Hans Hoffmann's Blog

As I am traveling abroad right now I thought I would edit and re-issue one of my more popular earlier blogs and one I enjoyed writing.  The edits are of the George Lucas type in nature but since it was one of my early blogs it was in need of some updating.  Enjoy and stay tuned for next weeks topic.

The competitive landscape was always changing and dynamic and with Microsoft always looking to move up the food chain and getting very focused on trying to crack the enterprise.   It was inevitable we would start encroaching on existing companies territories. It was also likely that some of these companies might be young companies like Microsoft who could be innovative. One of the brightest and certainly most vocal competitors Microsoft faced was SUN Microsystems. They were led by the ever vocal and brash Scott McNeely.  Scott never ever missed a chance on stage or in the press to bash Microsoft.  It made for great entertainment.

The history of SUN was a interesting one. The name stood for Stanford University Network. Originally the building complex they were in, housed two other companies Silicon Graphics (SGI) and a company called Cisco. All three companies can lay claim today as Silicon Valley legends. Scott was with a group of techies and when they chose roles he became President because he was a business guy and frankly did not know a whole lot about technology. I actually admired this as it reminds me of myself when I started in the  industry.  Check the archives of “60 Minutes” if you want to verify. It was an interesting interview. Coincidently he was a Detroit guy like Steve Ballmer.  The love ended there.

I was always impressed with SUN as they made hardware, but beyond hardware, they designed the chip (SUN Sparc), the Operating System (SUN Solaris) and then manufactured the boxes. This was in contrast to Microsoft which had a philosophy – you either made hardware or software, but you did not do both. They also had some very smart people who qualify as Tech Legends. Bill Joy was the CTO and a software guy at a hardware company. At Berkley he had written a OS called BSD. A forerunner to Linux and I believe something Linus Torvalds and company learned from, in particular what not to do. James Gosling a key player in architecting Java and Eric Schmidt, who went on help some start up called Google.

For some of you reading this post who are not as technical you may ask what is Java? To put it basically it’s a programming language. So people who wrote applications for a living had the option to choose Java as the language they want to write in. But why? Well this is where it gets interesting. For this of you have followed my blog, if you remember my blog on Novell I discussed their failed effort to unify Unix. Novell had the right idea, just the wrong approach. SUN had a different approach. I probably heard this summarized best at a Microsoft technology event by Corporate VP Paul Flessner. SUN was following what Microsoft was doing with Windows NT Server and realized that with the marriage of File and Print services and application services Microsoft had a winning formula for developers. At the time Unix developers chose whether they wanted to write apps for IBM AIX, SUN Solaris, HP UX, to name just a few. So SUN came up with the Java Virtual Machine (JVM) and said write to the JVM and then it will support and take care of the underlying OS. So whether you were running Windows, HP UX, AIX Solaris etc..if you wrote to the JVM your app would be supported (in theory). As Paul said, it was the smart thing to do. In the dev world the marriage of Java and the JVM is what we refer to as managed code. You do not have to worry about the underlying OS as much since the JVM handles everything (in theory).

As SUN gained popularity and Java really went crazy in the enterprise another thing took place, the dotcom boom. Two things really happened in the dotcom bubble for SUN. The first being that a pivotal player in dotcom was the Telecommunications carriers. Anyone who followed the stock market at this point realized that the stock valuations globally of Telco’s really went through the roof at this time. To shed a little light on history here, AT&T Bell Labs created the UNIX operating Systems. The OS that runs the phone system we are all on today is predominantly UNIX based. As these carriers built out their networks – the developer problem they had was solved by what SUN was providing with Java. They also wanted the lowest cost UNIX system, which at the time SUN was lower priced then what other vendors like HP or IBM had to offer. The second thing that happened was this Telco evolution that was going on extended to all the Dotcom start ups. I spent a lot of time traveling to Silicon Valley in those days and all over the place were the SUN billboards, “Sun Microsystems the . in Dotcom”. During this period SUN was blowing away it’s quarterly earning’s every quarter.

During this rise to glory it was the first time Microsoft was starting to hear that we were evil. It was hard to take. It was not new, but in the past these types of evil jabs were from people in the industry. These new attacks seemed to resonate out to the general public. It became common at Microsoft to walk into an office and see a picture of Scott McNeely on the wall being used as a dart board. As I move forward on my blog I will come back to this area of perception, but these attacks really made a lot of Microsoft employees angry and they hurt.

