A paradigm shift is when a new form of technology emerges that replaces the old, while a next generation technology builds on previous computing architectures (not replacing it, but rather growing out from it).  The difference between these two concepts may seem subtle, but it is this very distinction that may put an end to Microsoft.   

These “paradigm shifts” in IT rarely occur – a true paradigm shift happens when one form of computing completely replaces another.  In fact, there really has been only one true paradigm shift in recent history, when Supercomputer centers where replaced by on-site servers and desktops.  The advent of the desktop computer was a paradigm shift, whereas, the advent of servers that tie desktops together was a “next generation” iteration. 

There is a significant difference between a paradigm shift and iterative/evolutionary growth – the first is a complete replacement (flat world vs. round world), while the latter simply builds on what already exists (the introduction of laptops, which did not replace desktops). 

Today, it appears that we’re in the midst of a true paradigm shift, in which one form of computing may completely replace another form.  Cloud Computing, or “Software-as-a-Service,” is the new paradigm, and it will replace the current Server/desktop model due to efficiency and simplicity.

Microsoft’s miscalculation is the belief that Cloud Computing is evolutionary, or a next generation of computing, while there is growing evidence that this is a true paradigm shift.  Only time will tell, but it would seem a strong case could be made that we’re living in a historic moment (from a technology perspective).

I would seem that Microsoft is still trying to put old wine into new bottles, and their failure to understand the difference between an actual paradigm shift and an evolutionary/iterative shift will likely be their downfall (if, in fact, this is a paradigm shift):

Don’t Be Fooled…

It’s important to understand what this paradigm shift is.  The real paradigm shift is NOT about putting applications that were once on servers into the “cloud” (or Internet), which is what Microsoft’s Azure seems to be doing.  The real paradigm shift is in a multi-tenant architecture.  This kind of architecture utilizes limited instances of an application that is shared between many companies.  While the data for each company is stored separately, the application itself is shared.

Why Is Multi-Tenancy the Key?

Multi-Tenancy resolves the fatal flaws inherent in the current server/desktop paradigm – software upgrades, software patches, broken integrations, lost data due to upgrades, conflicting applications, hardware upgrades, managing thousands of desktop computers, etc.  IT departments are spending millions of dollars trying to maintain these infrastructures that continue to become more and more complex. 

The success of the current server/desktop model depends on complexity.  Revenue is derived from upgrades, patches, on-site installations, etc.  The more complex and difficult to manage this infrastructure becomes the more Microsoft and it’s developers earn. 

It would appear Microsoft’s Azure is simply taking this complex IT nightmare and moving onto a new platform.  All the issues described above are not resolved, but rather moved to a new place.  Software + Service (Microsoft’s approach to “SaaS”) is simply the same Emperor in new clothes, nothing more.  

Multi-tenancy, on the other hand, represents an entirely new form of computing.  Instead of computing power residing locally it is accessed via the Internet.  Instead of millions of different versions of a single application on hundreds of different servers and desktops, millions of companies can now use a single version on one Application – a single set of source code for all users.  The difference between these two approaches is night and day – one will ultimately replace the other.  

During the early stages of the Industrial Age factories created their own electricity.  This provided them with a competitive advantage and an entire industry grew up around creating on-site generators.  Each company spent a portion of their revenue developing their own infrastructure specifically to create electricity. 

Then, a new technology emerged.  This new “grid” technology allowed electricity to be created centrally and delivered via wires (sound familiar?).  Delivering electricity became far less expensive than a company could do on their own.  The entire industry who provided on-site electricity infrastructure practically vanished. 

It was a paradigm shift that is very similar to what we’re seeing today.  We’re in the early stages of this shift so there will be some hiccups and growing pains, but this does not mean it’s not a paradigm shift. 

I suspect the advent of “Cloud Computing,” or more specifically multi-tenant Cloud Computing, will ultimately replace our existing approach to computing.  Just like electricity was ultimately “outsourced and commoditized,” it would appear on-site computing will also go the way of on-site electricity creation. 

