Jan 282017

Earlier this decade it looked like Microsoft’s most profitable business line was doomed as Google Docs threatened to disrupt the Office franchise.

Yesterday Microsoft showed how they had seen off that threat when reporting their second-quarter results that beat Wall Street analysts’ estimates and saw the company’s stock market capitalisation topped $500bn, the first time since the year 2000.

Microsoft’s results were mainly due to its  cloud computing products with Azure growing at 93% year on year, Office 365 commercial at 47% and Office Consumer Products and Cloud Services at 22%.

Earlier in the week, cloud security company Okta released its Business at Work study that looked at trends in the commercial use of online services which showed how Microsoft’s products are dominating the market.

Microsoft’s advantage was underscored in a Gartner paper late last year. The Current State of Cloud Office and What to Do About It report found 10.7 percent of public listed companies surveyed were using Office 365 as opposed to 5.2% using Google. The rest had deployed hybrid or on-premise productivity suites.
So Microsoft seemed to have seen off the biggest threat to one of their most important products which for Alphabet/Google should be a worrying development as G-Suite (as it’s now called) has failed to become a meaningful revenue centre – advertising profits still made up 22 billion of the company’s $25 billion revenues in their last results.
Google’s failure to diversify should worry Alphabet investors, particularly given the headstart the company had over Microsoft Office in the early days of G-suite as then Microsoft CEO Steve Ballmer struggled to shift the company’s key product lines onto the cloud.
How much the initiatives of G-Suite’s new leader Diane Green can go in making Google’s product more attractive is a big question as Microsoft have shown they can match or beat their competitors’ offerings in areas like collaboration and artificial intelligence.

Despite Microsoft’s success in seeing off Google in the office productivity market the company still lags Alphabet market capitalisation of $570 billion but Microsoft have show they are far from a spent force in the software industry.

Oct 062016

What are the basic online tools for business? Here’s a quick list on what small and startup businesses can use to get online quickly and cheaply. This list will be updated regularly and please let us know if there’s anything we should add.




Google Docs

Microsoft Office 365

Open Office


Google Drive











Social media

Google My Business









What’s App

Workplaces @ Facebook

Google Hangouts (being depreciated)


Google Analytics



Customer support










Sep 212016

Oracle CEO Mark Hurd’s keynote at the company’s Open World conference in San Francisco yesterday illustrated a problem facing businesses around the world and its effects on enterprise software vendors like the one he heads.

“Standard and Poor’s top five hundred companies’ revenue growth is at one percent, their earnings growth is five percent.” “It means what? Expenses are going down.”

“This is the problem that the CEO has,” he says. “Why is it hard to grow revenue. All your investors want you to grow earnings and deliver growth. They have little patience for any long story about why it’s so hard.”

“They don’t care about any issues you may have. Grow earnings, grow cash flow, grow stock price. That’s it.”

Growing in a slow market

As a result of that the easiest way to grow earnings is to grow revenues but when global GDP and markets are flat, the only way to grow is to gain market share, Hurd says. “We have to know the customer better, we have to do a better job of marketing and we have to do a better job of aligning our goods and services to what our customers want. We have to improve our products and processes.”

That imperative for companies to cut their operating costs has had a brutal effect on enterprise IT budgets, “over the past five years, the growth in enterprise IT has been flat.” Hurd says, “the growth in spending has been basically zero.”

Customers drive the market

Like many things in the tech industry, the sector’s growth focus has shifted to consumers, “consumer spending on IT has almost quadrupled in the past decade. So while companies are sort of flat, consumers have been spending like crazy.” Hurd observes, “consumers are more sophisticated, more capable, more knowledgeable and expect better services than ever before.”

“Your customer experience is not being defined by your competitors but by technology fuelled consumers. For instance, AirBnB may be defining customer experience for the hospitality industry.”

“People are using a lot of social technologies in their personal lives,” “we expect ease of use, simplicity, clean interfaces are now things we expect in the enterprise side.”

Crimping innovation

In the enterprise IT sector, Hurd believes the flat market means many companies catering to the corporate market are skimping on Research and Development which in turn is crimping innovation, a factor compounded by cloud providers taking an increasingly larger share of the market.

This is underscored by cloud leader Amazon Web Services spending over ten billion dollars a year on R&D. Hurd’s boast that Oracle is spending half of that shows how the legacy players are struggling.

What stands out in Hurd’s keynote is how legacy providers see cloud computing as their salvation. However Amazon’s dominance in that space is a major obstacle for them.

For consumers, big and small, the shift to the cloud has been a good thing in shaking up the existing industry and making new technologies more accessible to smaller customers. For existing businesses like Oracle, there’s a challenge in adapting to a lower margin, commoditized and quickly changing market.

