The Social Enterprise Opportunity

I want to begin today with a quick shout-out to my fellow bloggers at Data Center Knowledge. In a recent post, they identified me as one of the bloggers they follow for cloud and utility computing, and I'm honored to me included among such a strong list of bloggers. (Rich Miller, who posted the list, is no slouch himself.) Update: I violated the cardinal rule of Internet social networking: assuming a given name applies to one person. Rich Miller from Data Center Knowledge is not the same Rich Miller that writes Telematique. My apologies to both.

One of those bloggers is Phil Wainwright, whose Software as Services blog is one of my regular reads. He is the most aggressive, forward thinker in the SaaS space, and he is very often sees opportunity that most of us miss. (Phil's blog is also a great way to stay on top of the companies and technologies that specifically support the SaaS market.)

Phil recently wrote an interesting post about SaaS and Web 2.0 concepts, titled "Enter the socialprise", in which he points out that the very nature of an "enterprise" is changing thanks to the Internet and cloud computing concepts. He notes that loyalty between individuals is replacing corporate loyalty, and that social networking on the Internet is creating a new work economy for individual knowledge workers.

He then goes on to challenge enterprise computing models:

But enterprise computing is still designed for the old, stovepipe model in which every transaction took place within the same firm. There’s no connection with the social automation that’s happening between individuals. Many enterprises even resist talking about social networking. And even when an application vendor adds some kind of social networking features, there’s always the suspicion that they’re just painting social lipstick on a stovepipe pig.

This yawning chasm is an opportunity for a new class of applications to emerge that can harness the social networks between individuals and make them relevant to the enterprise. Or perhaps reinvent a new kind of enterprise, better suited to the low-friction reality of the connected Web. Enter the socialprise.

The example he gives of a company leveraging this is InsideView, which is creating a very cool sales intelligence application that integrates with major SaaS CRM vendor products to aggregate information from a variety of online sources into a single prospect activity dashboard. This is an incredibly cool example of how rich data about individuals within and across firms can be used at an enterprise level.

Another product that is similar that struck me was JobScience, which is one of the companies whose blog is in the Data Center Knowledge list referenced above. JobScience is using force.com to create a rich social intelligence engine for Salesforce.com customers. Their product, aptly called Genius, is an excellent example of what they are able to do. Read the post for all the features, but my favorite is:

The Genius Tracker. Not only does the tracker pop up to tell me an email recipient has just opened my email, or is visiting my web site, but the more important intelligence this gives me is that this prospect is is online and engaged with our solution. If a sales rep can call 40 people in a day, and a blast to 5000 prospects shows me that 40 of those prospects are online and engaged, it doesn’t take a genius to figure out who to call. That rep’s going to have a much more productive day calling people who they know are in the office. Less voicemails, less brushoffs, less calls to people who don’t work there anymore.

Bordering on privacy issues, I know, but an amazing level of detail, and invaluable if used wisely. More importantly, it goes to show what is possible in a stable, shared application environment.

By the way, this direct integration with a given CRM platform by a "value added extender" is an interesting twist to the dependency issues that Bob Warfield writes about on the SmoothSpan blog. JobScience's products are services that become a feature of the destination both visually as well as functionally. Bob's point about being a component provider to the actual product is well taken, and I wonder if the only exit strategy for these guys is acquisition by Salesforce. What else can they hope for as a company dependent on force.com? Talk about cloud lock-in.

Update on Dataportability.org activities from the source

Interesting interview of Chris Saad and Frank Arrigo (Chris is organizing dataportability.org, and Frank is a Microsoft employee that is somehow related) by Robert Scoble.



Interesting in here is the update on what dataportability.org is focusing on right now--standard "best practices" for open data, and a "logo" to indicate standards are followed--plus the discussion of Silverlight, etc.

The importance of operations to online services customers

I hadn't caught up on Gabriel Morgan's blog in a while, so I'm a week or so late in seeing his interesting post on the importance of operations features in a SaaS product offering. Gabriel works at Microsoft on the team that is looking at the Software plus Services offerings introduced by Ray Ozzie a few months ago. According to Gabriel, being a software product company, Microsoft has occasionally been slow to learn a key lesson in the online services game:

In the traditional packaged software business, product features define what a product is but Customer 2.0 expects to have direct access to operational features within the Service Offering itself.

Take for example Microsoft Word. Product Features such as Import/Export, Mail Merge, Rich Editing, HTML support, Charts and Graphs and Templates are the types of features that Customer 1.0 values most in a product. SaaS Products are much different because Customer 2.0 demands it. Not only must a product include traditional product features, it must also include operational features such as Configure Service, Manage Service SLA, Manage Add-On Features, Monitor Service Usage Statistics, Self-Service Incident Resolution as well. In traditional packaged software products, these features were either supported manually, didn't exist or were change requests to a supporting IT department.

