Marketing Memos

Don’t get me wrong.  I like the old model for making money on software. 
A couple of clever people have a bright idea and cobble together a solution on
spare time and credit card debit, releasing their solution to the world and
charging obscene amounts of money for each copy.  That is the essence of
the Silicon Valley dream - digital prostitution (you got it, you sell it, you
still got it).

But of late so much market momentum has shifted to Open Source that even the
oldest and
most
cynical in the industry must give pause.  And in one case, we may well
be seeing the beginning of a revolution and a conspiratorial insurgency.

Here is the basic fact of life about the software industry: nobody buys
software.  It is the same as drill bits.  Last year millions of 1/4
inch drill bits were sold in America, but nobody surveyed wanted a 1/4 in drill
bit.  They all wanted a 1/4 inch hole.

Software is the same way.  The operating system is nearly irrelevant as
a purchasable item because what people want is  applications.  If the
application runs only on Macs, people will buy Macs.  Sun Micro built their
fading empire on growing a base of applications, as did Microsoft.  And
people buy application not because they need a CD-ROM filled with highly
organized bits, but because they want to accomplish something using the software
(like surfing the web to learn how to drill 1/4 inch holes).

Recently, IBM — the once and future 900 pound gorilla of the tech industry
– announced that

a client for Lotus Notes would be available on Linux.  The IBM
spokesman (if such creatures can be believed) noted that "he has personally been
‘hammered’ for the last several years at Linux and Lotus Notes conferences on
the issue of when a client would be available for the Linux desktop." 
Perhaps he was being hammered by

IBM employees who have been shoved into using Linux desktops and likely were
disconnected from their groupware grope.

The fact of the matter is that no enterprise will deploy Linux on the desktop
(outside of IT) unless their applications — or
reasonable equivalents
– are available.  The cost savings on software would be many orders of
magnitude less than the lost employee time and productivity.  Thus, common
applications must be ready for any sane CIO (if there is such a thing) to commit
to even a modest test deployment.

But we may well be on the cusp of such a moment. 

OSDL conducted a survey of tech professionals to determine what enterprises need
in a Linux desktop for it to be a practical alternative.  The results
largely matched early work I did with SuSE when "Linux desktop" was a new
concept.  Notice that with few exceptions, the list includes only
applications, and the exceptions are primarily application development oriented:

There are several take-aways here from a marketing and market perspective:

1. The Linux desktop
   
   "whole product" definition is incomplete, but not by much.  The two
   remaining holes are the toughest to fill and will take the longest time.

2. As always, there is a
   
   check-and-egg issue in that vendors don’t want to build Linux desktop
   applications or clients until there is a significant roll-out of Linux
   desktops, and CIOs will not roll out Linux desktops until there are
   sufficient business applications. 
   
   Catch-22.

3. Internal application cannot be built until CIOs get their in-house
   development staffs trained on Linux development, and that won’t happen until
   there is a compelling reason to roll-out Linux desktops … and that won’t
   happen until there are enough external Linux desktop applications (see
   above).  Catch-23?

(Note: This all ignores the elegant solution provided by my pal
Jeremy White and the good
folks at Codeweavers )

The market is near, but not yet at, a tipping point.  To get to the next
phase, there needs to be pressure from a few desperate, determined, or demented
stakeholders to move key applications to Linux.  In short, someone will
have to pony-up money and/or manpower to port existing applications to Linux, or
recreate them from scratch.  Neither will happen quickly as the
cost/benefit to the vendors is risky and most enterprises would rather invest
that kind of money internally.

The alternative is for vendors to Open Source some of their development work. 
If they open client code programming to communities with a vested interest in
creating Linux desktop applications, then the vendor can get the work done
relatively cheaply and quickly.  The downside is they face extra support
costs on the back end for no new revenues in the short term.

The other alternative is to port clients to web browsers.  With
AJAX
offering elegant ways of creating clients that are portable across most (if not
all) platforms, many vendors have a "port once and for all" opportunity.

The key is for vendors to recognize that they must support a Linux desktop in
the long term because of Asia.  Asia is growing like an economic weed, and
they are starting nearly from scratch.  Many Asian enterprises have no high
switching costs away from Microsoft or Apple, and thus are adopting Linux
desktops rapidly.  This means whatever applications you sell into Asia must
have a good Linux desktop story.  If not, those markets may be closed to
them, and competitors who do support Linux desktops will prosper.

Asia is the Linux desktop tipping point … and its coming faster than many
people want to admit.

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I have a right to kid Novell on their corporate wide marketing strategy. 
Under the (mis)leadership of Jack Messman, they messed it up man.

