Live Mesh Means Live Mosh: Market Implications of Microsoft’s New S+S Platform

No ‘Microsoft unplugged’ on this week’s Web 2.0 stage.

Only the clang-clang-clanging of plugged-in, fully-connected electric guitars powering up to shout out an asymmetric song about software plus services.

And on that big dance floor called the cloud, you can see the mosh pit beginning to form as those heavily-inked headbangers in the marketing departments of the software superpowers sport their platform body art of choice….App Engine Rules, Force.com Means No Software, and now… Live Mesh Ink=All Device Synch.

So who will prevail? Better yet, in the wake of this week’s Microsoft’s Live Mesh announcement, who is best positioned on the cloud computing dance floor to draw blood first? In plain punk-marketing English, now that Microsoft has opened a new front in their software + services offensive, what are the market implications of this for the cloud platform wars between the superpowers, specifically Google and Microsoft?

Here’s my take. At last, at long last, Microsoft is leveraging their superpower status to potentially change the game in the coming cloud platform wars. How so you ask? By positioning Live Mesh as a set of platform services around devices. Here’s 3 support points for my point of view.

1. “Devices”, whether Windows PCs or Windows-based smart phones, constitute a piece of market real estate where Microsoft possesses a dominant, asymmetric market advantage today, and Google does not. The battleground of devices, to paraphrase Sun Tzu, is one of the Nine Grounds of war where Google enters at a disadvantage. Sun Tzu calls this dispersive ground. Sun Tzu’s advice….Don’t Do Battle Upon this Ground.

2. As witnessed by the success of iPod/iTunes, Microsoft is validating that devices are the new ‘packaging’ model for software plus services delivery. Additionally, Microsoft’s relationships with PC OEMs, cell phone vendors, and wireless carriers constitute a future ‘channel’ for the ubiquitous distribution of Live Mesh.

3. Despite a slowing enterprise IT economy, devices remain a major growth area for consumers, and device-synch services constitute a potentially large opportunity for ad-based and sponsorship-advantaged business models outside of search, Google’s patch. I don’t know about you, but I can foresee a lot of ads being served into various Live Mesh services, or if you hate ads, a ‘premium’ subscription model ala anti-virus software and update services. In either case, MS benefits.

What are your strategic marketing counter-measures if you are Google?

First you mock Live Mesh…Disparagingly call it Live Mush and say it will never work in a million years, or that it will only work for MS devices, and that it’s just more ‘proprietary’ ‘break the internet’ stuff from Redmond.

Second….Enter into a ‘coalition of the willing’ with Apple and other MS device competitors with an alternative service that ‘embraces and extends’ Windows and has a ‘synch’ download like the Google toolbar for Windows.

Third, and most important---Actually teach developers how to make real money (not some mythical, VC-funded Long Tail ‘application marketplace’ chump change) writing and running apps on App Engine. Call it Cloud University from Google.

In other words, show ISVs and Web 2.0 services providers how to draw the most blood in the mosh pit of cloud computing.

The Redmondista bottom line. Live Mesh means it’s going to get real messy...uh moshy out there on the dance floor. As dance floors tend to be in the age of the software superpowers.

Office in the Cloud or Head in the Cloud? Notes on the Salesforce/Google Announcement

"Salesforce.com is thrilled to be offering Google Apps integrated with our Salesforce applications and Force.com Platform-as-a-Service to the millions of businesses looking to manage their entire office in the cloud. The combination of our leading CRM applications and Google's business productivity applications pushes forward the transformation of the industry to cloud computing. The end of software is here." Marc Benioff, Chairman and CEO, Salesforce.com.

First, congratulations are in order.

So please allow me to do my Randy Jackson imitation and say Major Props to My Dog Marc Benioff for Your Fly Deal with Google, embedding Google productivity apps like email, calendar, and more into the Salesforce UI.

Got to love it when historic go-it-aloners like Salesforce (reflected in a total sales/marketing expense line that hovers in the 50% of revenue range) do something slick right out of the 'embrace and extend' original Redmondista Bill Gates playbook. Clearly, this kind of alliance can not hurt Salesforce or Google in the markets both currently serve, may even result in a little more adoption for both companies products, as well as an increased share price based on future merger speculation.

But that's where my Randy Jackson imitation ends and my Simon Cowell imitation begins.
And as Simon is often known to opine, "This is a singing competition. And you have to pick the right song." And for my money, the song Benioff mentions above titled '...Looking to Manage Their Entire Office in the Cloud" is not a song that enterprise customers are ready to sing in 2008. And maybe never be able to sing, as a direct result of that miracle even more powerful than compound interest called MARKET LOCK-IN.

Two of the key concepts in the glossary of Asymmetric Marketing are 'ecozones' (locked-in customer installed-base of a market superpower, e.g. Microsoft), and 'ecoregions' (specific subset of an ecozone that clusters around a given superpower product/partner set, e.g. MS Exchange).

So in the context of the significant number of installed base ecoregions of Microsoft in productivity apps, and Oracle, SAP and IBM in enterprise CRM, I don't see that much 'disruption' coming out of this deal, much less 'the end of software'.

Bottom line---At this point in the evolution of SaaS to connected SaaS, I think this was a missed opportunity for Google and Salesforce to begin embracing, extending and coopting the Microsoft notion of 'software plus services', and inserting their own SaaS/PaaS value propositions into that much broader vision of an integrated on-premises/on-demand IT universe.

Whoever begins doing that in a smart way will be able to penetrate those superpower ecozones and ecoregions of Microsoft, Oracle and others, and establish cloud computing in the context of all computing. Not as the next stand-alone 'disruptive innovation'.

In other words, victory in the war for the 'office in the cloud' will go to those who get their heads out of the cloud and acknowledge the asymmetric nature of today's software market landscapes.

More Californication 2.0: Yahoo Googles a Menage

"Senator -- you can have my answer now if you like. My offer is this -- nothing. Not even the fee for the gaming license, which I would appreciate if you would put up personally." Michael Corleone, Godfather Part II

Like Michael Corleone, Jerry Yang and the Yangbangers decided not to wait 3 weeks to blow off Steve Ballmer's final offer... as I predicted. Instead, they decided to do it today by leaking news of the Yahoo/Google 'partnership' under which Yahoo essentially becomes a content affiliate of the Google ad network, and serves Google ads into Yahoo pages. This is one form of the indirect methods I hinted at in my post yesterday for the Yangbangers to stave off the Microsoft buyout offer.

And the monopoly watchers are already on alert, as indicated by the comments of a Wisconsin Senator on the Anti-Trust Subcommittee that he will be 'watching' Yahoo's new affiliate relationship with Google. Since Google can not bail out Yahoo outright, it will continue to try to do so indirectly, and/or through 3rd party relationships.

The lesson here for CEOs and CMOs of software and web companies is this. Understand how Yahoo has gone from web superpower to web affiliate of Google in years since their initial powered-by search deal with Google in 2000.

Following the asymmetric marketing playbook, Google rose from a startup supplier of search to Yahoo to a market superpower by capturing the momentum of Yahoo's business from inside. Just as the startup Microsoft did with IBM in PCs during the 1980's. I call it parasitic symbiosis in my book. It's how the mighty fall, and the asymmetric insurgents win the cage fight by entering the cage.

I suspect this new Microsoft/Yahoo/Google menage a trois is just going to get more like reality TV with every passing day so stay tuned.

With no Jack Bauer and the CTU on TV this spring, I can't wait to see what Steve Ballmer does next. I hope he gives me a call. I've got a few ideas of my own.

Californication 2.0: Microsoft/Yahoo Embrace Tough Love

As the great poet T.S. Eliot said, "April is the cruellest month". Fast forward to April 2008 and that would appear to be the case in that Californication 2.0 saga known as the Microsoft/Yahoo merger talks. Three days ago, Microsoft CEO Steve Ballmer sent a letter to the Yahoo Board of Directors stating as follows:

"If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board. The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal."

"Proxy contest"...."alternative slate of directors".... "take an offer directly to your shareholders".... "undesirable impact on the value of your company"..... Sounds like something or somebody went and seriously pissed off Steve Ballmer, which is not really the starting point for a successful asymmetric marketing strategy in the 21st century software plus services industry.

In response, Jerry Yang continued to play out his hand and ask for more money stating the MS offer 'substantially undervalues Yahoo' and then went one step further by invoking the strategic value of the combined entity as follows:

"Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo!, including any strategic benefits to Microsoft...." Which means that Jerry Yang also knows it's down to a 2-horse race in sponsored search and his horse is not in the running.

OK. Based on the above, I think it's safe to say we're past the 'friendly' offer phase of the MicroHoo dance. And the question of the moment remains a simple one. How will this whole thing play out?

Here's my scenario, based on the blueprint for 21st century software markets that I lay out in my book, Asymmetric Marketing.

1. To gain ground in search, Microsoft needs a 2-horse race, i.e. MS vs. Google. This is common knowledge, and a fact of life in the age of the software plus services superpowers. And with Yahoo in its portfolio, MS can get more creative about its overall 'software plus services' approach to carrying out 'category regime change' against Google in its core sponsored search business.

2. Meanwhile, Google is frozen by anti-trust concerns and can not directly come to Yahoo's rescue, although they may try an indirect, three-way deal involving a content player, e.g. News Corp., TimeWarner, etc. But these players also do business with Microsoft and may not want to risk their relationship capital with Redmond for Yahoo. Unless Google really sweetens the pot, which may not pass regulatory scrutiny after MS cries foul.

3. Even though Redmond is significantly overpaying for Yahoo at their current bid level, as well as absorbing a potentially hostile culture into Microsoft, the original poker-playing Redmondistas led by Ballmer will play out their hand to the end. So if I was a Yahoo board member I'd take Steve Ballmer at his word and expect a proxy fight. This will tie up Yahoo management resources and attention, and place Yahoo in the same kind of 'twist in the wind' position relative to its biggest customers that PeopleSoft was in when Larry Ellison of Oracle initiated the hostile phase of his takeover.

So look for the following headlines in the days and weeks to come.

Jerry Yang refuses to blink in the three week timeframe he's been handed, and Microsoft withdraws its offer.

Yahoo stock tanks after the withdrawal of the offer, and Yahoo shareholders call for the public hanging of Yang. Call it a 'yanging'.

In short order, institutional investors caught in the downdraft of Yahoo's stock sell-off will force the Yangbangers off the Yahoo board, and accept a lower offer than the original MS offer.

Jerry Yang will go to work on his new philanthropic venture.

And Eric Schmidt over at Google will call Al Gore. Gore will advise him to begin encouraging well-paid Google corporate attorneys to apply for staff positions in the Obama justice department, and prepare for the next phase of the Microsoft anti-trust offensive.

Californication 2.0.

Tough love in the 21st century software plus services industry.

Brought to you by the month of April. A tradition of cruelty for almost a century.

Speech-Driven SaaS Comes of Age: SpeechCycle Processes 50 Millionth Call

As Bill Gates recently pointed out, in 5 years he expects to see more internet searches carried out using speech than the traditional PC keyboard. One of the early indicators that his prediction may be on the way to becoming reality is today's news from New York-based, venture-funded SpeechCycle Inc. that their SaaS offering has processed more than 50 million phone-based natural language speech interactions since their system went live. So what's the big lightbulb here? How about this.

Fifty million automated speech interactions delivered via the Software-as-a-Service model is a far cry from yesteryear's clunky old IVR systems, and proves that in business-critical application areas like call center support for the world's leading broadband service providers, the 21st century enterprise is most definitely embracing the SaaS model, as long as it incorporates the kind of security, scalability, and ease-of-integration provided by breakthrough innovators like SpeechCycle.

Hats off to the SpeechCycle team for proving that Rich Phone Applications can be as powerful as Rich Internet Applications, and that the SaaS model is most definitely alive and well in the enterprise.

Yang Microsoft Rejection Memo: A Masterpiece of Management Dysfunction

It's rare that one gets to see a true masterpiece of dysfunctional thinking about marketing strategy out there in the public domain for all to see and deconstruct at will. Such a masterpiece of dysfunction is Yahoo CEO Yang's internal memo summing up the reasons:
1. Why the Microsoft takeover bid 'undervalues' Yahoo, and
2. Why the litany of failed Yahoo marketing strategies to date are the reason why Microsoft should up its offer and 'fairly' value Yahoo.

Let's just go with a couple biggees for now. First, Yang's rant on the Yahoo brand.

"we believe microsoft’s proposal substantially undervalues yahoo!—including
our highly recognizable global brand......." and later

"... our global brand is a tremendous base from which to build leadership as the starting point for internet use: yahoo! is one of the most recognizable and admired brands in the world."

This is where the Redmondista blog is out front on all things marketing in the age of the software superpowers, as my commentary last week broke ground in pointing out that the Microsoft offer did not even mention the Yahoo brand as a 'value' element in their proposal. And rightfully so.

Earth to Mr. Yang... the Yahoo brand may have widespread 'recognition', but it has not to date been a factor in halting the fury of the Google search blitzkrieg. In fact, the Yahoo brand, once perceived as a hip, fresh, internet-native marketing advantage, is now just another destination noun in an age of brand verbs........ "I 'googled' it." That's brand as verb, and the ascendance of that one phrase says more about the deterioration of Yahoo's marketing strategy than anything else.

But the second dysfunctional marketing biggee is even more worthy of comment. Here it is.

"our goal is to grow visits to key yahoo! starting points and properties, by approximately 15% per year over the next several years. and we’re on the move: we are the most visited site in the u.s., and the number of u.s. users grew strongly in the double-digits in 2007 on our yahoo.com home page alone. as our open platform takes shape it will significantly accelerate that growth."

Here's the problem with 'growing visits' and the whole 'starting point' concept in the age of Google search dominance.

THE SEARCH ENGINE IS THE STARTING POINT.

IF YOU CAN'T WIN ON SEARCH THEN THE STARTING POINT STRATEGY IS REALLY JUST THE OLD WEB 1.0 PORTAL STRATEGY IN DRAG. UNLESS OF COURSE YOUR STRATEGY IS TO RUN ADS ON GOOGLE TO DRIVE MORE TRAFFIC TO YAHOO.

That somehow this fact of 21st century web marketing life appears to be lost on Mr. Yang, coupled with the whole narcissistic self-obsession with 'brand' value, tells me why Microsoft may actually be wise to proceed with a 'hostile' (aka Larry Ellison vs. Peoplesoft) takeover of Yahoo.

MS management has perceived the core of Yahoo leadership, and made the diagnosis that it is dysfunctional. That delusional thinking about "branding" and "starting points" is in control, not a truly asymmetric strategy to halt Google's momentum.... and that perhaps a little adult 'intervention' is needed.

More later. This is just going to get more interesting by the day.