In other words "Service Offering = (Product Features) + (Operational Features)".

Wow. What a simple way to state something I've been concerned about for some time now: as you move your enterprise into the cloud, will your service providers (be it SaaS, HaaS, PaaS or others) provide you with the tools and data you need to successfully operate your business? How will you be able to interact with both the service provider's software and personel to make sure those operations run a) according to your wishes, and b) with no negative impact on your business?

Gabriel goes on:

Guess who builds and supports these Operational Features? Your friendly neighborhood IT department in conjunction with the Operations and Service Offering product group. This raises the quality bar for your traditional IT shop.

Heck, yeah. And guess what? Should a business do something crazy--oh, say, select SaaS products from more than one vendor to integrate into their varied business processes--they will need not only to build solid operational ties with each vendor, but integrate those operational features across vendors. Think about that.

How best to do that? You shouldn't be surprised when I tell you that a key element of the solution is SLAuto under the control of the business. Managing SaaS systems to business-defined service levels will be a critical role of IT in the cloud-scape of tomorrow.

7 Businesses to Start in 2008

Rather than offer a list of predictions for 2008, I thought I'd have some fun suggesting some businesses that could make you money in 2008 or the few years following.

1. SaaS<-->Enterprise data conversion practice: All those existing enterprise apps will need to have their data migrated to that trendy new SaaS tool; and should anyone actually decide they hate their first vendor, they'll be spending that money again to convert to the next choice. Perhaps they'll even get fed up and return to traditional enterprise software. Easy money.
2. Enterprise Integration as a Service: No matter how much functionality one SaaS vendor will provide, it will never be enough. Integration will always be necessary, but where/how will it be delivered? Go for the gold with a browser based integration option. Just figure out how to do it better/cheaper/faster than force.com, Microsoft, Google, Amazon, etc...
3. SaaS meter consolidation service: Given the problem stated in 2 above, who wants 5 or 6 bills where its impossible to trace the cost of a transaction across vendors? Provide a single billing service that consolidates the charges of the vendor stable and provides additional analytic capabilities to break down where costs and revenues come from. Then get ready to defend yourself against the data ownership walls put up by those same vendors (see 4 below).
4. SaaS/HaaS Customer litigation practice: Given the example of Scoble's experience with Facebook, there are clearly a lot of sticky legal issues to be worked out about "who owns what". Ride that gravy train with litigation expertise in data ownership, vendor contractual obligations and the role of code as law.
5. SaaS industry (or SaaS customer) data ownership rights lobbyist: Given 4 above, each industry player is going to want their voice in congress to protect/promote their interest. Drive the next set of legislation that screws up online equality and individual rights.
6. Sys Admin retraining specialist: All those sys admins who will be out of work thanks to cloud computing are going to need to be retrained to monitor SLAs across external vendor properties, and to get good at waiting on hold for customer service representatives.
7. Handset recycling services: The rate at which "specialized" hardware will evolve will raise the rate of obsolescence to a new high. Somebody is going to make a killing from all those barely used precious metals, silicon and LCD screens going to waste. Why not you?

"Social Production" vs. "Greed" Online

I want to start my comparison of Yochai Benkler's tome, "The Wealth of Networks: How Social Production Transforms Markets and Freedom", and Nick Carr's "The Big Switch: Rewiring the World from Edison to Google" with coverage of the direct critique of the former in the latter.

Benkler proposes that we are entering a new phase of economic history, which he calls the "networked information economy". Counter to the prior industrial economy, this phase is highlighted by the rising effect of "non-market" production on the creation of intellectual capital, made possible by the near zero cost of creating and sharing content on the Internet.

According to Benkler, in a network based economy:

1. "Individuals can do more for themselves independently of the permission or cooperation of others."



2. "Individuals can do more in loose affiliation with others, rather than requiring stable, long-term relations, like coworker relations or participation in formal organizations, to underwrite effective cooperation."

As a result of this, says Benkler, "we can make the twenty-first century one that offers individuals greater autonomy, political communities greater democracy, and societies greater opportunities for cultural self-reflection and human connection."

In chapter 7 of Carr's book, titled "From the Many to the Few", Carr makes an argument for the inequitable effects of social networking and unpaid content creation. With specific reference to Benkler and others writing about the rising importance of the so-called "gift economy", he notes that

"[t]here's truth in such claims, as anyone looking at the Web today can see...[b]ut there is a naivete, or at least a short-sightedness, to these arguments as well. The Utopian rhetoric ignores the fact that the market economy is rapidly subsuming the gift economy."

