Marketing Memos

There is hidden meaning to Silicon Strategies Marketing’s chess board metaphor.

Sure, chess is a universal emblem for strategy, because you cannot win the game unless you think strategically – or unless you are IBM and build a computer that simply grinds through all possible moves in order to predict all possible outcomes of every game. The hidden aspect of chess is that it is played on a board divided into conquerable places, and the goal it to dominate space by taking it one piece at a time.

In other words, segmentation.

Market segmentation is like chess in that chasing the wrong segment with the wrong piece is a catastrophe in the making. Many chess strategies work like great market segmentation strategies, by taking the space/segment next to the one you already own and have well defended.

Like SalesForce.com is doing.

SalesForce started life with the right strategy, namely attack just one issue and dominate the field. CRM (the software solution, not the corporate philosophy) was ripe for the taking because it was always somewhat detected from other centralized applications. This allowed SalesForce to worm its way into enterprises. Now that they dominate the outsourced CRM industry, the only way for them to grow is to find another segment. Since they campaign against licensed software installed behind corporate firewalls, their segment strategy has to evolve outside of traditional CRM.

The question: what is an adjacent segment?

Next to selling to a customer, supporting a customer is key to any business. Fail at either and you die and painful fiscal death. Thus SalesForce has picked customer service – which is an extended function of managing the relationship with customers (CRM) as their next conquest. Stated more simply than Marc Benioff did – because his marketing team is chasing ‘cloud’ buzz – SalesForce now offers knowledge bases, community support and a Twitter tie-in.

Benioff was right in guessing outsourced support systems might be the next billion dollar opportunity. More to the point, support is the fraternal twin to sales. Both are linked directly to the customer and are interrelated. It is easier for SalesForce to extend their current offering into a compatible or dependant segment than to enter a completely new market (for example, Benioff would have been bonkers to launch an ERP offering or the next MMOG). It is also a more successful strategy because people involved in the current segment have connections to people in the new segment.

A key aspect of segmentation strategy is to choose segments in which customers talk to one another. Sales people talk to support people and need feedback from support databases (log a problem ticket for a customer and your account manager had better know about it). Thus SalesForce.com’s “Service Cloud” – a lousy name because it confuses the customer – is a good segment move not only for its adjacent proximity to sales and CRM, but because communications channels between SalesForce’s existing customers and Service Cloud’s target customers exist and are active.

Now, if we could just get Marc Benioff to show a little excitement.

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I was unsurprised by Adobe’s Omniture acquisition.

Until I saw the price they paid.

Adobe is sitting on stacks of cash. As is routine with tech companies, cash fat firms buy other outfits during recessions when acquisition prices are normally lower. Omniture was not suffering, so Adobe’s $1.8B buy may be the right price to pay for this strategic move. I asked my acquaintances in both Adobe and Omniture about this … and they wisely said nothing, forwarding me links to official press releases.

I obviously need sneakier friends.

The stock market didn’t think it was a good short-term move. Despite beating the street’s estimates on quarterly earnings, Adobe shares dropped more than 6% on the announcement. Perhaps short-term selling of Adobe stock is warranted because their software sales revenues continue to suffer during the recession. But in the long term Omniture’s less volatile SaaS revenue streams will compliment and amplify Adobe’s Wall Street value.

This is a marriage that should have happened long ago. The enterprise value of analytics is undeniable. It is also an integration nightmare, with many sloppy and incompatible ways of extracting traffic data and many forms of user interaction that are not (yet) measurable at all. Merging the lead source of web creativity with serious business analytic capabilities will soon enough offer a seamless and automatic integration of the two.

Automatic is the key word.

Adobe tools will soon make web analytics a de facto reality. Web engineers and content creators will invisibly have analytics hooks embedded in their work. When management decides to track web activity, all things being equal, they will buy analytic services from Adobeture because (duh) it is already enabled. Adobe is in effect turning every Dreamweaver, Creative Suite and Flash animator into an Omniture sales person.

The other strategic issue that the media missed is microanalytics. Omniture has always been impatient with the state of analytics, venturing from web into mobile and into very tiny parts of the web experience. This is where Adobe will leverage Omniture in a way Omniture could not risk doing it alone. Adobe will be able to generate analytics tags within all Adobe web elements. AJAX calls, Flash files, Cold Fusion back-ends, PDF files. The richness and lower level of detail that will soon be available to marketers will provide very precise insights into web behavior.

This has interesting implications for the market. First, Adobe has by and large been the favored environment for creatively minded web workers and for many enterprises. Integrating Omniture doubles there strength therein. People will have to argue against management to not adopt Adobe for maintaining their web presence.