MS/Yahoo Combination: TimeWarner/AOL 2.0 or Asymmetric Rope-a-dope?

If you're a blogger in the realm of software/web/tech marketing, you absolutely need to take a position on the recent offer by Microsoft to acquire Yahoo for $44 billion. Why? Because on the surface, the buyout offer appears to be an exciting, perhaps industry-changing "Let's team up to tackle Google" moment.

Or then again, perhaps this could be a tale of two web has-beens from the 1990's seeking a 'Misery loves company' shotgun marriage in order to leverage their combination 'synergies' in the form of 'scale economics', 'expanded R&D capacity', 'operational efficiencies' ....You know, lot's of those power words in Microsoft's offer letter that financial analysts love to hear, as they did with the original Synergy 1.0 story that went down in history as the Time Warner/AOL fairy tale.

By the way, as a monumental aside for you tech marketing tea-leaf readers that lurk on the fringes of this blog, note the complete ABSCENCE OF ANY VALUE PLACED UPON THE MUCH BALLYHOOED YAHOO BRAND in the Microsoft letter to the Yahoo board. In point of fact, the word 'brand' does not even appear as a factor in the proposed combination of the two companies. So much for the power of Yahoo marketing in the after-bubble era. So much for all that Yahoo 'brand building' that has led Boohoo (I mean Yahoo) to its current state of flatness. (Is that what that guy meant by that 'world is flat' book?)

OK, back to the main narrative. The underlying issue here is a simple one, and you my gentle reader deserve a definitive answer.

Can the acquisition of Yahoo's audience and infrastructure by Microsoft enable it to mount a sustained attack on Castle Google, where-in lie the crown jewels of ad-sponsored search? An attack that can turn the tide and enable Microsoft to capture a market-share lead in sponsored search over time?

My answer. Capitol N, Capitol O, or NO!

And please allow me to reference none other than Microsoft Chairman and Redmondista Numero Uno Bill Gates in my defense. I quote:
"Once a format gets established it is extremely difficult for another format to come along and even become equally popular." Bill Gates, Internet Tidal Wave Internal Microsoft Memo, 1995.

Gates made these famous comments in reference to Adobe's establishment of Acrobat as a locked-in natural monopoly 'format', and by implication to Microsoft's own market dominance around desktop applications. He was saying that there were market wars you just can't win if the other guy has established a user-sanctioned 'natural monopoly'.

Looked at from this 1995 Bill Gates point of view, Google is not actually a search engine. It is a format.

A format for advertisers. We've all seen the format. Sponsored links at the top. Sponsored links down the right hand side of the page. A link at the bottom saying 'More sponsored links'. Google is a format for ad-sponsored software-as-a-service.

And as a format, Google follows the Redmondista Rule of Software Natural Monopolies. It enjoys a 'natural' or user-sanctioned monopoly. This natural monopoly is what makes it a platform for the advertisers (plug-in the word developers instead of advertisers if you are over the age of 40) who want to capitalize on the widespread adoption of the 'format'. And who have enjoyed enough market success on the Google advertising format that they are not going to jump ship to the new "MicroHoo" Branded search anytime soon....Without a compelling reason to switch.

And 'scale economics', 'expanded R&D capacity', 'operational efficiencies' don't matter to these folks at all. What they care about is selling their stuff to the universe through Google.

But is that the end of the story here. Is it all just another TimeWarner/AOL synergy mirage, or is there an even better reason for MS to acquire Yahoo than the 'synergies' listed in the MS offer letter. I think there very well may be. And I alluded to it in the title of this post under the phrase 'Asymmetric Rope-a-dope'.

First the 'rope-a-dope' part. For you ladies and virtual ladies in the audience, rope-a-dope is a boxing term originated by Muhammed Ali, the man who single-handedly re-invented the sport of professional ass-kicking in the 20th century. It means drawing in your opponent and taking him off his game plan by laying on the ropes of the ring, appearing weakened, and inviting him in oh-so-close... to throw as many punches at you as you can take.

The net benefit for those like Ali who perfected this asymmetric fighting strategy---Wear out your opponent and set him up for a powerful counter-attack and/or knock-out punch from a guy on the ropes who turns out to be an opponent who is not so weak after all.

So is it possible that the Yahoo buyout offer is asymmetric marketing or Microsoft rope-a-dope in action, and that the stated reasons for the buyout are not the real reasons for the buyout. I think there is a high probability that this is the case.

Why? Because the combination of MS and Yahoo holds the potential to take Google off their new A-game, which is rapid expansion into social networking, mobile services, sponsored enterprise applications and more. It forces Google to temporarily play defense against MicroHoo Branded Search instead of continuing on its campaign of diversification and cross-category expansion. And it is these new areas of Google market expansion that matter most to Redmond, as it is these new areas of market conquest that will move Google beyond being, in Steve Ballmer's words, a 'one-trick pony' into being a formidable competitor of Microsoft in Microsoft's core business.

So as FBI Special Agent Fox Mulder used to say, 'the truth is out there'. Somewhere. More on this MS/Yahoo dance as the situation develops.

But now I've gotta run because it's SuperDuper Tuesday and I've got to go out and vote for the Romney/Obama ticket......... or was that the Clinton/Huckabee ticket....... I know it's one of those synergy tickets but I just can't remember which one. Better do a quick search.

Yahoo Re-brands After 1000 Laid Off, Now Boohoo!

Boohoo-oo-oo! An intransitive verb meaning 'to weep noisily', may be an appropriate brand do-over for web superpower Yahoo, in the wake of their announced 'targeted' force reduction of up to 1000 staff. While Google, like the energizer bunny of paid search, keeps going and going, Yahoo seems to be losing its mojo, reporting both an earnings reduction and cautious revenue guidance for 2008.

So what happened to Yahoo? Short answer....It's called parasitic symbiosis, and the basic damage was done to Yahoo between 2000 and 2003 when they selected then startup Google as its search provider. Google's strategy was similar to the strategy employed by Microsoft relative to its early OEM deal with IBM for the original PC---Leverage their relationship as a portal-embedded 'powered by' provider of a SaaS application, in this case paid search, to capture the clicks and customers of their 'partner' Yahoo. Yahoo is still paying the price for this deal, and for their inability to develop asymmetric marketing counter-measures to the Google strategy of 'eating them from within'.

Are there approaches Yahoo can employ to derail the Google juggernaut? Absolutely. But to do so their management team needs to begin thinking more like a software superpower with a search platform, not a dying media property, e.g. your average metropolitan newspaper.

Bill's Last Day Video Rocks

Here's the link to the video produced by TriFilm on Bill Gates' last day on the job at Microsoft. Definitely a keeper for all those who relate to the journey of Redmondista Numero Uno.

Is Microsoft Getting Serious About Vertical Search?

The news that Microsoft has made an offer for FAST, the Norwegian developer of an OEM search platform, raises an interesting question. Is MS buying FAST as an enterprise search product, as this announcement seems to indicate, or is FAST part of a larger strategy to transform web search from the 'one big search engine' (aka Google) model into a 'tens of thousands of specialty and vertical search providers' model?

As I've indicated in previous posts, the vertical and/or specialty search model will enable MS (or whoever gets there first with a platform) to create an army of 3rd party search developers that incorporate their own domain knowledge into general purpose search engine feeds with various business models from ad-sponsored to premium subscriptions.

This is one strategy to counter the Google juggernaut and change the ad game game in search. FAST's OEM platform looks like a candidate for that. It would be nice to see some real competition in search from the original Redmondistas.

Asymmetric Marketing Awards 2007

OK. It’s a new year and what better way to start off the new year than to stay stuck in the past year.

Hence the First Annual Asymmetric Marketing Awards to those software and web players who most successfully:

a. Capitalized on the market momentum of an incumbent leader to grow their own business;

b. Engaged in cross-category market expansion, leveraging one asset into new markets; or

c. Grew their natural (customer-sanctioned) monopoly at the expense of their competitors.

So here’s my top 10 A-marketers for 2007, with me as the sole judge in the competition. (Seriously…What’s the point of having a marketing blog if you can’t pontificate?) I’m going to use the David Letterman model and start at the end of the list working forward to Number One.

10. EqualLogic: In 2007, Dell paid well north of a billion dollars for iSCSI innovator EqualLogic. While EqualLogic's public face to the world is that of a storage appliance provider, it is their focus on providing a seamless storage experience for Microsoft Exchange and SQL, and their focus on aligning with software superpowers that enabled their revenue growth and perceived leadership in iSCSI. Look for this trend of application-focused hardware, and hardware blended with software to grow in 2008.

9. Novell: In 2007, Novell began to benefit from their interoperability deal with Microsoft, including a revenue commitment of $240 million. This was smart asymmetric marketing on the part of Novell, i.e. to leverage the MS installed base to drive a Linux open source product into the market, and position themselves vis-à-vis Red Hat and others based on their interoperability with MS. While Novell as a company is still unprofitable, continuing down the asymmetric marketing path with Microsoft can only help them in their turnaround efforts.

8. Akamai: In 2007, Akamai's revenue for the first 3 quarters of the year exceeds 2006 revenue for all 4 quarters. They continue to practice asymmetric marketing by successfully attaching their application acceleration and edge network services to market creation initiatives of the software superpowers (MS Silverlight, Adobe Flash and SAP enterprise SOA) as well as to leading web properties (MySpace). Akamai is also one of the best examples of ‘Software plus services’ on the planet.

7. Facebook: By landing a $240 million equity investment from Microsoft, in addition to partnering with MS as their exclusive advertising partner, Facebook deserves to be among the top 10 asymmetric marketers of 2007. Their initiative to market their social networking site as a 'platform' for Web 2.0 developers is also a feather in their cap.

6: Salesforce.com: In 2007, Salesforce moved forward beyond the on-demand CRM category with it's PaaS (platform-as-a-service) offering, Force.com, and its initiative to create an army of 3rd party software developers. In addition SFDC began to aggressively partner with Google around the "Salesforce for Google AdWords" offering. With 2009 revenue forecasted at $1billion, Salesforce.com is clearly beginning to take more than a few plays from the Microsoft and Oracle superpower playbooks.

5. VMware: One of the most street-smart software companies in a long, long time, VMware has leveraged its relationships with EMC, Intel and other incumbent market leaders to grow a billion dollar plus software business, go public at a killer valuation, and emerge as a rising superpower in its own right. Virtualization is their ball to carry or fumble going forward, depending on how they handle the competitive challenges to come.

4. Adobe: The Acrobat natural monopolists broke through the 3 billion in annual revenue mark on the strength of their Creative Suite, proving that 12 years after the browser wars, it is possible to rise to and remain a software superpower in markets dominated by companies 15X their size. And their ever-expanding Flash ubiquity proves that they understand how to drive cross-category market momentum, a key indicator of superpower status.

3. Microsoft: In 2007, the original Redmondistas began to put some meat on their Software Plus Services vision, fought their way through the rolling Vista launch, launched new initiatives in Unified Communications, Security, Storage, Rich Internet Applications, Office Business Apps (OBAs) and more, while acquiring some assets to help their still-struggling online search and advertising war with Google. Their asymmetric marketing muscle across multiple categories enabled them to chalk up a killer Q1 2008 quarterly number. They remain Numero Uno in many, many categories (and my personal poster child for what asymmetric marketing is all about) but in the post-Gates era, they will have to ratchet up their game and re-invigorate their culture in an age of continuous superpower rivalry.

2. Oracle: Hats off to Larry Ellison. His high risk strategy of 37 acquisitions (including PeopleSoft & Siebel) over the past 3 years began to pay big dividends in 2007 relative to their head to head competition with SAP. In the words of Oracle President, Charles Phillips. “We like our growth strategy of expanding beyond ERP into high-end industry specific vertical software in contrast to SAP’s strategy of moving down market to sell ERP systems to small companies.” Cross-category expansion focused on strategic lock-in---An asymmetric marketing strategy for the ages.

1. Google: All’s NOT fair in the age of the software superpowers, so Steve Ballmer’s oft-quoted remark that search rival Google is a ‘one trick pony’, can be chalked up to brass knuckles combat PR. Unfortunately for my main man and Redmondista role model Steve B, Google’s ‘one trick’, i.e. ad-sponsored search, happens to be pretty freakin’ awesome. Hence Google’s selection to occupy the number one spot on the Redmondista Blog’s first annual asymmetric marketing awards. Throughout 2007, Google was clearly laying the foundation for tricks two, three and four with its Doubleclick acquisition, its YouTube video ubiquity, and partner/developer initiatives in social networking and mobile software designed to recruit an army of 3rd party developers to the Google standard. It remains to be seen whether Yahoo and/or Microsoft will develop a ‘category regime change’ strategy capable of toppling the Googleplexers in search before the cross-category juggernaut leaves the station. I keep giving them free hints but they don’t seem to paying attention. Oh well, so much for the value of free advice.

Apologies to all those who didn't make the 2007 list. Buying bulk quantities of my book and forcing your marketing and sales organization to apply the ideas contained therein may help you get ready for the 2008 awards.

OpenSocial: Google Tries It's Hand at 'Embrace & Extend'

Google's OpenSocial announcement is making waves around the web today, and rightfully so. It's a smart asymmetric marketing move right out of the Bill Gates Redmondista playbook. It's called 'embrace and extend'.

In this case, the Google folks have created a set of developer APIs to write applications for social networks, and gotten MySpace, LinkedIn and others to get on board. Simply put, embrace the community of social networking pioneers, and extend that community to the world of Google. Wouldn't be surprised to see a follow-on announcement for new Google Ad products (beyond AdWords and AdSense) that serve targeted ads into OpenSocial apps. Let's call it AdSocial.

Needless to say, lots of commentary about this as an anti-Facebook and anti-Microsoft move, comparing Google to the 'open platform' early Microsoft and Facebook to the 'closed platform' early Apple. While I wouldn't buy-in to that metaphor just yet (based on the $400 billion Microsoft ecosystem 'super tail'), this move is conditioned by software superpower rivalry, as is almost every major wave in the 21st century software industry.

Microsoft blogger Don Dodge has fired back at all the 'Facebook is kaput' speculation, making valid points about the user-centric (not developer-centric) nature of social networking relationships, privacy issues, and more.

It will be interesting to see the marketing countermoves made by Facebook and Microsoft. I'm hoping to see a headline that says something like "Is Open Social Just More Google Open Socialism?" (Had to get that in there for my brothers and sisters in the vast right conspiracy called the Microsoft ecosystem).

Who knows? Maybe Ballmer and Ozzie will figure out how to embrace and extend the embracers and extenders. In either case, just as I pointed out in my book, superpower competition between Microsoft and Google in emerging markets like social networking is a good thing for application developers and future Redmondistas.

Embrace the age of the software superpowers.
Superpower contention in emerging markets is an opportunity.
Sieze it before it siezes you.