As evidence, Carr notes that two of the most important Web 2.0 acquisitions of the last couple of years--that of Flickr by Yahoo, and YouTube by Google--were driven in large part by the incredible economics of these companies. When Flickr was acquired for $35 million, there were less than 10 people on staff. YouTube had less than 70 employees when they were bought for 1.65 billion.

However, perhaps the most astounding comparison between the two is that both had millions of people producing, organizing and promoting content, but effectively none of them got a single dime of equity. When YouTube was sold, each of the 3 founders got about a third of a billion dollars for 10 months of work. Its hard to argue that Google bought the web site software for that price. Google bought content and traffic, both of which were largely attributable to those unpaid millions.

I think Carr is right, unfortunately, that we overestimate the influence that "open" technologies will have on the incumbent industrial system. Carr notes important evidence like the growing income gap between the richest Americans and the rest of us, as well as the struggle that newspapers and other media companies are having to generate sufficient income to sustain their businesses--and, in turn, their employee's standard of living. I will add that even the distinct line between "open source" and "proprietary" projects is blurring, as Anne Zelenka notes on GigaOM today. The result of this trend will, of course, be mixed. At times the content created out of love, frustration or even narcissism will loosen the grip of corporate systems on our society, but these may always be offset by new controls and entrepreneurial successes by these same systems.

On the other hand, I think Nick is too skeptical about the amount of change that will beset business in the coming decades. It is easy to think of ways to provide equity to those that produce content, and I believe someone will come up with a business that does so in the next year or two. Furthermore, the process of democracy itself may be changed significantly in the next two decades, as both the government and entities seeking influence over the government (or seeking to loosen the control of government) find new ways to tweak the system. John Udell at Microsoft has covered an interesting corollary, public access to government data, and noted some of the progress made in that space.

Those of you that have read me for a while know that I am extremely interested in complexity theory and its applications to technological development. In the end, I believe what we are going to see in the next data is an "edge of chaos" process, where the forces of liberalization continually struggle against the forces of social and economic inertia. In the long term, however, I believe that this process will continually better the lives of those swept up in it; with (significant) luck, the lives of everyone on Earth. What is left to chance, however, is the amount of pain and suffering that may be felt as change takes place.

First look at Nick Carr's "The Big Switch" and Yochai Benkler's "The Wealth of Networks"

Welcome back one and all. I hope everyone enjoyed the holidays as much as I did this time. While I enjoyed several visits with family and friends throughout the week, most of my time was spent either playing with my son, or preparing the house for the arrival of my daughter in two weeks. As you might imagine, the latter is taking up most of my mental cycles these days.

I did, however, spend some time reading two books over the break, both covering the broad topic of the effects of Web 2.0 and the compute cloud system on society and culture. One is a very positive economic analysis of what the possibilities may be, while the other is a skeptical comparison of the history of the electric grid with the evolving history of the compute grid.

"The Wealth of Networks: How Social Production Transforms Markets and Freedom", by Yochai Benkler--which can be read for free online--surprised me as being a much more fascinating read than I expected it to be. I knew that Benkler was going for a more formal economic analysis of the effects of "non-market" production online (e.g. videos submitted to YouTube, photos on Flickr, etc.), but his analysis of both the trends and possibilities was actually very easy for anyone in technology to understand, and didn't require a lot of economics knowledge. I'm still working on this one, but I will provide some more in depth discussion in later posts.

Nicholas Carr's latest, "The Big Switch: Rewiring the World from Edison to Google", is everything you would hope from Nick, though perhaps with a little bit darker outlook than expected. However, I believe this is a must read for anyone contemplating the utility computing revolution, as it lays out an honest assessment of the evils that utility computing will bring along with the good. Using the history of the electric utility grid as a model, Nick points out that particular technical revolution brought with it promises of the democratization of humankind, but actually unfolded with much more mixed results. Utility computing will be no exception, Carr argues, and I heartily agree with him--though I am not sure I agree with all of his detailed examples and predictions.

I actually recommend reading these two books in parallel, as I have been. Here's what I did, and I think it allowed me to read both texts with a more critical eye:

• Read Chapters 1-3 of Benkler to get a sense of the economic arguments about how social production will change the way we interact, generate information and entertainment, and possibly change our political and cultural landscape to create a more egalitarian society.
• Now read Carr's work in its entirety, mostly to get sucked back to earth about how Benkler's grandiose vision is just that, a vision; much of the positive developments Benkler looks for can easily be countered by opposing forces looking to maintain or enhance the status quo.
• Now finish Benkler's work to gain a detailed perspective of the economics at work in the online world, but with a more critical eye towards his desired social and political outcomes.