In turn this means few enterprises will opt for another analytics vendor. This puts great pressure on the few remaining players. Google will own the bottom of the analytics market and Adobe will own the top. WebTrends may get squeezed out completely.

Most important though is how in the long run this will affect marketing. Real-time analytics combined with authoring and host-side tools will allow for instantly aggregating and simultaneously individualizing visitor activity. Hypothesize for a moment that you can tell not only what web page a visitor viewed, but what Flash movie he watched, which part he rewound to, if he stopped watching before the call to action, and what lines in a PDF he copied to his clip board. This level of precision, especially if tied to real-time server-side functions, gives marketers more control over the user experience and better ability to guide them to a specific action.

I’ll wait for Adobe sock to settle, then I’m adding a few shares to my long-view portfolio.

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If you want to suffocate your competitors, wrap the market with a set of tentacles and squeeze.

Like VMWare.

With the introduction of vSphere, VMWare initiated a strategy for the next evolution of IT infrastructure management, namely the cloud. At product launch VMWare showed it already paid attention to a whole product strategy. By engineering APIs and other bolt-in points, partnering software vendors could complete the cloud whole product definition. For example, VMWare is not a security software vendor and never should be. But virus and intrusion protection are on ITs worry list. So VMWare had to facilitate cloud-ready options for security. They designed their product so other vendors could become part of VMWare’s whole product definition.

Whole products are one aspect of dominating markets. The other essential elements to inviting FTC scrutiny include establishing partnerships with the top players in target segments and convincing the media that the race is over.

Whole product, whole ecosystem, whole mindshare.

Let’s put ourselves into the buyer’s cubicle for a moment. When evaluating any products – especially in new markets for complex technologies – you worry about three things: will it do everything I need, does it work with other stuff I use, and will the primary vendor have the strength to support me?

Whole product, whole ecosystem, whole mindshare.

VMWare’s whole product angle we covered, but it is worth noting that vendors are gleefully announcing participation. Via VMWorld, we see CA offering current and future software support within the vSphere framework. IBM, BMC and a long string of second tier players made announcements as well. No other virtualization or cloud management vendor has shown partner participation as broad or as deep. None of this is accidental. VMWare designed vSphere so others could profit by participating, and in doing so attracted said participation.

The media was perhaps the easiest to encourage due in no small part to the utter lack of competitive threat from Microsoft and Citrix, the only other virtualization solution with bucks and traction. Reporters live to “tell interesting stories” (that, by the way, is a copyrighted phrase, so be sure to cite Silicon Strategies Marketing if you repeat it). In the trade press, interesting stories mainly revolve around hot new concepts or who is flexing the most muscle. Since VMWare had established a cloud-focused whole product and was showing runaway strength for whole ecosystem, the press pretty much had to tell their story, the unwritten headline being “VMWare has taken the early and impenetrable lead in cloud management.”

Whole product, whole ecosystem, whole mindshare.

In short, with malice and forethought, VMWare wrapped tentacles around the market. The squeezing has begun. Red Hat almost did this in the early part of this century, but made one fatal mistake which Silicon Strategies Marketing capitalized upon while running SuSE Linux’s marketing strategy. Red Hat failed to think ahead. Part of our strategy for SuSE was to have them talking about the next item on the CxO’s forward planning list while Red Hat was talking about the previous one. While Red Hat was babbling to bitheads about Linux being cheaper, SuSE was chatting with CIOs about Linux leading to skill set consolidation. When Red Hat was touting a more efficient kernel, SuSE was talking to CIOs about strategic partnerships with IBM and Oracle. SuSE may still be #2, but can you name the “also ran” Linux distro vendors in 2001?

VMWare is not doing a Red Hat. While their tentacles are just beginning to wrap fully around the market, and when Citrix and Microsoft feebly toss out press releases to annoy the media, VMWare started talking about the next steps. They brought forth solutions to fill open holes in the market – cloud management application suites and SMB freebes. vCenter was introduced to automate cloud application management, capacity planning, recovery, charge backs and a rack full of other common infrastructure management issues. They also offered-up VMWare Go to seed SMB markets, providing a fast, easy and free way for smaller organizations to begin virtualizing. In the long run this will secure market wide mindshare and cause anyone moving up the IT admin food chain to have brand preference and experience with VMWare technologies.

I wax on and on about this not because I own VMWare stock and have some insane scheme to bump up the price (I do own some shares, and would appreciate it if you bought tons of it yourself). I bring all this up because it is extremely rare to see a company define, organize and instantly dominate a new market. vSphere and its tentacles are so well orchestrated as to be scary. VMWare knows the opportunity ahead in cloud computing and made sure they secured the three things necessary to dominate their new market.

Whole product, whole ecosystem, whole mindshare.

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