Paul Wallbank – Brilliant Communications

Tag: google

  • Tightening the screws

    Tightening the screws

    Google had a big boost this week with Spanish bank BBVA announcing its 110,000 staff will switch to use the cloud based productivity software.

    This wouldn’t be good news for Microsoft as their struggle to retain their almost monopoly position in corporate desktop applications and will undoubtedly mean reducing licensing fees and accepting tighter margins on their products.

    BBVA’s move is interesting on a number of fronts although there’s a few myths among the trend towards cloud computing services and office productivity.

    Cost saving myth

    Part of the focus of selling these products is on cost and the head of Google Enterprise apps in Europe, Sebastien Marotte, said that his corporate customers on average achieved cost savings of between 50% and 70%.

    The cost aspect is interesting, I’ve posted before about exaggerated claims for cloud computing savings, and Marotte’s statement deserves a closer look.

    It’s highly likely the claimed cost savings are based on licensing – the standard Google Apps cost of $50 per user per year is substantially less than even the discounted rates large corporations receive on Microsoft licenses.

    While the licensing cost is a serious line item, particularly when you have 110,000 employees, it isn’t the whole story; there’s training, maintenance, disaster recovery, security and a whole range of other issues.

    Cloud computing services address a lot of those costs, but nothing like the order of 50 to 70%. In fact, it would be hard to find an enterprise that had the sort of slack in its IT operations to achieve those sort of savings.

    In one respect, this is where its disappointing that cloud computing vendors tout those sort of savings – not only does it commoditise their industry but it perpetuates the myth amongst executives that IT staff spend the bulk of their time playing video games.

    While there are real savings to be made for businesses switching to cloud computing, any sales person claiming a 50% or greater saving should be asked to justify their claims or shown the door.

    Clean slate

    Another interesting point with BBVA switching to Google is how the bank wants employees to leave all their old email and data in their old systems. Carmen Herranz, BBVA’s director of innovation, says we “want to start from scratch… don’t want to carry across old behaviours”.

    Not migrating data is an interesting move and how BBVA’s users deal with retrieving their contact lists, dealing with existing email conversations and how staff will deal with feature differences like document revision tracking – an area where Microsoft Office outdoes Google Docs.

    Internal use only

    BBVA are only applying the Google services to internal documents as well which means the bank will be using other software – probably Microsoft Office – for corresponding externally.

    This makes it even more unlikely the touted cost savings of 50 to 70% are achievable, and may actually increase support costs while reducing productivity as many customer facing staff will have to deal with two systems.

    Having one system for use inside the business and another for external communications seems to be a European trend – before Christmas French company Atos announced it was abolishing email within the company but still using it for outside messages.

    Both abolishing email and moving to cloud based office packages are really about improving productivity in a business while cost savings are nice, the main focus on adopting cloud computing – or any other new technology – should be on freeing your staff to do more productive work.

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  • The importance of transparency

    The importance of transparency

    The US Federal Reserve has announced they will release more details from the information they use on determining official interest rates. On the same day the social networking site Twitter is embarrassed when its opaque verified account policy fails.

    Being open and honest is the key component in trust and in turn trust is the bedrock of society. If you can’t trust your neighbour, the local cop or the grocer at the shops then society quickly starts breaking down.

    Many big businesses, particularly those in markets where they are one of a small group of incumbents get away with abusing your trust; they tell an illegal surcharge can’t be waived because “that’s their policy, you can’t change an account because of the “terms and conditions” and that the call centre’s operators name is Janet even though it’s Rajiv and you know that when you call back asking for “Janet” you’ll be told”there’s 35 Janets working in the department right now”.

    All of this we’ve come to expect from big bureaucratic organisations like the phone company, the bank and the tax office. The interesting thing is how many new businesses that are adopting this anti-customer model of operating.

    Rules and policies are fine – as long as everyone knows them, they aren’t too onerous and they are applied fairly and consistently.

    The challenge for all businesses – particularly those taking on incumbents – is they have to show they are more trustworthy than the existing operators. If you can’t show that, then maybe it’s time to think about how you operate.