This shift is already taking place.  It’s only a matter of time before enough pressure builds and the dam breaks.  Cloud Computing is reaching a critical mass.  When it does, Microsoft will disappear (if it does not wholeheartedly adopt SaaS and walk away from their most profitable products and services).   

Helpful Links:

http://news.cnet.com/8301-13846_3-10079576-62.html

http://blogs.zdnet.com/microsoft/?p=1671&tag=mncol;txt

http://cloudenterprise.info/2008/10/29/microsoft-azure-vs-amazon-google-and-vmware/

There are some very specific reasons the SaaS industry (also called “cloud computing“) is growing exponentially:

• Low up-front development costs
• No ongoing maintenance – no on-site applications and software
• No homegrown applications that need constant tweaking
• No servers to maintain, patch, and secure
• No in-house network to protect and maintain
• Seamless upgrades – often 2 to 3 times per year
• No broken integrations from upgrades
• Fast implementation – companies can have full-blown applications in weeks rather than months and years
• Flexible application that can change and grow as the business changes and grows

IT departments have been severely burdened by upgrades, server patches, and security issues, as well as developing and maintaining homegrown applications.  Often, 60% to 70% of IT resources are directed at maintaining this infrastructure, while the business units within their organization are demanding more tools to make them more productive.  This tension between the need to maintain an in-house infrastructure and the need to quickly provide innovative IT solutions while keeping costs in check is straining IT organizations, regardless of company size.

The future is now and the evidence of the emergence of a significant shift in IT is mounting. 

The SaaS deployment method will ultimately eliminate the need for an in-house network and will continue to free resources to provide innovative tools to business units.  While the longer-term vision of companies maintaining their entire IT infrastructure in the “cloud,” or Internet, is not there now, the time is not far off.  There are some companies who have already saved millions of dollars by eliminating their in-house network and have found the new “cloud” environment incredibly fluid, flexible, and reliable. 

This trend is unstoppable, and Microsoft thinks it can stem the tide.  It cannot.  There are far too many benefits that come from cloud computing.  Microsoft is a massive company with huge influence, but it’s not large enough to stop the new paradigm of SaaS. 

Microsoft is trying to redefine SaaS as “Software + Service (pdf),” a mixture of in-house networks and cloud computing.  The only problem is while this model may help Microsoft, it will not help a company struggling with upgrading servers and old applications, patching software, and having to fix integrations at each upgrade.  These problems are a significant burden and CIO’s are looking for solutions, which is why they’re turning to SaaS in droves. 

The SaaS tide is rising and Microsoft’s attempt to slow down this trend will ultimately end in their demise, if they do not fully adopt SaaS.  Unfortunately for Micorsoft, fully adopting SaaS presents significant risk because it will cannibalize their main revenue source, which includes server-based applications like Exchange, security patches to applications, hardware, and upgrading and maintaining physical infrastructures.  Ultimately, it’s a lose-lose proposition for Microsoft because they do well with greater complexity which runs counter to what a CIO desires. 

Smaller companies and startups are beginning with the SaaS model and skipping over the installation of complicated and costly IT infrastructures.  The more progressive small companies don’t even try to develop in-house networks – they use services like salesforce.com, Google Apps, and Amazon S3.  Why would they, when they can have a far superiour IT infrastructure in the cloud?   

This phenomena is similar to how developing nations have skipped over expensive “hard lines” and have gone directly to wireless networks.  Why would any developing nation, given a choice, install copper wires throughout their country when they could install wireless towers at a fraction of the cost?  The same could be asked of any new and developing company considering how to develop their own IT infrastructure. 

The Software + Service model proposed by Microsoft does not resolve the issues with which CIO’s are struggling.  In fact, it adds more complexity, which is why Microsoft will ultimately not survive this new paradigm shift to Cloud Computing.  A true paradigm shift seldom occurs, but when they do large and seemingly unstoppable companies often disappear if they do not radically change.  The only problem is it’s very difficult for a large company to innovate because their survival depends on an old paradigm, which will be swallowed up by the new.

