Month: April 2010

I know an odd title for many who read my blog but please stay with me on this one as I try to bring the future to the present and hopefully you will understand where I am going with this one.  I do not think there is anyone out there who has not seen some of the first Unified Communications Software first released.  It was released in Star Trek, the original series, on September 8, 1966.  They had communicators, video chat etcetera. It was really cutting edge stuff.  Of course this was before the advent of the software industry.  This type of technology would persevere in film for many years to come.  It was a standard in science fiction.  For those who our not familiar with what unified communications is, it is essentially the “unification” of all the forms of electronic communications.  That would mean video conferencing, voice, email, web meetings, instant messaging and whatever new forms of communications we develop.  Today many companies are working on these type of capabilities including many of the big industry players, which includes Microsoft, Cisco and Google.

My first experience with Unified Communications goes back to 1999 when I was still in telesales working with Internet Service Providers.  In particular I was working with an ISP in Green Bay, Wisconsin.  I had heard about VOIP and video was now also starting to surface (keep in mind the term Unified Communications was not yet around).  I decided what the hell and built a case to my then manager Linda Griffin to allow me to get a head set, a little video camera so that I could effectively stop using the standard voice service provided by Qwest and just do everything over our existing 1omb network (for you nontechnical folks 10mb is not a lot).  This would lead the way in showing Microsoft how it could use technology to save millions of dollars. In short I was a genius.

Linda signed off on my idea and within two weeks I had everything I needed.  I let my client in Green Bay know we were ready to go.  The initial thrill of connecting gave way fairly quick as we established our link.  Using voice was working but it was of very low quality and you never knew when things would cut out.  When we added video a whole new dynamic happened.  The VoIP was reduced to one way communication and I quickly learned that the video was not studio quality and the windows behind me turned me into a shadow (kind of like those people  they interview on TV whose identity they want to protect).  I can’t say it was a humbling experience, I actually believe we learn more through our failures than our successes.  However it was dissapointing in terms of the glorious visions of success I had in my mind.  Most new technologies are not new  but a result of something already tried and in many instances failed.  Well I had achieved the latter.

Which brings us to the second component of the title, oil.  Oil is an industry that has been with us since the latter part of the 1800’s.  Though the techniques to find and extract oil have greatly benefitted from technology after that not a lot has changed in terms of getting oil out of the ground to the market.  No industry had a greater impact on world economics or world politics in the 20th century.  It also stands to have a significant impact on global affairs in the first half of the 21st century. One of the most significant things to happen in the oil industry in et new century occurred in July 2008, this is when the price of a barrel of oil peaked at $147.30.  There are many reasons things like this happen.  The rise of emerging markets has certainly created a “new” demand for oil.  The supply of oil is also changing.  Though there is an estimated trillion barrels of oil still left in the ground (“A thousand barrels a second” by Peter Tertzakian), the ability to get to that oil, process and refine is very expensive.  Though there is a strong movement to look at alternative fuels there is no silver bullet to replace oil and even if there was it would take time to put in place the infrastructure to replace our dependence on oil.  So for the short term (the next 20 years) we will still be heavily dependent on oil.

At this point you may start to wonder where Hans Hoffmann is going with this or maybe you have already guessed, but please bear with me just a little while longer.  Here is the good news.  The down economy we are currently in will end and things will start to return to normal.  We will get back to our desired style of luxury and life will be good, but there is going to be a cost.  The rest of the world is coming with the United States on this recovery and in some instances if not many will ge there before us (India, China and Brazil in particular).  This will put pressure on the basics of supply and demand in oil.  It will put pressure on governments to ease up on oil exploration and drill for more oil.  In short the price of oil will start to drastically increase again.  I will agree with those who forecast the coming of $200 a barrel, to me it seems obvious.  The growth in wind and solar will not be able to stop it.  The cost of pleasure and business travel will increase.  All the while Wall St will continue to ask for better margins on the cost of doing business.

