Friday, July 27, 2007

Only a matter of time before Microsoft combines ad business with 'software plus services'

Looking over the reports from the Microsoft financial analysts gathering this week in Redmond, Wash., I'm reminded of baseball ... modern ballparks in particular.

Far as I know, most major league baseball teams have been profitable for many years, many decades. Most of the teams in large cities are doing better than ever, in spanking new stadiums.

What's different now is the explosion of advertisements, endorsements, sponsorships, hucksterism and crass visual commercialism. Whether you attend a game or watch one on television, there isn't a time or place where you are not treated to literally dozens of commercial pitches while you try and figure out the real pitches.

Why on Earth would people who love baseball, or even just tolerate baseball, allow such a plastering of advertisements across their consciousness (and perhaps unconsciousness)? Well, because they don't have a choice, of course.

Baseball, like Microsoft (and soon, Google?), is a monopoly. There are few if any real choices for most anyone who wants to watch a major league game but to incur the ad wrath.

And that's why it's only a matter of time before Microsoft starts injecting scads of ads through their "software plus services" portfolio. That's right, when you open your online (or offline or hybrid-line) applications for a spreadsheet, word processor, email, calendar, ERP interface -- just like you're now thoroughly accustomed to on Web pages and services -- there will be ads. Lots of them. Targeted right to you as an individual or business (or both) with your pre-analyzed budget to spend in anticipation

Local, state, regional, mobile, location-based, keyword-oriented, and fuzzy-warm branding types of ads. All over your visual perimeter -- just like at the ballpark -- you'll be served up ads, ads, ads while you toil away to offer more cookie crumbs of insight into what the next ad should be that you see. Attention!

The implications for this, of course, are enormous. If Microsoft and the other services providers -- for they will all have to follow suit, just like each ballpark followed the other -- can better target these ads to you based on your relationship with them and the technology cauldron that forms from your use of "software plus services," then all the other providers of platforms for online ads will be sunk.

We used to have the division of church and state between media editorial and advertising, but what of the division between technology and advertising? There isn't one. You may think you own your PC (vendors would differ) but you don't own the servers that toss up your "software plus services." You want to play ball? You gotta look at the ads. You gotta see the craplets.

Reminds me of the line from fictional Southie strongman Frank Costello in The Departed: "I don't want to be a product of my environment, I want my environment to be a product of me." You, dear readers, will be a product of the environment that your "software plus services" provider wants for you, based on what's good for their investors.

Even, over the next 3 to 10 years, as the newspaper business thinks it can reinvent its paper-based revenue streams from the Internet, in comes the IT vendors. These "software plus services" providers will -- from start-up of the first craplets when you turn the thing on until the last mouse click before you die -- have you pegged. They will know what you want before you do. No other entity can better match ads to users than a combined IT platform provider and online services provider whose business is based on advertising revenue. The marketers will finally have the tools they've always wanted.

And so those other media company web sites that dish up the highest-quality content, that provide top-line fourth-estate journalism will do okay (we hope), but the largest ad dollars growth will go to those "software plus services" providers that can give the advertisers the best on-target and metrics-based match-up between buyers and sellers. And then the IT companies buy the media companies, and then they buy the telecos and cable and mobile providers. Nice and tidy. On stop shopping to get inside of your head/wallet.

Who to blame? No one. It's inevitable. Government regulators could scarcely keep up, even if they will and budgets existed. If Google and Microsoft don't do it someone else will. Mark Cuban thinks those alternatives could well be the local broadband providers, and he's right ... but only for a time. Once the total online ad monopoly kicks in, it will be a digital Standard Oil on steroids with no Sherman Antitrust Act.

Is Google the white knight and Microsoft the evil empire? Nope. Just like in any good vs evil saga (Star Wars?) both sides need each other desperately. For the better that Google does in making ad-based online applications and services work acceptably, the easier it is for Microsoft to inject that model into its current stable of software, and present it as ... services.

And the more successful (could they be any more successful?) that Microsoft is at providing PC applications and services locally, online or both, the easier it is for Google to make its SaaS alternatives look good enough. These two massively and globally influential companies will ratchet each other up to the level of the modern-day ballpark. It's not either-or, it's both Microsoft and Google propelling the shifts in the market to ad-based everything online, including your business applications, including your high school yearbook.