One of the reasons I like SaaS (also known as Cloud Computing), is it levels the playing field for small and large companies alike. 

When I was involved in a startup company, for example, we were able to create some incredibly sophisticated automated workflows and customer management applications on the salesforce.com platform.  In the past, these kinds of workflows and automation was only available to larger companies at a cost of hundreds of thousands of dollars.  In fact, one small company for which I worked was paying $170+K per year in technology development and the end-product was substandard and barely worked.

When I stepped in I was able to cut that budget by 50+% using salesforce.com and the end result was a multi-million dollar, highly sophisticated application at a fraction of the traditional cost.  They lowered their IT investment by 50% and had a far superior product.  This is the reality of the new world of technology.  Some companies are beginning to see this, and others are sticking with their older home-grown applications.

I recently talked to a VP of a 140-person company and they do not own a single server – anyone in IT should fear this fact.  They run their company on a platform that exists 100% on the Internet - salesforce.com and google apps.  The cost of their technology is a small percentage of other companies of similar sizes.

I’m convinced that we’re entering a new paradigm in the technology industry, and Microsoft has never been more vulnerable.  The reason is most of their revenue comes from the server/desktop model, and for them to switch to a SaaS model will destroy their revenue stream.  Later this month Microsoft will be launching their own version of a “SaaS” application to compete with companies like Google, Salesforce, Amazon, and WorkDay, which will include a blending of desktop/server model and SaaS.  This will be a huge mistake, and it could mark the first crack in the Microsoft armor. 

To me, this is like telling some people to ride on the right side of the street and others to drive on the Left.  There is no question that Microsoft (and the entire IT industry) is on the cusp of tremendous change.  While most industries like telecommunications, publishing, banking, etc, have capitalized on the efficiencies of the Internet, the IT industry has remained surprisingly in the 90’s. 

I believe this industry has remained so far behind because most people in this industry have a vested interest in the older technology model, which is anchored by Microsoft.  Here’s the deal.  If Microsoft moves into the SaaS marketplace, they essentially become less influential because they’re cutting off their main revenue stream and admits to a better deployment method (SaaS).  In order to survive, Microsoft needs companies to continue to use servers, desktops, software, software patches, homegrown applications, local networks, etc.  If these elements go away so do they. 

Let me repeat this, if all these hardware and software elements go away, so does Microsoft.  Think about that!  SaaS gives companies the tools to shed these expensive elements, and CIO’s are flocking to the SaaS deployment method.    

Microsoft is at a crossroads.  If they choose a pure SaaS deployment method, then it’s a huge leap of faith and has tremendous risk because their competitors are already well down the road to the cloud.  If they stay with the old technology, then companies like Google, Salesforce, WorkDay, and Amazon will continue to chip away at their market share until the industry hits the tipping point and the Microsoft way will be swallowed up in the new paradigm. 

I know this sounds a bit dramatic, but it’s absolutely true.  There is no middle ground here.  If Microsoft chooses the middle ground (which it appears that’s the direction as they coined the phrase Software and Service), then they choose the old technology, and will lose huge market share.  The two deployment models (server/desktop/software vs. Software-as-a-Service) do not mix, it’s a zero sum game.  Trying to bridge this divide is like MS asking CIO’s, “I know servers are expensive and keeping up with patches and upgrades are costly and risky, but we think you should stick with us even though the SaaS model is cheaper, better, and faster.”  

IT Departments are looking for ways to save in this economy and SaaS is what they’re looking at.   Fast deployment, lower cost of ownership, lower implementation costs, and a superior end-product.  The small company I described above is an example of what’s beginning to happen on a larger scale.  CIO’s are far more risk averse than small companies and are careful about making changes, but believe me it’s happening.   