Ugly puns aside, we are seeing something of a rebirth of marketing acumen at
Novell vis-à-vis the SuSE product line.  Allow me to provide a bit of
historical perspective so this all makes sense.

I was a marketing strategist for SuSE before Novell bought them. 

The situation I encountered at SSE was desperate, with flat North American
revenues for more than three years.  Think about that for a moment — flat
revenues in one of the fastest growth markets the tech industry has seen since
disk drives were invented.

The reasons were many and complex, but one thing was certain — Red Hat "got
it".  Red Hat recognized that enterprises would eventually agree to test
drive Linux, and would turn to their techies to define action plans.  Red
Hat spent a lot of money assuring that every techie on the planet could get a
copy of Red Hat for free, and encouraged them to deploy
skunk work
projects using Linux.  Thus, when management said to the techies "let’s
try Linux", the techies replied "OK.  We’ll get another copy of Red Hat."

By the time Silicon Strategies Marketing was brought on board, there was no
use in SuSE trying to repeat the process.  New strategies had to be
developed (for

a fuller recounting of Silicon Strategies Marketing work for SuSE, see out white
paper titled "Manhandling Markets" in our white paper library).  Red
Hat’s strategy, effective as it was, did not involve IT management to any
obvious degree.  Thus, SuSE embarked on an executive thought leadership
campaign, showing how Linux meant more to CIOs and CTOs than mere cost savings.

This worked pretty well,

contributing to a 5,000% rise in top-line revenues for SuSE in North America.
But Novell neither continued or modified the basic strategy, and lost this
marketing strategy vision as they depreciated Open Source as a business
direction in favor of using Linux to resuscitate their
aging
proprietary products.

I paint this historical (hysterical) picture to foreshadow the news of the
week — Novell has rediscovered marketing and promotions!  As I noted in
last week’s blog, the
old
SuSE branding has remerged, and some passion has reawakened in Novell’s Open
Source marketing teams.

And they are going after the techies — a reverse of what we accomplished at
SuSE.  Novell will not likely abandon any thought leadership process with
IT executives, but they realized they had to engage technologists and community
members at a visceral level to break the mindshare stranglehold Red Hat has on
them.  Thus, in
the latest
SuSE promotional materials, we see techies and community people as the
spokespersons.  Using peer images (ultra casual clothing, geek
continence, abusive music), the ads connect to the average younger technologist
(the Linux geeks) at an emotional level, which is an essential step in
establishing a trust relationship.

This visual and audio approach is amplified with select language.  For
example, a new slogan is "Your Linux is Ready".  The word
"your" is a externalizing word, putting the buyer as the center of the
discussion.  Too many technology companies lead with "we are" or "we do",
and few start a conversation with "you are" and "you need".  "Your Linux"
shows Novell wants to connect to techies in ways they have never done before.

Lest you think this is speculative, I’ll note that
John
Dragoon, Novell’s new CMO, tells that this campaign is one of "the most
ambitious marketing launches in Novell’s history." 

What makes this of interest to me is the reversing roles a company must
occasionally take.  When SuSE was being left in the dust by Red Hat, we had
to find an unexploited angle to gain traction.  Coaxing and coaching IT
executives was that angle, and it drove major advancements for SuSE (including
landing a global contract with Ford Motor Company).  But back then we knew
there would come a time when techie resistance would trump executive preference,
and SuSE would have to apply as much promotional power to the lower IT castes.

It looks like that time has come.

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What can you say about a tradeshow when the top vendor in the industry doesn’t bother to show up?

LinuxWorld was devoid of Red Hat this year, which says a bit about how secure Red Hat feels in their (current) leadership position.  Their event schedule shows they are now targeting the executive ranks (Gartner summits, InfoWorld
executive forums) and key partner events (Oracle World).  Red Hat started
life indoctrinating the techie caste, and holds them fairly firmly.  This
left pre-Novel SuSE to mine executive prospects, which had measurable success (5,000%
rise in revenues SuSE achieved through this approach ).  Red Hat is
trying to tie up what they didn’t have before … and what Novell may have let
lapse.

LinuxWorld has devolved back to its origins — a show where techies come to
learn more about operating system internals and how to better manage it. 
The "suits" are gone, vendor marketing VP’s leave after the first day, and there
is little of anything newsworthy.  Expect LinuxWorld to devolve more …
and perhaps disappear after a few years.

That having been said, there were interesting things to note in the realm of
technology marketing at LinuxWorld.  Most notably is that Novell has new
passion and verve.  They dominated the show, packed the isles during
presentations, and made attendees believe they had something important to say.

Oh, and they were "green" again.