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  • Channel Conflict

    Channel Conflict

    I first became aware of the term “Channel Conflict” in the late 1990s when running an IT business that was a Microsoft reseller.

    A channel conflict is where a supplier starts competing with the merchants they supply, or promoting one group of their customers against another. A good example is Google’s Travel Search that is upsetting many of Google’s own advertising customers.

    As a local IT support business my channel conflict came from Microsoft advertising their own direct sales and consulting services as well as promoting their premium “gold” partners.

    Conflict with such a big channel partner was frustrating and unavoidable given Microsoft’s position in the market. We couldn’t do anything about it except work towards Gold Partner status and differentiate ourselves from the competitors who had the advantages of Microsoft’s marketing.

    The web – in particular online commerce – is increasing these channel conflicts as the Internet sweeps away existing middlemen and allows others to develop.

    A good example of how e-commerce is changing things was a tweet from Australian business broadcaster Brooke Corte where she found a swimsuits retailer’s prices were 40% cheaper through her shopping mall’s website.

    Essentially the swimsuit retailer is being undercut by their own landlord’s e-commerce service – an incredibly difficult channel conflict.

    For the retailer, they are up against Westfield; a big, multinational player with substantial market share and deep pockets who also happens to be their landlord in many high traffic locations.

    It isn’t all bad news for the small retailer facing a channel conflict; Seth Godin has a good perspective of what happens when the big boys decide to play in your sandpit.

    Seth’s situation was in 2008 Google launched a competitor – Knol – to his Squidoo businesses. This appeared to be the death knell, or Knol, for Squidoo.

    Three years later, Google killed Knol.

    In many cases channel conflict turns out not to be such a problem for the specialist retailer – big companies like Google, Microsoft and Westfield are good at what they do and dealing with the minutiae of retailing is not necessarily one of them.

    Small businesses also have an advantage in the very online tools that are disrupting retail and other fields. TechCrunch recently looked at some of the mobile and price comparison tools and how local retailers can use them to compete with Amazon.

    Coupling technology with service and focus – two factors that large companies usually struggle with – can define the battlefield for smaller businesses struggling with channel conflict.

    As declining margins and new technologies tempt big suppliers into dabbling in areas they previously avoided channel conflict is only going to increase, though for the creative and confident businesses it isn’t the threat it first seems to be.

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  • The business of denial

    The business of denial

    Denial is a powerful sedative, it allows us to trundle dozily along a well worn patch oblivious to the reality our comfortable world has changed.

    Last week’s claim that youth is fed up with the iPhone by Nokia’s Niels Munksgaard – who has the wonderful title of Director of Portfolio, Product Marketing & Sales – is a great example of how far and how long denial can continue while there’s still money to pay executive bonuses.

    Canada’s beleaguered Research In Motion, manufacturers of the Blackberry phone, showed the same delusions when they released their Playbook tablet computer with the declaration Amateur Hour Is Over.

    The only amateur hour was in the hubristic minds of RIM’s marketing team.

    While profits keep flowing big organisation can afford delusions – Google can indulge their social media fantasies while the Adwords rivers of gold continue to flow ever faster and Microsoft can continue to indulge their delusions while their Windows and Office products remain immensely profitable.

    Microsoft’s “droidrage” campaign, designed to embarrass Google’s Android mobile phone platform, is part of that delusion; for Microsoft’s campaign to work they have to prove there is a widespread Android malware problem, show their system isn’t prone to the same flaws and – most importantly – have enough product on the market to sell to those disillusioned Google customers.

    Such a negative campaign has many fallacies – it assumes there are widespread security problems in Android, that Microsoft will pick up disaffected Google customers and there are enough Microsoft based products to grab those sales.

    Probably Microsoft’s biggest problem is the assumption that customers actually care about that stuff – for years Windows dominated its market despite being riddled with computer with security holes and malware.

    Microsoft succeeded because their competition was delusional; the best example being WordPerfect claiming graphic systems like Windows were a fad at a time when an inferior Microsoft Word was gobbling up their markets.

    By the time WordPerfect realised their error and released a truly dreadful WordPerfect for Windows it was all too late, like a stagecoach company realising the motorcar is here to stay.