Knowledge @ Wharton Talks S+S

Good article by the folks at Knowledge @ Wharton on the concept of hybrid applications and software plus services. Looks at Microsoft, Google, Adobe and others, examining scenarios, business models, etc.

Here's the link.

The Super Tail: A Virtuous Cycle of Software Superpower Symbiosis

You'd have to be living on Mars not to have heard of Chris Anderson's book, "The Long Tail". In the book, Anderson lays out the impact of web and digital distribution on the economy of market 'hits', arguing that a new wave of niche-driven abundance is underway. Since brick and mortar retailers (books, music) have limited shelf-space, and digital retailers have unlimited digital shelf-space, web-advantaged consumers now have the ability to access an ocean of niche products heretofore unavailable. I quote: “Broadly the Long Tail is about abundance. Abundant shelf space, abundant distribution, abundant choice.” (P143) So far, so good. He uses Netflix, Amazon, etc. as his proofpoints.

But then Anderson, like other 'new rules for the new economy' authors before him, grossly over-reaches with his theory, attempting to apply his 'long tail' metaphor beyond pure-play distribution landscapes to what are essentially value-creation landscapes, e.g. the software industry. I quote.

“As in other industries, there is a head and tail of software, with Microsoft on one end and millions of individual programmers, many of them in India and China, on the other. In between is the work of a huge number of small groups of developers, most of whom have a few good ways to reach customers around the world. But it’s still a very top-heavy distribution.Microsoft’s quasi-monopoly is the ultimate hit-dominated market.” (p. 208)

When I first read Anderson's assessment, it was clear to me that he had veered way off the mark, applying his Long Tail model in a simplistic and unhelpful fashion for ISVs. But I chose not to poke holes in it at that time, instead deciding to accumulate the data I needed to repudiate it. I now have that data.

It has come in the form of an IDC White Paper, sponsored by Microsoft, titled "The Economic Impact of IT, Software, and the Microsoft Ecosystem on the Global Economy".

Let me share with you a few highlights of this White Paper, and then go on to introduce an alternative to Long Tail theory for software markets. Something I call the 'Super Tail' consistent with the arguments I make in my book "Asymmetric Marketing: Tossing the 'Chasm' in the Age of the Software Superpowers". First 3 simple IDC White Paper highlights.

1. "For every unit of revenue – dollar, euro, peso, etc. – that Microsoft will earn in 2007, other companies will earn 7.79."

The takeaway here clearly repudiates the Anderson thesis relative to software markets. In fact, attached to the "hit-dominated' big head of the Microsoft "quasi-monopoly" is a rich, vibrant ecosystem of device developers, ISVs, services partners, managed services partners, certified IT professionals and others who comprise the 'super tail' of the Microsoft 'head'. A Super Tail of a software superpower that realizes almost 8-fold the revenue that Microsoft itself realizes. In fact, many of those "individual programmers" in India and China pay their bills as members of the Microsoft Super Tail and the adjacent Super Tails of other natural monopoly superpowers, e.g. Oracle, Adobe and others.

2. "The subset of the Microsoft ecosystem that excludes channel firms, whose revenues IDC does not track, will generate $425 billion in revenues in 2007."

Unlike the Long Tail, in which the niche markets over time approach the size of the 'hits' market, the Super Tail is driven by this "8-fold effect" in which Microsoft generates $50 billion in revenues, while its ecosystem partners generate $425 billion. Additionally, this 8-fold effect illustrates the symbiotic nature of software natural monopolies that provide a starting point and market foundation upon which other 'non-disruptive' innovators create value. Think of this as the virtuous cycle of software superpower symbiosis.

3. "While the IDC research sized the number of employees in the Microsoft ecosystem, and not the number of companies, IDC estimates that as many as two thirds of IT vendors offer products or services that run on Microsoft platforms, or include Microsoft products among those that they distribute and support. Most of these companies are small, local firms."

Unlike the distribution-centric Long Tail, in which the hits and niches do not enjoy a direct symbiotic relationship, in the Software Super Tail, 2 out of 3 Super Tail businesses are directly symbiotic with the 'big head' of Redmond. This means that the power of 'hits' continues to become re-inforced, repudiating Anderson's assertion that "If you think about it, today’s hit is tomorrow’s niche. Almost all products, even hits, see their sales decay over time.” (P142) The IDC study argues for the exact opposite conclusion. The symbiotic nature of the head/tail relationship in the Super Tail will only re-inforce the hits, and expand the footprint of the hits.

I'm going to flesh out this Super Tail argument in coming blog entries as I dig deeper into the data in the IDC White Paper and other materials, but as I point out in my book, one thing software marketers need to avoid like the plague are 'graphically correct' market models that do not provide the proper instrumentation to look at 21st century superpower-driven software markets. I use Moore's 'chasm' theory in my book as the whipping boy for graphical correctness, but mis-application of 'Long Tail' theory to software markets would also fall in under graphical correctness. The Bubble 2.0 flavor of graphical correctness.

Applying Long Tail theory incorrectly to software markets reminds me of that old exchange between Dr. Hannibal Lector and Agent Starling in 'Silence of the Lambs'.

"Do you think you can dissect me with that blunt instrument, Clarice?"

I ask you Chris, "Do you think you can dissect a value-creation ecosystem with a blunt distribution model?" If you do, then I say Game On my author brother! I welcome a good cage fight.

PS: I'll be working on the visuals for the Super Tail over the coming weeks, as well as how it will be extended in the new Microsoft 'software plus services' model, something that holds the potential to turn the '8-fold' Super Tail effect into a 10 or 20-fold Monster Tail effect in the future.

Embracing & Extending the Cloud

Darryl K. Taft at eWeek has a good piece today on Microsoft's Erik Meijer and Project Volta, which is focused on enabling Redmondista developers to write native applications for cloud computing, an essential ingredient of the MS software plus services vision.

Here is the link to Erik Meijer's blog.

Here is the link to a mini-paper on 'democratizing the cloud'.

Here is a link to a video with Meijer on MSDN.

By the way, note how Saleforce smartly inserted an ad for its Force.com 'platform as a service' into the Taft article. That's called asymmetric marketing in the realm of messaging, something I refer to in my book as a messaging mashup.

Big S Plus Little s: Microsoft's First Quarter Numbers

Lot's of analysts going gaga over Microsoft's first quarter revenue performance, and rightly so. Lot's of growth around the Vista rollout, server and tools, and every software segment. All the positive indicators of a true cross-category software superpower, and world's leading asymmetric marketer. Warms the cockles of my stone cold marketing heart when I see true asymmetric marketing in action. And even more so that I was the first guy to write a book about it. (Thank you Dr. Phil for permission to be 'braggin' on myself'.)

But then we come to the Online Services Division, which reported pre-aQuantive revenue of around $600 million ($591 for you closet beancounters). When you divide this $600 million by the 405 million currently registered Windows Live IDs, you get about $1.50 in revenue per quarter for each Live ID. Not really a 'Die Hard' Detective John McClane 'yippee-ki-yay' mother-freaker moment.

And not really a proof point that could demonstrate the success of Microsoft's 'software plus services' or S+S vision. More of a big S plus little s moment.

And then you look at the Yahoo and Google numbers in their most recent quarters and the dimension of the Microsoft S+S challenge becomes clear. Yahoo's online revenue, mostly based on advertising, was around 2.5 times the MS Online Services Division or $1.5 billion.

Google's was around 7 times the MS Online Services Division number, i.e. around $4.2 billion.

And Microsoft's other businesses combined were around 22 times its Online Services revenue.

While Microsoft's high profile deal for aQuantive, and the recent investment in FaceBook are designed to begin growing the quarterly online number, those approaches to growing its online market are not really relevant in any strategic sense to the immediate success of the S+S vision. To do that MS must begin leveraging that 22x software business to grow the online business. And that strategy has yet to emerge.

Nobody asked me, but here's a simple suggestion to begin reversing this deficit, begin to close the gap with Yahoo and Google, and start paying off the S+S vision before it becomes the next MS Bob marketing embarrassment.

Forget about owning vertical search as the way to grow ad revenue. Chris Liddell, MS CFO mentioned 4 verticals on the conference call as their next big upside.

Instead, let the tens of thousands of MS ISVs and other ecosystem partners create an ocean of vertical and specialty search portals using Live Search feeds as a 'platform'.

To do this MS needs to go back to its asymmetric marketing roots and quit imitating Google, change the overly restrictive search partner contract, and think about Live search the way Salesforce thinks about the data contained in its system, i.e. as a web services platform for an AppExchange network of third party developers.

Got some more Redmondista ideas to go along with this one. But those will cost you some of those blowout quarterly earnings. As Don Tattaglia said in the Godfather...'After all, we're not communists'.

"We Are All Chairman Mao's Search Engines"

"We are all Chairman Mao's young red guards, Making our hearts red in the storm. With Mao TseTung Thought we arm ourselves, Sweep away all pests". 1960's Cultural Revolution Era Song

It appears that the appeasement applecart of the 3 major US search engines is being overturned by our good friends, the government of China.

Apparently the Communist Party can't stand the idea of the his holiness the Dalai Lama sneeking in the back door to have a little Texas style meet and greet with George W.

Hence the redirecting of Google, Yahoo and Microsoft search engines to Baidu, apparently in retaliation for this sleight of Chairman Mao's wondrous legacy in Tibet. Here's an idea guys.

Get Steve Ballmer, Eric Schmidt and Jerry Yang all in the same room to agree to a 1 year shut down of all search engine operations in China, thereby blacking out the Chinese-hosted 2008 Olympics.

It's not really life-ending lost revenue for the big 3 compared to Western markets, and none of the big 3 gain or lose very much by the move. But it sure might motivate the emerging entrepreneurial class in China to come out of the closet politically, especially in an Olympics year.

For those of you love liberty, and the support the democratic aspirations of the Chinese people, here's a link to the Falun Gong news site Epoch Times, and their famous Nine Commentaries On the Communist Party. As I point out in my book, these folks are going to be running China someday (remember Yeltsin on the Soviet tank--it happens), and you may want to get to know them a little.

IDC Economic Impact Study on Microsoft Validates Asymmetric Marketing

It's coming up on a year since I finished the manuscript for my book, "Asymmetric Marketing: Tossing the 'Chasm' in the Age of the Software Superpowers". In the book, I make the case that the current superpower-dominated market landscape is the most stable launch & go-to-market environment ever for software entrepreneurs to prosper, and that ISV market strategy for the age of the superpowers must tip in the direction of strategic symbiosis with them, not disruptive innovation against them.

Today IDC released a Microsoft-sponsored study on the economic impact of the Microsoft ecosystem. It validates the core thesis in my book. The illustration above shows that while software represents 21% of IT spending, IT employment related to software represents 63% of total IT employment spend, including ISVs and service providers. Related to the study, Microsoft today issued a press release pointing to the 14.7 million IT jobs worldwide tied to the Microsoft ecosystem.The lesson here is simple. Embrace the age of the software superpowers. Take today's asymmetric market landscape as the starting point for your strategy. Develop your marketing strategy around attaching to the superpowers' installed base. Chasm crossing is so 1990's. So...what's the word I'm looking for...disruptive.

Oh...One more thing. Buy my book, por favor.

MS Unified Communications Launch: A Missed Opportunity for 'Software Plus Services' Or Something Else?

Interesting. Wondering what to make of it all.

Here is a major launch by Microsoft of its Unified Communications initiative, including the following:

A server product called Microsoft Office Communications Server 2007;

A client product called Microsoft Office Communicator 2007;

An online conferencing services product udate for Microsoft Office Live Meeting;

And a new device for phone/video conferencing called Microsoft RoundTable.

One would think a great opportunity to recruit new partners around the S+S or software plus services vision Microsoft has been articulating.

The Unified Communications launch event even included high level participation by Bill Gates himself.

But in the press release and the Bill Gates email to customers, I can't find any reference to software plus services as part of the Unified Communications vision. Or even a reference to the interoperability between Live Meeting and Office Communications Server, etc. Or how the fact that MS has a client/server/service/device unified offering makes it better yada yada yada.

And in the partner categories represented at the launch there were systems integrators, telephony providers, ISVs and device developers.

But no providers of online services. No next generation Redmondistas. No partners involved with any of the MS Live initiatives.

So I'm wondering out loud if this is just a case of stated messaging strategy, i.e. S+S, falling through the cracks of a major launch, i.e. a missed opportunity.

Or is it something more regarding the S+S mantra. Perhaps a backing off on the messaging until the strategy itself is a little more fleshed out.

Time will tell.

How MS Can Beat Google in Search: Kill this Contract

For Microsoft to defeat Google in search and enable a broader ad-sponsored application model, it needs to do more than pretty up the interface and improve on the quality of its search results. It needs to harness the power of its developer ecosystem and provide the best platform and business model to enable a new wave of vertical and specialty search.

And to harness this developer power Microsoft needs to kill (OK...how about radically modify) its current Windows Live Search Developer agreement, which is modeled after the equally onerous Google Custom Search Engine agreement, and develop something that provides incentives for vertical search to flourish. In other words, how about a little partner-advantaged, asymmetric marketing in the realm of search.

But don't take my word for it. Here's a few choice contract clauses for your consideration.

"In developing, distributing or hosting Authorized Applications, and in using the service, except as otherwise explicitly permitted by Microsoft in writing, you may not:

-display in the Authorized Applications any results returned from the service (including maps, photographic imagery, legends, digital watermarks, advertising, user interface elements, text, graphics, colors, logos and such other elements as we may choose to make available via the service from time to time) in a manner that modifies, adds to, minimizes, alters, obscures, blocks or misrepresents any portion of the results;"

Question: How do you do vertical, specialty or niche market search if you can’t ‘add to’ and/or ‘minimize’ any portion of the results? Answer: You can’t. It's a mash-up and I need complete control of my own user experience.

And you also can't:

"cause advertising from a third party to appear in close proximity to a display of results returned from the service;"

What does ‘close proximity’ mean.? Answer: It means I can’t control my own UI, and prioritize my own advertising over the MS feed. It means I can't get creative with my business model. So why bother using the MS feed.

And there's the whole 'throttling' thing. I quote.

"We may, in our sole discretion, limit the rate at which the service, or any subset of it, may be called (“Throttling”). We may perform this Throttling globally across the entire service, per end user, or on any other basis. You will not take steps to circumvent any technical measures we may put in place to enforce Throttling."

Give me a break. What’s the point of using the service if the service can’t be ‘called’ on-demand. Throttling is not a realistic alternative for a vertical search provider. It's a kiss of death.

And then there's this gem.

"We reserve the right to include advertising in the results provided to you via the service. You will not intentionally omit or obscure such advertising when providing results to end users."