Drip, drip, drip, drip…  it may take decades for small drops of water to break a giant stone, but when that final drop hits the stone and the first crack appears, it’s the beginning of the end – then each drop has more and more impact.  This is where we are.  The cracks are beginning to form.  The signs of these times are all around.  Microsoft’s SaaS strategy, which will be announced shortly, will tell us if MS will be in the game 10 years from now.  During times of transition the companies who have the big vision and are willing to take huge risks are the ones who prosper.  

I’m looking forward to Microsoft’s SaaS plan, and I hope you are too!!  They could go bold and change the IT world forever, or they could try to bridge the gap with incremental change and get eaten alive.  This should be an interesting few weeks. 

It doesn’t take long to figure out why Disney is such a success.  It’s clean, organized, and the experience is unforgettable.  I heard comments like, “They [Disney] just know how to do it.”  There’s a reason Disney is successful.  It’s not luck, or circumstance, or a “good business model.”  Importantly, the same underlying principles that make Disney successful can make any small business successful.

Seeing the multitudes of people happily move through their day as Disney reminded me of Ray Kroc, the founder of McDonald’s.  Next time you go to McDonald’s step back and watch the order.  The number of people, the location of each “station,” how the drive through orders meld with the orders coming in from the counter.  Ray Krock spend years perfecting the operations underlying the overall McDonald’s experience, and it was this eye-to-detail related to the customer experience that propelled McDonald’s to one of the most successful franchises in history.

It’s not enough to have a good product or service.  Small business owners need to focus on two key elements:

• The overall experience
• Delivery of that experience

How do your customers interact with your company?  Put yourself in the place of a customer, step away from your business, and walk through what a customer would experience when dealing with your company.  Take notes about things you’d change, add, stop doing.  Develop an overall experience that a customer would have.  Did they receive a thank you note?  Did they have a positive initial contact?  How did they find out about your company?

Now that you’ve developed what that experience may look like, begin to systematize the inner-workings of your company.  Make sure each customer has a consistent experience.  One way to do this is through technology and thanks to “cloud computing” (a.k.a. Software-as-a-Service) any small business can have access to a state-of-the-art customer relationship management system. 

A few years ago I worked for a financial service company.  We developed a system that made sure each client was contacted at least each quarter.  We used the leading Software-as-a-Service application, salesforce.com, to create reminders of these interactions and used HTML emails with merge fields to send customized communications.  We were able to create a number of automated workflows which resulted in a consistent customer experience.  Not surprisingly, the assets under management grew over 300% in 18 months. 

Step back and look at your company through the eyes of you customers.  Determine the optimum experience and try to replicate it over and over again using the latest technology.  It’s not rocket science, but it does take dedicated time and energy, and it will require you to get out of the day-to-day operations on a consistent basis.  

Today, Salesforce.com (the leading on-demand Customer Relationship Management application) and Google just announced a strategic partnership.  I’ve been writing about “software-as-a-service” almost since the beginning of this industry.  I’ve seen first hand how these applications, which are delivered via the Internet, have transformed companies.   

While the industry has been slow to develop due to security issues, when Google announced their Google Apps solution it gave the industry a shot in the arm.  Since then, the momentum has been building (since August Salesforce stock is up over 50%).  The synergy between these two apps are amazing:

Seeing these different applications work in concert is nothing short of amazing, but knowing that all this can be accessed from any computer with an Internet connection is fantastic.  Now, anyone within a company can have access to all critical data at any time from anywhere, even via wireless devices.

Today, the world of business changed.  While the effect may not be felt for years to come, today is historic.   Visit salesforce.com at 3:00 ET today to see the full announcement. 

If you have any questions about south of Boston web design or marketing feel free to request a free consultation from our corporate site:  www.sinatraco.com

Terms Defined

SaaS stands for “Software-as-a-Service.”  It represents a way to deliver a technology solution via the Internet.  Instead of creating or purchasing an application that resides on desktop (like Act!), companies subscribe and pay to use a fully developed application based on the number of users. 