This brings us back to Unified communications and the role it will play in the pending energy crisis.  The technology is nearly there and we will start to bring the future forward.  How we interact with one another is about to change as well.  In the past things like Video teleconferencing were neat but a little stiff in terms of interaction.  A part of that was due to poor quality and expensive costs.  However with the new economic realities and much improved technologies I believe things are about to change.  An example will be my old customer Cisco Systems.  When I would visit some buildings at their offices in Milpitas some buildings had no receptionist.  They simply had a monitor that would sence you enter the door and a receptionist in a central location would handle your request.  What was impressive and what got me to thinking was the great quality of the service and how personal the interaction was.  One of the reasons I have spent so much of a career on a plane is the ability to meet customers in person and establish the account executive to client relationship.  It is not hard to envision that in the near future face to face relationships will be dealt with via Unified Communications with a monitor and a VoIP connection.  The software today is enabling this and with the coming charge towards higher oil prices this will only accelerate the adoption of Unified Communication solutions in global business. As is always the case this change of technology force will upset some industries, but it will spur new ones.  That is nothing new to business and there will be those who profit greatly and those who miss the bus completely.

Hopefully I tied the pieces together nicely for everyone who read this title and wondered out loud, “What the hell is Hans talking about?”.  I thought I would conclude this article with some investment advice, but having seen others do this I thought better of it.  It seems like a gamble geared towards failure.  Not to mention losing a lot of people I consider friends.  Tonight I am going home to watch the Montreal Canadians versus Washington Capitols play an exciting game 7 in the NHL playoffs.  It’s in Washington, but in Montreal’s favor they can claim as one of their favorite sons William Shatner.  We of course love Mr. Shatner for what he brought to television in the role James T. Kirk.  As I began with in this blog the future laid out in Star Trek is upon us (the communications piece not the Enterprise), but it is being driven by an industry rich in history in driving the growth of the 20th century.  So let’s boldly go….

Good Night and Good Luck

Hans H Hoffmann April 28, 2010

When the market went in the tank it was a dark day for everyone. It was one of those things that when you talked to people prior to the collapse most people could tell things were not right. It was a typical conversation at the dinner table or while you were at the bar with friends or strangers.   How do you explain all the silly ads you saw on MSNBC.com or other websites, things to the tune of “Get a $500,000 loan today, no money down and no interest payments for 6 months”. Not to mention anyone could get these loans.  

When it hit it hit fast and hard and every CEO of every major company became an expert, including Microsoft’s Steve Ballmer.  Steve really got into reading about the Panic of 1873 and the economic collapse that started with the bankruptcy of a Philadelphia a banking firm, Jay Cooke and Company.  I can understand the correlation (Lehman Brothers?), but in my view all the collapses (junk bonds, dotcom, housing market’s etc..) I have witnessed are due to a failure to follow basic business principles.  The number one priority being your cash inflows must exceed your cash outflows.  However in the United States we have a gold rush mentality that stems back to the San Francisco gold rush of 1849.  We all believe we can be rich, we all believe we can be famous.  Whenever a rush presents itself Americans will run towards the light at the end of the tunnel, even if they do not know where they are going.

When the economy tanked I am sure everyone can attest that business. basically came to a halt.  In the world of information technology budgets were frozen and any grand plans of expansion were put on the  back burner.  Since I was selling into IT any chance of a large deal being done went to nil.  At Microsoft the reaction of senior leadership was not confusing to say the least.  I remember our COO Kevin Turner quoting his idol Sam Walton. Kevin (KT) came from Wal-Mart.  Sam told Kevin early on in his career, “Kevin, during an economic downturn there are those who participate and those who do not.  The latter always gain market share”.  I really liked that quote.  I thought at the time Microsoft was going to use its cash to keep business moving forward, to be aggressive when others were pulling back, to grow our share.   By the next morning Microsoft began contracting it’s business.

Following KT’s motivational speech everything was being cut across the organization.  Now KT’s method of leadership is old school and driven by fear.  Those beneath him are treated like line managers.  The word at the top is followed not challenged.  Over the next several months he would travel the globe and visit the field offices, sit in executive meetings and always say ” we are not participating in this economy”.  Every manager above me would say “Hans you need to grow share, now is our time to win”.  These were the echo’s of KT filtering down to the field reps.  Do not challenge, just do.