What if the advertising Microsoft is sending me is not relevant, yet it’s hogging my UI and my page space? Come on guys, ‘omit’ and ‘obscure’ is in fact the whole point in vertical and specialty search.

And if you think I'm just another complainer with a blog, I've saved the best for last. Here it is.

"This agreement may be terminated immediately for any reason and without notice by Microsoft. If this agreement terminates, all rights granted to you by this agreement will automatically terminate and you will cease to have any rights to use the service or APIs."

I can see the help desk drowning under the emails.... 'Hey...what happened to your MS Live Search-based vertical service.' I don't know. We got terminated.

And we got no notice.

I think I've made my point. If MS is serious about taking on Google in search, then do it via a wave of vertical search services enabled by the MS developer ecosystem. And get your lawyers out of the marketing department.

Willkommen, BienVenue, Welcome...To the European Socialist People's Republic of Software

We interrupt our regular programming to bring you this urgent bulletin from the Secretive Capitalistic Redmondista Underground Movement (SCRUM).

Today, counter-revolutionary running dog revisionist lackeys of the EU (Hey FactChecker...is EU an abbreviation for European Union or EUnuch), seeking in vain to reverse the inevitable march of asymmetric marketing and customer-sanctioned natural monopoly in the software industry, completed their Stalinist show trial of the shadowy market superpower known only as 'Microsoft'.

The goal of the courts, according to EU 'Competition Commission' (man does sound scary) dominatrix-person Neelie Kroes, is to reduce Microsoft's market share in Europe by taking control of Microsoft's 'embrace and extend' product roadmap, along with their asymmetric competitive advantage known as 'dark-itecture' (closely held strategic functionality).

I quote.

"A market level of much less than 95% would be a way of measuring success...You can't draw a line and say exactly 50 (percent) is correct, but a significant drop in market share is what we would like to see."

SCRUM has determined that as we go to press, European ISVs, smelling Redmond blood, have been ordered by Mistress Kroes to line up in the Red Light District of Amsterdam for their Orwellian Market Share Quota Allocations, now that 'those geeky Americans' have been put in their collective places.

Oops....daydreaming again. Gotta stop staying up late on Sunday night to watch Larry David's Curb Your Enthusiasm.

Now here's the real commentary.

This ruling (other than costing Microsoft a billion in fines) means next to nothing in the real world of software competition. In the real world of software competition, the following metrics of success will determine the outcome. I quote MS attorney Brad Smith.

"When this case started, we published Windows in 24 European languages; today that number is 41, and it will continue to grow. When we started this case, we had 3,900 employees in Europe; today we have 13,000, and that number will continue to grow. When this case started, we were spending $3 million a year on research and development in Europe; today we are spending almost half a billion, and that number will continue to grow. Today we work with over 200,000 business partners, who employ almost 3 million people on the European continent, and that number too will continue to grow."

At Redmondista we have a saying which we are not ashamed to admit we reverse-engineered from that VW commercial.

"On the road of life there are software superpowers and the 'competition commission'. Superpowers wanted."

And that even includes those other shadowy market share superpower piggies, Apple and Google.

Windows Update Uproar: An Opportunity to Sell S+S Vision

I love it when industry fur flies around the latest sensational headline about Microsoft 'wrongdoing', especially when the 'permission' word is invoked. This is the case with the latest uproar around Windows Update doing what it was designed to do, i.e. update and patch Windows user systems.

In this case, the big hue and cry is over Windows Update updating it's own update code (say that 5 times fast), not spying on the people of the planet for the greater glory of Redmond.

Microsoft, of course, issued the obligatory apology through the Vista weblog, even using the politically correct term 'community' to describe the negative feedback they received.

But here's the bigger issue. This is an opportunity missed by Microsoft marketing. An opportunity to explain that Windows Update is in fact Microsoft's first real 'software plus services' or S+S offering.

An opportunity to explain that S+S is a superior paradigm to SaaS or ODOP (on device or on premises---can I get an amen on that cool new acronym). A paradigm that enables a new way to think about value delivery in 21st century software markets, and the relationship between computing as utility and computing as customized functionality.

Remind me to send a note to Steve Ballmer on the creation of an S+S War Room. A command center designed to look at every crease and crevice in the Microsoft installed base, and identify the corresponding services roadmap. More on this in future posts.

Remembering 9.11: Be Prepared

For Redmondista ISVs, the best way to remember 9.11 is to get prepared for the next one.

Yesterday, the Department of Homeland Security released their new National Response Framework for public review and comment. I suggest we all take a close look at it.

Here's the link.

Novell's Asymmetric 'Moonlight' Strategy

In my book, I explain that true asymmetric marketing begins at that point a given ISV creatively coopts the market momentum of an incumbent market superpower in order to accelerate its own success.

The young Microsoft did this with IBM in PCs. The young Google did this with Yahoo in sponsored search. The young Adobe did this with Apple in desktop publishing. The young Oracle did this with Digital Equipment Corporation in relational databases.

It appears that Novell is now systematically applying an asymmetric marketing strategy through its 'interoperability' relationship with Microsoft, most recently around their development and validation of 'Moonlight', a Linux-compatible version of Microsoft's Silverlight RIA technology. This strongly positions Novell as the Microsoft Linux partner of choice in the fast-emerging Web 2.0/RIA space, in addition to the benefits I highlighted in my blog on Mark Shuttleworth's 'fractured fairy tale'.

ISVs should make it their business to study the creative marketing initiatives Novell has launched around their interoperability relationship with Microsoft. This creative thinking is open to all ISVs who want to win in the age of software plus services (S+S), on a market landscape dominated by the software superpowers.

Here's the MS press release on the official launch of Silverlight and Moonlight.

S+S Reality Check: Notes on the AutoPatcher Shutdown

In the age of software plus services, automated product updates are an integral part of the product experience, for better or worse. And maintaining control over the security, integrity and brand equity of one's updates should be seen as standard operating procedure for asymmetric product marketers.

That's the context in which I view yesterday's decision by Microsoft to trigger the shutdown of the AutoPatcher website, which provided an alternative to the Windows Update service.

With a strategic vision defined by the relationship between on-premise software and on-demand web services, aka S+S, it was only a matter of time before Microsoft would step in to either shut down or gain effective control of this kind of service.

The take-away for commercial ISVs: On a market landscape driven by software superpowers, it's imperative to practice asymmetric marketing in the domain of product management, and gain effective market permission to attach to a superpower's installed base of customers. Here's an example of how not to approach market permission, from the AutoPatcher FAQs.

Q: Is AutoPatcher legal?
A: Yes, Antonis Kaladis (our project manager) once spoke to a Microsoft employee and apparently they know about us but don't care what we do! The AutoPatcher project has been going strong since 2003 and never had a sniff of trouble from Microsoft.

Sniff delivered.

Mr. Foo Meets Mr. Bar: Notes on the MS/Cisco Alliance

If you do marketing of any kind in the high technology or web industry, you've got to bypass the many cursory news reports on the Cisco/MS alliance announcement this week and go straight to the pure, uncut dope, i.e. the transcript of the interview Charlie Rose conducted with Steve Ballmer and John Chambers. My advice is to mainline this rare asymmetric marketing tutorial by 2 market superpowers into the fattest Redmondista vein you have, and capitalize on the rush of market opportunity to follow.

Why? Because Microsoft and Cisco, commanding the two biggest partner networks in the industry, are aligning their respective visions around unified communications infrastructure, Web 2.0, mobile, QuadruplePlay, and other rapidly evolving markets in a way that will benefit a new generation of ISVs and solutions providers. It is a superpower market creation initiative worth attaching to in the age of software plus services.

My vote for quote of the interview goes to Ballmer for this gem, which seems to have passed old Charlie Rose right by. In response to a question about the challenge of aligning the innovation pockets inside Microsoft, I quote:

"We want product 'Foo' and product 'Bar' to work together and they don't, come on Microsoft, let's get to gettin' on this."

This of course being a reference to the ubiquitous FUBAR acronym.

Also some interesting observations about Google from both CEOs.

Here's the link to the interview.

Deconstructing Ozzie, Part 8: "Asymmetric Threats"

In an age of cross-category, natural monopoly software superpowers, one of the most fruitful marketing paths for ISVs and Web 2.0 developers to take begins at that specific point where a superpower systematically responds to new, potentially disruptive market challenges.

Microsoft's current set of initiatives around 'software plus services' (S+S) is their most recent response to an entire set of market challenges ranging from Google's ad-sponsored software vision, to the Linux promise of 'free' software, to Apple's ascendence in software-rich, mobile consumer devices, to subscription SaaS ala Salesforce and more.

In his interview with Knowledge @ Wharton, Ray Ozzie provides us with insight into how cross-category market superpowers think about potentially disruptive challenges.

"It's our job to do the best we can to cope with asymmetric threats and to use our size and scale as an opportunity."

What does Ozzie mean by 'asymmetric threats'? From whence do these threats originate? And how can ISVs benefit when superpowers like Microsoft use their 'size and scale as an opportunity' to cope with these threats? Let's go into 2 of the more high profile asymmetric threats faced by Microsoft to shine a little light on these questions.

1. Asymmetric Threats to Installed Base Natural Monopoly

As I point out in my book "Asymmetric Marketing", the primary strategic asset of a software superpower like Microsoft is 'natural' monopoly, i.e. the existence of a customer-sanctioned, installed-base lock-in.

Such is the case on the PC desktop, in desktop apps, in network servers, in enterprise email systems, and more. So the first kind of 'asymmetric threat' is one which can upset the natural monopoly apple cart, i.e. the so-called 'disruptive technology innovation'.

In the case of Microsoft's natural monopoly in enterprise and desktop software, the most high profile threat in recent history comes from 'free' software, i.e. open source Linux. So how did Microsoft respond to this threat, and how did ISVs creatively engage in marketing symbiosis with Microsoft as it responded to this threat. Ozzie sheds light on this as follows:

"In terms of a Linux compete, we could be very focused on that, but I think the company has a much more mature viewpoint of what customers need now in terms of interoperability, which led to a lot of the success in the server and tools division because of a fairly nuanced understanding. That probably wouldn't have occurred had we not had that one focused threat."

This 'mature viewpoint' and 'nuanced understanding', this focus on 'what customers need now in terms of interoperability' is what led Microsoft to enter into its relationship with Linux vendor Novell, a deal that Novell initiated and has creatively leveraged to grow its revenue and penetrate the Microsoft installed base ecoregion with market permission.

Put simply, as Microsoft responded to the asymmetric threat called open source Linux, Novell responded with asymmetric marketing that enabled them to capitalize on a market interoperability initiative of a superpower. Now let's look at the second category of asymmetric threat.

2. Asymmetric Threats to Legacy Business Models

Google's success in fostering an 'advertising sponsored' application vision would qualify as the second kind of asymmetric threat, i.e. a threat to Microsoft's underlying business model. By providing comparable web functionality for free (e.g. Office Apps), Google is attempting to commoditize that functionality and collapse Microsoft's paid license model. This 'commoditization' of Microsoft's value proposition and related business model is what Bill Gates saw in the Netscape threat in his 'Internet Tidal Wave' memo. I quote:

"They (Netscape) are pursuing a multi-platform strategy where they move the key API into the client to commoditize the underlying operating system."

Which lead me back to Ray Ozzie's comments on Google which go to the issue of business models.

"The real question in our competition with Google is not just, "What product will you produce to compete?" but how did the company transform from figuring out which of its many offerings should be ad-supported and which ones shouldn't? Which ones should be subscription-supported and which ones shouldn't? What go-to-market opportunities do we have as an organization, that we never even would have considered, had we not built that infrastructural foundation for that competitive challenge, that could now be taken advantage of by the various offerings?"

And this 'infrastructural foundation' Ozzie refers to are the 'Live' SaaS offerings, new tools like SilverLight, and the .NET and Windows server capabilities that will enable an integrated 'software plus services' strategic response to Google's ad-sponsored model. And it doesn't hurt to buy a few ad companies along the way.

Summing up, Redmondista ISVs have 3 scenarios they can pursue relative to 'asymmetric threats' to software superpowers. They can:
a. Align with these threats;
b. Align with the natural monopoly superpower in responding to these threats;
c. Do both, and 'game' the outcome using asymmetric marketing.

By the way, Novell's creative alliance with Microsoft is the 'c' option, and it's paying off for them relative to their competitors.

Xendetta: Citrix Counterattacks VMware

The virtualization category is one that could be extremely disruptive to the prevailing WinTel alliance that has driven the x86 platform industry since the early 1980's. So it should come as no surprise that there would be a high profile market reaction by the POMs (partners of Microsoft) to the VMware IPO earlier this week.

The reaction has come in the form of the decision by close Microsoft partner Citrix to acquire XenSource, a competitor of VMware.

Here's my favorite part of the announcement.

"The acquisition will also strengthen each company’s strong partnership with Microsoft and commitment to the Windows platform."

If this isn't superpower symbiosis in action by two breakout Redmondista ISVs, then I don't know what is.

VMWare: The New Kid on the Software Superpower Block

Yesterday was the VMWare IPO which provided a big bright spot, closing at $51 a share on another down Dow day. Founded in 1998, and acquired and incubated by storage systems leader EMC, VMWare is clearly positioned to emerge as a future software superpower based on their $1Billion annual revenue run rate, and their asymmetric marketing model.


Here's a few excerpts from their Form SC TO-1 tender offer document that provide insight into the strategy of an asymmetric marketer and future new kid on the software superpower block.

Strategic Symbiosis with Incumbent Market Leader

In this case the symbiosis-driven, Redmondista market attachment strategy is focused on Intel's x86 installed base, and Intel's multi-core processor roadmap. Intel invested $218 million prior the IPO.

"We believe that the addressable market opportunity for our virtualization solutions is large and expanding. IDC estimates that less than one million of the 24.6 million x86 servers and less than five million of the 489.7 million business client PCs deployed worldwide are running virtualization software. We believe industry trends towards more powerful yet under-utilized multi-core servers and the increasing complexity of managing desktop environments will further accelerate the widespread adoption of virtualization for both server and desktop deployments."


Asymmetric Partner-advantaged Marketing Model

No Joe B. commentary needed here.

"We have over 200 technology partners with whom we bring joint offerings to the marketplace. We classify our partners as:

Independent Hardware Vendors (IHVs). We have established strong relationships with large system vendors, including IBM, HP, Dell, NEC, Fujitsu, Fujitsu-Siemens and Sun, for joint certification and co-development. We also work closely with Intel, AMD and other IHVs to provide input on product development to enable them to deliver hardware advancements that benefit virtualization users. We coordinate with the leading storage and networking vendors to ensure joint interoperability, as well as to enable our software to access their differentiated functionality.