We are all just going along for the ride. For many of us, we think we get the functional services cheaply because the ads pay for the "software plus services." But when was the last time you saw the price of admission tickets to a ball game fall as they hoisted yet another billboard up over left field?

It won't be ad-based revenue or subscription. No, it will be ad-based revenue and subscription. Has to be. We have no choice.

Wednesday, July 25, 2007

SOA adds broth to technology acronym soup

SOA consultant Todd Biske, who did a great job on a panel I was honored to moderate earlier this week, has some good thoughts on the definitions and roles of IT categories and SOA.

His blog posting on "acronym soup" is worth a read.

And thanks to the other members of "The Future of SOA" panel at The Open Group conference -- Tony Baer, Beth Gold-Bernstein and Eric Knorr -- for their excellent contributions.

We'll make the discussion available as a BriefingsDirect podcast and transcript. I'll blog on it here when it's up.

Tuesday, July 24, 2007

Red Hat takes SOA modeling tool concept to open source development

In an attempt to add grease to the skids of SOA adoption, Red Hat has agreed to take a patented concept for a services modeling approach and usher it through an open source community development process before eventually adding it to the JBoss Enterprise SOA Platform.

Red Hat announced today that SOA expert and author Thomas Erl's concept for a services modeling and analysis tool will form the basis for a new project, the results of which will become a LGPL product that will be then be supported under the JBoss SOA offerings.

The tool-in-progress is designed to fill a gap in the market for a top-down, platform-agnostic way for non-developers to assess a business process and determine the required services that would comprise the process within a SOA environment. Erl said the tool will be a first in terms of its utility.

The way in which the tool incubates and arrives may also be unique. I'm assuming that Erl was compensated in some way by Red Hat for his intellectual property in defining the tool. And Red Hat will guide the community development process, and reap the rewards of a commercial open source model when it charges for subscription support and training for the tool and its associated SOA platform.

Perhaps more of us should be patenting ideas for software products and services, and then pitching them to Red Hat. I've always liked the idea of a cottage industry for enterprise software.

Anyway, the modeling tool as defined to date targets technical analysts so they can create a business-centric design of services, or containers of services, that combine to provide a business process or processes. The tool helps conceptualize and refine an inventory or blueprint of services, to then set the stage for the actual creation or acquisition of the requisite services, explained Erl. Managing multiple inventories also becomes easier via the tool's design.

Erl hopes the tool fosters better collaboration between analysts and SOA architects. It should help coordinate their group planning for services development and to provide a framework for iterative or Agile back-and-forth services creation with an end business process in mind.

The goal is to address the needs in the market today, to get the ball rolling on modeling for SOA, and also to be easily extensible to work within other SOA modeling initiatives -- such as UML-based work by OMG and others -- as they mature.

Community development may also create interfaces or plug ins for the service inventories to map to UDDI generally, as well as lead to specific connectors to registries and repositories.

Erl also published today a new book, "SOA: Principles of Service Design," which better fleshes out his concepts and methods on service engineering.

Monday, July 23, 2007

HP's Opsware buy highlights burgeoning role of management

I'm sitting at an engaging Open Group conference on SOA and its deep impact across IT and enterprises. A common theme, not surprisingly, is the issue of control ... some of the biggest fears about SOA is that it may be too good, too inclusive -- and may consequently spin out of control.

Managing complexity is at the heart of making SOA successful, but it's a double-edged sword. SOA can both slay and spawn complexity. Who wants to swap out integration complexity for services-driven operational and governance complexity?

Sure, SOA can bring more agility to the business processes that span companies, industries and commercial relationships. But at what cost if it's done poorly? If we gain agility but suffer chaos, breakdowns, lack of control and even more higher-abstraction complexity -- you'll see closed and brittle silos of IT assets remain very popular.

At the same time that SOA needs to be controlled well to be productive, we're seeing massive re-centralization of IT resources -- especially hardware, storage and networking infrastructure. Again, there's a tension here between efficiency and the dangers of having all your eggs in one basket. Going from nine datacenters to two makes a lot of sense, unless one of the two is out of control.

It seems to me that HP is evolving and inserting itself into the role of arbiter between control and creativity on many essential levels. We saw this in the Mercury acquisition last year, and we're seeing a affirmation of this role for HP in today's Opsware announcement.