When Novell first bought SuSE, I was party to some debate about branding. 
One faction took the Larry Ellison "acquisitions will be assimilated" approach,
thinking that "SuSE Linux" should morph into "Novell Linux" within a year. 
Others felt the SuSE brand was so strong changing too quickly — or at all —
would destroy market perception. 

So Novell did exactly the wrong thing and tried to do both.  Well,
that’s over with and SuSE green was the dominant theme at LinuxWorld.  From
copy, to color, to marketing message Silicon Strategies wrote for SuSE years
ago, the core SuSE brand has escaped and was shoved into the faces of the
attendees, who ate it up!  Welcome home, SuSE.

Yet the rest of the vendors were not doing as well.  I walked 1/2 of the
show floor and ranked each vendor on their
core
messages.  I had a very strict criteria:

1. In 10 seconds or less I had to know …
2. … what they offered and …
3. … what value it provided

Pretty simple, eh?  Anyone vending a product needs to be able to
communicate this succinctly.  Otherwise they are spending money on a booth
which would be better spent on booze.  I used this set of criteria on large
and small firms alike, and discovered that neither group did very well.

54% of vendor booths could not communicate the very fundamentals of their
offerings in the allotted time.  The bad part is that this is not
surprising, as core messages are one thing technology vendors do not do well …
especially software vendors.  This was painfully clear as nearly 90% of the
hardware vendors I surveyed had clear statements about what their products were
(iSCSI PCI cards) and why they were better (10% more throughput). 

But perhaps more surprising were those who did very badly.  ActiveGrid,
who I personally think has a unique and useful product had incomprehensible
headline messaging.  Bivio was worse, and Xandros had none.  That’s OK
as PalmSource, IBM and Fujitsu all failed the test as well.

At the other extreme, Oracle and HP had it right. 
Oracle had a simple message —
"Deploy Linux Faster" — which their in-booth partners echoed.  HP was
a little more vague with "Linux Primed for Business", but their kiosks signage
amplified the core message with individual and specific claims, and the dual
mode messaging worked well.  Other vendors who succeeded in communicating
their core value were Wyse (surprise), Unisys, EMC, Pentaho, Steeleye and
Emulex.

So what is the take away for today?  Two parts:

First - LinuxWorld is changing: It is reverting to a techie fest with
little or no hype.  Anyone targeting IT professionals not in the executive
ranks will find good prospects at LinuxWorld.

Second - messaging and passion matters:  But if you cannot
communicate to a prospect as they are walking past your booth, then stay home. 
You could hear the Fujitsu staff sighing in the void that was their booth, yet
you could not see the stage at SuSE given how deeply they were packing in
potential customers.

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The Internet is destroying and creating in one sweep of a rather majestic
arm. 

Some have prognosticated that in the future, even enterprises will rent their
applications from Software as a Service (SaaS) vendors.  This may or may
not come to pass, but I had thought that end-to-end IT as a Service (ITaaS) was
a practical impossibility.

Now I am not so sure.

IBM has identified some low hanging fruit in the form of continuous data backup
for SMBs.  Their offering, peddled in part through Circuit City, PC
World, and Staples, offers to continually back up and version control files on
user PCs.  The scheme accomplishes as a service what SMBs have trouble
doing as an IT policy, and eliminates the problems small IT departments face
(establishing backup servers, enforcing end user storage policies, architecting
versioning, etc.)  In short, SMBs can rent a level of service heretofore
know only to large, well heeled enterprises.

Plenty of competitively priced network bandwidth has destroyed barriers to
many functions, and now seems to be knowing at the very door of IT.  It is
wholly conceivable that the value of an IT department will be reduced over time. 
They will still be essential in the process of evaluation, acquisition, and
deployment.  But as an ongoing  provider of process, they may lose
value.

The question my alleged mind is raking through is "what other nominal IT
process functions could be outsourced?"  You can outsource some security
functions today, which unlike end user PC backups, is mission critical. 
You can outsource email management.  But will we reach a point where server
provisioning and configuration are outsourced, and most of that work is
automated?  Will IBM, with it’s mighty services group, be able to handle
"ad hoc" scripting from accumulated libraries?  Will HP’s Openview become a
service for managing entire SMB network infrastructures from afar?

Time will tell, but I’m wagering cold, hard cash that the answer to all these
questions is "yes".

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I opened a bit of a hornet’s nest with an article titled "Is
Enterprise Software Doomed?" that appeared on the Sandhill newsletter.

Several kind and

intelligent folks provided keen rebuttal,
picking at some
inequities of my article born of an 800 word limit.  Yet in the end
these folks and I agreed more than we disagreed.

The bottom line is that the industry has changed (note the past tense), and
software vendors must change accordingly, or
perish.

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