Independent Software Vendors (ISVs). We partner with leading systems management, infrastructure software and application software vendors to enable them to deliver value-added products that integrate with our VMware Infrastructure suite of products. Our Technology Alliance Program facilitates joint solution creation and coordinated go-to-market activities with our partners. Our ISV partners have distributed over 400 software applications as virtual appliances.

We have over 4,000 indirect channel partners as of December 31, 2006, an increase of over 1,500 from December 31, 2005."

Customer Installed Base

Talk about an emerging installed base 'lock-in', one of the key metrics of a software superpower possessing extensible market power.

"Our customer base includes 100% of the Fortune 100 and over 84% of the Fortune 1,000. Our customer base for our server solutions has grown to include 20,000 organizations of all sizes across numerous industries."

Compound "Suite" Product Model Drives Market Power and Lock-in

VMWare is also extremely streetsmart in terms of it's product and pricing approach, adopting a 'compound offering' model that market-hardens the offering against commoditization by competitors.

"Although many of the Company’s products are available individually, they are generally sold in product bundles which encompass most of the Company’s products. As we develop new products, they are typically sold as a new component to a bundle of products. Customers generally purchase the most recent bundle. Late in the second quarter of 2006, we introduced a new Enterprise product-bundle which largely replaced the previous product bundle. We added three unique products to this bundle and increased the corresponding list price by 15%. This price increase was partially offset by decreasing prices on certain core platform products. In some cases, we began providing these products for free. The impact of pricing on revenue growth in 2006 compared to 2005 was less than 10% of the overall increase in revenue. The impact of pricing on revenue growth in 2005 compared to 2004 was not significant. "

Community Creation

VMWare also gets the web, using it to build community around their virtualization platform.

"On average, our website receives approximately 400,000 unique visitors each week, as measured by a third-party tracking system. We also have created an online community called VMware Technology Network (VMTN) that enables customers and partners to share and discuss sales and development resources, implementation best practices, and industry trends among other topics. Attendance at VMworld, the largest annual industry conference on virtualization and hosted by VMware, has grown from approximately 1,400 attendees in 2004 to more than 6,700 attendees in 2006. We also offer management presentations, seminars and webinars on our products and topics of virtualization. We believe a combination of these efforts strengthens our brand and enhances our leading market position in our industry."

More on future superpower VMWare in future posts.

Asymmetric Marketing Economics 101

Redmond Channel Partner Online has a great piece deconstructing the economics of asymmetric marketing, Microsoft style. The piece goes into detail on 4 metrics of partner-advantaged marketing that drive Microsoft's asymmetric competitive advantage in many markets. These 4 metrics are described by RCP Online as follows:

-96 percent of Microsoft's revenues come through its partners.
-Those partners sell 350 Microsoft products.
-400,000 members belong to the program.
-Every $1 that Microsoft makes from sales of Windows Vista generates $18 in related revenues for partners

These 4 metrics, which are broken down and explained in detail, are a must-know for Redmondista ISV and services startups seeking to win in the age of software plus services (S+S).

PS: The title of the piece upon first glance might suggest that these are 'myths', as in 'untrue'. But what the author is saying here is really that these are part of the marketing 'mythology' that makes Microsoft a formidable competitor based on its partnering model.

Here's the link.

Mr. Ubuntu's Fractured Fairy Tale

"Microsoft has succeeded in fracturing the Linux and open-source community with the patent indemnity agreements it has entered into with several prominent vendors, Ubuntu leader and Canonical CEO Mark Shuttleworth told eWEEK."

Once upon a time there was a South African hero of the open source digital proletariat named Mark Shuttleworth. His exploits were known far and wide, including in outer space, so the great unwashed of the Coders Guild called him Space Shuttleworth of the Ubuntu tribe.

Space Shuttleworth was a man with a noble mission. To bring down the evil empire of paid software for the greater glory of Castle Computerdom. But unfortunately for Space Shuttleworth, the people of Castle Computerdom in the Kingdom of IT loved the paid software they had been using for more than 20 years, and continued to buy paid software from the leaders of the evil empire, Count Larry, Duke Hasso, and Baron Steve, at ever increasing rates of consumption.

If that wasn't bad enough, some members of Space Shuttleworth's open source rebel alliance, hypnotized by the concept of building a successful business, defected from the revolutionary party line.

What's worse, they developed a profitable tactical alliance with Baron Steve.

This made Space Shuttleworth blow a gasket on his shuttle O ring (which is not a good place to blow a gasket) at the LinuxWorld Expo, and accuse the peace-loving residents of Microsoft Manor of unspeakable crimes against the rebel alliance.

This fractured fairy tale, a segment of the Rocky & Bullwinkle software hour, has been brought to you by the folks at the Redmondista Blog, A Tradition of Spin-Debunking Excellence for About a Month.

And now we return you to our regular programming, already in process.

That was a most satisfying exercise in sarcasm. As it always is when I get to poke fun at an industry 'guru' trying to make market points with a rant against asymmetric marketers...in this case the fighting-to-be-reborn-by-attaching-to-a-superpower company called Novell.

Exactly, this is not about Microsoft fracturing anything, but about Novell capitalizing on an opportunity to market its SUSE Linux distribution through Microsoft.

Here's my proof points, i.e. the real facts not included in Mr. Ubuntu's fractured fairy tale.

1. Novell approached Microsoft, according to Justin Steinman, Director of Product Marketing for Linux and Open Platform Solutions, Novell Inc.

"The first call was made by our CEO Ron Hovsepian to Kevin Turner a little over a year ago, roughly late April or early May. It went back and forth and then it was announced Nov. 2, 2006."

2. Novell collected serious money and other marketing commitments from Microsoft for this deal.

"Under the Business Collaboration Agreement, we are marketing a combined offering with Microsoft. The combined offering consists of SUSE Linux Enterprise Server (“SLES”) and a subscription for SLES support along with Microsoft Windows Server, Microsoft Virtual Server and Microsoft Viridian, and is offered to customers desiring to deploy Linux and Windows in a virtualized setting. Microsoft made an upfront payment to us of $240 million for SLES subscription “certificates,” which Microsoft may use, resell or otherwise distribute over the term of the agreement, allowing the certificate holder to redeem single or multi-year subscriptions for SLES support from us (entitling the certificate holder to upgrades, updates and technical support). Microsoft will spend $12 million annually for marketing Linux and Windows virtualization scenarios and will also spend $34 million over the term of the agreement for a Microsoft sales force devoted primarily to marketing the combined offering. Microsoft agreed that for three years following the initial date of the agreement it will not enter into an agreement with any other Linux distributor to encourage adoption of non-Novell Linux/Windows Server virtualization through a program substantially similar to the SLES subscription “certificate” distribution program." (Novell quarterly report)

3. Novell got tons of enterprise IT buzz and interoperability street cred around this deal.

"This was groundbreaking landmark stuff. In the end the customer endorsements have been fantastic; WalMart, HSBC, Deutsche Bank and AIG. These are big brand names of people who not only procured SuSE Linux through this partnership, but also felt comfortable enough to speak out for it."

4. Novell and Microsoft agreed to disagree on the patent issues.

"Microsoft and Novell have agreed to disagree on whether certain open source offerings infringe Microsoft patents and whether certain Microsoft offerings infringe Novell patents. The agreement between our two companies puts in place a workable solution for customers for these issues, without requiring an agreement between our two companies on infringement."

So my conclusion is this. Novell is practicing asymmetric marketing.

Novell is creatively engaged in marketing symbiosis with a software superpower, in this case, Microsoft, in order to grow its business and position itself in the MS/Linux interoperability leader quadrant.

And some other folks in the open source industry are just a teeny tiny bit jealous.

By the way, this kind of rant is nothing new in the open source movement. In my book, "Asymmetric Marketing", I use the example of Sun CEO Jonathan Schwartz's public attack on Red Hat as proprietary as another 'fractured fairytale' straight out of Rocky and Bullwinkle.

Man I'm glad I watched a lot of cartoons as a kid. I'm starting to get a real ROI on all my 'mis-spent youth' behaviors.

Did you watch cartoons when you were a kid Mr. Shuttleworth? Did you immerse yourself in the Tao of Rocky and Bullwinkle?

I think not. That makes me sad.

Natural Monopoly & Enterprise Web 2.0

In my book "Asymmetric Marketing" I point out that market natural monopolies in the 21st century software industry are in fact customer-sanctioned monopolies. Especially in the enterprise, where the locked-in vendor relationships with Oracle, IBM, SAP, Microsoft and Cisco are strongest, the view of the CIO continues to tip in the direction of buying emerging technologies like Web 2.0 from these natural monopoly superpowers.

Here's an excerpt from a March Forrester report titled "CIOs Want Suites for Web 2.0" to underscore this point.

"When asked if they would prefer offerings from major incumbent vendors like Microsoft, IBM, or Oracle rather than from smaller pureplay firms like Socialtext, NewsGator, or MindTouch, the vast majority of CIOs indicated a preference for large vendors (71%). Furthermore, a strong correlation exists betweeen Web 2.0 use and a preference for large or small vendors; firms that use all six Web 2.0 technologies were significantly more interested in dealing with major vendors (93%)."

Forrester has done emerging category Redmondista ISVs focused on the S+S opportunity a great service with this research. It lays the foundation for the embrace of an asymmetric marketing model that takes symbiosis with the natural monopoly software superpowers as a primary strategic principle.

It also says this---Package, position and promote your S+S offering as a complementary extension of superpower platforms, not as the next great 'disruptive technology innovation', if you want to participate in the Enterprise 2.0 wave.

Deconstructing Ozzie, Part 7: The 'Grand Opening'

In "Asymmetric Marketing", I update Geoffrey Moore's 1990's 'chasm' notion of the 'whole product' with the 21st century construct of the web-connected, lock-in-optimized 'never-ending' product. Here's my one sentence description:

"'Whole products' are morphing into 'never-ending' products that incorporate constant feature updating, network effects, and loose-tight coupling of 'platform and service'."

There are compelling marketing advantages for Redmondista ISVs in building your offering along the lines of the never-ending product approach from Day One. The 2 biggest being:

1. By creatively blending code, content, community and community-driven effects, services, intangibles and more, the various flavors of the never-ending product approach (Windows Update, Apple iPod/iTunes, Salesforce.com AppExchange, xBox Live, eBay marketplace platform, Red Hat Network) enable very fine-grained competitive product differentiation. I use the term non-duplicatable in my book to describe this.

2. Emerging categories with extremely demanding sets of market requirements are able to more efficiently Day-1-introduce continuous never-ending product improvements that drive customer adoption and satisfaction.

In his Knowledge @ Wharton interview, Microsoft Chief Software Architect Ray Ozzie describes this never-ending product model in his own words.

"In the past, success for a software product was shipping, releasing to manufacturing. Today I refer to that as the 'grand opening'. It's not when things end, it's when they begin."

This 'grand opening' approach to thinking about products is proving to be especially valid for highly demanding sets of market requirements in emerging categories.

Let me paint a picture of this 'grand opening' approach to products being successfully used within a red hot emerging category referred to by startup vendors in the category as "Speech 3.0" or 3rd generation interactive voice applications.

Managing the 'Speech Cycle': The 'Grand Opening' Approach to Interactive Voice Applications

SpeechCycle is a New York-based pioneer in both on-demand and on-premise 3rd generation speech applications. Their flagship LevelOne 'Automated Agent' Suite is currently processing millions of technical support phone calls for leading cable 'Triple Play' providers (video, broadband internet, VoIP).

As a member of the SpeechCycle Advisory Board, I have to confess that I'm not exactly objective here, but I can state unequivocally that I have heard with my own ears ordinary callers interacting with SpeechCycle's LevelOne application and asking the following question of the 'automated agent' system: "Are you a real person?"

In an industry that has struggled to find consistent market adoption by mainstream customers, i.e. the speech applications industry, SpeechCycle refers to this as an 'immersive caller experience', i.e. the opposite of rigid Speech 1.0 IVR applications that drove callers crazy.

So how does this market innovation by SpeechCycle in the emerging Speech 3.0 applications market relate to Ozzie's 'grand opening' product model? Simple. The key to 3rd generation speech applications (both SaaS and on-premise) is what the SpeechCyclists call 'continuous improvement'.

And at the end of the day, continuous improvement comes from seeing each caller interaction with the system as a form of community-driven content that needs to be factored in to ongoing system updates.

The result for SpeechCycle---Customer self-service automation rates approaching 40% for complex, 'multi-turn' conversations lasting 10 minutes and more. Anyone who knows the speech category will tell you this is, to borrow a term made famous by Steve Jobs, insanely great.

But the starting point is to see the initial deployment of the LevelOne Automated Agent call center applications as a 'grand opening', i.e. where the innovation 'begins' but does not end. Here's a few high points of the 'never-ending-ness' of the SpeechCycle continuous improvement approach to speech applications across both on-demand and on-premise deployments.

SpeechCycle can consistently update the VUI (voice user interface) or call flow of the system at will. Traditional Speech 1.0 IVR companies (even some that claim to use standards like Voice XML) provide a static, rigid call flow environment that yields mere single digit automation rates, compared to the 30-40% rates typically enjoyed by the LevelOne system.

Organized around the never-ending product model, SpeechCycle's world class team of speech application experts constantly update the system with hundreds of thousands of human 'utterances' (i.e. human natural language interactions with the speech system),and even automate the mapping of that customer/caller-generated utterance content ('My internet isn't working) to the list of tech support and troubleshooting symptoms contained in the call center knowledgebase. This is a 'grand opening' product vision in spades.

In other words, the more the LevelOne application is used, the better it gets.

The SpeechCycle never-ending product model also provides valuable real-time input to the human customer care agents who are tasked with dealing with the 'long tail' of tech support symptoms that fall outside the scope of the LevelOne application. Additionally, the LevelOne application provides cable industry call center executives and C-level marketing leadership with invaluable real-time intelligence into what their customers are actually saying about their TriplePlay offerings. SpeechCycle calls this factoring the 'voice of the caller' into the continuous improvement process.

At the end of the day, as a direct result of the continuous improvement delivered by the system in automating complex technical support calls, SpeechCycle saves their customers millions of dollars a year in human resource costs, while protecting them from the downside of offshore call center outsourcing. They call it 'speechsourcing'.

In the age of software plus services (S+S), this same type of never-ending product DNA is poised to break out in many emerging Web 2.0 categories where community-created content is a primary application functionality driver.

And the 'grand opening' product marketing/management approach suggested by Ray Ozzie will assist a new wave of Redmondistas with challenging market requirements to succeed in the 21st century software industry.

