Paul Wallbank – Brilliant Communications

Category: cloud computing

Democratising customer service
“Nobody got girls on the helpdesk” says Mikkel Svane, founder of online customer service company Zendesk.

Mikkel hopes to make customer service sexy again as businesses find they have to focus on keeping clients happy.

This is a reversal of management thinking of the 1980s where, as Mikkel says, “customer service is a cost centre, outsource it, don’t spend any time on it and don’t let customers steal any of your time.”

Now the internet gives customers to tell the world about a company’s service, the days of outsourcing or disregarding support are over.

Mikkel Svane and Michael Hansen of Zendesk

Cloud technologies are changing how software is used in business, as Mikkel found when he and his partners started Zendesk.

It became very obvious that building something that was easy to adopt, web based and integrated with email, websites. Something easy to use that didn’t clutter the customer service experience.

Something that moved from managing the customer service experience to focusing on customer service.

We built it, put it out there and customers starting coming.

A lot of these companies thought they could never implement a customer service platform. Suddenly small companies found they could compete with bigger competitors.

The appeal to investors

Having customers signing up proved to be a big advantage in Silicon Valley, no-one knew anything about a Danish company, but with local customers starting coming on board US Venture Capital firms understood what the company does.

That customer base proved powerful as Zendesk has to date raised $84 million dollars over four rounds of VC funding and is looking at a stock market float with an IPO in the next few years.

“Silicon Valley has a great tradition of building businesses.” Says Mikkel, “coming to Silicon Valley was such a big step for Zendesk, in taking it from being some little startup to being a real company that could scale very quickly.”

A question of scale

Groupon is a good example, when Mikkel and his team first met the Groupon team the group buying service was a team of four guys in Detroit. Groupon founder Andrew Mason personally signed off on the initial Zendesk subscription.

“What the hell is this company, we don’t get it.” Mikkel said at the time.

Three years later Groupon was the fastest growing company in history with thousands of support agents on their systems supporting hundreds of thousands of products.

Despite Groupon’s recent problems, Svane is proud of how Zendesk helped the group buying service with growth that no business had seen before.

“With Zendesk they got not only a beautiful, elegant system they also got the scale and the trajectory. Imagine if they’d tried to do that with an Oracle database? You’d have never been able to grow so quickly.”

On being a good internet citizen

In the past we talked about platforms – the Oracle platform, the Microsoft plaftorm – today the Internet is the platform.

“We are a good citizen on the Internet platform,” says Mikkel. “Shopify is a good citizen of the internet platform, these type of tools are easy to integrate. We are all good citizens of the Internet platform.”

Having these open system is the great power of the cloud services, they way they integrate and work together adds value to customers and doesn’t lock them into one company’s way of doing things.

The threat to incumbents

Vendor lock in has been a curse for businesses buying software. The fortunes of companies like Oracle, Microsoft and IBM have been built holding customers captive as the costs of moving to a competitor were too great.

Cloud services like Zendesk, Shopify and Xero turn this business model around which is one of the attractions to customers and it’s why huge amounts of money are moving from legacy solutions to cloud based services.

Another reason for the drift to cloud services is the reduction in complexity, the incumbent software vendors made money from the training and consulting services required to use their products.

Having simple, intuitive systems makes it easier for companies to adopt and use the new breed of cloud services.

Focusing on the business

Mikkel’s aim is to help businesses focus on their customers and products rather than worry about IT and infrastructure. In the long term it’s about helping organisations establish long term relations with their clients.

“Companies today realise that it doesn’t matter how much it matters how much I can sell to you right now, it pales into in comparison of how much I can sell you over the lifetime of our relationship. This ties into the subscription economy. It’s much more important for companies to nurture the long term lifetime relationship.”

Having a long term relationship with customers is going to be one of the keys for business success in today’s economy.

The days of transaction based businesses making easy profits from skimming a few percent off each sale are over and companies have to work on building long term relationship with customers.

Services like Zendesk, Xero and Salesforce are those helping new, fast growth companies grab these opportunities. For incumbent businesses, it’s not a time to be assuming markets are safe.

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March 21, 2013
Retail and the internet of machines
Online retail and payment giants Ebay and PayPal hosted a media lunch in Sydney yesterday to publicise their Australian Business Update.

While eBay dominates the online selling market, PayPal’s position in the payment market place is extremely powerful with Internet monitoring company Comscore reporting in their Digital Wallet Roadmap how PayPal dominates the US market and does likewise in other markets like Australia.