The reality at Microsoft was everything went into cost cutting mode.  Any travel all of a sudden needed manger approval.   There was no entertainment budget to take clients to dinner.  The idea of taking share was being supported by spreadsheets, and a lot marketing that stretched the bounds of reality.  How Vista can save you money?  We had a bunch of supporting marketing material for that scenario, if you can call it that.  We had internal Sharepoint Portals with a bunch of how Microsoft can save you money type scenarios.  In alignment with what KT was hearing and what we in the field were hearing – every CIO, Director, Manager, Developer in IT were all saying the same thing, “Help us save money immediately”.  I read through the scenarios and never used one of them because I did not believe I would be able to defend any of them in front of a customer.  Signing a Microsoft Enterprise Agreement was not fitting the request.  Some of our competitors were able to excel in this environment.  In the enterprise space VMWare certainly had the right message at the right time.  With their virtualization technology they could tell CIO’s maximize the utilization of the hardware you have rather than increase data center space and increase energy costs.  It also fit in nicely with many of the “green IT” initiatives that have become so popular in the industry.  Another company I think made a lot of headway during this time was SalesForce.com, outsourced hosting of your CRM environment.  Saves you money and it’s useful.  Microsoft is now offering hosted Microsoft CRM.  Better late to the party than never.

Not everything was bad I do think that the crisis gave Microsoft a lot of opportunities to look internally at business practices and see where money was being spent and where could we be more efficient in how we spent our money.  I know Wall Street was thoroughly impressed with how much we were able to cut.  I don’t think Wall Street saw how crippled we were internally.

In my opinion what Microsoft should have done here was go after Oracle and say “Buy SQL Server and we will help fund the migration”.  It would have cost a lot in the short run but in the long run I think would have increased not only SQL Server sales, but Windows Server, Sharepoint Server, Dynamics  etc..To do that type of initiative at would have taken courage at the top.  It would have hit the companies share price, but in the long run I believe the company would have won more business and helped the overall health of the organization.  In today’s world those type of leaders are hard to come by.   We could have looked at other competitors the same way.

I doubt what I have laid out here is much different from any other company at the time.  I am sure every sales rep in America could sit down with me over a beer and commiserate over the challenges one of the greatest economic collapses in American history.  I guess the shear historian in me will remember the fear and panic that came  over every company in America.  At a time when corporate America needed strong leadership it seemed sorely lacking.  To be clear in my opinion this was not the fault of a few companies facing bankruptcy, but a potential complete meltdown of the US financial system.  A friend recently told me that George Bush and John McCain had warned about this scenario before it happened.   So did I.  As I said leaders show courage in the face of public opinion.   Politics aside the best quote out of the financial disaster came from a Wall Street lackey who when asked by a reporter “Didn’t you all see this coming ?” replied “Sure, but when you are at a party having a good time..”  Don’t worry there will be more parties in America, more gold rushes, it’s like leading a horse to water. The question at my old company is will the leaders rise up and see the challenge before them and the opportunity it presents or will they do what the shareholders tell them.

Good Night and Good Luck,

Hans Hoffmann April 21, 2010

During the last decade at Microsoft things changed dramatically at the company.  Like any big change some good and some bad.  One of the interesting success stories was and remains to this day the development of the xBox.

When you read what is on the internet a lot of credit was given to the developer Seamus Blackley, but having been at Microsoft at the time I think the biggest credit yet again goes to J Allard.  I think most importantly what he identified was a problem in the gaming industry. At the time the big thing in the gaming industry was Sony with the Playstation.  Nintendo seemed to be fading and after that there was no alternative.  The problem was the gaming developer.  Sony was basically dictating to game developers the terms of development for the Playstation.  Microsoft (J Allard) figured that the opportunity was to make a cheaper entry point into game development and allow developers to have a platform that made it easy to take games developed for the console and port to the PC – thus creating a bigger market.

The challenge internally was going to be to sell the executives that this was a good opportunity and more importantly to make it really work Microsoft would have to build and own the gaming console, in short get into the hardware business.  The one thing I will say about Billg is as much as he loves software he is not a “gamer”.  However J Allard is an old school guy who has great opinions and has the ear of the senior execs.  He was the guy who sold Billg on the internet,  he is a guy with a lot of clout at Microsoft (check out this expose in Wired) .  In the end he got everyone on board to take the plunge.