Deconstructing Ozzie, Part 6: When "Patterns" Collide

"Jerry, don't you see? This world here, this is George's sanctuary. If Susan comes into contact with this world, his world's collide. You know what happens then? Ka shha shha shha Pkooo (exploding sound)!" Seinfeld's Kramer, Speaking of George Costanza's "Worlds Colliding"

In more ways than not, this particular expression of Seinfeldian Krameresque thinking has served as the world outlook of marketing strategy 'experts' (based mainly in the SF Bay Area) who consistently embrace the narrow dualistic view that broad technology trends like SaaS, Web 2.0 and open source will provide that special spark of 'disruptive technology innovation' capable of sweeping away the installed base lock-in of the software superpowers.

In other words...when disruptive Web 2.0, open source, and on-demand innovation meets the on-premises, installed-base 'no fly zone' of software superpowers like Microsoft, Oracle, SAP, IBM and others...Kapow...Software worlds collide...To take a little poetic license with Kramer.

Unfortunately for today's post-bubble digital Kramers in the marketing strategy profession, 21st century software superpowers have, over the course of their market evolution, built customer-sanctioned 'natural monopolies' that are far more 'rugged' than Seinfeldian 'Worlds Colliding', i.e. more adaptive, armored and resilient in the face of software worlds disruptively crashing into each other.

In fact, it would be accurate to state that today's software superpowers have institutionalized the practice of embracing and extending these potentially disruptive trends, and even pre-emptively leverage them to bootstrap new waves of market innovation on which thousands of ISV and services partners can ride.

Such is the case with the Microsoft software plus services (S+S) vision, which as I pointed out in Part 5 of 'Deconstructing Ozzie' is one of those 'disruptive innovation in a positive way' paradigms shared by other superpowers including Cisco, Google, eBay, Oracle, Symantec, SAP, Yahoo and others (whether they publicly brand-embrace S+S or not).

Fast forward to Ray Ozzie for his take on world's colliding.

In his Knowledge @ Wharton interview, Ray Ozzie advises the developer community (both inside and outside Microsoft) in how to think about the S in software and the S in services as part of a larger set of software opportunity 'patterns'. I quote:

"The guidance that we are giving the development community -- and the guidance that we use in-house -- is to look at applications through the following lens: When the business model behind that app means that you have to get it everywhere, we call that the "universal web application pattern." When the most important thing is the experience that the user has with that application and you might be willing to trade off the breadth of the web for the richness of that experience, we call that an "experience first pattern."

Not worlds colliding, but application patterns colliding...and then co-existing. The 'services' or 'universal web application pattern', and the 'software' or 'experience first pattern'. Ozzie elaborates.

"There's no hard line between the two (patterns), but there is some guidance there. It's clear that the ad-based model is a "universal web pattern." The whole business model says, 'Pick a technology for building that solution that gets to every eyeball on earth." At the opposite extreme are Windows games and, I believe, the Office Desktop components, which are 'experience first.' You want to make the experiences as rich as you can and you code to the [Windows] platform in order to do that. But these are not absolutes."

At the recent Microsoft Financial Analyst Meeting, Ozzie explained the symbiotic interplay between these 2 patterns in very clear and simple terms.

"From my viewpoint, every one of our software offerings is either a socket for a new attached service that connects to that software offering, or an upgrade or up-sell opportunity to extend a product's value proposition up to the Web and, potentially, through mobile devices."

Installed-base software 'sockets' colliding with attached services to provide an 'upgrade or up-sell' opportunity.

And lest there was any doubt about Microsoft's commitment to the 'universal web pattern' part of the S+S equation, i.e. the other end of the software socket currently dominated by Google, Steve Ballmer added this at the very same Financial Analyst Meeting:

"We're bringing the same kind of vision and tenacity that is in our DNA that drove us into the enterprise business into consumer devices and online services. We are going to be an advertising company, and we are going to be a devices company."

A software superpower, an advertising company, and a device company, with a $7 Billion R&D budget.

"Patterns" colliding in a market-cosmic 'big bang' of installed-base software plus 'in the cloud' services symbiosis.

This is the asymmetric marketing opportunity that Redmondista ISVs and managed services partners need to systematically begin to assess. It will be bigger than the client/server computing wave and the e-commerce wave....combined. Kapow!

Big S+S News Day: MS Financial Analyst Meeting

Lots of info on software plus services coming out of Microsoft executive presentations to financial analysts yesterday. Here's the links.

PC World Story click here.

Mary Jo Foley coverage click here.

eWeek Microsoft Watch click here.

Computer Business Review click here.

Cnet News.com click here and here.

Redmondista 1 Month Anniversary Poll

It's one month and counting since June 26, the birthday of the Redmondista blog. Check out the new home page poll in the left side column. I'm hoping one of the news services with mass readership picks up the question and runs with it.

Question: "Has Microsoft clearly articulated its software plus services vision"? Answers to click on are self-explanatory.

Headbutting the Long Tail

It's good for economies when smart folks notice big things. Like Chris Anderson's observation and articulation of 'long tail' economics, in which niche markets benefit through web-based, zero-scarcity distribution.

But strategic marketers are not about economics as a thing in itself. Rather strategic marketers are tasked with making one's own enterprise the dominant player in a given market. And this means capitalizing on every internal and external competitive advantage possible.

It's in that context that I find the recent news that Netflix, a 'long tail' poster child, is apparently losing subscribers to Blockbuster very interesting for Redmondistas seeking to win in the age of software plus services (S+S).

What Blockbuster did to begin to chip away at Netflix was to enable their customers to return their video rentals to a physical Blockbuster retail location and exchange an online rental for a free new one on the spot. In other words, the old-school, distribution-ineffecient, 'big head' retail store became an ingredient in Blockbuster's own 'long tail' web initiative. That's an indicator of what might occur in the coming market battles in the age of S+S. Why?

Think of the locked-in installed base of Microsoft products as the 'big head'.

Think of Microsoft's Live services initiative as a 'long tail'.

The question becomes "How can we leverage the power of the 'big head' to realize the full value of the multitude of niche services available in the 'long tail'. How do the 'big head' of hits (Windows natural monopoly) and the 'long tail' of new niche services interoperate in a virtuous cycle of competitive advantage?"

That's the question that S+S market winners will answer. I call it superpower symbiosis.

Search Wars Point/Counterpoint: Attack the Model!

"Jane, you ignorant slut!"

That's how Saturday Night Live original cast member Dan Aykroyd would begin his response to fellow original cast member Jane Curtin in their classic fake news version of CBS 60 Minutes 'Point/Counterpoint' segment.

Three decades later, thanks to the ginormous quantity of personal data that is collected via cookies, IP address info, registered user search history, etc. during the course of regularly using the Google, Yahoo or MS Live search engines, one is able to actually determine beyond a reasonable doubt that Jane is in fact an ignorant slut---So ignorant in fact that she spends her time online researching 'how to commit murder'.

It is against this straight-out-of-a-Nancy Grace-crimestopper-episode background that the new Microsoft Privacy Principles for Live Search and Online Ad Targeting released July 23 have been announced. The message being simple and pro-consumer:

"We will continue to develop new user controls that will enhance privacy. Such controls may include letting individuals use our search service and surf Microsoft sites without being associated with a personal and unique identifier used for behavioral ad targeting, or allowing signed-in users to control personalization of the services they receive."

Above and beyond this Privacy Principles announcement (which comes too late to help Jane but just in time for wannabe murderers like myself), Microsoft and Ask.com have wisely decided to engage the overall search industry around enhanced consumer privacy guidelines. I quote:

"Microsoft and Ask.com are proposing that leading search providers (read competitor Google, JEB), online advertising companies (read competitor Google's acquisition target DoubleClick, JEB) and privacy advocates convene to engage in an active dialogue to discuss privacy considerations posed by the proliferation of online advertising and search. The goal of the dialogue is to determine ways that the industry can work cooperatively to define privacy principles that take these new considerations into account."

OK. This is where being a 50-something market veteran who watched the browser wars unfold and wrote a book called "Asymmetric Marketing" quoting special operations warfare experts actually helps you read between the lines.

And the message between the lines is this--PRIVACY IS THE NEW BATTLEFIELD FOR ROUND 2 (COUNTERPOINT) OF THE SEARCH WARS.

As we all know, Google won Round 1 by a knockout, successfully establishing their search business from 2000-2003 via 'powered by Google' symbiosis inside the Yahoo portal, and changing the game in web applications via the 'sponsored search' or advertising model.

But now we're in Round 2, the age of software plus services (S+S) in which Microsoft has decided to 'Counterpoint', i.e. counter-attack across the full spectrum of Google market advantage.

By beginning to change the market conversation to one about privacy, and the data being collected by all search engines in the interests of effective ad targeting (Jane in our example above perhaps saw ads for 'hopeless case pro bono trial lawyers from the ACLU'), Microsoft can begin to level the playing field. How?

More privacy, more user control over data, less effectiveness in the targeted ad model. In other words, take up the sword of privacy to attack the underlying effectiveness of the ad-sponsored application model. Over time, ad effectiveness and ad ROI goes down, favoring those with a blended revenue model not dependent on 100% advertising revenue.

This is what the original Redmondistas did when Internet Explorer was given away free, as an alternative to the paid Netscape model. They attacked the model itself.

It will be interesting to see how it plays out here, and whether MS, Yahoo, and Ask are able to begin to flatten the Google revenue hockey stick by improving privacy and reducing ad-targeting effectiveness. And of course what Google does in response. Hey...Superpower entrepreneurism is a contact sport.

But this is a blog for emerging ISVs, so here's where I'd like to see it go in the hands of some upstart Redmondista search provider...Paid search.

No, not paid as in I pay to post my Adwords listings. But paid as in I pay an annual or monthly subscription fee for 100% anonymity, zero profiling, zero advertising. How about $29 a year.

I'll bet Jane wishes she had forked over the $29 before clicking on 'how to commit murder'.

OK. Time to log in to post to Google Blogger. And click the little box that says "Remember Me" so I don't have to log in again.

Dell Goes S+S, Oops Make That H+S

Dell's acquisition of managed services platform provider Silverback is an early indicator of how hardware platform market leaders are getting on board the S+S express, i.e. thinking in terms of 'hardware plus services' or H+S.

Lots of press speculation accompanying the short deal announcement which contained the cryptic one-liner, "Dell plans to leverage SilverBack Technologies, Inc. into its operations as part of its ongoing strategy of IT simplification."

Is that IT simplification for Dell, or for Dell customers, or for Dell partners?

In the age of S+S, I'm betting it's all of the above. But kudos to Dell marketing for the excellent obfuscation. In my book I call it 'dark-itecture'.

Services with a Capital S: MS Infrastructure Spend

LiveSide.net folks have deconstructed the latest MS earnings report and are reporting on the 'increased data center costs' in the online services and Windows Live initiatives. We're talking hundreds of millions of dollars in investment in the underlying infrastructure to make S+S a market reality. Their conclusion: "Windows Live isn't going anywhere, anytime soon..."

Here's the link.

Deconstructing Ozzie, Part 5: "One Shared Future"

In "Asymmetric Marketing", I consistently poke fun at the 1.0 and 2.0 'bubbleboys' who continue to preach the mantra that pure-play 'disruptive innovation" conforming to the tech fad-du-jour (Web 2.0, open source, SaaS) is capable of challenging the software and web superpowers in a fundamental way.

I point out that the superpowers are highly adaptive competitors that systematically co-opt disruptive innovation ideation, productize it, and then introduce it into their vast installed base customer ecozones in order to pre-emptively defend themselves against market challengers.

Seen from this point of view, 2 things become clear about Microsoft's 'software plus services' (S+S) strategic vision:

1. S+S is the expression of this systematic response to disruptive challengers in the age of cross-category software superpowers, and

2. All software superpowers are S+S practitioners, or publicly on their way to embracing S+S.

In the Knowledge @ Wharton interview, Ray Ozzie uses the example of Adobe to make these same points. I quote.

"Adobe is a great example. Flash is a rich client; it's rich code delivered to the edge. It's not a centralized model; it's a decentralized model. It just happens to be tethered to the service. If anybody has a software and services model, it's Adobe, because of that rich [Flash Player] applet that they extend the browser with. The more they enhance that, as you can see in their Flex and Apollo plans,the more it becomes this unified software and service vision, which is basically the same as Microsoft's vision."

Building on Ozzie's point, on could state that above and beyond Microsoft and Adobe, all 21st century software and web superpowers can be described as S+S players.

Google S+S
The Google Toolbar that attaches seamlessly to Microsoft Internet Explorer, enabling direct Google searches from the browser interface is S+S in action. Yahoo does something similar with their toolbar, and also embraces S+S in their music service, pre-installing their music player software on Dell PCs. Google's Enterprise Search Appliance and Desktop search are also S+S in action. Trust me when I say that after losing out on multiple occasions to Microsoft's embrace and extend asymmetric marketing model while at Sun and Novell, Google CEO Eric Schmidt is most definitely a born-again asymmetric marketer and knows the benefits of symbiotic attachment to superpower products.

Symantec S+S
Security superpowers like Symantec pioneered S+S in the form of device-based software and a continuous stream of web updates which are necessary to keep anti-virus, anti-spyware, anti-spam and intrusion prevention systems up-to-date.

eBay S+S
The acquisition of Skype web calling software by eBay has enabled them to integrate this device-based application with the eBay service in new ways, e.g. searching eBay from inside Skype, or using Skype to interact with eBay marketplace buyers and sellers.

Cisco S+S
Cisco's acquisition of web conferencing pioneer WebEx represents their embrace of the basic S+S vision. As explained by Cisco Chief Development Officer Charlie Giancarlo, "WebEx is a leading provider of on-demand Web-based applications. It provides a network-based solution for delivering value-added intercompany collaboration with a focus on SMB. This is an extension of Cisco’s vision for Unified Communications and collaboration."

Additionally, IBM, Oracle and SAP all have extended their on-premises software businesses to on-demand models and embrace the basic vision of S+S.

Ray Ozzie describes this trend in the following way way:

"...we only have one shared future as a software industry. And that is centrally deployed code that has a different lifetime associated with it on the device it's deployed to."

And then he adds this:

"So I don't see radical differences in the approaches that Adobe might be taking, that we're taking, or that the web industry in general is taking. The languages and run-times may be different. And we come at it from a history of the desktop coming up to the web. They are coming from a history of being on the web and going down to the desktop, but the endpoint is the same."

"One shared future"....no "radical differences"...."the endpoint is the same".

The message is clear. Strategy in the 21st century software industry is all about S+S, and for asymmetric marketers, the marketing endpoint is the same.

Strategic symbiosis with the software and web superpowers, or as we call it around here, The Redmondista Manifesto.

In Part 6 of Deconstructing Ozzie, we'll look at Ray Ozzie's guidance to the Redmondista development community.

To read Deconstructing Ozzie, Part 1: "Breathtaking" please click here.

To read Deconstructing Ozzie, Part 2: "An Architect One Level Up" please click here.