Their update confirms the trends which have been obvious for some time, particularly in how mobile devices are now driving retail. eBay’s research indicates properly implemented multichannel strategies drives six times more sales than just having an online presence.

What was particularly notable with eBay’s presentation was how the Internet of Machines is changing the retail and logistics industries as smartphones and connected point of sales systems are cutting out jobs and middle men.

Paypal are particularly proud of their US partnership with cash register manufacturer NCR that integrates smartphone payments with the point of sales systems in restaurants, convenience stores and gas stations.

eBay illustrated this with their examples of coupon offers being tied to smartphone payment systems so people paying for gas with their smartphone get a voucher offer for various up sells.

Studies in the US have found a $10 offer can result in sales of up to $100. A pretty compelling deal for most merchants.

With these technologies, we’re seeing how connected machines are changing even the most mundane business tasks.

It may well be that the days of the service station cashier are numbered; it’s quite possible that in one generation we’ll have gone from full staffed gas stations to totally automated facilities.

The example of gas station attendants and cashiers is just one example of how automation is changing many retail and sales tasks. It would be a brave person to say their job isn’t safe.

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March 5, 2013
Was telecommuting another broken technology promise?
Telecommuting promised, or still promises, to free caged office workers from their cubicles, relieve the sardine-tin conditions on our peak hour trains and reduce traffic congestion on clogged roads. But has that promise been lost like so many other predictions of the technology age?

Banning remote workers is the latest edict from Marissa Meyer as she continues her daunting task of turning around Yahoo!.

Meyer’s move follows Google’s Chief Financial Officer Patrick Pichette claiming telecommuting is counterproductive and discouraged at his company.

One of the great promises of the computer age – almost up there with the paperless office – is the ability to work from home as if you were sitting in an office.

So promising is telecommuting it’s one of the main selling points for Australia’s National Broadband Network.

Having two of Silicon Valley’s biggest companies come out against remote working, particularly Google with its reputation for innovation and creativity, seems to damn the practice.

This isn’t helped by Australia’s nanny state deciding that companies are liable for remote workers who manage to fall over in their own home – twice.

Risk is the real barrier to adopting telecommuting, the risk of a compensation claim for a remote working employee falling over while rummaging in their kitchen fridge is one aspect but a more a bigger risk in the mind of a bureaucrat is that a subordinate is not under their control.

Control is almost certainly what focuses Pichette’s mind. While Google is portrayed as a company full of original thinking, non-conformist geeks in reality only half the staff, at best, fit the stereotype while the rest are the same corporate bureaucrats you’ll find at an insurance company or a quantity surveyor’s office.

In the case of Yahoo! a decade of mismanagement has left the company unsure of who exactly works for them, Meyer’s solution is to order everyone into the office so she can count heads.

The fact that some Yahoo! staff will quit, others won’t be able to get to an office and some will turn out to have been long dead (with relatives gleefully cashing Yahoo!’s cheques) is a bonus for Meyer as she looks at reducing staff costs.

In reality remote working is growing, partly because so much of the white collar workforce has been contracted out and few freelancers are interested in hanging around clients’ offices if they can avoid it.

A bigger factor is that workplaces themselves are changing as fewer organisations need to have huge office blocks. While the cubicles themselves might not go away, they are going to be clustered where the customers and workforces are rather than locked away in modern ivory towers.

That has some major consequences for our workforces and cities which the bureaucrats – both in the private and public sectors – have barely started to get their heads around.

Photo of commuters at Liverpool Street Station courtesy of Genkaku aka James Farmer through SXC.hu

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February 25, 2013
Pennies for Apps – how Apple and Google dominate online income
“App Store tops 40 billion downloads” trumpets Apple in a media release curiously timed to coincide with the opening of the Consumer Electronics Show.

While impressive, those figures aren’t great for developers. As writer Ed Bott points out they are getting 17.5 cents per download.

Making things worse, that return is trending downwards. Tech site Giga Om put the return at 20 cents a year earlier.

Giga Om also points out App Store returns are skewed towards the big successful game apps, meaning the majority of app developers are scratching for pennies.

This phenomenon is also happening with online advertising as Google Adsense partners find their income dwindling for pay for click adverts.

On top of declining revenues, there’s the cut that Google and Apple take. In the App Store, Apple’s take is 30% while Google pocket over 50% of Adsense revenue.

Working for pennies has become the norm for for creators like musicians, writers and app developers in the digital economy. The long tail is fine, but it barely pays the bills for all but a few outliers. Everyone else needs a day job.