CRM stand for “Customer Relationship Management.”  It’s a technology application that allows a company to keep track of all the details associated with their customers.  Wikepedia describes it this way:

“Customer relationship management (CRM) is a broad term that covers concepts used by companies to manage their relationships with customers, including the capture, storage and analysis of customer information.”  more… 

CRM is an application that can be delivered via a SaaS deployment method, or can reside on a company’s servers.  A good example of an open source CRM application that could reside on a company’s server is SugarCRM.  Whereas, a good SaaS CRM application is salesforce.com.  Both of these applications are considered CRM, but one uses a SaaS deployment model, while the other can reside on the company’s servers.  There are pros and cons to both models, which I’ll address in later posts.

Simply stated, CRM is an application, while SaaS is a deliver method for an application.    

As it relates to small to medium sized companies, I would say a lack of CRM application puts a company at a disadvantage, makes it less efficient, and puts employees in a tough position.  Due to the advent of SaaS, now CRM is within reach of any company, and not having this kind of functionality is a poor strategic move.

More from Wikepedia about the SaaS deployment method:

“The traditional rationale for outsourcing of IT systems is that by applying economies of scale to the operation of applications, a service provider can offer better, cheaper, more reliable applications than companies can themselves. The use of SaaS-based applications has grown dramatically, as reported by many of the analyst firms that cover the sector. But it’s only in recent years that SaaS has truly flourished.”  More… 

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So often, these small to medium sized companies do not have to add many pages and wholesale changes rarely occur.  They pay for functionality they essentially do not need because they told the developer that the site needed to scale over time.  The developer did what was asked.  By overpaying for development they did not need, these companies underpaid for design.  In the end, these web sites often fail - salespeople will not even send people to their own site and they actually undermine their success because their competition has a far superior presentation (most web site visitors rarely understand the nuances of a well developed web site).

Small to medium sized companies need to weigh what they think is most important.  Is is scalability for long term growth, or visual appearance.  I normally recommend starting with solid design that has some functionality.  But don’t go overboard on servers, hosting, development, database systems, etc.  For the most part, small businesses can get the back-end systems they need by using Software-as-a-Service (SaaS) applications, which I’ve discussed in previous posts, without breaking the bank.  

Being able to add pages easily, change the look and feel, etc. are great features to have, but is it the best use of current resources?  In my opinion,  it’s difficult for any company to realize ROI on back-end programming unless there is an expectation of exponential growth of the number of pages and size of company.  Also, if your expectations are high, as in many startups, remember that back-end systems can be added later if the company does take off or a need to add hundreds of new pages arises.

To me, a very simple web site is the way to start and it helps to remove the risk associated with marketing.  This will allow you to test messages, see how clients interact with the ideas, and make changes based on observations.  I think one of the biggest mistakes small business owners make is being so worried about scaling for growth that they pay too much for initial development, or marketing, or hiring, etc.

I’ve seen this scenario play out over and over again.  It is no fault of the developer because they are creating exactly what the client is asking for.  Business owners need to be smart in how they allocate resources.  One of the biggest traps is when high expectations drive web development and marketing initiatives. 

Test, test, test, test…  then do, do, do…  Many small and medium sized companies take the opposite approach and designers and web developers are more than happy to build amazing applications, web sites, and campaigns. 

If you have any questions about south of Boston web design or marketing feel free to request a free consultation from our corporate site:  www.sinatraco.com 
    

“Software as a service (SaaS) is a software application delivery model where a software vendor develops a web-native software application and hosts and operates (either independently or through a third-party) the application for use by its customers over the Internet. Customers pay not for owning the software itself but for using it.” more…

Small to mid-sized companies have not had access to higher end technology.  They simply did not have the resources to create an enterprise-wide business application that manages sales, marketing, customer relationships, etc.  A “360-degree customer view” was unheard of for the SMB (Small to Medium Business) space.  Thanks to SaaS, now even the smallest business has access to some of the most powerful business applications on the planet.  