To read Deconstructing Ozzie, Part 3: "Disruptive Innovation in a Positive Way" please click here.

To read Deconstructing Ozzie, Part 4: "Seamless Experiences" please click here.

Category Regime Change Comes to VoIP

In my book, I introduce the concept of 'category regime change', in which best-of-breed competitors in stand-alone categories are defeated by cross-category superpowers with category extensible market power.

I use the MS vs. Lotus, WordPerfect, Novell, Netscape battles as teaching material to describe the concept. If you use Amazon's 'Search Inside this Book' function you can track almost 50 separate references to category regime change in "Asymmetric Marketing: Tossing the 'Chasm' in the Age of the Software Superpowers".

MSNBC today is reporting on yet one more instance of this phenomenon of category regime change, now occurring among stand-alone VoIP providers, as 'disruptive innovator' SunRocket shut down without notifying its customers.

In the wake of the SunRocket shutdown, technology market watcher Red Herring also opined that a similar fate may be in store for Vonage.

Both SunRocket and Vonage face asymmetric competition from cable industry market leaders like Comcast and Time Warner that possess tens of millions of installed base customer relationships in video and broadband internet access, and can upsell VoIP as part of their 'triple play' model.

Redmondistas take note---Category regime change is a naturally occuring phenomenon in the age of superpower-driven S+S. The wise strategy for software and services innovators is to engage in 'symbiosis' with market leaders, and develop products, programs and practices that capitalize on the installed base relationships of these superpowers. That's the starting point for asymmetric marketing and for successful defense against category regime change.

Microsoft: A Different Kind of C.O.O.L.

A colleague and I often share our mutual enthusiasm for the FX Original Series, 'The Shield', which follows the adventures of a mythical LAPD unit called 'the strike team'. In one of the original episodes, Vic Mackey, the team leader of the special ops strike team is asked by a child-molesting, hostage-holding perpetrator he is interogating whether he is playing 'good cop' or 'bad cop'.

Mackey's answer is a classic late night crime drama one-liner.

"I'm a different kind of cop", he growls, as he wacks the perp in the head with a rolled-up telephone directory. Ouch. Confession delivered. Binary (good cop/bad cop) view of police forever dispelled.

So what's that got to do with asymmetric marketing? So glad you asked.

Coming out of last week's Microsoft partner event, there's an interesting column by Lee Pender of Redmond Channel Partner reflecting on a Jupiter analyst's observation that Microsoft needs to stop trying to be "cool". In other words stop trying to be Apple, or some other consumer-focused tech business, and go back to being the glasses and pocket protector capitol of the universe.

My take on this cool/uncool conversation is along the lines of the Vic Mackey parable above. With Microsoft, it's not about cool or uncool, or whether some analyst perceives you to be cool or uncool.

It's about being a different kind of cool. A third way of cool.

Trust me on this. As the father of a certifiably 'cool' iPod-attached, Facebook-posting, Ugg-boot wearing, just-completed-my-freshman-year daughter, I can tell you unequivocally that 2007-cool is a kind of adolescent digital narcissism disguised as cool.

It's an "I can't wait for my friends to get my latest text message" kind of cool. And that's not how market-leading, opportunity creating market superpowers should behave---Like college freshmen seeking attention and trying to fit in by seeming to stand out.

Microsoft's historic cool is what the rappers refer to as OG cool, i.e. 'original gangsta' cool. As I point out in my book "Asymmetric Marketing", it's is about that cage fighter competition kind of cool that takes a startup company from one category to one hundred categories. It's extreme sports cool, not digital couch potato cool.

Microsoft cool is that embrace, extend and expropriate kind of cool that coopted the IBM PC standard as its own, and leveraged it to build the world's first software superpower. It's in-your-face Simon Cowell cool, as distinct from that warm and fuzzy and giddy Paula Abdul cool.

It's that shameless and unabashedly fierce natural monopoly cool that creates large markets over time, and drives highly stable opportunity landscapes that tens of thousands of developer and solutions partners can attach to.

It's that 'only the paranoid survive' cool that made Silicon Valley great.

It's official Redmondista cool. Asymmetric marketing warfare kind of cool---the kind you can't buy in a cup at Starbucks, or download like a ringtone. The kind you learn through a generation of competitive combat and multiple shifts in the computing paradigm.

So here's my new official Redmondista definition of cool. It's an acronym. Hey, geeks love acronyms.

C.O.O.L. Creating Optimized Opportunity Landscapes.

Dig it man.......I'm Redmondista cool. Pass me my Harry Potter glasses and that stale, day old pizza. I've got this startup idea I need to work on for a social network of totally fierce, extreme market competitors that attach themselves to the world's leading software superpower and change the face of computing with S+S.

Think I'll call it Redmondista.org. Community policy---No cool people allowed.

Deconstructing Ozzie, Part 4: "Seamless Experiences"

In my book I introduce the term 'dotcomplexity advantage' to describe web-based software and service offerings that benefit from viral, many-to-many self-organizing network effects. In short, the power of 'dot' plus the properties of complex adaptive systems described by science thought leaders like Stuart Kauffman as 'complexity' theory.

eBay's auction marketplace would be an example of many-to-many dotcomplexity advantage in action. MySpace.com would also be an example, as would Salesforce.com's initiative to build its APEX platform business by attracting a community of SaaS and web services developers.

Undoubtedly Google's connecting of web advertisers with web searchers, or TellMe's voice search platform for connecting callers with retailers and advertisers are also expressions of dotcomplexity advantage in the 21st century software industry .

Open source software also possesses latent market power because of this many-to-many dotcomplexity effect, as do peer-to-peer applications like Skype. Here's how I describe the impact of this concept of dotcomplexity advantage on the conventional software industry.

"Leveraging dotcomplexity advantage begins with the simple understanding that the internet and always-on network connectivity have changed software product management and marketing forever. 'Whole products' are morphing into 'never-ending' products that incorporate constant feature updating, network effects, and loose-tight coupling of 'platform and service'."

It is exactly this 'loose-tight coupling' of platform and service, this never-ending product model that Ray Ozzie refers to in his Knowledge @ Wharton interview when he says:

"What we as an industry need to deliver are seamless experiences -- however those things are accomplished -- to do the appropriate thing in the browser and the appropriate thing on a laptop or on a device to solve that problem." He then goes on to add:

"So the way I view it is, first generation "software as a service" really just meant browser. Second generation means weave together hardware, software and services to accomplish a specific solution.The iPod is a great example of that. You have hardware, the embedded software on the device and anassociated [online] service. The BlackBerry is another great example [of the combination of] hardware,software and service. The Xbox is a terrific example -- you've got amazing software in the games,hardware to support it and Xbox Live as a service."

I use exactly the same examples (iPod, xBox and Blackberry) in my book in a section titled 'The Services-Coupled Platform', but I also throw in a company like Akamai, that combines its Edge platform and its associated edge network service.

The key, as Ozzie points out, is to think in terms of a 'seamless experience' that connects devices, software and web services in ways that are unique, compelling and game-changing in the market place. Ozzie's focus on the 'seamless experience' is exactly the way Redmondistas need to think about the blended offerings they develop in the age of S+S.

And it these 'seamless experience' offerings that Ozzie and Microsoft see as an opportunity to "deliver the aggregate productivity value in all places". OK, time for the take-aways.

1. The Seamless Experience Take-away

Product marketing and management in the 21st century software industry should be seen as a creative exercise---An exercise in developing Fusion 2.0 products that over time become difficult for competitors to commoditize, i.e. become virtually non-duplicatable. Here's a link to Google books online version of Asymmetric Marketing. Chapter 3 focuses on Asymmetric Product Strategy.

2. The Aggregate Product Value Take-away

'Aggregate product value' in the age of S+S is not a 1 plus 1 equals 2 exercise. In other words, 1S(software) plus 1S (services) produces not a linear but an exponential outcome. More like S+S equals 10S. Need an example. Take a look at the aggregate product value produced for Google users by the downloadable Google Toolbar which bolts into Microsoft Internet Explorer for seamless Google searching. That's an example of S+S and marketing symbiosis in action. And you thought Google was not an S+S company. How about Google Enterprise Search Appliance plus Google web search. That's S+S in spades.

In the next installment, we'll look at how today's software superpowers are all aligning themselves with an S+S Redmondista roadmap, and Ray Ozzie's comment that there is only 'one shared future' for the software industry.

To read Deconstructing Ozzie, Part 1: "Breathtaking" please click here.

To read Deconstructing Ozzie, Part 2: "An Architect One Level Up" please click here.

To read Deconstructing Ozzie, Part 3: "Disruptive Innovation in a Positive Way" please click here.

Knocked Up by S+S: eWeek's Vizard Gets It

Outstanding commentary on the implications of S+S for the Microsoft solutions partner channel by Michael Vizard of eWeek. In a piece today titled "Pregnant Pause" Vizard writes:

"This is a time of great change in the Microsoft channel and many of the decisions that solution providers make about their business in the next six months are very well likely to dictate their fates for the next decade."

You don't get more on the money than this. My own take is that S+S is Browser Wars 2.0.

In other words, just as MS made the commitment to win the battle for basic web technology vs. Netscape, they are now on the warpath targeting any SaaS or Web 2.0 'disruption' (can you say Google) to the MS franchise, and have wisely adopted an embrace and extend approach called S+S.

Vizard's article is a Redmondista must-read and goes into many of the more nuanced issues for MS channel partners involved in making the transition to the S+S vision a successful one.

Here's the link.

Redmondista Etiquette Lessons Courtesy of Redmond Partner Magazine

For my money, Redmond Partner Magazine does great work in assisting Microsoft partners and future Redmondistas how to succeed in the Microsoft ecosystem.

Here's a valuable article they've titled "Minding Your Microsoft Manners" on partner etiquette in successfully working with the Microsoft culture.

It's solid field marketing advice for asymmetric marketers who want to align with the MS agenda and marketing practices, and not screw up a meeting with MS by using the verb 'to google'.

One addition I'd make for the emerging Redmondista movement---Make sure you connect your own story to the leading edge of Microsoft's 'vision thing', which nets out to S+S or software plus services.

Redmondista Must-Reads from MS Partner Conference

Lots of S+S focus and news coming out of the MS Partner Conference. Here's a link to Steve Ballmer's keynote focusing on S+S and the role of Silverlight, and pushing back on 'SaaS' and 'Web 2.0' as insufficient visions in an age of S+S. I quote:

"The shorthand I like to use when we're talking about this evolution in computation and user interface model is software plus services. Some people like to use software as a service, and I think that basically has certain implications that I don't think are right. Some people talk about Web 2.0; that's got other implications that I don't think are exactly right."

And here's a link to how Microsoft partners can play in the new world of S+S.

Deconstructing Ozzie, Part 3: "Disruptive Innovation in a Positive Way"

As the interview continues, Ray Ozzie addresses what he refers to as 'small i' innovation and 'Big I' Innovation at Microsoft. Here's how he frames it.

'Small i' innovation refers to "innovations within the core of what those products (e.g. Microsoft Windows and Office businesses) are intended to do."

'Big I', as Ozzie sees it, goes to "some fundamental change in the environment that gives one the opportunity to step back and say, 'Could we serve those needs in a dramatically different way?' Today that really is all around services."

Ozzie then lays out the fundamental strategic question underlying Microsoft's 'software plus services' vision which can roughly be described as connecting the small i of the vast MS Windows and MS application installed base with the Big I of SaaS and web services.

"So each group within Microsoft -- and in our industry -- is at a point where we should be saying, "If we're aspiring to deliver productivity to a customer, how should we best weave that into services that are deployed through a browser? What aspects do you want mobile? What kind of synchronization (relationship between software and services--JEB) should automatically be built in?......I think that is potentially disruptive innovation in a positive way."

The phrase 'disruptive innovation in a positive way' describes precisely the strategic ISV roadmap I refer to as 'superpower symbiosis' in my book, 'Asymmetric Marketing: Tossing the 'Chasm' in the Age of the Software Superpowers'. Here's the way I put it.

"...Asymmetric marketers creatively attach their businesses to the installed base of locked-in superpower customers in ways that are sustainable. All the while seeking to capitalize on the superpowers' own cooptation of disruptive technology innovation. I call this pro-active marketing process superpower symbiosis."

This 'positive way' disruptive innovation Ozzie refers to is not optional for today's new generation of Redmondista ISVs and Web 2.0 services developers.

It is the way of pragmatic marketing necessity on an asymmetric competitive landscape characterized by the enterprise and consumer installed-base dominance of the software superpowers. It's real world strategy, not the kind of 'Microsoft is Dead' thinking that can set up an emerging category startup for failure.

So if you want to win at the Big I of innovation game, then symbiotically attach that innovation to the 'small i' innovation occurring in the installed base of the superpowers. OK, time for the take-aways.

1. The 'small i' Take-away

In the age of S+S, there is a brand new opportunity environment for ISVs who add value to the Windows platform, i.e. who have been in the 'small i' business of supporting innovation at the core of what Microsoft Windows platform offerings do. Now, this vast network of Microsoft ISV partners can also look to the Big I of services innovation, finding symbiotic ways to use their own browser-based applications to creatively attach to Microsoft installed-base ecoregions and solutions channels. Think of this as the Bridge 2.0 product opportunity, a Redmondista opportunity in connecting MS platforms to the world of SaaS and Web 2.0.

2. The 'Big I' Take-away

As the TellMe and aQuantive acquisitions demonstrate, Microsoft is prepared to pay serious money for companies that enable it to pay off the vision of S+S...Sooner rather than later. If your startup can demonstrate 'Big I' value, and is able to creatively align itself with the S+S vision, you will no doubt end up on the Ray Ozzie Chief Asymmetric Marketing Officer Radar Screen Dashboard.... Or even on the Steve Ballmer 'How many ways can I stick it to Google' dashboard.

Both work for me.

To read Deconstructing Ozzie, Part 1: "Breathtaking" please click here.

To read Deconstructing Ozzie, Part 2: "An Architect One Level Up" please click here.

ThoughtCrime Marketing: Drivers Wanted

As the popular VW commercial goes, "On the road of life there are passengers and drivers. Drivers wanted."

So too, on the road of software marketing there are the Microsoft-is-evil, open-everything, 'Disruptive Innovations R Us' purists... And then there are the marketing thought criminals.

Needless to say, the open-everything purists appear to be having a hard time coming to terms with the recent State of Massachusetts decision to include Microsoft's Open XML document format in their list of supported specifications.

One prominent editor at eWeek even opined that Microsoft's positioning of Open XML is like the infamous 'Newspeak' described in George Orwell's classic novel 1984, a language created for the sole purpose of exercising mind control over an oppressed population, i.e. eliminating 'thought crime'.