Early on at Microsoft it was clear that the xBox was something different.  I do not mean this from a technical level but as a whole organization within Microsoft.  They seemed to be marching to the same beat over in xBox land.  They had a start-up allure that at the time was dormant at Microsoft and was being reinvigorated.  Out of the gate I thought they had the name right and I thought owning the game console was the right thing to do.   In hind site we were owning the experience.  THere were several things xBox did and they did right:

1. Brand marketing
2. Understand the “gamer” and the “gamer” experience
3. Look to te future and the role the internet would play in gaming

To the first point at Microsoft then and today the number one brand is Windows and the Windows Logo.  Had corporate marketing been allowed to participate in having influence in the game experience I can only imagine what they would have come up with, but I am sure it would have included the Windows “Start” button.  But to the good of the company and the community, xBox built its own brand.  I think that was very important as it essentially separated the xBox team from the rest of the company.  They were not beholden to what was already at Microsoft they were their own business.  It allowed the team to start with a clean slate.  That being said they would never admit to this.  I was attending an internal Microsoft tech conference and one of the agenda items was “xBox keys to organizational success”.  they had a GM talk and what amazed me was how he evaded questions and gave us insulting answers.  THings like, “we come to work passionate and ready to work hard”.  the whole time I kept thinking the answer was obvious, ” you are not the WIndows team, you have no history, no historical politics, legacy code, OEM agreements, etc..”  I guess he did not want to hurt anyones feelings.  Gutless.

Second it was apparent they had spent the time to understand what the “gamer” was doing when they were playing.  In many instances they had music going via a iPod or other MP3 player. so they made sure to incorporate that into the experience of playing a xBox game.  For the console they allowed 3rd parties to create “cool” or “funky” panels to put on the face of the console.  The xBox team took time to focus on the experience.  Microsoft in my view sometimes falls into the trap that they believe technology is the experience, but in reality technology enables the experience but IS NOT the experience.  It’s a subtle difference in thinking but it’s very important.  I think the xBox team understood this and it is a large reason for their success

Finally they did what I viewed as a very simple thing which was support online gaming.  Sony was slow to pick this up, but then again that seems to be a trend with them.  Remember whan talking about music players with hard drives, they felt “hard drives were interesting technology”…hello Apple.  As I often say “seeing the future is easy, timing it is hard and missing it is unforgivable”.  Driving traffic over a network utilizing the internet seems very obvious as it takes an “individual” experience and makes it a “community” experience.  As a parent video games are best when played as a group activity and not having one kid play while 3 watch.

There would be some misses along the way as Nintendo came back from the dead by altering the playing field with the Wii.  Microsoft is working hard on something that will alter the playing field once again, which is code-named “Project Natal”.  Sony, well they are being Sony and falling further behind.  They just do not realize it yet.  My thinking all along with these new controllers is that it will extend the gaming console into new markets, namely health and fitness.  It seems apparent that the game console will become the media hub for all your content.  As we see technologies like IPTV (now that we have moved to Digital Cable) the carriers; telecommunications, satellite, and Cable will want partnerships with the major game console vendors (Microsoft, Nintendo and Sony)

 Today xBox is a ort of nearly every ones vocabulary.  It has really been one of the brightest if not the brightest success story Microsoft has had this past decade.  It stated very simply as a problem was identified, but it was a problem that played to a Microsoft core strength the developer.  To many of the other big initiatives at Microsoft like Bing or Zune did not start because a problem was identified and needed to be addressed, they were born more out of panic and a realization we had fallen behind.  It does go to show that even in a company as big as Microsoft we could still teach a hungry start-up a thing or two.  We just needed to return to our roots.