A bigger question though facing all large corporations, not just software companies, is this new normal of low economic growth. Succeeding in that environment is going require a completely different management and investor mind set to that of the last seventy years.

Sep 202016

One of the things that cloud computing has changed for the software industry are the fat profits – the shift to Software as a Service (SaaS) has seen the margins collapse as the rental model doesn’t offer the same big lumps of cash that the old way of doing business offered.

That has had terrible consequences for a generation of enterprise IT salespeople who lived well on fat commissions as they sold million dollar packages to large corporations and government agencies.

So it was interesting today to hear Oracle’s CEO, Mark Hurd – a master IT salesman himself – claim at the company’s Open World press conference today that operating margins on cloud services are quite good.

Certainly Oracle’s results show that with a claimed 61% profit margin there is money to be made in cloud services however their experience is not typical of the industry. For example, Microsoft’s online products only deliver a third of the profits as the company’s more traditional software lines.

Even with the still fat profit margins, it’s hard to see how a company like Oracle can maintain its old salesman driven model as deals based more on long term service contracts rather than big deals mean there aren’t the lumps of cash for salespeople to grab a slice of.

Older companies struggle with shifting mindsets in their industries and some, such as the taxi business in the face of Uber, take too long to change. Whether software companies like Oracle are navigating the change is something I’ll look at in tomorrow’s post.

Sep 162016

Ahead of next week’s Oracle Open World, which I’m attending, the software giant has announced its quarterly results which illustrate how software has shifted to the cloud.

The company’s cloud revenues jumped 77% on the previous year which is impressive but represents less than a tenth of the company’s sales.

What would concern Oracle’s shareholders is the stagnation of sales in their main product lines – on premise software makes up 69% of the firm’s revenue but it didn’t grow for the quarter and new license sales dropped eleven percent, which doesn’t bode well for the future.

Oracle’s big announcement in the last quarter though was the acquisition of cloud ERP provider Netsuite for $9.3 billion.

That acquisition will test how Oracle pivots into the cloud, it may well be the Netsuite management teach the parent company some tricks.


Jun 102016
business return on assets is falling away

Ride service Uber has raised the game for logistics and delivery services in opening a group of Application Program Interfaces for third party developers.

The four functions available in the Uber Rush package cover delivery tracking, quotes and history. They make starting a logistics service or adding functions to a business far easier.

While there is a downside in the risk of being locked into Uber’s service this move will give a lot of developers the opportunity to develop delivery tracking products, for incumbent postal and courier services, this API is bad news on a number of levels.

May 202016

Netsuite founder Evan Goldberg hopes the lessons he’s learned from building a software company can help researchers find new ways to treat cancers.

When Netsuite founder Evan Goldberg was contacted by his birth mother it was not all good news, she revealed to him she had one of the BRAC genetic markers, an hereditary trait that indicates a high risk of breast cancer.

A day before the official launch of the BRAC Foundation he has founded with a ten million dollar donation, Goldberg spoke to Decoding the New Economy at the Suiteworld conference in San Jose about how he believes he can help improve the treatement of cancers.

“How I think I can make a difference is applying some of the things we’ve learned at Netsuite,” he explained. “Netsuite has been all about breaking down silos, it’s not a system to run a department, it’s to run a business.”

“Much research and money is focused on a particular type of cancer – breast cancer, lung cancer, prostate cancer but it turns out from what we’ve learned from genetic research that cancers can be more similar to each other across different cancer types than to those in the same organs.”

“So in the same way we’re trying to break down silos between parts of a business, trying to break down silos between researchers, different institutions has sort of been a theme of mine.”

“What’s really interesting this notion of looking at where the cancer started, which is what we’ve been doing for a hundred years, looking at what is the mechanism underneath it is kind of how we’ve looked at business at Netsuite.”

“We’re supporting research in the BRCA Foundation from numerous different institutions and researchers that are looking at all different types of cancer. So bringing them together and cutting through all sorts of silos, these sort of artificial silos – some of which still have value in some ways – but fostering collaboration where there wasn’t any before.”

“It’s not a perfect analogy,” Goldberg admits, “but I do think that this notion of looking at cancer across different dimensions is similar to how we’ve been looking at business.”

“It’s a totally different world, the world of medics, research institutions, hospitals and clinicians, it’s a very different world to the businesses I’m used to deal with. Although there are still similarities in the motivations and the barriers to success.”

One has to hope BRAC Foundation will be successful however Goldberg is the first to admit the bulk of the work lies with the scientists. “The real hard work is done by the researchers,” he says. “Hopefully we can help them.”