IBM wants to help you keep your company special. HP, it seems, wants to let you know how to keep it stable.

The largest enterprises will thrive or stumble on their ability to gain agility and creativity, along with operational efficiency. They must go hand-in-hand. But true management comes with holistic control -- that which spans operational and systems management, heterogeneous datacenters management, services governance, IT governance -- and ultimately business governance. There needs to be semantic continuity to how all these management layers relate, and that usually means standards.

I was recently quoted in an article on IT and SOA management, and I believe that the distinctions between layers of management need bridging via standards and expertise.

This type of widely and deeply inclusive management and control has been missing in the IT industry. HP is demonstrating by its organic and acquisitions growth that this will be one of the essential pillars of functionality it will provide for the IT infrastructures of the future. Vigorous commercial competition and aggressive open communities involvement will be essential for making IT and automated business management conceptually and practically coordinated.

I hope we see more open source and community-based initiatives from HP to augment and accelerate its recent acquisitions activities. Opsware will be a powerful asset for HP for many years to come.

Disclosure: HP is a sponsor of BriefingsDirect podcasts.

SOA will fold into general enterprise architecture, Linthicum tells Open Group crowd

While enterprise architects (EAs) and services oriented architecture (SOA) architects are often at loggerheads today, the two will working hand in hand toward the same goals in a matter of a few years.

"In five years I don't think there will be SOA ... it's all going to fold back into enterprise architecture," said Dave Linthicum, CEO of Linthicum Group, in a keynote address today at The Open Group's Enterprise Architecture Practitioner's Conference in Austin, Texas. "SOA is a subpattern of EA."

[UPDATE: Todd Biske is also blogging from the event. ... Many slides from the speakers here.]

In effect, Linthicum said, SOA is just good EA. The goals for each are ultimately the same: To get better at building agile IT architectures and to make change the number one requirement for IT.

But that's not what you'll find on the street. In many cases those planning SOAs are not in synch with those that are keeping the trains running on time, so to speak, inside enterprise datacenters. Linthicum pointed out that there are currently "two worlds out there," enterprise architects and SOA architects, with one working up from the existing IT landscape and the other working down, respectively, from the larger concepts of agility, reuse and orchestration of service points.

"There's not a lot of synergy, and even some fighting," said Linthicum. "The EA guys don't get full implications of SOA, and SOA guys don't get how SOA meshes with existing enterprise methods and standards."

Into this Babel, many if not most CEOs think that IT is holding them back. The business leaders want to change automated business processes much more quickly.

So many business leaders are open to SOA. They cotton to the idea of IT easily adapting and becoming agile, they encourage reuse, they want independent change management. The idea is to "orchestrate" rather than integrate, and to "configure" rather than develop, said Linthicum.

At the same time, CEOs need for all the parts that are currently running to keep running. Hence the need for deeper understanding and cooperation between the EA crowd and SOA crowd.

So what are the next steps to make EA and SOA act in concert? How can the will of the organization at large be cultivated to support the $7 million to $10 million needed for even a medium-sized business to meaningfully implement SOA?

Linthicum recommends that IT leaders see beyond the SOA hype, to encourage enterprise architects to become advocates for positive change that embraces SOA principles and methods. He also says that SOA must play well with and embrace such mega trends such as SaaS, Web 2.0, application modernization, datacenter consolidation, and semantic data management.

"See the emerging web as a resource," Linthicum extolled the crowd of some 300 IT leaders and architects. "The lines are blurring between enterprise apps and the web."

Conceptually IT professionals are on board about SOA ... how to get there is the rub, he said. There remain too many "bad practices," such as selecting technology before knowing SOA needs, not sticking to EA best practices, not creating a strong business case for SOA, using wrong people, and suffering from a lack of influence and political strength in the organization.

"Don't select technology too early, don't get caught up in the hype ... look to the data issues and semantics first ... Keep your vendors working for you. The smarter you are the more successful they can help you be," said Linthicum.

Sunday, July 22, 2007

The macro economics side of new marketing efficiencies

The Wall Street Journal on July 2 contained an excellent story about how economists view U.S. businesses' prospects for the coming months. The story explains how businesses are facing higher energy, food, and labor costs while needing to hire more workers -- all of which mutes general productivity.