Microsoft did respond and we came out with our own Java tool called J++ and started showing up at conferences. I had an opportunity at a Microsoft class once to hear then VP , now President of the Server & Tools Division, Bob Muglia talk about this. Bob was a short stout man with a high-pitched and squeaky voice. Bob said that Microsoft went to a conference for Java developers and not only showed up with our own IDE (Integrated Development Environment), but it was the best one at the event. SUN was quick to recognize what was going on. If we built our own empire of Java Developers we could start defining and taking ownership of the JVM. If we were leading the developers on how to write the JVM, well then Sun would be minimize.. Sun Microsystems did what all smart companies do, they filed a lawsuit.

During all this SUN had what they perceived as a big problem with Java. Make no mistake Java was huge in the industry. However SUN was not making any money on Java. They refused to hand it over to the standards bodies (which in my view would have been the smart thing to do). They also were more clueless about Open Source then Microsoft. I think they missed the point on this one. They did conferences for Java, but they really should have built a strong program around the developer community – once you have developers they can write applications to your platform (and others). They could have created a strong developer brand around Java. They would have owned the direction of the community. In the end SUN was so afraid of seeding any control of Java, that they did nothing. They were also a hardware company and they had a huge hit with software. Hardware is great for revenue, you can get really big numbers, because it is expensive to buy, but your margins are not that great. On the other side software is cheaper and you really need economies of scale to drive big revenue numbers. However software margins are huge, usually around 90% so Net Profits are great. The one thing I will say having sold developer tools for a number of years is as developer technologies progress prices usually fall. Making money on developer tools is not like Windows or Office, average growth is around 11.5%. SUN really needed to build a home run software application that ran on the JVM that they then could have market to the Enterprise masses, sadly that was just not in their DNA at the time.

As the dotcom boom died so did SUN Microsystems. The problem SUN had was that so much revenue was being generated by the dotcom boom that when it went bust all of SUN’s eggs were in one basket. It was surprising to see how much revenue was being generated for SUN by the telecommunications industry. Having called on the French based telecom equipment maker Alcatel, I knew that these accounts were large (if memory serves me correctly Alcatel was a $40 million a year account for SUN). A second thing that occurred was the rise of Linux. What was interesting was for all the Open Source Community talk of anything but Microsoft, Linux did not impact Windows, but it killed all the high-end high-priced UNIX OS’s. I love penguins. The biggest winner of all with Linux was IBM. Another story for another blog.

Sun Microsystems would exist for a long time afterward, but it never regained the voice it had in the industry . Most of the really brilliant people have left though a few remain. They recently completed the process of being acquired by Oracle. Too bad, they were an exciting company to follow, but in the world of the internet, empires rise and fall faster than ever seen before. Moving forward it’s only going to get faster.

Good Night and Good Luck,

Hans Hoffmann May 18, 2010

Steve Ballmer was in Brazil last week at the University of Sao Paulo talking about the new release of Live Messenger, formerly MSN Messenger.  It has a new social networking focus, which I am sure is cool as everything Microsoft is doing lately for consumers has a social networking component.  It did get me to thinking about Windows Live and MSN and how it evolved while I was at Microsoft. When I look back at the legacy of the internet and how Microsoft responded one group always stands out to me: MSN.  It is an interesting journey.  The original MSN (Microsoft Network) debuted back in August of 1995.  It was to coincide with the release of Windows 95.  To put this all into perspective both MSN and Windows 95 were designed and released without the internet in mind.  To my younger readers, yes there was a world without the internet.   Since that time MSN has changed direction so many times it was even hard internally to keep track of what they were doing or where they were going. 

 The original MSN was built to compete with AOL and CompuServe.  These were what we called “walled garden” services.  What this meant was as a MSN or AOL partner I would sign up to deliver my services over their particular network.  When I went to AOL I got options for all sorts of things.  It could be “Mama’s cookie recipes'” or “Bob’s train collectible’s”, the point being these were only available to AOL subscribers.  When Microsoft in 1996 announced MSN 2.0 it was apparent right away the impact the Internet was having.  All these partners who had signed up for the walled garden approach came to Redmond and were told, the internet is the future and you are all on your own.