Good Night and Good Luck,

Hans Henrik Hoffmann April 15th , 2010

One of the most interesting things through the years at Microsoft was to follow the competition as they came and went.  It was an annual ritual at the Microsoft Global Sales summit to listen to the COO, Steve B, or Bill G list and talk through the key competitors for the year.   It seemed every year there was a new competitor, some of the old (Oracle and IBM), but like the industry it was a list in constant motion.  Not a year would go by without Billg saying the biggest fear from a competitive standpoint was that small hungry startup that just wanted it more than Microsoft.

In 2001 Eric Schmidt left his job as CEO of Novell to take over the helm at what was then a little know start-up called Google.  Eric was a well-respected man in the industry, one of those people who had great technical skills combined with good business acumen.   When he had left Sun Microsystems to take over Novell in 1997 I think everyone said aloud, “Why?”.  At the time everyone could see that Novell was a sinking ship.  Now moving in to Google I think everyone thought this was a promising move for one of the industry’s top talents.  Little did anyone realize how good a move it would be.  It was a young hungry start-up.

In the world of industry I am not sure there is a commercial sector that as part of its sales training does not recommend Sun Tzu’s classic “The Art of War”.  One of the basic tenants laid out on the book is going into battle against superior armed forces. When competing against Microsoft this was often the case of smaller companies.  But Sun Tzu would argue in such circumstances that it is imperative for the army with smaller forces to change the battle field to its advantage.  When competing against Microsoft it was a mistake to offer packaged software and license agreements, because you can argue who invented it, but make no mistake Microsoft owns it.

Google was interesting in that they were not the first search engine company, there had been many (Yahoo, Alta Vista, Lycos etc..).  Started by a couple young men Larry Page and Sergey Brin, they stumbled upon something unique.  Yes they had the kick ass algorithm that made search fast and provided useful information.  However, what really set them apart was the ad generated business model where Google was paid for ads based on key word searches.  It was a way to monetize their internet search engine and as will be discussed it has been succesful, very successful.  It was a new business model, in fact a new battle field.

The Google mission statement is brilliant “to organize the world’s information and make it universally accessible and useful”.  As I said about Microsoft’s original mission statement, Google’s does the same,  it lays out what the company wants to do without really stating what it is the company does.  Google writes software to do search , you would not know that from the  mission statement, but it is implied.

The simple combination if an ad driven business model and a concise mission statement has allowed Google to fund further software development, in a way you could say it is an indirect business model.  Where Microsoft provides bundled software to create more software , Google uses its ad driven revenues to fund further software development.  In short, back to our friend Sun Tzu, they changed the playing field.

When asked if Microsoft has made any mistakes I heard repeatedly from SteveB and Billg, “we really blew it in search”.  Ray Ozzie shortly after joining Microsoft from Groove stated in his first “visionary” paper how the industry was now developing this indirect ad driven revenue model and Microsoft needed to do that as well.  As much as I heard this I always felt then as I do now, Microsoft would never have figured this out on their own.  It is the challenge many companies face when they have a cash cow as  part of a stable financial diet  Microsoft was making billions on Office and Windows through their traditional channels of packaged software and OEM agreements.  It’s very hard to think outside of the box when you are making lots of money.  There were efforts but even things like Service Provider License Agreements and hosted product offerings were not done with  full corporate backing, but were hidden for small groups to build into something big, which took a long time and usually never materialized.

Today Google stands at revenues of $23.6 billion with Net Profits of $6.5 billion as of the end of 2009.  For a company that incorporated in 1998 that is very impressive.  When I first joined Microsoft in 1991 we were just beginning to start uttering the word billion, which was in the 16th year of the company.   In the internet age I often think in terms if the velocity of business.   What I mean by this is simply laid out by the definition of velocity. In physics velocity means the rate of change of position.  Going from a small tech startup to technology power  within 10 years would be a prime definition of  the velocity of business.

Looking forward Google has laid the groundwork for future success.  The acquisition of YouTube, though at the time in some technology quarters was  looked down upon, in time I think will be proven brilliant.  There is no question in mind the future of search will be closely tied to video,  Today we get decent broadband streaming services but with the advent of 100gb networks this is only going to get better, much better.  Once again the ability to tie ad revenues to video services will be key to driving growth.  Today I think everyone gets a clip or two a day of funny videos, sports highlights (did anyone see Lionel Messi’s  four goals yesterday?), movie clips etc…In the not too distant future we will have houses full of monitors all capable of streaming what ever video content we want.  Google see’s this future and wants to own it.

