Marketing Memos

One problem with Linux is that nobody really knows how big it is. Like any other virus, you have no idea exactly how many bodies it has infected.

Ignore the sales numbers from Novell and Red Hat. They tell only part of the story, namely the demand by larger institutions who must ensure success and have support. These sales figures do not even come close gauging unsupported replications of subscribed distributions, hosted Linux (which often is self maintained), departmental servers, all the OpenSuse and Fedora installs, and the occasional renegade Linux laptop.

And those are the small markets.

I’ve been watching the embedded space more and more. Silicon Strategies Marketing has clients in the mobile phone business, the Linux business, and now in the embedded Linux space. We have been mapping where embedded Linux is finding traction, and some of the issues within that market.

The question is “where is embedded Linux not being used?”

• A relative of mine who works on Defense Department and “spook” contracts notes that Linux is the favorite platform for all military and intelligence embedded applications. As he phrased it “We can’t afford to reboot a spy satellite every few hours.”
• Linux is used in routers from a lot of different manufactures. Networking is a core Linux strength and with an embedded web server, it is easy to create user friendly interfaces.  And now everything needs to be network savvy.
• Phones are just starting to use Linux, but the open nature of the devices and the ability to plop new native applications on them is a strong differentiators. This is part of the reason Google went with Linux for G-phones.

Devices need to be smarter than in the past. This means they must have logic. It is far better to use an embedded operating system that has broad support. That really means Linux or Windows.

Linux wins mainly for two reasons:

1. It is more stable. Google wouldn’t run their entire product on Linux if it weren’t.
2. It is modular and tiny.

It is that last point that is perhaps most important. Much has been made of Window’s lack of modularity. WE (Windows Embedded) is considered by many to be a poor hack of XP, where fragility was induced by wholesale ripping apart of the operating system. I cannot comment directly, but this is the growing reputation. Some acquaintances of mine at Circuit City’s HQ said a WE deployment on cash registers was abandoned due to endless problems, which supposedly were induced by removing pieces of XP and seeing interwoven parts of the OS die.

Linux is by design module from top to tail. Much of Linux’s success has come by its ability to upgrade (or roll-back) discreet parts of the total package without disrupting other parts. This also means you can remove big chunks of unneeded functionality without much work or fear, creating custom versions of the OS.

This is why Linux will own the embedded space. When whittled down, the Linux kernel can be nearly 10oKB small, which is tiny. Total RAM requirements can be less than 4 MB. This makes putting Linux into nearly any device possible. Add the ability to customize all upper-level packages to operate well within small-device space, and you have something with which Microsoft cannot compete and simultaneously chase dreams of acquiring/integrating Yahoo.

Here’s the kicker: more smart devices are hitting the market all the time. Your dashboard (which soon will have integrated GPS navigation DVD player, Bluetooth interfaces, and more) is embedded. Your cell phone is embedded. Your home network is built on embedded devices. Your oven might require embedded logic to keep you from burning dinner … again. MP3 players need embedded OSs.

The list is endless and growing. The question then is “How do I profit from this?” That’s my secret for now.

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Has Microsoft lost its bearings?

This is more than idle speculation. Their recent failures, when placed side-by-side, showing an interesting pattern and a prescription for peril.

The two mistakes are Vista and Yahoo, and together they show a company that has forsaken its core missions and failing to defend their position, in part by chasing things other than what made them great (well … big) to begin with.

Microsoft’s mission was to make the end-user computing experience standard and bearable. It doesn’t matter if we are discussing MS-DOS, Windows, Office, or Internet Explorer. Long ago Microsoft rightly concluded that the user was important, that computing power was going personal, and that they should dominate the market.

They also were once a paranoid pack of profiteers and found ways of beating competition back to the point that various governments around the world intervened to prevent a desktop monopoly.  They have lost that edge.

In recent years, Microsoft has been chasing other dreams. MP3 players, web properties, cell phones, cash registers (POS terminals), advertising, game boxes, and more. It could be argued that each of these is an end-user computing point. But each is a detachment from where Microsoft’s buttered bread — the desktop.

Resources and attention diverted to other products caused a lack of attention to be paid to the desktop arena. While Microsoft was failing to deliver with Vista, it was also failing to see how Linux would become the de facto operating system for the next generation of users in developing countries. Microsoft created nothing new or  useful for the established market while forfeiting the emerging market.