The story says:
If they can't pull off a resurgence in productivity, businesses face a tough choice: Raise prices or live with reduced profit margins. Judging from their outlook for corporate profits, the forecasters believe that many ... will choose to split the difference.
That means raising their prices some and living with lower profits, too. This is quite different from the most previous business climate where consistently rising productivity and tame inflation allowed for ongoing record profits.

However, there is another aspect to this somewhat bleak assessment. The next business cycle will demand that many companies focus on efficient top-line growth so that they can maintain profits, even as productivity slackens.

Many businesses may be constrained in how they can grow revenues, perhaps because they only supply a static region or supply a shrinking customer base. Most businesses, however, can find new ways to sell their goods and services in more places -- especially by better use of the Internet. That's because the Internet is and will continue to be a marketer's most powerful tool.

If the past business climate was about productivity as a means to profits, and the Internet was a benefit, then the next business cycle is about revenue growth and finding new markets as the means to fiscal health. And that means that the Internet becomes indispensable. The better you know how to leverage the Internet for your business the better off you will be as an individual -- for your current employer or the next.

Interestingly, the need to find efficient ways to increase the market for goods and services comes just as advertising -- a traditional way to grow revenues -- is in transition. Many businesses are re-evaluating how they advertise, spurred on by Google, viral marketing on the Web, and better use of community outreach and online communication with customers, partners, and prospects.

In observing IT vendors in how they reach markets in novel ways, I now see four major thrusts (and a further diminishing role for traditional advertising). The four major go-to-market avenues are:
  • Traditional inside efforts. This means creating a compelling web site, a great sales force (inside, outside, direct and channel), strong ecommerce applications, downloads and other online distribution means, and super customer support. This will not change.
  • Traditional outside efforts. This means advertising through new and old media, marketing promotions and events, email and direct marketing, and PR/AR/IR. This section may well see resources shifted to the two newer categories ...
  • Viral. This means creating content and conversation, blogs/podcasts/videocasts, or reacting to content and conversation, such that online awareness is understanding is generated about your goods, services, and image, via the social networking effects on the Web. This is and should continue to grow significantly, probably funded by the previous ad budgets.
  • Search. Through all of a business's efforts, they should focus on making their values and knowledge easily accessed via Web, and more discretely searched through the keywords and phrases that best bind it to their users and communities. This will be the more effective way to grow the top line revenues for many companies for some time. Again, look for traditional ad budgets to fuel this arena, too.
So if you are associated with a business they sees the landscape as the country's leading economists do, and you recognize you must grow both current and new markets -- to spur more revenue and business volume -- and that you must do it efficiently, do yourself a favor. Right now pretend that you are a customer or prospect of what you sell.

Now, go to Google or another major web search engine. Search on some terms that might come to your mind as you begin a research or informational journey on what your business supplies. Focus on the problem that your online prospect will have, and the solution you bring to them. Does a search on one lead to the other? Does a question about to fix what you fix actually point to how to evaluate and/or acquire that fix? Right now, online?

It should. What you should see there in the top search results on the left, or organic side, are the fruits of all your marketing efforts:
  • Your website, your product and service descriptions, pricing and how you beat the competition in value, the means to contact a sales rep, a click-through to purchase option, or more direct help.
  • The freely available trustworthy informational assets on the problem-solution set that defines your business value, including conversations, media write-ups, third-party endorsements, interviews, and blogs ... anything that your communities generate about you.
This is how new revenues and market opportunities will be born most productively. When the going gets tough, a business's online marketing gets going.

Like many, you will also buy search-based advertising, based on those essential keywords, that create more ways for those seeking you out as a business to reach your website, product information, sales and support, and solutions. But when you want the most bang for the fewer bucks, the organic results pay best and longest. Invest in them now.

What's also interesting is that the investment, and -- more importantly -- the return on the investment you and your clients make in organic search results will remain strong in nearly any macro business environment. That's right, whether the business cycle is in profit growth mode, revenue growth mode, recession, depression, boom times or flat -- your best ticket to keeping the accountants happy is bringing in leads and sales organically, via search-inspired research and inquiry.

So my prognosis is that the ways in which the Internet can assist companies have evolved well during the past 10 years, but the coming business climate -- no matter what climate it is -- is where Internet marketing will be needed the most. And the future, no matter what the world economy is up to, will also deliver the most value and power through the reach of the World Wide Web.