There is another aspect of Google which is targeting the web developer.  Today 70% of all development is targeting the web.  Google hired former Microsoft exec Vic Gundrota to help drive developer audience efforts.  I had seen Vic speak a number of times while at Microsoft.  He is a visionary guy with a flair for “dramatic” presentations.  Sometimes a bit corny, but always interesting.    Google is borrowing a bit from Microsoft by creating a partner channel and encouraging developers to use Google’s tools and write applications for Android and Chrome.  Android is about mobility but Chrome to me is the more interesting technology play.  Anyone who wants to write software these days and make money  is targeting the web.  This is not rocket science.  At Microsoft three years ago I was watching yet another  exciting Microsoft “rah rah” video in Las Vegas, when the lovely lady on-screen said, “do you know 80% of all activity on the desktop today is on the web?”.  You don’t say.  Microsoft has a lot of smart people, but sometimes I did wonder.  Maybe it was rocket science. Chrome was a browser.  Yes another one.  What it is and will become over time is an internet development platform.  From a developer standpoint you won’t be as dependent on Windows API’s for writing your applications and because it’s in the browser you can run whatever underlying OS that you want.  The naysayers can say what they want but it is the smart thing for Google to do.  At Microsoft the PR you receive is the standard “why would developers do this?” .  Why does Google support multiple OS’s, like Android and Chrome, it will never work (at one point Microsoft had Windows and NT, but that is another story).  But if you look at what is being talked about there is a lot of discussion around the features in the upcoming release of  Internet Explorer 9 as for the next release of Windows..not a word.  As a former Microsoft employee my fear is once again Microsoft is following and not leading.  Maybe in the end Windows will just be a buggy set of device drivers?

Since I left Microsoft I have tried other technologies on the web, one being setting up a gMail account.  Google’s gMail has been a huge success and it seems like most people setting up their internet mail accounts seem to gravitate towards gMail.  It used to be people used Hotmail. Someone sent me a word document as an attachment and gMail in its wisdom said I could open the document using Google Docs.    I tried it and it worked flawlessly.  This  gets to a final discussion on changing the playing field as well as using your competitors playbook.  Google is using its ad revenues to fund other software projects.  In this case targeting one that would compete directly with Microsoft’s great cash cow Office.   By allowing users to read Microsoft Word docs they borrow from what Microsoft was doing when I first joined in 1991, which was provide Microsoft Word users the ability to read WordPerfect and WordStar documents.  If you want users to migrate off an existing application make it easy for them to do so.

Looking forward Microsoft has done some very good things, there Bing search engine caused an immediate response from Larry Page and Sergey Brin, to study the new search, it’s a good thing to get your competitors to react once in a while.  Microsoft is also trying to get an online version of Office.  One of the great challenges for any company with the assets like Microsoft is to change with the industry while keeping shareholders happy.  However as a whole it looks like rather than take the fight to Google it waits to see what Google is going and then reacts to it.

I said earlier video is going to play an even larger part in ad driven revenues moving forward.  One of the technologies Microsoft has been touting is Silverlight, the Adobe Flash killer (YouTube supports Flash).  I have used Silverlight and it is easy to work and seems to work very well, but to be really successful it needs to be translated into ad revenues for Bing.  Microsoft is a very good technical company but with so many business it competes against itself internally and fails to capitalize on opportunities.  Billg said the key to Microsoft’s future success is “integrated innovation”.  It is the integrated piece that is sorely lacking.  However if Microsoft can stop acting like the US Congress the opportunity to lead as a technical leader and not a financial leader is before them.  One  of the original Apple employees and Silicon Valley legend Guy Kawasaki was speaking to a group of venture capitalists in the valley and he made the point to the audience, “don’t focus so much on if your investment will make money, but focus on the technical innovation and enthusiasm of what your investing in, making money is implied”.  Microsoft would be wise to head these words.  There was a time when it did.  I think under the guise of Satya Nadella it is starting to wake again.