They were too busy chasing Jerry.

Dismayed by their own lackluster performance in the portal and search arenas, Microsoft sought to buy position through buying Yahoo. Though there may be interesting, undisclosed synergies in the MicroHoo marriage, the mere transfer of assets added nothing to their market, that being the desktop.

Imagine for a moment that instead of birthing the bloated Vista, Microsoft had worked diligently on making XP more Internet aware — that their operating system knew how to make the most of a global network of computers without the need to muck-about in a web browser … that all web 2.0 technologies became an active part of the desktop experience, delivering intelligence to any/all desktop application — Microsoft’s or anyone else’s — providing that those applications ran on Windows.

This would be sticking to their vision, which is now walleyed.

It is too late to salvage Vista’s reputation, and it might well be worth working on XP+. It is too late to salvage the Yahoo deal (unless Jerry buckles) and might well be worth making the cellphone, Xbox, and PC collaborate. It might well be worth getting legal copies of XP onto every laptop flooding into Asia, Russia, and Latin America.

It might be better for Balmer to stick to his knitting.

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I recently gave a talk at the Software Licensing and Marketing (SLAM) conference where I painted a dower and gloomy picture for technology marketing this and next year.

Seems I may have been overly optimistic.

Though not yet officially proclaimed, we are in a recession. If my wet cocktail napkin math is any good, we will in this recession for quite some time — well into next year. Oddly though, in the earliest quarters of this recession some multi-national tech companies (Oracle, IBM, etc.) reported amazingly good sales growth.

And this will be a short lived phenomenon as the recession spreads.

Dig into their numbers. For example, IBM recently reported an 11% sales growth. But if you subtract the effects of the falling U.S. dollar, IBM’s sales grew a mere 4%. Granted, any real growth in the early part of a recession is a Good Thing™. But for an industry giant like IBM to slip to a 4% growth rate indicates the beginning of a downward slide.

That recessionary slide is going international.

We live in a global economy. Unlike any other time in human history, a major change in fortunes in one locale will impact economies everywhere. Thus tech companies that are currently doing well abroad will soon not be doing so well anywhere. The temporary influx of cash will rapidly diminish as the dollar finds a floor and the U.S. recession spreads like an Asian flu.

Satyam may be the leading indicator.

Satyam has routinely experienced growth rates of 45% or more a year. But for fiscal 2009 they recently scaled back their expectation by 40%. And this is a preliminary pull-back and will get worse. With oil inflationary pressures raging unabated, with Europe and the Americas reducing corporate spending, and with hyper wage inflation in India, the situation for Satyam is likely to get darker than a certain hole in Calcutta.

For tech marketeers, this means the number of recession survival options is dropping faster than a college girl’s top during Mardi Gras. U.S. is down, Europe is pulling back, and now Asia is sliding.

What makes this period exceptionally worse for tech is that we are at the end of one of our industry’s very predictable cycles. During good economic times customers go on buying binges, acquiring all forms of new technology, including stuff that they don’t really need. The market then goes from this binge phase to a period of technology indigestion, where customers quit consuming and try to integrate everything they have bought.

The current indigestion phase has arrived at the same time as the recession. Ouch!

Expect to see a lot of small tech companies with promising wares to be gobbled-up in the coming year. Many will simply die, but others will find acquisition exits to avoid becoming corporate corpses.

For the rest of you, Silicon Strategies Marketing has some tactics and strategies for surviving a recession. Give us a call and write us a check … we’ll be glad to help.  There may be a recession, but we have decided not to participate.

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When Gartner insinuated that Microsoft was doomed, you heard the loudest sound from a mass of penguins since the release of Happy Feet (had to plug that movie since my step-brother did the motion capture for it, as well as Lord of the Rings, Polar Express, and other great films).

The death of Windows has been greatly predicted, and equally exaggerated, but nothing lives forever and Microsoft may well accelerate necrosis with Vista (does anyone like Vista?). Bill Gates abandoned ship with suspiciously good timing … after all, rats are the first to jump a sinking ship.

Gartner’s maintains that Microsoft has not listened to the market. This is not news per se. Microsoft has always worn a hearing aid, and often it needs to be rebooted. Vista may be the terminal manifestation of this malady. Vista provides nothing of significant new value while crippling system performance and breaking certain peripherals. Giving up a little performance might be acceptable when significant new functionality is part of the bargain.  But what Vista doesn’t giveth, Vista does taketh away while smiting your peripherals.