    The problem for businesses in denial is that reality eventually does bite; plenty of people in the newspaper industry believed their advertising based model was secure and profitable – indeed many of the cosseted managers in that sector still believe it is – which now leaves them struggling in a changed world they thought they could ignore.

    Denial among incumbents is a great opportunity for newer, more flexible players; for years mobile phone and tablet computer manufacturers were in denial about the usuability of their product – Apple proved them wrong and now commands the most profitable chunks of those markets.

    Being the village blacksmith or a buggy whip maker was a good business to be in at the beginning of the 20th Century. Thirty years later those block boys and saddlemakers who hadn’t made the jump found themselves out of work.

    It’s going to be interesting to see will be this century’s buggy whip manufacturers.

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  • The dying Yelp of Sensis

    The dying Yelp of Sensis

    This story originally appeared on Technology Spectator

    Fifteen years ago Sensis, the directories arm of Telstra, was untouchable. A listing in the Yellow and White Pages was essential for every business and Sensis’ monopoly was a true river of gold.

    Sensis’ launch this week of an Australian partnership with the US based review site Yelp is Telstra’s desperate throw of the dice to survive in a market where its directories business has become irrelevant.

    Attempts to stay relevent

    There have been many attempts by Sensis to overcome this erosion of its core maket including purchasing an IT services business and unsuccessful forays into publishing and online search with Trading Post and CitySearch.

    Probably Sensis’ lowest point was the squandered millions of dollars and years of management time wasted in trying to compete against Google after Telstra CEO Sol Trujilo made the sneering comment of “Google Schmoogle”.

    Declining values

    At the time of Trujillo’s comment in 2005 Sensis was valued at $10 billion as a stand alone company. After last week’s disappointing results that saw revenue drop 18 per cent for the year, the value of the division is an optimistic $5 billion.

    Yelp itself is unlikely to help Sensis’ revenue woes. Despite filing for a $100 billion public offering, Yelp has never made a profit in its seven years of operation. Although licensing their service to failing directory companies around the world might prove to be a handy revenue stream.

    That lack of profit – on North American revenues that are tiny compared to Sensis’ Australian cashflow ­– shows the fallacy in the social media business model that many of the popular online services are faced with.

    Users of social media services like Yelp are looking for a community of trustworthy and relevant referrals. The directory sale model is based on displaying the biggest advertisers prominently, which is exactly what social media users don’t want.

    Yelp also comes into a marketplace already crowded with competing, established services like Word Of Mouth Online, Eatability, and the faster moving social media platforms like Foursquare.

    Competitors’ Missed Opportunities

    In many ways Sensis has been lucky in that most of the competition has been from smaller upstarts while their bigger competitors haven’t capitalised on the market opportunities.

    Google Places, the biggest competitor to the world’s Yellow Pages directories, is mired in bureaucracy and isn’t doing a good job in telling business its story while Facebook’s local search function isn’t getting much traction either.

    Of the local Australian incumbents, ninemsn isn’t interested in local business with its international partner Microsoft not offering an Australian product and the local team preferring to deal with big spending advertising agencies, while Fairfax squandered its early advantage and eventually sold the CitySearch service to Sensis.

    News Limited’s True Local is having limited success while it struggles with the transition from print to online. At News’ recent launch of its new digital platform, the company’s executives stated they expected journalists to develop a “digital mind”.

    Lacking a Digital Mindset

    That “digital mindset” is the key to the problem at companies like News Limited, Fairfax and Sensis. In a marketplace where customers, advertising and readers have moved online it requires management, not just the lower workers, to “think digital”.

    Sensis’ key problem is its management structures – and more importantly its sales teams’ commissions and KPIs – which are still based around its traditional business models that will make selling services like Yelp difficult.

    The phone directory business model is a product of the 1920s and in many ways Telstra and the other Yellow Pages franchisees around the world should be grateful it has lasted so long.

    Whether the phone directories that have been so profitable for phone companies can make it to their one hundredth birthday is an open question. One thing is for sure, bolting on an unprofitable and late to market social media service isn’t the answer.

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