I am still working on Benkler's book, but I can say now that my eyes have been opened to how much change is before us, and how the great value we get from social production is tempered by the effects on certain careers, economic segments and perhaps even the quality of work we produce itself.

I will dig into a few specific subjects soon, comparing Benkler's vision with Carr's, and adding my own "special sauce". I would really welcome comments from my contemporaries who have read one or both of these works, including critiques of my critiques. My intuition tells me that those that understand what is at stake, and what could happen--both good and bad--will have a distinct advantage as the next two decades play themselves out.

Update: Below are links to the follow on posts for this joint review of the two works:

• Social Production vs. Greed Online
• The Compute Grid is Like Nothing Before It
  

User Experience and Fluidity (er, Patration...)

First, thanks to Simon in reminding me about his seminal post defining a new key industry term, patration, to define what I call software fluidity. Is he serious? Only your use of the term in every day life will tell... [Insert cheezy smiley face here.]

Second, if you haven't run across it yet, check out the debate between Robert Scoble/Nick Carr and Michael Krigsman/the Enterprise Irregulars about the need for enterprise software vendors to learn from the "drive to sexiness" of consumer software. My personal opinion? I've worked in enterprise software for years, and I still don't understand why engineers take no pride in making something amazing to install, learn and use. All the effort goes into command line tools and cool functions, little goes into human experience. How has Apple remained relevant all of these years? A focus on sexiness, without losing sight of functionality.

I agree with Nick, sexiness and functionality/stability are not mutually exclusive--except in the eyes of most enterprise software vendors...

Links - 08/09/2007

Technology companies tout greener credentials, but significant improvements are well off (Associated Press via Technology Review): This article is a layman's explanation about the energy consumption imposed by data centers, and the reasons behind that consumption. There are some interesting statistics here (most of which are recycled--pardon the pun), but the article is light on possible solutions. Remember, the entire purpose of SLAuto is to deliver the required service levels for your business using the most cost (and energy?) effective resources necessary to do so.

"Why is Amazon Web Services partnering with NaviSite?" (Isabel Wang): An overview of several interesting trends around utility computing in the managed hosting market. My comments:

1. NaviSite is providing an interesting service here, and one I think will need to evolve to an automation model eventually. Today it looks like your same old monitoring-only "management" environment, but with a few interesting hooks who knows.
2. I love the PlanetWide Media story only because it is one of the first example of "Web 2.0" infrastructure mashup that I've seen. Why not Web 3.0? Because I would bet right now that Planet Media is economically locked in to LayeredTech for the foreseeable future (i.e. the cost of moving their software would negate the benefit of moving it).
3. Hmmm. Perhaps the future goes so far as to divide mindshare into recombinable building blocks. (OK, sorry, the BS meter pegged on that one...)
4. Isabel wraps up with a comment about the long tail of computing itself, which I believe is the real next revolution in IT that will drive new businesses and perhaps even industries. I believe Nicholas Carr agrees, but we shall have to wait an see.

Green data center scuttlebutt from NGDC conference (Server Specs: SearchDataCenter.com): The interesting part of this video to me is the description of the GDC panel discussion as "sniping". I agree, and that's why I left early. Nothing interesting came out of the discussion other than the fact that each major vendor is still months or even years away from actually reducing the energy burden of the data center market (reinforcing the AP article above). I say watch for solutions that may be a little more short term.

"Web 3.0" and Infrastructure

In "What is Web 3.0?" Nicholas Carr breaks down various early definitions of Web 3.0 for the reader. In the end, he offers the following:

Web 3.0 involves the disintegration of digital data and software into modular components that, through the use of simple tools, can be reintegrated into new applications or functions on the fly by either machines or people.

Great definition, but again leaves out the importance of infrastructure on the equation. (Wait, wasn't Carr the one who pointed out that it all starts with infrastructure? What happened, Nicholas?) I would modify his statement to read

Web 3.0 involves the disintegration of digital data, software and infrastructure into modular components that, through the use of simple tools, can be reintegrated into new applications or functions on the fly by either machines or people.

To get a sense of how this technology would affect infrastructure, picture a world in which every aspect of the infrastructure stack, from application server to operating system to bare metal server to network fabric to shared storage, etc., can be assembled as necessary to meet the service level needs of an application (or even an application function). Need a J2EE service to run at 4 9's up time? Choose from a smorgasbord of app server vendors running on a selection of Hardware as a Service vendors with access to any number of supporting services from a variety of Software as a Service vendors--or let a service level automation tool (whether an appliance, a software product or a SaaS offering) do it for you. Ideally, let the SLAuto determine the most cost-effective way to deliver your service at the SL's you require.

To be fair, this is a ways down the road, but then so is anything Web 3.0.