Here at Redmondista we applaud the State of Massachusetts decision. Why? Because they are prudently acknowledging the fact that government at all levels should support backwards compatibility of new XML standards with existing users of Microsoft Office. I think it used to be called common sense.

But in the world of IT industry media commentary, common sense is apparently a thought crime. Especially the common sense in acknowledging that new 'standards' should take into account the customer-sanctioned 'natural monopolies' of companies like Microsoft, Oracle, Adobe, Google and others.

Or that new standards should take into account the role of the vast network of tens of thousands of Microsoft ISV and solutions partners. In the words of Microsoft's Dan'l Lewin "96% of Microsoft’s revenue is driven through our partners, and for every $1 of our revenue, our partners make $7 to $8."

Or that new standards should reflect the actual opportunity reality of 21st century software markets---That market innovators should practice strategic symbiosis with the software superpowers. Even the Linux folks are starting to do that, as reflected in the MS/Novell relationship. But hey, I guess common sense is too much to ask of the IT industry trade press.

But isn't that why Al Gore invented the internet and God invented blogging.

Especially Orwellian, natural-monopoly-hugging, thought criminal blogs like this one.

Deconstructing Ozzie, Part 2: "An Architect One Level Up"

As the Knowledge @ Wharton interview with Microsoft Chief Software Architect Ray Ozzie continues, he elaborates on his role within the organization. I quote:

"The first task is to bridge the different groups [within Microsoft]. I might see something going on within one group that another group might be able to take advantage of that [might not be visible] from their vantage point within a division. So, in essence, it's an architect one level up. The same thing pertains to market strategy and business strategy. I may be able to see these different products and how they could come together to solve an opportunity in the market that [the individual product groups] might not otherwise recognize. It's a role that sits at the juncture of technology and market and business strategy -- all put together."

Without reading too much between the lines here, Ozzie is describing in his own words the defining characteristic of Microsoft (and other 21st century software and web superpowers).

They are 'cross-category' market leaders. They are not your father's stand-alone category 'gorillas'.

They possess 'category-extensible' market power in which leadership in one domain can be leveraged to capture new market territory.

And his job 'sits at the juncture of technology and market and business strategy--all put together'.

In other words, Ray Ozzie, like Bill Gates before him, is the Chief Asymmetric Marketing Officer of Microsoft.

He is that technology and market 'architect one level up' that sees the entire 'superpower market dashboard' of all products across all categories in all markets, and makes recommendations on how initiatives 'come together' in the real world of 21st century software and web markets.

It is from this cross-category Chief Asymmetric Marketing Officer dashboard, this superpower marketing 'war room', that broad, transformational visions like 'software plus services' (S+S) are conceived, strategized and executed.

OK. Let's go to the take-aways.

1. The S+S Take-away

The Microsoft S+S vision that gave rise to the Live set of services is not simply a tactical response to Google. It is part of a broader strategic imperative for Microsoft as it connects its Windows installed base to the world of Saas and Web 2.0. It is 'architect one level up' thinking. It is important for ISVs to see this fact, and to take this fact into consideration when deciding whether to engage in disruptive innovation against Microsoft, or to align with the S+S vision by practicing strategic symbiosis. Making this point in this way is not shilling for Microsoft. It's about basing your strategy on strategic sobriety, not intoxication with the tech fad-du-jour.

2. The 'Juncture' Take-away

ISVs who make it their business to study Microsoft can also identify opportunity at 'the juncture of technology and market and business strategy'. I'm sure Ray Ozzie, a successful serial entrepreneur prior to joining Microsoft, would concur with this assessment. There is no monopoly on creativity in the 21st century software industry, and asymmetric marketers who think like 'an architect one level up' can be the beneficiaries of cross-category market dynamics.

To Read "Deconstructing Ozzie, Part 1: "Breathtaking", click here.

S+S Math Lesson: C Drive Plus 'Cloud' Drive Equals Market Opportunity

It's important for redmondista ISVs, Web 2.0 developers, and web experience designers to understand how to identify emerging market opportunity in the age of superpower software plus superpower services. Here's a link to a recent eWeek news report on Microsoft's beta of Windows Live Folders, a free web-based file storage service that provides a glimpse into the new math of S+S, in which files stored on a Windows PC 'C' drive can be seamlessly backed-up and managed on a Windows Live service, and where files in a Windows Live service can be shared among other Windows Live and 3rd party services.

What is the implication of this Windows Live Folders beta for the development community? Simple. Microsoft is providing not just a storage service here, but a storage platform for Web 2.0 developers focused on S+S applications that couple conventional Windows services with Windows Live services.

Wise redmondistas will capitalize on this Live storage platform as it takes shape.

Here's the link to the Windows Live Developer site.

Here's the link to the Windows Live Beta site.

SAP Chairman Says S-S, Oops I Really Meant S+S

Even the Chairman of a leading software superpower occasionally has one of those YouTube moments where something he said yesterday comes back tomorrow to bite him in his brand messaging lederhosen.

This is what happened to SAP chairman Hasso Plattner recently as he felt compelled to clarify a comment he had made during a recent speech. Here's the comment needing clarification courtesy of Computer Business Review Online.

"This model (Software as a Service) will compete with our current model, and 99% of our installations are on site."

Apparently, some folks processed these remarks as meaning SAP's A1S-codenamed SaaS offering was perceived by the chairman as something that would 'cannibalize' the SAP enterprise installed base and 'compete' with SAP's current on-premises business model. In other words, SAP was all about an S-S approach (software minus the on-demand services).

Oops. Somebody call Paris Hilton's publicist so we can charm our way out of this one. Hence the quick 'clarification'.

Anyway, the quick fix I'd recommend for Chairman Plattner would be to read former SAP leader Shai Agassi's blog on Enterprise Third Generation software. Here's what he says:

"My view is that we are on the verge of the third generation of Enterprise software – the first being mainframes, second was three tier client Server and the third one still not here. A lot of people considered the web versions of 3-tier C/S as the next generation or Software as a Service as 3rd Gen, I view those more as 2.5 Gen. The generations have a lot in similarity to the wireless industry in that you can get a lot of the promise of 3rd gen with 2.5 gen, but to do it right the underling infrastructure needs to shift to the new architectures."

That's about as good a description of the emerging S+S vision as I've seen. Danke shoen Shai Agassi.

Deconstructing Ozzie, Part 1: "Breathtaking"

Redmondista hats off to Knowledge @ Wharton for their outstanding April interview with Ray Ozzie, Microsoft Chief Software Architect, founder of Groove software, and the creator of Lotus Notes. This interview is a must-read for today's new generation of SaaS, Web 2.0 and Enterprise 2.0 ISVs seeking to grow their businesses along the lines of the software + services or S+S model.

In this 10 part series, which I have titled 'Deconstructing Ozzie', I will focus on specific comments Ray Ozzie makes in the interview which are particularly relevant to the Redmondista Way, and drill down on the take-aways for emerging category ISVs and web services providers who want to align their agenda with that of Microsoft and the other software superpowers. So let's get started.

At the beginning of the interview Ray Ozzie shares his first impressions of Microsoft, from the inside.

“What is breathtaking to me, once inside, is the scope and the number of initiatives that are being undertaken in parallel by all of [Microsoft's
product] groups. It's a much more nuanced business than I had
appreciated.”

In order for Redmondista readers to quantify the basis for Ozzie's 'breathtaking' first impression, let's tune in to Steve Ballmer's March 2007 talk at Stanford University, in which he jokes about a recent interaction between himself and Bill Gates. I quote.

"We just did something where we wrote down 70 technologies that are going to change the world over the next five or six years. Bill Gates and a team of our technical guys wrote them down, and actually when they first came back with them, I said, you're not allowed to have 70 of them. I'm kind of a more simpleminded guy; give me five. And Bill said, no, we spend $7 billion on R&D; I want to at least have $100 million on each, I get 70. (Laughter.) And I remember that from math camp, so to speak. (Laughter.) That worked."

70 initiatives at an 'average' $100 million R&D investment per initiative. $7 Billion in R&D... per year!

To put that number in context, in 2006 the entire VC investment in all software companies combined was $5 Billion. OK. Let's throw in another $4 Billion in VC investment in all internet-specific companies combined. That gives you $9 Billion which looks like it beats the $7 Billion, right! But now we have to back out all the sales and marketing and administration expense from that $9 Billion. So by any measure, Ray Ozzie walked into a Microsoft where the R&D budget is greater than the sum of the R&D budgets of all VC-funded software and web companies combined.

OK. This is where Ozzie's 'breathtaking' comment starts sounding like an understatement.

So let's begin with 2 take-aways from Ray Ozzie's first impression of Microsoft from the inside:

1. The 'Scope and Number of Initiatives' Take-away

ISVs and Web 2.0 services developers should see these 70 initiatives at $100 million per initiative as opportunities for attachment to the Microsoft developer ecosystem. And Microsoft's recent acquisitions of TellMe, aQuantive, and others indicates that even with this enormous R&D spend, key functionality and market gaps will remain a fact of life. So follow the Redmondista Manifesto of asymmetric marketing and engage in strategic symbiosis with the leading software superpower.

2. The 'In Parallel' Take-away

The lesson here is equally 'breathtaking'. The age of cross-category market superpowers with category extensible market power is here to stay. This is the nature of the 'nuanced' business Ray Ozzie walked in to.

In part 2, I'm going to drill down on Ray Ozzie's job description as Chief Software Architect, and explain why the job should really be called Chief Asymmetric Marketing Officer.

Search Wars Going S+S

Business Week has an excellent piece on one dimension of Microsoft's strategy in search---Go vertical, Go domain specific. Go relevance. The article positions the TEllMe and other acquisitions in this context.

It would be nice to see a follow-up piece on the second dimension of Microsoft's strategy---Enterprise search.

This is where the S+S vision can really be paid off, i.e. enabling rich search of enterprise information that serves the productivity needs of knowledge workers. And it's also where Google is weakest, possessing no significant installed base of enterprise software customers.

Enterprise search is also an area where Microsoft's network of ISV and search solutions partners can get into the cage fight, providing a true redmondista roadmap for search on the S+S model, multiplied by domain-driven expertise.

Snapshot of a Cross-category Superpower

As I point out in my book, the age of the stand-alone category gorilla has given way to the age of the cross-category market superpower. Here's a link to the July 1 Redmond Partner Magazine cover story drilling down on Microsoft's competitive landscape relative to some of the other superpowers like Oracle, IBM, Google, etc. The takeaway...there is major ISV opportunity in understanding the nature of cross-category market power, and aligning with it to grow your own business.

As the superpowers contend with each other, jagged edge market landscapes are here to stay in the age of software + services.

Apple as Redmondista

Here's a Mary Jo Foley report on the buzz that Apple is smartly making the new iPhone interoperable with Microsoft Exchange. This is an example of how asymmetric marketers like Apple creatively attach their new product initiatives to the installed base of the software superpowers.

If you are the sales or marketing leader for a Web 2.0 startup the lesson here is clear. If a giant in its own right, i.e. Apple, can practice conscious strategic symbiosis with the installed base of Microsoft, so can you.

So don't fall prey to the 'Microsoft is Dead' mentality, or think that the kind of go-it-alone market-think of the bubble will work on today's asymmetric, jagged edge market landscapes. It won't. Here's a link to my commentary on the value for today's new generation of entrepreneurs in learning from the redmondista way.

Redmondista Manifesto: 7 Success Principles for the Age of Software + Services

A 'redmondista' is an application, infrastructure or Web 2.0 pioneer in an emerging category that systematically aligns itself with the Software + Services (S+S) agenda of Microsoft (or other market superpowers). The redmondista goal---To creatively capture competitive advantage in 21st century enterprise and consumer markets.

There are 7 core strategic principles of a redmondista:

1. From the standpoint of business strategy, a redmondista is an asymmetric marketer.

Redmondistas assiduously study and learn from the multi-decade experience of the rise of the cross-category software superpowers. This history teaches them to foster symbiotic relationships with incumbent market leaders, and leverage the market momentum of these leaders for their own advantage.

2. Unlike the 1990's generation of 'bubbleboys', Redmondistas are not seduced by the disruptive technology innovation fad-du-jour. They are radical entrepreneurial pragmatists in the tradition of 'Microsoft the startup'.

Redmondistas know that SaaS, open source, Web 2.0, Enterprise 2.0, etc. do not in and of themselves constitute the starting point for successful innovation strategy. The starting point for successful innovation strategy is creative 'attachment' to the customer-sanctioned 'natural monopoly' installed base of the software superpowers. This is what asymmetric marketers call 'strategic symbiosis', or 'embrace, extend, expropriate'.

3. Redmondista product strategy revolves around the broad vision of 'software + services'.

Seen from this standpoint, Microsoft, Google, Oracle, Cisco, IBM, eBay, Symantec, Yahoo, SAP, Apple and Adobe can all be characterized as practitioners of the redmondista way. All provide both SaaS and on-device or on-premise functionality and leverage that blended model for market advantage.

4. Redmondista sales strategy tips in the direction of OEM (MS Dos on IBM PC) and SaaS 'powered by' (Google Search on Yahoo portal) approaches.

This enables the redmondista to leapfrog adoption 'chasms' and coopt the sales initiatives of incumbent market leaders and their vast partner ecozones.

5. Redmondistas creatively erect barriers to competitor entry through delivering non-duplicatable, networked customer experiences.

They study the experience of MSN Hotmail, eBay, Yahoo, MySpace, Google and other web superpowers in driving many-to-many viral network effects that create ongoing competitive separation.

6. Redmondistas see their adaptive operating culture as the key to their survival and competitive success.

They build self-correcting, 'only the paranoid survive' organizations that foster marketplace sobriety, internal candor, self-organizing and ownership at all levels.

7. Redmondistas grow their brand equity by positioning themselves inside the market conversations of the software and web superpowers.

They engage in complementary storytelling that communicates the value of their own products and services in the context of superpower brand spend and superpower messaging muscle.

WELCOME TO THE REDMONDISTA REVOLUTION!

EMBRACE THE AGE OF SOFTWARE + SERVICES!

Superpower Contention in Software + Services

Here's a link to an article on ASP News on the coming market slugfest in S+S, i.e. software + services. Despite the anti-MS headline, which criticizes .NET for being a Windows-centric web services model (Can you say Homer Simpson), and the usual anti-Redmond commentary from Salesforce.com execs, the article makes the important point that Adobe, Google and Microsoft are all S+S players, providing both 'in the cloud' and on-device application functionality.

This is good news for .NET ISVs and means that the debate around SaaS vs. on-premises should evolve to a more pragmatic market conversation on how redmondista marketers can attach their rich services to the MS enterprise installed base, while also leveraging the Adobe and Google market footprints.

Stay tuned for S+S to emerge as the single biggest theme in the 21st century software industry, characterized by an asymmetric market landscape dominated by the software superpowers.