The timing for Vista’s vultures could not be worse. Competition is perpetual, a lesson that Microsoft has unlearned. Vista and its nothing-for-something value proposition arrives while Linux continues its accent. Linux is becoming ever more user friendly while maintaining ruthless internal efficiency. Since Linux can be had for zilch (providing you bootstrap your own support), it provides unbeatable value.

Especially in comparison to Vista.

Gartner gurus also note that Vista carries decades of legacy code in a highly non-modular package. Thus any change in core or subsidiary functionality is difficult and time consuming, as witnessed by the five years it took to give whelp the product. New millenium markets move much faster, and both Mac and Linux OSs — being new, UNIX based, and highly modular — will evolve faster than Windows can hope to.

Windows may be the new CPM.

Microsoft’s tin ear continues to be their downfall. Many customers, especially corporate types, want to stay on XP. Yet Microsoft has announced that after June this will not be possible — no OEM or shrink-wrapped copies of XP will be permitted. In other words the market has spoken and Balmer said “tough.”

Back home we call that “stupid.”

However, Linux may not be the scariest of Balmer’s nightmares. Commoditized broadband has given birth to competition from Software as a Service (SaaS). The pit bull of SaaS is SalesForce.com, who from the start said their goal was to eliminate software as we know it. Google started pecking at Microsoft’s highly profitable application suite by giving away word processors, spreadsheets, shared calendars and other goodies (or should we call these Googlies).

Now SalesForce and Google are tag-teaming Microsoft while Gates skates away across his lake of greenbacks.

SalesForce CRM data can now be called from Google applications. This is the first and best integration of significant and popular independent SaaS offerings, and one that adds real functionalist. Small companies who have grown dependant upon SalesForce, and would like to dump Microsoft, now have a means for doing so while adding new capabilities.

That’s a good value proposition, unlike Vista’s inverse value prop.

Recall what I said at the top of this missive about Vista delivering nothing new or valuable. SalesForce and Google are, and attacking Microsoft’s strengths in one breath.

Rumor’s of Windows death may be exaggerated … or they may have been a tiny bit premature.

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For varied and unrelated reasons, I have been involved with many firms either in the collaboration field (VA Software cum CollabNet, Open-Xchange, Novell and their GroupWise offering) or for whom collaboration is an essential part of the product (Mobile Compete). This accumulated history led to me being the Collaboration Solutions judge for this year’s CODiE award.

When it comes to collaboration most vendors don’t get it.

Collaboration is not about technology, it is about people. Specifically it is about people sharing information in a manner that achieves one of several possible goals:

1. Reduce miscommunication
2. Ensure the appropriate information is available for making good decisions
3. Reduce the time to acquire that important information

So, the “it” that vendors don’t “get” is the multipart question of collaboration, those parts being:

• Who needs to collaborate
• What kind of information do they need to share
• How do they prefer to share it

Let’s take Mobile Complete as the first example. Their DeviceAnywhere product allows mobile application developers to remotely use real handsets to test their applications. Mobile Compete added several collaboration tools within their service. Answering the questions above:

• Who: Mobile application developers, Q&A and tech support teams.
• What: How a mobile application is behaving on a specific handset with a specific carrier.
• How: Either in real-time (while everyone is connected to the Internet) or asynchronously using replays of a session with a handset.

In their approach, Mobile Complete (without knowing it) answered these basic questions and provides very specific tools for their target market. From my discussions with Mobile Complete customers, the solutions are wildly successful.

Open-Xchange was a more generic, info-work type of collaboration suite (email, document management, calendars, project task lists, list management, etc.). What they did better than everyone else was integrating and linking (how) the data from these various information types (what) so that anyone using Open-Xchange could very easily hunt or search for important data (how).

This is a wide open opportunity in many software markets today. Collaboration if the very essence of any organization bigger than one person. People need to work with (collaborate) with other people. Looked at in a perverse light, CRM is one big collaboration suite dedicated to a specific set of users (sales , marketing, etc.).

If you are looking to differentiate in your markets/segments, ask yourself these three questions and see if there is a recurring need for your end-users to collaborate using the data you manipulate. If so, and if your competitors are not offering collaboration features, you may have a decisive wedge.

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