Two good examples for SaaS applications are Liferro and Salesforce.com.  Both applications allow a company, regardless of size, to centralize their operations while providing employees access to corporate intelligence to do their jobs more effectively.  It also allows a company to outsource IT infrastructure and lower risk due to little development and no on-premise hardware.

I’ve implemented both salesforce.com and Liferro and have seen it make a significant difference.  One small business owner even told me - ”I actually like paying for salesforce.com, I enjoy writing that check every quarter.”  That kind of recognition of value when it comes to technology is extremely rare. 

It’s no surprise that Google has recently launched some fantastic SaaS business applications.  Imagine having access to your MS Office apps via the Internet, which allows you to share docs, access data, create presentations, all online 24/7 from anywhere in the world.  You can stop imagining because Google has done it. 

SaaS levels the playing field and provides small to medium sized companies access to the same technology that was once reserved only for the “big boys.”  Now, a two-person company located in a corn field in Nebraska can use the same multi-million dollar software application used by a F50 company in downtown NY City.  That’s a powerful idea.  In fact, it’s revolutionary.

In my opinion, every company should be looking at SaaS regardless of size because it is the way business will be done in the years to come.  SaaS has it all and now that the security issues have been mainly resolved it’s about to reach critical mass and explode (if it hasn’t already). 

If you have any questions about south of Boston web design or marketing feel free to request a free consultation from our corporate site:  www.sinatraco.com

Posts in this category will attempt to give some advice into how to implement a CRM application.  A great deal of the ideas here will focus on the Software-as-a-service (SaaS) deployment model, which I believe is the most effective way to deliver a great deal of functionality at a reasonable rate.  I’ve seen first-hand both sides of the “build vs. buy” debate as it relates to technology and I fall firmly on the side of SaaS!!

A few years ago I was consulting for a company who talked to a developer about creating a complete database to track clients.  The developer mapped out the sales processes and began to create the homegrown application.  It was a long and arduous process and the company was spending upwards of $170K per year in development.  The final application was never delivered because the scope of the project grew out of control by the end of the process.  It was a frustrating process and the entire project was not only a complete failure, but it put the company in financial trouble.

This is not a unique example.  This kind of story happens all too often with companies of all sizes from the smallest of the small to the largest of the large. 

When I arrived on the scene, the owners of the company where clearly frustrated and any kind of technology was scoffed at.  I introduced one of the leading SaaS applications, salesforce.com.  A SaaS application is one that is accessed via the internet so it worked well with the 7 oiffices they had spread throughout the country.  It is also paid via a monthly subscription rate based on the number of users, which meant the overall cost would be predictable and stable. 

We mapped out all the processes, automated workflows, gave visibility into the sales pipeline, tracked marketing campaigns, developed a dashboard management system, and had a centralized place to capture all client interactions.  When the application launched (in about a month!) it changed the way in which the company did business.  It transformed the work environment. 

Most importantly, I was able to reduce the $ spent on technology from $170K+ per year to around $30K per year, a reduction of 82%.  Better still, the new salesforce.com application took this company light years and within 18 months grew by over 480%.  This was a powerful example of how not to do CRM and what happens when it is done correctly. 

A few recommendations when implementing a SaaS application:

• If you have poor proceeses in place SaaS will not help – you need to map out your processes BEFORE you take the SaaS leap
• Find someone locally that has experience with salesforce.com or some of the other SaaS solutions – there are nuances of these applications that can be difficult to pick up early on.  The good news is as you get aquainted with the solution it is very easy to manage in-house with little IT infrastructure
• Make a commitment from the TOP to use the application – if the leaders of the company don’t use it, neither will the employees.  Once a manager pulls out a color dashboard that shows everyone’s output in living color, you’ll be amazed by how productivity goes through the roof.

If you have any questions about south of Boston web design or marketing feel free to request a free consultation from our corporate site:  www.sinatraco.com