google Calendar for use in scheduling meetings. And his assistant, dutifully obeying orders, had put the meeting into Google Calendar and sent me a link that would guide me through the acknowledgement process.

And so, two weeks in advance of our meeting, I set out to acknowledge the invite. Google Calendar dutifully opened a website and I set to work. Two failed attempts to acknowledge later, I emailed the assistant directly and confirmed my attendance. She emailed back, insisting that the Calendar was working correctly – and that I should keep trying. I asked a colleague, who was also attending the meeting, if he had been able to respond. No such luck either. We both sent email acknowledgements and assumed that was enough.

It almost wasn’t. Luckily, my client trusted that I wouldn’t forget a meeting this important, and showed up anyway. But it was a close call.

To give Google the benefit of the doubt it deserves, Google Calendar is beta software, and, obviously behaves as such. Why my client was using beta software for such an important task (not my meeting per se – this company has decided to standardize on Google Calendar for all its meetings) is a good question, for which there is one simple answer: The model for much of the social web is free, and almost unavoidably so, and my client was merely living the Web 2.0 dream of turning on the free functionality and watching…. a hopefully efficient and effective set of processes emerge. Nice try.

I think the best thing you can say about the free social software model is that you will always get exactly what you pay for when using free Web 2.0 software. In this sense, the ROI looks almost incalculably high: Paying nothing (or nearly nothing, particularly relative to the high price of enterprise software) and getting something of value is truly the best thing that has happened to software since the open source movement. Who doesn’t dream of infinite ROI? Even the smarmiest vendor on the planet wouldn’t mind being able to claim something substantially higher than a 100 percent return on their customers’ investment.

Of course, there’s the sticky little problem of what happens when free software bites back: in addition to being out $500 and a day’s travel, there was the genuine risk that I would have lost some future business with this client, and, well, I’d also like to think that the client would have been bereft of the valuable services I was prepared to render had Google Calendar’s beta glitch succeeded in scuppering the meeting entirely.

Indeed, this is one of the problems with free software, and one of the problems of basing so much of the future of Web 2.0 (which in turn claims to be the future of enterprise software) on a free software model. Among many other problems (here’s a recent rant of mine on the subject), free implies a level of service and support – and functionality – that is simply not up to enterprise software standards. This article from the New York Times makes Gmail’s support regime look like a cross between a Kafkaesque nightmare and a Joseph Heller comedy.

There are lots of other examples of getting what you pay for: I recently went on Facebook to actually try to conduct some business (as opposed to the unrepentant socializing I normally use Facebook for.) That happened to be one of the moments Facebook was performing like one of the kids it was originally intended to server: balky, recalcitrant, and, in the end, largely useless for the function I was trying to get it to perform. I’ve seen Gmail do some similarly amazing things, not-ready-for-primetime things, including resetting my password randomly and being plain unavailable at the very moment I need it the most.

In the end we all need to take a deep breath and think hard about whether “free” and “enterprise class” have any business being used in the same sentence. The promise of infinite ROI must be tempered with the potential cost of failure and down time. I know I can’t afford to lose business due to a free software glitch, and, conversely, I know I’m willing and able to pay to make sure my business runs as smoothly and efficiently as possible. Especially when it comes to spending what is, even for my business, the relatively small amount needed to buy the goods and services needed to keep thing humming smoothly.

Is there room at the top of the price heap for improvement? You betcha: a lot of enterprise software is outrageously priced, even before you count the annual maintenance cost. But free, despite appearances, has its own costs too. And I think we should all think first before assuming free is as free as it looks. There’s no such thing as a free lunch, and there’s no such thing as free software either.

Well, that experiment is over. Actually, it lasted a lot longer than I thought it would. The upshot of what was my first foray into the blogosphere was that my blog never got the traffic that ZDNet wanted for the basic, entry level pittance they were paying me. No matter that the people reading it — based on the feedback I was getting — included many of the top execs and influencers in the enterprise software industry: They didn’t provide the pageviews that made ZDNet want to keep forking over the aforementioned pittance every month.  And so it goes.

Luckily for me, and hopefully you, the blogosphere is so organized that it’s relatively easy for me to relocate here and continue to post on enterprise software market topics as I see fit. Hopefully this blog will be as good or better than its predecessor, being freed up from the confused embrace of ZDNet. I’ll let you be the judge.

My goals here are simple: Write about what’s new and different and exciting in the enterprise software market, and do so in a way that’s relevant, interesting, and informative — and maybe even funny, if the issue calls for it. I’ll be starting slow, as a much-needed Thanksgiving vacation looms next week. But come December, expect to come to this site and be reminded why enterprise software matters. See you then.

Josh