It was around 1999/2000 that the group I was in was briefly re-organized under MSN.  At the time MSN was being led by Brad Chase (Windows 95 fame) and Jon DeVaan, an engineer.  Thomas Koll was our VP for what was then the Network Service Provider Group (NSP).  We were introduced to the new organization at the Bellevue Convention Center.  Brad was the “showman” so he did most of the talking.  Jon was an engineer, did I already say that?  Brad talked about MSN as “The comeback kids”.  In order to have a “comeback”, you had to have achieved some measure of success in the past.   Something MSN had not really experienced. Everything Brad talked about was very consumer focused.  The NSP folks in the audience were Business Development people used to doing deals with large Telco’s and Network Equipment Providers.   We were like deer in headlights.  Speechless and confused.  It was apparent in the weeks following that Thomas pleaded with someone  to change this pending train wreck.  But I can say for at least 2 weeks I was a part of MSN.

At Microsoft MSN was its own entity doing its own thing.  This was highlighted more or less by Microsoft’s move into mobile phones.  The mobile phone folks believed in a world on windows.  The MSN folks just wanted to be a relative service, regardless of the platform.  The mobile world had a lot of different platforms, which Google, AOL and Yahoo played on all of them  – Symbian, Palm, RIM, Windows Mobile etc..They were offering services lile instant messaging, email and search.  Needless to say the MSN folks did this as well across all platforms.  The Windows mobile guys working with the wireless carriers did not like this one bit and only wanted those services available on the Microsoft based phones.  What happened then was the MSN mobile team  and Windows Mobile team each went into the carriers alone to strike their own deal.  The wireless carriers were confused as to whom they should be working with at Microsoft.  At the same time Bill Gates was out their talking about integrated innovation and better together.  Problem was internal politics (to this day) did not allow for that to happen.  On this issue I will be honest I was with the MSN folks, I did not ever understand the logic of the Windows Mobile groups thinking.  I am sure Microsoft is not unique in these type of political plays, but in the end the results are all the same, the customer loses.

When the internet changed yet again with services like Google and Yahoo! starting to dominate the Internet landscape it seemed ripe for change yet again in MSN land.  In particular like I highlighted in my earlier blog post on  Google, search was now the big game changing beast on the internet so Microsoft jumped on board and launched Live in 2005.  The search strategy was owned at Microsoft by MSN.  As is usually the case when Microsoft thinks too much the whole Live branding experience (Live Search, Live ID, Live Messenger etc..)  was a bust.  The common thing you heard was that Google was a verb and how do you compete with that.  As I have said before Microsoft is not good at sex and sizzle.  The whole Live strategy I found confusing the fact that it still lives on, even now after the launch of Bing, has made the brand even more confusing to me.  To muddle things even more according to Alexa Live search still ranks higher than Bing at #5 while Bing sits at #24.  I believe that is a big challenge when Microsoft changes strategies that before they compete effectively they have to undo what they have already marketed to consumers. 

I guess this brings me back to Sao Paulo and the new Live Messenger.  When I read it, it made me realize l do not know where the whole Live brand fits in overall to what Microsoft is trying to accomplish against Google.  I probably should since I worked at Microsoft for 18 years, maybe I did not pay close enough attention, but if I can’t make sense of it how can consumers??

In the end MSN has been through a lot in its now 15 year history at Microsoft.  They have had downs and they have had some slight ups.  Though those ups rarely happened around earnings season.  They continue to try new things and drive new revenue streams (advertising driven revenue).  They have seen every trend the internet has thrown their way and failed more times than I can remember (Anyone ever use Soapbox?  It was the YouTube killer…I am being serious).  They need an infusion of youth to help them think ahead of the curve.  Bringing in veteran’s of Microsoft leads to old ways of thinking.  They need a Sun Tzu moment where they change the playing field otherwise they will continue to follow.  Until they do they will…well they will just continue to be the same old MSN.  Or as Bruce Springsteen was sang about  MSN (not really it was his marriage) “One step forward, two steps back”.

Good Night and Good Luck

Hans Hoffmann May 6th 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