In some respects this isn’t new – writers, poets, musicians and painters have generally starved in their garrets throughout history – but the Twentieth Century model of intellectual property, record labels and broadcast empires offered at least a decent living to many.

Right now the 21st Century model seems to be that creators can go back to starving, while the big four online conglomerates make the profits previously shared around by the movie studios, record labels and book publishers.

Maybe though the rivers of gold which are making Apple and Google’s managers rich may turn out to be just as vulnerable as those of the newspapers they’ve displaced.

It may well be that the current dominance of the App Store and Adsense are a transition effect as we move to other business models. It’s difficult to see right now, but we can’t rule it out.

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January 8, 2013
Was the netbook the Trabant or Model T of the computer world?
Taiwanese technology website Digitimes reports Asustek have shipped their last eeePC netbooks, bringing to an end a product that promised to change the computing world when they were first released in 2007.

At the time the eeePC netbook picked up on a number of trends – cheap hardware, the maturity of the open source Linux operating system, affordable wireless access and, most importantly, the accessibility of cloud computing services.

There’d been a pent up demand for usable portable computers for years but Microsoft and their hardware partners consistently released clunky, overpriced tablet computers that simply didn’t deliver on their promises.

For users wanting a cheap, fairly robust portable computer then netbooks were a good choice, at the price you could even risk having one eaten by lions.

Unfortunately for netbook a few things went against the idea.

Customers don’t like Linux

An early blow to the eeePC was that retail users don’t like Linux. Most computer users are happy with Windows and MacOS and weaning them off what they know is a very hard sell.

Sadly on this topic I have first hand knowledge having suffered the pain of co-founding a business in the mid 2000s that tried to sell Linux to small businesses.

Asustek discovered this when they found customers preferred the more expensive Windows XP version over the original Linux equipped devices.

Unfortunately Microsoft’s licenses damaged the economics of the netbook and held the manufacturers hostage to Microsoft who, at the time, wasn’t particularly inclined to encourage customers to use cloud services.

Manufacturer resistance

Microsoft weren’t the only supplier unhappy with netbooks. Harry McCracken at Time Tech describes how chip supplier Intel worked against the products.

For manufacturers, the netbooks were bad news as they crushed margins in an industry already struggling with tiny profits. However all of them couldn’t ignore the sales volumes and released their own netbooks which cannabilised their own low end laptop and desktop ranges.

In turn this irritated the army of PC resellers who found their commissions and margins were falling due to the lower ticket prices of netbooks.

The rise of the tablet

The one computer manufacturer who stayed aloof from the rush into low margin netbooks was Apple who had no reason to rush down the commodity computing rabbit hole. It was Steve Jobs who launched the product that made netbooks irrelevant.

“Netbooks aren’t better at anything… they are just cheaper, they are just cheap laptops” Jobs said at the iPad launch in January 2010.

Immediately the iPad redefined the computer market; those who’d been waiting a decade for a decent tablet computer scooped the devices up.

Executives who wouldn’t have dreamt of replacing their Blackberries with an iPhone, let alone using an Apple computer proudly showed off their shiny iPads.

The arrival of the iPad in boardrooms and executive suites also had the side effect of kick starting the Bring Your Own Device movement as CIOs and IT managers found that their policy of Just Say No was a career limiting move when the Managing Director wanted to connect her iPad to the corporate network.

Rebuilding PC margins

Around the time of the iPad’s released the major PC manufacturers declared a detente over netbooks and joined Intel in developing the Ultrabook specification.

The aim of the Ultrabook was to de-commodify the PC laptop market by offering higher quality machines with better margins.

While the Ultrabook has worked to a point, competition from tablet computers and the demands of consumers who’ve been trained to look for sub $500 portables means the more expensive systems are gradually coming down to the netbook’s price points.

Today’s Ultrabook will be next month’s netbook.

For the PC manufacturers, the lesson is that computers have been a commodity item for nearly a decade and only savvy marketing and product development – both of which have been Apple’s strengths – is the only way for long term success in the marketplace.

Those US based manufacturers who haven’t figured this out are only go to find that Chinese manufacturers – led by companies like Taiwan’s Asustek – will increasingly take the bottom end of the market from them.

The car industry is a good comparison to personal computers in commoditisation – with the passing of the netbook, the question is whether we’ll remember the eeePC as a Trabant, Model T Ford or a Volkswagen Beatle.

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January 2, 2013